<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNICOMP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
COLORADO 7371 84-1003745
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1800 SANDY PLAINS PARKWAY, SUITE 305
MARIETTA, GEORGIA 30066
(770) 424-3684
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
STEPHEN A. HAFER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
UNICOMP, INC.
1800 SANDY PLAINS PARKWAY, SUITE 305
MARIETTA, GEORGIA 30066
(770) 424-3684
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
David F. Evans Gregory Gorder
David K. Armstrong Richard C. Sohn
Snell & Wilmer L.L.P. Perkins Coie
111 E. Broadway, Suite 900 1201 Third Avenue, 40th Floor
Salt Lake City, Utah 84111 Seattle, Washington 98101-3099
(801) 237-1900 (206) 583-8888
------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 2,415,000
share................................. shares $5.89 $14,225,859 $4,906
</TABLE>
(1) Includes 315,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Computed in accordance with Rule 457(c) of the Securities Act of 1933 on the
basis of the average of the high and low sale prices of the Common Stock on
September 12, 1996.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
UNICOMP, INC.
CROSS-REFERENCE SHEET
PURSUANT TO
ITEM 501(B) OF REGULATION S-K
------------------------
<TABLE>
<CAPTION>
ITEMS OF FORM S-1 LOCATION IN PROSPECTUS
- ------------------------------------------------------ ---------------------------------------------------------
<S> <C> <C>
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page
Item 2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
Item 3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
Item 4. Use of Proceeds........................... Use of Proceeds
Item 5. Determination of Offering Price........... Outside Front Cover Page; Underwriting
Item 6. Dilution.................................. Risk Factors; Dilution
Item 7. Selling Security Holders.................. Principal Shareholders
Item 8. Plan of Distribution...................... Outside and Inside Front Cover Pages; Underwriting
Item 9. Description of Securities to Be
Registered.............................. Description of Capital Stock
Item 10. Interests of Named Experts and Counsel.... Not Applicable
Item 11. Information With Respect to the
Registrant.............................. Outside and Inside Front Cover Pages; Prospectus Summary;
Risk Factors; Price Range of Common Stock; Dividend
Policy; Capitalization; Selected Consolidated Financial
Data; Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Relationships and Related
Transactions; Principal Shareholders; Shares Eligible
for Future Sale; Legal Matters; Experts; Consolidated
Financial Statements
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION DATED SEPTEMBER 18, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
2,100,000 SHARES
[UNICOMP, INC. LOGO]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by UniComp,
Inc. ("UniComp" or the "Company"). The Company's Common Stock is quoted on the
Nasdaq National Market under the symbol "UCMP." On September 13, 1996, the last
reported sale price of the Common Stock as reported by the Nasdaq National
Market was $5.88 per share. See "Price Range of Common Stock."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.......................................... $ $ $
Total (3).......................................... $ $ $
</TABLE>
(1) Excludes a nonaccountable expense allowance payable to Cruttenden Roth
Incorporated, representative of the Underwriters (the "Representative"), and
the value of warrants to purchase up to 210,000 shares of Common Stock at an
exercise price equal to 165% of the public offering price to be issued to
the Representative (the "Representative's Warrant"). The Company and a
certain shareholder (the "Selling Shareholder") have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company estimated
at $988,000, including the Representative's nonaccountable expense allowance
of $370,000, assuming a public offering price of $5.88 per share.
(3) The Company and the Selling Shareholder have granted the Underwriters a
45-day option to purchase up to 315,000 additional shares of Common Stock on
the same terms and conditions as set forth above, solely to cover
over-allotments, if any. If all such shares of Common Stock are purchased,
the total Price to Public, Underwriting Discounts and Commissions, Proceeds
to Company and Proceeds to Selling Shareholder will be $ , $ ,
$ and $ , respectively. See "Principal Shareholders" and
"Underwriting."
The shares of Common Stock are offered severally by the Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to certain other conditions. It is expected that the
delivery of the certificates representing the Common Stock offered hereby will
be at the offices of the Representative, Irvine, California, on or about
, 1996.
CRUTTENDEN ROTH
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy or information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy or information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Avenue, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Chicago Regional Office,
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. The Common Stock is quoted on the Nasdaq National Market.
Reports, proxy or information statements and other information concerning the
Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement, including exhibits filed as part thereof,
copies of which may be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
The Company has applied for United States trademark registration for the use
of the name "UNIBOL." This Prospectus also contains other trademarks and trade
names, which are the property of their respective holders.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS
INCLUDES FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY. SEE "RISK FACTORS." EXCEPT AS
OTHERWISE SPECIFIED, INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
UniComp, Inc. ("UniComp" or the "Company") provides information technology
services to businesses located primarily in the United Kingdom and
platform-migration software and payment-processing systems to users in North
America and Europe. The Company's strategy is to emphasize its platform-
migration and payment-processing software products and to expand its services
business within its existing geographic markets. The Company believes this
strategy will allow it to expand profit margins and provide its high-quality
information technology services to a broad and growing installed base of users
of its platform-migration and payment-processing products.
The worldwide information technology industry is characterized by rapid
technological change, which often leads to increased costs of maintaining
internal information technology resources capable of responding to such change.
The Company believes that as companies strive to compete and utilize complex new
technologies, more companies will move toward outsourcing their information
technology requirements, thereby enhancing the Company's information technology
services business.
The Company believes that decreasing prices, increasing functionality in
information technology products and the inherent constraints of proprietary
platforms have contributed to increased market acceptance of open systems and
customer demand for information technology products based on such systems.
Changing to new computing platforms, however, often results in significant
disruption of business operations as users are retrained and software errors are
discovered and corrected. Also critical is the potential loss of data contained
in existing databases that may result from a change to new applications
software. The Company's platform-migration software products address these
issues, enabling its customers to move more efficiently to open systems.
Payment processing for commercial businesses has grown rapidly in recent
years as a result of a proliferation in, and increased usage of, credit and
debit cards and wider acceptance of such cards among merchants. Advances in
payment-processing and telecommunications technologies have also been key
factors contributing to such growth. The Company designs, develops and markets
payment-processing systems that provide merchants with greater hardware
independence by supporting a variety of hardware platforms, including personal
computers, point-of-sale terminals and other peripheral devices. The Company's
strategy in the payment-processing market is to focus its sales and marketing
efforts on the relatively small number of large payment processors and hardware
vendors.
The Company has experienced significant growth, with total revenues growing
to $22.3 million for fiscal year 1996 from $12.2 million for fiscal year 1994, a
compound annual growth rate of approximately 35%. In fiscal year 1996,
approximately 51% of total revenues were derived from the Company's maintenance
and other technology services, with more than 80% of total revenues attributable
to international operations, primarily in Northern Ireland.
The Company was incorporated in Colorado in 1985. Its executive offices are
located at 1800 Sandy Plains Parkway, Suite 305, Marietta, Georgia 30066 and its
telephone number is (770) 424-3684. Unless the context otherwise indicates,
references to "UniComp" or the "Company" include UniComp, Inc. and its wholly
owned subsidiaries.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,100,000 shares
Common Stock to be outstanding immediately
after this offering........................ 7,348,232 shares (1)
Use of proceeds.............................. Repayment of outstanding indebtedness,
working capital and other general corporate
purposes, including potential acquisitions.
See "Use of Proceeds."
Nasdaq National Market symbol................ UCMP
</TABLE>
SUMMARY FINANCIAL DATA (2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED
------------------------------- ------------------------
FEB. 28, FEB. 28, FEB. 29, MAY 31, MAY 31,
1994 1995 1996 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................................. $ 12,206 $ 18,325 $ 22,291 $ 4,921 $ 5,884
Operating income............................................... 1,604 2,217 2,555 462 782
Income before taxes............................................ 1,465 2,117 2,262 495 698
Provision for taxes............................................ 255 495 203 48 238
Net income..................................................... 1,210 1,622 2,059 447 460
Net income per share........................................... $ 0.28 $ 0.34 $ 0.40 $ 0.09 $ 0.09
Weighted average shares outstanding............................ 4,344 4,710 5,188 4,868 5,396
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1996
-------------------------
<S> <C> <C>
AS ADJUSTED
ACTUAL (3)
--------- --------------
BALANCE SHEET DATA:
Working capital........................................................................ $ 1,742 $ 12,237
Total assets........................................................................... 16,460 26,955
Debt, including current portion........................................................ 4,495 2,671
Total shareholders' equity............................................................. 7,080 17,575
</TABLE>
- ------------------------
(1) Based on shares outstanding as of May 31, 1996. Excludes (i) 802,500 shares
of Common Stock issuable upon exercise of outstanding stock options granted
under the Company's Long Term Incentive Plan (the "LTI Plan"), (ii) 235,000
shares of Common Stock reserved for future issuance under the LTI Plan,
(iii) 210,000 shares of Common Stock issuable upon exercise of the
Representative's Warrant, (iv) 342,013 shares of Common Stock issued at a
weighted average price of $4.55 per share upon conversion of certain
convertible promissory notes between May 31, 1996 and August 31, 1996, (v)
25,000 shares of Common Stock issuable upon exercise of an outstanding
warrant to purchase shares of Common Stock at $6.90 per share issued in
connection with the sale of such convertible promissory notes (the "Note
Warrant"), and (vi) 87,500 shares of Common Stock issuable upon exercise of
outstanding warrants to purchase shares of Common Stock at $6.00 per share
and 87,500 shares of Common Stock issuable upon exercise of outstanding
warrants to purchase shares of Common Stock at $7.00 per share issued to a
financial advisor to the Company (together, the "Advisor Warrants"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Management--Long-Term
Incentive Plan," "Description of Capital Stock" and "Underwriting."
(2) The Summary Financial Data prior to the pooling-of-interests transaction
with Smoky Mountain Technologies, Inc. ("Smoky Mountain") in April 1996,
give effect to the resulting combined entity.
(3) Adjusted to reflect the sale of the 2,100,000 shares of Common Stock offered
hereby (after deducting underwriting discounts and commissions and estimated
offering expenses) and the application of the estimated net proceeds
therefrom.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. CERTAIN STATEMENTS UNDER THE CAPTIONS "PROSPECTUS SUMMARY," "USE
OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS STATEMENTS MADE IN THE
FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS, CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE COMPANY'S
ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS AND INDUSTRY DEVELOPMENTS TO DIFFER
MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE, ACHIEVEMENTS OR DEVELOPMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: COMPETITION IN THE INFORMATION TECHNOLOGY INDUSTRY;
DEPENDENCE ON FOREIGN SALES; RAPID TECHNOLOGICAL CHANGE IN THE INFORMATION
TECHNOLOGY INDUSTRY; PRODUCT DEVELOPMENT AND MARKET ACCEPTANCE OF NEW PRODUCTS;
THE COMPANY'S ABILITY TO MANAGE OVERSEAS OPERATIONS; THE COMPANY'S ABILITY TO
MANAGE GROWTH AND ACQUISITIONS; AVAILABILITY OF QUALIFIED PERSONNEL; AND OTHER
FACTORS REFERENCED IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER EACH OF THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE SHARES OF
COMMON STOCK OFFERED HEREBY.
HIGHLY COMPETITIVE INFORMATION TECHNOLOGY INDUSTRY
The information technology industry is intensely competitive and subject to
rapid change. The Company believes the principal competitive factors it faces
include reputation and quality of service, relative price and performance,
technical expertise and product availability. The Company's competitors in the
information technology services market include installation and service
organizations within many established companies, computer manufacturers, custom
software developers, regional systems integrators, software and hardware
distributors and systems consultants. The market for the Company's platform-
migration software is highly competitive as well. 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 market for the Company's
payment-processing systems is also highly competitive. The Company believes that
the principal competitive factors in this business 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. Some of the Company's
current and potential competitors have longer operating histories and financial,
sales, marketing, technical and other competitive resources that are
substantially greater than those of the Company. As a result, the Company's
competitors may be able to adapt more quickly to changes in customer needs or to
devote greater resources than the Company to sales, marketing and product
development. As the markets in which the Company competes have matured, product
price competition has intensified and is likely to continue to intensify. Such
price competition could adversely affect the Company's results of operations.
There can be no assurance that the Company will be able to continue to compete
successfully with existing or new competitors. See "Business--Competition."
DEPENDENCE ON FOREIGN SALES
The Company's revenues from international operations represented 83.7%,
84.7% and 78.4% of total revenues for fiscal years 1996, 1995 and 1994,
respectively. The Company expects that its international operations will
continue to account for a significant percentage of its total revenues. Certain
risks are inherent in international operations, including unexpected changes in
regulatory requirements, currency exchange rate fluctuations, changes in trade
policy or tariff regulations, customs matters, longer payment cycles, higher tax
rates or additional withholding requirements, difficulty in enforcing
agreements, intellectual property protection difficulties, foreign collection
problems and military, political and transportation obstacles. In addition,
foreign operations involve uncertainties arising from local business practices,
5
<PAGE>
cultural considerations and international political and trade tensions.
Denomination of the Company's revenues and expenses are generally in
corresponding currencies. As a result the Company has not hedged against foreign
currency exchange rate risks to date. The Company may in the future seek to
implement hedging techniques with respect to foreign currency transactions.
There can be no assurance, however, that such hedging activities would
successfully protect against foreign currency exchange losses or against other
international sales risks such as exchange limitations, price controls or other
foreign currency restrictions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Marketing and
Distribution" and Note 12 of Notes to the Supplemental Consolidated Financial
Statements.
RAPID TECHNOLOGICAL CHANGE AND INTRODUCTION OF NEW PRODUCTS AND SERVICES
The information technology industry is characterized by rapid technological
advances, changes in customer requirements and frequent new product
introductions and enhancements, which could disrupt the Company's services
business and render the Company's products obsolete. The Company's future
success will depend in large part on its ability to anticipate and respond to
such advances, changes and new product introductions. Any failure by the Company
to do so could have a material adverse effect on its competitive position and
results of operations. In addition, the Company is subject to the risks
generally associated with new product introductions and applications, including
lack of market acceptance, delays in development or failure of products to
perform as expected. In February 1996, the Company released version 1.05 of its
UNIBOL400 product, which is the first version offered for widespread commercial
distribution. The UNIBOL400 product has yet to achieve a substantial installed
user base. There can be no assurance as to when, if ever, the UNIBOL400 product
will achieve a substantial user base. See "Business--Products and Services" and
"--Product Development."
POTENTIAL FOR DELAYS IN PRODUCT INTRODUCTION
Delays in product development and introduction may have an adverse effect on
the product's success and the Company's reputation and results of operations,
and may allow competitors to introduce products and gain market share during any
such delays. Any failure by the Company to timely develop and introduce new
products and product enhancements that are responsive to market conditions and
customer requirements may have an adverse effect on the Company's business,
results of operations and financial condition. Furthermore, the complex software
products developed by the Company may contain undetected errors when first
introduced or when new versions are released. There can be no assurance that
current or future releases of Company products will not contain errors or that
any such errors will not result in loss or delay of market acceptance of such
products. The Company has previously experienced delays in developing and
introducing new products, and there can be no assurance that it will be able to
introduce future products on a timely basis. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business--Strategy" and "--Product Development."
MANAGEMENT OF OVERSEAS OPERATIONS
The Company's headquarters and administrative offices are in Atlanta,
Georgia; however, as of August 31, 1996, approximately 200 of the Company's 230
employees work in the Company's Belfast, Northern Ireland facilities. This
geographical distance, as well as the time-zone difference, can isolate
management from operational issues, delay communications and require devotion of
a significant amount of time, effort and expense to international travel. There
can be no assurance that the Company will not face significant management
demands associated with its international operations in the future. Any
significant disruption in the management of the Company's international
operations could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business--Strategy," "--Product Development" and "--Marketing and
Distribution."
6
<PAGE>
OPERATIONS IN NORTHERN IRELAND
A substantial majority of the Company's personnel and operations are located
in Northern Ireland. In addition, 83.7% of the Company's total revenues for
fiscal year 1996 are attributable to operations in Northern Ireland. Northern
Ireland has historically experienced periods of religious, civil and political
unrest. There can be no assurance that further unrest in Northern Ireland will
not occur, which could disrupt the Company's ability to provide information
technology services and product development programs and have a material adverse
effect on the Company's results of operations and financial condition. In fiscal
years 1996, 1995 and 1994, the Company received grants of approximately
$389,000, $369,000 and $285,000, respectively, from the government of Northern
Ireland to fund the Company's research and development programs. The Company's
use of these funds is subject to various rules and regulations, including the
requirement that the Company repay such funds in the event it removes certain
operations from Northern Ireland. There can be no assurance that the Company
will continue to be eligible for or will receive similar grants in the future
or, if such grants are received, whether additional restrictions will apply to
the Company's use of such funds. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Product
Development" and
"--Facilities."
RISK OF ACQUISITION PROGRAM
A substantial portion of the Company's growth to date has been attributable
to its acquisition program, which has primarily been driven by opportunities
that have presented themselves to the Company. Significant administrative,
operational and financial resources are required to successfully integrate and
manage the Company's diverse businesses. There are numerous operational and
financial risks involved in managing acquired businesses, including difficulties
in assimilating acquired operations, diversion of management's attention,
amortization of acquired intangible assets, increases in administrative costs,
additional costs associated with debt or equity financing and potential loss of
key employees or customers of acquired operations. There can be no assurance
that the Company will be successful in integrating its current acquisitions or
retaining and motivating key personnel of acquired companies. Any failure to
integrate the Company's current and potential future businesses, maintain and
expand its acquired customer and technology base and retain and motivate key
employees of acquired companies could have an adverse effect on the Company's
business, results of operations and financial condition. The Company may use
some of the net proceeds of this offering to pursue strategic acquisitions as
part of its overall growth strategy. While the Company has no understandings,
commitments or agreements with respect to any acquisition, it anticipates that
potential acquisition opportunities may become available in the future. There
can be no assurance that the Company will complete any future acquisitions or
that any completed acquisition will result in the Company's receiving the
anticipated benefit of any such acquisition. See "Business--Strategy" and
"--Acquisition History."
COMPETITIVE MARKET FOR TECHNICAL PERSONNEL AND RETENTION OF KEY EMPLOYEES
The Company's success depends in part on its ability to attract, hire, train
and retain qualified managerial, technical and sales and marketing personnel.
Competition for such personnel is intense. In particular, there can be no
assurance that the Company will be successful in attracting and retaining the
technical personnel it requires to conduct and expand its operations
successfully. The Company's results of operations could be materially adversely
affected if the Company were unable to attract, hire, train and retain qualified
personnel. The Company's success also depends to a significant extent on the
continued service of Stephen A. Hafer, its President and Chief Executive
Officer, and other members of the Company's management, the loss of any one of
whom could have a material adverse effect on the Company's business, results of
operations and financial condition. None of the Company's executive officers is
party to a written employment or noncompete agreement with the Company. The
Company has purchased a $1.0 million key person life insurance policy on the
life of Mr. Hafer. See "Management."
7
<PAGE>
UNCERTAINTY OF FUTURE RESULTS
Product revenues generated by the Company's software products are difficult
to forecast because of the evolving product lifecycle of the UNIBOL36 product,
the recent introduction of the UNIBOL400 product and the recent acquisition of
the Company's payment-processing systems business. In addition, although the
Company's service revenues are more predictable than its product revenues,
unexpected variations in job pricing and complexity could have an adverse effect
on the profitability of customer service projects. The Company bases its expense
levels, which are relatively fixed in the short term, in significant part on its
expectations of future product revenues and service demands. If demand for the
Company's products and services is below expectations, results of operations
could be adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Much of the Company's future success depends on its ability to protect its
proprietary technology. The Company relies principally on trade secret and
copyright law, as well as nondisclosure agreements and other contractual
arrangements, to protect such proprietary technology. There can be no assurance
that such measures will be adequate to protect the Company from infringement by
others of its technologies or that the Company will be effective in preventing
misappropriation of its proprietary rights. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. See "Business--Intellectual
Property."
RISK OF CLAIM ASSOCIATED WITH ACQUISITION
In connection with its acquisition in 1993 of ICS Computing Group, Limited
("ICGL"), the Company incurred a claim by the seller related to pension
overfunding. Based upon the advice of its U.K. solicitor, the Company believes
that it has adequate defenses to this claim such that the expected outcome would
not be material to the Company's results of operations or financial condition.
Due to uncertainties of the legal process, however, there can be no assurance
that the outcome of this claim will be in accordance with the Company's
expectations.
CONTROL BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
Immediately following consummation of this offering, the Company's executive
officers and directors and their affiliates will beneficially hold an aggregate
of approximately 20% of the Company's outstanding shares of Common Stock
(approximately 19% if the Underwriters' over-allotment option is exercised in
full). As a result, these shareholders, acting together, may be able to exert
significant influence on many matters requiring approval by the shareholders of
the Company, including the election of directors. See "Principal Shareholders."
BROAD MANAGEMENT DISCRETION IN USE OF NET PROCEEDS
The Company intends to use approximately $1.8 million of the estimated net
proceeds of this offering for repayment of outstanding indebtedness. The
remainder of the net proceeds will be used for working capital and other general
corporate purposes, including financing anticipated growth. Accordingly, the
Company's management will retain broad discretion as to the use of a substantial
portion of the net proceeds of this offering. See "Use of Proceeds."
VOLATILITY OF STOCK PRICE
The Common Stock is currently quoted on the Nasdaq National Market. The
market price of the Common Stock could be subject to significant fluctuations in
response to quarterly variations in the Company's results of operations, changes
in earnings estimates by analysts, announcements of new products or services
offered by the Company or its competitors, loss of key customer, distributor or
vendor
8
<PAGE>
relationships, general conditions in the computer software industry, or other
events or factors, including events or factors that may be unrelated to the
Company. Furthermore, in recent years, the stock market in general, and the
market for shares of stock in technology companies in particular, has
experienced extreme price fluctuations. Such fluctuations could materially and
adversely affect the market price of the Common Stock in the future. See "Price
Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. Upon completion of this
offering, in addition to the 2,100,000 shares offered hereby, approximately
3,698,000 shares that are not subject to lock-up agreements with the
Representative will remain eligible for resale in the public market without
restriction under the Securities Act of 1933, as amended (the "Securities Act").
The executive officers, directors, certain other shareholders of the Company and
their affiliates, and warrant holders have agreed, pursuant to lock-up
agreements with the Representative, that they will not, without the prior
written consent of the Representative, sell or otherwise dispose of an aggregate
of approximately 1,696,000 outstanding shares of Common Stock and approximately
425,000 shares of Common Stock issuable upon exercise of outstanding options or
warrants beneficially owned by them for a period of 12 months from the date of
this Prospectus. Upon the expiration of these lock-up agreements, such shares of
Common Stock will become eligible for sale in the public market, subject to the
provisions of Rule 144 under the Securities Act. The Representative may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to any of such lock-up agreements. See "Shares Eligible
for Future Sale."
In September 1996, the Company filed a registration statement on Form S-3
for the resale of up to 125,000 shares acquired by the holders of such shares in
connection with the Company's acquisition of Smoky Mountain. These holders also
have the right to require the Company to file registration statements in April
1997 and April 1998 for the resale to the public of an additional 125,000 shares
and 250,000 shares of Common Stock, respectively. Holders of 235,000 of the
shares to be registered for public resale in April 1998 have entered into
12-month lock-up agreements with the Representative, agreeing to defer their
registration rights until the earlier of release of these shares from the
lock-up agreements and the expiration of the lock-up agreements. The Company
intends to maintain the effectiveness of the current registration statement on
Form S-3 regarding the resale of 125,000 shares during the pendency of these
holders' lock-up agreements. The Representative may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to any of such lock-up agreements. See "Description of Capital
Stock--Registration Rights."
As of August 31, 1996, an aggregate of 200,000 shares of Common Stock were
reserved for issuance pursuant to the Note Warrant and the Advisor Warrants.
Holders of the Note Warrant and the Advisor Warrants each possess certain
registration rights with regard to the 25,000 shares and 175,000 shares,
respectively, issuable thereunder. The holders of the Advisor Warrants have
entered into a 12-month lock-up agreement with the Representative, subject to
earlier release by the Representative. See "Description of Capital
Stock--Registration Rights."
As of August 31, 1996, 802,500 shares of Common Stock were subject to
options outstanding under the LTI Plan, 70,000 of which were currently
exercisable at a weighted average exercise price of $3.31 per share. The
remainder of these options become exercisable at various points over the next
four years at a weighted average exercise price of $4.16 per share. An
additional 235,000 shares of Common Stock are reserved for future issuance under
the LTI Plan. The Company has filed a registration statement on Form S-8 to
register the shares of Common Stock reserved for issuance under the LTI Plan,
thus permitting the resale of such shares in the public market without
restriction under the Securities Act, subject in certain events to the
expiration of lock-up agreements and Rule 144.
9
<PAGE>
Upon completion of this offering, the Representative will receive the
Representative's Warrant to purchase up to 210,000 shares of Common Stock at an
exercise price equal to 165% of the public offering price. The Representative
possesses certain demand and incidental rights to require the Company to
register for public resale the shares of Common Stock issuable under the
Representative's Warrant. The Representative's Warrant may not be exercised
until the first anniversary of the date of this Prospectus. See "Description of
Capital Stock--Representative's Warrant" and "Underwriting."
ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the Company's shareholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company without further
action by the shareholders and may adversely affect the voting and other rights
of the holders of Common Stock. The Company has no present plans to issue shares
of Preferred Stock. Furthermore, certain provisions of the Company's charter
documents may have the effect of delaying or preventing changes in control or
management of the Company, which could have an adverse effect on the market
price of the Common Stock. See "Description of Capital Stock."
DILUTION
The assumed public offering price for the shares of Common Stock offered
hereby is substantially higher than the net tangible book value per share of
Common Stock. As a result, purchasers of shares of Common Stock in this offering
are likely to incur immediate and substantial dilution per share. See
"Dilution."
NO DIVIDENDS ON THE COMMON STOCK
The Company has not paid any cash dividends on the Common Stock since its
inception and does not anticipate paying cash dividends for the foreseeable
future. See "Dividend Policy."
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,100,000 shares of
Common Stock offered hereby, at an assumed public offering price of $5.88 per
share, are estimated to be approximately $10.5 million (approximately $11.8
million if the Underwriters' over-allotment option is exercised in full) after
deducting underwriting discounts and commissions and estimated offering
expenses. The Company will not receive any proceeds from the sale, if any, of
shares of Common Stock by the Selling Shareholder pursuant to exercise of the
Underwriters' over-allotment option. See "Principal Shareholders."
The Company intends to use approximately $1.8 million of the net proceeds of
this offering to repay principal and accrued interest on certain outstanding
indebtedness, comprised of a short-term line of credit and a term loan. As of
May 31, 1996, the outstanding principal amounts under the short-term line of
credit and the term loan were approximately $1.2 million and $575,000,
respectively. The short-term line of credit bears interest based on the Bank of
Ireland base rate plus 1.75% (7.5% per annum as of August 31, 1996) and matures
in May 1997. The term loan bears interest at LIBOR plus 1.75% (8.63% per annum
as of August 31, 1996) and matures in February 1999. The remainder of the net
proceeds will be used for working capital and other general corporate purposes,
including the potential use of a portion of the net proceeds to finance
strategic alliances or acquisitions of complementary businesses, products or
technologies. Although the Company reviews and considers possible acquisitions
on an on-going basis, no specific acquisitions are currently under consideration
or discussion. The amounts, if any, actually expended for each described use are
at the discretion of the Company and may vary significantly depending on a
number of factors, including the Company's future revenue growth, the amount of
cash generated by the Company's operations, the progress of the Company's
product development programs, changing competitive conditions and market
acceptance of the Company's products.
Pending their uses as set forth above, the net proceeds of this offering
will be invested in government securities or in short-term, investment-grade,
interest-bearing securities.
11
<PAGE>
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the periods indicated, the high and low
sale prices of the Common Stock as reported by the Nasdaq National Market. Such
quotations do not include retail mark-ups, mark-downs, or other fees or
commissions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR 1997
Third Quarter (through September 13, 1996).................................... $ 6.06 $ 5.81
Second Quarter ended August 31, 1996.......................................... 7.63 5.00
First Quarter ended May 31, 1996.............................................. 8.63 6.25
FISCAL YEAR 1996
Fourth Quarter ended February 29, 1996........................................ $ 8.50 $ 5.38
Third Quarter ended November 30, 1995......................................... 7.25 5.25
Second Quarter ended August 31, 1995.......................................... 7.25 3.75
First Quarter ended May 31, 1995.............................................. 4.75 3.25
FISCAL YEAR 1995
Fourth Quarter ended February 28, 1995........................................ $ 3.88 $ 3.00
Third Quarter ended November 30, 1994......................................... 4.13 2.88
Second Quarter ended August 31, 1994.......................................... 4.13 2.25
First Quarter ended May 31, 1994.............................................. 6.13 3.38
FISCAL YEAR 1994
Fourth Quarter ended February 28, 1994........................................ $ 6.38 $ 4.00
Third Quarter ended November 30, 1993......................................... 8.13 4.75
Second Quarter ended August 31, 1993.......................................... 8.88 3.13
First Quarter ended May 31, 1993.............................................. 4.31 2.88
</TABLE>
On September 13, 1996, the closing sale price of the Common Stock on the
Nasdaq National Market was $5.88 per share. As of August 31, 1996, there were
approximately 580 owners of record of the Common Stock. Because many of such
shares may be held by brokers and other institutions on behalf of shareholders,
the Company is unable to estimate the total number of beneficial owners
represented by these record holders.
DIVIDEND POLICY
The Company has never paid cash dividends on the Common Stock, and presently
intends to retain any future earnings to finance its operations and expand its
business. It therefore does not anticipate paying cash dividends for the
foreseeable future.
12
<PAGE>
DILUTION
The net tangible book value of the Company as of May 31, 1996 was
approximately $1.4 million or $0.28 per share of Common Stock. Net tangible book
value per share represents the Company's total tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding. Without
taking into account any further changes in net tangible book value after May 31,
1996 other than the receipt of the estimated net proceeds from the sale of the
2,100,000 shares of Common Stock offered hereby at an assumed public offering
price of $5.88 per share, the net tangible book value of the Company as of May
31, 1996 would have been $11.9 million, or $1.63 per share. This represents an
immediate increase in net tangible book value of $1.35 per share to existing
shareholders and an immediate dilution of $4.25 per share to purchasers of
Common Stock in this offering, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed public offering price per share....................................... $ 5.88
Net tangible book value per share as of May 31, 1996...................... $ 0.28
Increase per share attributable to new investors.......................... 1.35
---------
Net tangible book value per share after this offering......................... 1.63
---------
Dilution per share to new investors........................................... $ 4.25
---------
---------
</TABLE>
The foregoing excludes (i) 802,500 shares of Common Stock issuable upon
exercise of outstanding stock options granted under the LTI Plan, (ii) 235,000
shares of Common Stock reserved for future issuance under the LTI Plan, (iii)
210,000 shares of Common Stock issuable upon exercise of the Representative's
Warrant, (iv) 342,013 shares of Common Stock issued upon conversion of certain
convertible promissory notes between May 31, 1996 and August 31, 1996, (v)
25,000 shares of Common Stock issuable upon exercise of the Note Warrant, and
(vi) 175,000 shares of Common Stock issuable upon exercise of the Advisor
Warrants. The exercise of any of the above described options or warrants may
result in additional dilution. See "Management--Long-Term Incentive Plan,"
"Description of Capital Stock" and "Underwriting."
13
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of May 31, 1996 and (ii) the adjusted capitalization of the Company
reflecting the sale of the 2,100,000 shares of Common Stock offered hereby at an
assumed public offering price of $5.88 per share and the receipt and application
of the net proceeds therefrom (after deducting underwriting discounts and
commissions and estimated offering expenses). The following table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 31, 1996
----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Revolving lines of credit................................................................. $ 1,540 $ 291
Current portion of long-term debt......................................................... 472 319
--------- -----------
Total short-term debt................................................................. 2,012 610
--------- -----------
Long-term debt, less current portion...................................................... 2,483 2,061
--------- -----------
Total debt............................................................................ 4,495 2,671
--------- -----------
Shareholders' equity:
Common Stock, $.01 par value per share; 25,000,000 shares authorized; 5,248,232 shares
issued and outstanding, actual; 7,348,232 shares issued and outstanding, as adjusted
(1)................................................................................... 52 73
Additional paid-in capital.............................................................. 6,717 17,191
Retained earnings....................................................................... 936 936
Treasury stock.......................................................................... (461) (461)
Cumulative translation adjustment....................................................... (164) (164)
--------- -----------
Total shareholders' equity................................................................ 7,080 17,575
--------- -----------
Total capitalization...................................................................... $ 11,575 $ 20,246
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Excludes (i) 802,500 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the LTI Plan, (ii) 235,000 shares of
Common Stock reserved for future issuance under the LTI Plan, (iii) 210,000
shares of Common Stock issuable upon exercise of the Representative's
Warrant, (iv) 342,013 shares of Common Stock issued upon conversion of
certain convertible promissory notes between May 31, 1996 and August 31,
1996, (v) 25,000 shares of Common Stock issuable upon exercise of the Note
Warrant, and (vi) 175,000 shares of Common Stock issuable upon exercise of
the Advisor Warrants. See "Management's Discussion and Analysis of Financial
Condition--Liquidity and Capital Resources," "Management--Long-Term
Incentive Plan," "Description of Capital Stock" and "Underwriting."
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated financial data selected by the Company set forth below with
respect to the Company's statement of operations data for each of the fiscal
years in the three-year 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 and notes thereto of
the Company included elsewhere herein. The selected financial data with respect
to the statement of operations data for February 29, 1992 and February 28, 1993
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
in this Prospectus. The selected consolidated financial data set forth below
with respect to the Company's statement of operations data for the three months
ended May 31, 1996 and 1995 and the Company's balance sheet data at May 31, 1996
are derived from unaudited consolidated financial statements included in this
Prospectus. The selected financial data with respect to the Company's balance
sheet data at May 31, 1995 are derived from unaudited consolidated financial
statements not included in this Prospectus. The results of operations for the
three months ended May 31, 1996 are not necessarily indicative of results to be
expected for any future period of the fiscal year ending February 28, 1997. 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 in this Prospectus.
<TABLE>
<CAPTION>
THREE
FISCAL YEAR ENDED MONTHS ENDED
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FEB. 29, FEB. 28, FEB. 28, FEB. 28, FEB. 29, MAY 31, MAY 31,
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues.............................. $ 1,452 $ 2,799 $ 12,206 $ 18,325 $ 22,291 $4,921 $5,884
Cost of sales............................... 1,072 1,787 5,407 6,443 7,978 1,780 2,440
--------- --------- --------- --------- --------- --------- ---------
Gross profit................................ 380 1,012 6,799 11,882 14,313 3,141 3,444
Operating expenses.......................... 733 2,009 5,195 9,665 11,758 2,679 2,662
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)..................... (353) (997) 1,604 2,217 2,555 462 782
Other expenses (income)..................... 47 (17) 139 100 293 (33) 84
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before taxes.................. (400) (980) 1,465 2,117 2,262 495 698
Provision for taxes......................... 152 -- 255 495 203 48 238
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................... $ (552) $ (980) $ 1,210 $ 1,622 $ 2,059 $ 447 $ 460
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share................. $ (0.21) $ (0.31) $ 0.28 $ 0.34 $ 0.40 $ 0.09 $ 0.09
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding......... 2,659 3,192 4,344 4,710 5,188 4,868 5,396
Balance Sheet Data:
Total assets................................ $720 $1,550 $7,310 $9,958 $ 16,672 $ 10,375 $ 16,460
Working capital (deficit)................... (235) (391) 656 (566) 1,349 58 1,742
Debt, including current portion............. 181 503 1,798 1,656 4,507 2,427 4,495
Total shareholders' equity.................. 112 (35) 1,851 3,352 6,117 4,036 7,080
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION 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 PROSPECTUS 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 "RISK FACTORS." THESE
AND OTHER FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED.
OVERVIEW
UniComp provides information technology services to businesses located
primarily in the United Kingdom and platform-migration software and
payment-processing systems to users in North America and Europe. In fiscal year
1996, the Company generated $22.3 million in total revenues, of which $11.4
million were derived from information technology services and $5.5 million were
derived from sales of ancillary computer equipment and supplies. The remaining
$5.4 million in revenues were derived from license fees for the Company's
platform-migration software and payment-processing systems. The Company expects
revenues from software licensing to increase as a percentage of total revenues
in the future.
During each of the last three fiscal years, approximately 80% of the
Company's total revenues were derived from its international operations.
Denomination of the Company's revenues and expenses are generally in
corresponding currencies. As a result, the Company has not hedged against
foreign currency exchange rate risks to date.
Cost of sales for maintenance and information technology services includes
supplies, parts, subcontractors and other direct costs of delivering the
services, except for salary costs, which are included in selling, general and
administrative costs. Cost of sales for ancillary computer equipment and
supplies consists of the actual cost of the products sold. Cost of sales for
software licensing includes amortization of capitalized software development
costs, as well as any royalties payable on embedded technologies. The Company
amortizes capitalized software development costs over the estimated life of the
product, generally three to four years. Gross margins can increase significantly
as software licensing revenues increase over amortization costs.
Selling, general and administrative expenses include salaries and related
costs for all employees, travel, internal equipment, premises and marketing
costs, as well as general office and administrative costs. Development grants
received from the government of Northern Ireland have been recorded as a
reduction in selling, general and administrative expenses, or a reduction in
capitalized development costs, and are anticipated to remain relatively constant
for the foreseeable future. Although the Company expects the dollar amount of
selling, general and administrative expenses to increase as the Company grows,
it anticipates that these expenses will remain constant or decrease as a
percentage of total revenues.
In April 1996, the Company completed its acquisition of Smoky Mountain,
which designs, develops and markets payment-processing systems. The acquisition
has been accounted for by the pooling-of-interests method. Generally accepted
accounting principles prescribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. The Selected
Consolidated Financial Data give retroactive effect to the pooling-of-interests
with Smoky Mountain prior to the transaction date since it results in the most
meaningful presentation of historical results. As such, the consolidated balance
sheets at February 29, 1996 and at February 28, 1995 and 1994 and the
consolidated results of operations for the fiscal years ended February 29, 1996
and February 28, 1995 and 1994 present the resulting combined entity in the
Supplemental Consolidated Financial Statements included in this Prospectus. See
Notes 1 and 3 of Notes to the Supplemental Consolidated Financial Statements.
16
<PAGE>
On August 1, 1995, the Company acquired certain assets and liabilities of
Advec Limited ("Advec"), a provider of information technology services and
ancillary products in Northern Ireland. The acquisition has been accounted for
by the purchase method. As such, Advec's results of operations have been
included since the date of acquisition.
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenues for the fiscal years ended
February 29, 1996 and February 28, 1995 and 1994 and the three months ended May
31, 1996 and 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
---------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FEB. 28, FEB. 28, FEB. 29, MAY 31, MAY 31,
1994 1995 1996 1995 1996
-------------- -------------- -------------- ------------- -------------
(DOLLARS IN THOUSANDS)
Total revenues............................... $12,206 100.0% $18,325 100.0% $22,291 100.0% $4,921 100.0% $5,884 100.0%
Cost of sales................................ 5,407 44.3 6,443 35.2 7,978 35.8 1,780 36.2 2,440 41.5
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Gross profit................................. 6,799 55.7 11,882 64.8 14,313 64.2 3,141 63.8 3,444 58.5
Operating expenses........................... 5,195 42.6 9,665 52.7 11,758 52.7 2,679 54.5 2,662 45.2
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Operating income............................. 1,604 13.1 2,217 12.1 2,555 11.5 462 9.3 782 13.3
Other expenses (income)...................... 139 1.1 100 0.5 293 1.3 (33) (0.7) 84 1.4
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Income before taxes.......................... 1,465 12.0 2,117 11.6 2,262 10.2 495 10.0 698 11.9
Provision for taxes.......................... 255 2.1 495 2.7 203 0.9 48 1.0 238 4.0
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Net income................................... $ 1,210 9.9% $ 1,622 8.9% $ 2,059 9.3% $ 447 9.0% $ 460 7.9%
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
</TABLE>
THREE MONTHS ENDED MAY 31, 1996 COMPARED TO THREE MONTHS ENDED MAY 31, 1995
REVENUES. Revenues for the three months ended May 31, 1996 increased to
$5.9 million compared to $4.9 million for the comparable period in the prior
fiscal year, an increase of $1.0 million or 19.6%.
Revenues from maintenance and other information technology services
increased to $3.4 million for the three months ended May 31, 1996 from $2.5
million for the comparable period in the prior fiscal year, an increase of
$906,000 or 36.2%. A portion of this increase was due to approximately $210,000
of additional maintenance and service revenues for the three months ended May
31, 1996 arising as a result of the Advec acquisition. The remainder of the
increase was primarily due to an increase in revenues from additional contracts
and an increase in revenues associated with the renewal of existing contracts.
Revenues from sales of equipment and supplies increased to $1.5 million for
the three months ended May 31, 1996 from $1.2 million for the comparable period
in the prior fiscal year, an increase of $249,000 or 20.5%. This increase was
primarily due to approximately $274,000 of additional equipment revenues for the
three months ended May 31, 1996 arising as a result of the Advec acquisition.
Revenues from software licensing decreased to $1.0 million for the three
months ended May 31, 1996 compared to $1.2 million for the comparable period in
the prior fiscal year, a decrease of $191,000 or 15.9%. This decrease was
primarily due to the recognition in the quarter ended May 31, 1995 of $475,000
of revenues associated with a one-time sale of platform-migration software to
Siemens Nixdorf totalling $1.5 million for the fiscal year ended February 29,
1996. Additionally, software sales of the Unibol division declined approximately
$150,000 for the three months ended May 31, 1996 as compared to the comparable
period in the prior fiscal year due to revenues from the sale of the UNIBOL400
product increasing more slowly than the decline in sales of the UNIBOL36
product. These decreases were offset by an increase in revenues from licensing
of payment-processing systems to $514,000 in the three months ended May 31, 1996
from $81,000 in the comparable period of the prior fiscal year.
17
<PAGE>
INTERNATIONAL REVENUES. Revenues from international operations, principally
in the United Kingdom, increased to $4.9 million for the three months ended May
31, 1996 from $4.5 million for the comparable period in the prior fiscal year,
an increase of $343,000 or 7.6%. This increase was primarily attributable to
increased revenues arising as a result of the Advec acquisition, an increase in
revenues from additional contracts and an increase in revenues associated with
the renewal of existing contracts. Revenues in the United States increased to
$1.0 million for the three months ended May 31, 1996 from $390,000 for the
comparable period in the prior fiscal year, an increase of $632,000 or 159.7%.
This increase was primarily due to a $452,000 increase in revenues from the
payment-processing division in the first quarter of fiscal year 1997.
GROSS PROFIT. Gross profit for maintenance and other information technology
services declined slightly to 83.7% of maintenance and service revenues for the
three months ended May 31, 1996 from 86.7% for the comparable period in the
prior fiscal year principally due to pricing pressure caused by more competitive
market conditions on bids for new and renewed contracts.
Gross profit for equipment and software declined to 23.9% of ancillary
equipment and software revenues for the three months ended May 31, 1996,
compared to 40.2% for the comparable period in the prior fiscal year. The
decrease in gross margin on ancillary equipment and software was principally due
to an increase in amortization of approximately $127,000 on capitalized software
based on the first release of UNIBOL400 in the fourth quarter of the fiscal year
ended February 29, 1996, increased royalties on equipment and software due to a
large order of third-party equipment and software from one of the Company's
maintenance customers in Northern Ireland, and the decline in software licensing
revenues.
OPERATING EXPENSES. Selling, general and administrative expenses remained
fairly constant at $2.5 million for the three months ended May 31, 1996 and
1995. Selling, general and administrative expenses as a percentage of total
revenues improved to 42.1% for the first quarter of fiscal year 1997 compared to
51.1% for the comparable period in the prior fiscal year. The largest component
of the Company's selling, general and administrative expenses consisted of
employee salaries and related costs, which were $2.0 million for the three
months ended May 31, 1996 compared to $1.8 million for the three months ended
May 31, 1995.
OTHER EXPENSES. Other expenses were $84,000 for the three months ended May
31, 1996 compared to other income of $33,000 for the comparable period in the
prior fiscal year. The interest expense component increased to $93,000 for the
three months ended May 31, 1996 from $38,000 for the comparable period in the
prior fiscal year. The increase in interest expense was principally due to
interest costs associated with the $2.0 million principal amount of 7.0%
convertible promissory notes issued in December 1995.
TAXES. The effective income tax rate (income taxes expressed as a
percentage of pretax income) was 34.0% for the three months ended May 31, 1996,
compared to 9.7% for the comparable period in the prior fiscal year. This
increase was due to the fact that the Company became fully taxable for the
quarter ended May 31, 1996, which has resulted in an increase in the tax
provision for the first quarter of fiscal year 1997 to $238,000 from $48,000 for
the comparable period in the prior fiscal year, an increase of $190,000.
FISCAL YEAR ENDED FEBRUARY 29, 1996 COMPARED TO FISCAL YEAR ENDED FEBRUARY
28, 1995
REVENUES. Revenues for fiscal year 1996 increased to $22.3 million compared
to $18.3 million for fiscal year 1995, an increase of $4.0 million or 21.6%.
Revenues from maintenance and other information technology services
increased to $11.4 million for fiscal year 1996 from $9.0 million for fiscal
year 1995, an increase of $2.4 million or 27.6%. Revenues arising from the Advec
acquisition contributed approximately $330,000 to such increase. The remainder
of the increase was due principally to the effects of a full year of revenue
from CI Computer Software
18
<PAGE>
Limited ("CICS"), which was acquired in September 1994, and the increase in
revenues from additional contracts and the renewal of existing contracts.
Revenues from the sale of ancillary equipment and supplies increased to $5.5
million for fiscal year 1996 from $4.1 million for fiscal year 1995, an increase
of $1.4 million or 34.2%. The increase was principally due to a large sale to
British Coal and the Advec acquisition.
Revenues from software licensing increased to $5.4 million for fiscal year
1996 compared to $4.8 million for fiscal year 1995, an increase of $560,000 or
11.7%. Software sales from payment-processing systems increased to $790,000 for
fiscal year 1996 from $360,000 for fiscal year 1995, an increase of 119.2%.
The foregoing increases were partially offset by the elimination of sound
system revenues for fiscal year 1996 as a result of the divestiture of the
Company's sound systems business in the prior fiscal year.
INTERNATIONAL REVENUES. Revenues from international operations, principally
in the United Kingdom, increased to $18.7 million for fiscal year 1996 from
$15.5 million for fiscal year 1995, an increase of $3.2 million or 20.2%.
Revenues in the United States increased to $3.6 million for fiscal year 1996
from $2.8 million for fiscal year 1995, an increase of $800,000 or 29.9%.
GROSS PROFIT. Gross profit for maintenance and other information technology
services declined slightly to 84.0% of maintenance and other information
technology service revenues for fiscal year 1996 from 88.2% for fiscal year
1995, primarily due to reduced profits attributable to increased price
competition.
Gross profit for ancillary equipment and software was 43.5% of ancillary
equipment and software revenues for fiscal year 1996 compared to 43.0% for
fiscal year 1995. Increased amortization on capitalized software based on the
first release of UNIBOL400 in the fourth quarter of fiscal year 1996 was offset
by higher margins on sales of payment-processing systems.
OPERATING EXPENSES. Selling, general and administrative expenses increased
to $11.0 million for fiscal year 1996 compared to $9.0 million for fiscal year
1995, an increase of $2.0 million or 22.6%. This increase was primarily related
to increased salaries and related costs due to the full-year effect of the CICS
acquisition for fiscal year 1996 and the effect of additional expenses from the
date of the Advec acquisition. Selling, general and administrative expenses as a
percentage of total revenues remained relatively constant at 49.6% for fiscal
year 1996 compared to 49.2% for fiscal year 1995.
OTHER EXPENSES. Other expenses increased to $293,000 for fiscal year 1996
compared to $100,000 for fiscal year 1995, an increase of $193,000. Interest,
the primary component of other expenses, increased to $251,000 for fiscal year
1996 from $224,000 for fiscal year 1995, an increase of $27,000 or 12.1%. The
increase in interest expense was due to the issuance of $2.0 million principal
amount of 7.0% convertible promissory notes in December 1995. The Company also
initiated new borrowings from the Bank of Ireland related to the acquisition of
a new building for Company operations in Belfast, Northern Ireland. Other income
for fiscal year 1995 included the gain on the disposition of the Company's sound
systems business of $154,000.
TAXES. The effective income tax rate (income taxes expressed as a
percentage of pretax income) was 9.0% for fiscal year 1996, compared to 23.4%
for fiscal year 1995. Substantially all the tax expense recorded in fiscal year
1995 related to operations in the United Kingdom. Approximately $450,000 of tax
expense was recorded for operations in the United Kingdom for fiscal year 1996.
Additionally, in fiscal year 1996 approximately $55,000 of tax expense was
recorded in the United States for certain state taxes and federal alternative
minimum taxes. However, the $505,000 of total tax expense recorded for fiscal
year 1996 was reduced by approximately $302,000 due to elimination of the
deferred tax asset valuation allowance relating to the net operating loss
carryforward in the United States. Based on the Company's 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
19
<PAGE>
the deferred tax asset valuation allowance, the effective income tax rate in
future periods is expected to significantly increase.
FISCAL YEAR ENDED FEBRUARY 28, 1995 COMPARED TO FISCAL YEAR ENDED FEBRUARY
28, 1994
REVENUES. Revenues for fiscal year 1995 increased to $18.3 million compared
to $12.2 million for fiscal year 1994, an increase of $6.1 million or 50.1%.
Revenues from maintenance and other information technology services increased to
$8.9 million for fiscal year 1995 from $5.7 million for fiscal year 1994, an
increase of $3.2 million or 57.7%. Revenues from sales of ancillary equipment
and software increased to $8.9 million for fiscal year 1995 from $6.0 million
for fiscal year 1994, an increase of $2.9 million or 47.8%. These increases were
due principally to the inclusion of ICGL revenues of $14.5 million for an entire
year for fiscal year 1995 compared to $9.1 million for only nine months in
fiscal year 1994. Sound system revenues decreased to $468,000 for fiscal year
1995 from $503,000 for fiscal year 1994 due to the disposition of the Company's
sound systems business in fiscal year 1995.
INTERNATIONAL REVENUES. Revenues in the United Kingdom increased to $15.5
million for fiscal year 1995 from $9.6 million for fiscal year 1994, an increase
of $5.9 million or 62.3%. This increase was primarily due to the inclusion of
the ICGL revenues for an entire year in fiscal year 1995 compared to revenues
for only nine months in fiscal year 1994. Other increases were due to the
inclusion of revenues from CICS, which was acquired in September 1994, of
approximately $533,000 and increases in software license and maintenance fees.
Revenues in the United States increased to $2.8 million for fiscal year 1995
from $2.6 million for fiscal year 1994, which was principally due to an increase
in revenue from sales of payment-processing systems of approximately $475,000
from fiscal year 1994 to fiscal year 1995. Payment-processing systems sales
began in October 1993 and accounted for revenues of $50,000 for fiscal year
1994. This increase was offset by a decrease in certain information technology
service revenues of $207,000 to $182,000 for fiscal year 1995 from $389,000 for
fiscal year 1994.
GROSS PROFIT. Gross profit increased to 64.8% of total revenues for fiscal
year 1995 compared to 55.7% of total revenues in fiscal year 1994. The increase
in gross profit was primarily due to the acquisition of ICGL and continued
growth of operations in the United Kingdom.
OPERATING EXPENSES. Selling, general and administrative expenses increased
to $9.0 million for fiscal year 1995 from $4.6 million for fiscal year 1994, an
increase of $4.4 million or 96.0%. The increase was due principally to the
inclusion of ICGL for the entire year in fiscal year 1995.
OTHER EXPENSES. Other expenses decreased to $100,000 for fiscal year 1995
compared to $139,000 for fiscal year 1994, a decrease of $39,000 or 27.7%. The
interest expense component increased to $224,000 for fiscal year 1995 from
$174,000 for fiscal year 1994 due principally to a full year of debt service on
the purchase of ICGL. Other income in fiscal year 1995 included the gain on
disposal of the Company's sound systems business of $154,000.
TAXES. The effective income tax rate (income taxes expressed as a
percentage of pretax income) was 23.4% for fiscal year 1995, compared to 17.4%
for fiscal year 1994. Substantially all of the tax expense recorded in fiscal
years 1995 and 1994 related to operations in the United Kingdom. During fiscal
year 1994, the Company utilized all remaining tax loss carryforwards in the
United Kingdom, thereby increasing the effective income tax rate in fiscal year
1995 compared to fiscal year 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant growth, with total revenues growing
to $22.3 million for fiscal year 1996 from $12.2 million for fiscal year 1994, a
compound annual growth rate of approximately 35%. During this period, the
Company has met its liquidity requirements primarily through operations, private
placements of debt and equity securities, bank financing and grants from the
government of Northern Ireland.
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<PAGE>
The Company has generated positive operating cash flows of $2.5 million,
$2.8 million and $3.0 million for each of fiscal years 1996, 1995 and 1994. At
May 31, 1996, the Company had approximately $608,000 in cash and equivalents
compared to $1.3 million at February 29, 1996. The decrease in cash and
equivalents is principally due to the final payment of $300,000 relating to the
purchase of the rights to use and modify the source code of the database
embedded in the UNIBOL400 product and approximately $250,000 in working capital
requirements for the payment-processing division.
During the fiscal year ended February 29, 1996, the Company expended $1.6
million for capital improvements, including approximately $600,000 for a new
building in Northern Ireland. The Company also expended $1.0 million to purchase
the rights to use and modify the source code for the database embedded in the
UNIBOL400 product. Other significant investing expenditures in fiscal year 1996
included the Advec acquisition for approximately $420,000, and increased
capitalization of internally developed software costs of approximately $600,000
to $1.7 million in fiscal year 1996 from $1.1 million in fiscal year 1995,
principally due to an increase in development costs necessary to bring the
UNIBOL400 product to general availability.
The Company issued $2.0 million principal amount of 7.0% convertible
promissory notes in December 1995. The proceeds from the convertible promissory
notes were used to acquire the rights to use and modify the source code of the
database embedded in the UNIBOL400 product and for general working capital
purposes. As of August 31, 1996, all the principal and related accrued interest
thereon had been converted into 430,291 shares of Common Stock.
In connection with the addition of the new building in Belfast, Northern
Ireland, the Company secured a 10-year variable interest mortgage based on LIBOR
plus 1.75% (8.63% per annum as of August 31, 1996) of approximately $690,000
payable with quarterly installments of approximately $17,300. Other significant
sources of cash from financing activities include additional borrowings of
approximately $417,000 on the short-term line of credit in the United Kingdom
and of approximately $618,000 of proceeds from the exercise of stock options.
The Company received grants to fund research and development from the
government of Northern Ireland of approximately $389,000, $369,000 and $285,000
for fiscal years 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 can be no assurance that
the Company will be able to continue to receive such grants.
The Company believes that the net proceeds of this offering, together with
cash generated from operations and available credit, if necessary, will be
sufficient to meet its working capital needs both on a short- and a 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. There can be no
assurance that financing will be available or, if available, will be on terms
acceptable to the Company.
SEASONALITY AND INFLATION
The Company's operations have not proven to be significantly seasonal,
although quarterly revenues and net income may 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 results of operations or financial condition.
21
<PAGE>
BUSINESS
OVERVIEW
UniComp provides information technology services to businesses located
primarily in the United Kingdom and platform-migration software and
payment-processing systems to users in North America and Europe. The Company's
strategy is to emphasize its platform-migration and payment-processing software
products and to expand its services business within its existing geographic
markets. The Company believes this strategy will allow it to expand profit
margins and provide its high-quality information technology services to a broad
and growing installed base of users of its platform-migration and
payment-processing products.
The Company has experienced significant growth, with total revenues growing
to $22.3 million for fiscal year 1996 from $12.2 million for fiscal year 1994, a
compound annual growth rate of approximately 35%. In fiscal year 1996,
approximately 51% of total revenues were derived from the Company's maintenance
and other information technology services, with more than 80% of total revenues
attributable to international operations, primarily in Northern Ireland.
INFORMATION TECHNOLOGY SERVICES
The worldwide information technology industry is characterized by rapid
technological change, which often leads to increased costs of maintaining
internal information technology resources capable of responding to such change.
The Company believes that, as companies strive to compete and utilize complex
new technologies, more companies will move toward outsourcing their information
technology requirements. The Company believes that this movement will enhance
its information technology services business.
The Company provides information technology services, including maintenance
and support services, installation and integration of software and hardware
systems and outsourcing of information technology services. Maintenance and
support services consist of system upkeep, including system maintenance,
technical support and training. Installation and integration services include
system consulting and design, custom software modification, software
installation and testing, as well as a broad range of systems configuration and
integration services for computer networks. The Company also provides
information technology services to businesses on an outsourced basis, thereby
offering its customers an opportunity to reduce information technology overhead
while continuing to respond to technological change. Outsourcing services
include disaster recovery, facilities management and related information
technology support services.
PLATFORM-MIGRATION SOFTWARE
During the past several years, there has been a movement in the computer
industry from proprietary systems toward open and portable systems. The Company
believes that decreasing prices, increasing functionality in information
technology products and the inherent constraints of proprietary platforms have
contributed to increased market acceptance of open systems and customer demand
for information technology products based on such systems. Changing to new
computing platforms, however, often results in significant disruption of
business operations as users are retrained and software errors are discovered
and corrected. Also critical is the potential loss of data contained in existing
databases that may result from a change to new applications software.
In response to the demand for applications software capable of running on
multiple computing platforms, UniComp has developed platform-migration software
that rehosts existing code to an open computing platform. The Company believes
that its UNIBOL rehosting solution allows businesses and independent software
vendors ("ISVs") to migrate their applications software to open systems in a
more
22
<PAGE>
cost-effective manner than competing methodologies. Rehosting enables businesses
to retain their investment in existing software and databases. Rehosting also
allows ISVs to expand their market opportunities without replacing or rewriting
applications, retraining or replacing software developers or incurring the cost
and disruption of re-engineering their products.
PAYMENT-PROCESSING SYSTEMS
Payment processing refers to the sequence of activities that occur among a
customer, a merchant and a payment processor when goods or services are sold.
Payment processing for commercial businesses has grown rapidly in recent years
as a result of a proliferation in and increased usage of credit and debit cards
and wider acceptance of such cards among merchants. Advances in
payment-processing and telecommunications technologies have also been key
factors contributing to such growth. The Company believes that the transition
from paper-based to electronic payment processing provides greater convenience
to merchants and consumers, reduces fees charged to merchants and facilitates
faster, more accurate settlement of payments.
The Company designs, develops and markets payment-processing systems that
provide merchants with greater hardware independence by supporting a variety of
hardware platforms, including personal computers, point-of-sale terminals and
other peripheral devices. Payment-processing systems include the software and
hardware combinations that allow electronic settlement of payment transactions.
The Company's strategy in the payment-processing market is to focus its sales
and marketing efforts on the relatively small number of large payment processors
and hardware vendors. The Company is currently selling its payment-processing
systems to each of the three largest payment processors in the United States,
which together represent over one million merchant locations and more than $250
billion in annual transaction volume.
MARKETS
INFORMATION TECHNOLOGY SERVICES
The worldwide information technology industry is characterized by rapid
technological change, which often leads to increased costs of maintaining
internal information technology resources capable of responding to such change.
According to the Outsourcing Institute, a leading industry publication, the
worldwide information technology services market, which includes maintenance,
support and systems integration services, was estimated to be $38 billion in
1995 and is expected to grow to $65 billion by 1998. The information technology
services market in Northern Ireland, where more than 80% of the Company's total
revenues are derived, is estimated by the Company to have been approximately
$150 million in 1995. The Company believes that the information technology
markets in Northern Ireland and the United Kingdom are regionally focused and
highly fragmented, with the U.K. market being substantially larger than that of
Northern Ireland. The Company believes that as companies strive to compete and
utilize complex new technologies, more companies will move toward outsourcing
their information technology requirements.
PLATFORM-MIGRATION SOFTWARE
IBM's midrange computing platforms, the System/36 and the AS/400, have
served as a popular computing solution for business applications since IBM's
introduction of these two systems in 1983 and 1988, respectively. While IBM
discontinued producing the System/36 in 1988, industry sources estimate
approximately 250,000 System/36 systems remained in use worldwide at the end of
1995. Industry publications estimate that over 360,000 AS/400 systems were in
use worldwide at the end of 1995. The Gartner Group estimates that, by the end
of 1997, the installed base of AS/400 systems will increase to over 450,000
systems worldwide.
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In adopting IBM's midrange computing platforms, businesses, and the ISVs
that support them, have invested substantial resources developing applications
software that provides a wide variety of manufacturing, accounting and other
information-management functions. According to industry sources, by 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 midrange
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 in revenues from AS/400
applications software sales.
IBM computing platform users and developers have historically been
constrained by the nonportable and proprietary nature of IBM's 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 a wider range of software and hardware vendors, as well as
increased system capacity, interoperability and scalability. Since the late
1980s, vendors of hardware and, to a lesser extent, software have experienced
substantial price reductions of their products due to increased competition and
the availability of alternative operating systems. The Company believes that
decreasing prices and increasing functionality in information technology
products have also led to increased market acceptance of open systems and
customer demand for information technology products based on such systems. 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 currently smaller, but growing faster,
than the AS/400 applications software market.
Changing to new computing platforms often results 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. ISVs must also adapt to customer demands associated
with increased popularity of new computing platforms. ISVs that have developed
successful AS/400 applications software are faced with the challenge of
migrating their products to new platforms to meet customer demands while
maintaining their existing customer base for applications software running on
the AS/400 platform.
Approaches to migrating System/36 and AS/400 systems may be summarized as
follows:
<TABLE>
<S> <C>
REFACING Refacing involves replacing the "green-screen" interface with a
graphical user interface. Because refacing affects only the end-user
interface, the source code must still be run on the original computing
platform, thereby defeating 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. Since this entails
completely rewriting applications software to meet customer
requirements, it often results in increased cost, risk of failure,
disruption and delay.
PACKAGED SOLUTIONS Migrating to a new computing platform can sometimes be accomplished by
installing an applications software package that has been
independently developed to run on open or portable platforms. While a
substantial number of packaged software applications are available,
businesses implementing this approach will often have to abandon their
investment in existing databases and software and may incur
substantial retraining costs.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
REHOSTING Rehosting involves migration of applications software to a new
computing platform with minimal change to the source code or user
interface. Rehosting is achieved by rebuilding applications software
to run efficiently on the new computing platform. This solution often
enables businesses to enjoy the continued use of their existing
programs and databases, reduce retraining costs and obtain the
advantages of a new computing platform. The Company offers a rehosting
solution through its UNIBOL product line.
</TABLE>
PAYMENT-PROCESSING SYSTEMS
The market for payment-processing systems has grown substantially over the
last several years as electronic-based transaction settlement has begun to
replace paper-based settlement. According to Credit Card News, a leading
industry publication, the total U.S. credit-card charge volume for VISA and
MasterCard was in excess of $550 billion in 1995 and represented in excess of 7
billion transactions, up from $440 billion and 5.6 billion transactions in 1994.
The market for check verification services has also demonstrated rapid growth.
The dollar volume of checks verified in 1995 increased 18.1% to $178 billion
from $151 billion in 1994.
The payment-processing market is dominated by a few large
transaction-processing companies, the five largest of which, according to an
industry publication, accounted for approximately 42% of this market in 1995.
These processors are as follows:
<TABLE>
<CAPTION>
AGGREGATE MERCHANT
TRANSACTION VOLUME LOCATIONS
------------------ -----------
<S> <C> <C>
First Data Merchant Services....................................................... $129.5 billion 558,000
National Processing, Inc........................................................... $65.7 billion 125,000
National Data Corporation.......................................................... $65.0 billion 400,000
Bank of America.................................................................... $24.9 billion 95,000
First USA Payment Tech, Inc........................................................ $24.6 billion 180,000
</TABLE>
STRATEGY
The Company's strategy is to become the leading provider of
platform-migration software and hardware-independent payment-processing systems
to businesses worldwide, and to continue to provide high-quality information
technology services in the United Kingdom. Key elements of this strategy
include:
LEVERAGE COMPLEMENTARY BUSINESSES. The Company intends to initiate efforts
to market its information technology services to its platform-migration software
and payment-processing systems clients. The Company believes that cross-selling
among its different businesses will increase total revenues by expanding the
range of customers to whom it can effectively market its information technology
services and products.
EMPHASIZE SOFTWARE PRODUCTS. To enhance its current competitive advantage,
the Company intends to continue to invest in product development and marketing.
Initially, the Company intends to focus on its UNIBOL400 product, including
developing support for programs written using the COBOL/400 language, as well as
support for the Windows NT platform. The Company is also developing enhancements
and add-ons to its payment-processing systems to provide data collection for
time and attendance reporting, inventory ordering, frequent shopper programs,
electronic benefits processing and remote bill paying. Finally, the Company
intends to expand its marketing efforts for platform-migration software and
payment-processing systems, primarily through increasing its direct sales force
to better penetrate target markets.
EXPAND WITHIN EXISTING GEOGRAPHIC MARKETS. The Company believes that its
success to date is partially attributable to a preference by many companies
located in Northern Ireland and the United Kingdom to
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<PAGE>
conduct business with regional providers of information technology services. The
Company intends to leverage its name recognition and reputation within its
existing geographic markets to increase its market share in Northern Ireland and
expand its customer base throughout the United Kingdom.
EXPAND DISTRIBUTION CHANNELS. The Company intends to continue to emphasize
distribution of its platform-migration software and payment-processing systems
through multiple distribution channels. It currently markets and distributes its
platform-migration software through its direct sales force, as well as through
independent distributors in over 50 countries. Additionally, the Company has
entered into strategic or marketing relationships with major UNIX hardware
system vendors, including Hewlett-Packard, Siemens Nixdorf and Data General, as
well as international systems integrators. The Company also markets and sells
its platform-migration software through ISVs. The Company believes that its
multichannel distribution strategy enables it to effectively market its products
and services to a wide range of potential customers. The Company currently
markets its payment-processing systems through large transaction-processing
companies, as well as point-of-sale hardware and software vendors.
ACQUIRE STRATEGIC BUSINESSES, PRODUCTS AND TECHNOLOGIES. The Company
intends to continue to seek opportunities to acquire businesses, products and/or
technologies that it believes will complement its business operations. The
Company seeks opportunistic acquisitions that may provide complementary
technology, expertise or access to certain distribution channels. In addition,
the Company may seek to acquire certain component technologies that may provide
opportunities to accelerate its product development efforts.
PRODUCTS AND SERVICES
UniComp provides information technology services and designs, develops and
markets platform-migration software and payment-processing systems. In fiscal
year 1996, UniComp generated $22.3 million in total revenues, of which $11.4
million were derived from information technology services and $5.5 million were
derived from sales of ancillary computer equipment and supplies. The remaining
$5.4 million in revenues were derived from license fees for the Company's
platform-migration software and payment-processing systems.
INFORMATION TECHNOLOGY SERVICES
The Company provides a wide variety of information technology services,
including maintenance and support services, installation and integration of
software and hardware systems and outsourcing of information technology
services. Maintenance and support services consist of system upkeep, including
computer system maintenance, technical support and training. Installation and
integration services include system consulting and design, custom software
modification, software installation and testing, as well as a broad range of
systems configuration and integration services for computer networks. The
Company also provides information technology services to businesses on an
outsourced basis, offering its customers an opportunity to reduce information
technology overhead while continuing to respond to technological change.
Outsourcing services include disaster recovery, facilities management and
related information technology support services.
Typically, the Company's maintenance and support contracts are for an
initial term of one to three years and are terminable by either party upon three
months' notice subsequent to the initial term. The Company's installation and
integration contracts typically provide for payment on a time-and-materials
basis and are terminable by the customer on 30 days' notice. Outsourcing
agreements vary by customer, depending on the type of service to be provided by
the Company.
PLATFORM-MIGRATION SOFTWARE
The Company designs, develops and markets platform-migration software under
its UNIBOL brand.
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<PAGE>
UNIBOL36. The UNIBOL36 system rehosts applications software written in RPG
or COBOL, and related data, from IBM's System/36 to UNIX or Windows NT systems.
During each of the last three fiscal years, the UNIBOL36 product has been the
Company's largest source of revenues from software licensing.
UNIBOL400. The UNIBOL400 system rehosts applications software written in
RPG/400 from IBM's AS/400 to UNIX systems. The Company released version 1.05,
the first version released for widespread commercial distribution, in February
1996. In August 1996, the Company released a version supporting Oracle database
connectivity. As of August 31, 1996, the UNIBOL400 system was installed at 10
sites in the United States and Europe.
Advantages of the UNIBOL rehosting solution include:
<TABLE>
<S> <C>
VERSATILITY The UNIBOL36 system enables the migration to open systems of
applications software written in either RPG or COBOL languages. 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, RPG/400. The Company expects to
release a version that supports COBOL/400 in calendar year 1997. The
UNIBOL400 system is currently available on four UNIX hardware
platforms, including two of the most popular UNIX platforms. In
September 1996, the Company released its UNIBOL36 NT product, which
supports the Windows NT platform. The Company also plans to develop a
version of the UNIBOL400 system that supports Windows NT.
USER INTERFACE The UNIBOL systems preserve the "look and feel" of the legacy system's
user interface, thereby saving businesses that are migrating to a new
computing platform substantial retraining, documentation and technical
support costs. By enabling the use of a single set of end-user
documentation, this feature allows for efficient technical support of
applications software running on multiple computing platforms.
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.
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.
MILLENNIUM FEATURE Many software applications contain six-character date fields with a
two-character year that will incorrectly interpret the year 2000 as
the year 1900. The Company's UNIBOL36 product solves this rapidly
approaching problem through an algorithm that interprets two-digit
years that are less than 40 as being in the 21st century rather than
the 20th century, thereby solving the millennium problem without
extensive re-coding. Users may change year settings to increase or
decrease the trigger value.
</TABLE>
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PAYMENT-PROCESSING SYSTEMS
The Company designs, develops and markets software and hardware systems to
facilitate the settlement of electronic payment transactions. Functions
supported by the Company's payment-processing systems include credit, debit and
purchase-card processing, check authorization and guarantee, signature capture,
communication, retrieval and address verification. To address the lack of
interoperability that now exists among many vendors' hardware and software
products, the Company's payment-processing systems are designed to provide
payment processors and merchants with a high degree of hardware independence by
supporting a variety of hardware platforms, including personal computers and
certain point-of-sale terminals, as well as the Company's own payment-processing
hardware and other peripheral devices.
The Company believes its Universal Payment Software ("UPS") to be the most
critical component of its payment-processing systems. The UPS applications
software facilitates transaction processing at merchant locations and 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 applications software facilitates a variety of
functions, including credit, debit and purchase-card processing, check
authorization and guarantee, signature capture, communication and retrieval and
address verification.
The Company also designs, develops and markets a variety of ancillary
hardware, software and related systems that comprise certain of its
payment-processing systems. The Company's Universal Terminal Software acts as
the application environment for a variety of point-of-sale peripherals, while
the Universal Payment Host resides on a personal computer located at the payment
transaction processor and collects data for authorization and settlement
processing on the host computer. The Company's Universal Payment Adaptor Master
Controller and Universal LAN Adapter products provide the hardware platforms on
which the UPS applications software operates and supports connectivity with up
to 63 peripheral devices, including several types of point-of-sale terminals,
ECRs, printers and other devices, as well as entire local area networks.
MARKETING AND DISTRIBUTION
The Company currently markets and distributes its services and products in
the United States and the United Kingdom through its direct sales force. In
addition, the Company markets its platform-migration software through
independent distributors 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. The Company also markets and sells its platform-migration
software through ISVs. The Company believes that its multi-channel distribution
strategy enables it to effectively market its platform-migration software and
services to a wide range of potential customers. The Company currently markets
its payment-processing systems through large transaction-processing companies,
as well as through point-of-sale hardware and software vendors.
DIRECT SALES AND MARKETING FORCE
As of August 31, 1996, the Company marketed and sold its information
technology services through 22 direct sales and marketing personnel. The Company
organizes its information technology services business such that each service
technician maintains a direct relationship with certain of the Company's service
customers. Specific marketing programs vary by target customer. The Company
believes that its direct sales approach, including having Company service
technicians serve as client-relationship managers, leads to better account
penetration and management, better communications and long-term relationships
with its clients and greater opportunities for follow-on sales of products and
services to its existing client base. To date, the Company has focused its sales
and marketing efforts for information technology services primarily on
businesses in Northern Ireland.
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As of August 31, 1996, the Company marketed and sold its platform-migration
software directly through the Company's 18-person UNIBOL sales and marketing
staff, which is supported by 15 individuals on the Company's UNIBOL technical
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, public relations, advertising programs, seminars,
audio conferences, trade shows, newsletters and its Internet homepage.
As of August 31, 1996, the Company marketed and sold its payment-processing
systems directly through a three-person sales and marketing staff. The Company
also employs two technical support personnel focused on payment-processing
systems. The Company is currently selling its payment-processing systems to each
of the three largest payment processors, which together represent over one
million merchant locations and more than $250 billion in annual transaction
value. Because the target market for the Company's payment-processing systems
consists of a small number of large transaction processors, the Company's direct
sales staff markets its payment-processing systems largely through system
demonstrations and collateral sales materials.
DISTRIBUTORS
As of August 31, 1996, independent distributors in over 50 countries sold
the Company's UNIBOL products. Distributors primarily consist of software
consultants and systems integrators. A distributor qualifies to sell the
Company's products by paying an annual support and maintenance fee. The
Company's distribution agreements typically provide for a one-year term and are
terminable upon 30 days' notice by either party. The Company's distributors
generally 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 is a strategic partner in Hewlett-Packard's AS/400 Open Midrange
Alternative Program, which provides cooperative marketing support for the
UNIBOL400 product. In addition, the Company has an OEM bundling agreement with
Siemens Nixdorf under which Siemens Nixdorf provides platform-migration,
training, systems integration and ongoing support services for UNIBOL products.
The Company is also an authorized ISV for Data General's Aviion computer systems
and is a strategic partner in Data General's worldwide competitive ISV
recruitment program, which provides the Company with access to cooperative
marketing programs and applications software porting assistance. In addition,
the Company markets its payment-processing systems through OEM relationships
with large point-of-sale hardware vendors, including IBM, NCR and ICL/Fujitsu
for cash registers and Checkmate, ATALLA and Verifone for transaction terminals.
INDEPENDENT SOFTWARE VENDORS
According to industry sources, there are approximately 8,000 ISVs currently
supporting applications software for the AS/400 platform. The Company believes
that, by using the UNIBOL400 system, ISVs will be able to offer their
applications software on open systems and other portable platforms. The Company
believes it can accelerate market acceptance of its UNIBOL400 product by
leveraging its reputation in the System/36 market and focusing on the ISV
distribution channel. The Company also believes that, by using the ISV
distribution channel, it will derive licensing revenue from both the initial
sale to an ISV of the UNIBOL400 system and from subsequent license fees payable
when an ISV licenses its migrated applications to end users.
As of August 31, 1996, the Company had entered into licensing agreements
with over 25 ISVs for the UNIBOL400 product. The Company believes these ISVs
have developed significant software tools in their respective industries, which
are often mission-critical, enterprise-wide software applications for a specific
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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 ISV agreements are
nonexclusive, have a one-year term and are terminable by either party on 30
days' notice. Typically, an ISV will pay an initial development and migration
fee and annual support payments to the Company for the right to migrate the
ISV's applications software to a new computing platform, and will pay an
additional fee for each user of the ISV's applications software running under
the UNIBOL400 system.
SIGNIFICANT CUSTOMERS
No one of the Company's customers accounted for more than 10% of the
Company's total revenues in any of its three most recent fiscal years. The
following table lists some of the Company's significant end-users and customers.
INFORMATION TECHNOLOGY SERVICES
A.I. Services (Northern Ireland), Limited
Albany International
AVX, Limited
Belfast Harbour Commissioners
British Fuel Limited
Broomhill Home Furnishings Limited
Building & Heavy Industries
Cantrell & Cochranz
Computeraid
Construction Holiday Pay
CPL Distribution, Limited
Cray Communications
Data Sciences
Desmonds
Dopra Systems Integration, Limited
Dupont
Granada Computer Services
Guinness
Harland & Wolff
Harland and Wolff Ship
HTE, Inc.
John Henderson
John Kelly, Limited
Kingspan Building Products
Lombard & Ulster
Mackie International Limited
Moygashel, Limited
NACCO Materials Handling, Limited
NIE
Northern Ireland Airports
Northern Ireland Court Services
Northern Ireland Health Boards
Polarcup
Short Brothers
Small Systems Group
Thomas McLaughlin, Limited
Ulster Bank, Limited
Ulster Carpet Mills
University of Ulster
PLATFORM-MIGRATION SOFTWARE
Appliance Parts, Incorporated
Aviation Equipment, Incorporated
Cass Logistics, Incorporated
Computer Bank, Incorporated
Computer Power, Incorporated
Consordi Stedi
Data General Corporation
DCS, Limited
DHL
Federal Communications Group
Glasgow City Council
Hewlett-Packard Company
Holland America Line Westours
Hotel Information Systems
Logix
RCG Information Services
Siemens Nixdorf
Sislight, S.A. DE C.V.
Sligos
Synapse Midrange Services, Limited
Tesco Stores, Limited
The Whalley Glass Company
Theta Systems, Incorporated
PAYMENT-PROCESSING SYSTEMS
First Data Merchant Services
National Data Corporation
National Processing, Inc.
Telecheck Services, Incorporated
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PRODUCT DEVELOPMENT
As of August 31, 1996, the Company's product development staff consisted of
31 employees, 28 of whom were located in Belfast, Northern Ireland. The market
for midrange business computing products has historically been characterized by
frequent technological advances, evolving industry standards and escalating
customer expectations. As a result, the Company's future growth and success will
be largely dependent on its ability to enhance its existing products and develop
or acquire new products.
The Company anticipates that the long-term success of the UNIBOL400 product
will require further product development, including development of support for
the Windows NT platform. The Company anticipates supporting Windows NT by
implementing a client/server version of its UNIBOL400 product, with a Windows 95
or Windows NT personal computer client networked to a server running Windows NT
and supporting object linking and embedding 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 software.
The Company is also developing enhancements and add-ons to its
payment-processing systems to provide data collection for time and attendance
reporting, inventory ordering, frequent shopper programs, electronic benefits
processing and remote bill paying.
COMPETITION
Some of the Company's current and potential competitors have longer
operating histories and financial, sales, marketing, technical and other
competitive resources that are substantially greater than those of the Company.
As a result, the Company's competitors may be able to adapt more quickly to
changes in customer needs or to devote greater resources to this market than the
Company. Such competitors could also attempt to increase their presence in the
Company's markets by forming strategic alliances with other competitors of the
Company, offering new or improved products and services to the Company's
customers or increasing their efforts to gain and retain market share through
competitive pricing. As the markets in which the Company competes have matured,
price competition has intensified and is likely to continue to intensify. Such
price competition could adversely affect the Company's results of operations.
There can be no assurance that the Company will be able to continue to compete
successfully with existing or new competitors.
INFORMATION TECHNOLOGY SERVICES
The Company believes that it is one of the largest providers of information
technology services in Northern Ireland. The market for the Company's
information technology services is intensely competitive due primarily to low
barriers to entry. The Company believes that the primary competitive factors in
this market include familiarity with local customs and practices, price,
technical expertise and reputation. The Company believes that it has many direct
and indirect competitors, none of which is dominant in the Company's
marketplace. The Company faces indirect competition from hardware manufacturers
that service their own equipment such as Digital Equipment Company and IBM. The
Company also faces direct competition from various independent information
technology service providers in Northern Ireland.
The Company believes that it competes by providing quality products and
services at competitive prices. The Company also believes that it distinguishes
itself from its competition on the basis of its technical expertise, vendor
alliances, direct sales strategy and customer-service orientation. Based on the
level of the Company's recurring business with many of its large customers, the
Company believes that it compares favorably to many of its competitors with
respect to the principal competitive factors set forth above.
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PLATFORM-MIGRATION SOFTWARE
The market for the Company's platform-migration software 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 from developers of
rehosting solutions, including Financial Technologies, Inc., Universal Software,
Emphasys Software and California Software, Inc. In addition, the Company faces
competition from companies that provide other migration solutions such as
refacing, re-engineering and packaged software applications. These competitors
include Wall Data Incorporated, PKS Software GmbH, Raconix and EFA Associates.
PAYMENT-PROCESSING SYSTEMS
The market for the Company's payment-processing systems is highly
competitive. The Company believes that the principal competitive factors in this
business include the ability to provide comprehensive, integrated
payment-processing systems, 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 and hardware systems, including Verifone, Checkmate,
IC Verify, Banktec and Open Systems.
ACQUISITION HISTORY
In December 1985, the Company was organized as Liberty Ventures, Ltd., a
Colorado corporation, for the primary purpose of seeking selected mergers or
acquisitions. In September 1986, the Company acquired UniComp Systems, Inc., a
Texas corporation, for shares of the Company's Common Stock and changed its name
to UniComp, Inc.
In June 1992, for 1,500,000 shares of the Company's Common Stock, the
Company acquired Arccom Management Systems, Inc., a Georgia corporation largely
owned by two of the Company's executive officers and directors, Messrs. Henry
and Hafer, that marketed and sold the UNIBOL36 product in the United States.
In May 1993, the Company acquired for $4.1 million ICGL, a U.K. company
consisting of three subsidiary companies, one of which, Unibol, Ltd., is the
developer of the UNIBOL36 and UNIBOL400 platform-migration software. The
acquisition of ICGL also included its two subsidiaries specializing in the
delivery of technology products and services to businesses located in Northern
Ireland and the United Kingdom: ICS Computing Limited, specializing in
vertical-market applications software and services; and Computer Maintenance
Ireland Limited, providing hardware maintenance, systems integration, training
and systems support, primarily in Northern Ireland.
In September 1994, the Company acquired CICS, a United Kingdom company that
provides software consultancy, custom software applications and hardware supply
and installation for the IBM AS/400 marketplace in Northern Ireland, primarily
in exchange for assuming the net liabilities of CICS and forgiving a $200,000
working capital loan made by CICS to the seller.
In August 1995, the Company acquired the assets (including hardware sales
and maintenance contracts) and certain liabilities of Advec, a computer
consulting company in Northern Ireland, for approximately $420,000.
In April 1996, the Company acquired Smoky Mountain, a North Carolina
corporation specializing in payment-processing systems, for 500,000 shares of
Common Stock.
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INTELLECTUAL PROPERTY
The Company regards its software as proprietary and relies primarily on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions, including employee and third-party
nondisclosure agreements to protect its proprietary rights. The Company seeks to
protect its software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. The Company has
filed an application to register its trademark "UNIBOL" product logo in the
United States and has registered such mark in the United Kingdom. The Company
presently has no patents or patent applications pending. The Company believes
that the ownership of patents is not presently a significant factor in its
business and that its success does not depend on the ownership of patents, but
primarily on the innovative skills, technical competence and marketing abilities
of its personnel. The Company requires its personnel to enter into
confidentiality agreements.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information the Company regards as proprietary.
EMPLOYEES
As of August 31, 1996, the Company employed approximately 230 persons on the
basis of full-time equivalent employment, including 40 (10 in the United States
and 30 in the United Kingdom) in sales, marketing and related activities; 160
(15 in the United States and 145 in the United Kingdom) in software development
and customer support operations; and 30 (10 in the United States and 20 in the
United Kingdom) in general administration and finance.
None of the Company's employees is represented by a labor union. The Company
believes that its relationship with its employees is good.
FACILITIES
The Company leases its headquarters in Marietta, Georgia, which currently
totals approximately 10,745 square feet. The Company pays approximately $18,800
per month as its base lease. The lease expires in September 2000 and contains a
renewal option for one additional three-year term. The Company's headquarters
include sufficient space for its sales and marketing, administrative, finance
and management personnel. The Company leases approximately 30,000 square feet of
office and warehouse in Belfast, Northern Ireland, at a monthly cost of $15,000
under a 10-year lease expiring in 1999. The Company owns another facility in
Belfast under a 10-year mortgage loan with interest at a variable rate of LIBOR
plus 1.75% (8.63% per annum as of August 31, 1996) with an outstanding principal
balance as of August 31, 1996 of approximately $613,000. Annual payments on this
loan are approximately $69,000. The Company also leases office space in
California, Texas and North Carolina at an aggregate cost of $5,200 per month.
The Company believes that either its current facilities are adequate to meet its
needs for the foreseeable future or adequate space is readily available in all
geographical areas in which the Company does business.
LEGAL PROCEEDINGS
In connection with its acquisition in 1993 of ICGL, the Company incurred a
claim by the seller related to pension overfunding. Based upon the advice of its
U.K. solicitor, the Company believes that it has adequate defenses to this claim
such that the expected outcome would not be material to the Company's financial
condition or results of operations. Due to uncertainties of the legal process,
however, no assurance can be made that the outcome of this case will be in
accordance with the Company's expectations.
The Company is not presently a party to any other material litigation and,
to management's knowledge, no material litigation is threatened against the
Company.
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MANAGEMENT
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, President and Chief
Executive Officer
J. Patrick Henry.......................... 44 President of Unibol, Inc. and Director
L. Allen Plunk............................ 26 Chief Financial Officer
Nelson J. Millar.......................... 59 Director
Thomas Zimmerer........................... 55 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 and President
since September 1995. He has served as Treasurer of Foutz & Associates, a public
relations company, since 1981 and as President and Chairman of Arccom
Technologies, Inc., an investment holding company, since 1990. Mr. Hafer holds a
B.S. in Accounting from Florida State University.
J. PATRICK HENRY. Mr. Henry has been President of Unibol, Inc., which
controls the Company's North and South American UNIBOL operations, since January
1992 and a Director of the Company since 1992. Mr. Henry first joined the
Company in March 1991 as Vice President of Sales with seven years of data
processing experience as a Marketing Manager at Burroughs Corporation. Mr. Henry
holds a B.S. in Industrial Management from Georgia Institute of Technology and
an M.B.A. in Finance from Georgia State University.
L. ALLEN PLUNK. Mr. Plunk was appointed as the Company's Chief Financial
Officer in August 1996. From June 1992 until joining the Company, Mr. Plunk was
with Coopers & Lybrand L.L.P., where he was most recently a manager and
specialized in accounting and Securities and Exchange Commission reporting
related to the software industry. Mr. Plunk is a Certified Public Accountant and
holds a B.B.A. in Accounting from Harding University.
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. From September
1992 to May 1993, Mr. Millar acted as the Managing Director of the ICS Computing
Group Limited, the group of companies that the Company acquired in May 1993.
From 1976 to 1993, Mr. Millar was the Managing Director of CMI Limited, the
systems integration subsidiary acquired by the Company. Mr. Millar holds a
Higher National Diploma in Business Studies from Queen's University in Belfast,
Northern Ireland, and is a member of the British Computer Society and Fellow of
the Institute of Directors.
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. 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 addition, he has served as a consultant to
over 75 United States and foreign corporations. Dr. Zimmerer holds a B.S.B.A. in
Management and Economics from the
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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 to be key employees:
SAMUEL JAMES FRAZER. Mr. Frazer has been Managing Director of CICS, a
subsidiary of the Company, since its incorporation in 1986.
GEORGE GRUBER. Mr. Gruber cofounded Smoky Mountain in October 1993 and
currently serves as its Vice President and Secretary. From 1992 to 1994, Mr.
Gruber was Director of Research and Development of ATM International, Inc., a
modem manufacturing company. From 1985 to 1992, he was Director of Research and
Development at the predecessor of SK Technologies Corporation, which is a
leading manufacturer of retail point-of-sale software.
IAN GRAHAM. Dr. Graham has been Managing Director of Unibol Limited, the
Company's European UNIBOL operations, including overseeing development of the
UNIBOL products since 1980. He holds a B.S.c. and a Ph.D. in Electronic
Engineering from Queens University in Belfast, Northern Ireland.
DAVID MAWHINNEY. Mr. Mawhinney has been Managing Director of ICS since May
1993, having joined ICS in 1980 as a sales executive. From 1984 to 1991, he was
ICS's Sales Manager and, from 1991 to 1993, its Sales Director. Mr. Mawhinney
holds an Honors Degree in Psychology from Queen's University in Belfast,
Northern Ireland.
KEN ROULSTON. Mr. Roulston has been Managing Director of Computer
Maintenance Ireland Limited since 1993, having joined CMI as a sales manager in
1986. 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.
B. MICHAEL WILSON. Mr. Wilson cofounded Smoky Mountain in October 1993, and
currently serves as its President. Mr. Wilson previously founded Lighthouse
Technologies, Inc. in March 1992, which he merged into Smoky Mountain in October
1993. Mr. Wilson was manager of Research and Development for SK Technologies
Corporation from 1989 to 1992.
COMPENSATION OF DIRECTORS
Nonemployee Directors are reimbursed for all out-of-pocket expenses incurred
in attending meetings of the Board of Directors and committees thereof.
Nonemployee Directors are also eligible to participate in the Company's 1996
Director Incentive Plan (the "Director Plan"). Under the Director Plan, each
nonemployee Director will receive an option to purchase up to 10,000 shares of
Common Stock upon his or her initial appointment or election to the Board of
Directors and an option to purchase 5,000 shares of Common Stock on March 1 of
each year, beginning in fiscal year 1997 and ending in fiscal year 2006. All
such options are immediately exercisable on their date of grant. See "--Director
Plan."
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established a Compensation Committee,
consisting of all members of the Board, 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, compensation plans and specific compensation levels for its executive
officers, and administers the LTI Plan.
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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.
DIRECTOR PLAN
GENERAL. The Director Plan was adopted by the Company's Board of Directors
in September 1996 and became effective upon adoption. The Director Plan provides
for the grant of nonqualified stock options to all nonemployee Directors of the
Company pursuant to an automatic, nondiscretionary grant mechanism. The Company
has reserved 150,000 shares of Common Stock for grants under the Director Plan.
SUMMARY. The Board of Directors believes that the Director Plan will
promote the Company's success and enhance its value by (i) strengthening the
Company's ability to attract and retain the services of experienced and
knowledgeable persons as nonemployee Directors of the Company and (ii) linking
the personal interests of nonemployee Directors to those of the Company's
shareholders. A committee may be appointed by the Board of Directors to
administer the Director Plan. Such committee would have the full power and
discretion to interpret and administer the Director Plan, but would not have the
authority to determine eligibility or to (i) determine the number, exercise
price or vesting period of options granted or (ii) take any action that would
result in grants under the Director Plan not being treated as "formula grants"
under the Exchange Act.
ELIGIBILITY. Only nonemployee Directors are eligible to participate in the
Director Plan. Two Directors are currently eligible to participate in the
Director Plan.
TERMS OF OPTIONS. The exercise price of options granted to nonemployee
Directors must be 100% of the fair market value of the Common Stock on the day
before the date of grant. The consideration for exercising options granted to
nonemployee Directors may consist only of cash, cash equivalents or previously
acquired shares of Common Stock having a fair market value at the time of
exercise equal to the total option price. Options granted have a 10-year term,
unless the option is earlier terminated, forfeited or surrendered pursuant to
the provisions of the Director Plan. Options granted may be exercised under the
Director Plan on or after the date of grant.
Each person who first becomes a nonemployee Director of the Company on or
after the effective date of the Director Plan will automatically be granted an
option to purchase up to 10,000 shares of Common Stock as of the date he or she
becomes a Director. Additionally, each individual who is a nonemployee Director
on March 1, 1997, and each anniversary date thereafter through and including
March 1, 2005, will automatically be granted an option to purchase 5,000 shares
of Common Stock.
If a Director ceases to serve as a Director because of death or disability,
the options previously granted to him or her under the Director Plan will remain
exercisable for one year after the Director's date of death or disability, or
until the options' scheduled expiration date, whichever is earlier. If a
Director ceases to be a Director for any reason other than death or disability,
the options previously granted to him or her under the Director Plan will remain
exercisable for 90 days after the Director's service on the Board terminates, or
until their scheduled expiration date, whichever is earlier.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Appropriate adjustments shall be
made in the option exercise price in the event any change is made in the
Company's capitalization, such as a merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the Company's corporate structure that results in
a greater or lesser number of shares of Common Stock outstanding, so that the
proportionate interests of the nonemployee Directors will be maintained as
before the occurrence of such event.
36
<PAGE>
AMENDMENT AND TERMINATION. The Committee may amend, terminate or modify the
Director Plan at any time. However, Board of Director approval is required for
any Director Plan amendment that would materially increase the benefits to
nonemployee Directors or the number of securities that may be issued, or
materially modify the eligibility requirements of the Director Plan. Further,
Director Plan provisions relating to the amount, price and timing of securities
to be rewarded under the Director Plan may not be amended more than once every
six months.
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 1,037,500 shares of Common Stock available for issuance under
the LTI Plan.
The LTI Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee determines the total number and types of
awards 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
employees who are subject to the provisions of Section 16 of the Exchange Act
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. The Company's Chief Executive Officer has
similar authority with respect to employees who are not subject to the
provisions of Section 16 of the Exchange Act. Unless otherwise provided in the
option grant, options granted under the LTI Plan expire ten years from the date
of grant or, if earlier, 30 days after the optionee's termination of service
with the Company, other than by reason of death or disability, 12 months after
the optionee's disability or 15 months after the optionee's death. As of August
31, 1996, options to purchase 802,500 shares of Common Stock were outstanding
under the LTI Plan at a weighted average exercise price of $4.08 per share,
options to purchase 162,500 shares of Common Stock had been exercised at a
weighted average exercise price of $3.40 per share, and 235,000 shares of Common
Stock remained available for grant under the LTI Plan.
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. Under the LTI Plan, the Company may pay such amount in cash, in
Common Stock or in 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. As of August 31, 1996, no SARs had
been granted under the LTI Plan.
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. As of August 31, 1996, no restricted stock
awards had been granted under the LTI Plan.
37
<PAGE>
PERFORMANCE SHARES. The Compensation Committee is authorized under the LTI
Plan to grant performance shares to selected employees. Typically, each
performance share will be deemed to be the equivalent of one share of Common
Stock. As of August 31, 1996, no performance shares had been granted under the
LTI Plan.
DIVIDEND EQUIVALENTS. The Compensation Committee may also grant dividend
equivalents in conjunction with the grant of options or SARs. Dividend
equivalents entitle the holder to receive an additional amount of Common Stock
upon the exercise of the underlying option or SAR. As of August 31, 1996, no
dividend equivalents had been granted under the LTI Plan.
OTHER STOCK-BASED AWARDS. The Compensation Committee may also grant other
awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Common Stock, as deemed by the
Compensation Committee to be consistent with the purposes of the LTI Plan. As of
August 31, 1996, no such stock-based awards had been granted.
401(K) PLAN
In February 1996, the Board of Directors approved a regional prototype
defined contribution 401(k) profit-sharing plan and trust (the "401(k) Plan")
that is intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"). To be eligible to participate in the 401(k) Plan
(the "Plan Eligibility Requirements"), an employee must be 21 years of age and
have completed 1,000 hours of service that are credited on the anniversary date
of the employee's hiring. After satisfying the Plan Eligibility Requirements,
employees of the Company may enroll in the 401(k) Plan on any January 1 or July
1. A participating employee, by electing to defer a portion of his or her
compensation, may make pretax contributions to the 401(k) Plan, subject to
limitations under the Code, of a percentage (not to exceed 12%) of his or her
total compensation. The Company contributes 50% of every dollar the participant
contributes up to a total of 2% of the participant's gross compensation.
Participant contributions and earnings are 100% vested at all times, while
Company-matching contributions vest in 20% increments over a five-year period,
beginning one year after the Company's matching contribution. Participants may
alter their contribution amounts as of any January 1 or July 1. Employees are
responsible for directing the investments of all assets in their individual
account. Contributions may be withdrawn, with possible penalties for certain
early withdrawals, only after (i) the employee reaches age 59 1/2, (ii) the
employee's retirement with the Company, (iii) the employee's death or
disability, (iv) the termination of the employee's employment with the Company,
or (v) the termination of the 401(k) Plan. The Company pays all expenses
associated with the 401(k) Plan.
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. No executive officer of the Company, other than the
Chief Executive Officer, received total compensation in excess of $100,000 for
the fiscal year ended February 29, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
FISCAL ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) COMPENSATION ($)(1)
- ---------------------------------------------------------------------- ----------- ------------- -------------------
<S> <C> <C> <C>
Stephen A. Hafer...................................................... 1996 $ 100,000 $ 0
President and Chief Executive Officer 1995 63,000 12,000
1994 10,500 12,000
</TABLE>
- ------------------------
(1) Mr. Hafer received $1,000 per month as a Director of the Company for fiscal
years 1994 and 1995.
38
<PAGE>
STOCK OPTION GRANTS
The Company did not grant any stock options to its executive officers in
fiscal year 1996.
STOCK OPTION VALUES
The following table sets forth, as of February 29, 1996, certain information
regarding unexercised options held by the Chief Executive Officer. As of that
date, no stock options had been exercised by the Chief Executive Officer.
1996 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END(#) FISCAL YEAR-END ($)(1)
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
Stephen A. Hafer.......................................... 37,500 112,500 $ 185,250 $ 555,750
</TABLE>
- ------------------------
(1) Represents the closing sale price of the Common Stock on February 29, 1996
of $8.25 per share, minus the per share exercise price of the options
multiplied by the number of shares issuable upon exercise of the options.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of August 31, 1996, Stephen A. Hafer, Chairman, President and Chief
Executive Officer of the Company, pursuant to a promissory note to the Company
issued by him and two promissory notes issued to the Company by Arccom
Technologies, Inc., a company controlled by Mr. Hafer, owed the Company $347,130
in principal and interest on such promissory notes. The promissory notes bore
interest at 10% per annum and were scheduled to mature on March 1, 1997.
Unrelated to the Company or the above-mentioned indebtedness, J. Patrick Henry,
President of the Company's Unibol, Inc. subsidiary and a Director of the
Company, was obligated to make certain payments to Mr. Hafer. On August 31,
1996, in satisfaction of his unrelated obligations to Mr. Hafer, Mr. Henry
transferred 63,000 shares of Common Stock owned by Mr. Henry to the Company in
full satisfaction of the above-described indebtedness owed by Mr. Hafer to the
Company pursuant to such promissory notes.
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.
40
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of August 31, 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. Pursuant to the rules of the Commission, in
calculating percentage ownership, each person is deemed to beneficially own
shares that such person is entitled to purchase pursuant to options exercisable
within 60 days of August 31, 1996, but options owned by others (even if
exercisable within 60 days) are deemed not to be outstanding shares.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
SHARES --------------------------------
BENEFICIALLY AFTER
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING OFFERING
---------------------------- ----------------- ----------------- -------------
<S> <C> <C> <C>
Stephen A. Hafer (1)........................................... 1,314,050 23.1% 16.9%
1800 Sandy Plains Parkway
Suite 305
Marietta, Georgia 30066
J. Patrick Henry (2)........................................... 232,000 4.1% 3.0%
Thomas Zimmerer................................................ 11,400 * *
Nelson J. Millar............................................... 3,200 * *
All Directors and executive officers as a group (5 persons)
(3).......................................................... 1,560,650 27.4% 20.0%
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 289,000 shares held by Arccom Technologies, Inc., of which Mr.
Hafer is President and sole shareholder; 400,000 shares held by Linder
Financial Corporation, of which Mr. Hafer is Chairman of the Board and a
majority shareholder; 20,000 shares held by Foutz & Associates, Inc., a
company owned by Marta Hafer, Mr. Hafer's spouse; and 20,000 shares held by
Marta Hafer. Also includes 75,000 shares subject to options exercisable
within 60 days. Mr. Hafer has sole voting and investment power with respect
to these shares.
(2) Includes 25,000 shares subject to options exercisable within 60 days. In the
event that the Underwriters' over-allotment option is exercised in full, Mr.
Henry will sell 50,000 shares of Common Stock, after which he will
beneficially own 182,000 shares of Common Stock, representing 2.3% of the
Common Stock outstanding after this offering.
(3) Includes 100,000 shares subject to options exercisable within 60 days. In
the event that the Underwriters' over-allotment option is exercised in full,
Mr. Henry will sell 50,000 shares of Common Stock. In such event, all
directors and executive officers of the Company as a group will beneficially
own 1,510,650 shares of Common Stock, representing 19.4% of the Common Stock
outstanding after this offering.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares,
consisting of 25,000,000 shares of Common Stock, par value $.01 per share, and
5,000,000 shares of Preferred Stock, par value $1.00 per share.
COMMON STOCK
As of August 31, 1996, 5,590,245 shares of Common Stock were issued and
outstanding. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders. Holders of Common Stock are
entitled to such dividends, if any, as may be declared by the Board of Directors
at its discretion out of funds legally available for that purpose, and to
participate pro rata in any distribution of the Company's assets upon
liquidation after the payment of all debts and payment to holders of Preferred
Stock. Holders of Common Stock have no preemptive or conversion rights, nor are
there any redemption or sinking fund rights with respect to the Common Stock.
There is no cumulative voting with respect to the election of Directors, which
means that the holders of a majority of the shares can elect all the Directors
if they choose to do so. All outstanding shares of Common Stock are, and all
shares of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
The Company currently has no shares of Preferred Stock outstanding and has
no current plans to issue any shares of Preferred Stock. The Board of Directors
has the authority to issue Preferred Stock from time to time in one or more
series and, without further approval of the shareholders, to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking funds and any other rights, preferences,
privileges and restrictions applicable to each series of Preferred Stock. The
issuance of Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
adversely affect the rights of the holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock and
may adversely affect the market price of, and the voting and other rights of the
holders of, the Common Stock.
REPRESENTATIVE'S WARRANT
The Company has agreed to sell to the Representative or its designees, for
nominal consideration, the Representative's Warrant to purchase up to 210,000
shares of Common Stock at an exercise price equal to 165% of the public offering
price. The Representative possesses certain demand and incidental registration
rights that may require the Company to register for public resale the shares of
Common Stock issuable under the Representative's Warrant. The Representative's
Warrant is exercisable for a period of four years, beginning one year from the
date of this Prospectus. See "Underwriting."
NOTE WARRANT
In connection with the sale of $2.0 million aggregate principal amount of
convertible promissory notes to certain offshore investors in December 1995, the
Company granted to the placement agent for such promissory notes the Note
Warrant to purchase 25,000 shares of Common Stock at $6.90 per share. The Note
Warrant expires on December 20, 2000. Holders of the Note Warrant possess
certain registration rights with regard to the shares issuable thereunder. See
"--Registration Rights."
42
<PAGE>
ADVISOR WARRANTS
On July 16, 1996, the Company entered into a financial consulting agreement
with B C Capital Corp., an affiliate of the investment banking firm of Barber &
Bronson. In connection therewith, the Company granted to B C Capital Corp. and
certain of its affiliates the Advisor Warrants to purchase an aggregate of
87,500 shares of Common Stock at $6.00 per share and warrants to purchase an
aggregate of 87,500 shares of Common Stock at $7.00 per share. The Advisor
Warrants expire on July 15, 2001. Holders of the Advisor Warrants possess
certain registration rights with regard to the shares issuable thereunder.
See "--Registration Rights."
REGISTRATION RIGHTS
In connection with the acquisition of the Company's payment-processing
technology, the Company issued 500,000 shares of Common Stock to the
shareholders of Smoky Mountain (the "Registrable Shares"). Such shareholders are
entitled to certain registration rights with regard to the Registrable Shares.
Pursuant to such registration rights, the Company registered 25% of the
registrable shares for public resale on Form S-3, under the Securities Act, in
September 1996 (Registration No. 333-11605). Subject to certain limitations, the
Company must also use its best efforts to register for resale on Form S-3, under
the Securities Act: (i) an additional 25% of the Registrable Shares by April 16,
1997, and (ii) the balance of the Registrable Shares by April 16, 1998. The
Company has agreed to maintain the effectiveness of all registration statements
covering the resale of the Registrable Shares, until such time as the
Registrable Shares registered thereunder are sold, otherwise transferred or
become freely tradable.
Holders of the Advisor Warrants are entitled to certain registration rights
with respect to the shares of Common Stock issuable under the Advisor Warrants.
At any time prior to July 15, 2003, holders of the Advisor Warrants may request
that the Company file a registration statement under the Securities Act for the
public resale of the Common Stock issuable upon exercise of the Advisor Warrants
and, upon such request and subject to certain conditions, the Company will be
required to prepare and file and use its best efforts to cause to become
effective any such registration. The holders of the Advisor Warrants have the
right to demand registration as described above on at least two separate
occasions.
The Representative possesses similar demand registration rights with respect
to the shares of Common Stock issuable pursuant to the Representative's Warrant.
Such rights are exercisable at any time prior to the expiration of the
Representative's Warrant on the fifth anniversary of this Prospectus. These
rights may be exercised on three separate occasions.
In the event the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of others, the
holders of the Advisor Warrants, the Note Warrant and the Representative's
Warrant are entitled to notice of such registration and to include the shares of
Common Stock underlying such warrants therein, subject to certain limitations,
including the right of the underwriters of any offering by the Company to limit
the number of shares included in such registration. The Company is generally
obligated to bear the expenses, other than underwriting discounts and sales
commissions, of the above-described registrations.
The Company provided notice to the holders of the Advisor Warrants and the
Note Warrant of the filing of the Registration Statement incorporating this
Prospectus and all such holders waived their rights to have any shares of Common
Stock included in this Registration Statement. See "Shares Eligible for Future
Sale."
ANTITAKEOVER CONSIDERATIONS
The Company's Board of Directors has the authority, without shareholder
approval, to issue up to 5,000,000 shares of Preferred Stock and to determine
the rights and preferences thereof. This authority, together with certain
provisions of the Company's Amended and Restated Bylaws (the "Bylaws"), may
discourage takeover attempts or tender offers that could result in shareholders
receiving a premium over
43
<PAGE>
the market price for the Common Stock or that shareholders may otherwise
consider to be in their best interests.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Company's Bylaws provide that the Company may indemnify any person who
was or is made a party or is threatened to be made a party to any threatened,
pending or completed action by reason of being a Director, officer, employee,
fiduciary or agent of the Company or serving at the request of the Company as a
Director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner reasonably
believed to be in the best interests of the Company and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The Company has also entered into indemnification
agreements pursuant to which it has agreed, among other things, to indemnify its
Directors and officers against certain liabilities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Corporate Stock
Transfer, Denver, Colorado.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,690,000 shares of
Common Stock outstanding. Of these shares, 5,869,000 shares (including the
2,100,000 shares sold in this offering) will be freely tradable without
restriction under the Securities Act. An additional 1,821,000 shares may be sold
subject to the limitations of Rule 144 under the Securities Act, 1,696,000 of
which are held by certain employees, executive officers, Directors and certain
other shareholders of the Company and are subject to lock-up agreements that
expire 12 months after the date of this Prospectus, or earlier at the discretion
of the Representative.
In general, under Rule 144 under the Securities Act, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares (as
that term is defined in Rule 144) for at least two years, including any person
who may be deemed to be an affiliate of the Company, is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of then-outstanding shares of Common Stock (approximately
77,000 shares immediately after this offering) or the average weekly trading
volume in the Common Stock as reported by Nasdaq during the four calendar weeks
preceding such sale. Sales pursuant to Rule 144 also are subject to certain
other requirements relating to the volume, manner of sale, and other limitations
under Rule 144 and notice and availability of current public information about
the Company. Affiliates may publicly sell shares not constituting restricted
securities under Rule 144 in accordance with the foregoing volume limitations
and other restrictions, but without regard to the two-year holding period. Under
Rule 144(k), a person who is not deemed to have been an affiliate of the Company
at any time during the 90 days immediately preceding a sale by such person, and
who has beneficially owned restricted shares for at least three years, is
entitled to sell such shares under Rule 144 without regard to the limitations
described above.
In September 1996, the Company filed a registration statement on Form S-3
for the resale of up to 125,000 shares acquired by the holders of such shares in
connection with the Company's acquisition of Smoky Mountain. These holders also
have the right to require the Company to file registration statements in April
1997 and April 1998 for the resale to the public of an additional 125,000 shares
and 250,000 shares of Common Stock, respectively. Holders of 235,000 of these
shares to be registered for public resale in April 1998 have entered into
12-month lock-up agreements covering such shares with the Representative,
agreeing to defer their registration rights until the earlier of release of
these shares from the lock-up agreements or the expiration of the lock-up
agreements. The Company intends to maintain the effectiveness of the current
registration statement on Form S-3 regarding the resale of 125,000 shares during
the pendency of these holders' lock-up agreements. The Representative may in its
sole discretion, and at any time without notice, release all or a portion of the
securities subject to any of such lock-up agreements. See "Description of
Capital Stock--Registration Rights."
As of August 31, 1996, an aggregate of 200,000 shares of Common Stock were
reserved for issuance pursuant to the Note Warrant and the Advisor Warrants.
Holders of the Note Warrant and the Advisor Warrants each possess certain
registration rights with regard to the 25,000 shares and 175,000 shares,
respectively, issuable thereunder. The holders of the Advisor Warrants has
entered into a 12-month lock-up agreement with the Representative. See
"Description of Capital Stock--Registration Rights."
As of August 31, 1996, 802,500 shares of Common Stock were subject to
options outstanding under the LTI Plan, 70,000 of which were currently
exercisable at a weighted average exercise price of $3.31 per share. The
remainder of these options become exercisable at various points over the next
four years at a weighted average exercise price of $4.16 per share. An
additional 235,000 shares of Common Stock are reserved for future issuance under
the LTI Plan. The Company has filed a registration statement on Form S-8
(Registration No. 33-98564) to register the shares of Common Stock reserved for
issuance under the LTI Plan, thus permitting the resale of such shares in the
public market without restriction under the Securities Act, subject in certain
events to the expiration of lock-up agreements and Rule 144.
45
<PAGE>
Upon completion of this offering, the Representative will receive the
Representative's Warrant to purchase up to 210,000 shares of Common Stock at an
exercise price equal to 165% of the public offering price. The Representative
possesses certain demand and incidental registration rights that may require the
Company to register for public resale the shares of Common Stock issuable under
the Representative's Warrant. The Representative's Warrant may not be exercised
until the first anniversary of the date of this Prospectus. See "Description of
Capital Stock--Representative's Warrant" and "Underwriting."
The Company maintains the effectiveness of a registration statement on Form
S-3 dated June 14, 1993 as amended (Registration No. 33-64312) for the public
resale of 75,000 shares of Common Stock held by Mr. Hafer, the Company's
President, Chief Executive Officer and Chairman of the Board. Of these shares,
16,000 shares have been sold by Mr. Hafer and 59,000 shares remain eligible for
sale. All such remaining eligible shares are subject to a lock-up agreement that
expires 12 months after the date of this Prospectus, or earlier at the
discretion of the Representative.
The Company makes no prediction as to the effect, if any, that future sales
of shares or the availability of shares for future sale will have on the
prevailing market price of the Common Stock. Sales of substantial amounts of the
Common Stock in the public market or the perception that such sales could occur
could have an adverse effect on the prevailing market price of the Common Stock.
46
<PAGE>
UNDERWRITING
The Underwriters named below, acting through the Representative, Cruttenden
Roth Incorporated, have agreed, severally, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company the number
of shares of Common Stock indicated below opposite their respective names at the
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus. The Underwriting Agreement provides that
the obligations of the Underwriters are subject to certain conditions, and that
the Underwriters are committed to purchase all of such shares (other than those
covered by the over-allotment option described below), if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Cruttenden Roth Incorporated........................................................................
------------
Total........................................................................................... 2,100,000
------------
------------
</TABLE>
The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price reflected on the cover page of this Prospectus and to selected securities
dealers at such price less a concession not exceeding $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not exceeding
$ per share to other dealers. After the public offering of the shares of
Common Stock, the public offering price and other offering terms may be changed.
The Company and the Selling Shareholder have granted the Underwriters an
over-allotment option, exercisable during the 45-day period after the date of
this Prospectus, to purchase up to 315,000 additional shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus less
the underwriting discounts and commissions. The Underwriters may exercise the
over-allotment option only to cover over-allotments in the sale of Common Stock.
If the Underwriters exercise the over-allotment option, the Underwriters will
purchase additional shares in approximately the same proportion as the shares
set forth in the above table.
In connection with this offering, the Company has agreed to issue to the
Representative the Representative's Warrant to purchase up to 210,000 shares of
Common Stock. The Representative's Warrant is exercisable for a period of four
years, beginning one year from the date of this Prospectus. The Representative's
Warrant is exercisable at a price equal to 165% of the public offering price.
The Representative's Warrant is nontransferable for a period of one year
following the date of this Prospectus, except (i) to any of the Underwriters, or
to individuals who are either officers or partners of an Underwriter or (ii) by
will or the laws of descent and distribution. The holders of the
Representative's Warrant will have, in that capacity, no voting, dividend or
other shareholder rights. The Representative possesses certain demand and
incidental registration rights that may require the Company to register for
public resale the shares of Common Stock issuable under the Representative's
Warrant. The number of shares covered by the Representative's Warrant and the
exercise price are subject to adjustment in certain events to prevent dilution.
Any profit realized by the Representative on the sale of securities issuable on
exercise of the Representative's Warrant may be deemed to be additional
underwriting compensation.
The Representative will also receive at the closing of this offering a
nonaccountable expense allowance equal to 3% (less $20,000 advanced and other
expenses of the Representative paid by the Company) of the aggregate public
offering price of the shares of Common Stock sold in this offering.
The executive officers, Directors and certain other shareholders of the
Company and their affiliates, who as of August 31, 1996 held an aggregate of
1,460,650 shares of Common Stock and options to purchase
47
<PAGE>
an aggregate of 250,000 shares, of which 70,000 are currently exercisable, have
agreed not to sell any shares of Common Stock owned by such persons, pursuant to
Rule 144 under the Securities Act or otherwise, without the prior written
consent of the Representative, for a period of 12 months from the date of this
Prospectus. The Representative has the discretion to reduce or eliminate such
lock-up period.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
In addition, the Company and the Selling Shareholder have agreed to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, and to contribute in certain events to any liabilities
incurred by the Underwriters in connection with the sale of shares of Common
Stock.
In connection with this offering, certain Underwriters and selling group
members, if any, or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market making
transactions in the Common Stock on the Nasdaq National Market in accordance
with Rule 10b-6A under the Exchange Act during the two business-day period
before commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
The foregoing sets forth the material terms and conditions of the
Underwriting Agreement, but does not purport to be a complete statement of the
terms and conditions thereof. Copies of the Underwriting Agreement are on file
at the offices of the Representative, the Company and the Commission. See
"Additional Information."
LEGAL MATTERS
The law firm of Snell & Wilmer L.L.P., Salt Lake City, Utah, has acted as
counsel to the Company in connection with this offering and will render an
opinion as to the legality of the shares of Common Stock being offered hereby.
Perkins Coie, Seattle, Washington, has acted as counsel to the Underwriters in
connection with certain legal matters relating to this offering.
EXPERTS
The supplemental consolidated financial statements of UniComp, Inc. and its
subsidiaries included in this Registration Statement have been audited by
Coopers & Lybrand L.L.P., independent accountants, as set forth in their report
dated August 23, 1996, accompanying such financial statements, and are included
herein in reliance upon the report of such firm, which report is given upon
their authority as experts in accounting and auditing.
48
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Supplemental Consolidated Financial Statements:
Supplemental Consolidated Balance Sheets as of February 29, 1996 and February 28, 1995................... F-3
Supplemental Consolidated Statements of Operations for the years ended February 29, 1996 and February 28,
1995 and 1994.......................................................................................... F-5
Supplemental Consolidated Statements of Changes in Stockholders' Equity for the years ended February 29,
1996 and February 28, 1995 and 1994.................................................................... F-6
Supplemental Consolidated Statements of Cash Flows for the years ended February 29, 1996 and February 28,
1995 and 1994.......................................................................................... F-7
Notes to Supplemental Consolidated Financial Statements.................................................. F-8
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet as of May 31, 1996.................................................. F-20
Condensed Consolidated Statements of Operations for the three months ended May 31, 1996 and 1995......... F-22
Condensed Consolidated Statements of Cash Flows for the three months ended May 31, 1996 and 1995......... F-23
Notes to Condensed Consolidated Financial Statements..................................................... F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of UniComp, Inc. and Subsidiaries:
We have audited the supplemental consolidated balance sheets of UniComp,
Inc. and subsidiaries as of February 29, 1996 and February 28, 1995, the related
supplemental consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
February 29, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplemental financial statements give retroactive effect to the merger
of UniComp, Inc. and Smoky Mountain Technologies, Inc. on April 16, 1996, which
has been accounted for as a pooling of interests as described in notes 1 and 3
to the supplemental consolidated financial statements. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling of interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation; however, they will
become the historical consolidated financial statements of UniComp, Inc. and
subsidiaries after annual financial statements covering the date of consummation
of the business combination are issued.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated balance sheets of UniComp, Inc. and
subsidiaries at February 29, 1996 and February 28, 1995, and the consolidated
results of their operations and their cash flows for each of the years in the
three-year period ended February 29, 1996 in conformity with generally accepted
accounting principles applicable after financial statements are issued for a
period which includes the date of consummation of the business combination.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
August 23, 1996
F-2
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
ASSETS
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 1,261,153 $ 85,845
Accounts and other receivables:
Trade, net of allowance of $137,878 and $127,006 in 1996 and 1995,
respectively................................................................... 4,721,909 3,575,491
Receivables from related party................................................... 404,478 277,646
Other receivables................................................................ 205,636 259,528
Inventories........................................................................ 715,944 531,888
Prepaid expenses................................................................... 852,050 456,875
Other.............................................................................. 171,396 9,391
------------- ------------
Total current assets........................................................... 8,332,566 5,196,664
------------- ------------
Property and equipment, net.......................................................... 2,401,969 1,618,603
------------- ------------
Other assets:
Acquired and developed software, net of accumulated amortization of $1,371,355 and
$689,419 in 1996 and 1995, respectively.......................................... 4,802,724 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 20,683
------------- ------------
Total other assets............................................................. 5,937,518 3,142,844
------------- ------------
Total assets................................................................... $ 16,672,053 $ 9,958,111
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-3
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (CONTINUED)
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable................................................................... $ 2,128,526 $ 1,308,059
Accrued expenses................................................................... 1,195,896 1,016,267
Deferred revenues.................................................................. 1,662,864 2,298,826
Line of credit..................................................................... 1,078,933 661,750
Income taxes payable............................................................... 148,015 198,500
Other accrued taxes................................................................ 393,915 12,525
Current portion of notes payable................................................... 375,105 266,732
------------- ------------
Total current liabilities...................................................... 6,983,254 5,762,659
------------- ------------
Long-term liabilities:
Notes payable...................................................................... 1,072,926 727,079
Convertible notes.................................................................. 1,980,000 --
Deferred income taxes.............................................................. 519,109 116,616
------------- ------------
Total long-term liabilities.................................................... 3,572,035 843,695
------------- ------------
Total liabilities.............................................................. 10,555,289 6,606,354
------------- ------------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock: $.01 par value, authorized 25,000,000, issued and outstanding
5,163,432 and 5,001,234 at February 29, 1996 and February 28, 1995,
respectively..................................................................... 51,634 50,012
Additional contributed capital..................................................... 6,229,829 5,527,454
Retained earnings (deficit)........................................................ 475,636 (1,583,874)
------------- ------------
6,757,099 3,993,592
Less treasury stock................................................................ (460,554) (493,654)
Cumulative translation adjustment.................................................. (179,781) (148,181)
------------- ------------
Total stockholders' equity..................................................... 6,116,764 3,351,757
------------- ------------
Total liabilities and stockholders' equity..................................... $ 16,672,053 $ 9,958,111
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-4
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SUPPLEMENTAL 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............................................ $ 10,881,491 $ 8,911,948 $ 6,031,127
Maintenance and services.......................................... 11,409,528 8,944,368 5,671,837
Sound systems..................................................... -- 468,268 503,392
------------- ------------- -------------
Total revenues.................................................. 22,291,019 18,324,584 12,206,356
------------- ------------- -------------
Cost of sales:
Equipment and software............................................ 6,151,381 5,078,321 4,558,261
Maintenance and support........................................... 1,826,341 1,059,353 561,796
Sound systems..................................................... -- 304,570 286,612
------------- ------------- -------------
Total cost of sales............................................. 7,977,722 6,442,244 5,406,669
------------- ------------- -------------
Gross profit........................................................ 14,313,297 11,882,340 6,799,687
------------- ------------- -------------
Selling, general and administrative................................. 11,048,431 9,014,043 4,598,053
Depreciation expense................................................ 709,858 651,551 597,424
------------- ------------- -------------
Total operating expenses........................................ 11,758,289 9,665,594 5,195,477
------------- ------------- -------------
Operating income.................................................... 2,555,008 2,216,746 1,604,210
Other income (expense):
Other, net........................................................ (41,701) 123,707 35,337
Interest.......................................................... (251,182) (224,034) (174,107)
------------- ------------- -------------
Other income (expense), net..................................... (292,883) (100,327) (138,770)
Income before provision for income taxes............................ 2,262,125 2,116,419 1,465,440
------------- ------------- -------------
Provision for income taxes.......................................... (202,615) (494,741) (255,291)
------------- ------------- -------------
Net income.......................................................... $ 2,059,510 $ 1,621,678 $ 1,210,149
------------- ------------- -------------
------------- ------------- -------------
Net income per share................................................ $ 0.40 $ 0.34 $ 0.28
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares................................... 5,188,092 4,710,228 4,343,501
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-5
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SUPPLEMENTAL 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 OF NUMBER OF ADDITIONAL RETAINED TOTAL
SHARES SHARES CONTRIBUTED EARNINGS STOCKHOLDERS'
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
Shares issued to effect pooling of
interest with Smoky Mountain........ 500,000 5,000 (5,000) 0
Effect of shares issued by Smoky
Mountain............................ 33,186 33,186
Net income............................ 1,210,149 1,210,149
Distribution by Smoky Mountain........ (38,125) (38,125)
Change in cumulative translation
adjustment.......................... 98,147
---------- -------- --------- --------- ----------- ----------- -------------
Balance February 28, 1994............... 4,841,434 48,414 -- -- 5,460,913 (3,165,261) 1,850,758
Stock issued.......................... 159,800 1,598 98,541 100,139
Treasury stock purchased.............. (143,654)
Subscription receivable............... (82,000) (82,000)
Effect of shares issued by Smoky
Mountain............................ 50,000 50,000
Net income............................ 1,621,678 1,621,678
Distribution by Smoky Mountain........ (40,291) (40,291)
Change in cumulative translation
adjustment.......................... (4,873)
---------- -------- --------- --------- ----------- ----------- -------------
Balance February 28, 1995............... 5,001,234 50,012 -- -- 5,527,454 (1,583,874) 3,351,757
Stock issued.......................... 162,198 1,622 603,375 604,997
Change in treasury stock.............. 33,100
Effect of shares issued by Smoky
Mountain............................ 99,000 99,000
Net income............................ 2,059,510 2,059,510
Change in cumulative translation
adjustment.......................... (31,600)
---------- -------- --------- --------- ----------- ----------- -------------
Balance February 29, 1996............... 5,163,432 $51,634 -- $ -- $6,229,829 $ 475,636 $6,116,764
---------- -------- --------- --------- ----------- ----------- -------------
---------- -------- --------- --------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-6
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SUPPLEMENTAL 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......................................................... $ 2,059,510 $ 1,621,678 $ 1,210,149
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization.................................... 1,449,240 956,664 981,730
Loss on disposition of equipment................................. 29,395 -- --
Allowance for doubtful accounts.................................. 10,872 60,812 7,000
Deferred income taxes............................................ 60,855 7,825 338,624
Changes in assets and liabilities:
Accounts and other receivables................................. (1,241,638) (591,999) (88,258)
Inventories.................................................... (184,056) (39,123) 273,355
Prepaid expenses............................................... (295,175) (212,152) 294,702
Accounts payable............................................... 820,467 19,459 (1,576,698)
Accrued expenses............................................... 313,847 318,719 --
Other accrued taxes............................................ 381,390 12,525 --
Deferred revenues.............................................. (635,962) 738,925 1,285,341
Income taxes payable........................................... (50,485) 198,500 --
Pension liability.............................................. -- (265,000) 241,178
Other assets................................................... (232,989) (24,072) (5,200)
------------- ------------- -------------
Net cash provided by operating activities.................... 2,485,271 2,802,761 2,961,923
------------- ------------- -------------
Cash flow from investing activities:
Capital expenditures............................................... (1,574,535) (924,800) (549,602)
Proceeds from disposal of property and equipment................... 51,916 -- --
Acquired and developed software.................................... (2,695,328) (1,067,783) (379,713)
Deferred acquisition costs......................................... -- -- 275,864
Business disposition............................................... -- (154,208) --
Business acquisition............................................... (422,083) (78,558) (2,208,198)
------------- ------------- -------------
Net cash used by investing activities........................ (4,640,030) (2,225,349) (2,861,649)
------------- ------------- -------------
Cash flow from financing activities:
Proceeds from issuance of convertible notes, net................... 1,900,000 -- --
Payments on notes payable.......................................... (228,291) (463,702) (1,245,017)
Proceeds from borrowing............................................ 1,099,693 159,430 --
Issuances of common stock, net..................................... 717,097 68,139 943,686
Smoky Mountain distributions....................................... -- (40,291) (38,125)
Receivables from related party..................................... (126,832) (214,850) 345,394
Repurchase of treasury stock....................................... -- (143,654) (350,000)
------------- ------------- -------------
Net cash provided (used) by financing activities............. 3,361,667 (634,928) (344,062)
------------- ------------- -------------
Net increase (decrease) in cash...................................... 1,206,908 (57,516) (243,788)
Effect of exchange rate changes on cash.............................. (31,600) (4,873) 98,147
Cash and cash equivalents at beginning of year....................... 85,845 148,234 293,875
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 1,261,153 $ 85,845 $ 148,234
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these supplemental consolidated
financial statements.
F-7
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The supplemental consolidated financial statements have been prepared to
give retroactive effect of the acquisition of Smoky Mountain Technologies, Inc.
("Smoky Mountain") as described in Note 3. Generally accepted accounting
principles proscribe giving effect to a consummated business combination
accounted for by the pooling-of-interests method in financial statements that do
not include the date of consummation. These financial statements reflect the
consolidated financial position of UniComp, Inc. and its Subsidiaries ("the
Company") prior to the date of consummation; however, they will become the
historical consolidated financial statements of the Company after annual
financial statements covering the date of consummation of the business
combination are issued. 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.
The financial statements include the accounts of UniComp, Inc. and its
subsidiaries all of which are wholly owned. 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-8
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL 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
---------- ----------
<S> <C> <C>
Services in process................................................... $ 7,222 $ 110,085
Computer hardware and software........................................ 708,722 421,803
---------- ----------
Total............................................................... $ 715,944 $ 531,888
---------- ----------
---------- ----------
</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 $610,000, $235,000 and $42,000 in 1996, 1995, and 1994,
respectively.
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 $2,695,328 (including $1,000,000 of purchased
software), $1,067,783, and $379,713 during 1996, 1995, and 1994, respectively,
with amortization of $681,936, $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 realizable
value, if any, is recognized as expense in the period it is determined.
F-9
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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%.
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
$200,000, $180,000 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"). FAS 121
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
F-10
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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"). FAS 123 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.
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
Land............................................... N/A 58,737 57,066
Leasehold improvements............................. 5-10 421,071 434,714
Computer equipment................................. 3-5 1,720,167 1,872,739
Capitalized leases................................. 2-5 312,649 335,033
Computer software.................................. 3 148,237 210,766
Furniture and fixtures............................. 5 761,982 752,806
Vehicles........................................... 2-4 139,207 188,082
------------- -------------
4,526,104 4,012,707
Less accumulated depreciation...................... (2,124,135) (2,394,104)
------------- -------------
$ 2,401,969 $ 1,618,603
------------- -------------
------------- -------------
</TABLE>
3. BUSINESS COMBINATIONS AND DISPOSAL:
ACQUISITION OF SMOKY MOUNTAIN TECHNOLOGIES, INC.
On April 16, 1996, the Company completed its acquisition of Smoky Mountain,
a software and hardware developer for the financial transaction industry. The
Company issued 500,000 shares of its common stock for all of the outstanding
common stock of Smoky Mountain. This transaction has been accounted for as a
pooling of interests; therefore, these financial statements have been restated
to reflect this merger.
Smoky Mountain prepared its financial statements on a December 31 year end.
Smoky Mountain's fiscal year end has been changed to conform with the Company's
year end and its financial data is included in the Supplemental Consolidated
Financial Statements for all periods presented as of the Company's year end.
F-11
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS COMBINATIONS AND DISPOSAL: (CONTINUED)
The stockholders' equity accounts have been adjusted to reflect the 149
shares of Smoky Mountain preferred stock which were converted into 6,037 shares
of Smoky Mountain common stock. Adjustments have also been made to reflect the
conversion of all Smoky Mountain common stock into 500,000 shares of the
Company's common stock. No other adjustments were required to reflect the
consolidation of Smoky Mountain into the Company since the accounting policies
of Smoky Mountain prior to the transaction were substantially the same as the
Company's and prior to the date of the acquisition there were no transactions
between the companies.
Smoky Mountain's revenues and net income included in the Company's
consolidated statements of operation for the three years ended February 29, 1996
and February 28, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 29, 1996
----------------------------------------
SMOKY
UNICOMP MOUNTAIN TOTAL
------------- ---------- -------------
<S> <C> <C> <C>
Revenues........................................... $ 21,305,287 $ 985,732 $ 22,291,019
Net income (loss).................................. 2,061,938 (2,428) 2,059,510
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28, 1995
----------------------------------------
SMOKY
UNICOMP MOUNTAIN TOTAL
------------- ---------- -------------
<S> <C> <C> <C>
Revenues........................................... $ 17,798,566 $ 526,018 $ 18,324,584
Net income (loss).................................. 1,637,715 (16,037) 1,621,678
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28, 1994
----------------------------------------
SMOKY
UNICOMP MOUNTAIN TOTAL
------------- ---------- -------------
<S> <C> <C> <C>
Revenues........................................... $ 12,157,833 $ 48,523 $ 12,206,356
Net income......................................... 1,186,124 24,025 1,210,149
</TABLE>
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 Sound
Systems, Plc. ("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-12
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL 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............................................................. $ 14 $ -- $ --
State............................................................... 43 11 --
Foreign............................................................. 80 188 12
Deferred provision:
Federal............................................................. (307) (14) --
State............................................................... -- -- --
Foreign............................................................. 373 310 243
--------- --------- ---------
$ 203 $ 495 $ 255
--------- --------- ---------
--------- --------- ---------
</TABLE>
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........................................ $ 770 $ 716 $ 490
State income taxes (net of federal tax deduction)................... 29 7 --
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............................................................... (4) 10 14
--------- --------- ---------
Tax expense..................................................... $ 203 $ 495 $ 255
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
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 of $54,653, $320,000,
$44,371, $264,891, and $289,327, respectively.
5. RELATED PARTY TRANSACTIONS:
Accounts and other receivables from related parties at February 29, 1996 and
February 28, 1995 are comprised of $404,478 and $277,646, respectively, due from
affiliated companies or officers 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
$1,033,006, $869,586 and $793,026, 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>
F-14
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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 Northern Ireland,
payable in quarterly installments of $17,300 commencing October
1995............................................................... $ 654,075 $ --
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............................................................... 181,956 203,811
------------ ----------
Total notes payable............................................... 1,448,031 993,811
Less: current portion............................................... 375,105 266,732
------------ ----------
$ 1,072,926 $ 727,079
------------ ----------
------------ ----------
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 375,105
1998........................................................ 250,853
1999........................................................ 222,000
2000........................................................ 222,000
2001........................................................ 70,000
Thereafter.................................................. 308,073
-----------
$ 1,448,031
-----------
-----------
</TABLE>
CONVERTIBLE NOTES
In December 1995, the Company issued $2,000,000 aggregate principal amount
of two-year 7% convertible promissory 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>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL 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 price of shares under option at February 29, 1996
was $3.31.
All options granted have exercise prices of 100% of the market value at the
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 promissory notes, the
Company granted warrants to purchase 25,000 shares of the Company's common stock
at $6.90 per share, the fair value of the common stock at the date of grant. As
of February 29, 1996, the warrants had 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.
The Company held 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. 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.
F-16
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest totaled $249,307, $245,682 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 of common stock.
12. SEGMENT INFORMATION:
The Company operates in a single industry segment of marketing 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
------------ -------------
<S> <C> <C>
FISCAL YEAR 1996
Revenues......................................................... $ 3,632,543 $ 18,658,476
Cost of sales.................................................... 1,044,433 6,933,289
Gross profit..................................................... 2,588,110 11,725,187
SG&A expense..................................................... 2,087,798 8,960,633
Depreciation..................................................... 59,082 650,776
Operating income................................................. 441,230 2,113,778
Total assets..................................................... $ 3,498,816 $ 13,173,237
FISCAL YEAR 1995
Revenues......................................................... $ 2,796,697 $ 15,527,887
Cost of sales.................................................... 905,517 5,536,727
Gross profit..................................................... 1,891,180 9,991,160
SG&A expense..................................................... 1,294,026 7,720,017
Depreciation..................................................... 57,108 594,443
Operating income................................................. 291,510 1,925,236
Total assets..................................................... $ 1,068,747 $ 8,889,364
FISCAL YEAR 1994
Revenues......................................................... $ 2,636,215 $ 9,570,141
Cost of sales.................................................... 1,308,040 4,098,629
Gross profit..................................................... 1,328,175 5,471,512
SG&A expense..................................................... 823,676 3,774,377
Depreciation and amortization.................................... 39,490 557,934
Operating income................................................. 618,984 985,226
Total assets..................................................... $ 1,085,392 $ 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 the
fiscal years ended February 29, 1996, and February 28, 1995 and 1994.
F-17
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 a salary increase of 5.5%.
- All employees over 25 years of age are eligible for the pension plan.
- 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.
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 transitions 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-18
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL 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.
A portion of the Company's business is focused 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 UNIBOL400 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 its ability to 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-19
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
MAY 31, 1996
ASSETS
<TABLE>
<CAPTION>
MAY 31,
1996
-----------
<S> <C>
Current assets:
Cash and cash equivalents...................................... $ 608,426
Accounts and other receivables:
Trade, net of allowance of $120,965 at May 31, 1996.......... 5,124,807
Related party receivables.................................... 321,228
Other receivables............................................ 212,442
Inventories.................................................... 615,808
Prepaid expenses............................................... 919,728
Other assets................................................... 311,561
-----------
Total current assets....................................... 8,114,000
-----------
Property and equipment, net...................................... 2,352,768
-----------
Other assets:
Acquired and developed software, net of accumulated
amortization of $1,709,555 at May 31, 1996................... 4,961,802
Goodwill, net of accumulated amortization of $79,263 at May 31,
1996......................................................... 672,571
Deferred tax asset............................................. 348,638
Other.......................................................... 10,449
-----------
Total other assets......................................... 5,993,460
-----------
Total assets............................................... $16,460,228
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-20
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
MAY 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MAY 31,
1996
-------------
<S> <C>
Current liabilities:
Accounts payable................................................................................. $ 1,717,100
Accrued expenses................................................................................. 798,491
Deferred revenues................................................................................ 1,314,636
Line of credit................................................................................... 1,540,170
Income taxes payable............................................................................. 209,384
Other accrued taxes.............................................................................. 319,780
Current portion of notes payable................................................................. 472,473
-------------
Total current liabilities.................................................................... 6,372,034
-------------
Long-term liabilities:
Notes payable.................................................................................... 982,811
Convertible notes................................................................................ 1,500,000
Deferred income taxes............................................................................ 524,934
-------------
Total long-term liabilities.................................................................. 3,007,745
-------------
Total liabilities............................................................................ 9,379,779
-------------
Stockholders' equity:
Common stock: $.01 par value, authorized 25,000,000, issued and outstanding 5,248,232 at May 31,
1996........................................................................................... 52,482
Additional contributed capital..................................................................... 6,716,581
Retained earnings.................................................................................. 936,194
-------------
7,705,257
Less treasury stock................................................................................ (460,728)
Cumulative translation adjustment.................................................................. (164,080)
-------------
Total stockholders' equity................................................................... 7,080,449
-------------
Total liabilities and stockholders' equity................................................... $ 16,460,228
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
<TABLE>
<CAPTION>
MAY 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Equipment and software.............................................................. $ 2,475,684 $ 2,419,197
Maintenance and services............................................................ 3,408,351 2,502,282
------------ ------------
Total revenues.................................................................. 5,884,035 4,921,479
------------ ------------
Cost of sales:
Equipment and software.............................................................. 1,885,001 1,447,534
Maintenance and support............................................................. 555,049 332,710
------------ ------------
Total cost of sales............................................................. 2,440,050 1,780,244
------------ ------------
Gross profit.......................................................................... 3,443,985 3,141,235
------------ ------------
Selling, general and administrative................................................... 2,479,882 2,516,426
Depreciation expense.................................................................. 182,354 163,288
------------ ------------
Total operating expenses........................................................ 2,662,236 2,679,714
------------ ------------
Operating income...................................................................... 781,749 461,521
Other income (expense):
Other, net.......................................................................... 9,298 71,518
Interest............................................................................ (92,804) (38,276)
------------ ------------
Other income (expense), net..................................................... (83,506) 33,242
Income before provision for income taxes.............................................. 698,243 494,763
------------ ------------
Provision for income taxes............................................................ 237,683 48,136
------------ ------------
Net income............................................................................ $ 460,560 $ 446,627
------------ ------------
------------ ------------
Net income per share.................................................................. $ 0.09 $ 0.09
------------ ------------
------------ ------------
Weighted average number of shares..................................................... 5,396,083 4,867,834
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-22
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
<TABLE>
<CAPTION>
MAY 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net cash provided (used) by operating activities:
Net income.......................................................................... $ 460,560 $ 446,627
Adjustments to reconcile net income to net cash used by operations:
Depreciation and amortization..................................................... 542,472 374,471
Gain on sale of equipment......................................................... (5,342) --
Allowance for doubtful accounts................................................... (16,913) 21,206
Deferred taxes.................................................................... 5,825 75,000
Changes in assets and liabilities:
Accounts and other receivables.................................................... (309,541) 98,739
Inventories....................................................................... 100,136 (261,980)
Prepaid expenses.................................................................. (67,678) (61,718)
Accounts payable.................................................................. (411,426) 146,130
Accrued expenses.................................................................. (397,405) (210,062)
Other accrued taxes............................................................... (74,135) 16,174
Deferred revenues................................................................. (348,228) (884,452)
Income taxes payable.............................................................. 61,369 (26,864)
Other............................................................................. (51,523) (507)
------------ ------------
Net cash used by operating activities......................................... (511,829) (267,236)
------------ ------------
Cash flow from investing activities:
Capital expenditures................................................................ (127,811) (392,971)
Acquired and developed software..................................................... (497,278) (365,322)
------------ ------------
Net cash used by investing activities......................................... (625,089) (758,293)
------------ ------------
Cash flow from financing activities:
Payments on notes payable........................................................... (186,612) (61,228)
Proceeds from borrowing............................................................. 655,102 832,969
Issuance of common stock, net....................................................... -- 153,375
Reclassification of notes receivable from related party............................. -- 82,000
------------ ------------
Net cash provided by financing activities..................................... 468,490 1,007,116
------------ ------------
Net decrease in cash.................................................................. (668,428) (18,413)
------------ ------------
Effect of exchange rates on cash...................................................... 15,701 2,445
------------ ------------
Cash and cash equivalents at beginning of period...................................... 1,261,153 85,845
------------ ------------
Cash and cash equivalents at the end of the period.................................... $ 608,426 $ 69,877
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-23
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, the information furnished herein reflects all
adjustments which are necessary for the fair presentation of the results for the
periods reported. Certain information and footnote disclosure normally included
in financial statements prepared in accordance with generally accepted
accounting principles has been omitted. It is suggested that these quarterly
consolidated financial statements and notes be read in conjunction with the
financial statements and notes included in this registration statement.
2. SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended May 31, 1996, $480,000 of UniComp, Inc.'s (the
"Company's") convertible promissory notes were converted into 84,800 shares of
common stock in noncash transactions.
F-24
<PAGE>
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
Use of Proceeds................................ 11
Price Range of Common Stock.................... 12
Dividend Policy................................ 12
Dilution....................................... 13
Capitalization................................. 14
Selected Consolidated Financial Data........... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business....................................... 22
Management..................................... 34
Certain Relationships and Related
Transactions.................................. 40
Principal Shareholders......................... 41
Description of Capital Stock................... 42
Shares Eligible for Future Sale................ 45
Underwriting................................... 47
Legal Matters.................................. 48
Experts........................................ 48
Index to Consolidated Financial Statements..... F-1
</TABLE>
--------------------------
2,100,000 SHARES
UNICOMP, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
CRUTTENDEN ROTH
INCORPORATED
, 1996
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the Common Stock being registered hereby. All the amounts shown are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq additional listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 4,906
NASD filing fee................................................... 1,923
Nasdaq additional listing fee..................................... 17,500
Legal fees and expenses........................................... 350,000
Representative expense allowance.................................. 370,000
Accounting fees and expenses...................................... 180,000
Blue Sky fees and expenses........................................ 2,500
Transfer Agent fees............................................... 2,500
Printing and engraving expenses................................... 40,000
Miscellaneous..................................................... 18,671
---------
Total......................................................... $ 988,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Colorado law permits extensive indemnification of present and former
directors, officers, employees or agents of a Colorado company, whether or not
authority for such indemnification is contained in the indemnifying company's
articles of incorporation or bylaws. Specific authority for indemnification of
present and former directors and officers, under certain circumstances, is
contained in paragraph 12 of the Registrant's Amended and Restated Bylaws
(Exhibit 3.3 hereto) (the "Bylaws"). Under Colorado law, for a company to
provide indemnification, a disinterested majority of the company's board of
directors, independent legal counsel, a court or the shareholders must find that
the director, officer, employee or agent acted, or failed to act, in good faith
and in a manner he or she reasonably believed, in the case of conduct in his or
her official capacity with the company, was in the best interests of the company
or, in all other cases, was at least not opposed to the company's best
interests, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Statutory
indemnification is permissive, except in the event of a successful defense, in
which case, unless limited by the articles of incorporation, a director,
officer, employee or agent must be indemnified against reasonable expenses
incurred by him or her in connection therewith. Indemnification is permitted
with respect to expenses, judgments, fines and amounts paid in settlement by
such persons.
The Registrant's Bylaws provide that the Registrant may indemnify any person
who was or is made a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Registrant), by reason of the fact that he or she is or was a
director, officer, employee, fiduciary or agent of the Registrant or is or was
serving at the request of the Registrant as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to the
best interests of the Registrant and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
II-1
<PAGE>
The Registrant's Bylaws also provide that the Registrant may indemnify a
person who was or is made a party or is threatened to be made a party to any
proceeding by or in the right of the Registrant to procure a judgment in his or
her favor by reason of the fact that he or she is or was a director, officer,
employee or agent of the Registrant, or is or was serving at the request of the
Registrant as a director, officer, employee, fiduciary or agent of another
corporation or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense or
settlement of such action if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
Registrant. No indemnification shall be made in respect of any claim, issue or
matter as to which such person has been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the Registrant unless and
only to the extent that the court in which the action is brought determines that
in view of all the circumstances such person is fairly and reasonably entitled
to indemnification for expenses which the court deems proper.
The Registrant's Bylaws also provide that to the extent that an authorized
representative of the Registrant who neither was nor is a director or officer of
the Registrant has been successful on the merits or otherwise in defense of any
action, suit or proceeding, he or she shall be indemnified by the Registrant for
and against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith. Such an authorized
representative may, at the discretion of the Registrant's Board of Directors, be
indemnified by the Registrant in certain circumstances to the same extent he or
she would have been had he or she been a director of officer of the Registrant.
A determination of whether indemnification is proper shall be made by the
Board of Directors by a majority vote of a quorum consisting of disinterested
directors or, if such a quorum is not obtainable or, even if obtainable, as a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the Registrant's shareholders. The Registrant shall
advance expenses (including attorneys' fees) upon receipt of an undertaking by
or on behalf of the director to repay such amount unless it is determined that
he or she is not entitled to be indemnified.
In order to induce qualified and essential persons to serve as members of
the Board of Directors or officers of the Registrant, the Registrant believes it
is advantageous to enter into indemnification agreements. As such, the
Registrant has entered into indemnification agreements with its officers and
members of the Board of Directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 1, 1993, the Registrant has sold the following unregistered
securities:
1. On December 14, 1993, the Registrant sold 166,667 shares of Common Stock
to certain unrelated offshore investors. The aggregate purchase price for such
shares was $600,000.
2. On September 1, 1994, the Registrant issued a warrant to purchase 50,000
shares of Common Stock at $2.00 per share to a principal of Ally International
Securities, Inc. as compensation for underwriting services provided by Ally
International Securities, Inc. The warrant became exercisable upon issuance and
expires on September 1, 1997. The warrant has been exercised in full.
3. On October 26, 1994, the Registrant sold 100,000 shares of Common Stock
to certain unrelated offshore investors. The aggregate purchase price for such
shares was $274,000. As part of this transaction, the purchasers also acquired
warrants to purchase 15,000 shares of Common Stock at an exercise price of
$3.625 per share. All such warrants were exercised in full on May 30, 1995.
4. On December 24, 1995, the Registrant sold $2.0 million aggregate
principal amount of convertible promissory notes to certain unrelated offshore
investors, which amount was convertible into shares of Common Stock at a
weighted average exercise price of $4.80 per share. As of August 31, 1996, all
of the principal amount of the notes and accrued interest thereon had been
converted to 430,291 shares of Common Stock.
II-2
<PAGE>
5. On December 24, 1995, the Registrant granted the Note Warrant for 25,000
shares of Common Stock at $6.90 per share to First Bermuda Securities, Ltd. as a
portion of the compensation for its services in acting as placement agent in
connection with the sale of the convertible promissory notes.
6. On April 16, 1996, the Registrant issued 500,000 shares of Common Stock
in exchange for all the issued and outstanding stock of Smoky Mountain
Technologies, Inc.
7. On July 16, 1996, the Registrant issued warrants to purchase an
aggregate of 87,500 shares of Common Stock at $6.00 per share and an aggregate
of 87,500 shares of Common Stock at $7.00 per share to B C Capital Corp. and
certain of its affiliates in connection with a financial consulting agreement
entered into by B C Capital Corp. and the Registrant.
Other than the transactions described in Items 2, 6 and 7, the sale and
issuance of debt and equity securities described above were made in reliance
upon the exemption from registration contained in Regulation S under the
Securities Act. The transactions described in Items 2, 6 and 7 were made in
reliance on Section 4(2) of the Securities Act. Other than the transaction
described in Item 4, no underwriter was involved in any of the above
transactions. First Bermuda Securities, Ltd. acted as placement agent for the
sale of the notes described in Item 4.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ----------- ------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement*
3.1 Certificate of Incorporation of the Registrant (previously filed with Form
S-18, filed April 15, 1986 (Reg. no. 33-04906-D) 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 (Reg. no. 33-04906-D) and incorporated herein by
reference)
3.3 Amended and Restated Bylaws of the Registrant
5.1 Opinion of Snell & Wilmer L.L.P. as to legality of shares*
10.1 End-User Purchase Agreement between the Registrant and Hewlett-Packard dated
October 25, 1994 (previously filed with Form 10-K/A amendment no. 2 for the
fiscal year ended February 28, 1994 and incorporated herein by reference)
10.2 Business Partner Agreement between the Registrant and IBM dated March 1, 1994
(previously filed with Form 10-K/A amendment no. 2 for the fiscal year ended
February 28, 1994 and incorporated hereby by reference)
10.3 Agreement between the Registrant and Siemens Nixdorf dated January 3, 1995
(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 (previously filed with Form 10-K for the fiscal year ended February
25, 1996 and incorporated herein by reference)
10.5 Offshore Warrant Agreement between the Registrant and First Bermuda
Securities, Ltd. dated December 20, 1995 (previously filed with Form 10-K
for the fiscal year ended February 25, 1996 and incorporated herein by
reference.)
10.6 Form of 7% Convertible Promissory Notes dated December 20, 1995 issued by the
Registrant to certain offshore investors (previously filed with Form 10-K
for the fiscal year ended February 25, 1996 and incorporated herein by
reference)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ----------- ------------------------------------------------------------------------------
<C> <S>
10.7 Stock Purchase Agreement between the Registrant and Smoky Mountain
Technologies, Inc. dated April 16, 1996 (previously filed with Form 8-K
dated May 1, 1996, as amended, and incorporated herein by reference)
10.8 Employment Agreements dated April 16, 1996 between the Registrant and each of
B. Michael Wilson and George Gruber, (previously filed with Form 8-K dated
May 1, 1996, as amended, and incorporated herein by reference)
10.9 Form of Indemnification Agreement to be used between the Registrant and
members of the Board of Directors and executive officers of the Registrant
21.1 Subsidiaries of the Registrant
23.1 Report and Consent of Independent Accountants
23.2 Consent of Snell & Wilmer L.L.P. (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
99.1 UniComp, Inc. Long Term Incentive Plan (previously filed with Form S-8 (Reg.
no. 33-98564) and incorporated herein by reference)
99.2 UniComp, Inc. 1996 Director Incentive Plan
</TABLE>
- ------------------------
* to be filed by amendment
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because the required information is
either included in the consolidated financial statements or the notes
thereto or is not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Marietta,
State of Georgia, on the 18th day of September, 1996.
UNICOMP, INC.
By: /s/ STEPHEN A. HAFER
-----------------------------------------
Stephen A. Hafer
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Stephen A. Hafer and L. Allen Plunk, and each of them, with full power
of substitution and resubstitution and full power to act without the other, as
his true and lawful attorney-in-fact and agent to act in his name, place and
stead and to execute in the name and on behalf of each person, individually and
in each capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing, ratifying and confirming all that said attorneys-in-fact and agents or
any of them or their substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 18th day of September, 1996.
SIGNATURE TITLE
- -------------------------------------- --------------------------------------
/s/ STEPHEN A. HAFER Chairman of the Board, President and
- -------------------------------------- Chief Executive Officer (Principal
Stephen A. Hafer Executive Officer)
/s/ L. ALLEN PLUNK
- -------------------------------------- Chief Financial Officer (Principal
L. Allen Plunk Financial and Accounting Officer)
/s/ J. PATRICK HENRY
- -------------------------------------- Director
J. Patrick Henry
- --------------------------------------
Nelson J. Millar Director
/s/ THOMAS ZIMMERER
- -------------------------------------- Director
Thomas Zimmerer
II-5
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE
AT THE CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
THE PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF 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 $110,296 $ (99,424) $137,878
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.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Underwriting Agreement*
3.1 Certificate of Incorporation of the Registrant (previously filed with Form S-18, filed
April 15, 1986 (Reg. no. 33-04906- D) 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
(Reg. no. 33-04906-D) and incorporated herein by reference)
3.3 Amended and Restated Bylaws of the Registrant
5.1 Opinion of Snell & Wilmer L.L.P. as to legality of shares*
10.1 End-User Purchase Agreement between the Registrant and Hewlett-Packard dated October 25,
1994 (previously filed with Form 10-K/A amendment no. 2 for the fiscal year ended
February 28, 1994 and incorporated herein by reference)
10.2 Business Partner Agreement between the Registrant and IBM dated March 1, 1994 (previously
filed with Form 10-K/A amendment no. 2 for the fiscal year ended February 28, 1994 and
incorporated hereby by reference)
10.3 Agreement between the Registrant and Siemens Nixdorf dated January 3, 1995 (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 (previously filed
with Form 10-K for the fiscal year ended February 25, 1996 and incorporated herein by
reference)
10.5 Offshore Warrant Agreement between the Registrant and First Bermuda Securities, Ltd. dated
December 20, 1995 (previously filed with Form 10-K for the fiscal year ended February 25,
1996 and incorporated herein by reference.)
10.6 Form of 7% Convertible Promissory Notes dated December 20, 1995 issued by the Registrant to
certain offshore investors (previously filed with Form 10-K for the fiscal year ended
February 25, 1996 and incorporated herein by reference)
10.7 Stock Purchase Agreement between the Registrant and Smoky Mountain Technologies, Inc. dated
April 16, 1996 (previously filed with Form 8-K dated May 1, 1996, as amended, and
incorporated herein by reference)
10.8 Employment Agreements dated April 16, 1996 between the Registrant and each of B. Michael
Wilson and George Gruber, (previously filed with Form 8-K dated May 1, 1996, as amended,
and incorporated herein by reference)
10.9 Form of Indemnification Agreement to be used between the Registrant and members of the
Board of Directors and executive officers of the Registrant
21.1 Subsidiaries of the Registrant
23.1 Report and Consent of Independent Accountants
23.2 Consent of Snell & Wilmer L.L.P. (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
99.1 UniComp, Inc. Long Term Incentive Plan (previously filed with Form S-8 (Reg. no. 33-98564)
and incorporated herein by reference)
99.2 UniComp, Inc. 1996 Director Incentive Plan
</TABLE>
- ------------------------
* to be filed by amendment
<PAGE>
Exhibit 3.3
AMENDED AND RESTATED
BYLAWS
OF
UNICOMP, INC.
A COLORADO CORPORATION
<PAGE>
TABLE OF CONTENTS
1. OFFICES............................................................... 1
2. SHARES ............................................................... 1
3. PREEMPTIVE RIGHTS..................................................... 1
4. PERPETUAL EXISTENCE................................................... 2
5. NON-LIABILITY OF SHAREHOLDERS......................................... 2
6. INDEMNIFICATION....................................................... 2
7. MEETING OF SHAREHOLDERS............................................... 2
(a) Place of Meeting............................................ 2
(b) Annual Meeting.............................................. 2
(c) Special Meetings............................................ 2
(d) Notice of Meetings.......................................... 3
(e) Quorum, Manner of Acting and Adjournment.................... 3
(f) Organization................................................ 3
(g) Notice of Business.......................................... 4
(h) Voting; Proxies............................................. 5
(i) Voting Lists................................................ 5
(j) Consent of Shareholders in Lieu of Meeting.................. 5
8. BOARD OF DIRECTORS ................................................... 6
(a) Powers...................................................... 6
(b) Number, Term of Office and Qualification.................... 6
(c) Nomination of Directors..................................... 6
(d) Vacancies................................................... 8
(e) Resignations................................................ 8
(f) Organization................................................ 8
(g) Place of Meeting............................................ 8
(h) Organization Meeting........................................ 8
(i) Regular Meetings............................................ 9
(j) Special Meetings............................................ 9
(k) Quorum, Manner of Acting and Adjournment.................... 9
(l) Action by Unanimous Written Consent......................... 9
(m) Interested Directors or Officers............................ 9
(n) Compensation................................................ 10
(o) Committees.................................................. 10
1
<PAGE>
9. NOTICES - WAIVERS - MEETINGS ......................................... 11
(a) What Constitutes Notice..................................... 11
(b) Waivers of Notice........................................... 11
(c) Conference Telephone Meetings............................... 11
10. OFFICERS ............................................................. 12
(a) Number, Qualifications and Designation...................... 12
(b) Election and Term of Office................................. 12
(c) Subordinate Officers, Committees and Agents................. 12
(d) Resignations................................................ 12
(e) Removal..................................................... 12
(f) Vacancies................................................... 12
(g) General Powers.............................................. 13
(h) The President............................................... 13
(i) The Chairman................................................ 13
(j) The Vice Presidents......................................... 13
(k) The Secretary............................................... 13
(l) The Treasurer............................................... 14
(m) Officer's Bonds............................................. 14
(n) Compensation................................................ 14
11. CERTIFICATES OF STOCK, TRANSFER, ETC ................................. 14
(a) Issuance.................................................... 14
(b) Transfer.................................................... 15
(c) Stock Certificates.......................................... 15
(d) Lost, Stolen, Destroyed, or Mutilated Certificates ......... 15
(e) Record Holder of Shares..................................... 15
(f) Determination of Shareholders of Record..................... 15
12. INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC........................... 16
(a) Directors and Officers; Third Party Actions................. 16
(b) Directors and Officers; Derivative Actions.................. 16
(c) Employees and Agents........................................ 17
(d) Procedure for Effecting Indemnification..................... 17
(e) Advancing Expenses.......................................... 18
(f) Scope of Paragraph.......................................... 18
13. INSURANCE............................................................. 18
(a) Insurance Against Liability Asserted Against Directors,
Officers, Etc. ............................................. 18
2
<PAGE>
14. MISCELLANEOUS......................................................... 19
(a) Corporate Seal.............................................. 19
(b) Checks...................................................... 19
(c) Contracts................................................... 19
(d) Inspection.................................................. 19
(e) Fiscal Year................................................. 19
15. AMENDMENTS............................................................ 19
(a) Amendments.................................................. 19
3
<PAGE>
BYLAWS
of
UNICOMP, INC.
1. OFFICES.
The corporation may have offices at such places within or without the
State of Colorado as the Board of Directors may from time to time determine
or the business of the corporation may require, provided that the corporation
maintains a registered office within the State of Colorado.
2. SHARES.
The Board of Directors shall have authority to authorize the issuance,
from time to time without any vote or other action by the shareholders, of
any or all shares of stock of the corporation of any class at any time
authorized, and any securities convertible into or exchangeable for any such
shares, in each case to such persons and for such consideration, and on such
terms as the Board of Directors from time to time in its discretion lawfully
may determine. Shares so issued, for which the consideration has been paid
to the corporation, shall be fully paid stock and the holders of such stock
shall not be liable for any further call or assessment thereon.
3. PREEMPTIVE RIGHTS.
No common shareholder of this corporation shall by reason of his holding
common shares of any class have any preemptive or preferential rights of
purchase to subscribe to any shares of any class of this corporation, now or
hereafter to be authorized, or any notes, debentures, bonds or other
securities convertible into or carrying options or warrants to purchase
shares of any class, now or hereafter to be authorized, whether or not the
issuance of any such shares, or such notes, debentures, bonds or other
securities, would adversely affect the dividend or voting rights of such
shareholder, other than such rights, if any, as the Board of Directors, in
its discretion from time to time, may grant and at such price as the Board of
Directors in its discretion may fix; and the Board of Directors may issue
shares of any class of this corporation, or any notes, debentures, bonds, or
other securities convertible into or carrying options or warrants to purchase
shares of any class, without offering any such shares of any class, either in
whole or in part, to the existing shareholders of any class.
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4. PERPETUAL EXISTENCE
The corporation shall have perpetual existence.
5. NON-LIABILITY OF SHAREHOLDERS.
The private property of the shareholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
6. INDEMNIFICATION
The corporation shall have power to indemnify any person, including
present or former directors, officers, trustees, employees or agents of the
corporation or any person who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the extent
permitted by Colorado Law and/or the Bylaws of the corporation. Such
indemnification shall be in addition to all other rights to which those
indemnified may be entitled under any statute, bylaw, agreement, vote of
shareholders or otherwise.
7. MEETING OF SHAREHOLDERS.
(a) PLACE OF MEETING. All meetings of the shareholders of the
Corporation shall be held in Colorado or at such place within or without the
State of Colorado as shall be designated by the Board of Directors in the
notice of such meeting;
(b) ANNUAL MEETING. The Board of Directors may fix the date and time
of the annual meeting of the shareholders, but if no such date and time is
fixed by the Board of Directors, the meeting for any calendar year shall be
held no later than February 28 of the following year-end, if not a legal
holiday, and if a legal holiday, then on the next succeeding day which is not
a legal holiday. At the annual meeting, the shareholders then entitled to
vote shall elect by written ballot directors and shall transact such other
business as may properly be brought before the meeting;
(c) SPECIAL MEETINGS. Except as may be provided in the corporation's
Articles of Incorporation, special meetings of the shareholders of the
corporation for any purpose or purposes for which meetings may lawfully be
called, may be called at any time for any purpose or purposes by the Board of
Directors or by any person or committee expressly so authorized by the Board
of Directors and by the holder of at least ten (10) percent of all shares
entitled to vote at the proposed special meeting. At any time, upon written
request of any person or persons who have duly called a special meeting,
which written request shall state the purpose or purposes of the meeting, it
shall be the duty of the
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Secretary to fix the date of the meeting to be held at such date and time as
the Secretary may fix, not less than ten nor more than sixty days after the
receipt of the request, and to give due notice thereof. If the Secretary
shall neglect or refuse to fix the time and date of such meeting and give
notice thereof, the person or persons calling the meeting may do so;
(d) NOTICE OF MEETINGS. Written notice of the place, date and hour of
every meeting of the shareholders, whether annual or special, shall be given
not less than ten nor more than sixty days before the date of the meeting to
each shareholder of record entitled to vote at the meeting. Every notice of a
special meeting shall state the purpose or purposes thereof;
(e) QUORUM, MANNER OF ACTING AND ADJOURNMENT. The holders of a
majority of the stock issued and outstanding (not including treasury stock)
and entitled to vote at a meeting of the shareholders, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute, by the Articles of Incorporation or by these Bylaws. If, however, a
quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At any such adjourned meeting, at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting. When a quorum is present at any meeting, the vote of the holders of
the majority of the stock having voting power present in person or
represented by proxy shall decide any questions brought before such meeting,
unless the question is one upon which, by express provision of the applicable
statute, the Articles of Incorporation or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Except upon those questions governed by the
aforesaid express provisions, the shareholders present in person or by proxy
at a duly organized meeting can continue to do business until adjournment,
notwithstanding withdrawal of enough shareholders to leave less than a quorum;
(f) ORGANIZATION. At every meeting of the shareholders, the Chairman
of the Board, or in the case of vacancy in office or absence of the Chairman
of the Board, such person as may be designated by the Board of Directors,
shall act as Chairman of such meeting, and the Secretary, or, in his absence,
an assistant secretary, or in the absence of both the Secretary and the
assistant secretaries, a person appointed by the Chairman of the
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Meeting shall act as Secretary;
(g) NOTICE OF BUSINESS. No business may be transacted at an Annual
Meeting of shareholders, other than business that is either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the Annual Meeting by or at
the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the Annual Meeting by any
shareholder of the Corporation (i) who is a shareholder of record on the date
of the giving of the notice provided for herein, and on the record date for
the determination of shareholders entitled to vote at such annual meeting and
(ii) who complies with the notice procedures set forth below.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary
of the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding Annual Meeting of
shareholders; PROVIDED, HOWEVER, that in the event that the Annual Meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the shareholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the Annual meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before
the Annual Meeting (i) a brief description of the business desired to be
brought before the Annual Meeting and the reasons for conducting such
business at the Annual Meeting, (ii) the name and record address of such
shareholder, (iii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by such
shareholder, (iv) a description of all arrangements or understandings between
such shareholder and any other person or persons (including their names) in
connection with the proposal of such business by such shareholder and any
material interest of such shareholder in such business and (v) a
representation that such shareholder intends to appear in person or by proxy
at the annual Meeting to bring such business before the meeting.
No business shall be conducted at the Annual Meeting of shareholders
except
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business brought before the Annual Meeting in accordance with the procedures
set forth herein; PROVIDED, HOWEVER, that, once business has been properly
brought before the Annual Meeting in accordance with such procedures, nothing
in this paragraph shall be deemed to preclude discussion by any shareholder
of any such business. If the Chairman of an Annual Meeting determines that
business was not properly brought before the Annual Meeting in accordance
with the foregoing procedures, the Chairman shall declare to the meeting that
the business was not properly brought before the meeting and such business
shall not be transacted.
(h) VOTING; PROXIES. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share of
common stock and the number of votes per share as designated in the
designation of rights adopted with respect to each share of preferred stock
registered in his name on the books of the corporation on the record date for
such meeting. All elections of directors shall be by written ballot, unless
waived by the shareholders present or unless action is taken pursuant to
paragraph 7(j) of the Bylaws. The vote upon any other matter need not be by
ballot. No proxy shall be voted after three years from its date, unless the
proxy provides for a longer period. Every proxy shall be executed in writing
by the shareholder or by his duly authorized attorney-in-fact and filed with
the Secretary of the corporation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement or any
provisions in the proxy to the contrary, but the revocation of a proxy shall
not be effective until notice thereof has been given to the Secretary of the
corporation. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of
such death or incapacity is given to the Secretary of the corporation;
(i) VOTING LISTS. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every
meeting of shareholders, a complete list of the shareholders entitled to vote
at the meeting. The list shall be arranged in alphabetical order showing the
address of each shareholder and the number of shares registered in the name
of each shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present;
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(j) CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Unless otherwise
provided in the Articles of Incorporation, any action required by law to be
taken at any annual or special meeting of shareholders of the corporation, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
8. BOARD OF DIRECTORS.
(a) POWERS. The management of the corporation shall be under the
direction of the Board of Directors; and all powers of the corporation,
except those specifically reserved or granted to the shareholders by statute,
the Articles of Incorporation or these Bylaws, are hereby granted to and
vested in the Board of Directors;
(b) NUMBER, TERM OF OFFICE AND QUALIFICATION. The Board of Directors
shall consist of such number of directors, not less than one or more than
seven, as may be determined from time to time by the Board of Directors
subject to the provisions of the Articles of Incorporation. Each Director
shall hold office until his successor is elected and qualified or until his
earlier resignation;
(c) NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the corporation, except as may be otherwise provided in the
Articles of Incorporation, or otherwise, with respect to the right of holders
of preferred stock to nominate and elect a specified number of directors in
certain circumstances. Nominations of persons for election to the Board of
Directors, or at any Special Meeting of shareholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (b) by any shareholder of the
corporation (i) who is a shareholder of record on the date of the giving of
the notice provided for herein and on the record date for the determination
of shareholders entitled to vote at such meeting and, (ii) who complied with
the notice procedures set forth in this paragraph 8(c).
In addition to any other applicable requirements, for a nomination to be
made by a shareholder, such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
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To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual Meeting, not less than sixty (60)
days nor more than ninety (90) days prior to the anniversary date of the
immediately preceding Annual Meeting of shareholders; PROVIDED, HOWEVER, that
in the event that the Annual Meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
shareholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which such
notice of the date of the Annual Meeting was mailed or such public disclosure
of the date of the Annual Meeting was made, whichever first occurs; and (b)
in the case of a Special Meeting of shareholders called for the purpose of
electing directors, not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the Special Meeting was
mailed or public disclosure of the date on the Special Meeting was made,
whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of record by the
person and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder;
and (b) as to the shareholder giving the notice (i) the name and record
address of such shareholder, (ii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
such shareholder, (iii) the description of all arrangements or understandings
between such shareholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such shareholder, (iv) a representation that such shareholder intends
to appear in person or by proxy at the meeting to nominate the persons named
in its notice and (v) any other information relating to such shareholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election
of directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee consenting to being named as a
nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this paragraph 8(c). If the Chairman of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the nomination
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was defective and such defective nomination shall be disregarded.
(d) VACANCIES. Vacancies and newly created directorships may be filled
by a majority of the directors then in office, though less than a quorum, or
by a sole remaining director, and the directors so chosen shall hold office
until his successor shall have been duly elected and qualified unless he
shall resign, become disqualified, disabled or shall otherwise be removed. If
there are no directors in office, then an election of directors may be held
in the manner provided by statute;
(e) RESIGNATIONS. Any director of the corporation may resign at any
time by giving written notice to the Chairman of the Board or the Secretary
of the corporation. Such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective;
(f) ORGANIZATION. At every meeting of the Board of Directors, the
Chairman of the Board, if there be one, or, in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following officers
present in the order stated: the President; the Vice President; or a
Chairman chosen by a majority of the directors present, shall preside, and
the Secretary, or, in his absence, an Assistant Secretary, or in the absence
of the Secretary and the Assistant Secretaries, any person appointed by the
Chairman of the meeting, shall act as Secretary;
(g) PLACE OF MEETING. The Board of Directors may hold its meetings,
both regular and special, at such place or places within or without the State
of Colorado as the Chairman of the Board or the Board of Directors may from
time to time determine, or as may be designated in the notice calling the
meeting;
(h) ORGANIZATION MEETING. Immediately after each annual election of
directors or other meeting at which the entire Board of Directors is elected,
the newly elected Board of Directors shall meet for the purpose of
organization, election of officers, and the transaction of other business, at
the place where said election of directors was held. Notice of such meeting
need not be given. Such organization meeting may be held at any other time
or place which shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors;
(i) REGULAR MEETINGS. Regular meetings of the Board of Directors shall
be held without notice at such time and at such place as shall be determined
from time to time by the Board of Directors. Notice of any regular meeting
shall be given in the manner prescribed for special meetings of the Board of
Directors;
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(j) SPECIAL MEETINGS. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board of Directors, the
President or on the written request of three or more of the directors. Notice
of each such meeting shall be given to each director in writing, or by
telephone personally, at least 24 hours before the time at which the meeting
is to be held. Each such notice shall state the time and place of the
meeting to be so held;
(k) QUORUM, MANNER OF ACTING AND ADJOURNMENT. At all meetings of the
Board of Directors a majority of the total number of directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute or by the Articles of Incorporation. If a quorum shall
not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present;
(l) ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee as the case may be;
(m) INTERESTED DIRECTORS OR OFFICERS. No contract or transaction
between the corporation and one or more of its directors or officers, or
between the corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorized the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(i) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(ii) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
shareholders entitled to
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vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the shareholders; or
(iii) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified by the Board of
Directors, a committee thereof, or the shareholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction;
(n) COMPENSATION. Each director who is not also an employee of the
corporation or any subsidiary thereof shall be paid such compensation for his
services as a director and shall be reimbursed for such expenses as may be
fixed by the Board of Directors;
(o) COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have power or
authority in reference to amending the certificate of incorporation, adopting
an agreement of merger or consolidation, recommending to the shareholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the shareholders a dissolution of the
corporation or a revocation of dissolution, removing or indemnifying
directors or amending these Bylaws; and unless the resolution expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Unless the Board of
Directors otherwise provides, each committee may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote
of a majority of the members present at a meeting at the time of such vote if
a quorum is present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business;
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9. NOTICES - WAIVERS - MEETINGS.
(a) WHAT CONSTITUTES NOTICE. Whenever, under the provisions of the
statutes or of the Articles of Incorporation or of these Bylaws, written
notice is required to be given to any directors or shareholder, such notice
may be given to such person, either personally or by sending a copy thereof
through the mail, by telegraph, by private delivery service, or by facsimile
transmission, charges prepaid, to his address appearing on the books of the
corporation. If the notice is sent by mail, by telegraph or by private
delivery service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office or private delivery service for transmission to such person. If the
notice is sent by facsimile transmission, it shall be deemed to have been
given upon transmission, if transmission occurs before 5:00 p.m. at the place
of receipt, and upon the day following transmission, if transmission occurs
after 5:00 p.m.;
(b) WAIVERS OF NOTICE. Whenever any written notice is required to be
given under the provisions of the Articles of Incorporation, these Bylaws, or
by statute, a waiver thereof in writing, signed and deliver to the
corporation for inclusion in the minutes or filing with the corporation
records by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the shareholders, directors, or members of
a committee of directors need be specified in any written waiver of notice of
such meeting. Attendance of a person, either in person or by proxy, at any
meeting, shall constitute a waiver of notice of such meeting, except when a
person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened;
(c) CONFERENCE TELEPHONE MEETINGS. One or more directors may
participate in a meeting of the Board, or of a committee of the Board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this paragraph 9(c) shall constitute
presence in person at such meeting.
10. OFFICERS.
(a) NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the
corporation shall be chosen by the Board of Directors and shall be a Chairman
of the Board, President, one or more Vice Presidents, a Secretary, a
Treasurer (or Chief Financial Officer), and such other officers as may be
elected in accordance with the provisions of paragraph (c) of this paragraph
10. The Board of Directors, in its discretion may also choose a chairman of
the Board of Directors (who must be a Director). One person may hold more
than one office. Officers may be, but need not be, directors or shareholders
of the corporation;
(b) ELECTION AND TERM OF OFFICE. The officers of the corporation,
except those elected by delegated authority pursuant to paragraph (c) of this
paragraph 10, shall be elected annually by the Board of Directors, and each
such officer shall hold his office until his successor shall have been
elected and qualified, or until his earlier resignation or removal;
(c) SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The Board of
Directors may from time to time, elect such other officers, employees or
other agents as it deems necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as are provided
in these Bylaws, or as the Board of Directors may from time to time
determine. The Board of Directors may delegate to any officer or
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committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the
authority and duties of such subordinate officers, committees, employees or
other agents;
(d) RESIGNATIONS. Any officer or agent may resign at any time by
giving written notice to the Board of Directors, or to the President or the
Secretary of the corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective;
(e) REMOVAL. Any officer, committee, employee or other agent of the
corporation may be removed, either for or without cause, by the Board of
Directors or other authority which elected or appointed such officer,
committee or other agent whenever in the judgment of such authority the best
interests of the corporation will be served thereby;
(f) VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, or any other cause, shall be filled by the Board
of Directors or by the officer or committee to which the power to fill such
officer has been delegated pursuant to paragraph (c) of this paragraph 10, as
the case may be, and if the office is one for which these Bylaws prescribe a
term, shall be filled for the unexpired portion of the term;
(g) GENERAL POWERS. All officers of the corporation, as between
themselves and the corporation, shall, respectively, have such authority and
perform such duties in the management of the property and affairs of the
corporation as may be determined by these Bylaws, or in the absence of
controlling provisions in the Bylaws, as may be provided by resolution of the
Board of Directors;
(h) THE CHAIRMAN. The Chairman of the Board shall preside at all
meetings of the shareholders and of the Board of Directors, and shall perform
such other duties as may from time to time be assigned to him by the Board of
Directors;
(i) THE PRESIDENT. The President shall, subject to the control of
the Board of Directors, have general and active supervision of the affairs,
business, officers and employees of the corporation. He shall have
authority to sign, execute, and acknowledge, in the name of the corporation
deeds, mortgages, bonds, contracts or other instruments, authorized by the
Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or these
Bylaws, to some other officer or agent of the corporation. He shall, from
time to time, in his discretion or at the order of the Board, submit to the
Board reports of the operations and affairs of the
12
<PAGE>
corporation. He shall also perform such other duties and have such other
powers as may be assigned to him from time to time by the Board of Directors;
(j) THE VICE PRESIDENTS. The corporation may have one or more Vice
Presidents, having such duties as from time to time may be determined by the
Board of Directors or by the President;
(k) THE SECRETARY. The Secretary shall keep full minutes of all
meetings of the shareholders and of the Board of Directors; shall be ex
officio Secretary of the Board of Directors; shall attend all meetings of the
shareholders and of the Board of Directors; shall record all the votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in
a book or books to be kept for that purpose. The Secretary shall give, or
cause to be given, notices of all meetings of the shareholders of the
corporation and of the Board of Directors; shall be the custodian of the seal
of the corporation and see that it is affixed to all documents to be executed
on behalf of the company under its seal; shall have responsibility for the
custody and safekeeping of all permanent records and other documents of the
corporation; and, in general, shall perform all duties incident to the office
of Secretary and such other duties as may be prescribed by the Board of
Directors or by the President, under whose supervision he shall be. The
Board of Directors may elect one or more Assistant Secretaries to perform
such duties as shall from time to time be assigned to them by the Board of
Directors or the President;
(l) THE TREASURER. The Treasurer shall have or provide for the custody
of all funds, securities and other property of the corporation; shall collect
and receive or provide for the collection or receipt of money earned by or in
any manner due to or received by the corporation; shall deposit or cause to be
deposited all said moneys in such banks or other depositories as the Board of
Directors may from time to time designate; shall make disbursements of
corporate funds upon appropriate vouchers; shall keep full and accurate
accounts of transactions of his office in books belonging to the corporation;
shall, whenever so required by the Board of Directors, render an accounting
showing his transactions as Treasurer, and the financial condition of the
corporation; and, in general, shall discharge any other duties as may from
time to time be assigned to him by the Board of Directors. The Board of
Directors may elect one or more Assistant Treasurers to perform the duties of
the Treasurer as shall from time to time be assigned to them by the Board of
Directors or the Treasurer;
(m) OFFICER'S BONDS. Any officer shall give a bond for the faithful
discharge of his duties in such sum, if any, and with such surety or sureties
as the Board of Directors shall require. The corporation may obtain such
bonds at its expense as the Board of Directors shall require;
13
<PAGE>
(n) COMPENSATION. The compensation of the officers and agents of the
corporation be fixed from time to time by the Board of Directors or by such
committee as may be designated by the Board of Directors to fix salaries or
other compensation of officers.
11. CERTIFICATES OF STOCK, TRANSFER, ETC.
(a) ISSUANCE. The certificate for stock of the corporation shall be
numbered and registered in the stock ledger and transfer books or equivalent
records of the corporation as they are issued. They shall be signed by the
President, or a Vice President, and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and shall bear the
corporate seal, which may be a facsimile, engraved or printed. Any of or all
the signatures upon such certificate may be a facsimile, engraved or printed
if such certificate of stock is signed or countersigned by a transfer agent
or by a registrar. In case any officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon any share
certificate shall have ceased to be such officer, transfer agent or registrar
before the certificate is issued, it may be issued with the same effect as if
he were such officer, transfer agent or registrar at the date of its issue;
(b) TRANSFER. Transfers of shares of stock of the corporation shall be
made on the books of the corporation upon surrender of the certificates
therefor, endorsed by the person named in the certificate or by attorney
lawfully constituted in writing.
(c) STOCK CERTIFICATES. Stock certificates of the corporation shall be
in such form as provided by statute and approved by the Board of Directors.
The stock record books and the blank stock certificate books shall be kept by
the Secretary or by any agency designated by the Board of Directors for that
purpose;
(d) LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. The Board of
Directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate
or certificates, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to
the certificate alleged to have been lost, stolen or destroyed;
(e) RECORD HOLDER OF SHARES. The corporation shall be entitled to
recognize
14
<PAGE>
the exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on it books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Colorado;
(f) DETERMINATION OF SHAREHOLDERS OF RECORD. In order that the
corporation may determine the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record
date is fixed:
(i) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held;
(ii) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Only such shareholders as shall be shareholders on the record date fixed or
determined as aforesaid shall be entitled to notice of or to vote at such
meeting or adjournment, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
12. INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC.
(a) DIRECTORS AND OFFICERS; THIRD PARTY ACTIONS. The corporation shall
indemnify any director or officer of the corporation who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact he is or was an authorized representative of
15
<PAGE>
the corporation (which, for the purposes of this paragraph 12 and paragraph
13 of these Bylaws, shall mean a director, officer, employee or agent of the
corporation, or a person who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) for, from and against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful;
(b) DIRECTORS AND OFFICERS; DERIVATIVE ACTIONS. The corporation shall
indemnify any director or officer of the corporation who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was an authorized
representative of the corporation, for, from and against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper;
(c) EMPLOYEES AND AGENTS. To the extent that an authorized
representative of the Company who neither was nor is a director or officer of
the Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this
paragraph 12 or in defense of any claim, issue or matter therein, he shall be
indemnified by the corporation for, from and against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Such an authorized representative may, at the discretion of the
Board of Directors, be indemnified by the corporation in any other
circumstances to any extent if the corporation would be required by
paragraphs (a) and (b) of this paragraph 12 to
16
<PAGE>
indemnify such person in such circumstances to such extent if he were or had
been a director or officer of the corporation;
(d) PROCEDURE FOR EFFECTING INDEMNIFICATION. Indemnification under
paragraphs (a), (b) or (c) of this paragraph 12 shall be made when ordered by
a court and shall be made in a specific case upon a determination that
indemnification of the authorized representative is required or proper in the
circumstances because he has met the applicable standard of conduct set forth
in paragraphs (a) and (b) of this paragraph 12. Such determination shall be
made:
(i) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or
(ii) If such a quorum is not obtainable, or, even if obtainable a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or
(iii) By the shareholders.
If a claim under this paragraph 12 is not paid in full by the corporation
within ninety days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending
any action, suit or proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant
has not met the standards of conduct which make it permissible for the
corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel
or its shareholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he had met the applicable standard of conduct, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its shareholders) that the claimant has not met
such applicable standard of conduct shall be a defense to the action or
create a presumption that claimant had not met the applicable standard of
conduct;
(e) ADVANCING EXPENSES. Expenses (including attorneys' fees) incurred
in defending a civil or criminal action, suit or proceeding shall be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding, as authorized by the Board of Directors in a specific case, upon
receipt of an undertaking by or on behalf of an
17
<PAGE>
authorized representative to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
required in this paragraph 12 or authorized by law;
(f) SCOPE OF PARAGRAPH. Each person who shall act as an authorized
representative of the corporation, shall be deemed to be doing so in reliance
upon such rights of indemnification as are provided in this paragraph 12(f).
The indemnification provided by the paragraph shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any agreement, vote of shareholders or disinterested directors, statute
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office or position, and shall continue as
to a person who has ceased to be an authorized representative of the
corporation and shall insure to the benefit of the heirs, executors and
administrators of such a person.
13. INSURANCE.
(a) INSURANCE AGAINST LIABILITY ASSERTED AGAINST DIRECTORS, OFFICERS,
ETC. The corporation, whenever so authorized by the Board of Directors, may
purchase and maintain insurance on behalf of any authorized representative,
as said term is defined in paragraph 12(a) of these Bylaws, against any
liability asserted against him and incurred by him in such capacity, or
arising out of his status as such, whether or not the corporation would be
authorized or required to indemnify him by law or paragraph 12 of these
Bylaws.
14. MISCELLANEOUS.
(a) CORPORATE SEAL. The corporate seal of the corporation shall have
inscribed thereon the name of the corporation and the year of its
incorporation. The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or otherwise reproduced;
(b) CHECKS. All checks, notes, bills of exchange or other orders in
writing shall be signed by such person or persons as the Board of Directors,
or officer or officers authorized by resolution of the Board of Directors
may, from time to time, designate;
(c) CONTRACTS. Except as otherwise provided in these Bylaws, the Board
of Directors may authorize any officer or officers including the President
and any Vice President, or any agent or agents, to enter into any contract or
to execute or deliver any instrument on behalf of the corporation and such
authority may be general or confined to specific instances;
18
<PAGE>
(d) INSPECTION. The books, accounts and records of the corporation may
be kept outside the State of Colorado at such place or places as may be
designated from time to time by the Board of Directors and shall be open for
inspection in person by any member of the Board of Directors at all times;
(e) FISCAL YEAR. The fiscal year of the corporation shall be
determined by the Board of Directors.
15. AMENDMENTS.
(a) AMENDMENTS. These Bylaws may be amended or repealed, and new
Bylaws adopted, by the Board of Directors.
19
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of
___________________, 1996 between UniComp, Inc., a Colorado corporation
("Corporation"), and _________________ ("Indemnitee").
RECITALS:
A. Indemnitee, a member of the Board of Directors or an officer
of Corporation, performs a valuable service in such capacity for Corporation;
and
B. The stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors,
agents and employees of Corporation to the maximum extent authorized by
Colorado Law; and
C. The Bylaws and Colorado Law, by their non-exclusive nature,
permit contracts between a corporation and the members of its Board of
Directors or officers with respect to indemnification of such directors
and/or officers; and
D. In accordance with the authorization as provided by Colorado
Law, Corporation has purchased and presently maintains a policy or policies
of Directors and Officers Liability Insurance ("D&O Insurance"), covering
certain liabilities which may be incurred by its directors and officers in
the performance as directors of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D&O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or officers
by such D&O Insurance and by statutory and by-law indemnification provisions;
and
F. In order to induce Indemnitee to continue to serve as a member
of the Board of Directors and/or an officer of Corporation, Corporation has
determined and agreed to enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service
as a director and/or an officer after the date hereof, the parties hereto
agree as follows:
1. INDEMNITY OF INDEMNITEE. Corporation hereby agrees to hold
harmless and indemnify Indemnitee to the fullest extent authorized or
permitted by the provisions of the Act, as may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set
forth in
<PAGE>
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Indemnitee:
(a) Against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of
Corporation) to which Indemnitee is, was or at any time becomes a party, or
is threatened to be made a party, be reason of the fact that Indemnitee is,
was or at any time becomes a director, officer, employee or agent of
Corporation, or is or was serving or at any time serves at the request of
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and
(b) Otherwise to the fullest extent as may be provided to
Indemnitee by Corporation under the Bylaws of Corporation and Colorado Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof or pursuant to any D&O
Insurance purchased and maintained by Corporation;
(b) in respect to remuneration paid to Indemnitee if it shall
be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or
sale by Indemnitee of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto
or similar provisions of any federal, state or local statutory law;
(d) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest, or to
constitute willful misconduct;
(e) on account of Indemnitee's conduct which is the subject
of an action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of any action, claim or proceeding (other than
a proceeding referred to in Section 8(b) hereof) initiated by the Indemnitee
unless such action, claim or proceeding was authorized in the specific case
by action of the Board of Directors;
<PAGE>
(g) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both Corporation and Indemnitee have been advised that the
Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public
policy and is, therefore, unenforceable and that claims for indemnification
should be submitted to appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1
and 2 hereof is unavailable by reason of a Court decision described in
Section 3(g) hereof based on grounds other than any of those set forth in
paragraphs (b) through (f) of Section 3 hereof, then in respect of any
threatened, pending or completed action, suit or proceeding in which
Corporation is jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Indemnitee
in such proportion as is appropriate to reflect (i) the relative benefits
received by Corporation on the one hand and Indemnitee on the other hand from
the transaction from which such action suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Indemnitee on the other
in connection with the events which resulted in such expenses, judgments,
fines or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of Corporation on the one hand and of
Indemnitee on the other shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such
expenses, judgments, fines or settlement amounts. Corporation agrees that it
would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation
which does not take account of the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations
of Corporation contained herein shall continue during the period Indemnitee
is a director, officer, employee or agent of Corporation (or is or was
serving at the request of Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Indemnitee was a director and/or an
officer of Corporation or serving in any other capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Indemnitee of notice of the commencement of any action,
suit or proceeding, Indemnitee will, if a claim in respect thereof is to be
made against Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Indemnitee otherwise
<PAGE>
than under this Agreement. With respect to any such action, suit or
proceeding as to which Indemnitee notifies Corporation of the commencement
thereof:
(a) Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, to the extent that it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from Corporation to
Indemnitee of its election so as to assume the defense thereof, Corporation
will not be liable to Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by Indemnitee in connection with the defense
thereof other than reasonable costs of investigation or as other provided
below. Indemnitee shall have the right to employ its counsel in such action,
suit or proceeding but the fees and expenses of such counsel incurred after
notice from Corporation of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) the employment of counsel by Indemnitee
has been authorized by Corporation, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between Corporation and
Indemnitee in the conduct of the defense of such action or (iii) Corporation
shall not in fact have employed counsel to assume the defense of such action,
in each of which cases the fees and expenses of Indemnitee's separate counsel
shall be at the expense of Corporation. Corporation shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on behalf
of Corporation or as to which Indemnitee shall have made the conclusion
provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. Corporation shall be permitted
to settle any action except that it shall not settle any action or claim in
any manner which would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent. Neither Corporation nor Indemnitee will
unreasonably withhold its consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Indemnitee employs his own counsel
pursuant to Section 6(b)(i) through (iii) above, Corporation shall advance to
Indemnitee, prior to any final disposition of any threatened or pending
action, suit or proceeding, whether civil, criminal, administrative or
investigative, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding within ten (10) days after receiving copies of invoices presented
to Indemnitee for such expenses.
(b) Indemnitee agrees that Indemnitee will reimburse
Corporation for all reasonable expenses paid by Corporation in defending any
civil or criminal action, suit or
<PAGE>
proceeding against Indemnitee in the event and only to the extent it shall be
ultimately determined by a final judicial decision (from which there is no
right of appeal) that Indemnitee is not entitled, under the provisions of the
Bylaws, this Agreement, Colorado Law, or otherwise, to be indemnified by
Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be
required to advance such expenses to Indemnitee if Indemnitee (i) commences
any action, suit or proceeding as a plaintiff unless such advance is
specifically approved by a majority of the Board of Directors or (ii) is a
party to an action, suit or proceeding brought by Corporation and approved by
a majority of the Board which alleges willful misappropriation of corporate
assets by Indemnitee, disclosure of confidential information in violation of
Indemnitee's fiduciary or contractual obligations to Corporation, or any
other willful and deliberate breach in bad faith of Indemnitee's duty to
Corporation or its stockholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on
Corporation hereby in order to induce Indemnitee to continue as a director
and/or an officer of Corporation, and acknowledges that Indemnitee is relying
upon this Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action
to enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Indemnitee for all
Indemnitee's reasonable fees and expenses in bringing and pursuing such
action.
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary to secure such rights and to
enable Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee
by this Agreement shall not be exclusive of any other right which Indemnitee
may have or hereafter acquire under any statute, provision of Corporation's
Articles of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Indemnitee by
this Agreement shall continue after Indemnitee has ceased to be a director,
officer, employee or other agent of Corporation and shall inure to the
benefit of Indemnitee's heirs, executors and administrators.
<PAGE>
12. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
or all of the provisions hereof shall be held to be invalid or unenforceable
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation
of the Corporation to indemnify the Indemnitee to the full extent provided by
the Bylaws or the Act.
13. GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Colorado.
14. BINDING EFFECT. This Agreement shall be binding upon
Indemnitee and upon Corporation, its successors and assigns, and shall inure
to the benefit of Indemnitee, his heirs, personal representatives and assigns
and to the benefit of Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on and as of the day and year first above written.
UNICOMP, INC.
a Colorado corporation
By:
---------------------------
Print Name:
-------------------
Title:
------------------------
INDEMNITEE
-------------------------------
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARIES OF THE REGISTRANT INCORPORATION
<S> <C>
UniComp U.K. Holdings, Limited United Kingdom
ICS Computing Group Limited United Kingdom
CI Computer Software Limited United Kingdom
Unibol Limited United Kingdom
Computer Maintenance Ireland Limited United Kingdom
ICS Computing Limited United Kingdom
UniComp IOM Limited Isle of Man
Smoky Mountain Technologies, Inc. North Carolina
Arccom Management Systems, Inc. (d/b/a Unibol,
Inc.) Georgia
UniComp Systems, Inc. Texas
</TABLE>
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EXHIBIT 23.1
REPORT AND CONSENT OF INDEPENDENT ACCOUNTANTS
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REPORT AND CONSENT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the supplemental consolidated financial
statements of UniComp, Inc. and subsidiaries as of February 29, 1996 and
February 28, 1995, and for each of the three fiscal years in the period ended
February 29, 1996, which financial statements are included in the Prospectus, we
have also audited the financial statement schedule listed in Item 16(b) herein.
In our opinion, this financial statement schedule, 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
August 23. 1996
We consent to the inclusion in this registration statement on Form S-1 of
our report dated August 23, 1996, on our audits of the supplemental consolidated
financial statements and financial statement schedule of UniComp, Inc. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
September 16, 1996
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EXHIBIT 99.2
UNICOMP, INC. 1996 DIRECTOR INCENTIVE PLAN
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UNICOMP, INC.
1996 DIRECTOR INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. UniComp, Inc. a Colorado Corporation, hereby
establishes the "UniComp, Inc. 1996 Director Incentive Plan" (the "Plan")
for the benefit of its Nonemployee Directors. The Plan sets forth the
terms of initial and annual grants of Options to Nonemployee Directors,
and such grants are subject to the terms in this Plan.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to encourage
ownership in the Company by Nonemployee Directors, and to strengthen
the ability of the Company to attract and retain the services of
experienced and knowledgeable individuals as Nonemployee Directors of
the Company and to provide those individuals with a further incentive
to work for the best interests of the Company and its shareholders.
1.3 DURATION OF THE PLAN. The Plan is effective as of the date
approved by the Company's Board of Directors at its August 30th 1996
Board of directors meeting (the "Effective Date"). The Plan shall
remain in effect until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions, subject to
the right of the Board of Directors to terminate the Plan at any time
pursuant to Article 7 or Section 8.4. However, no Award may be granted
under the Plan on or after July 31, 2005.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. For purposes of the Plan, the following terms will have the
meanings set forth below:
(a) "Award" means a grant of Nonqualified Stock Options under the Plan.
.
(b) "Board" or "Board of Directors" mean the Board of Directors of the
Company, and includes any committee of the Board of Directors
designated by the Board to administer this Plan.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the committee appointed by the Board to administer
the Plan.
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(e) "Company" means UniComp, Inc. a Colorado Corporation, or any
successor as provided in Section 8.3.
(f) "Director" means any individual who is a member of the Board of
Directors of the Company.
(g) "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3). To the extent permitted pursuant
to Section 16 of the Exchange Act, Disability shall be determined
by the Board in good faith, upon receipt of sufficient competent
medical advice from one or more individuals, selected by the Board,
who are qualified to give professional medical advice.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor provision.
(i) "Fair Market Value" means with respect to Stock or any other
property, the fair market value of such Stock or other property as
determined by the Committee in its discretion, under one of the
following methods: (i) the average of closing bid and asked prices
for the Stock as reported on the NASDAQ National Market System (or
any other national securities exchange on which the Stock is then
listed) for that date or, if no prices are reported for that date,
such prices on the next proceeding date for which closing bid and
asked prices were reported; or (ii) the price as determined by such
methods or procedures as may be established from time to time by the
Committee.
(j) "Grant Date" means the date this Plan is adopted by the Board of
Directors at its August, 1996 meeting and thereafter March 1, 1997
and each anniversary of that date through and including March 1,
2005.
(k) "Nonemployee Director" means any individual who is a Director of the
Company, but who is not otherwise a common-law employee of the
Company.
(l) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 6, that is not intended to be an
incentive stock option qualifying under code Section 422.
(m) "Option" means a Nonqualified Stock Option granted under the Plan.
(n) "Participant" means a Nonemployee Director of the Company who has
been granted an Award under the Plan.
(o) "Person" shall have the meaning in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
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(p) "Shares" means the shares of common stock of the Company.
2.2 GENDER AND NUMBER. Except as indicated by the context, any masculine term
also shall include the feminine, the plural shall include the singular and
the singular shall include the plural.
2.3 SEVERABILITY. If any provision of the Plan is determined to be invalid
for any reason, the remaining portion of the Plan shall be construed and
enforced as if the invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan will be administered by the Committee, subject
to the restrictions set forth in the Plan.
3.2 ADMINISTRATION BY THE COMMITTEE. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner
that is consistent with the Plan's provisions. However, the Committee
does not have the power to (i) determine Plan eligibility, or to
determine the number, the price, the vesting period, or the timing of
Awards to be made under the Plan to any Participant, or (ii) take any
action that would result in the Awards not being treated as "formula
awards" within the meaning of rule 16b-3(c)(ii) of the Exchange Act or
any successor provision thereto.
3.3 DECISIONS BINDING. The Committee's determinations and decisions under
the Plan, and all related orders or resolutions of the Board shall be
final, conclusive, and binding on all persons, including the Company,
its stockholders, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. The total number of Shares available for grant under
the Plan may not exceed 150,000, subject to adjustment as provided in
Section 4.3. the Shares issued pursuant to Options exercised under the
Plan may be authorized and unissued Shares or Shares reacquired by the
Company, as determined by the Committee.
4.2 LAPSED AWARDS. If any Option granted under the Plan terminates, expires,
or lapses for any reason, any Shares subject to purchase pursuant to such
Option again will be available for grant under the Plan to the full extent
permitted under Section 16 of the Exchange Act.
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4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other
change in the corporate structure of the Company affecting the shares,
the number and/or type of Shares subject to any outstanding Award, and
the Option exercise price per Share under any outstanding Option will
be automatically adjusted so that the proportionate interests of the
Participants will be maintained as before the occurrence of such
event. Any adjustment pursuant to this Section 4.3 will be conclusive
and binding for all purposes of the Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in the Plan are limited to
Nonemployee Directors.
5.2 ACTUAL PARTICIPATION. All eligible Nonemployee Directors will receive
grants of Options pursuant to Article 6.
ARTICLE 6. INITIAL AND ANNUAL OPTION GRANTS
6.1 INITIAL GRANT OF OPTIONS. Each individual who first becomes a Nonemployee
Director on or after the Effective Date shall be granted an Option to
purchase up to 10,000 Shares as of the date the individual first becomes
a Nonemployee Director.
6.2 ANNUAL GRANT OF OPTIONS. Each individual who is a Nonemployee
Director on the relevant Grant Date shall be granted an Option to
purchase 5,000 Shares on each Grant Date, subject to the limitation on
the number of Shares that may be awarded under this Plan. The
specific terms of each annual Option grant is subject to the
provisions of this Article 6 and the Option Agreement executed
pursuant to Section 6.4.
6.3 EXERCISABILITY. Options granted at each Grant Date under this
Plan shall be deemed to be a separate grant. The Participant may
exercise all or part of each separate Option granted under this Plan
on or after the relevant Grant Date.
6.4 OPTION AGREEMENT. Each Option grant will be evidenced by an
Option Agreement that will not include any terms or conditions that
are inconsistent with the terms and conditions of this Plan.
6.5 OPTION PRICE. The exercise price per Share under an Option
granted pursuant to this Article 6 shall be equal to the Fair Market
Value of such share on the day before the relevant Grant Date or the
date upon which the individual first becomes a Nonemployee Director in
the case of options granted pursuant to Section 6.1 ("Option Price").
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6.6 DURATION OF OPTIONS. Each Option granted under this Article 6
shall expire on the tenth (10th) anniversary date of its grant unless
the Option is earlier terminated, forfeited, or surrendered pursuant
to a provision of this Plan or the applicable Option Agreement.
6.7 PAYMENT. Options are exercised by delivering a written notice
of exercise to the Secretary of the Company, setting forth the number
of Shares to be exercised, accompanied by full payment for the Shares.
The Option Price is payable:
(a) in cash or its equivalent; or
(b) by tendering previously acquired Shares having a Fair Market Value
at the time of exercise equal to the total Option Price (provided
that the Shares tendered upon Option exercise have been held by the
Participant for at least six (6) months prior to their tender to
satisfy the Option Price); or
(c) by a combination of (a) and (b).
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased pursuant
to the exercise of the Option.
6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. To the extent necessary
to ensure that Options granted under this Article 6 comply with
applicable law, the Board shall impose restrictions on any shares
acquired pursuant to the exercise of an Option under this Article 6,
including, without limitation, restrictions under applicable Federal
securities laws, under the requirements of any Stock exchange or
market upon which such Shares are then listed and/or traded, and under
any blue sky or state securities laws applicable to such Shares.
6.9 TERMINATION OF SERVICE ON BOARD OF DIRECTRS DUE TO DEATH OR
DISABILITY. If a participant's service on the Board is terminated by
reason of death or Disability, the Option will remain exercisable at
any time prior to its expiration date, or for one (1) year after the
date of death or Disability, whichever period is shorter, by the
Participant or such person or persons as shall have been named as the
Participant's legal representative or beneficiary, or by such persons
that have acquired the Participant's rights under the Option by will
or by the laws of descent and distribution.
6.10 TERMINATION OF SERVICE ON BOARD OF DIRECTORS FOR OTHER REASONS.
If the Participant's service on the Board is terminated for any reason
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other than for death or Disability, any outstanding Options held by
the Participant will remain exercisable for thirty (30) days after the
date the Participant's service on the Board terminates.
6.11 NONTRANSFERABILITY OF OPTIONS. No Option granted under this
Article 6 may be sold, transferred, pledged, assigned, or otherwise
alienated, other than by will, or by the laws of descent and
distribution. Further, all Options granted to a participant under this
Article 6 shall be exercisable during his or her lifetime only by such
Participant.
ARTICLE 7. AMENDMENT, MODIFICATION, AND TERMINATION
7.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms
set forth in this Section 7.1, the Board of Directors may terminate,
amend, or modify the Plan at any time; However, Plan provisions
relating to the amount, price, and timing of securities to be awarded
under the Plan may not be amended more than once every six (6) months.
7.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no
termination, amendment, or modification of the Plan shall in any
manner adversely affect any Award previously granted under the Plan,
without the written consent of the Participant holding the Award.
ARTICLE 8. MISCELLANEOUS
8.1 INDEMNIFICATION. Each individual who is or was a member of the
Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be party
or in which he or she may be involved by reason of any action taken or
failure to act under this Plan and from any and all amounts paid by
him or her in settlement thereof, with the Company's approval, or paid
by him or her in satisfaction of any judgment in any such action,
suit, or proceeding against him or her, provided he or she shall give
the company an opportunity, at its own expense, to assume and defend
the same before he or she undertakes to defend it on his or her own
behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be
entitled under the Company's Certificate of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
8.2 BENEFICIARY DESIGNATION. Each Participant under the Plan may
name any beneficiary or beneficiaries to whom any benefit under the
Plan is to be paid in the event of his or her death. Each designation
will revoke all prior designations by the
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same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with
the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
8.3 SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor
to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the
Company.
8.4 REQUIREMENTS OF LAW. The granting of Awards under the Plan
shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities
exchanges as may be required. Notwithstanding any other provision of
the Plan, the Board of Directors may, at its sole discretion,
terminate, amend, or modify the Plan in any way necessary to comply
with applicable requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission as interpreted pursuant to
no-action letters and interpretive releases.
8.5 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Colorado.
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