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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended February 29, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to ______
Commission file number 0-15671
UNICOMP, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
Colorado 84-1003745
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 Sandy Plains Pkwy, Ste 305 30066
Marietta, Ga (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number (770) 424-3684
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $28,345,365 on June 7, 1996.
The number of shares outstanding of the registrant's Common Stock as of June 7,
1996 was 5,248,232.
Documents incorporated by reference
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to
this Form 10-K. [ ]
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
UniComp, Inc. (the "Company") was originally incorporated under the
laws of the State of Colorado on December 5, 1985, under the name of Liberty
Ventures, Ltd. for the primary purpose of seeking selected mergers or
acquisitions with a business entity. On September 19, 1986, the Company
acquired all of the issued and outstanding shares of common stock of UniComp
Systems, Inc. (formerly UniComp, Inc.), a Texas corporation, in exchange for
30,000,000 shares of the Company's common stock pursuant to an Exchange
Agreement between the Company and UniComp Systems. On November 9, 1986, the
Company changed its name from Liberty Ventures, Ltd. to UniComp, Inc.
Platform-Migration Software and Development Tools
In October 1992, the Company acquired Arccom Management Systems, Inc.
(renamed Unibol, Inc. in 1994), a Georgia corporation selling and marketing
UNIBOL36 in the United States which was owned by Messrs. Henry and Hafer (who
served as Chairman of the Company's Board of Directors at the time of the
acquisition), for 1,500,000 shares of the Company's Common Stock.
In May 1993, the Company acquired ICS Computing Group Limited, a
United Kingdom company consisting of three subsidiary companies, one of which,
Unibol Ltd., is the developer of the UNIBOL36 and UNIBOL400 platform migration
software applications, for $4,140,925 cash consideration.
United Kingdom Technology Products and Services
The 1993 acquisition of ICS Computing Group Limited also included two
subsidiaries specializing in the delivery of United Kingdom technology products
and services: ICS Computing Limited, which specializes in vertical-market
applications software and services, and CMI Limited, which provides hardware
maintenance services, systems integration services, training, and systems
support, primarily in Northern Ireland.
In 1994, the Company acquired CI Computer Software Ltd., a United
Kingdom company that provides software consulting, custom software applications
and hardware supply and installation for the IBM AS/400 marketplace in Northern
Ireland.
In 1995, the Company acquired the assets and liabilities of Advec
Limited which also provides software consulting and hardware supply and
installation in Northern Ireland.
Subsequent Event
In April 1996, the Company acquired Smoky Mountain Technologies, Inc.,
a North Carolina corporation specializing in payment processing systems (Smoky
Mountain) for 500,000 shares of the Company's Common Stock. Smoky Mountain
specializes in payment processing systems.
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NARRATIVE DESCRIPTION OF BUSINESS
OVERVIEW
UniComp designs, develops and markets platform-migration software and
development tools that enable users to migrate applications software written
for proprietary IBM mid-range computer systems to portable operating systems
such as UNIX and Windows NT. The Company also provides vertical-market
application software and systems integration, maintenance and support services
primarily in the United Kingdom. Through its recent acquisition of Smoky
Mountain in April 1996, the Company will now also provide payment processing
systems.
Demand for platform migration products and services has arisen from
the installed base of 250,000 System/36 and 360,000 AS/400 system users that
have historically had limited functionality and interoperability by the
proprietary nature of an IBM computing platform. The emergence of open and
portable computing platforms, including UNIX and Windows NT, often offer users
significant advantages, including access to additional software, a wide range
of hardware vendors, increased system capacity, interoperability and
scalability.
Independent Software Vendors ("ISVs") must adapt to customer demands
associated with increased popularity of new computing platforms. An ISV who
has developed successful AS/400 applications software is faced with the
challenge of migrating its products to new platforms to meet customer demands
while maintaining its existing customer base for applications software running
on the AS/400 platform.
The Gartner Group, a software industry observer, estimates that sales
of server/host systems based on the UNIX and Windows NT operating systems will
increase to $40 billion annually by the year 2000, up from estimated $22
billion in 1996. Industry sources establish that the UNIX applications
software market, while somewhat smaller than the $2.5 billion AS/400
applications software market, is growing more rapidly.
The Company believes that the UNIBOL rehosting solution allows
businesses and ISVs to migrate their applications software to open systems in a
cost-effective manner. Its solution can enable businesses to retain their
investment in existing software and databases. Rehosting allows ISVs to expand
their market opportunity without replacing or rewriting applications,
retraining or replacing software developers or incurring the cost and
disruption of re-engineering their software applications.
The Company's strategy is to become the leading producer of
platform-migration software and development tools for businesses and ISVs
serving the business community. To achieve this goal, the Company intends to
continue to build, expand and emphasize its multi-layered distribution
channels, leverage strategic relationships with leading platform vendors and
system integrators, invest in product developments and enhancements, acquire
strategic businesses and technologies and diminish dependence on lower-margin
businesses.
Through the acquisition of Smoky Mountain, the Company now provides
software, hardware and systems designed to facilitate the processing of
transactions. The payment processing systems provide functionality for a
variety of transactions including credit, debit and purchase card processing,
check authorization and guarantee, signature capture, communication and
retrieval and address verification services. The payment processing systems
are designed to provide payment processors and merchants a high degree of
hardware independence by supporting a variety of hardware platforms.
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The Company also provides regional technology services including
systems integration, maintenance, and support services to customers in the
United Kingdom as well as regional vertical-market application software. The
Company's vertical-market application software is installed at over 200 sites
in the United Kingdom, primarily in Northern Ireland. The Company acquired its
U.K.-based technology businesses during the past three years in a number of
transactions beginning with its acquisition in 1993 of the business that
developed the UNIBOL36 system. The Company's acquisitions have generally
provided it with favorable cash flows that, together with grants from the
Northern Ireland government, have helped fund product development efforts for
the UNIBOL systems.
PLATFORM-MIGRATION SOFTWARE MARKET
IBM's midrange computing platforms the System/36 and AS/400, have
served as the computing solution for business applications since IBM's
introduction of these two systems in 1983 and 1988, respectively. IBM
discontinued producing the System/36 in 1988. The Company estimates that in
1995 approximately 250,000 System/36 systems remained in use and over 360,000
AS/400 systems were in use worldwide. The Gartner Group estimates that by the
end of 1997, the installed base of AS/400 systems will grow to in excess of
450,000 systems worldwide.
In adopting IBM's midrange computing platforms, the businesses and
the software vendors that support such platforms have invested substantial
resources developing software applications that provide a wide variety of
manufacturing, accounting and other information-management functions. The
Company believes that in 1995, an estimated 25,000 software applications had
been developed for use on AS/400 systems. Development of applications software
intended for use on IBM's mid-range computing platforms continues, assisted by
approximately 8,000 ISVs that IBM estimates develop and market applications
software for the AS/400 platform. In 1995, these ISVs generated an estimated
$2.5 billion of revenue from AS/400 applications software sales.
Use of the IBM computing platform has historically limited users and
developers due to the non-portable nature of IBM's proprietary operating
systems. Software applications written for the System/36 and AS/400 platforms
would not run on other computing platforms, including those using open
operating systems such as UNIX, or other portable operating systems such as
Windows NT. These other computing platforms often offer users significant
advantages, including access to certain additional software, a wider range of
hardware vendors, and increased system capacity, interoperability and
scalability. The Gartner Group estimates that sales of server/host systems
based on the UNIX and Windows NT operating systems will increase to $40 billion
annually by the year 2000, up from an estimated $22 billion in 1996. Industry
sources estimate that the UNIX applications software market is somewhat
smaller, but growing faster, than the AS/400 applications software market.
As new computing platforms become available, businesses are faced with
the difficult decision of whether (a) to abandon expensive, and often
customized mission-critical, software applications specifically developed to
meet unique business requirements, (b) to undertake to completely rewrite
existing software applications to enable them to run on new computing
platforms, or (c) to rely on available packaged applications software that may
not provide adequate functionality to meet specialized business needs.
Changing to new applications software often may result in significant
disruption of business operations as users are retrained and errors in the new
software are discovered and corrected. Even more critical to many businesses
is the potential loss of data contained in existing databases that may result
from a change to new applications software.
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ISVs must also adapt to customer demands associated with increased
popularity of new computing platforms. An ISV that has developed successful
AS/400 applications software is faced with the challenge of migrating its
products to new platforms to meet customer demands while maintaining its
existing customer base for applications software running on the AS/400
platform.
In response to the demand for applications software capable of running
on multiple computing platforms, UniComp has developed platform-migration and
development tools that, by rehosting existing code to an open system or other
new computing platform, are designed to enable businesses to preserve their
investment in existing, or legacy, applications software, and also allow ISVs
to expand their market opportunity.
Businesses and ISVs seeking to migrate to open or portable platforms
face a number of alternative solutions that vary by cost, probability of
success, length of migration period, functionality, compatibility and
scalability.
REFACING Refacing interprets the original character-based screen
specifications to create a graphical user interface,
replacing the green-screen interface, thus making the
applications software appear to have been updated.
Because refacing solutions affect only the end-user
interface, the source code must still be run on a
proprietary system. This defeats the goal of many users
to upgrade system performance, interoperability and
scalability.
RE-ENGINEERING Re-engineering requires rewriting existing applications
software to enable it to operate on a new computing
platform, typically using computer-aided software
engineering (CASE) and other software development tools.
Often this solution entails completely rebuilding
applications software to meet customer requirements with
its attendant cost, risk of failure, disruption and
delay.
PACKAGED SOLUTIONS Migrating to a new computing platform can sometimes be
accomplished by installation of an applications software
package that has been independently developed to run on
open or portable platforms. While a substantial number
of packaged applications software are available,
businesses migrating to a new computing platform with
this solution will often have to abandon a significant
investment in existing databases and software with
features and reports customized for a specific business
use and may incur substantial retraining costs.
REHOSTING Rehosting involves migration of applications software to
a new operating system with minimal change to the source
code or user interface, which is achieved by porting the
application to run efficiently on the new platform.
This solution can enable businesses to enjoy the
continued use of their existing programs and databases,
reduce retraining costs and obtain the advantages of a
new computing platform.
UNICOMP SOLUTION
The Company believes that the UNIBOL rehosting solution allows
businesses and ISVs to migrate their applications software to open systems in a
cost-effective manner. This solution can enable businesses to retain their
investment in existing software and databases. Rehosting allows ISVs to expand
their market opportunity without replacing or rewriting applications,
retraining or replacing software developers or incurring the cost and
disruption of re-engineering their software applications. Advantages of the
UNIBOL rehosting solution include:
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- Native Environment. The UNIBOL36 and UNIBOL400 systems are
native System/36 and AS/400 application development and
execution environments for open systems, essentially replacing
the functionality of the proprietary operating system under
which the applications software was written. The Company
believes that, as a native open-systems environment, the
UNIBOL environment generally enables applications software to
operate at least as efficiently as under the original
proprietary operating system.
- User Interface. The UNIBOL systems preserve the look and feel
of a legacy system's user interface, helping to assist
businesses in migrating to a new platform without incurring
substantial retraining, documentation or technical support
costs. This feature can also assist ISVs to support
applications software running on multiple computing platforms
with a single set of end-user documentation.
- Developer Interface. The UNIBOL systems offer software
developers many system/36 and AS/400-style development tools
as well as access to native UNIX development facilities.
This feature facilitates the transition from a system/36 or
AS/400 development environment to a UNIBOL environment on
new computing platforms and allows further development of
migrated applications software.
- Desktop Integration. The Company's UNIBOL desktop products
enable its customers to integrate the use of PCs with
UNIX-based platforms. UNIBOL/Desktop products are designed to
operate with PCs networked to UNIBOL host systems and
include terminal emulation and ODBC access. UNIBOL400 also
supports other popular AS/400 PC-connectivity tools, such as
Wall Data's Rumba/400 and Seagull Software's GUI/400 products.
- Scalability. The UNIBOL systems allow users to enjoy the
scalability of UNIX Platforms. The design of the UNIBOL
systems enables users to achieve this scalability without any
significant loss of system efficiency.
- Versatility. The UNIBOL36 system enables applications written
in either RPG or COBOL languages to be migrated to an open
system. The Company currently offers the UNIBOL36 system on
most major UNIX platforms, including IBM RS/6000, HP9000,
Siemens Nixdorf RM Series, DEC Alpha, Sun Sparcstation, Data
General Aviion and Intel/SCO UNIX. The UNIBOL400 system
currently supports applications software written in the most
popular AS/400 language, RPG400. The Company expects to
release a version that supports COBOL400 in the first half of
calendar year 1997. The UNIBOL400 system is currently
available on four UNIX hardware platforms. The Company
expects to release a version of the UNIBOL400 system that
supports Windows NT in calendar year 1997.
The UNIBOL36 system has been installed at more than 3,000 sites in
over 50 countries and the UNIBOL400 system, which was first released for
widespread commercial distribution in February 1996, is currently installed at
14 sites.
PAYMENT PROCESSING SYSTEMS
Through the Company's recent acquisition of Smoky Mountain in April
1996 the Company now designs, develops and markets software, hardware and
systems designed to facilitate the processing of transactions. The payment
processing systems provide functionality for a variety of transactions
including credit, debit and
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purchase card processing, check authorization and guarantee, signature capture,
communication and retrieval and address verification services. The payment
processing systems are designed to provide payment processors and merchants a
high degree of hardware independence by supporting a variety of hardware
platforms including personal computers, certain POS terminals, electronic cash
drawers and other peripheral devices and the Company's own payment processing
hardware.
UNITED KINGDOM TECHNOLOGY PRODUCTS AND SERVICES
In fiscal 1996, UniComp generated over $15.0 million of net revenues
from regional technology services including systems integration, maintenance
and support services provided to customers in the United Kingdom as well as
regional vertical-market application software. The Company's vertical-market
application software is installed at over 200 sites in the United Kingdom,
primarily in Northern Ireland. The Company acquired its U.K.-based software
technology businesses during the past three years in a number of transactions
beginning with its acquisition in 1993 of the business that developed the
UNIBOL36 system. The Company's acquisitions have generally provided it with
favorable cash flows that, together with grants from the Northern Ireland
government, have helped fund product development efforts for the UNIBOL
systems.
The Company's U.K.-based software technology businesses include a
subsidiary that is a provider of hardware-independent computer maintenance,
support and systems integration services in Northern Ireland. Approximately
half of the Company's regional technology products and services revenues in
fiscal 1996 were generated by this subsidiary. Through another U.K.
subsidiary, the Company also provides computer products services to a variety
of vertical markets, including distributors of large bulk products, certain
manufacturing businesses and the public sector. The Company also provides in
the United Kingdom training programs, custom-developed software for the AS/400
platform and general software consulting.
STRATEGY
The Company's strategy for achieving future growth focuses on becoming
a leading provider of platform-migration and software development tools for
businesses and ISVs serving the business community. Key elements of this
strategy include:
Invest in product development. To enhance its current competitive
advantage, the Company intends to continue to invest in product development
with the goal of achieving timely product, feature-design and introduction
cycles. Initially, the Company intends to focus on its UNIBOL400 system,
including developing support for the COBOL/400 language and for Oracle and
Informix databases, as well initiating its Windows NT platform-migration system
for AS/400 applications software.
Expand distribution channels. The Company intends to continue to
emphasize distribution of its products through multiple distribution channels.
It currently markets and sells its products directly through its U.S. and U.K.-
based direct sales force, as well as a network of distributors in over 50
countries. The Company also believes that development of its current and
future strategic relationships will be crucial to its success. The Company has
entered into strategic relationships with major UNIX system vendors including,
Hewlett Packard, Siemens Nixdorf, Data General, as well as international
systems integrators including Fujitsu Ltd. and Bell Atlantic. With the
introduction of its UNIBOL400 system, the Company has also begun to focus on
marketing and selling through ISVs. The Company believes that its
multi-channel distribution strategy enables it to effectively market its
products and services to a wide range of potential customers.
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Acquire strategic businesses and technologies. The Company's growth
to date has been largely attributable to its acquisition program. The Company
intends to continue to seek opportunities to acquire businesses, products
and/or technologies that it believes will complement its business operations.
In its acquisition program the Company intends to leverage its expertise and
distribution channels. In addition, the Company may seek to acquire certain
component technologies that may provide opportunities to accelerate the
Company's product development efforts.
Diminish dependence on lower-margin businesses. To allow it to focus
its resources where it believes the greatest growth and profit potential exist,
the Company plans to diminish its dependence on the sale of computer equipment
and installation services and its regional software products and services
businesses, which generally operate with lower profit margins. The Company
believes that this strategy will be consistent with its intent to continue to
focus on strategic acquisitions.
PRODUCTS AND SERVICES
The Company offers platform-migration software and development tools,
payment processing systems and U.K. technology products and services.
Platform-Migration Software and Development Tools
To initiate migration, a user first loads source and executable
components of the applications software from the proprietary system onto data
tapes via the native save commands and peripherals. The UNIBOL system then
loads these application files onto the new computing platform, creating
libraries, source files, message files and data areas that contain build
instructions for compiling the application source members. The UNIBOL system
then executes the build instructions and recompiles application source files
into native executable object code. After completing the testing and
validation process, the applications software will be ready to run on the new
computing platform.
UNIBOL36. The UNIBOL36 system rehosts applications software written
in RPG or COBOL, and related data, from IBM System/36 to UNIX systems. During
each of the last three fiscal years, UNIBOL36 has been the Company's largest
source of revenue from software sales and licenses.
UNIBOL400. The UNIBOL400 system rehosts applications software written
in RPG/400 from IBM AS/400 to UNIX systems. The Company released version 1.05,
the first version released for wide--spread commercial distribution, in
February 1996. The Company is developing enhancements to support Oracle and
Informix databases, COBOL400 language and migration to Windows NT platforms.
Payment Processing Systems
Through the Company's acquisition of Smoky Mountain Technologies in
April 1996, the Company now offers a variety of payment processing systems,
including:
Universal Payment Software ("UPS"). The UPS applications software
facilitates transaction processing at merchant locations. The Product operates
on a variety of hardware platforms including: personal computers, the
Company's Universal Payment Adapter Master Controller and certain Electronic
Cash Registers ("ECRs"). The UPS application software performs a variety of
functions including credit, debit and purchase card transaction processing,
check authorization and guarantee, signature capture and retrieval and address
verification services.
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Universal Payment Adaptor Master Controller ("UPA Master"). The UPA
Master is the hardware on which the UPS applications software operates. The
UPA Master is a LAN Controller which supports up to 63 devices including the
Company's Universal LAN Adapter and several types of POS Terminals.
Universal Terminal Software ("UTS"). UTS software located at the
payment transaction processor location is POS terminal based software that runs
on different types of POS terminals but uses the same base software. This
means only one base application needs to be maintained to make necessary
changes to keep current with Host Processor and Industry regulations and
changes.
Universal LAN Adapter ("ULA"). ULA is a hardware device that supports
multiple peripheral devices including POS Terminals, ECRs, printers and input
devices and check readers and allows them to operate on a LAN supported by a
UPA Master.
Universal Payment Host ("UPH"). The UPH system resides on a PC
located at the payment transaction processor (such as a bank or credit card
processor). The UPH system collects data for authorization and settlement
processing on the host computer.
United Kingdom Technology Products and Services
The following description summarizes other products and services
offered by the Company in the United Kingdom.
Distributex. The Distributex applications software is distribution
management software used largely by distributors of large bulk products. This
product is currently installed in over 200 U.K. sites, primarily at facilities
involved in the British coal industry.
Max. Max is general manufacturing business software that is licensed
by the Company for resale under a renewable annual, royalty-bearing reseller
license that is exclusive for Northern Ireland.
Maintenance and Support. The Company provides hardware maintenance
services, systems integration, training, and systems support, primarily in
Northern Ireland.
MARKETING AND DISTRIBUTION
The Company currently markets and distributes its products directly
through its U.S. and U.K.-based direct sales forces, as well as indirectly
through distributors and systems integrators, in over 50 countries. The
Company has entered into strategic relationships with major UNIX hardware
system vendors, including Hewlett-Packard, Siemens Nixdorf and Data General, as
well as, international systems integrators, including Fujitsu Ltd. and Bell
Atlantic. With the introduction of its UNIBOL400 system, the Company has also
begun to focus on marketing and selling through ISVs. The Company believes
that its multi-channel distribution strategy enables it to effectively market
its products and services to a wide range of potential customers.
Direct Sales Force
As of year end, the Company's platform-migration software and
development tools were sold directly through the Company's thirteen UNIBOL
salespersons, who are supported by nine people on the Company's UNIBOL
technical sales support staff. UNIBOL's direct sales force operates from the
Company's offices in Belfast, Atlanta, Dallas and Los Angeles. The Company
markets its UNIBOL products through direct mail,
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public relations and advertising programs, seminars, audio conferences, trade
shows, newsletters and the Company's Internet homepage.
For its U.K.-based technology products and services, the Company
relies on seven people selling vertical-market software products and organizes
its technology services business such that each service technician maintains a
direct relationship with a portion of the Company's service customers.
Marketing programs for these businesses vary by target customer.
Distributors
The Company relies on a network of distributors in over 50 countries
who carry the Company's UNIBOL products. These distributors primarily consist
of software consultants and systems integrators. The Company's distribution
agreements typically provide for a one-year term and are terminable upon 30
days' notice by either party. Generally the Company's distributors do not hold
inventory of UNIBOL products but will place orders for immediate shipment.
The Company generally does not rely on distributors in its other
businesses.
Hardware Vendors
The Company has various agreements with hardware vendors for its
UNIBOL products including the following:
Hewlett-Packard. The Company is a strategic partner in
Hewlett-Packard's AS/400 Alternative worldwide migration program. This program
provides funding for cooperative marketing programs use of Hewlett-Packard
development equipment.
Siemen's Nixdorf (SNI). SNI is an authorized distributor of UNIBOL
products. SNI provides migration, training, system integration and ongoing
support services for UNIBOL products which are bundled with their UNIX
platform.
Data General. The Company is an authorized ISV for Data General
Aviion computer systems and is a strategic partner in Data General's worldwide
competitive ISV recruitment program. This program provides the Company with
access to cooperative marketing programs and applications software porting
assistance.
Independent Software Vendors
According to industry sources, there are approximately 8,000 ISVs
writing applications software for the AS/400 platform. The Company believes
that these ISVs represent a promising distribution channel for the UNIBOL400
system. Using the UNIBOL400 system, ISVs offering AS/400 applications software
will be able to offer their applications software in open systems and other
portable platforms. By leveraging its reputation in the System/36 market and
focusing on ISVs as resellers of UNIBOL400, the Company believes it can achieve
market acceptance of UNIBOL400. Using the ISV distribution channel, the
Company believes that it will derive licensing revenue from both the initial
sale to the ISV of UNIBOL400 and subsequent license fees payable when an ISV
licenses its migrated applications to end users.
To date, the Company has entered into licensing agreements with seven
ISV's providing applications software that the Company believes represents
significant software tools in their respective industry, often
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including mission-critical, enterprise-wide applications for a specific
vertical market. These ISVs and their respective industries include HTE, Inc.
(public sector), Artesia Data Systems, Inc. (oil and gas) and Cass Logistics
Inc. (transportation). Generally, the Company's UNIBOL distributor agreements
are nonexclusive with a one-year term, terminable by either party on 30 days'
notice. Typically, an ISV will make a minimum license and support payment to
the Company for migrating the ISV's applications software to a new computing
platform and additional amounts for each user of the ISV's applications
software running under the UNIBOL 400 system.
SUPPLIERS
The Company is not dependent on any single third party vendor or
supplier for its products.
COMPETITION
Platform-Migration Software and Development Tools. The market for the
Company's migration software applications is highly competitive. The Company
believes that the principal competitive factors in this business include
product performance, time to market for new product introductions, adherence to
industry standards, price, and marketing and distribution resources. The
Company believes that it competes favorably in all of these categories. The
Company faces direct competition primarily from the following vendors who sell
competitive software: PKS Software GmbH, Financial Technologies, Inc.,
Universal Software, Emphasys Software and Raconix. In addition, the Company
faces competition from companies that provide other migration solutions such as
refacing, re-engineering and packaged software applications.
Payment Processing Systems. The market for the Company's payment
processing systems is highly competitive. The Company believes that the
principal competitive factors include the ability to provide a comprehensive,
integrated payment processing system, product performance, time to market for
new product introductions, adherence to industry standards, price, marketing
and distribution resources. The Company believes that it competes favorably in
all of these categories. The Company faces competition from vendors of payment
processing software, hardware and systems including Verifone, Checkmate,
Atomic, IC Verify, Banktec and Open Systems.
United Kingdom Technology Products and Services. The Company is one
of the largest service and maintenance providers in Northern Ireland and a
leading provider of certain custom software applications in the United Kingdom.
The market for the Company's U.K. technology products and services business is
competitive due primarily to low barriers to entry. The Company believes that
the primary competitive factors include familiarity with local customs and
practices, price and reputation.
PRICING
The Company believes its products are priced competitively with
similar products on the market offered by competitors.
PRODUCT DEVELOPMENT
In addition to amounts reimbursed by government grants or capitalized
in accordance with Statement of financial Accounting Standards no. 86, the
Company incurred research and development costs of approximately $570,000 and
$215,000 in 1996 and 1995 respectively. Grant reimbursements were $389,000 and
$369,000 in 1996 and 1995 respectively. Capitalized software development costs
were $2,684,408 (including
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$1,000,000 of purchased software) and $1,067,783 during 1996 and 1995
respectively, with amortization of $678,902 and $305,113 during the same
periods.
The Company's UNIBOL product development staff consists of 12
employees in Belfast, Northern Ireland. Of these, three are devoted primarily
to development of support for the COBOL/400 language, two are focused on
integrating Oracle and Infomix database support into the UNIBOL400 product,
three on development of a Query/400 style data access tool, and four on product
testing and error control and correction. In the second half of fiscal 1997,
the Company intends to devote three of its product development staff to
development of support for Windows NT.
The Company anticipates supporting Windows NT by implementing a
client/server version of its UNIBOL400 product, with a windows95 or Windows NT
desktop PC client networked to a server running Windows NT and supporting
object linking and embedding (OLE) technology. Following the release of the
client/server version of UNIBOL400 for Windows NT, the Company plans to develop
an object oriented application framework for use in the development and
deployment of commercial applications.
INTELLECTUAL PROPERTY
The Company's performance is dependent to a large extent on its
ability to protect its proprietary interest in its software products. The
Company maintains industry standard safeguards against the unauthorized
distribution of the source code for its products. The Company only licenses
and distributes object code versions of UNIBOL36 and UNIBOL400 products to its
customers. UNIBOL36 and UNIBOL400 object code versions are protected against
unauthorized use by means of unique passwords assigned to each user by the
Unibol division during the installation process on the customer's computer.
SIGNIFICANT CUSTOMERS
The Company continually seeks new customers for its products and is
not particularly dependent on any individual customer for current or future
revenues. No customer accounted for more than 10% of the Company's total sales
during fiscal year ending February 29, 1996.
BACKLOG
As of February 29, 1996 the Company had no significant backlog.
EMPLOYEES
As of February 29, 1996, the Company employed approximately 198
persons on the basis of full-time equivalent employment including 36 persons in
sales, marketing, and related activities; 137 persons in software development
and customer support operations; and 25 persons in general administration and
finance.
None of the Company's employees is represented by a labor union and
the Company believes that its relationships with its employees are good.
FINANCIAL INFORMATION ABOUT FOREIGN OPERATIONS AND EXPORT SALES
Approximately 88% of the Company's revenues are derived from
activities in the United Kingdom. In view of the locations of the
international activities, the Company does not believe that there are any
special
12
<PAGE> 13
risks beyond normal business risks attendant to its activities abroad. See
Note 12 and Note 15 to the consolidated financial statements.
ITEM 2. PROPERTIES
The Company currently operates out of two primary facilities in
Belfast, Northern Ireland and four facilities in the United States. The
Company leases approximately 30,000 square feet in Belfast, Northern Ireland,
at an annual cost of approximately $223,000 under a long term lease expiring in
December 2000. The Company owns another facility in Belfast under a ten-year
variable interest rate mortgage loan with an outstanding principal balance as
of February 29, 1996 of $654,075. Annual payments on this loan are
approximately $69,200. In addition to its two Belfast facilities, the Company
leases office space in Georgia, California and Texas at an aggregate cost of
approximately $5,500 per month. The Company believes that its current
facilities are either adequate to meet the Company's needs for the foreseeable
future or that adequate space is readily available in all geographical areas in
which the Company does business.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material litigation and,
to management's knowledge, no material litigation is threatened against the
Company. No material pending legal proceedings are directed against the
Company, other than routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year ended February 29, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On May 9, 1988, the Company began reporting transactions in the Common
Stock on the Nasdaq SmallCap Market. On August 1, 1995, the Common Stock began
trading on the Nasdaq National Market under the symbol UCMP. The following
table sets forth, for the periods indicated, the high and low sale prices for
the Common Stock as reported by Nasdaq. Such quotations do not include retail
mark ups, mark downs, or other fees or commissions.
<TABLE>
<CAPTION>
HIGH LOW
FISCAL YEAR 1996
<S> <C> <C>
Fourth Quarter ended February 29, 1996 . . . . . . . $8.50 $6.88
Third Quarter ended November 30, 1995 . . . . . . . . 6.38 5.38
Second Quarter ended August 31, 1995 . . . . . . . . 6.75 5.38
First Quarter ended May 31, 1995 . . . . . . . . . . 4.50 3.19
FISCAL YEAR 1995
Fourth Quarter ended February 28, 1995 . . . . . . . $3.75 $3.00
Third Quarter ended November 30, 1994 . . . . . . . . 3.88 2.88
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C>
Second Quarter ended August 31, 1994 . . . . . . . . 3.88 2.13
First Quarter ended May 31, 1994 . . . . . . . . . . 5.29 4.04
FISCAL YEAR 1994
Fourth Quarter ended February 28, 1994 . . . . . . . $6.00 $4.00
Third Quarter ended November 30, 1993 . . . . . . . . 7.38 4.88
Second Quarter ended August 31, 1993 . . . . . . . . 8.44 3.12
First Quarter ended May 31, 1993 . . . . . . . . . . 4.19 3.25
</TABLE>
On June 7, 1996, the last reported sale price of the Common Stock on
the Nasdaq National Market was $7.50 per share. As of June 7, 1996, there were
approximately 589 holders of record of the Common Stock. Because many of such
shares are held by brokers and other institutions on behalf of shareholders,
the Company is unable to estimate the total number of shareholders represented
by these record holders.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock, and
presently intends to retain any future earnings to finance its operations and
expand its business, and therefore does not anticipate paying cash dividends in
the foreseeable future.
14
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below with respect
to the Company's statement of operations for each of the three years in the
period ended February 29, 1996 and with respect to the Company's balance sheet
data at February 28, 1995 and February 29, 1996 are derived from the audited
consolidated financial statements of the Company, included elsewhere herein and
are qualified by reference to such Consolidated Financial Statements and Notes
relating thereto. The selected financial data with respect to the statement of
operations data for February 28, 1993 and 1992 and the balance sheet data at
February 29, 1992, February 28, 1993 and February 28, 1994 are derived from
audited consolidated financial statements not included herein. The selected
consolidated financial data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
FEB. 29, FEB. 28, FEB. 28, FEB. 28, FEB. 29,
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA: (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . $ 1,452 $ 2,799 $ 12,158 $ 17,799 $ 21,305
Gross profit . . . . . . . . . . . . . 380 1,012 6,759 11,633 13,562
Selling general and admin. expenses . . 687 848 4,583 8,754 10,335
Operating income (loss) . . . . . . . . (353) (997) 1,580 2,236 2,533
Other expense (income), net . . . . . . (15) (17) 139 89 275
Net income (loss) . . . . . . . . . . . (552) (980) 1,186 1,638 2,062
Net income (loss) per share . . . . . . $ (0.21) $ (0.31) $ 0.29 $ 0.39 $ 0.44
BALANCE SHEET DATA:
Working capital (deficit) . . . . . . . $ (164) $ (391) $ 660 $ (513) $ 1,351
Total assets . . . . . . . . . . . . . 720 1,550 7,286 9,605 15,951
Long-term debt . . . . . . . . . . . . 0 109 1,798 869 3,275
Total stockholders' equity . . . . . . (41) (35) 1,832 3,339 6,007
</TABLE>
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. Except for the historical
information contained herein, this Form 10-K contains forward-looking
statements that are subject to risks and uncertainties including economic,
competitive and technological factors affecting the Company's operations,
markets, products, services and prices as well as other factors discussed in
Note 15 of the Notes to the Consolidated Financial Statements. These and other
factors may cause actual results to differ materially from those anticipated.
OVERVIEW
The Company markets its products and services domestically and
internationally. For the fiscal years ended February 29, 1996 and February 28,
1995 and 1994, revenues from outside the United States constituted 87.6%, 87.2%
and 78.7%, respectively, of net revenues. The majority of these revenues were
from sales made and services rendered in the United Kingdom.
In future periods, the Company intends to diminish dependence on sales
of computer equipment which has relatively low gross margins and focus on
software license sales of the Company's products which has significantly higher
gross margins. In addition, gross margins on license sales can increase
significantly as the total license sales increase above the initial cost of
development. The Company anticipates that overall gross margins will improve
as revenues from the sale of application software become a greater percentage
of total revenues.
Cost of sales for software license revenues include the amortized
portions of each product's capitalized development costs, as well as any
royalties payable on embedded technologies. Cost of sales for computer
equipment revenues consist of the actual cost of the products sold. Costs for
maintenance, support and other services include supplies and parts,
subcontractors and other direct costs of delivering the products and services
except for the salary costs, which are included in Selling, General and
Administrative costs.
Selling, General and Administrative costs include salaries and related
costs for all staff (excluding capitalized product development), travel,
internal equipment costs, premises, marketing, as well as general office and
administrative costs. Although the Company expects the dollar amount of these
expenses to increase as the company grows, it anticipates that these expenses
will stabilize or decrease as a percentage of net revenue.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEAR ENDED FEBRUARY 29, 1996 TO FEBRUARY 28, 1995
REVENUES
Revenues for the fiscal year ended February 29, 1996 were $21.3
million compared to $17.8 million for fiscal year ending February 28, 1995, an
increase of $3.5 million, or 19.7%. Revenues from foreign operations,
principally in the United Kingdom, increased to $18.7 million in 1996 from
$15.5 million in 1995, or 20.1%, and revenues in the United States increased to
$2.6 million in 1996 from $2.3 million in 1995, or
16
<PAGE> 17
16.6%. The overall increase was primarily attributable to growth in custom
developed software, equipment sales and implementation services, and
maintenance and support services.
Equipment sales increased $1.4 million or 34.2% to $5.5 million in
1996 from $4.1 million in 1995 principally due to a large sale to British Coal
and the acquisition of the operations of Advec Limited in the United Kingdom in
August 1995.
Revenues from software sales increased slightly to $4.6 million in
1996 compared to $4.4 million in 1995. Management anticipates that software
sales in future periods will steadily increase as UNIBOL400 which was made
available for general release during the fourth quarter of fiscal year 1996
gains market acceptance. The Company believes that the future market demand
for UNIBOL36 will begin to decline as the product life cycle reaches maturity.
It is anticipated, however, that the growth in the licensing activity of
UNIBOL400 will exceed any reduction in revenues from the sale of UNIBOL36.
Maintenance and support services increased $1.6 million or 25.1% to
$8.0 million in 1996 from $6.4 million in 1995 due principally to an increase
in revenues arising from the acquisition of Advec Limited, the effects of a
full year of revenue from CI Computer Software Limited ("CICS") which was
acquired in the United Kingdom in September 1994, and the Company's gaining of
an overall increased market share in Northern Ireland.
Custom developed software and implementation revenue increased $.8
million or 33.2% to $3.2 million in 1996 from $2.4 million in 1995 due
principally to an increase in revenues of approximately $.6 million as a result
of a full year of revenues from CICS in 1996.
The above increases were partially offset by the elimination of sound
system revenues for fiscal year ended February 29, 1996 as a result of the
divestiture of Dominion Sound Systems, Plc. ("Dominion") in November 1994.
COST OF SALES
Cost of sales for equipment and software increased to $5.9 million in
1996 from $4.8 million in 1995, an increase of 23.2%. Gross profit from
equipment and software sales declined to 41.4% in 1996 from 43.9% in 1995 due
primarily to increased amortization on capitalized software based on the first
release of UNIBOL400 in the fourth quarter of fiscal year ended February 29,
1996, and general declining margins on the sale of equipment.
Cost of sales for maintenance and support increased to $1.8 million in
1996 from $1.1 million in 1995, or 72.4%. Gross profit from maintenance and
support declined to 83.7% in 1996 from 87.9% in 1995 due principally to reduced
profits from the increased market competitiveness in the maintenance and
support market.
OPERATING EXPENSES
Selling, general and administrative expenses for the fiscal year ended
February 29, 1996 were $10.3 million compared to $8.8 million in fiscal year
ended February 28, 1995, an increase of $1.6 million, or 18.1%. This increase
is primarily related to increased salaries and related costs due to the full
year effect of the CICS acquisition for 1996 and the effect from additional
expenses from the date of acquisition of Advec
17
<PAGE> 18
Limited. Selling, general and administrative expenses as a percent of revenue
remained relatively consistent (48.5% in 1996 verses 49.2% in 1995).
Depreciation was $695,000 in the fiscal year ended February 29, 1996
as compared to $643,000 for the prior year representing normal growth in
assets comparable to that of the entire business.
OTHER EXPENSES
Other expenses, net were $275,000 in 1996 as compared to $89,000 in
1995. The interest expense component increased to $233,000 in 1996 from
$213,000 in 1995. The increase in interest expense is due to the issuance of
$2,000,000 principal amount, 7% convertible notes in December 1995. The
proceeds from the convertible notes were used to acquire the rights to certain
development software to be embedded in the UNIBOL400 product and for general
working capital purposes. The Company also initiated new borrowings in the
United Kingdom related to the acquisition of a new building for Company
operations in Belfast Northern Ireland. Other income for 1995 included the
gain on the disposition of Dominion of $154,000.
TAXES
The effective income tax rate (income taxes expressed as a percentage
of pre-tax income) was 8.7% and 23.8% for the years ended February 29, 1996 and
February 28, 1995, respectively. Substantially all of the tax expense recorded
in 1995 ($509,000) related to the operations in the United Kingdom.
Approximately $450,000 of tax expense has been recorded in the United Kingdom
for 1996. Additionally, approximately $50,000 of expense has been recorded in
the United States for certain state taxes and federal alternative minimum
taxes. In 1996 tax expense was reduced by approximately $302,000 related to the
elimination of the deferred tax asset valuation allowance related to the United
States net operating loss carryforward. Based on the earnings history and
projected future taxable income, management determined that it was more likely
than not that the balance of the deferred tax asset would be realized in future
periods. Due to the elimination of the deferred tax asset valuation allowance,
the effective income tax rate in future periods is expected to significantly
increase.
NET INCOME AND EARNINGS PER SHARE
Net income increased $424,000, or 25.9%, from fiscal year ended
February 28, 1995 to fiscal year ended February 29, 1996. Earnings per share
increased to $.44 in 1996 from $.39 in 1995. Earnings per share for fiscal
year ended February 29, 1996 is based upon an increased number of shares
outstanding due to the issuance of 162,198 shares in 1996 (primarily from the
exercise of employee stock options granted in 1993) and the effects of the
number of shares that would be outstanding assuming the conversion of options
and warrants. In 1995 the conversion effect of options and warrants provided a
dilution of less than 3% and therefore their effect was not included in the
weighted average number of shares.
COMPARISON OF FISCAL YEAR ENDED FEBRUARY 28, 1995 TO FEBRUARY 28, 1994
REVENUES
Revenues for the fiscal year ended February 28, 1995 were $17.8
million compared to $12.2 million for fiscal year ending February 28, 1994, an
increase of $5.6 million, or 46.4%. Revenues in the United Kingdom increased
to $15.5 million in 1995 from $9.6 million in 1994, or 62.3%. This increase is
primarily due to the inclusion of the ICS Computing Group ("ICS") revenues of
$14.5 million for an entire year in 1995
18
<PAGE> 19
compared to $9.1 million for only nine months of 1994. Other increases were
due to the inclusion of revenues from CICS of approximately $533,000 which was
acquired in September 1994 and increases in software license and maintenance
fees. These increases were offset by a decrease in revenues in the United
States to $2.3 million in 1995 from $2.6 million in 1994, or 12.3%, which was
principally due to decreases in revenues from the Union Automation Software
Division to $182,000 in 1995 from $389,000 in 1994. This decrease was due to
increased competition resulting in lower priced hardware and correspondingly
lower maintenance fees.
Equipment and software sales increased $2.5 million or 42.0% to $8.5
million in 1995 from $6.0 million in 1994. Maintenance and support services
increased $3.1 million or 55.9% to $8.8 million for 1995 from $5.6 million in
1994. These increases are due principally to the inclusion of ICS for an
entire year for 1995 compared to nine months for 1994. Sound system revenues
decreased to $468,000 in 1995 from $503,000 in 1994 due to the disposition of
Dominion Sound Systems in November 1994.
GROSS PROFIT
Gross profits increased to $11.6 million in 1995 from $6.8 million in
1994. Gross profit percentages were 65.4% in 1995 as compared to 55.6% in
1994. The increase in gross profit is attributable to higher sales volume and
higher profit margin of software sales and training and support due principally
to the acquisition of ICS and continued growth of the operations in the United
Kingdom.
OPERATING EXPENSES
Selling, general and administrative expenses increased to $8.8 million
in 1995 from $4.6 million in 1994, or 91%. Depreciation also increased
slightly from $596,000 in 1994 to $643,000 in 1995. These increases are due
principally to the inclusion of ICS for the entire year in 1995.
OTHER EXPENSES
Other expenses were $139,000 in 1994 compared to $89,000 in 1995. The
interest expense component increased from $174,000 in 1994 to $213,000 in 1995
due principally to a full year of debt service on the purchase of ICS. Other
income in 1995 included the gain on disposal of Dominion of $154,000.
TAXES
The effective income tax rate (income taxes expressed as a percentage
of pre-tax income) was 23.8% and 17.7% for the years ended February 28, 1995
and February 28, 1994, respectively. Substantially all of the tax expense
recorded in 1995 and 1994 related to the operations in the United Kingdom
because all United States taxable income was offset by the United States net
operating loss carryforward. During 1994, the Company utilized all remaining
tax loss carryforwards in the United Kingdom, as such, the effective income tax
rate increased from 1994 to 1995.
NET INCOME AND EARNINGS PER SHARE
Net income increased $452,000, or 38.1%, from fiscal year ended
February 28, 1994 to 1995. The increase in net income is attributable
principally to the growth in the operations in the United Kingdom. Earnings
per share increased to $.39 in 1995 from $.29 in 1994.
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<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant growth since fiscal year 1994,
with revenues growing from $12,157,833 to $21,305,287 for fiscal year 1996.
During this period, the Company has financed its cash requirements primarily
through operations, private placement of debt and equity securities, bank
financing, grants from the government of Northern Ireland and acquisition
financings.
At February 29, 1996 the Company had $1.2 million in cash and
equivalents as compared to $83,000 at February 28, 1995. The increase in cash
and equivalents as compared to February 28, 1995 is due principally to proceeds
from the issuance of convertible notes in December 1995.
Cash provided by operations of $2.6 million for fiscal year ended
February 29, 1996 compared to $2.7 million for fiscal year ended February 28,
1995 remained consistent.
During 1996, the Company expended $1.5 million for capital
improvements including approximately $.6 million for a new building in the
United Kingdom. The Company also expended $1 million to purchase the source
code for a database which is embedded in the UNIBOL400 product. Other
significant investing expenditures in 1996 included the purchase of Advec
Limited, and increased capitalization of internally developed software
costs (approximately $.6 million) principally due to an increase in effort to
bring the UNIBOL400 product to general availability.
The Company issued $2.0 million in convertible notes in December 1996.
The convertible notes bear interest at the rate of 7% per year and are due and
payable (if not otherwise converted) on December 19, 1997 and are convertible
at the holder's option as follows: 20% of the principal and accrued interest
are convertible 61 days after issuance with an additional 20% convertible each
subsequent 10 days into shares of common stock at the lesser of $5.75 per share
or 85% of the market price of the common stock on the date of conversion. As
of February 29, 1996, $20,000 in principal and the related accrued interest
thereon had been converted into 3,478 shares of common stock. In connection
with the addition of the new building in the United Kingdom, the Company
secured a variable interest mortgage of approximately $690,000. Other
significant sources of cash from financing activities include, additional
borrowings on the short term line of credit in the United Kingdom
(approximately $417,000) and proceeds from the exercise of stock options
(approximately $618,000).
The Company received grants to fund research and development from the
government of Northern Ireland in the amounts of approximately $389,000,
$369,000, and $285,000 for fiscal years ended 1996, 1995 and 1994,
respectively. These grants are subject to the legislative rules and
regulations of Northern Ireland and the United Kingdom. Management does not
anticipate that the receipt of grants will diminish significantly in the
foreseeable future, however, there is no assurance that the Company will be
able to continue to receive such grants.
The Company believes that the cash generated from increased
profitability together with borrowings, if necessary, will be sufficient to
meet its working capital needs both on a short and long term basis. However,
the Company's capital needs will depend on many factors, including the
Company's ability to maintain the upward trend of profitable operations, the
need to develop and improve products, and various other factors. Depending on
its working capital requirements, the Company may seek additional financing
through debt or equity offerings in the private or public markets at any time.
The Company's ability to obtain additional financing will depend on its results
of operations, financial condition and business prospects, as well as
conditions then prevailing in the relevant capital markets.
20
<PAGE> 21
SEASONALITY AND INFLATION
The Company's operations have not proven to be significantly seasonal,
although quarterly revenues and net income could be expected to vary. Although
the Company cannot accurately determine the amounts attributable thereto, the
Company has been affected by inflation through increased costs of employee
compensation and other operating expenses. The Company believes that these
have not had a material effect on the Company's operations or its financial
condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-22 attached hereto and
incorporated herein.
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<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen A. Hafer . . . . . . . . 47 Chairman of the Board of Directors, President
and Chief Executive Officer and acting Chief
Financial Officer
J. Patrick Henry . . . . . . . . 43 President of Unibol, Inc. and Director
Ian Graham . . . . . . . . . . . 48 Managing Director of Unibol, Ltd.
Nelson J. Millar . . . . . . . . 58 Director
Thomas Zimmerer . . . . . . . . . 54 Director
</TABLE>
Stephen A. Hafer. Mr. Hafer currently serves as the Company's
Chairman of the Board, President and Chief Executive Officer, positions he has
held since January 1993. From July 1990 to January 1993, Mr. Hafer was the
Company's Chief Financial Officer. Mr. Hafer has been Chairman of the Board of
Linder Financial Corporation, an asset based lending company, since November
1994. Mr. Hafer holds a B.S. in Accounting from Florida State University. As
of June 1, 1996 Mr. Hafer is acting Chief Financial Officer until such time as
a permanent CFO can be located.
J. Patrick Henry. Mr. Henry has been President of the Company's North
and South American UNIBOL operations since January 1992. Mr. Henry first
joined the Company in March 1991 as Vice President of Sales after 7 years of
data processing experience as Marketing Manager at Burroughs Corporation. Mr.
Henry holds a B.S. in Industrial Management from Georgia Tech. and an MBA in
Finance from Georgia State University.
Ian Graham. Dr. Graham has been Managing Director of the Company's
European UNIBOL operations, including overseeing development of the UNIBOL
products since 1980. He holds a Ph.D. in Electronic Engineering from Queens
University in Belfast.
Nelson J. Millar. Mr. Millar has been a Director of the Company since
November, 1994. Mr. Millar has been the President and owner of Trafalgar
Management Consultants in Belfast, Northern Ireland since 1993. Mr. Millar
acted as the Managing Director of the group of companies acquired in May 1993
by the Company, which included the developer of the UNIBOL products. From 1976
to 1993 Mr. Millar was the Managing Director of the Northern Ireland systems,
maintenance and systems integration business acquired by the Company.
Thomas Zimmerer. Dr. Zimmerer has been a Director of the Company
since May 1994. Dr. Zimmerer holds the Allen and Ruth Harris Chair of
Excellence in Business, and has served as Professor of Management, at East
Tennessee State University since 1993 and was previously on the faculty of
Clemson University from 1987 through 1993. Dr. Zimmerer co-founded Clemson
University's Emerging Technology and Marketing Center and has co-authored eight
books and over 90 articles and professional papers. In
22
<PAGE> 23
addition, he has served as a consultant to over 75 U.S. and foreign
corporations. Dr. Zimmerer holds a B.S.B.A. in Management and Economics from
the American University in Washington, D.C., an M.S. in Economics from
Louisiana State University and a Ph.D. in Management from the University of
Arkansas.
OTHER KEY EMPLOYEES
In addition to the executive officers named above, the Company
considers the following individuals.
Samuel James Frazer. Mr. Frazer has been Managing Director of CI
Computer Software Ltd. in Northern Ireland since its incorporation in 1986.
David Mawhinney. Mr. Mawhinney has been Managing Director of ICS
Computing Limited since May 1993. Mr. Mawhinney originally joined ICS
Computing in 1980.
Ken Roulston. Mr. Roulston has been Managing Director of C.M.I. since
1993. Mr. Roulston is an advisor to the Board of the Interactive Systems
Centre which is part of the University of Ulster and is involved in the
research of emerging technologies.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established a Compensation
Committee, consisting of its two outside directors, Mr. Millar and Dr.
Zimmerer, and an Audit and Nominating Committee, consisting of Mr. Millar, Dr.
Zimmerer and Mr. Hafer.
The Compensation Committee establishes the Company's general
compensation policies and the Company's compensation plans and specific
compensation levels for executive officers, and administers the UniComp, Inc.
Long-Term Incentive Plan.
The Audit and Nominating Committee recommends the appointment of the
Company's independent auditors and reviews the Company's corporate accounting
and reporting practices, internal accounting controls, audit plans and results,
investment policies and financial results. The Audit and Nominating Committee
also makes recommendations to the Board of Directors concerning candidates for
election as directors.
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company receive 200 shares of restricted
Common Stock as compensation for their services as directors and are reimbursed
for expenses incurred in attending Board of Directors meetings.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company to its Chief Executive Officer for the three
fiscal years ended February 29, 1996. Other than Mr. Hafer, no executive
officer of the Company received total compensation in excess of $100,000 for
the fiscal year ended February 29, 1996.
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<PAGE> 24
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1)
<S> <C> <C> <C>
Stephen A. Hafer . . . . . . . . . . . . . . . 1996 100,000 -0-
Chief Executive Officer 1995 $63,000 $12,000
1994 $10,500 $12,000
- ---------------
</TABLE>
(1) In fiscal year 1994 and 1995, Mr. Hafer received $1,000 per month for his
services as a Director of the Company.
STOCK OPTION GRANTS
The Company did not grant any stock options to its executive officers during
the Fiscal year ended February 29, 1996.
STOCK OPTION VALUES
The following table sets forth, as of February 29, 1996, certain
information regarding unexercised options held by the Chief Executive Officer.
As of that date, no stock options had been exercised by the Chief Executive
Officer.
24
<PAGE> 25
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR END ($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Stephen A. Hafer . . . 37,500 112,500 $157,125 $471,375
</TABLE>
- -----------------------
(1) Represents the $7.50 closing sale price of the Common Stock on June 7, 1996
minus the per share exercise price of the options multiplied by the number
of shares issuable upon exercise of the option.
LONG-TERM INCENTIVE PLAN
In 1993, the Company adopted the LTI Plan to assist the Company in securing
and retaining key employees and consultants. The LTI Plan authorizes grants of
incentive stock options, nonqualified stock options, stock appreciation rights
("SARs"), restricted stock performance shares and dividend equivalents to
officers and key employees of the Company and outside consultants to the
Company. There are 1,200,000 shares of Common Stock available for award under
the LTI Plan. As of February 29, 1996 the Company had granted options to
purchase 992,500 shares of common stock, of which, 162,500 have been exercised
and 257,500 have been forfeited. There are currently 465,000 shares available
for future grant under the LTI Plan.
The Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee determines the total number and type of
award granted in any year, the number and selection of employees or consultants
to receive awards, the number and type of awards granted to each grantee and
the other terms and provisions of the awards, subject to the limitations set
forth in the LTI Plan.
Stock Option Grants. The Compensation Committee has the authority to
select individuals who are to receive options under the LTI Plan and to specify
the terms and conditions of each option so granted (incentive or nonqualified),
the exercise price (which must be at least equal to the fair market value of
the Common Stock on the date of grant with respect to incentive stock options),
the vesting provisions and the option term. Unless otherwise provided by the
Compensation Committee, any option granted under the LTI Plan expires 10 years
from the date of grant or, if earlier, three months after the optionee's
termination of service, other than termination for cause, with the Company or
three years after the optionee's death or disability. As of February 29, 1996
the Company has granted options to purchase 992,500 shares of Common Stock
under the LTI Plan, of which, 162,500 have been exercised and 257,500 have been
forfeited.
Stock Appreciation Rights. The Compensation Committee may grant SARs
separately or in tandem with a stock option award. A SAR is an incentive award
that permits the holder to receive (per share covered thereby) an amount equal
to the amount by which the fair market value of a share of Common Stock on the
date of exercise exceeds the fair market value of such share on the date the
SAR was granted (the base price). Under the LTI Plan, the Company may pay such
amount in cash, in Common Stock or a combination of both. Unless otherwise
provided by the Compensation Committee at the time of grant, the provisions of
the LTI Plan relating to the termination of employment of a holder of a stock
option will apply equally, to the extent applicable, to the holder of a SAR. A
SAR granted in tandem with a related option will generally have the same terms
and provisions as the related option with respect to exercisability. A SAR
granted separately will have such terms as the Compensation Committee may
determine, subject to the provisions of the LTI Plan. No SARs have been
granted under the LTI Plan.
25
<PAGE> 26
Restricted Stock Awards. The Compensation Committee is authorized under the
LTI Plan to issue shares of restricted Common Stock to eligible participants on
such terms and conditions and subject to such restrictions, if any, as the
Compensation Committee may determine. No restricted stock awards have been
granted under the LTI Plan.
Performance Shares. The Compensation Committee is authorized under the LTI
Plan to grant performance share units to selected employees. Typically each
performance share unit will be deemed to be the equivalent of one share of
Common Stock. No performance shares have been awarded under the LTI Plan.
Divided Equivalents. The Compensation Committee may also grant dividend
equivalent rights in conjunction with the grant of options of SARs. Dividend
equivalent rights entitle the holder to receive an additional amount of Common
Stock upon the exercise of the underlying option or SAR. No dividend
equivalents have been awarded under the LTI Plan.
ITEM 12. PRINCIPAL SHAREHOLDERS
The following table sets forth as of June 7, 1996, certain information
regarding the beneficial ownership of the Common Stock by (i) each person known
by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) each director of the Company; (iii) the Company's Chief Executive
Officer; and (iv) all directors and executive officers of the Company as a
group. Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares shown.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES PERCENT BENEFICIALLY
BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stephen A. Hafer(2) . . . . . . . . . . . . . . . . . 1,238,500 23.43%
1800 Sandy Plains Parkway
Suite 305
Marietta, Georgia 30066
J. Patrick Henry(3) . . . . . . . . . . . . . . . . . 282,500 5.37%
1800 Sandy Plains Parkway
Suite 305
Marietta, Georgia 30066
Thomas Zimmerer . . . . . . . . . . . . . . . . . . . 11,400 0.22%
Nelson J. Millar . . . . . . . . . . . . . . . . . . 3,200 0.06%
All directors and executive officers as a group
(6 persons) . . . . . . . . . . . . . . . . . . 1,535,600 29.26%
</TABLE>
- -----------------------
(1) Pursuant to the rules of the Securities and Exchange Commission, in
calculating the percentage ownership, shares of Common Stock subject to
options exercisable within 60 days of the date of this table are deemed to
be outstanding shares and beneficially owned by the holder of such options,
but options owned by others (even if exercisable within 60 days) are deemed
not to be outstanding shares.
(2) Includes 300,000 shares held by Arccom Technologies, Inc. of which Mr.
Hafer is President and majority shareholder; 400,000 shares held by Linder
Financial Corporation of which Mr. Hafer is Chairman of the Board and a
majority shareholder; and 1,000 shares held by Foutz & Associates, Inc., a
company owned by Mr. Hafer's wife. Also includes 37,500 shares subject to
options exercisable within 60 days. Mr. Hafer has sole voting and
investment power with respect to these shares.
(3) Includes 12,500 shares subject to options exercisable within 60 days.
26
<PAGE> 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Accounts and other receivables from related parties at February 29, 1996
and February 28, 1995 are comprised of $362,474 and $197,674, respectively, due
from affiliated companies controlled by the President and Chief Executive
Officer which have borrowed funds from the Company principally in the form of
unsecured 10% notes which mature within one year from February 29, 1996.
In fiscal year 1995 the Company issued 6,600 shares of Common Stock to Dr.
Thomas Zimmerer, a director of the Company, in exchange for independent
consulting services Dr. Zimmerer performed for the Company.
On April 15, 1993, an affiliated company controlled by Mr. Hafer exercised
a warrant to purchase 250,000 shares of the Company's Common Stock at $0.20 per
share.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of the Form 10-K
(1) Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of February 29, 1996 and
February 28, 1995
Consolidated Statements of Operations for the years ended
February 29, 1996, and February 28, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the
years ended February 29, 1996, and February 28, 1995 and
1994.
Consolidated Statements of Cash Flow for the years ended
February 29, 1996 and February 28, 1995 and 1994.
Notes to Consolidated Financial Statements
27
<PAGE> 28
(2) Financial Statement Schedules
Schedule II - Valuation and qualifying accounts
All other schedules have been omitted as the required information is
not applicable, the amounts are not significant or the information is set forth
in the Financial Statements or the Notes thereto.
(b) Reports on Form 8-K: None.
(c) Exhibits:
3.1 Certificate of Incorporation and Bylaws of registrant
(previously filed with Form S-18 filed April 15, 1986 and
incorporated herein by reference).
3.2 Amendment to Certificate of Incorporation changing the
registrant's name from Liberty Ventures, Ltd. to UniComp, Inc.
(previously filed with Form S-18, filed April 15, 1986 and
incorporate herein by reference).
10.1 End-User Purchase Agreement between the registrant and Hewlett
Packard dated November 4, 1993 (previously filed with Form
10-K/A amendment #2 for the fiscal year ended February 28,
1993 and incorporated herein by reference).
10.2 Business Partner Agreement between the registrant and IBM
dated April, 1993 (previously filed with Form 10-K/A amendment
#2 for the fiscal year ended February 28, 1993 and
incorporated herein by reference).
10.3 Agreement between the registrant and Siemens Nixdorf
(previously filed with Form 10-K for the fiscal year ended
February 28, 1995 and incorporated herein by reference).
10.4 Agreement for sale of a business between the registrant and
Euro Software Limited dated September 25, 1995 for the
acquisition of the assets of Advec Limited.
10.5 Offshore Warrant Agreement between the registrant and First
Bermuda Securities Limited dated December 20, 1995
28
<PAGE> 29
10.6 Form of 7% Convertible Promissory Notes dated December 20,
1995 issued by the registrant to certain offshore investors.
21.1 Subsidiaries of the Registrant (previously filed with Form
10-K for the fiscal year ended February 28, 1995 and
incorporated herein by reference).
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule (for SEC use only)
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNICOMP, INC.
June 7, 1996 By: /s/ Stephen A. Hafer
---------------------------
Stephen A. Hafer, President
Pursuant to the requirements of the Securities Exchange Act of 1993,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
/s/ Stephen A. Hafer 6/7/96
- -------------------------------------------- ----------------
Stephen A. Hafer Date
Chairman, President, Chief Financial Officer
and Chief Executive Officer
/s/ J. Patrick Henry 6/7/96
- -------------------------------------------- ----------------
J. Patrick Henry Date
Director
/s/ Dr. Thomas W. Zimmerer 6/7/96
- -------------------------------------------- ----------------
Dr. Thomas W. Zimmerer Date
Director
/s/ Nelson Millar 6/7/96
- -------------------------------------------- ----------------
Nelson Millar Date
Director
30
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
UniComp, Inc. and Subsidiaries:
We have audited the consolidated financial statements and the financial
statement schedule of UniComp, Inc. and subsidiaries listed in Item 14(a) of
this Form 10-K. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
UniComp, Inc. and subsidiaries as of February 29, 1996 and February 28, 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended February 29, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
May 23, 1996
F-1
<PAGE> 32
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,206,831 $ 82,606
Accounts and other receivables:
Trade, net of allowance of $123,878 and
$127,006 in 1996 and 1995, respectively 4,378,833 3,468,003
Receivables from related party 362,474 197,674
Other receivables 190,408 259,528
Inventories 604,971 500,670
Prepaid expenses 852,050 456,875
Other 156,457 9,228
----------- ----------
Total current assets 7,752,024 4,974,584
----------- ----------
Property and equipment, net 2,269,749 1,503,690
----------- ----------
Other assets:
Acquired and developed software,
net of accumulated amortization of
$1,368,321 and $689,419 in 1996
and 1995, respectively 4,794,838 2,789,332
Goodwill, net of accumulated amortization
of $57,345 and $0 in 1996 and 1995,
respectively 694,489 332,829
Deferred tax asset 348,638 540,000
Valuation allowance - (540,000)
Other 91,667 4,816
----------- ----------
Total other assets 5,929,632 3,126,977
----------- ----------
Total assets $15,951,405 $9,605,251
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 33
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,938,057 $1,212,370
Accrued expenses 1,014,149 896,536
Deferred revenues 1,597,864 2,298,826
Line of credit 1,078,933 661,750
Income taxes payable 127,031 198,500
Other accrued taxes 393,915 12,525
Current portion of notes payable 250,840 206,881
----------- ----------
Total current liabilities 6,400,789 5,487,388
----------- ----------
Long-term liabilities:
Notes payable 1,044,073 662,248
Convertible notes 1,980,000 -
Deferred income taxes 519,109 116,616
----------- ----------
Total long-term liabilities 3,543,182 778,864
----------- ----------
Total liabilities 9,943,971 6,266,252
----------- ----------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock: $.01 par value, authorized
25,000,000 issued and outstanding,
4,663,432 and 4,501,234 at February 29,
1996 and February 28, 1995, respectively 46,634 45,012
Additional contributed capital 6,052,643 5,449,268
Retained earnings (deficit) 548,492 (1,513,446)
----------- ----------
6,647,769 3,980,834
Less treasury stock (460,554) (493,654)
Cumulative translation adjustment (179,781) (148,181)
----------- ----------
Total stockholders' equity 6,007,434 3,338,999
----------- ----------
Total liabilities and stockholders' equity $15,951,405 $9,605,251
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 34
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Equipment and software $ 10,092,975 $ 8,552,293 $ 6,020,970
Maintenance and support 11,212,312 8,778,005 5,633,471
Sound systems - 468,268 503,392
------------- ------------- -------------
Total revenues 21,305,287 17,798,566 12,157,833
------------- ------------- -------------
Cost of sales:
Equipment and software 5,916,684 4,802,100 4,550,004
Maintenance and support 1,826,341 1,059,353 561,796
Sound systems - 304,570 286,612
------------- ------------- -------------
Total cost of sales 7,743,025 6,166,023 5,398,412
------------- ------------- -------------
Gross profit 13,562,262 11,632,543 6,759,421
------------- ------------- -------------
Selling, general and administrative 10,334,661 8,753,530 4,582,822
Depreciation expense 694,672 642,716 596,414
------------- ------------- -------------
Total operating expenses 11,029,333 9,396,246 5,179,236
------------- ------------- -------------
Operating income 2,532,929 2,236,297 1,580,185
Other income (expense)
Other, net (41,701) 123,707 35,337
Interest (233,403) (212,795) (174,107)
------------- ------------- -------------
(275,104) (89,088) (138,770)
Income before provision for income taxes 2,257,825 2,147,209 1,441,415
------------- ------------- -------------
Provision for income taxes (195,887) (509,494) (255,291)
------------- ------------- -------------
Net income $ 2,061,938 $ 1,637,715 $ 1,186,124
============= ============= =============
Net income per share $ 0.44 $ 0.39 $ 0.29
============= ============= =============
Weighted average number of shares 4,688,092 4,210,228 4,135,168
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 35
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------- -------------------
NUMBER NUMBER ADDITIONAL RETAINED TOTAL
OF SHARES OF SHARES CONTRIBUTED EARNINGS STOCKHOLDER
ISSUED AMOUNT ISSUED AMOUNT CAPITAL (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 28, 1993 3,560,767 $35,608 10,000 $(190,000) $4,697,734 (4,337,285) $ (35,398)
Stock issued 680,667 6,806 925,993 932,799
Treasury stock purchased (350,000)
Conversion of preferred stock 100,000 1,000 (10,000) (10,000) 9,000 0
Subscription receivable 200,000 (200,000) 0
Net income 1,186,124 1,186,124
Change in cumulative translation
adjustment 98,147
--------- ------- ------- --------- ---------- ---------- ----------
Balance February 28, 1994 4,341,434 43,414 0 0 5,432,727 (3,151,161) 1,831,672
Stock issued 159,800 1,598 98,541 100,139
Treasury stock purchased (143,654)
Subscription receivable (82,000) (82,000)
Net income 1,637,715 1,637,715
Change in cumulative translation
adjustment (4,873)
--------- ------- ------- --------- ---------- ---------- ----------
Balance February 28, 1995 4,501,234 45,012 0 0 5,449,268 (1,513,446) 3,338,999
Stock issued 162,198 1,622 603,375 604,997
Change in treasury stock 33,100
Net income 2,061,938 2,061,938
Change in cumulative translation
adjustment (31,600)
--------- ------- ------- --------- ---------- ---------- ----------
Balance February 29, 1996 4,663,432 $46,634 $ 0 $ 0 $6,052,643 $ 548,492 $6,007,434
========= ======= ======= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 36
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net cash provided (used) by operating activities:
Net income $ 2,061,938 $ 1,637,715 $ 1,186,124
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 1,431,019 947,829 980,720
Loss on disposition of equipment 29,395 0 0
Allowance for doubtful accounts (3,128) 60,812 7,000
Deferred income taxes 60,855 7,825 338,624
Changes in assets and liabilities:
Accounts and other receivables (976,822) (484,511) (88,258)
Inventories (104,301) (7,905) 273,355
Prepaid expenses (295,175) (212,152) 294,702
Accounts payable 725,687 (70,716) (1,582,212)
Accrued expenses 251,831 198,988 0
Other accrued taxes 381,390 12,525 0
Deferred revenues (700,962) 738,925 1,285,341
Income taxes payable (71,469) 198,500 0
Pension liability 0 (265,000) 241,178
Other assets (234,080) (14,242) 0
----------- ------------- -------------
Net cash provided by operating
activities 2,556,178 2,748,593 2,936,574
----------- ------------- -------------
Cash flow from investing activities:
Capital expenditures (1,542,042) (818,173) (531,471)
Proceeds from disposal of property and equipment 51,916 0 0
Acquired and developed software (2,684,408) (1,067,783) (379,713)
Deferred acquisition costs 0 0 275,864
Business disposition 0 (154,208) 0
Business acquisition (422,083) (78,558) (2,208,198)
----------- ------------- -------------
Net cash provided (used) by investing activities (4,596,617) (2,118,722) (2,843,518)
----------- ------------- -------------
Cash flow from financing activities:
Proceeds from issuance of convertible notes, net 1,900,000 0 0
Payments on notes payable (228,291) (463,702) (1,245,017)
Proceeds from borrowing 1,071,258 34,748 0
Issuances of common stock, net 618,097 18,139 910,500
Notes receivables from related party (164,800) (133,878) 345,394
Repurchase of treasury stock 0 (143,654) (350,000)
----------- ------------- -------------
Net cash provided (used) by financing activities 3,196,264 (688,347) (339,123)
----------- ------------- -------------
Net increase (decrease) in cash 1,155,825 (58,476) (246,067)
Effect of exchange rate changes on cash (31,600) (4,873) 98,147
Cash and cash equivalents at beginning of year 82,606 145,955 293,875
----------- ------------- -------------
Cash and cash equivalents at end of year $ 1,206,831 $ 82,606 $ 145,955
=========== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 37
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements are prepared on the basis of
generally accepted accounting principles and include the accounts of the
Company and its subsidiaries (the "Company") all of which are wholly owned.
The preparation of financial statements requires management to make
estimates and assumptions underlying the reported amounts and disclosures.
Amounts affected by these estimates include, but are not limited to, the
estimated useful lives, related amortization expense and carrying values of
the company's intangible assets and capitalized software development costs.
Changes in the status of certain matters or facts or circumstances
underlying these estimates could result in material changes to these
estimates, and actual results could differ from these estimates.
All material intercompany balances and transactions have been eliminated in
consolidation. Certain amounts previously presented in the consolidated
financial statements have been reclassified to conform to current
presentation.
REVENUE RECOGNITION
The Company's revenues are generated primarily in the United Kingdom and
the United States from licensing software products, the sale of computer
equipment, and providing maintenance and support.
Revenues from the sale of hardware, the Company's computer software
products and the resale of third-party software are recognized upon
delivery, customer acceptance, fulfillment of significant vendor
obligations and determination that collectibility is probable. Revenue
related to sales which impose significant vendor obligations on the Company
are deferred until the obligations are satisfied. Revenues from consulting
services are recognized as services are provided. Contract revenues from
post-contract customer support are deferred and recognized over the life of
the contract.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
All assets and liabilities in the balance sheet of a foreign subsidiary
whose functional currency is other than the United States dollar are
translated at the year-end exchange rate. Income statement items are
translated at the average currency exchange rate for the period.
Translation gains and losses are accumulated as a separate component of
stockholders' equity and are not included in determining net income.
Transaction gains and losses are included in the results of operations in
the period which they occur and are not significant in any period
presented.
F-7
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes all cash balances and highly liquid
investments with an original maturity of three months or less. At times,
cash in bank deposits may exceed the federally insured limits. The Company
has not experienced and does not anticipate any losses from such accounts.
INVENTORIES
Inventories consist of equipment, services in process, computer hardware,
and software available for resale. Inventories are stated at the lower of
cost or market, cost being determined on a first-in first-out (FIFO) basis.
Components of inventories are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Equipment $ - $ - $ 14,467
Services in process 7,222 110,085 118,930
Computer hardware and
software 597,749 390,585 289,416
-------- -------- --------
Total $604,971 $500,670 $422,813
======== ======== ========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment, including certain equipment acquired under capital
leases, are stated at cost less accumulated depreciation. Depreciation is
provided on the straight-line method over the estimated useful lives of the
related assets, except for leasehold improvements and capital leases which
are amortized over the life of the related lease. When assets are retired
or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in
the results of operations.
ACQUIRED AND DEVELOPED SOFTWARE
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed" (FAS 86), costs incurred to develop the Company's
software products which are to be licensed to its customers and costs of
purchased software are capitalized and amortized at the greater of the
amount computed using the ratio of current product revenues as compared to
the current and estimated future revenues of that product, or on a
straight-line basis over the estimated life of the products, generally
three to four years. All research and development costs incurred prior to
technological feasibility or subsequent to general availability have been
expensed in the period which they were incurred and totaled approximately
$570,000, $215,000 and $37,000 in 1996, 1995, and 1994, respectively.
F-8
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Costs which are capitalized include direct and indirect costs associated
with payroll, benefits and computer usage, among others. The Company
capitalized software development costs of $2,684,408 (including $1,000,000
of purchased software), $1,067,783, and $379,713 during 1996, 1995, and
1994, respectively, with amortization of $678,902, $305,113, and $384,306
during the same periods. Capitalized software costs are net of amounts
reimbursed by United Kingdom government grants totaling approximately
$389,000, $369,000, and $285,000 in 1996, 1995, and 1994, respectively.
The amount by which unamortized software costs exceeds the net realized
value, if any, is recognized as expense in the period it is determined.
GOODWILL
Goodwill is recorded upon acquisition and amortized on a straight-line
basis over its estimated period of future benefit, generally ten years.
The Company evaluates the recoverability of goodwill based upon a
comparison of estimated undiscounted future cash flows from the related
operations as compared with the carrying value of the respective assets.
The amount by which unamortized goodwill exceeds future estimated cash
flows, if any, is recognized as expense in the period it is determined.
HEDGING
The Company does not use hedging strategies to reduce the effects of
unfavorable price movements on profitability as a result of fluctuations in
foreign exchange rates.
INCOME TAXES
Income taxes are provided on taxable income at the statutory rates
applicable to such income in the United States and the United Kingdom under
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (FAS 109). Under FAS 109, the deferred tax liabilities and assets
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes.
These differences are primarily attributable to differences in the
recognition of depreciation and amortization of property and equipment,
intangible assets, and capitalized software development costs. Deferred
income taxes of approximately $353,000 have not been provided on the
cumulative undistributed earnings of foreign subsidiaries in the amount of
$2,344,290 since such amounts are considered by management to be permanently
reinvested.
NET INCOME PER SHARE
Net income per common and common equivalent share is based upon the
weighted average of common and common equivalent shares outstanding during
the year. Primary and fully diluted net income per share are the same.
The weighted average number of shares outstanding for 1996 includes 294,656
common equivalent shares assuming the conversion of options and warrants
which are dilutive. The weighted average number of shares outstanding for
1995 and 1994 include no common equivalent shares since dilutive
securities do not reduce net income per share by at least 3%.
F-9
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING STANDARDS
The American Institute of Certified Public Accountants has issued Statement
of Position 93-7 (SOP 93-7), "Reporting on Advertising Costs," which is
effective for fiscal years beginning after June 15, 1994. SOP 93-7
generally requires that advertising costs, with certain exceptions, be
expensed as incurred. As the Company has historically expensed advertising
costs as incurred, the effects of the Company's adoption of SOP 93-7 during
Fiscal year 1996 did not have a material effect on the Company's
consolidated financial statements. Advertising expenses for 1996, 1995
and 1994 were approximately $190,000, $175,000 and $150,000, respectively.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed Of" (FAS 121). The
Statement requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
expected future cash flows of those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting for long-lived
assets that are expected to be sold or discarded. The Company will adopt
FAS 121 in Fiscal year 1997. The effect of adoption is not expected to be
material to the Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). This Statement requires that companies with
stock-based compensation plans either recognize compensation expense based
on new fair value accounting methods or continue to apply the provisions of
Accounting Principles Board Opinion No. 25 and disclose pro forma net
income and earnings per share assuming the fair value method had been
applied. The Company will adopt the disclosure method in Fiscal year 1997
and the adoption is not expected to have a material effect on the Company's
financial position or results of operations.
F-10
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. PROPERTY AND EQUIPMENT:
The components of property and equipment at February 29, 1996 and February
28, 1995 are as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
(YEARS) 1996 1995
<S> <C> <C> <C>
Buildings 20 $ 964,054 $ 161,501
Leasehold improvements 5-10 417,487 431,130
Computer equipment 3-5 1,657,438 1,840,755
Capitalized leases 2-5 312,649 335,033
Computer software 3 148,237 210,766
Furniture and fixtures 5 756,534 747,407
Vehicles 2-4 111,140 160,043
------------ ------------
4,367,539 3,886,635
Less accumulated depreciation 2,097,790 2,382,945
------------ ------------
$ 2,269,749 $ 1,503,690
============ ============
</TABLE>
3. BUSINESS COMBINATIONS AND DISPOSAL:
ADVEC LIMITED
On August 1, 1995, the Company acquired certain assets and liabilities of
Advec Limited in the United Kingdom under an asset purchase agreement for
approximately $418,000. The acquisition has been accounted for as a
purchase and accordingly, the purchase price has been allocated to the
assets acquired and the liabilities assumed based on the estimated fair
values at the date of acquisition. The results of operations have been
included from August 1, 1995. The excess consideration above the fair
value of net assets acquired of approximately $395,000 has been recorded as
goodwill. Supplemental pro forma information for the results of operations
is not presented since the amounts are not material to the Company's
consolidated financial position and results of operations.
DOMINION SOUND SYSTEMS, PLC.
On November 30, 1994, the Company sold the capital stock of Dominion in
exchange for the assumption of the net liabilities of Dominion in the
amount of $154,208. This amount was recognized in 1995 and is included in
other income.
F-11
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. BUSINESS COMBINATIONS AND DISPOSAL, CONTINUED:
CI COMPUTER SOFTWARE LIMITED
On September 18, 1994, the Company acquired the capital stock of CI
Computer Software Limited, a United Kingdom company, in exchange for $20,
assumption of net liabilities and forgiveness of a working capital advance
in the amount of approximately $200,000. The business combination was
accounted for as a purchase and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based on the
estimated fair values at the date of acquisition. The results of
operations are included from September 18, 1994, the date of acquisition.
The excess consideration above the fair value of net assets acquired of
approximately $333,000 has been recorded as goodwill.
ICS COMPUTING GROUP LIMITED
On May 21, 1993, the Company acquired Questgold Technology Limited
("Questgold"), a United Kingdom company, for approximately $4.1 million.
The business combination was accounted for as a purchase and accordingly,
the purchase price has been allocated to the assets acquired and the
liabilities assumed based on the estimated fair values at the date of
acquisition. The results of operations are included from May 21, 1993, the
date of acquisition. On June 15, 1993, Questgold changed its name to ICS
Computing Group Limited.
4. INCOME TAXES:
The significant components of income tax expense (benefit) are as follows
(all amounts are in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current provision:
Federal $ 7 $ - $ -
State 43 11 -
Foreign 80 188 12
Deferred provision:
Federal (307) - -
State - - -
Foreign 373 310 243
------- ------ ------
$ 196 $ 509 $ 255
======= ====== ======
</TABLE>
F-12
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. INCOME TAXES, CONTINUED:
A reconciliation of the provision for income taxes to the amount computed
by applying the statutory federal income tax rate to income before income
taxes is as follows (all amounts are in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income tax at statutory rate $ 768 $ 730 $ 490
State income taxes (net of federal tax
deduction) 28 7 0
Impact of foreign taxes (52) (126) (61)
Utilization of federal net
operating losses (238) (112) (188)
Reduction of deferred tax asset
valuation allowance (302) - -
Other (8) 10 14
------- ------- -------
Tax expense $ 196 $ 509 $ 255
======= ======= =======
</TABLE>
The deferred tax asset was offset by a 100% valuation allowance for
1995 and 1994. Based upon the performance of the United States
subsidiaries, the Company determined that a valuation allowance related to
the deferred tax asset in the United States was not required as of February
29, 1996. As a result, the Company reduced the valuation allowance by
$238,000 for current year utilization of the federal net operating loss and
recorded a credit of $302,000 to tax expense to reduce the valuation
allowance to zero. The deferred tax liability recorded is principally due
to temporary differences as a result of the timing of recognition of the
capitalization and amortization of internally developed software costs and
the amortization of goodwill. The components of the deferred tax asset are
as follows (all amounts are in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cumulative U.S. NOL's at
statutory rate $ 302 $ 540 $ 736
Cumulative U.K. NOL's
at statutory rate 40 - -
Alternative minimum
tax credit carryforward 7 - 1
------ ------ ------
Gross deferred tax
asset $ 349 $ 540 $ 737
====== ====== ======
</TABLE>
As of February 29, 1996, the Company has net operating loss carryforwards,
subject to certain limitations under the provisions of Internal Revenue
Code Section 382, that expire February 28, 2003 through 2007, respectively,
of $54,653, $320,000, $44,371, $264,891, and $289,327.
F-13
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. RELATED PARTY TRANSACTIONS:
Accounts and other receivables from related parties at February 29, 1996
and February 28, 1995 are comprised of $362,474 and $197,674, respectively,
due from affiliated companies which have borrowed funds from the Company
principally in the form of unsecured 10% notes which mature within one year
from February 29, 1996.
6. LEASES:
The Company leases office space and automobiles under non-cancelable
operating leases. Rental expense for the years ended 1996, 1995 and 1994
were $1,011,103, $857,316 and $788,235, respectively. In addition, the
Company leases certain computers under capital leases.
Future minimum lease payments for operating leases and capital leases at
February 29, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
<S> <C> <C>
1997 $ 729,092 $ 55,197
1998 604,839 16,150
1999 379,156
2000 259,114
2001 28,182
Thereafter 28,182
------------ ---------
$ 2,028,565 $ 71,347
============ =========
</TABLE>
7. LINE OF CREDIT:
The Company maintains a line of credit in the United Kingdom which is
secured by certain accounts receivables. The line of credit is utilized
for short-term borrowing for general corporate use. Interest is charged
based on the average outstanding balance at a variable rate which was 8% as
of February 29, 1996. The outstanding balance on the line of credit was
$1,078,933 and $661,750 at February 29, 1996 and February 28, 1995,
respectively.
F-14
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. LONG-TERM DEBT:
NOTES PAYABLE
Notes payable as of February 29, 1996 and February 28, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Notes payable to a United Kingdom
bank, interest at a variable rate,
currently 8%, collateralized by a
building in the U.K., payable in
quarterly installments of
$17,300 commencing October 1995 $ 654,075 $ 0
Notes payable to a United Kingdom
bank, interest at a rate of 8.5%,
collateralized by accounts receivable
and other assets of the Company, payable in
quarterly installments of $38,200
commencing March 1995 612,000 790,000
Other 28,838 79,129
------------ ----------
Total notes payable 1,294,913 869,129
Less: current portion 250,840 206,881
------------ ----------
$ 1,044,073 $ 662,248
============ ==========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997 $ 250,840
1998 222,000
1999 222,000
2000 222,000
2001 70,000
Thereafter 308,073
------------
$ 1,294,913
============
</TABLE>
CONVERTIBLE NOTES
In December 1995, the Company issued $2,000,000 of two-year 7% convertible
notes. The notes are convertible at the holder's option as follows: 20%
of the principal and accrued interest are convertible 61 days after
issuance with an additional 20% convertible each subsequent 10 days into
shares of common stock at the lesser of $5.75 per share or 85% of the
market price of the common stock on the date of conversion. As of February
29, 1996, $20,000 in principal and the related accrued interest thereon had
been converted into 3,478 shares of common stock.
F-15
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. STOCKHOLDERS' EQUITY:
The Company has an incentive plan under which options to purchase shares of
the Company's common stock have been granted to eligible employees. There
are 1,200,000 shares of common stock available for award under the plan
which is administered by the Compensation Committee of the Board of
Directors.
Option activity under the stock option plan is summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994
<S> <C> <C> <C>
Shares under option at beginning of year 980,000 690,000 -
Granted 12,500 300,000 690,000
Exercised (162,500) - -
Forfeited (257,500) (10,000) -
-------- ------- -------
Shares under option at end of year 572,500 980,000 690,000
======== ======= =======
Shares under option exercisable at end of year 70,000 - -
======== ======= =======
Shares available for future grant 465,000 220,000 510,000
======== ======= =======
</TABLE>
The exercise price of options exercised under the plan, during 1996
were $3.31 to $4.41. The exercise prices of shares under option at
February 29, 1996 were $3.31 to $4.41.
All options granted have exercise prices of 100% of market value at
date of grant and are generally exercisable at the rate of 25% per year
beginning two years from date of grant. Options expire 10 years from the
date of grant.
In accordance with the issuance of the convertible notes, the Company
granted warrants to purchase 25,000 shares of the Company's stock at $6.90,
the fair value of the common stock at the date of grant. As of February
29, 1996, the warrants have not been exercised.
The Company granted 4,800, 9,800, and 1,000 shares of common stock to
outside directors during 1996, 1995 and 1994, respectively, and recognized
$24,000, $24,570, and $900 of expense related to these transactions during
the same periods. Additionally, in 1994, the Company issued 63,000 common
shares to holders of a bridge loan in accordance with the terms of the
subscription agreement. The Company recognized expense of $56,700
associated with this transaction.
F-16
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. STOCKHOLDERS' EQUITY, CONTINUED:
The Company holds 133,400 shares of Common Stock in treasury at February
29, 1996. 100,000 shares were given to the Company during fiscal year
ended February 28, 1994 as payment for debt owed to the Company. In
November 1994, 40,000 shares were reacquired from a previous officer of
Dominion Sound Systems. Subsequently in 1995, 6,600 shares were issued to
a director for services for which the Company recognized $16,170 of
expense. Treasury stock is held at cost and presented as a reduction of
stockholders' equity.
10. COMMITMENTS AND CONTINGENCIES:
The Company is not presently a party to any material litigation, nor to the
knowledge of management is any material litigation threatened against the
Company. There are no significant pending legal proceedings, other than
routine litigation incidental to the Company's business.
11. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest totaled $231,528, $234,443 and $215,607 in 1996,
1995 and 1994, respectively.
The Company paid income taxes of $262,559 and $12,684 in 1996 and 1995.
The Company paid no income taxes in 1994.
During 1996, convertible notes with principal amounts of $20,000 were
converted into 3,478 shares common stock.
12. SEGMENT INFORMATION:
The Company operates in a single industry segment of marketing of computer
hardware and software, software support services and software development
services.
A summary of operations by geographic area follows:
<TABLE>
<CAPTION>
U.S. U.K.
OPERATIONS OPERATIONS
FISCAL YEAR 1996
<S> <C> <C>
Revenues $ 2,646,811 $ 18,658,476
Cost of sales 809,736 6,933,289
Gross profit 1,837,075 11,725,187
SG&A expense 1,374,028 8,960,633
Depreciation 43,896 650,776
Operating profit 419,151 2,113,778
Total assets $ 2,778,168 $ 13,173,237
</TABLE>
F-17
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. SEGMENT INFORMATION, CONTINUED:
<TABLE>
<CAPTION>
U.S. U.K.
OPERATIONS OPERATIONS
FISCAL YEAR 1995
<S> <C> <C>
Revenues $ 2,270,679 $ 15,527,887
Cost of sales 629,296 5,536,727
Gross profit 1,641,383 9,991,160
SG&A expense 1,033,513 7,720,017
Depreciation 48,273 594,443
Operating profit 311,061 1,925,236
Total assets $ 715,887 $ 8,889,364
FISCAL YEAR 1994
Revenues $ 2,587,692 $ 9,570,141
Cost of sales 1,299,783 4,098,629
Gross profit 1,287,909 5,471,512
SG&A expense 808,445 3,774,377
Depreciation and amortization 38,480 557,934
Operating profit 594,959 985,226
Total assets $ 1,060,792 $ 6,224,991
</TABLE>
The Company sells its product and services to a variety of customers. No
individual customer accounted for more than 10% of Company revenues during
fiscal years 1996, 1995 and 1994.
13. PENSIONS:
The Company's U.K. subsidiaries operate a pension plan which is designed to
provide death and retirement benefits for eligible employees. The pension
costs are assessed in accordance with the advice of a qualified actuary.
Actuarial assumptions used at February 29, 1996 included a 9% long-term
rate of return on assets, a 8.5% discount rate and salary increase of 5.5%.
- All employees over 25 years of age are eligible for the scheme.
- Benefit formula: annual pension to be 1/60 of final pensionable salary
for each year of pensionable service subject to a maximum fraction of
2/3.
- Funding policy: the employer contributes to the fund at rates determined
by the actuary. Employees contribute in accordance with the plan.
- Assets held are fixed interest securities and deferred annuities
insurance policies.
F-18
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. PENSIONS, CONTINUED:
Cost components for 1996 (in 000's):
<TABLE>
<S> <C>
Service cost $ 116
Interest cost 318
Return on assets (360)
Amortization and deferral of
period service costs 11
-----
Net periodic pension cost $ 85
=====
</TABLE>
Reconciliation of funded status as of February 29, 1996 (in 000's):
<TABLE>
<S> <C>
Accrued benefits obligation $3,481
======
Project benefit obligation $3,638
Assets at market value 3,820
------
Funded status 182
Unrecognized transition asset (59)
Unrecognized loss 104
------
Prepaid pension expense $ 227
======
</TABLE>
14. FOURTH QUARTER ADJUSTMENTS:
During the fourth quarter of 1996, the Company recorded an income tax
provision principally in the United Kingdom in the amount of $258,000. The
effective tax rate used during the year reflected anticipated foreign tax
rates and tax planning alternatives during the quarterly periods and was
adjusted to the actual amounts in the fourth quarter. Additionally, in the
fourth quarter, the Company recognized a credit to tax expense of $302,000
related to recognition of the United States deferred tax asset when the
Company determined that it was more likely than not that the deferred tax
asset would be realized in future periods.
Also, during the fourth quarter of fiscal year 1996, the Company recorded a
$227,000 credit related to the defined benefit pension plan in the United
Kingdom based on the computation of its actuarial determination of net
periodic pension cost in the fourth quarter.
F-19
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. SIGNIFICANT RISKS AND UNCERTAINTIES:
The Company's operating results and financial condition can be impacted by
a number of factors, including but not limited to any of the following
which could cause actual results to vary materially from current and
historical results or the Company's anticipated future results.
The Company's business is focused principally on developing and marketing
platform-migration software and development tools that enable users to
migrate applications written for proprietary IBM mid-range computer systems
to portable operating systems such as UNIX and Windows NT in the United
States and the United Kingdom. Product revenues to be received from the
Company's UNIBOL products are difficult to forecast because of the evolving
product lifecycle for the UNIBOL36 product and the recent introduction of
the UNIBOL 400 product. The Company's success will depend on the level of
market acceptance and enhancements to the market on a timely and cost
effective basis, and maintain a labor force sufficiently skilled to compete
in the current environment.
While management believes that the Company's financing needs for the
foreseeable future will be satisfied from cash flows from operations and
the Company's existing credit facilities, unforeseen events and adverse
economic or business trends may significantly increase cash demands beyond
those currently anticipated that affect the Company's ability to
generate/raise cash to satisfy financing needs.
The Company derives net revenues primarily from its operations in Northern
Ireland. It is reasonably possible that this concentration of revenues
makes the Company vulnerable to the risk of a near-term severe impact on
consolidated net revenues due to unforeseen political and economic forces
as well as exchange rate fluctuations.
As a result of the above and other factors, the Company's operations and
financial position can vary significantly from quarter-to-quarter and
year-to-year. These variations may contribute to volatility in the market
for the Company's common stock.
F-20
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16. SUBSEQUENT EVENT:
On April 16, 1996, the Company completed its acquisition of Smoky Mountain
Technologies, Inc. (SMT). The Company issued 500,000 shares of its common
stock for all of the outstanding common stock of SMT. This transaction
will be accounted for as a pooling of interests.
Unaudited pro forma results of operations including SMT for the years ended
December 31, and assuming this merger had occurred on February 29, 1996 are
as follows (all amounts are in thousands except per share amounts):
<TABLE>
<CAPTION>
(IN 000S)
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994
<S> <C> <C> <C>
Revenues $ 22,190 $ 18,271 $ 12,182
Net income $ 2,031 $ 1,692 $ 1,201
Net income per share $ 0.39 $ 0.36 $ 0.26
</TABLE>
F-21
<PAGE> 52
UNICOMP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
BALANCE AT TH CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END OF
THE PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1994
Accounts receivable
allowance $ 500 $ 65,694 $ 66,194
Deferred tax asset
valuation allowance $ 895,000 (157,249) (1) $ 737,751
Year ended February 28, 1995
Accounts receivable
allowance $ 66,194 $ 80,710 $ 10,759 $ (30,657) $ 127,006
Deferred tax asset
valuation allowance $ 737,751 $ (197,751) (1) 540,000
Year ended February 29, 1996
Accounts receivable
allowance $ 127,006 $ 96,296 $ (99,424) $ 123,878
Deferred tax asset
valuation allowance $ 540,000 $ (540,000) (2) $ 0
</TABLE>
(1) To adjust the valuation allowance to reflect the utilization of net
operating losses during the year
(2) To adjust the valuation allowance to reflect the utilization of net
operating losses during the year and realization of remaining
deferred tax asset.
F-22
<PAGE> 1
EXHIBIT 10.4
DATED 25TH September 1995
EURO SOFTWARE SYSTEMS LIMITED (1)
UNICOMP HOLDINGS (UK) LIMITED (2)
--------------------------------
AGREEMENT FOR SALE OF A BUSINESS
--------------------------------
We hereby certify that the within
is a true copy of the original
of which it purports to be a copy
Dated this 13th day of October 1995
Signed /s/ Johns Elliot
-----------------
Johns Elliot
Solicitors
11 Lombard Street
BELFAST BT1 1RG
TUGHAN & CO.,
Marlborough House,
30 Victoria Street,
Belfast.
BT1 3GS
Ref: PA/RT/0424U
<PAGE> 2
THIS AGREEMENT is made this 25th day of September 1995
BETWEEN:
(1) EURO SOFTWARE SYSTEMS LIMITED a company incorporated under the laws of
Northern Ireland with registered number NI [18435] whose registered
office is at Advec House, Falcon Road, Belfast BT12 ("the Seller")
(2) UNICOMP HOLDINGS (UK) LIMITED a company incorporated under the laws of
England with registered number 2777955 whose registered office is at
Acre House, 11/15 William Road, London NW1 3ER ("the Buyer")
1. INTERPRETATION
1.1 In this Agreement including the Schedules:-
1.1.1 the following words and expressions have the following meanings, unless
they are inconsistent with the context:
"Assets" means the property, assets and rights
of the Business to be purchased by the
Buyer as described in clause 2.1 which
relate to the trading activities of
the Seller in U.K.
"Book Debts" means the trade debts owed to the
Seller at the Effective Date in
connection with the Business including
without limitation amounts due on foot
of invoices issued by the Seller in
relation to services to be performed
after 1st July 1995
"Business" means the business of supply and
maintenance of hardware acquired by
the Seller from the company formerly
known as Advec Limited (now Pixels
Limited) but for the avoidance of
doubt does not include the Timeless
Software
1
<PAGE> 3
"Contracts" means the current contracts and
engagements of the Seller in relation
to the Business as listed in Appendix
1, but excluding contracts with
employees
"Effective Date" means the commencement of business on
the 1st day of July 1995
"Employees" means the persons who, at the
Effective Date, were employed by the
Seller for the purposes of the
Business a list of whom is included in
Schedule 2
"Goodwill" means the freehold goodwill of the
Seller in relation to the Business,
together with the exclusive right for
the Buyer or its assignee to represent
itself as carrying on the Business in
succession to the Seller, and the use
of the name "Advec" in association
with the Business
"Heads of Agreement" means the agreement dated 11th July
1995 between the Seller and the Buyer
for the sale of the Business to the
Buyer
"Industrial Property Rights" means all industrial and intellectual
property rights of the Seller in
respect of the company formerly known
as Advec Limited only including,
without limitation, the patents, trade
marks, registered designs and
copyrights in any part of the world
and the copyright in all drawings,
plans, specifications, designs and
computer software owned by the Seller
and used in or for the purposes of the
Business and all know-how and
2
<PAGE> 4
confidential information so owned and
used
"Liabilities" means all liabilities of the Business
outstanding at close of business on
10th July 1995
"Regulations" means the Transfer of Undertakings
(Protection of Employment) Regulations
1981
"Stocks" means the stocks of engineering parts
and equipment and the engineering
spares, tools and test equipment owned
by the Seller at the Effective Date
for the purposes of or in connection
with the Business, including items
which, although subject to reservation
of title by the vendors, are under the
control of the Seller listed in
Appendix 3
1.1.2 all references to a statutory provision or measure shall be construed as
including references to:
(a) any statutory modification, consolidation or re-enactment (whether
before or after today's date) for the time being in force;
(b) all statutory instruments or orders made pursuant to it;
(c) all statutory provisions of which it is a consolidation,
re-enactment or modification;
1.1.3 except where the context otherwise requires, words denoting the singular
include the plural and vice versa; words denoting any gender include all
other genders; words denoting persons include firms and corporations and
vice versa;
1.1.4 unless otherwise stated, a reference to a clause, sub-clause or Schedule
is a reference to a clause or sub-clause of, or a Schedule to, this
Agreement;
3
<PAGE> 5
1.1.5 clause headings are for ease of reference only and are not intended to
affect the construction of this Agreement.
1.1.6 a document expressed to be "in the approved terms" means a document the
terms of which have been approved by or on behalf of the parties to this
Agreement and a copy of which has been signed for identification purposes
by or on behalf of them.
1.1.7 all warranties, representations, indemnities, covenants, agreements and
obligations given or entered into by more than one person in this
Agreement are given or entered into jointly and severally.
2. AGREEMENT FOR SALE
2. Subject to the terms and conditions of this Agreement, the Seller as
beneficial owner shall sell to the Buyer which shall purchase as at the
Effective Date:
2.1 the Business as a going concern; and
2.2 all the property, assets and rights of the Seller used in the conduct of
the Business including, but without limitation;
(a) the Goodwill;
(b) the Stocks;
(c) the benefit of the Contracts; and
(d) the Industrial Property Rights.
3. PURCHASE CONSIDERATION
3.1 The consideration for the sale by the Seller of the Business and the
Assets (other than the Stocks) shall be the sum of [pound sterling]
171,580 and for the Stocks the sum of [pound sterling]100,000.
3.2 The consideration stated in Clause 3.1 shall be paid as follows:-
3.2.1 as to [pound sterling]100,000 paid on signing of Heads of Agreement;
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<PAGE> 6
3.2.2 a further payment of [pound sterling]131,580 on the date hereof (if not
already paid in accordance with the terms of the Heads of Agreement)
3.2.3 four further monthly payments of [pound sterling]10,000 each of first
payment to be made on 1st October 1995 and thereafter on the first day of
each succeeding month
3.3 The consideration shall be exclusive of any value added tax.
3.4 If any amount shall become payable to the Buyer by way of compensation or
indemnity in respect of a breach of warranty hereunder, the purchase
price payable pursuant to this section shall be reduced by the amount so
payable in respect of such breach; provided however that any such set-off
or reduction shall be without prejudice to the right of the Buyer to
recover the excess of any compensation or indemnity or any costs from the
Seller.
4. COMPLETION
4.1 The sale and purchase shall be completed immediately upon exchange of
this Agreement when all the matters set out in this clause 4 shall be
effected.
4.2 The Seller shall deliver to the Buyer, at the principal office of the
Business, such of the Assets (if any) as are capable of being transferred
by delivery and have not already been delivered.
4.3 The Seller shall cause to be delivered or (if so requested by the Buyer)
made available to the Buyer:
4.3.1 such documents as are required by the Buyer's Solicitors to complete the
sale and purchase of the Assets and vest title to the Assets in the
Buyer, including (but without limitation) assignments of the Goodwill,
Contracts, Industrial Property Rights
4.3.2 copies only of all its books of account, ledgers, payroll records, income
records, stock and other records, information relating to customers and
suppliers (including without limitation a list of all the customers of
the Business during the last two years, a list of purchasers to which
outstanding quotations have been given and a list
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<PAGE> 7
of unfulfilled orders as at the Effective Date), relevant computer
programmes and other books and documents which relate to the Business
(other than minute books relating to directors' and shareholders'
meetings and statutory books) all originals to remain in the custody of
the Seller;
4.3.3 all its designs and drawings, plans, instructional and promotional
material, sales publications, advertising materials, terms and conditions
of sale and other technical material and sales matter which relate to the
Business together with any plates, blocks, negatives and similar material
relating to them;
4.3.4 copies only of all records (including without limitation national
insurance and PAYE) relating to all the Employees duly completed and up
to date all originals to remain in the custody of the Seller;
4.3.5 copies only of the value added tax records referred to in clause 10.2 all
originals to remain in the custody of the Seller;
4.3.6 letter of non-crystallisation in the approved terms duly executed by
Northern Bank Limited.
4.3.7 a certified copy of a resolution of the board of directors of the Seller
approving the sale of the Assets on the terms of this Agreement and
authorising Mr. Martin to execute it for and on behalf of the Seller.
4.4 Upon completion of the matters referred to above the Buyer shall deliver
to the Seller:-
4.4.1 a banker's draft in respect of the part of the purchase consideration
specified in clause 3.2.2 (if not already paid)
4.5 The Buyer shall not be obliged to complete the purchase of any of the
Assets unless the purchase of all the Assets is completed in accordance
with this Agreement.
4.6 The Buyer may in its absolute discretion waive any requirement contained
in clause 4.2 or 4.3.
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4.7 In addition to the other provisions of Clause 4.3 it is further agreed
that the Buyer may at its own expense and subject to indemnifying the
Seller against any reasonable costs thereby incurred by the Seller carry
out an historical audit of the books and records of the Seller relating
to the Business to satisfy USA Stock Exchange requirements and the Seller
agrees to co-operate with and provide all relevant information and
records within its control to the Buyer to enable the Buyer to comply
with such requirements.
5. INDEPENDENT ACCOUNTANTS
If any difference of opinion arises between the parties or their respective
accountants, in relation to any provisions of this Agreement in respect of which
a party is expressed to have the right to refer such matter for determination by
an independent firm of accountants pursuant to this clause 13, subject to any
time period referred to in the relevant provision during which the parties must
seek to resolve the dispute before referring it to an independent firm having
expired, either party may refer the matter to an independent firm of accountants
for resolution as follows:
5.1 the independent firm shall be jointly agreed by the parties or, if no
agreement is reached within 10 days after either party notifies the other
that it wishes to appoint a firm under this clause, shall be appointed at
the request of either party by the President of the Ulster Society of the
Institute of Chartered Accountants in Ireland;
5.2 the independent firm shall be requested to resolve the matter in dispute
applying the terms of this Agreement;
5.3 the determination of the independent firm shall be final and binding on
both parties in the absence of manifest error;
5.4 the costs of the determination of the independent firm shall be within
their award.
6. DEBTORS
6.1 The Seller shall forthwith supply to the Buyer full details of the Book
Debts and the Buyer shall account to the Seller at monthly intervals for
the amounts received by it in respect of the Book Debts and the Seller
shall account to the Buyer at monthly intervals for amounts by it but due
to the Buyer
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<PAGE> 9
6.2 Subject to any express intention to the contrary on the part of the
debtor, any money received by the Buyer in respect of any Book Debts from
a person who is also indebted to the Seller shall be deemed to have been
paid in or towards discharge of the oldest debt, regardless of the
identity of the creditor.
6.3 Each of the Buyer and the Seller shall for a period of 12 months give to
the other reasonable access to its books and records in relation to the
receipt of monies.
7. CREDITORS AND LIABILITIES
7.1 The Seller shall forthwith supply to the Buyer full details of the
Liabilities.
7.2 The Seller shall promptly discharge the Liabilities and notwithstanding
completion of the purchase of the Business shall be responsible for all
debts payable by and claims outstanding against it at the Effective Date
including all wages, sums payable under taxation statutes, rent and other
expenses and the Seller shall indemnify and keep indemnified the Buyer in
respect of all losses, claims or demands as a result of non-payment of
the Liabilities.
7.3 In addition to clause 7.2:
7.3.1 the Seller shall remain liable for claims by third parties in respect of
any service supplied or sale made by the Seller or any act or omission of
the Seller prior to the Effective Date or arising from defective
products or parts of products manufactured by the Seller, even if the
defective products or parts were sold by the Buyer
7.3.2 upon becoming aware of any such claim the Seller will promptly give
notice of it to the Buyer and shall not take steps which might reasonably
be expected to damage the commercial interests of the Buyer without prior
consultation with the Buyer
7.3.3 the Buyer shall indemnify the Seller against claims by third parties
arising from defective products which may be brought against the Seller
in respect of sales occurring after the Effective Date which relate to
the Business and are not covered by clause 7.3.1
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7.4 The liability of the Seller under clause 7.3.1 shall extend to any
settlement of a claim (including costs) made with the approval of the
Seller.
7.5 The Buyer shall take all reasonable steps to perform, in accordance with
its normal business standards, the obligations of the Seller to provide
after-sales service or to meet warranty claims of customers arising in
the normal course of the Business as a result of transactions carried out
by the Seller prior to the Effective Date, insofar as copies of which
have been produced to the Buyer.
8. CONTRACTS
The Buyer shall perform and discharge the outstanding obligations and
liabilities of the Seller under the Contracts, except for any obligations
or liabilities attributable to a breach on the part of the Seller.
9. EMPLOYEES
9.1 On the signing of this Agreement the Buyer will reimburse the Seller for
full amounts incurred by and legally payable by the Seller in relation to
the redundancy of Tom Edgar, Robert Hall and Graham Whiteside
9.2 The Buyer will keep the Seller indemnified against all claims by the
Employees or any of them pursuant to the Regulations or otherwise in
relation to their employment after 31st July 1995 and against all claims
by the said Tom Edgar, Robert Hall and Graham Whiteside or any of them
pursuant to the Regulations or otherwise arising out of this Agreement.
9.3 The Seller shall indemnify the Buyer against any order to pay
compensation to any of its employees other than the Employees and the
said Tom Edgar, Robert Hall and Graham Whiteside made pursuant to the
Regulations provided that the order is not made as a result of any act
or omission of the Buyer in derogation of its obligations under this
Agreement.
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<PAGE> 11
9.4 All salaries and other emoluments, including holiday pay, tax and
national insurance payments and contributions to retirement benefit
schemes, relating to the Employees shall be borne by the Seller up to the
31st day of July 1995 and at the date of this Agreement all necessary
apportionments shall be made as at the Effective Date such apportionment
to include also all expenses for the Employees paid by the Seller after
the Effective Date.
10. VALUE ADDED TAX
10.1 The parties shall use all reasonable endeavours to procure that the sale
of the Business is deemed to be a transfer of a business as a going
concern for the purposes of the Value Added Tax Act 1994 and Regulation 5
of the Value Added Tax (Special Provisions) Order 1992.
10.2 The Seller shall forthwith deliver to the Buyer all the records of the
Business for value added tax purposes which are required by the Value
Added Tax Act of 1983 & 33(1)(b) to be preserved by the Buyer.
10.3 The Buyer shall for a period of not less than 6 years from the Effective
Date preserve the records delivered to it by the Seller and, upon
reasonable notice during normal business hours, make them available to
the Seller or its agents.
11. TITLE AND APPORTIONMENTS
11.1 The Seller shall take all necessary steps and co-operate fully with the
Buyer to ensure that it obtains the full benefit of the Business and
Assets and shall execute such documents and take such other steps (or
procure other necessary parties so to do) as are necessary or appropriate
for vesting in the Buyer all its rights and interests in the Assets.
11.2 Insofar as the Assets comprise the benefit of contracts which cannot
effectively be assigned to the Buyer without the consent of a third party
or except by an agreement of novation:
11.2.1 the Seller and the Buyer shall use all reasonable endeavours to obtain
consent or to procure a novation
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<PAGE> 12
11.2.2 unless and until consent is obtained or the contracts are novated the
Buyer shall, for its own benefit and to the extent that the contracts
permit, perform on behalf of the Seller (but at the Buyer's expense) all
the obligations of the Seller arising after the Effective Date (insofar
as they have been disclosed to the Buyer) and indemnify the Seller
against all costs, proceedings, claims, demands and expenses which may be
incurred by the Seller as a result of any act, neglect, default or
omission on the part of the Buyer to perform or comply with any such
obligations of the Seller which fails to be performed after the Effective
Date.
11.3 All outgoings relating to or payable in respect of the Business up to the
Effective Date shall be borne by the Seller and as from the Effective
Date shall be borne by the Buyer and all rents, royalties and other
periodical payments receivable in respect of the Business up to that time
shall belong to and be payable to the Seller and as from that time shall
belong to and be payable to the Buyer.
11.4 Where any amounts fall to be apportioned under this Agreement, the Seller
shall provide the Buyer with full details of the apportionments, together
with supporting vouchers or similar documentation, and in the absence of
dispute the appropriate payment shall be made by or to the Seller
forthwith. If the amount of any apportionment is in dispute, the
provisions of clause 5.2 shall apply for resolving the dispute and the
amount determined in accordance with that clause shall be paid within 14
days of the determination, and not so paid then paid together with
interest calculated on a daily basis (as well after as before judgment),
from the Effective Date until the date of actual payment, at the rate of
3 per centum per annum above the base rate from time to time of Northern
Bank Limited.
12. WARRANTIES BY THE VENDOR
The Seller warrants to the Buyer that full details of all information
regarding the cancellation, termination or non-renewal of maintenance
contracts which the Seller has received, whether or not in writing, prior
to the 10th July 1995 have been given to the Buyer.
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<PAGE> 13
13. ANNOUNCEMENTS
No announcement of any kind shall be made in respect of the subject
matter of this agreement except as specifically agreed in writing between
the Seller and the Buyer, or in any announcement required by The Stock
Exchange. Any announcement by either party shall in any event be issued
only after prior consultation with the other.
14. COSTS
All expenses incurred by or on behalf of the parties, including all fees
of agents, solicitors, accountants employed by either of the parties in
connection with the negotiation, preparation and execution of this
Agreement shall be borne solely by the party which incurred them.
15. COMMUNICATIONS
15.1 All communications between the parties with respect to this Agreement
shall be delivered by hand or sent by first-class post to the address of
the addressee as set out in this Agreement, or to such other address
(being in the United Kingdom) as the addressee may from time to time have
notified for the purpose of this clause, or sent by telex.
15.2 Communications shall be deemed to have been received:
15.2.1 if sent by first-class post: 3 business days after posting exclusive of
the day of posting
15.2.2 if delivered by hand: on the day of delivery
15.2.3 if sent by facsimile: at the time of transmission.
15.3 Communications addressed to the Seller shall be marked for the attention
of Darwin Martin, Euro Software Systems Limited, Advec House, Falcon
Road, Belfast. Communications addressed to the Buyer shall be marked for
the attention of Joe Higgins at Hydepark house, Mallusk Road,
Newtownabbey BT36 8WU.
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15.4 In proving service:
15.4.1 by delivery by hand: it shall be necessary only to produce a receipt for
the communication signed by or on behalf of the addressee
15.4.2 by post: it shall be necessary only to prove that the communication was
contained in an envelope which was duly addressed and posted in
accordance with this clause.
15.4.3 by facsimile: it shall be necessary only to produce the sender's copy
bearing the addressee's answerback.
16. ENTIRE AGREEMENT AND SCHEDULES
16.1 This Agreement and the Schedules shall constitute the entire Agreement
and understanding between the parties with respect to all matters which
are referred to.
16.2 All the Schedules form part of this Agreement.
16.3 This Agreement shall be binding upon each party's successors and assigns.
17. INVALIDITY
17.1 If any term or provision in this Agreement shall in whole or in part be
held to any extent to be illegal or unenforceable under any enactment or
rule of law, that term or provision or part shall to that extent be
deemed not to form part of this Agreement and the enforceability of the
remainder of this Agreement shall not be affected.
18. PROPER LAW
18.1 The construction, validity and performance of this Agreement shall be
governed by the laws of Northern Ireland.
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Signed for and on behalf of
EURO SOFTWARE
SYSTEMS LIMITED
Signed by /s/ Stephen A. Hafer, Chairman
for and on behalf of
UNICOMP HOLDINGS (UK)
LIMITED in the presence
of:- /s/ Joseph Higgins, Director
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SCHEDULE 1
CONSIDERATION
Goodwilll )
Fixed Assets )
Industrial Property Rights ) [pound sterling]171,580
Contracts and all other )
property, assets and rights )
Stocks [pound sterling]100,000
SCHEDULE 2
EMPLOYEES
Richard Taylor
Sonya McConville
Peter Hawkins
Gerry Brown
John Cunningham
Terry Young
Connor Murphy
Edna Armstrong
Neil Bain
Graham Childs
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<PAGE> 1
EXHIBIT 10.5
OFFSHORE WARRANT SUBSCRIPTION AGREEMENT
This Warrant Subscription Agreement (the "Agreement"), dated as
of December 20, 1995, is entered into by and between Unicomp Inc., a Colorado
corporation (the "Issuer"), and First Bermuda Securities Limited. (the
"Purchaser").
The Issuer has offered to sell outside the United States (as
that term is defined in Regulation S ("Regulation S") under the United States
Securities Act of 1933, as amended (the "Act")) to the Purchaser a warrant to
purchase 25,000 shares of its common stock ("Common Stock"), $0.001 par value,
at a price of $6.90 per share. Capitalized terms used herein and not defined
herein shall have the meanings given to them in Regulation S.
The parties hereto agree as follows:
1. Sale of Warrant. Upon the basis of the representations
and warranties, and subject to the terms and conditions, set forth in this
Agreement, the Issuer covenants and agrees to sell to the Purchaser on the
Closing Date (as hereinafter defined), a warrant in the form of Exhibit A
hereto (the "Warrant") to purchase 25,000 shares of its Common Stock (such
shares of Common Stock and other securities issued and issuable upon any
exercise of the Warrant or a New Warrant (as defined below), the "Warrant
Shares"), at a price equal to $6.90 per share, in exchange for services already
rendered in full by the Purchaser in a capital-raising transaction for the
Issuer and upon the basis of the representations and warranties, and subject to
the terms and conditions, set forth in this Agreement, the Purchaser covenants
and agrees to accept from the Issuer on the Closing Date the Warrant as
payment in full for said services.
2. Closing. The closing of the sale of the Warrant
pursuant to Section 1 hereof shall take place on or before December 20, 1995
(the "Closing Date"), at the offices of First Bermuda Securities Limited,
located at 33/35 Reid Street, Jardine House, Hamilton Bermuda HM11. The
Warrant shall be delivered by, or on behalf of, the Issuer at the
above-mentioned offices of First Bermuda on the Closing Date. Delivery of the
Warrant shall be in accordance with the instructions of the Purchaser, and in
such names as the Purchaser shall instruct, subject to customary settlement
procedures.
3. Description of the Warrant
(a) Execution and Delivery. The Warrant shall be
executed by the Issuer and delivered to the Purchaser on the Closing Date.
(b) Exercise. (i) The Issuer covenants that procedures
will be implemented ("Procedures") to ensure that the Warrant and any new
warrant issued pursuant to Section 2(a) or Section 4 of the Warrant or
otherwise (a "New Warrant") may not be exercised within the United States and
that no Warrant Share may be delivered within the United States upon any such
exercise, other than in an offering that meets the definition of "offshore
transaction" pursuant to paragraph (i)(3) of Rule 902 of Regulation S, unless
registered under the Act or an exemption from such registration is available.
The Purchaser and any subsequent transferee pursuant to the terms of this
Agreement and the Warrant or any New Warrant (the Purchaser and each such
transferee, a "Holder") covenant not to exercise the Warrant or any New Warrant
except in compliance with the Procedures and the terms of this Agreement and
the Warrant or such New Warrant.
(ii) Each Holder agrees to deliver, prior to any
exercise of the Warrant or any New Warrant, a certificate in the form of
Schedule Two to Exhibit A hereto or a written opinion of counsel that the
Warrant, or New Warrant, as the case may be, and the Warrant Shares delivered
upon any exercise thereof have been registered under the Act or are exempt from
registration thereunder.
(iii) The Issuer need not issue or deliver Warrant
Shares unless and until in the opinion of the Issuer's counsel (such counsel's
fees to be paid by the Issuer) all applicable requirements of state securities
laws and registration of such shares under the Act, and all applicable listing
requirements of any national securities exchange on which shares of the same
class are then listed have been complied with.
<PAGE> 2
(c) Transferability of Warrant. Each Holder will not
sell, assign convey, pledge, hypothecate, grant security interests in,
encumber, give away or in any other manner dispose of or transfer, whether
voluntarily or by operation of law, any of the Warrant any New Warrant or the
Warrant Shares to any person or entity that to the actual knowledge of such
Holder, competes directly or indirectly with the Issuer without the prior
written consent of the Issuer. Any attempted transfer of the Warrant, the
Warrant Shares or any New Warrant not m accordance with this Section 3(c) shall
be null and void, and the Issuer shall not in any way be required to give
effect to such transfer. No transfer of the Warrant or any New Warrant shall
be effective for any purpose hereunder unless and until (i) written notice of
such transfer and of the name and address of the transferee has been received
by the Issuer, (ii) the transferee shall first agree in a writing deposited
with the Secretary of the Issuer to be bound by all the provisions of this
Agreement, and (iii) in the opinion of the Issuer's counsel (such counsel's
fees to be paid by the Issuer) all requirements of applicable state securities
laws and any requirement to register such transfer under the Act have been
complied with.
(d) Successors to the Issuer. This Agreement shall be
binding upon and inure to the benefit of any successor or successors of the
Issuer.
(e) Legends. The Warrant and each New Warrant
shall bear a legend stating:
This warrant and the shares of common stock of Unicomp Inc. to be issued
upon any exercise of the Warrant have not been registered under the
Securities Act of 1933, as amended (the "Act") and this warrant may not be
exercised by or on behalf of any U.S. person (as defined in Regulation S
under the Act) unless registered under the Act or an exemption from such
registration is available.
In addition this Warrant is subject to restrictions on sale, assignment,
conveyance, pledge, hypothecation, grant of security interest,
encumbrance, gift or any other manner of disposition or transfer, whether
voluntarily or by operation of law, as set forth in an Offshore Warrant
Subscription Agreement dated as of December 20, 1995, by and between First
Bermuda Securities Limited, and Unicomp Inc., a copy of which is available
for inspection at the offices of Unicomp Inc..
Further, unless the Warrant Shares have been registered under the Act, upon any
exercise of any part of the Warrant or any New Warrant, all certificates
representing Warrant Shares shall bear on the face thereof substantially the
following legend:
The shares of common stock represented hereby have not been registered
under the Federal Securities Act of 1933, as amended (the "Act") or the
securities laws of any state, and may be offered or sold only if
registered under the Act and all other applicable securities laws or if
Unicomp Inc. receives a satisfactory opinion of counsel that an exemption
from such registration is available.
4. Representations and Warranties of the Purchaser. The
Purchaser understands, and represents and warrants to, and agrees with, the
Issuer, that:
(a) The Purchaser understands that no federal or state
agency has passed on or made any recommendation or endorsement of the Warrant.
(b) The Purchaser acknowledges that, in making the
decision to purchase the Warrant, it has relied solely upon independent
investigations made by it and not upon any representations made by the Issuer
with respect to the Issuer or the Warrant.
(c) The Purchaser understands that the Warrant is
being offered and sold to it in reliance on specific exemptions or
non-application from the registration requirements of federal and state
securities laws and that the Issuer is relying upon the truth and accuracy of
the representations, wan-antics, agreements, acknowledgements and
understandings of the Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of the Purchaser to
acquire the Warrant.
(d) The Purchaser is not a U.S. Person (as defined in
Regulation S) and is not an affiliate of the Issuer.
(e) No offer of the Warrant was made to the Purchaser
in the United States.
(f) At the time the buy order for the Warrant was
originated the Purchaser was located outside the United States.
<PAGE> 3
(g) None of the Purchaser, its affiliates or any
person acting on behalf of the Purchaser or any such affiliate has engaged, or
will engage, in any Directed Selling Efforts with respect to the Warrant, any
New Warrant or the Warrant Shares; and the Purchaser and its affiliates have
complied, and will comply, with the Offering Restrictions, and any other
requirements, of Regulation S.
(h) The Purchaser is aware that the Warrant, any New
Warrant and the Warrant Shares have not been and will not be registered under
the Act and may only be offered or sold pursuant to registration under the Act
or an available exemption therefrom, and subject to the terms and conditions
set forth herein.
(i) The Purchaser:
(i) will not, during the period commencing on
the Closing Date and ending on the day 40 days after the Closing Date (the
"Restricted Period"), offer or sell the Warrant, any New Warrant or any Warrant
Shares in the United States, to a U.S. Person or for the account or benefit of
a U.S. Person or other than in accordance with Rule 903 or Rule 904 of
Regulation S; and
(ii) will, after the expiration of the Restricted
Period, offer, sell, pledge or otherwise transfer the Warrant, any New Warrant
or any Warrant Shares only pursuant to registration under the Act or an
available exemption therefrom and, in any case, in accordance with applicable
state securities laws.
(j) If the Purchaser offers and sells the Warrant, any
New Warrant or any Warrant Shares during the Restricted Period, then it will do
so only in accordance with the provisions of Regulation S or pursuant to
registration under the Act.
(k) The transactions contemplated by this Agreement:
(i) have not been pre-arranged with a purchaser
located in the United States or is a U.S. Person; and
(ii) are not part of a plan or scheme to evade
the registration provisions of the Act.
(l) The Purchaser is purchasing the Warrant for its
own account for the purpose of investment and not (i) with a view to, or for
sale in connection with, any distribution thereof or of any New Warrant or
Warrant Shares or (ii) for the account or on behalf of any U.S. Person.
(m) The Purchaser has consulted with the Issuer with
respect to the transactions pursuant to this Agreement, and no objection has
been raised by the Issuer.
(n) Neither the Purchaser nor any affiliate thereof
has entered, or will enter or has the intention of entering, into any put
option, short position or other similar instrument or position with respect to
the Warrant Shares or securities of the same class as the Warrant Shares
purchased in any transaction.
5. Representations and Warranties of the Issuer. The
Issuer represents and warrants to, and agrees with, the Purchaser that:
(a) The Issuer has been duly incorporated and is
validly existing as a corporation in good standing under the laws of Colorado.
(b) This Agreement has been duly authorized, executed
and delivered by the Issuer and is a valid and binding agreement enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Issuer has full corporate. power and authority necessary to
enter into this Agreement and to perform its obligations hereunder.
(c) No consent, approval authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Issuer or any of its affiliates is required for execution of this Agreement,
including, without limitation, the issuance and sale of the Warrant or any
exercise of the Warrant or the issuance of shares upon any exercise of the
Warrant, or the performance of its obligations hereunder.
<PAGE> 4
(d) Neither the sale of the Warrant or any exercise of
the Warrant, any New Warrant or the issuance of Warrant Shares upon any exercise
of the Warrant, pursuant to, nor the performance of its obligations under, this
Agreement by the Issuer will:
(i) violate, conflict with, result in a breach
of, or constitute a default (or an event which with the giving of notice or the
lapse of time or both would be reasonably likely to constitute a default) under
(A) the articles of incorporation, charter or by-laws of the Issuer or any of
its affiliates, (B) any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Issuer or any of its affiliates of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Issuer or any of its affiliates or over the properties or assets of the Issuer
or any of its affiliates, (C) the terms of any bond, debenture, note or any
other evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which
the Issuer or any of its affiliates is a party, by which the Issuer or any of
its affiliates is bound, or to which any of the properties of the Issuer or any
of its affiliates is subject, or (D) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which the Issuer or any of
its affiliates is a party; or
(ii) result in the creation or imposition of any
lien, charge or encumbrance upon the Warrant, any New Warrant or any Warrant
Shares or any of the assets of the Issuer or any of its affiliates.
(e) The Warrant (except for clauses iii and vi below)
and all Warrant Shares upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances;
(ii) have been, or will be, duly and validly
authorized and will be duly and validly issued;
(iii) shall be duly authorized, validly issued,
fully paid and nonassessable, and the Holder will have full legal and
equitable title thereto, free and clear of all liens, encumbrances, claims and
rights of others created by or through the Issuer. The Issuer shall use its
best efforts to list such Warrant Shares prior to such delivery upon each
securities exchange, if any, upon which such class of security is listed at the
time of such delivery;
(iv) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Issuer;
(v) will not subject the holders thereof to
personal liability by reason of being such holders; and
(vi) are quoted on, and will be, following the
completion of the Restricted Period (if sold in accordance with the provisions
of this Agreement), eligible for trading on, the National Association of
Securities Dealers Automated Quotations system ("NASDAQ").
(f) The Issuer is a Reporting Issuer and has filed all
reports required to be filed by Section 13(a) or 15(d) of the Securities and
Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
(g) There is no pending or, to the best knowledge of
the Issuer, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Issuer or any of its affiliates that would materially affect the execution by
the Issuer of, or the performance by the Issuer of its obligations under, this
Agreement.
(h) The Issuer, any person representing the Issuer,
and, to the best knowledge of the Issuer, any other person selling or offering
to sell the Warrant in connection with the transaction contemplated by this
Agreement, have not made, at any time through and including the date hereof,
any oral communication in connection with the offer or sale of the Warrant
which contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(i) The Issuer is not in possession of any material
non-public information that, if disclosed, would, or could reasonably be
expected to have, an effect on the price of the Warrant or the Common Stock as
to which the Purchaser is not aware. The Purchaser acknowledges awareness of
the
<PAGE> 5
Issuer's intent to file a Form S-3 in the near future in order to register
certain shares of the Issuer's common stock which are issued and outstanding
but not currently registered and acknowledges that the Issuer currently is
placing and may in the future place shares of its common stock in Regulation S
offerings other than through the Purchaser.
(j) The sale of the Warrant pursuant to this Agreement
will be made in accordance with the provisions and requirements of Regulation S
and any applicable state law.
(k) No offer to buy the Warrant was made to the Issuer
by any person in the United States.
(l) None of the Issuer, any affiliate of the Issuer,
or any person acting on behalf of the Issuer or any such affiliate has engaged,
or will engage, in any Directed Selling Efforts with respect to the Warrant,
any New Warrant or the Warrant Shares.
(m) The transactions contemplated by this Agreement:
(i) have not been pre-arranged with a purchaser
who is in the United States or is a U.S. Person; and
(ii) are not part of a plan or scheme to evade
the registration provisions of the Act.
(n) The Issuer has not issued, and after the Closing
Date will not issue, any stop transfer order or other order impeding the sale
and delivery of the Warrant, any New Warrant or any Warrant Shares except for a
stop order restricting the sale of the Warrant, any New Warrant or any such
Warrant Shares into the United States or to, or for the account or benefit of,
U.S. Persons during the Restricted Period, and a stop order restricting the sale
of the Warrant and any New Warrant pursuant to Section 3(c) hereof.
(o) The Issuer has not offered to sell or sold any
warrants convertible into its common stock in a transaction involving
Regulation S in the past year; and there are no outstanding warrants
convertible into its common stock which have been sold in a transaction
involving Regulation S, except for the Warrant.
6. Covenants of the Issuer. The Issuer covenants and
agrees with the Purchaser to:
(a) continue to comply with all applicable reporting
requirements of the Exchange Act;
(b) refrain from publishing or disseminating any
material in connection with the offering of the Warrant, any New Warrant or the
Warrant Shares except as required by regulatory or judicial order or request or
as deemed by the Issuer to be advisable in complying with Nasdaq reporting or
listing requirements.
(c) ensure that all Offering Restrictions applicable
to the sale of Warrant, any New Warrant and the Warrant Shares pursuant to this
Agreement are thoroughly complied with and satisfied;
(d) refrain from engaging, and insure that none of its
affiliates will engage, in any Directed Selling Efforts with respect to the
Warrant, any New Warrant and the Warrant Shares; and
(e) notify the Purchaser promptly if at any time
during the period beginning on the date of this Agreement and ending on the
Closing Date (i) any event shall have occurred as a result of which any oral
communication made by the Issuer, any person representing the Issuer, or, to
the best knowledge of the Issuer, by any other person in connection with the
transactions contemplated by this Agreement would include an untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (ii) there is any public disclosure of material
information regarding the Issuer or its financial condition or results of
operation.
<PAGE> 6
7. Conditions Precedent to the Purchasers Obligations. The
obligations of the Purchaser hereunder are subject to the performance by the
Issuer of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
(a) The representations and warranties made by the
Issuer in this Agreement shall, unless waived by the Purchaser, be true and
correct as of the date hereof and at the Closing Date, with the same force and
effect as if they had been made on and as of the Closing Date.
(b) The Issuer will provide an opinion of counsel
confirming in substance the representations and warranties set out in
paragraphs (a), (b), (c), (d), (e) and (f) of Section 5. Such counsel will not
opine as to laws of foreign countries.
8. Conditions Precedent to the Issuer's Obligations. The
obligations of the Issuer hereunder are subject to the performance by the
Purchaser of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
(a) The representations and warranties made by the
Purchaser in this Agreement shall, unless waived by the Issuer, be true and
correct as of the date hereof and at the Closing Date, with the same force and
effect as if they had been made on and as of the Closing Date.
(b) The Purchaser will execute and deliver to the
Issuer, and retain in the records of the Purchaser, a certificate in the form
attached hereto as Exhibit B.
9. Fees and Expenses. Each of the Purchaser and the Issuer
agrees to pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses and disbursements
of such party's counsel.
10. Non-delivery of the Warrant. If, on the Closing Date,
the Issuer shall fail to deliver the Warrant to the Purchaser pursuant to this
Agreement for any reason other than the failure by the Purchaser to comply with
its obligations hereunder, then the Issuer shall:
(i) hold the Purchaser harmless against any
loss, claim or damage arising from or as a result of such failure by the Issuer
(including, without limitation, any such loss, claim or damage resulting from
an obligation to resell the Warrant), and
(ii) reimburse the Purchaser for all of its
out-of-pocket expenses, including fees and disbursements of its counsel,
incurred by the Purchaser in connection with this Agreement and the
transactions contemplated herein; provided, however, that the Issuer shall then
be under no further liability to the Purchaser except as provided in this
Section 10 and Section 11 hereof.
11. Indemnification.
(a) In the event the Purchaser becomes involved in any
capacity in any action proceeding or investigation in connection with any
matter referred to in or relating to this Agreement (except as expressly
provided for in paragraph (c) of this Section 11), the Issuer will reimburse
the Purchaser for its reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as such
expenses are incurred, and will indemnify and hold the Purchaser harmless from
and against any losses, claims, damages or liabilities to which it may become
subject in connection with any such action, proceeding, investigation or
matter, unless such loss, claim, damage or liability results primarily from the
Purchaser's gross negligence, recklessness or bad faith in performing the
services which are the subject of this Agreement.
(b) In the event that the Issuer becomes involved in
any capacity in any action, proceeding or investigation in connection with any
matter referred to in or relating to this Agreement (except as expressly
provided for in paragraph (c) of this Section 11), the Purchaser will reimburse
the Issuer for its reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, as such
expenses are incurred, and will indemnify and hold the Issuer harmless from and
against any losses, claims, damages or liabilities to which it may become
subject in connection with any such action, proceeding, investigation or
matter, unless such loss, claim damage or liability results primarily from the
Issuer's gross negligence, recklessness or bad faith in performing the services
which are the subject of this Agreement.
<PAGE> 7
(c) Promptly after receipt by an indemnified party
under this Section II of notice of the commencement of any action, such
indemnified party shall notify the Indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have
pursuant to this Section 11 unless, due to the failure to be so notified, the
indemnifying party is unable to contest the losses or claims indemnified
against, and such omission shall in no event relieve the indemnifying party
from any liability which it may have to any indemnified party otherwise than
under this Section 11. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may elect by written notice delivered to
such indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party, (who shall not, except with the consent
of the indemnified party, with consent shall not be unreasonably withheld, be
counsel to the indemnifying party); provided however, that if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assert such legal defenses and otherwise to participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 11 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall be liable for only the reasonable expenses of counsel and shall not be
liable for the expenses of more than one separate counsel for each indemnified
party), (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; provided further, however,
that, if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clauses (i) or (iii).
12. Survival of the Representations, Warranties, etc. The
respective agreements, representations, warranties, indemnities and other
statements made by or on behalf of the Issuer and the Purchaser, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation made by or on behalf of the other party to this Agreement
or any officer, director or employee of, or person controlling or under common
control with, such party and will survive delivery of any payment for the
Warrant.
13. Notices. All communications hereunder shall be in
writing, and, if sent to the Purchaser shall be sufficient in all respects if
delivered, sent by registered mail, or by telecopy and confirmed to the
Purchaser at:
First Bermuda Securities Limited
33/35 Reid Street, Jardine House
Hamilton Bermuda HM 11
Attention: Maxwell R. Roberts
Telephone: (441) 295-1330
Telecopy: (441) 292-9471
or, if sent to the Issuer, shall be delivered, sent by registered mail or by
telecopy and confirmed to the Issuer at:
Unicomp Inc.
1800 Sandy Plains Parkway
Suite 320A
Marietta, Georgia 30066
Attention: Stephen A. Hafer
Telephone: (770) 424-3684
Telecopy: (770) 424-5558
<PAGE> 8
14. Miscellaneous.
(a) This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
(b) This Agreement shall inure to the benefit of and
be binding upon the parties hereto, their respective successors and, with
respect to Section 11 hereof, the officers, directors and controlling persons
thereof and each person under common control therewith, and no other person
shall have any right or obligation hereunder.
(c) This Agreement shall be governed by, and construed
in accordance with, the laws of the islands of Bermuda.
(d) The headings of the sections of this document have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
IN WITNESSOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
BY: UNICOMP INC.
Signature: /s/Stephen A. Hafer
--------------------------
Name: Stephen A. Hafer
Title: Chairman & President
BY: FIRST BERMUDA SECURITIES LIMITED
Signature: /s/Maxwell R. Roberts
--------------------------
Name: Maxwell R. Roberts, CPA
Title: Chief Operating Officer
<PAGE> 9
EXHIBIT A
THIS WARRANT AND THE SHARES OF COMMON STOCK OF UNICOMP INC.
TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND THIS WARRANT MAY
NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON (AS DEFINED IN
REGULATION S UNDER THE ACT) UNLESS REGISTERED UNDER THE ACT OR ON
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
IN ADDITION, THIS WARRANT IS SUBJECT TO RESTRICTIONS ON SALE,
ASSIGNMENT, CONVEYANCE, PLEDGE, HYPOTHECATION, GRANT OF SECURITY
INTEREST, ENCUMBRANCE, GIFT OR ANY OTHER MANNER OF DISPOSITION OR
TRANSFER, WHETHER VOLUNTARILY OR BY OPERATION OF LAW, AS SET FORTH
IN AN OFFSHORE WARRANT SUBSCRIPTION AGREEMENT, DATED AS OF DECEMBER
20, 1995, BY AND BETWEEN FIRST BERMUDA SECURITIES, LTD., AND UNICOMP
INC. "THE AGREEMENT"), A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT
THE OFFICES OF UNICOMP INC.
WARRANT
to Purchase Shares
of
Common Stock ($0.001 par value)
of
UNICOMP INC.
This certifies that, for value received, First Bermuda Securities
Limited and any subsequent transferee pursuant to the terms of the Agreement
and this Warrant (each, a "Holder") is entitled to purchase, subject to the
provisions of this Warrant, from Unicomp Inc., a Colorado corporation (the
"Issuer"), at any time or from time to time on or after the date hereof and on
or before December 20, 2000 (the "Expiration Date"), 25,000 fully paid and
nonassessable shares of common stock, $0.001 par value (the "Common Stock"), of
the Issuer at a price equal to $6.90 per share (the "Exercise Price")(such
shares of Common Stock and other securities issued and issuable upon exercise
of this Warrant, the "Warrant Shares").
Section 1. Definitions. Except as otherwise specified herein, terms
defined herein shall have the meanings assigned to them in the Agreement.
Section 2. Exercise of Warrant. (a) Subject to the provisions
hereof, this Warrant may be exercised, in whole or in part, but not as to a
fractional share, at any time or from time to time on or after the date hereof
and on or before the Expiration Date, by presentation and surrender hereof to
the Issuer at the address which, in accordance with the provisions of Section
10 hereof, is then effective for notices to the Issuer, with the Election to
Purchase Form annexed hereto as Schedule One, duly executed and accompanied by
payment to the Issuer as further set forth below in this Section 2, for the
account of the Issuer, of the Exercise Price for the number of Warrant Shares
specified in such form. If this Warrant should be exercised in part only, the
Issuer shall, upon surrender of this Warrant for the cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder hereof to purchase
the balance of the Warrant Shares purchasable hereunder. The Issuer shall
maintain at its principal place of business a register for the registration of
this Warrant and registration of transfer for this Warrant. The Exercise Price
for the number of Warrant Shares specified in the Election to Purchase Form
shall be payable in United States dollars by certified or official bank check
payable to the order of the Issuer or by wire transfer of immediately available
funds to an account by the Issuer for that purpose.
A-1
<PAGE> 10
(b) Prior to the delivery of any securities which the Issuer
shall be obligated to deliver upon exercise of this Warrant, the Issuer shall
use its best efforts to comply with all Federal and state laws and regulations
thereunder, including without limitation, Regulation S under the Act, requiring
the registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority, provided, however, that the
Issuer shall have no obligation to register the Warrant Shares beyond its
obligation set forth in Section 9 below. The Issuer need not issue or deliver
such shares of Common Stock unless and until in the opinion of the Issuer's
counsel (such counsel's fees to be paid by the Issuer) all applicable
requirements of state securities laws and registration of such shares under the
Act, and all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed have been complied
with.
(c) The Issuer covenants that procedures will be implemented
("Procedures") to ensure that this Warrant may not be exercised within the
United States and that the Warrant Shares may not be delivered within the
United States upon such exercise, other than in offerings that meet the
definition of "offshore transaction" pursuant to paragraph (i)(3) of Rule 902
of Regulation S under Regulation Act unless registered under the Act or an
exemption from such registration is available. The Holder covenants not to
exercise this Warrant except in compliance with the Procedures and the terms of
the Agreement. The Purchaser or any other Holder of this Warrant must deliver,
prior to any exercise of this Warrant, (i) a certificate in the form attached
hereto as Schedule Two or (ii) a written opinion of counsel that this Warrant
and the securities delivered upon any exercise thereof have been registered
under the Act or are exempt from registration thereunder.
(d) All Warrant Shares, when issued upon exercise of this
Warrant, shall be duly authorized, validly issued, fully paid and
nonassessable, and the Holder will have full legal and equitable title thereto,
free and clear of all liens, encumbrances, claims and rights of others created
by or through the Issuer. The Issuer shall use its best efforts to list such
Warrant Shares prior to such delivery upon each securities exchange, if any,
upon which such class of security is listed at the time of such delivery.
(e) Unless the Warrant Shares have been registered under the
Act, upon any exercise of any part of this Warrant, all certificates
representing Warrant Shares shall bear on the face thereof substantially the
following legend:
The shares of common stock represented hereby have not been registered
under the Federal Securities Act of 1933, as amended (the "Act") or the
securities laws of any state, and may be offered or sold only if
registered under the Act and all other applicable securities laws or
Unicomp Inc. receives a satisfactory opinion of counsel that an exemption
from such registration is available.
(f) This Warrant may not be exercised to any extent by
anyone after the end of the Warrant term.
Section 3. Reservation of Shares; Preservation of Rights of
Investor. The Issuer hereby agrees that there shall be reserved for issuance
and/or delivery upon exercise of this Warrant, such number of Warrant Shares as
shall be required for issuance or delivery upon exercise of this Warrant. The
Warrant surrendered upon exercise shall be cancelled by the Issuer. After the
Expiration Date, no shares of Common Stock shall be subject to reservation in
respect of this Warrant. The Issuer further agrees (i) that it will not, by
amendment of its Articles of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observation or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Issuer, (ii) promptly to take all action as may from time to time be
required in order to permit the Holder to exercise this Warrant and the Issuer
duly and effectively to issue shares of its Common Stock or other securities as
provided herein upon the exercise hereof, and (iii) promptly to take all action
required or provided for herein to protect the rights of the Holder granted
hereunder against dilution. Without limiting the generality of the foregoing,
should the Warrant Shares at any time consist in whole or in part of shares of
capital stock having a par value, the Issuer agrees that before taking any
action which would cause an adjustment of the Exercise Price so that the same
would be less than the then par value of such Warrant Shares, the Issuer shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of such Common Stock at the Exercise Price as so adjusted.
The Issuer further agrees that it will not establish a par value for its Common
Stock while this Warrant is outstanding in an amount greater than the Exercise
Price.
Section 4. Exchange, Transfer, Assignment or Loss of Warrant. The
Holder will not sell, assign, convey, pledge, hypothecate, grant security
interests in, encumber, give away or in any other manner dispose of or
transfer, whether voluntarily or by operation of law, any of this Warrant, the
Warrant Shares
A-2
<PAGE> 11
or any new Warrant to any person or entity that, to the actual knowledge of
such Holder, competes directly or indirectly with the Issuer without the prior
written consent of the Issuer. Any attempted transfer of this Warrant, the
Warrant Shares or any new Warrant not in accordance with this Section shall be
null and void, and the Issuer shall not in any way be required to give effect
to such transfer. No transfer of this Warrant shall be effective for any
purpose hereunder until (i) written notice of such transfer and of the name and
address of the transferee has been received by the Issuer, (ii) the transferee
shall first agree in a writing deposited with the Secretary of the Issuer to be
bound by all the provisions of this Agreement and (iii) in the opinion of the
Issuer's counsel (such counsel's fees to be paid by the Issuer), all
requirements of applicable state securities laws and any requirement to
register such transfer under the Act have been complied with. Upon surrender
of this Warrant to the Issuer by any transferee authorized under the provisions
of this Section 4, and subject to the terms and conditions of the Securities
Act, the Issuer shall, without charge, execute and deliver a new Warrant
registered in the name of such transferee at the address specified by such
transferee, and this Warrant shall promptly be cancelled. The Issuer may deem
and treat the registered holder of any Warrant as the absolute owner thereof
for all purposes, and the Issuer shall not be affected by any notice to the
contrary. Any Warrant, if presented by an authorized transferee, may be
exercised by such transferee without prior delivery of a new Warrant issued in
the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Issuer will execute and deliver a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute a separate
contractual obligation on the part of the Issuer, whether or not the Warrant so
lost, stolen, destroyed or mutilated shall be at any time enforceable by
anyone.
Section 5. Rights of the Holder. Neither a Holder nor his
transferee by devise or the laws of descent and distribution or otherwise shall
be, or have any rights or privileges of, a shareholder of the Issuer with
respect to any Warrant Shares, unless and until certificates representing such
Warrant Shares shall have been issued and delivered thereto.
Section 6. Adjustments in Exercise Price and Warrant Shares. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision
or combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for which this
Warrant may be exercised shall be increased or reduced, as of the record date
for such recapitalization, in the same proportion as the increase or decrease
in the outstanding shares of Common Stock, and the Exercise Price shall be
adjusted so that the aggregate amount payable for the purchase of all Warrant
Shares issuable hereunder immediately after the record date for such
recapitalization shall equal the aggregate amount so payable immediately before
such record date.
(b) If the Issuer declares a dividend on Common Stock, or
makes a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities convertible into
or exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend or distribution, in proportion to
the increase in the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all such securities convertible into Common Stock)
of Common Stock as a result of such dividend or distribution, and the Exercise
Price shall be adjusted so that the aggregate amount payable for the purchase
of all the Warrant Shares issuable hereunder immediately after the record date
for such dividend or distribution shall equal the aggregate amount so payable
immediately before such record date.
(c) If the Issuer declares a dividend on Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders of
its Common Stock, other than as part of its dissolution or liquidation or the
winding up or its affairs, any shares of its stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder shall
receive notice of such event as set forth in Section 8 below.
(d) In case of any consolidation of the Issuer with, or
merger of the Issuer into, any other corporation (other than a consolidation or
merger in which the Issuer is the continuing corporation and in which no change
occurs in its outstanding Common Stock), or in case of any sale or transfer of
all or substantially all of the assets of the Issuer, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Issuer, except where the Issuer is the surviving entity and no change occurs in
its outstanding
A-3
<PAGE> 12
Common Stock), the corporation formed by such consolidation or the corporation
resulting from such merger or the corporation which shall have acquired such
assets or securities of the Issuer, as the case may be, shall execute and
deliver to the Holder simultaneously therewith a new Warrant, satisfactory in
form and substance to the Holder, together with such other documents as the
Holder may reasonably request, entitling the Holder thereof to receive upon
exercise of such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer or exchange of securities, or upon the dissolution following such sale
or other transfer, by a holder of the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange, provided that if the kind or
amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance is not the same
for each share of Common Stock in respect of which rights of election shall not
have been exercised ("non-electing share"), then for the purpose of this
paragraph (d) the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance for each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares. Such
new Warrant shall contain the same basic other terms and conditions as this
Warrant and shall provide for adjustments which, for events subsequent to the
effective date of such written instrument shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 6. The above
provisions of this paragraph (d) shall similarly apply to successive
consolidations, mergers, exchanges, sales or other transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration
of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall,
upon exercise of this Warrant have the right to receive, in lieu of the shares
of Common Stock of the Issuer that the Holder otherwise would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to the Holder upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock of the
Issuer had the Holder been the holder of record of such shares of Common Stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such dissolution,
liquidation or winding up results in any cash distribution in excess of the
Exercise Price provided by this Warrant for the shares of Common Stock
receivable upon exercise of this Warrant, the Holder may, at the Holder's
option, exercise this Warrant without making payment of the Exercise Price
and, in such case, the Issuer shall, upon distribution to the Holder, consider
the Exercise Price to have been paid in full and, in making settlement to the
Holder, shall obtain receipt of the Exercise Price by deducting an amount equal
to the Exercise Price for the shares of Common Stock receivable upon exercise
of this Warrant from the amount payable to the Holder. For purposes of this
paragraph, the sale of all or substantially all of the assets of the Issuer and
distribution of the proceeds thereof to the Issuer's shareholders shall be
deemed a liquidation.
(f) If an event occurs which is similar in nature to the
events described in this Section 6, but is not expressly covered hereby, the
Board of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock,
$0.001 par value, of the Issuer as the same exists at the Closing Date or as
such stock may be constituted from time to time, except that for the purpose of
this Section 6, the term "Common Stock" shall include any stock of any class of
the Issuer which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Issuer and which is not subject to redemption by the
Issuer.
(h) The Issuer shall retain a firm of independent public
accountants of recognized standing (who may be any such firm regularly employed
by the Issuer) to make any computation required under this Section 6, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 6.
(i) Whenever the number of Warrant Shares or the Exercise
Price shall be adjusted as required by the provisions of this Section 6, the
Issuer forthwith shall file in the custody of its secretary or an assistance
secretary, at its principal office, and furnish to each Holder hereof, a
certificate prepared in accordance with paragraph (h) above, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth in
reasonable detail the circumstances requiring the adjustment.
(i) Notwithstanding any other provision, this Warrant shall
be binding upon and inure to the benefit of any successor or successors of the
Issuer.
(k) No adjustment in the Exercise Price in accordance with
the provisions of this Section 6 need be made if such adjustment would amount
to a change in such Exercise Price of less than
A-4
<PAGE> 13
$.01; provided, however, that the amount by which any adjustment is not made by
reason of the provisions of this paragraph (k) shall be carried forward and
taken into account at the time of any subsequent adjustment in the Exercise
Price.
(l) If an adjustment is made under this Section 6 and the
event to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 6 shall be readjusted to the Exercise Price and
the number of Warrant Shares which would be in effect had the earlier
adjustment hot been made.
Section 7. Taxes on Issue or Transfer of Common Stock and
Warrant. The Issuer shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities on the exercise of this Warrant. The Issuer
shall not be required to pay any tax which may be payable in respect of any
transfer of this Warrant or in respect of any transfers involved in the issue or
delivery of shares or the exercise of this Warrants in a name other than that of
the Holder and the person requesting such transfer, issue or delivery shall be
responsible for the payment of any such tax (and the Issuer shall not be
required to issue or deliver said shares until such tax has been paid or
provided for).
Section 8. Notice of Adjustment. So long as this Warrant
shall be outstanding, (a) if the Issuer shall propose to pay any dividends or
make any distribution upon the Common Stock, or (b) if the Issuer shall offer
generally to the holders of Common Stock the right to subscribe to or purchase
any shares of any class of Common Stock or securities convertible into Common
Stock or any other similar rights, or (c) if there shall be any proposed
capital reorganization of the Issuer in which the Issuer is not the surviving
entity, recapitalization of the capital stock of the Issuer, consolidation or
merger of the Issuer with or into another corporation, sale, lease or other
transfer of all or substantially all of the property and assets of the Issuer,
or voluntary or involuntary dissolution, liquidation or winding up of the
Issuer, or (d) if the Issuer shall give to its stockholders any notice, report
or other communication respecting any significant or special action or event,
then in such event, the Issuer shall give to the Holder, at least thirty days
prior to the relevant date described below (or such shorter period as is
reasonably possible if thirty days is not reasonably possible), a notice
containing a description of the proposed action or event and stating the date
or expected date on which a record of the Issuer's stockholders is to be taken
for any of the foregoing purposes, and the date or expected date on which any
such dividend, distribution, subscription, reclassification, reorganization
consolidation, combination, merger, conveyance, sale, lease or transfer,
dissolution, liquidation or winding up is to take place and the date or
expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
Section 9. Registration Rights. (a) Right to Piggyback.
Whenever the Company proposes to register any of its shares of Common Stock
under the Securities Act of 1933, as amended (the "Securities Act") and the
registration form to be used is not a Form S-8 or Form S-4 and otherwise may be
used for the registration of any Warrant Shares (a "Piggyback Registration"),
the Company will give prompt written notice to all holders of the Warrant
Shares for which the registration form may be used of its intention to effect
such a registration and will include in such registration all Warrant Shares
(in accordance with the priorities set forth in Subsections 9(b) and 9(c)
below) with respect to which the Company has received written requests for
inclusion therein within fifteen (15) days after the receipt of the Company's
notice or such shorter time as the Company may deem necessary or advisable due
to the anticipated filing date of such registration. Inclusion of Warrant
Shares in any secondary registration on behalf of holders of the Company's
securities will be subject to any rights of approval and other rights which
such holders may have and conditions which such holders may impose.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
in such registration (i) first, the securities that the Company proposes to
sell and (ii) second, the Warrant Shares requested to be included in such
registration and other securities requested to be included in such registration
pro rata among the holders of the Warrant Shares and the other securities on
the basis of the number of securities so requested to be included therein.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, the
Company will include in such
A-5
<PAGE> 14
registration (i) first, the securities requested to be included therein by the
holders requesting such registration and such other securities as may have the
right to be included on a priority with such securities, pro rata based on the
number of such securities requested to be included in such registration and
(ii) second, the Warrant Shares and other securities requested to be included
in such registration, pro rata based on the number of Warrant Shares and other
securities so requested to be included therein.
(d) Selection of Underwriters. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering will be in the discretion of the Company.
Section 10. Notices. All communications hereunder shall be
in writing, and, if sent to the Holder shall be sufficient in all respects if
delivered, sent by registered mail, or by telecopy and confirmed to the Holder
at:
First Bermuda Securities Limited
33/35 Reid Street, Jardine House
Hamilton, Bermuda HMII
Attention: Maxwell R. Roberts
Telephone: (809) 295-1330
Telecopy: (809) 292-9471
or it to any other Holder, addressed to such Holder at such address as it shall
have specified to the Issuer in writing, or, if sent to the Issuer, shall be
delivered, sent by registered mail or by telecopy and confirmed to the Issuer
at:
Unicomp Inc.
1800 Sandy Plains Parkway
Suite 320A
Marietta, Georgia 30066
Attention: Stephen A. Hafer
Telephone: (770) 424-3684
Telecopy: (770) 424-5558
Section 11. Governing Law. This Warrant shall be governed
by, and interpreted in accordance with, the laws of the State of Colorado.
Dated: December 20, 1995
UNICOMP INC.
BY: S.A. Hafer
-----------------------
Name: S.A. Hafer
Title: President
ATTEST:
Mary Ann Culpepper
- ------------------
Secretary
A-6
<PAGE> 15
Schedule One
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase shares of Unicomp Inc. Common Stock issuable
upon the exercise of this Warrant, and requests that certificates for such
shares shall be issued in the name of:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: , 19
-----------------------
Name of Registered Owner:
----------------------------------------------------
- -------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature:
---------------------------------------------------------------------
A-7
<PAGE> 16
Schedule Two
[Warrant Agent]
Dear Sir/Madam
In connection with the warrant of Unicomp Inc. issued to First
Bermuda Securities Limited, on December 20, 1995, and attached hereto, the
undersigned certifies, represents and warrants as follows:
1. I/We hereby exercise the warrants identified above. [Give details of
how payment is being made, in accordance with terms of warrants.]
2. I/We hereby certify that I am/we are not a U.S. person (as that term
is defined in Regulation S under the Securities Act); nor am I/we
acting for or on behalf of a U.S. person.
3. At the time of exercise of the warrants I am/we are and any person
for whom we are acting is located outside the United States.
4. Please deliver the common stock of Unicomp Inc. as follows:
-------------
-------------
-------------
[specify address outside the United States]
Very truly yours,
[WARRANTHOLDER]
By:
------------------
Name:
Title:
A-8
<PAGE> 17
EXHIBIT B
[Warrant Agent]
Dear Sir/Madam
In connection with the Warrant of Unicomp Inc., issued to First
Bermuda Securities Limited, on December 20, 1995, and attached hereto, the
undersigned performed the functions of managing underwriter in connection with
the offering of such warrants and certifies, represents and warrants as
follows:
We hereby certify that the distribution of the warrants identified
above was completed on December 20, 1995.
Very truly yours,
FIRST BERMUDA SECURITIES LIMITED
By:
-------------------------------
Name:
Title:
A-9
<PAGE> 1
EXHIBIT 10.6
FORM OF CONVERTIBLE NOTE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S)
EXCEPT PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
UNICOMP, INC.
7% CONVERTIBLE NOTE DUE DECEMBER 24, 1997
THIS NOTE is one of a duly authorized issue of Convertible Notes of UNICOMP,
INC., a corporation duly organized and existing under the laws of the state of
Colorado (the "Company") designated as its 7% Convertible Note Due December 24,
1997, in an aggregate principal amount of up to $2,000,000.
FOR VALUE RECEIVED, the Company promises to pay to purchaser or the registered
holder hereof (the "Holder"), the principal sum of $250,000.00 (United States
Dollars) on December 24, 1997 (the "Maturity Date"), and to pay interest on the
principal sum outstanding from time to time in arrears on the Maturity Date, at
the rate of 7% per annum accruing from the date of issuance. Accrual of
interest shall commence on the first business day to occur after the date
hereof until repayment in full of the principal sum has been made or duly
provided for. Accrued and unpaid interest shall bear interest at the same rate
from the due date of the interest payment until paid. The interest so payable
will be paid on the Maturity Date to the person in whose name this Note (or one
or more predecessor Notes) is registered on the records of the Company
regarding registration and transfers of the Notes (the "Note Register") on the
tenth day prior to the Maturity Date; provided, however, that the Company's
obligation to a transferee of this Note arises only if such transfer, sale or
other disposition is made in accordance with the terms and conditions of the
Initial Offshore Securities Subscription Agreement executed by the original
Holder. The principal of, and interest on, this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Note Register of the Company as designated in writing by the Holder from
time to time. The Company will pay the principal of and interest upon this
Note on the Maturity Date, less any amounts required by law to be deducted, to
the registered Holder of this Note as of the tenth day prior to the Maturity
Date and addressed to such Holder at the last address appearing on the Note
Register. The forwarding of such check shall constitute a payment of principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Note to the extent of the sum represented by
such check plus any amounts so deducted.
This Note is subject to the following additional provisions:
1. The Notes are issuable in denominations of $100,000 and integral
multiples thereof.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be
withheld under the applicable provisions of the United States income
tax laws or other applicable laws at the time of such payments.
3. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act").
Prior to due presentment for or transfer of this Note, the Company and
any agent of the Company may treat the person in whose name this Note
is duly registered on the Company's Note Register as the owner hereof
for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected by notice to the
contrary.
4. The Holder of this Note is entitled, at its option, at any time
commencing sixty one (61) days after the Closing Date as defined in
the Initial Offshore Securities Subscription Agreement until maturity
hereof to convert 1/5 of the original aggregate principal amount
subscribed for or any portion of the principal amount hereof into
shares of common stock of the Company ("Shares")
<PAGE> 2
at a conversion price for each share of common stock equal to the
lesser of the closing bid price on December 20, 1995, or eighty five
percent (85%) of the Market Price of the Company's common stock. In
the event of any stock split, dividend, combination or similar event,
the conversion price will be subject to appropriate adjustment. The
remaining 4/5 of the original principal amount of this Note will be
subject to the above noted terms with the exception that it will not
be convertible into Shares of common stock until the expiration of
seventy one (71) days after the Closing Date (i.e., 1/5 of the
original aggregate principal amount), eighty one (81) days after the
Closing Date (i.e., 1/5 of the original aggregate principal amount),
ninety one (91) days after the Closing Date (i.e., 1/5 of the original
aggregate principal amount) and one hundred and one (101) days after
the Closing Date (i.e., 1/5 of the original aggregate principal
amount), respectively. For purposes of this section, the Market Price
shall be the closing bid price of the common stock the day prior to
the date of conversion as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or the
closing bid price in the over-the-counter market the day prior to the
date of conversion or, in the event the common stock is listed on a
stock exchange, the Market Price per Share shall be the closing bid
price on such exchange the day prior to the date of conversion as
reported in the Wall Street Journal. Such conversion shall be
effectuated by surrendering the Notes to be converted to the Company,
with the form of conversion notice attached to the Note as Exhibit A,
executed by the Holder of the Note evidencing such Holder's intention
to convert this Note, and accompanied, if required by the Company, by
proper assignment hereof in blank. Interest accrued or accruing from
the date of issuance to the date of conversion shall be paid in shares
of common stock of the Company, calculated at the same conversion
price as the principal amount as determined above and shall constitute
payment in full of any such interest on the same terms as would
otherwise apply to the conversion of the principal amount hereof. No
fractional Shares or scrip representing fractions of Shares will be
issued on conversion, but the number of Shares issuable shall be
rounded to the nearest whole Share. The date on which notice of
conversion is given shall be deemed to be the date on which the Holder
has delivered this Note, with the conversion notice duly executed, to
the Company, or if earlier, the date set forth in such notice of
conversion if the Note is received by the Company within five business
days thereafter.
5. No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Note at the time, place, and rate, and in the
coin or currency, herein prescribed. This Note and all other Notes
now or hereafter issued on similar terms are direct obligations of the
Company. This Note ranks equally with all other Notes now or
hereafter issued under the terms set forth herein. Repayment of this
Note shall be subordinate in all respects to any Note or other
indebtedness of the Company, whether outstanding as of the date of
this Note or hereafter incurred.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing of
suit and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment
of all sums owing and to be owing hereon, regardless of and without
any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
7. If one or more of the "Events of Default" as described in paragraph 8
shall occur, the Company agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by Holder
in collecting any amount due under this Note.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Company shall default in the payment of principal or
interest on this Note; or
(b) Any of the representations or warranties made by the Company
herein, in the Initial Offshore Securities Subscription
Agreement dated as of December 20, 1995 between the Company
and the Holder (the "Subscription Agreement"), or in any
certificate or financial or other statements heretofore or
hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Note or the
Subscription Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any other
covenant, term, provision, condition, agreement or obligation
of the Company under this Note and such failure shall
<PAGE> 3
continue uncured for a period of seven (7) days after notice
from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing
its inability to pay its debts as they mature; (3) make an
assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent
to the appointment of a trustee, liquidator or receiver for it
or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of
the properties or assets of the Company and shall not be
dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process except mechanics and materialmen's liens incurred in
the ordinary course of business in excess of Two Hundred
Thousand Dollars ($200,000) in the aggregate shall be entered
or filed against the Company or any of its properties or other
assets and shall remain unvacated, unbonded or unstayed for a
period of fifteen (15) days or in any event later than five
(5) days prior to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed, stayed or bonded
within ninety (90) days after such institution or the Company
shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in
any such proceeding; or
(i) The company shall have its common stock delisted from an
exchange or NASDAQ.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider this Note immediately due and
payable, without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period
of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
9. For so long as any amount payable under this Note remains unpaid, the
Company shall furnish to the Holder the following information:
(a) No later than ninety (90) days following the end of each
fiscal year, beginning with the fiscal year ending February
28, 1996, consolidated balance sheets, statements of income
and statements of cash flow and shareholders' equity of the
Company and its subsidiaries, if any, prepared in accordance
with generally accepted accounting principles ("GAAP"), and
audited by a firm of independent public accountants (i.e.,
10K).
(b) Within forty-five (45) days after the end of each quarter
(except the fourth quarter) of each fiscal year, consolidated
balance sheets, statements of income and statements of cash
flow and shareholders' equity of the Company and its
subsidiaries, if any, including a summary discussion of major
variances, if any, between such quarterly statement and the
budget (i.e., 10Q's).
10. The Company covenants and agrees that until all amounts due under this
Note have been paid in full, by conversion or otherwise, unless the
Holder waives compliance in writing, the Company shall:
<PAGE> 4
(a) Give prompt written notice to the Holder of any Event of
Default as defined in this Note or of any other matter which
has resulted in, or could reasonably be expected to result in,
a materially adverse change in its financial condition or
operations.
(b) Give prompt notice to the Holder of any claim, action or
proceeding which, in the event of any unfavorable outcome,
would or could reasonably be expected to have a material
adverse effect on the financial condition of the Company.
(c) At all times reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the
conversion of this Note such number of its duly authorized
shares of common stock as shall from time to time be
sufficient to effect the conversion of the outstanding
principal balance of this Note into shares of common stock.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of this Note and
(i) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it, or
(ii) in the case of mutilation, upon surrender and
cancellation of this Note,
the Company at its expense will execute and deliver a new
Note, dated the date of the lost, stolen, destroyed or
mutilated Note.
11. The Holder of this Note agrees to bear the cost of any U.S.
withholding tax on interest payable under this Note.
12. The Holder of this Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Note or the Shares of common stock
issuable upon exercise thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky
laws or similar laws relating to the sale of securities.
13. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of
this Note will not in any way be affected or impaired thereby.
14. This Note constitutes the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof.
Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by
the Company and the Holder.
15. This Note shall be governed by and construed in accordance with the
laws of the state of New Jersey.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
UNICOMP, INC.
DATED: December 20, 1995 BY: its President Stephen A. Hafer
----------------------------- --------------------------------
[HOLDER]
DATED: BY:
----------------------------- --------------------------------
<PAGE> 5
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holders in order to Convert the Note)
The undersigned hereby irrevocably elects to convert the above Note No. ______
into Shares of common stock of UNICOMP, INC. (the "Company") according to the
conditions hereof, as of the date written below.
----------------------------------------
Date of Conversion(*)
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
Address:
----------------------------------------
----------------------------------------
(*)This original Note and Notice of Conversion must be received by the Company
by the fifth business date following the Date of Conversion.
<PAGE> 6
FORM OF CONVERTIBLE NOTE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S)
EXCEPT PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
UNICOMP, INC.
7% CONVERTIBLE NOTE DUE DECEMBER 24, 1997
THIS NOTE is one of a duly authorized issue of Convertible Notes of UNICOMP,
INC., a corporation duly organized and existing under the laws of the state of
Colorado (the "Company") designated as its 7% Convertible Note Due December 24,
1997, in an aggregate principal amount of up to $2,000,000.
FOR VALUE RECEIVED, the Company promises to pay to purchaser or the registered
holder hereof (the "Holder"), the principal sum of $100,000.00 (United States
Dollars) on December 24, 1997 (the "Maturity Date"), and to pay interest on the
principal sum outstanding from time to time in arrears on the Maturity Date, at
the rate of 7% per annum accruing from the date of issuance. Accrual of
interest shall commence on the first business day to occur after the date
hereof until repayment in full of the principal sum has been made or duly
provided for. Accrued and unpaid interest shall bear interest at the same rate
from the due date of the interest payment until paid. The interest so payable
will be paid on the Maturity Date to the person in whose name this Note (or one
or more predecessor Notes) is registered on the records of the Company
regarding registration and transfers of the Notes (the "Note Register") on the
tenth day prior to the Maturity Date; provided, however, that the Company's
obligation to a transferee of this Note arises only if such transfer, sale or
other disposition is made in accordance with the terms and conditions of the
Initial Offshore Securities Subscription Agreement executed by the original
Holder. The principal of, and interest on, this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Note Register of the Company as designated in writing by the Holder from
time to time. The Company will pay the principal of and interest upon this
Note on the Maturity Date, less any amounts required by law to be deducted, to
the registered Holder of this Note as of the tenth day prior to the Maturity
Date and addressed to such Holder at the last address appearing on the Note
Register. The forwarding of such check shall constitute a payment of principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Note to the extent of the sum represented by
such check plus any amounts so deducted.
This Note is subject to the following additional provisions:
1. The Notes are issuable in denominations of $100,000 and integral
multiples thereof.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be
withheld under the applicable provisions of the United States income
tax laws or other applicable laws at the time of such payments.
3. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act").
Prior to due presentment for or transfer of this Note, the Company and
any agent of the Company may treat the person in whose name this Note
is duly registered on the Company's Note Register as the owner hereof
for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected by notice to the
contrary.
4. The Holder of this Note is entitled, at its option, at any time
commencing sixty one (61) days after the Closing Date as defined in
the Initial Offshore Securities Subscription Agreement until maturity
hereof to convert 1/5 of the original aggregate principal amount
subscribed for or any portion of the principal amount hereof into
shares of common stock of the Company ("Shares")
<PAGE> 7
at a conversion price for each share of common stock equal to the
lesser of the closing bid price on December 20, 1995, or eighty five
percent (85%) of the Market Price of the Company's common stock. In
the event of any stock split, dividend, combination or similar event,
the conversion price will be subject to appropriate adjustment. The
remaining 4/5 of the original principal amount of this Note will be
subject to the above noted terms with the exception that it will not
be convertible into Shares of common stock until the expiration of
seventy one (71) days after the Closing Date (i.e., 1/5 of the
original aggregate principal amount), eighty one (81) days after the
Closing Date (i.e., 1/5 of the original aggregate principal amount),
ninety one (91) days after the Closing Date (i.e., 1/5 of the original
aggregate principal amount) and one hundred and one (101) days after
the Closing Date (i.e., 1/5 of the original aggregate principal
amount), respectively. For purposes of this section, the Market Price
shall be the closing bid price of the common stock the day prior to
the date of conversion as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or the
closing bid price in the over-the-counter market the day prior to the
date of conversion or, in the event the common stock is listed on a
stock exchange, the Market Price per Share shall be the closing bid
price on such exchange the day prior to the date of conversion as
reported in the Wall Street Journal. Such conversion shall be
effectuated by surrendering the Notes to be converted to the Company,
with the form of conversion notice attached to the Note as Exhibit A,
executed by the Holder of the Note evidencing such Holder's intention
to convert this Note, and accompanied, if required by the Company, by
proper assignment hereof in blank. Interest accrued or accruing from
the date of issuance to the date of conversion shall be paid in shares
of common stock of the Company, calculated at the same conversion
price as the principal amount as determined above and shall constitute
payment in full of any such interest on the same terms as would
otherwise apply to the conversion of the principal amount hereof. No
fractional Shares or scrip representing fractions of Shares will be
issued on conversion, but the number of Shares issuable shall be
rounded to the nearest whole Share. The date on which notice of
conversion is given shall be deemed to be the date on which the Holder
has delivered this Note, with the conversion notice duly executed, to
the Company, or if earlier, the date set forth in such notice of
conversion if the Note is received by the Company within five business
days thereafter.
5. No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Note at the time, place, and rate, and in the
coin or currency, herein prescribed. This Note and all other Notes
now or hereafter issued on similar terms are direct obligations of the
Company. This Note ranks equally with all other Notes now or
hereafter issued under the terms set forth herein. Repayment of this
Note shall be subordinate in all respects to any Note or other
indebtedness of the Company, whether outstanding as of the date of
this Note or hereafter incurred.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing of
suit and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment
of all sums owing and to be owing hereon, regardless of and without
any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
7. If one or more of the "Events of Default" as described in paragraph 8
shall occur, the Company agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by Holder
in collecting any amount due under this Note.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Company shall default in the payment of principal or
interest on this Note; or
(b) Any of the representations or warranties made by the Company
herein, in the Initial Offshore Securities Subscription
Agreement dated as of December 20, 1995 between the Company
and the Holder (the "Subscription Agreement"), or in any
certificate or financial or other statements heretofore or
hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Note or the
Subscription Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any other
covenant, term, provision, condition, agreement or obligation
of the Company under this Note and such failure shall
<PAGE> 8
continue uncured for a period of seven (7) days after notice
from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing
its inability to pay its debts as they mature; (3) make an
assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent
to the appointment of a trustee, liquidator or receiver for it
or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of
the properties or assets of the Company and shall not be
dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process except mechanics and materialmen's liens incurred in
the ordinary course of business in excess of Two Hundred
Thousand Dollars ($200,000) in the aggregate shall be entered
or filed against the Company or any of its properties or other
assets and shall remain unvacated, unbonded or unstayed for a
period of fifteen (15) days or in any event later than five
(5) days prior to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed, stayed or bonded
within ninety (90) days after such institution or the Company
shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in
any such proceeding; or
(i) The company shall have its common stock delisted from an
exchange or NASDAQ.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider this Note immediately due and
payable, without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period
of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
9. For so long as any amount payable under this Note remains unpaid, the
Company shall furnish to the Holder the following information:
(a) No later than ninety (90) days following the end of each
fiscal year, beginning with the fiscal year ending February
28, 1996, consolidated balance sheets, statements of income
and statements of cash flow and shareholders' equity of the
Company and its subsidiaries, if any, prepared in accordance
with generally accepted accounting principles ("GAAP"), and
audited by a firm of independent public accountants (i.e.,
10K).
(b) Within forty-five (45) days after the end of each quarter
(except the fourth quarter) of each fiscal year, consolidated
balance sheets, statements of income and statements of cash
flow and shareholders' equity of the Company and its
subsidiaries, if any, including a summary discussion of major
variances, if any, between such quarterly statement and the
budget (i.e., 10Q's).
10. The Company covenants and agrees that until all amounts due under this
Note have been paid in full, by conversion or otherwise, unless the
Holder waives compliance in writing, the Company shall:
<PAGE> 9
(a) Give prompt written notice to the Holder of any Event of
Default as defined in this Note or of any other matter which
has resulted in, or could reasonably be expected to result in,
a materially adverse change in its financial condition or
operations.
(b) Give prompt notice to the Holder of any claim, action or
proceeding which, in the event of any unfavorable outcome,
would or could reasonably be expected to have a material
adverse effect on the financial condition of the Company.
(c) At all times reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the
conversion of this Note such number of its duly authorized
shares of common stock as shall from time to time be
sufficient to effect the conversion of the outstanding
principal balance of this Note into shares of common stock.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of this Note and
(i) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it, or
(ii) in the case of mutilation, upon surrender and
cancellation of this Note,
the Company at its expense will execute and deliver a new
Note, dated the date of the lost, stolen, destroyed or
mutilated Note.
11. The Holder of this Note agrees to bear the cost of any U.S.
withholding tax on interest payable under this Note.
12. The Holder of this Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Note or the Shares of common stock
issuable upon exercise thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky
laws or similar laws relating to the sale of securities.
13. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of
this Note will not in any way be affected or impaired thereby.
14. This Note constitutes the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof.
Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by
the Company and the Holder.
15. This Note shall be governed by and construed in accordance with the
laws of the state of New Jersey.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
UNICOMP, INC.
DATED: December 20, 1995 BY: its President Stephen A. Hafer
---------------------------- --------------------------------
[HOLDER]
DATED: BY:
---------------------------- --------------------------------
<PAGE> 10
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holders in order to Convert the Note)
The undersigned hereby irrevocably elects to convert the above Note No. ______
into Shares of common stock of UNICOMP, INC. (the "Company") according to the
conditions hereof, as of the date written below.
-----------------------------------------
Date of Conversion(*)
-----------------------------------------
Applicable Conversion Price
-----------------------------------------
Signature
-----------------------------------------
Name
Address:
-----------------------------------------
-----------------------------------------
(*)This original Note and Notice of Conversion must be received by the Company
by the fifth business date following the Date of Conversion.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND
We consent to the incorporation by reference in the registration statements of
UniComp, Inc. on Form S-8 (No. 33-98564) and on Form S-3 (No. 33-64312) of our
report dated May 23, 1996, on our audits of the consolidated financial
statements and the financial statement schedule of UniComp, Inc. and
subsidiaries as of February 29, 1996 and February 28, 1995 and for each of the
three years in the period ended February 29, 1996, which report is included in
this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
June 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNICOMP, INC. CONTAINED IN THE FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<EXCHANGE-RATE> 1
<CASH> 1,206,831
<SECURITIES> 0
<RECEIVABLES> 5,055,593
<ALLOWANCES> 123,878
<INVENTORY> 604,971
<CURRENT-ASSETS> 7,752,024
<PP&E> 4,367,539
<DEPRECIATION> 2,097,790
<TOTAL-ASSETS> 15,951,405
<CURRENT-LIABILITIES> 6,400,789
<BONDS> 3,024,073
0
0
<COMMON> 46,634
<OTHER-SE> 5,960,800
<TOTAL-LIABILITY-AND-EQUITY> 15,951,405
<SALES> 10,092,975
<TOTAL-REVENUES> 21,305,287
<CGS> 5,916,684
<TOTAL-COSTS> 7,743,025
<OTHER-EXPENSES> 11,071,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 233,403
<INCOME-PRETAX> 2,257,825
<INCOME-TAX> 195,887
<INCOME-CONTINUING> 2,061,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,061,938
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
