<PAGE>
As filed with the Securities and Exchange Commission on December 12, 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
--------------
RADIANT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 7373 11-2749765
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
1000 ALDERMAN DRIVE, SUITE A
ALPHARETTA, GEORGIA 30202
(770) 772-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN H. HEYMAN
EXECUTIVE VICE PRESIDENT
RADIANT SYSTEMS, INC.
1000 ALDERMAN DRIVE, SUITE A
ALPHARETTA, GEORGIA 30202
(770) 772-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<CAPTION>
ARTHUR JAY SCHWARTZ, ESQ. WILLIAM H. AVERY, ESQ.
<S> <C>
SMITH, GAMBRELL & RUSSELL, LLP ALSTON & BIRD
SUITE 1800 ONE ATLANTIC CENTER
3343 PEACHTREE ROAD, N.E. 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30326 ATLANTA, GEORGIA 30309
(404) 264-2620 (404) 881-7000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, no par value....... $40,710,000 $12,337
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</TABLE>
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(1) Includes 442,500 shares that may be sold by the Company and certain
selling shareholders upon exercise of the Underwriters' over-allotment
option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL 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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Subject to Completion
December 12, 1996
2,950,000 Shares
[LOGO APPEARS HERE]
Common Stock
--------
Of the 2,950,000 shares of Common Stock being offered hereby, 2,500,000
shares are being sold by Radiant Systems, Inc. ("Radiant" or the "Company") and
450,000 shares are being sold by certain shareholders of the Company (the
"Selling Shareholders"). See "Principal and Selling Shareholders." The Company
will not receive any proceeds from the sale of shares by the Selling
Shareholders. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $10.00 and $12.00 per share. See "Underwriting"
for the factors to be considered in determining the initial public offering
price. The Company will apply for listing of the Common Stock on the Nasdaq
National Market under the trading symbol "RADS."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
--------
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>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDERS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(2).......................... $ $ $ $
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</TABLE>
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(1) Before deducting expenses of the offering payable by the Company estimated
at $500,000.
(2) The Company and certain of its shareholders have granted the Underwriters a
30-day option to purchase up to 442,500 additional shares of Common Stock
solely to cover over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares at the Price
to Public shown above. If the option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Shareholders will be $ , $ ,
$ and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
The Robinson-Humphrey
Company, Inc.
THE DATE OF THIS PROSPECTUS IS , 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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>
DESCRIPTION OF RADIANT SYSTEMS, INC.
INSIDE FRONT COVER DIAGRAM
TITLE: The Radiant Solution
STRUCTURE: Diagram mapping the flow of information created by deploying the
Company's technology solution. The diagram begins with a depiction
of a consumer initiating a transaction at the Company's consumer-
activated system, which transmits data to a point of sale system,
which in turn is connected to a back office management system. The
back office system periodically transmits data to the Company's
headquarters management system, which has the capability to
communicate electronically with user's vendors and suppliers.
Each stage is depicted by a disc with a stylized picture of the
relevant device or object (a PC for back office systems, a
headquarters building for headquarters management systems, etc.).
Arrows connect those components of the system having direct, online
connections while jagged lines depict nonreal time, batch
connections. The discs are arranged in a semicircle with stylized
pictures of businesspeople in the center, representing the Company's
consulting and implementation services, connected with each disc
with a dotted line.
SUPPORTING
TEXT: "The Company offers a series of fully integrated, software-based
retail automation products that comprise the Radiant solution. The
Radiant solution enables retailers to interact electronically with
consumers, capture data at the point of sale, manage site operations
and logistics and communicate electronically with their sites,
vendors and credit networks. The Radiant solution can be deployed on
an enterprise-wide basis."
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent auditors and will make available copies of quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY 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.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and combined financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Except as otherwise specified herein, all information in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option
and (ii) reflects the conversion of all outstanding shares of non-voting Class
A Common Stock into an equal number of shares of Common Stock simultaneously
with the completion of this offering. See "Description of Capital Stock."
THE COMPANY
Radiant Systems, Inc. ("Radiant" or the "Company") provides enterprise-wide
technology solutions to selected vertical markets within the retail industry.
The Company offers fully integrated retail automation solutions including point
of sale ("POS") systems, consumer-activated ordering systems, back office
management systems and headquarters-based management systems. The Company's
products enable retailers to interact electronically with consumers, capture
data at the point of sale, manage site operations and logistics and communicate
electronically with their sites, vendors and credit networks. In addition, the
Company offers systems planning, design and implementation services that tailor
the automation solution to each retailer's specifications. The Company believes
that its site solutions are easy to implement, typically requiring less than a
week to install and a few hours to train individual users.
Radiant is currently a leading provider of integrated retail automation
solutions to the convenience store market and has a growing presence in the
entertainment market through its PrysmTech joint venture. In addition, the
Company intends to expand its presence in the quick service restaurant ("QSR")
market in 1997. Since these markets require many of the same product features
and functionality, the Company believes it can leverage its existing technology
across these markets with limited incremental product development efforts.
In the convenience store market, the Company offers a fully integrated retail
automation solution, including the site-based Compu-Touch product, an
integrated point of sale and back office solution; OrderPoint, a consumer-
activated ordering system with multimedia capabilities; and Core-Tech, a
headquarters-based, enterprise-wide management system. In the entertainment
market, the Company markets an integrated site-based solution through its
PrysmTech joint venture. This solution includes BoxMan, a box-office POS
system; ConcMan, a concession stand POS system; OrderPoint, a consumer-
activated ticket and concession management and ordering system; and OfficeMan,
a back office solution. Radiant expects to introduce its headquarters-based
Core-Tech enterprise-wide management system to the entertainment market in
1997. To accelerate its entry into the QSR market, Radiant acquired a company
with a limited product offering in May 1996. The Company is developing a new
suite of products for this market using its core technologies and its recently
introduced Radiant platform. This platform allows multiple multimedia software
applications to operate on separate terminals simultaneously, all driven by a
single PC. As of December 1, 1996, the Company had installed its products in
over 2,200 sites and had over 50 customers in its various vertical markets,
including Conoco, Inc., Ultramar Diamond Shamrock Corporation, Dillon
Companies, Inc., Emro Marketing Company (Speedway/Starvin' Marvin), Sheetz,
Inc., Regal Cinemas, Loews Theatre Management Corporation and Wawa, Inc.
The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the vertical markets it serves. To this
end, the Company introduced several new solutions in 1996, including
OrderPoint, Core-Tech, a Windows NT version of Compu-Touch and Radiant, a
multimedia networking platform. In addition, the Company has expanded its
direct sales effort during the last twelve months and intends to further expand
this effort in 1997.
3
<PAGE>
The Company originally was organized under the laws of the state of New York
on August 1, 1985, and subsequently reincorporated under the laws of the state
of Georgia on October 27, 1995. The reincorporation was effected through a
merger of the New York corporation with and into the Georgia corporation. The
name of the Company was changed to Radiant Systems, Inc. from Softsense
Computer Products, Inc. on November 13, 1996. Since its inception, the Company
has elected to be treated as a corporation subject to taxation under Subchapter
S of the Internal Revenue Code of 1986, as amended. The Company's S Corporation
status, however, will terminate upon completion of this offering. The Company's
principal executive offices are located at 1000 Alderman Drive, Suite A,
Alpharetta, Georgia 30202, and its telephone number is (770) 772-3000.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company........... 2,500,000 shares
Common Stock offered by the Selling Sharehold-
ers.......................................... 450,000 shares
Common Stock to be outstanding after the of-
fering....................................... 10,983,701 shares(1)
Use of proceeds............................... Repayment of indebtedness,
repurchase of outstanding
shares of Common Stock and
general corporate purposes,
including working capital.
Proposed Nasdaq National Market symbol........ RADS
</TABLE>
- --------
(1) Excludes (i) 2,819,750 shares of Common Stock issuable upon the exercise of
stock options outstanding as of December 1, 1996, of which options to
purchase 292,500 shares were exercisable, (ii) 20,000 shares of Common
Stock issuable upon the exercise of stock purchase warrants to be
outstanding upon completion of this offering, and (iii) 781,851 shares of
Common Stock which will be repurchased by the Company with the proceeds of
this offering, some of which are the result of the exercise of certain
warrants. See "Management--Stock Option Plan," "Underwriting" and "Use of
Proceeds."
4
<PAGE>
SUMMARY COMBINED AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS PRO FORMA
ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, SEPTEMBER 30, ENDED
-------------------------------------- --------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996 1996(1)
------ ------ ------ ------- ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Systems sales.......... $ 686 $1,079 $3,748 $13,529 $14,078 $9,447 $17,472 $23,343
Customer support,
maintenance and other
services.............. 361 412 552 919 1,804 1,366 2,514 3,243
------ ------ ------ ------- ------- ------ ------- -------
Total revenues.......... 1,047 1,491 4,300 14,448 15,882 10,813 19,986 26,586
Cost of revenues:
Systems sales.......... 332 462 2,307 9,459 9,863 6,769 10,602 14,546
Customer support,
maintenance and other
services.............. 279 366 588 1,208 2,300 1,660 3,644 3,867
------ ------ ------ ------- ------- ------ ------- -------
Total cost of revenues.. 611 828 2,895 10,667 12,163 8,429 14,246 18,413
------ ------ ------ ------- ------- ------ ------- -------
Gross profit............ 436 663 1,405 3,781 3,719 2,384 5,740 8,173
Income (loss) from
operations
before purchased
research
and development costs.. (75) 26 547 (94) (2,101) (1,777) (632) 374
Income (loss) from
operations............. (75) 26 547 (94) (2,101) (1,777) (662) 344
Interest expense, net... -- 3 19 82 166 83 305 496
Other (income).......... -- -- -- -- (406) (374) (572) (35)
------ ------ ------ ------- ------- ------ ------- -------
Income (loss) before
provision
for income taxes....... (75) 23 528 (176) (1,861) (1,486) (395) (117)
Pro forma income tax
provision
(benefit)(2)........... (27) 11 206 (61) (709) (566) (146) (46)
------ ------ ------ ------- ------- ------ ------- -------
Pro forma net income
(loss)................. $ (48) $ 12 $ 322 $ (115) $(1,152) $ (920) $ (249) $ (71)
====== ====== ====== ======= ======= ====== ======= =======
Pro forma net income
(loss) per common and
common equivalent
share(3)............... $ (0.10) $ (0.02) $ (0.01)
======= ======= =======
Weighted average common
and
common equivalent
shares
outstanding............ 11,595 11,187 11,587
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ (555) $17,076
Total assets .......................................... 10,014 27,302
Long-term debt and shareholder loan,
including current portion ............................ 5,898 733
Shareholders' equity (deficit)......................... (3,489) 20,490
</TABLE>
5
<PAGE>
- --------
(1) The pro forma statement of operations data for the nine months ended
September 30, 1996 gives effect to the proposed acquisition of PrysmTech,
L.L.C. ("PrysmTech") as if such acquisition occurred on January 1, 1996.
See "Pro Forma Financial Information."
(2) As a result of its election to be treated as an S Corporation for income
tax purposes, the Company has not been subject to federal or state income
taxes. Pro forma net income amounts include additional provisions for
income taxes determined by applying the Company's anticipated statutory tax
rate to pretax income (loss), adjusted for permanent tax differences.
(3) Pro forma net income (loss) per share is computed by dividing pro forma net
income (loss) available to common shareholders by weighted average shares
outstanding. Supplementary pro forma net income (loss) per share (resulting
from the anticipated repayment of borrowings with a portion of the proceeds
of this offering as indicated in "Use of Proceeds") is $(0.10) for the year
ended December 31, 1995 and $(0.01) for the nine months ended September 30,
1996.
(4) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $11.00
per share and the exercise of outstanding warrants to purchase 1,265,551
shares of Common Stock, which will occur prior to the closing of this
offering, for an aggregate exercise price of $962,000, after deducting
estimated underwriting discounts and offering expenses and the application
of the net proceeds therefrom (other than repayment of the proposed
PrysmTech note, which was not outstanding at September 30, 1996). See "Use
of Proceeds."
Softsense(R), Compu-Touch(R) and OrderPoint(R) are registered trademarks
of the Company. The Company has applied for registration of its SoftsenseTM
design, Core-TechTM and RadiantTM and design trademarks. The following
trademarks and tradenames used in this Prospectus are the property of
owners other than the Company: Smile Gas, Speedway/Starvin' Marvin,
Panasonic, Novell, Microsoft SQL Server, Windows NT, PowerBuilder and
Pizzeria Uno.
6
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the shares of Common Stock offered by this Prospectus.
History of Operating Losses; Accumulated Deficit. As of September 30, 1996,
the Company had an accumulated deficit of $3.7 million. For the nine months
ended September 30, 1996 and for fiscal years 1995 and 1994, the Company
incurred net losses of $249,000, $1.2 million and $115,000, respectively.
There can be no assurance that the Company will be able to achieve
profitability for fiscal 1996 and, if achieved, will sustain such
profitability. The Company anticipates that completing its products under
development and marketing existing products and new releases will require
substantial expenditures. Accordingly, an investment in the Common Stock is
extremely speculative in nature and involves a high degree of risk. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Growth. The growth in the size and complexity of the Company's
business and the expansion of its product lines and its customer base will
place a significant strain on the Company's management and operations. An
increase in the demand for the Company's products could strain the Company's
resources or result in delivery problems, delayed software commitments, slow
response time, or insufficient resources for assisting customers with
implementation of the Company's products and services, which could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company anticipates that continued growth, if any,
will require it to recruit, hire and assimilate a substantial number of new
employees, including consulting, product development, sales and marketing
personnel. Since September 1995, the Company has hired a new President and
Chief Operating Officer, a new Chief Financial Officer and several other
members of senior management. There can be no assurance that the new
management can effectively manage the Company's operations.
The Company's ability to compete effectively and to manage future growth, if
any, also will depend on its ability to continue to implement and improve
operational, financial and management information systems on a timely basis
and to expand, train, motivate and manage its work force, particularly its
direct sales force and consulting services organization. There can be no
assurance that the Company will be able to manage any future growth, and any
failure to do so could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company's ability to undertake new projects and increase revenues is
dependent on the availability of the Company's personnel to assist in the
development and implementation of the Company's technology solutions. The
Company currently is attempting to increase consulting capacity in
anticipation of future sales. Should the Company increase its consulting
capacity and such sales fail to materialize, the Company's business, operating
results and financial condition would be adversely affected.
Fluctuations in Quarterly Operating Results. The Company has experienced and
expects to continue to experience quarterly fluctuations in its operating
results. The Company's recent revenue growth should not be taken as indicative
of the rate of revenue growth, if any, that can be expected in the future. The
Company believes that period-to-period comparisons of its operating results
are not meaningful and that the results for any period should not be relied
upon as an indication of future performance. Moreover, a significant portion
of the Company's quarterly revenues has been derived from a limited number of
customers in the convenience store market. The Company currently anticipates
that this trend will continue. Any significant cancellation or deferral of
customer orders could have a material adverse effect on the Company's
operating results in any particular quarter.
The introduction of new research and development projects requires the
Company to significantly increase its operating expenses to fund greater
levels of product development and to develop and commercialize additional
products and services. To the extent that such expenses precede or are not
subsequently followed by increased revenues, the Company's business, results
of operations and financial condition will be materially and adversely
affected.
7
<PAGE>
The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside the Company's
control. These factors include the level of usage of computer-based and
consumer-activated products and services, the size and timing of individual
customer orders, the introduction of new products or services by the Company
or its competitors, pricing changes in the industry, technical difficulties
with respect to the use of computer-based products and services developed by
the Company, general economic conditions and economic conditions specific to
the computer, convenience store, entertainment and QSR markets. As a strategic
response to changes in the competitive environment, the Company may from time
to time make certain pricing, service or marketing decisions or acquisitions
that could have a material adverse effect on the Company's business, results
of operations and financial condition.
Due to all of the foregoing factors, in some future quarters the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock
would likely be materially and adversely affected.
Industry Concentration and Cyclicality. All of the Company's total revenues
in 1995 and approximately 74.7% of the Company's total pro forma revenues in
the first nine months of 1996 were related to the convenience store market,
which is dependent on the domestic and international economy. The convenience
store market is affected by a variety of factors, including global and
regional instability, governmental policy and regulation, natural disasters,
consumer buying habits, consolidation in the petroleum industry, war and
general economic conditions. Adverse developments in the convenience store
market could materially affect the Company's business, operating results and
financial condition. In addition, the Company believes the purchase of its
products is relatively discretionary and generally involves a significant
commitment of capital, because purchases of the Company's products are often
accompanied by large scale hardware purchases. As a result, although the
Company believes its products can assist convenience stores in a competitive
environment, demand for the Company's products and services could be
disproportionately affected by instability or downturns in the convenience
store market which may cause customers to exit the industry or delay, cancel
or reduce planned expenditures for information management systems and software
products.
Concentration of Customers. The Company sells systems and services to a
number of major customers. During the first nine months of 1996, approximately
62.9% of the Company's total revenues were derived from four customers. During
1995 and 1994, approximately 59.4% and 75.9%, respectively, of the Company's
total revenues were derived from two customers. There can be no assurance that
the loss of one or more of these customers will not have a material adverse
effect on the Company's business, operating results and financial condition.
New Product Development and Rapid Technological Change. The Company
periodically introduces new products in order to remain competitive. The
Company and its prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in the rapidly evolving
market for computer-based products and services. To address these risks, the
Company must, among other things, continue to respond to competitive
developments; attract, retain and motivate qualified personnel; implement and
successfully execute its sales strategy; develop and market additional
products and services in present and future markets; upgrade its technologies
and commercialize products and services incorporating such technologies. There
can be no assurance that the Company will be successful in addressing such
risks.
The types of products sold by the Company are subject to rapid and continual
technological change. Products available from the Company, as well as from its
competitors, have increasingly offered a wider range of features and
capabilities. The Company believes that in order to compete effectively in
selected vertical markets, it must provide compatible systems incorporating
new technologies at competitive prices. There can be no assurance that the
Company will be able to continue funding research and
8
<PAGE>
development at levels sufficient to enhance its current product offerings or
will be able to develop and introduce on a timely basis new products that keep
pace with technological developments and emerging industry standards and
address the evolving needs of customers. There can also be no assurance that
the Company will not experience difficulties that will result in delaying or
preventing the successful development, introduction and marketing of new
products in its existing markets or that its new products and product
enhancements will adequately meet the requirements of the marketplace or
achieve any significant degree of market acceptance. Likewise, there can be no
assurance as to the acceptance of Company products in new markets, nor can
there be any assurance as to the success of the Company's penetration of these
markets, or to the revenue or profit margins with respect to these products.
The inability of the Company, for any reason, to develop and introduce new
products and product enhancements in a timely manner in response to changing
market conditions or customer requirements could materially adversely affect
the Company's business, operating results and financial condition. See
"Business--Product Development and Radiant Technology."
In addition, the Company strives to achieve compatibility between the
Company's products and retail systems the Company believes are or will become
popular and widely adopted. The Company invests substantial resources in
development efforts aimed at achieving such compatibility. Any failure by the
Company to anticipate or respond adequately to technology or market
developments could materially adversely affect the Company's business,
operating results and financial condition.
Competition. The market for retail information systems is intensely
competitive. The Company believes the principal competitive factors in such
market are product quality, reliability, performance and price, vendor and
product reputation, financial stability, features and functions, ease of use
and quality of support. A number of companies offer competitive products
addressing certain of the Company's target markets. The Company competes with
in-house systems developed by the Company's targeted customers and with third-
party suppliers such as Dresser Industries, Inc., Gilbarco, Inc.,
International Business Machines Corporation, NCR Corporation, Matsushita
Electric Corporation of America (Panasonic), JDA Software Group, Inc. and
Tandem Computers, Inc., among others. In addition, the Company believes that
new market entrants may attempt to develop fully integrated systems targeting
the retail industry. In the market for consulting services, the Company
competes with the consulting divisions of the big six accounting firms,
Electronic Data Systems, Inc. and other systems integrators. Many of the
Company's existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical and marketing
resources than the Company. There can be no assurance that the Company will be
able to compete successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's business,
operating results and financial condition. See "Business--Company Operations--
Convenience Store Market--Competition," "--Entertainment Market--Competition"
and "--Quick Service Restaurant Market."
Dependence on Key Personnel; Ability to Attract and Retain Technical
Personnel. The Company's future success depends in part on the performance of
its executive officers and key employees. The Company does not have in place
employment agreements with any of its executive officers. The Company
maintains a $1.0 million "key person" life insurance policy on each of Erez
Goren and Alon Goren, the Chief Executive Officer and Chief Technical Officer,
respectively, of the Company. The loss of the services of any of its executive
officers or other key employees could have a material adverse effect on the
business, operating results and financial condition of the Company.
The Company is heavily dependent upon its ability to attract, retain and
motivate skilled technical and managerial personnel, especially highly skilled
engineers involved in ongoing product development and consulting personnel who
assist in the development and implementation of the Company's total business
solutions. The market for such individuals is intensely competitive. Due to
the critical role of the Company's product development and consulting staffs,
the inability to recruit successfully or the loss of a
9
<PAGE>
significant part of its product development or consulting staffs would have a
material adverse effect on the Company. The software industry is characterized
by a high level of employee mobility and aggressive recruiting of skilled
personnel. There can be no assurance that the Company will be able to retain
its current personnel, or that it will be able to attract, assimilate or
retain other highly qualified technical and managerial personnel in the
future. The inability to attract, hire or retain the necessary technical and
managerial personnel could have a material adverse effect upon the Company's
business, operating results and financial condition. See "Business --
Employees" and "Management."
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its ability to protect its proprietary
technology. The Company relies on a combination of patent, copyright and trade
secret laws and non-disclosure agreements to protect this proprietary
technology. The Company enters into confidentiality and non-compete agreements
with its employees and license agreements with its customers and potential
customers which limits access to and distribution of its software,
documentation and other proprietary information. There can be no assurance
that the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. 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.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. The
termination of any such licenses, or the failure of the third-party licensors
to adequately maintain or update their products, could result in delay in the
Company's ability to ship certain of its products while it seeks to implement
technology offered by alternative sources, and any required replacement
licenses could prove costly. While it may be necessary or desirable in the
future to obtain other licenses relating to one or more of the Company's
products or relating to current or future technologies, there can be no
assurance that the Company will be able to do so on commercially reasonable
terms or at all. See "Business -- Proprietary Rights."
Control by Management. Upon completion of the offering, Erez Goren, the
Company's Co-Chairman and Chief Executive Officer, and Alon Goren, the
Company's Co-Chairman and Chief Technical Officer, will collectively own
approximately 62.4% of the Common Stock then outstanding (approximately 59.4%
if the Underwriters' over-allotment option is exercised in full).
Consequently, together they will continue to be able to elect the Company's
directors, to determine the outcome of most corporate actions requiring
shareholder approval and otherwise to control the business of the Company. See
"Principal and Selling Shareholders."
Broad Discretion over Use of Proceeds. Approximately 57.1% of the net
proceeds to the Company of this offering ($14.3 million) are allocated to
general corporate purposes, including product development and working capital.
The Company's management will have broad discretion over the application of
these funds. There can be no assurance that management will make such
application effectively or in a manner that will not result in a material
adverse effect on the Company or its results of operations. See "Use of
Proceeds."
Absence of Prior Public Market; Dilution. Prior to this offering, there has
been no public market for shares of the Company's Common Stock. Although the
Company intends to apply for listing of the Common Stock on the Nasdaq
National Market, there can be no assurance that an active trading market for
the Common Stock will develop or continue after the offering. The initial
offering price of the Common Stock will be determined by negotiations among
the Company, the Selling Shareholders and the Underwriters based on several
factors and may not be indicative of the market price for the Common Stock
after this offering. See "Underwriting." Investors in the offering will
experience immediate and substantial dilution of the net tangible book value
of the Common Stock, and current shareholders will receive a material increase
in the net tangible book value of their shares of Common Stock. See
"Dilution."
10
<PAGE>
Shares Eligible for Future Sale; Registration Rights. Upon completion of
this offering, the Company will have 10,983,701 shares of Common Stock
outstanding, assuming no exercise of the Underwriters' over-allotment option
and the repurchase of certain outstanding shares of Common Stock as set forth
in "Use of Proceeds." Of these shares, 2,950,000 shares offered hereby will be
eligible for sale in the open market without restriction. All of the remaining
8,033,701 shares of Common Stock are "restricted securities" as that term is
defined in Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). Of these restricted securities, approximately
7,199,968 shares will be eligible for sale in the public market 90 days
following the date of this Prospectus pursuant to Rule 144. Additional shares
of Common Stock, including shares issuable upon exercise of options and
warrants, will also become eligible for sale in the public market pursuant to
Rule 144 from time to time. The Company and its directors, executive officers
and current shareholders have agreed, however, not to sell any of their shares
of Common Stock (other than the shares to be sold by the Company and the
Selling Shareholders in this offering) for a period of 180 days from the date
of this Prospectus without the prior written consent of the Underwriters.
Following this offering, sales and potential sales of substantial amounts of
the Company's Common Stock in the public market pursuant to Rule 144 or
otherwise could adversely affect the prevailing market prices for the Common
Stock and impair the Company's ability to raise additional capital through the
sale of equity securities. See "Principal and Selling Shareholders,"
"Description of Capital Stock," "Shares Eligible for Future Sale" and
"Underwriting."
Upon the completion of this offering, the holder of 43,638 shares of Common
Stock will be entitled to certain piggyback registration rights with respect
to such shares. If the Company were required to include in a Company-initiated
registration shares held by such holder pursuant to the exercise of its
piggyback registration rights, such sale might have an adverse effect on the
Company's ability to raise needed capital in the capital markets at a time and
price favorable to the Company. See "Description of Capital Stock" and "Shares
Eligible for Future Sale."
Volatility of Market Price for Common Stock. From time to time after this
offering there may be significant volatility in the market price for the
Common Stock. Quarterly operating results of the Company or of other companies
participating in the computer-based products and services industry, changes in
conditions in the economy, the financial markets of the computer products and
services industries, natural disasters or other developments affecting the
Company or its competitors could cause the market price of the Common Stock to
fluctuate substantially.
Anti-Takeover Provisions. The Company will amend its Articles of
Incorporation to authorize the Board of Directors to issue up to 5,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of the preferred stock without further
vote or action by the Company's stockholders. 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. While
the Company has no present intention to issue additional shares of preferred
stock, such issuance, while providing desired flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. See "Description of Capital Stock--
Preferred Stock." In addition, certain current and proposed provisions of the
Company's Articles of Incorporation and Bylaws may discourage proposals or
bids to acquire the Company. This could limit the price that certain investors
might be willing to pay in the future for shares of Common Stock. The
Company's Articles of Incorporation will be amended to divide the Board of
Directors into three classes, as nearly equal in size as possible, with
staggered three-year terms. One class will be elected each year. The
classification of the Board of Directors could have the effect of making it
more difficult for a third party to acquire control of the Company. The
Company is also subject to certain provisions of the Georgia Business
Corporation Code which relate to business combinations with interested
shareholders. See "Description of Capital Stock--Certain Charter and Bylaw
Provisions."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company at an assumed initial public offering
price of $11.00 per share, are estimated to be approximately $25.1 million
after deducting the estimated underwriting discounts and offering expenses
payable by the Company. Additionally, prior to the closing of this offering
the Company will receive net proceeds of $962,000 from the exercise of
outstanding stock purchase warrants. The Company will not receive any proceeds
from the sale of Common Stock by the Selling Shareholders.
The Company anticipates that the net proceeds of the offering will be used
(i) to repay all of the Company's outstanding debt to Sirrom Capital
Corporation (approximately $4.5 million at December 1, 1996) (the "Sirrom
Debt"), (ii) to repay debt to be incurred in connection with the proposed
acquisition of PrysmTech ($3.0 million) (the "PrysmTech Debt"), (iii) to repay
an outstanding note to Emro Marketing Company, a customer of the Company
(approximately $873,000 at December 1, 1996) (the "Emro Note"), (iv) to repay
an outstanding note to Lawrence D. Parker, a shareholder of the Company (the
"Shareholder Note") (approximately $184,000 at December 1, 1996), (v) to
repurchase 781,851 shares of Common Stock for a total of approximately $2.2
million from two shareholders from whom the Company has a right of repurchase
at a substantial discount to the initial public offering price and (vi) for
general corporate purposes, including research and development, sales and
marketing, possible strategic acquisitions and the increased working capital
requirements of the Company generated by its growth.
The Sirrom Debt was incurred to finance working capital requirements
resulting from the Company's growth. The Sirrom Debt bears interest at a fixed
rate of 14.0% and is payable in monthly installments of accrued interest to
maturity (due June 2001 with respect to $3.0 million of the original principal
amount and due September 2001 with respect to $1.5 million of the original
principal amount). The PrysmTech Debt will be incurred in connection with the
acquisition of PrysmTech in December 1996, will bear interest at a rate of
8.5% and will be due December 1998. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources." The Shareholder Note was incurred in October 1994 to repurchase a
portion of Mr. Parker's equity interest in the Company, bears interest at a
rate of 8.0% and is payable in equal monthly installments through December
1997. The Emro Note bears interest at a rate of 6.0% and is due February 2002.
See "Certain Transactions."
The Company has no current specific plan for the remaining estimated net
offering proceeds of approximately $14.3 million. The Company is raising such
monies at this time in order to increase the Company's working and equity
capital, to create a market for the Company's Common Stock, to facilitate
future access by the Company to public equity markets, to enhance the
Company's public image and credibility to support its marketing efforts,
particularly with current and potential future strategic partners, and for
general corporate purposes. Such general corporate purposes include the
funding of the support of the Company's sales and marketing efforts, funding
the development and enhancement of the Company's services and technology and
expanding customer support operations. The Company also may use a portion of
the net proceeds to acquire other businesses, technologies, services or
products complementary to the Company's current business, although the Company
currently has no agreements or understandings with respect to any acquisition,
and no portion of the net proceeds has been allocated to specific
acquisitions.
Pending such uses, the net proceeds of this offering will be invested in
short-term, interest-bearing investment grade securities.
DIVIDEND POLICY
The Company currently anticipates that all of its earnings will be retained
for development of the Company's business and does not anticipate paying any
cash dividends in the foreseeable future. The Sirrom Debt, which will be
repaid with the proceeds of this offering, contains restrictions on the
ability of the Company to pay dividends. Future cash dividends, if any, will
be at the discretion of the Company's Board of Directors and will depend upon,
among other things, the Company's future earnings, operations, capital
requirements and surplus, general financial condition, contractual
restrictions and such other factors as the Board of Directors may deem
relevant.
12
<PAGE>
CAPITALIZATION
The following table sets forth the actual indebtedness and capitalization of
the Company as of September 30, 1996 and as adjusted to reflect (i) the sale
by the Company of 2,500,000 shares of Common Stock offered hereby (at an
assumed initial public offering price of $11.00 per share) and the application
of the estimated net proceeds therefrom as described under "Use of Proceeds"
(other than repayment of the PrysmTech Debt, which was not outstanding at
September 30, 1996) and (ii) the issuance of 1,265,551 shares of Common Stock
upon the exercise of outstanding stock purchase warrants and the receipt by
the Company of net proceeds therefrom of $962,000. See "Principal and Selling
Shareholders." The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Company's combined financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and shareholder loan... $ 721 $ 380
------- -------
Long-term debt and shareholder loan...................... $ 5,187 $ 353
Shareholders' equity:
Common stock, no par value per share, 30,000,000 shares
authorized, 8,000,001 shares issued and outstanding;
10,983,701 shares issued and outstanding, as adjusted
(1)(2)................................................. 0 25
Additional paid-in capital.............................. -- 24,126(3)
Warrants................................................ 359 40
Deferred sales discount................................. (147) --
Accumulated deficit..................................... (3,701) (3,701)
------- -------
Total shareholders' equity (deficit).................. (3,489) 20,490
------- -------
Total capitalization................................. $ 1,698 $20,843
======= =======
</TABLE>
- --------
(1) Actual and as adjusted shares issued and outstanding exclude (i) an
aggregate of 3,000,000 shares of Common Stock reserved for issuance under
the Company's 1995 Incentive Stock Option Plan, of which 2,455,750 shares
were subject to outstanding incentive stock options as of September 30,
1996, and (ii) 264,000 shares of Common Stock issuable upon the exercise
of non-qualified stock options which were outstanding on September 30,
1996. Actual shares issued and outstanding exclude 1,285,551 shares of
Common Stock issuable upon the exercise of stock purchase warrants which
were outstanding on September 30, 1996. Options to purchase 270,300 shares
of Common Stock were exercisable as of September 30, 1996. See "Management
- Stock Option Plan" and Note 8 to the combined financial statements of
the Company.
(2) Issued and outstanding shares, as adjusted, includes 174,642 shares of
Common Stock issuable upon the exercise of stock purchase warrants which
will be exercised by Sirrom Capital Corporation prior to the completion of
this offering and 909,091 shares of Common Stock issuable upon the
exercise of stock purchase warrants which will be exercised by Emro
Marketing Company prior to the completion of this offering. See "Principal
and Selling Shareholders." Issued and outstanding shares, as adjusted
excludes 781,851 shares of Common Stock which will be repurchased by the
Company with the proceeds of this offering. See "Use of Proceeds."
(3) Includes $962,000 to be received upon the exercise of the stock purchase
warrants referenced in Note 2, above.
13
<PAGE>
DILUTION
The deficit in net tangible book value of the Company at September 30, 1996,
was approximately $4.3 million or $(0.53) per share of Common Stock. Net
tangible book value per share represents the amount of the Company's total
assets less intangible assets and total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to the sale
by the Company of 2,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share, the exercise of
outstanding stock purchase warrants to purchase 1,265,551 shares of Common
Stock (the "Warrants") and the repurchase by the Company of 781,851 shares of
Common Stock (the "Stock Repurchase"), the pro forma net tangible book value
of the Company at September 30, 1996 would have been $19.7 million or $1.79
per share of Common Stock. This represents an immediate increase in net
tangible book value of $2.32 per share to existing shareholders and an
immediate dilution in net tangible book value of $9.21 per share to investors
purchasing shares of Common Stock in this offering. The following table
illustrates the resulting per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Deficit in net tangible book value per share at September
30, 1996................................................... $(0.53)
Increase per share attributable to new investors........... 2.32
------
Pro forma net tangible book value per share after this
offering.................................................... 1.79
------
Net tangible book value dilution per share to new
investors................................................... $ 9.21
======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, the number of shares of Common Stock previously purchased from the
Company, giving effect to the exercise of the Warrants, the total
consideration paid and the average price per share paid to the Company by
existing stockholders and by new investors purchasing the shares of Common
Stock offered hereby, assuming an initial public offering price of $11.00 per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 9,265,552 78.8% $ 962,000 3.4% $ 0.10
New investors.............. 2,500,000 21.2 27,500,000 96.6 $11.00
---------- ----- ----------- -----
Total..................... 11,765,552 100.0% $28,462,000 100.0%
========== ===== =========== =====
</TABLE>
The sale of shares by the Selling Shareholders in this offering and the
Stock Repurchase will cause the pro forma number of shares held by all
existing shareholders of September 30, 1996 to be reduced to 8,033,701 shares,
or 73.1% of total shares of Common Stock to be outstanding after this
offering, and the pro forma number of shares held by new investors as of
September 30, 1996 to be 2,950,000 shares, or 26.9% of the total shares of
Common Stock to be outstanding after this offering. See "Principal and Selling
Shareholders."
The foregoing discussion and tables assume no exercise of stock options
outstanding on September 30, 1996. As of September 30, 1996, there were
options outstanding to purchase a total of 2,719,750 shares of Common Stock
(including options to purchase 264,000 shares issued outside of the 1995
Incentive Stock Option Plan) at a weighted average exercise price of $1.62 per
share and 544,250 additional shares were reserved for grant of future options
under the Company's 1995 Incentive Stock Option Plan. See "Management--Stock
Option Plan" and Note 8 to the Company's combined financial statements. In
addition, the foregoing discussion and tables assume no exercise of warrants
to purchase 20,000 shares of Common Stock, as such warrants will not be
exercised prior to the completion of this offering.
14
<PAGE>
SELECTED COMBINED AND PRO FORMA FINANCIAL DATA
The following table sets forth selected combined and pro forma financial
data of the Company for the periods indicated, which data has been derived
from the combined and pro forma financial statements of the Company. The
combined financial statements of the Company as of December 31, 1994 and 1995,
and for each of the years in the three-year period ended December 31, 1995,
have been audited by Arthur Andersen LLP, independent public accountants. The
selected combined financial data for the nine month periods ended September
30, 1995 and 1996 are derived from the unaudited combined financial statements
of the Company. The unaudited combined financial statements include all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial condition and
results of operations for these periods. Operating results for the nine months
ended September 30, 1996 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1996. This selected
combined financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
combined financial statements of the Company and the notes thereto, and the
pro forma financial data should be read in conjunction with the Pro Forma
Financial Information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS PRO FORMA
ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, SEPTEMBER 30, ENDED
------------------------------------- ---------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996 1996(1)
----- ------ ------ ------- ------- ------- ------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Systems sales.......... $ 686 $1,079 $3,748 $13,529 $14,078 $ 9,447 $17,472 $23,343
Customer support,
maintenance and other
services.............. 361 412 552 919 1,804 1,366 2,514 3,243
----- ------ ------ ------- ------- ------- ------- -------
Total revenues........ 1,047 1,491 4,300 14,448 15,882 10,813 19,986 26,586
Cost of revenues:
Systems sales.......... 332 462 2,307 9,459 9,863 6,769 10,602 14,546
Customer support,
maintenance and other
services.............. 279 366 588 1,208 2,300 1,660 3,644 3,867
----- ------ ------ ------- ------- ------- ------- -------
Total cost of
revenues.............. 611 828 2,895 10,667 12,163 8,429 14,246 18,413
----- ------ ------ ------- ------- ------- ------- -------
Gross profit............ 436 663 1,405 3,781 3,719 2,384 5,740 8,173
Operating expenses:
Product development.... 161 196 271 984 1,640 1,174 2,078 2,401
Purchased research and
development costs...... -- -- -- -- -- -- 30 30
Sales and marketing.... 173 203 209 470 607 436 793 889
Depreciation and
amortization........... 20 19 46 178 583 387 676 777
General and
administrative......... 157 219 332 2,243 2,990 2,164 2,825 3,732
----- ------ ------ ------- ------- ------- ------- -------
Income (loss) from
operations.............. (75) 26 547 (94) (2,101) (1,777) (662) 344
Interest expense, net... -- 3 19 82 166 83 305 496
Other (income).......... -- -- -- -- (406) (374) (572) (35)
----- ------ ------ ------- ------- ------- ------- -------
Income (loss) before
provision for pro forma
income taxes........... (75) 23 528 (176) (1,861) (1,486) (395) (117)
Pro forma income tax
provision (benefit)(2).. (27) 11 206 (61) (709) (566) (146) (46)
----- ------ ------ ------- ------- ------- ------- -------
Pro forma net income
(loss).................. $ (48) $ 12 $ 322 $ (115) $(1,152) $ (920) $ (249) $ (71)
===== ====== ====== ======= ======= ======= ======= =======
Pro forma net income
(loss) per common and
common equivalent
shares(3).............. $ (0.10) $ (0.02) $ (0.01)
======= ======= =======
Weighted average common
and common equivalent
shares outstanding..... 11,595 11,187 11,587
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
----- ----- ----- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......... $(235) $(310) $(102) $(1,027) $(3,664) $ (555)
Total assets............. 128 409 2,716 4,818 4,235 10,014
Long-term debt and
shareholder loan,
including current
portion.................. -- 7 89 1,067 970 5,898
Shareholders' equity
(deficit)................ (196) (273) 145 (722) (3,154) (3,489)
</TABLE>
- --------
(1) The pro forma statement of operations data for the nine months ended
September 30, 1996 gives effect to the proposed acquisition of PrysmTech,
as if such acquisition occurred on January 1, 1996. See "Pro Forma
Financial Information."
(2) As a result of its election to be treated as an S Corporation for income
tax purposes, the Company has not been subject to federal or state income
taxes. Pro forma net income amounts include additional provisions for
income taxes determined by applying the Company's anticipated statutory
tax rate to pretax income (loss), adjusted for permanent tax differences.
(3) Pro forma net income (loss) per share is computed by dividing pro forma
net income (loss) available to common shareholders by weighted average
shares outstanding. Supplementary pro forma net income (loss) per share
(resulting from the anticipated repayment of borrowings with a portion of
the proceeds of this offering as indicated in "Use of Proceeds") is
$(0.10) for the year ended December 31, 1995 and $(0.01) for the nine
months ended September 30, 1996.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company historically has focused on providing integrated technology
solutions to selected vertical markets within the retail industry. The Company
derives its revenues primarily from the sale of integrated systems, including
software, hardware and related support and consulting services. The Company
plans to increase licensing of certain of its software products on a stand-
alone basis. In addition, the Company, through its Radiant Solutions Group,
offers implementation and integration services which are billed on a per diem
basis. The Company's revenues from its various technology solutions are, for
the most part, dependent on the number of installed sites a customer has.
Accordingly, while the typical sale is the result of a long, complex process,
the Company's customers usually continue installing additional sites over an
extended period of time. Revenues from systems sales are recognized as
products are shipped, provided that collection is probable and no significant
post shipment vendor obligations remain. Revenues from customer support,
maintenance and other services are generally recognized as the service is
performed.
Prior to 1993, the Company developed software solutions for the video rental
and car care markets. The Company entered the convenience store market in 1993
by establishing relationships with two customers. Sales to these two customers
represented approximately 75.9%, 59.4% and 26.4% of the Company's total
revenues in 1994, 1995 and the first nine months of 1996, respectively. In
order to increase the Company's focus on revenue growth and profitability, the
Company expanded its senior management team in 1995 and 1996. In addition, the
Company responded to strong demand for its technology solutions by investing
heavily in new product development. The Company also identified additional
market opportunities for its new products. As a result, the Company has
substantially increased its sales, marketing and product development
activities.
Since November 1995, a number of events resulted in strong revenue growth
for the Company. The Company developed new products, established relationships
with new customers and increased sales to existing customers. The Company also
entered two new vertical markets -- the entertainment market and the QSR
market. The Company expanded its presence in the entertainment market in
November 1995 by entering into a joint venture (PrysmTech) to market
enterprise-wide technology solutions to this industry. To accelerate its entry
into the QSR market, in May 1996 the Company purchased Liberty Systems
International, Inc. ("LSI"), a technology solution provider to the QSR
industry. During this period, the Company also expanded its sales force and
continued to add management, consulting and product development personnel. The
revenue growth of the Company and PrysmTech has resulted in profitability in
the second and third quarters of 1996.
As a result of its election to be treated as an S Corporation for income tax
purposes, the Company has not been subject to federal or state income taxes.
Pro forma net income amounts discussed herein include additional provisions
for income taxes determined by applying the Company's anticipated statutory
tax rate to pretax income (loss), adjusted for permanent tax differences. The
Company's S Corporation status will terminate upon completion of this
offering.
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain statement of operation items to total revenues:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER
DECEMBER 31, 30,
--------------------- ------------- PRO FORMA NINE
MONTHS ENDED
1993 1994 1995 1995 1996 SEPTEMBER 30, 1996
----- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Systems sales.......... 87.2 % 93.6 % 88.6 % 87.4 % 87.4
Customer support,
maintenance and other
services.............. 12.8 6.4 11.4 12.6 12.6 12.2
----- ----- ----- ----- ----- -----
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Systems sales.......... 53.6 65.4 62.1 62.6 53.1 54.7
Customer support,
maintenance and other
services.............. 13.7 8.4 14.5 15.4 18.2 14.6
----- ----- ----- ----- ----- -----
Total cost of
revenues............. 67.3 73.8 76.6 78.0 71.3 69.3
----- ----- ----- ----- ----- -----
Gross profit............ 32.7 26.2 23.4 22.0 28.7 30.7
Operating expenses:
Product development.... 6.3 6.8 10.3 10.8 10.4 9.0
Purchased research and
development costs..... -- -- -- -- 0.1 0.1
Sales and marketing.... 4.9 3.3 3.8 4.1 4.0 3.3
Depreciation and amor-
tization.............. 1.1 1.3 3.7 3.6 3.4 2.9
General and administra-
tive.................. 7.7 15.5 18.8 19.9 14.1 14.1
----- ----- ----- ----- ----- -----
Income (loss) from oper-
ations................. 12.7 (0.7) (13.2) (16.4) (3.3) 1.3
Interest expense, net... 0.4 0.5 1.0 0.8 1.6 1.8
Other (income).......... -- -- (2.5) (3.5) (2.9) (0.1)
----- ----- ----- ----- ----- -----
Income (loss) before pro
forma income taxes..... 12.3 (1.2) (11.7) (13.7) (2.0) (0.4)
Pro forma income tax
provision (benefit).... 4.8 (0.4) (4.4) (5.2) (0.8) (0.1)
----- ----- ----- ----- ----- -----
Pro forma net income
(loss)................. 7.5% (0.8)% (7.3)% (8.5)% (1.2)% (0.3)%
===== ===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Systems Sales. The Company derives the majority of its revenues from sales
and licensing fees for its headquarters and site-based solutions. Systems
sales increased 84.9% to $17.5 million for the nine months ended September 30,
1996, compared to $9.4 million for the same period in 1995. The increase
related to sales and license fees from new and existing customers.
Additionally, the Company introduced several new products in 1996, including
Core-Tech, OrderPoint, its Radiant platform and a Windows NT version of Compu-
Touch. Initial demand for these products contributed to the Company's increase
in revenues.
Customer Support, Maintenance and Other Services. The Company also derives
revenues from customer support, maintenance and other services, which
increased 84.0% to $2.5 million for the nine month period ended September 30,
1996, compared to $1.4 million for the same period in 1995. The increase was
due to increased support and maintenance revenues and the establishment and
expansion of the Company's Radiant Solutions Group.
17
<PAGE>
Cost of Systems Sales. Cost of systems sales consist primarily of hardware
and peripherals for site-based systems and labor. These costs are expensed as
products are shipped. Cost of systems sales increased 56.6% to $10.6 million
for the nine months ended September 30, 1996, compared to $6.8 million for the
same period in 1995. The increase was directly attributable to the increase in
systems sales. Cost of systems sales as a percentage of total revenues
declined to 53.1% from 62.6%. Cost of systems sales as a percentage of systems
revenues declined to 60.7% from 71.7%. The decreases were due to increased
sales of existing and newly introduced software products, which have higher
margins.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services consists primarily of personnel and
other costs associated with the Company's services operations. Cost of
customer support, maintenance and other services increased 119.5% to $3.6
million for the nine months ended September 30, 1996 from $1.7 million for the
same period for 1995. The increase was due primarily to the Company's decision
to establish the Radiant Solutions Group and the related increase in wages
associated with this effort. Cost of customer support, maintenance and other
services as a percentage of total revenues increased to 18.2% from 15.4%. Cost
of customer support, maintenance and other services as a percentage of
customer support, maintenance and other services revenues increased to 144.9%
from 121.5%. These increases reflect the investment in the Company's Radiant
Solutions Group.
Product Development Expenses. Product development expenses consist primarily
of wages and materials expended on product development efforts. Product
development expenses increased 77.1% to $2.1 million for the nine months ended
September 30, 1996, compared to $1.2 million for the same period in 1995. The
increase was due to higher development costs associated with new product
development, including development activity associated with the Company's QSR
industry efforts and development of new credit card network interfaces.
Product development expenses as a percentage of total revenues decreased to
10.4% from 10.8% because total revenues increased at a faster pace than
product development expenses. The Company capitalizes a portion of its
software development costs. In the first nine months of 1996, software
development costs of $416,000 were capitalized by the Company, as compared to
$247,000 for the same period in 1995. The Company capitalized 16.7% of its
product development costs in the first nine months of 1996, as compared to
17.4% for the same period in 1995.
Sales and Marketing Expenses. Sales and marketing expenses increased 81.7%
to $793,000 during the nine months ended September 30, 1996, compared to
$436,000 for the same period in 1995. The increase was associated with the
Company's expansion of its sales force and increased commission expense
attributable to higher sales. Sales and marketing expenses as a percentage of
total revenues decreased to 4.0% from 4.1%.
Depreciation and Amortization. Depreciation and amortization expense
increased 74.7% to $676,000 for the nine months ended September 30, 1996,
compared to $387,000 for the same period in 1995. The increase resulted from
an increase in computer equipment and other assets required to support an
increased number of employees. Depreciation and amortization as a percentage
of total revenues decreased to 3.4% from 3.6% during the period, primarily
because revenues increased at a faster pace than associated personnel support
costs. Additionally, amortization of capitalized software development costs
increased 135.8% to $158,000 for the nine months ended September 30, 1996,
compared to $67,000 for the same period in 1995 as a result of higher
capitalized software development costs.
General and Administrative Expenses. General and administrative expenses
increased 30.6% to $2.8 million for the nine months ended September 30, 1996,
compared to $2.2 million for the same period in 1995. The increase was due
primarily to personnel increases in 1996. General and administrative expenses
as a percentage of total revenues decreased to 14.1% from 19.9% as a result of
higher sales volumes.
Interest Expense. Interest expense increased 268.3% to $306,000 for the nine
months ended September 30, 1996, compared to $83,000 for the same period in
1995. The increase resulted from the
18
<PAGE>
Company borrowing $4.5 million in the second and third quarters of 1996 and
the borrowing costs associated therewith. Interest expense as a percentage of
total revenues increased to 1.6% from 0.8% due to the increase in borrowings.
Other Income. Other income for the nine months ended September 30, 1996
consisted primarily of earnings from the Company's PrysmTech joint venture,
while, in the same period for 1995, other income represented gain on the sale
of Company assets. Other income increased 53.1% to $573,000 for the nine
months ended September 30, 1996 compared to $374,000 for the same period in
1995.
Pro Forma Income Tax Provision (Benefit). The pro forma effective tax rate
for the nine months ended September 30, 1996 was a benefit of 36.8%, compared
to a benefit of 38.1% for the same period in 1995.
Pro Forma Net Income (Loss). Pro forma net loss decreased 72.9% to $249,000
for the nine months ended September 30, 1996, compared to $920,000 for the
same period in 1995. The decrease resulted from increased revenues and
improved margins in the first nine months of 1996 over the same period in
1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Systems Sales. Systems sales increased 4.1% to $14.1 million for the year
ended December 31, 1995 ("fiscal 1995"), compared to $13.5 million for the
year ended December 31, 1994 ("fiscal 1994"). The increase related to sales
and license fees from new customers and increased sales and license fees to
existing customers.
Customer Support, Maintenance and Other Services. Customer support,
maintenance and other services increased 96.3% to $1.8 million for fiscal
1995, compared to $919,000 for fiscal 1994. The increase was due to a greater
number of customer sites supported by the Company.
Cost of Systems Sales. Cost of systems sales increased 4.3% to $9.9 million
for fiscal 1995, compared to $9.5 million for fiscal 1994. The increase was
directly attributable to increased systems sales. Cost of systems sales as a
percentage of total revenues declined to 62.1% from 65.5%. Cost of systems
sales as a percentage of systems sales increased to 70.1% from 69.9%.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services increased 90.5% to $2.3 million for
fiscal 1995 from $1.2 million for fiscal 1994. The increase was due primarily
to increased personnel costs associated with the support of more customers and
sites. Cost of customer support, maintenance and other services as a
percentage of total revenues increased to 14.5% from 8.4%. Cost of support,
maintenance and other services as a percentage of customer support,
maintenance and other services revenues decreased to 127.5% from 131.4%, as
growth in support and maintenance revenues grew at a faster rate than
expenses.
Product Development Expenses. Product development expenses increased 66.6%
to $1.6 million for fiscal 1995, compared to $984,000 million for fiscal 1994.
The increase was associated with increased development costs associated with
new product development and new credit card network interfaces. Product
development expenses as a percentage of total revenues increased to 10.3% from
6.8% due to the development efforts discussed above. In fiscal 1995, software
development costs of $329,000 were capitalized by the Company, as compared to
$133,000 for fiscal 1994. The Company capitalized 16.7% of its product
development costs in fiscal 1995, as compared to 11.9% in fiscal 1994.
Sales and Marketing Expenses. Sales and marketing expenses increased 29.0%
to $607,000 during fiscal 1995, compared to $470,000 for fiscal 1994. The
increase was associated with increased salaries and commissions. Sales and
marketing expenses as a percentage of total revenues increased to 3.8% from
3.3% in fiscal 1995 primarily because of commission plans introduced during
the period.
19
<PAGE>
Depreciation and Amortization. Depreciation and amortization expense
increased 228.2% to $583,000 for fiscal 1995, compared to $178,000 for fiscal
1994. The increase resulted from an increase in computer equipment and other
assets required to support a greater number of employees. Depreciation and
amortization as a percentage of total revenues increased to 3.7% from 1.3%
during the period due to the increased expense. Additionally, amortization of
capitalized software development costs increased 350.0% to $99,000 for fiscal
1995, compared to $22,000 for fiscal 1994 as a result of higher capitalized
software development costs.
General and Administrative Expenses. General and administrative expenses
increased 33.3% to $3.0 million for fiscal 1995, compared to $2.2 million for
fiscal 1994, due to the Company's investment in infrastructure. General and
administrative expenses as a percentage of total revenues increased to 18.8%
from 15.5%.
Interest Expense. Interest expense increased 103.6% to $166,000 for fiscal
1995, compared to $82,000 for fiscal 1994.
Other Income. Other income increased to $406,000 for fiscal 1995 compared to
none for fiscal 1994. Other income in 1995 primarily represented gain on the
sale of Company assets of $374,000 and equity in earnings of PrysmTech of
$32,000.
Pro Forma Income Tax Provision (Benefit). The pro forma effective tax rate
for fiscal 1995 was a benefit 38.1%, compared to a benefit of 34.5% for fiscal
1994. The increase in the benefit relates to a decrease in the relative
significance of permanent tax differences to pretax loss.
Pro Forma Net Income (Loss). Pro forma net loss increased 898.9% to $1.2
million for fiscal 1995, compared to $115,000 for fiscal 1994. The increase in
the loss was the result of increased research and development costs and
continued investments in infrastructure.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Systems Sales. Systems sales increased 261.0% to $13.5 million for fiscal
1994, compared to $3.7 million for the year ended December 31, 1993 ("fiscal
1993"). The increase related to sales and license fees from new customers and
increased sales and license fees to existing customers.
Customer Support, Maintenance and Other Services. Customer support,
maintenance and other services increased 66.4% to $919,000 for fiscal 1994,
compared to $552,000 for fiscal 1993. The increase resulted from a greater
number of customer sites supported by the Company.
Cost of Systems Sales. Cost of systems sales increased 310.1% to $9.5
million for fiscal 1994, compared to $2.3 million for fiscal 1993. The
increase was directly attributable to increased systems sales. Cost of systems
sales as a percentage of total revenues increased to 65.4% from 53.6%. Cost of
systems sales as a percentage of systems sales increased to 69.9% from 60.0%
due to a higher component of hardware sales in fiscal 1994.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services increased 105.2% to $1.2 million for
fiscal 1994 from $588,000 for fiscal 1993. The increase was due primarily to
increased personnel costs associated with the support of more customers and
sites. Cost of customer support, maintenance and other services as a
percentage of total revenues decreased to 8.4% from 13.7%. Cost of customer
support, maintenance and other services as a percentage of customer support,
maintenance and other services revenues increased to 131.4% from 106.6% as
customer support and maintenance revenues grew at a faster rate than related
expenses.
Product Development Expenses. Product development expenses increased 263.4%
to $984,000 for fiscal 1994, compared to $271,000 for fiscal 1993. The
increase was associated with increased development costs associated with new
product development. Product development expenses as a
20
<PAGE>
percentage of total revenues increased to 6.8% from 6.3% due to the
development efforts discussed above. In fiscal 1994, software development
costs of $133,000 were capitalized by the Company, as compared to none for
fiscal 1993. The Company capitalized 11.9% of its product development costs in
fiscal 1994.
Sales and Marketing Expenses. Sales and marketing expenses increased 125.5%
to $470,000 during fiscal 1994, compared to $208,000 for fiscal 1993 as a
result of higher sales. Sales and marketing expenses as a percentage of total
revenues decreased to 3.3% from 4.9% in fiscal 1994 primarily because fixed
expenses were spread over higher sales volumes.
Depreciation and Amortization. Depreciation and amortization expense
increased 284.6% to $178,000 for fiscal 1994, compared to $46,000 for fiscal
1993. The increase resulted from an increase in computer equipment and other
assets required to support an increased number of employees. Depreciation and
amortization as a percentage of total revenues increased to 1.3% from 1.1%
during the period due to the increased expense. Additionally, amortization of
capitalized software development costs increased to $22,000 for fiscal 1994,
compared to none for fiscal 1993 as a result of higher capitalized software
development costs.
General and Administrative Expenses. General and administrative expenses
increased 575.1% to $2.2 million for fiscal 1994, compared to $332,000 for
fiscal 1993 due to the Company's investment in infrastructure. General and
administrative expenses as a percentage of total revenues increased to 15.5%
from 7.7%.
Interest Expense. Interest expense increased 332.6% to $82,000 for fiscal
1994, compared to $19,000 for fiscal 1993.
Pro Forma Income Tax Provision (Benefit). The pro forma effective rate for
fiscal 1994 was a benefit of 34.5%, compared to a provision of 39.0% in fiscal
1993.
Pro Forma Net Income (Loss). The Company had a pro forma net loss of
$115,000 for fiscal 1994, compared to pro forma net income of $322,000 for
fiscal 1993. The pro forma net loss was the result of the foregoing factors.
21
<PAGE>
QUARTERLY INFORMATION
The following tables set forth certain unaudited financial data for each of
the Company's last seven calendar quarters and such data expressed as a
percentage of the Company's total revenues for the respective quarters. The
information has been derived from unaudited combined financial statements
that, in the opinion of management, reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of such
quarterly information. The operating results for any quarter are not
necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Systems sales.......... $4,521 $2,377 $2,549 $4,631 $2,709 $7,191 $7,572
Customer support,
maintenance and other
services.............. 461 461 444 438 542 833 1,139
------ ------ ------ ------ ------ ------ ------
Total revenues........ 4,982 2,838 2,993 5,069 3,251 8,024 8,711
Cost of revenues:
Systems sales.......... 3,436 1,549 1,784 3,093 1,968 4,503 4,131
Customer support,
maintenance and other
services.............. 555 538 568 640 1,006 1,119 1,519
------ ------ ------ ------ ------ ------ ------
Total cost of
revenues............. 3,991 2,087 2,352 3,733 2,974 5,622 5,650
------ ------ ------ ------ ------ ------ ------
Gross profit............ 991 751 641 1,336 277 2,402 3,061
Operating expenses:
Product development.... 347 409 417 467 601 708 769
Purchased research and
development costs..... -- -- -- -- -- 30 --
Sales and marketing.... 149 179 109 170 216 282 295
Depreciation and amor-
tization.............. 128 126 133 196 186 214 276
General and administra-
tive.................. 706 719 738 827 803 1,017 1,005
------ ------ ------ ------ ------ ------ ------
Income (loss) from oper-
ations................. (339) (682) (756) (324) (1,529) 151 716
Interest expense, net... 31 27 25 84 36 40 229
Other (income).......... -- (374) -- (33) (90) (281) (201)
------ ------ ------ ------ ------ ------ ------
Income (loss) before pro
forma income taxes..... (370) (335) (781) (375) (1,475) 392 688
Pro forma income tax
provision (benefit).... (141) (128) (297) (143) (544) 144 254
------ ------ ------ ------ ------ ------ ------
Pro forma net income
(loss)................. $ (229) $ (207) $ (484) $ (232) $ (931) $ 248 $ 434
====== ====== ====== ====== ====== ====== ======
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems sales.......... 90.7% 83.8% 85.2% 91.4% 83.3% 89.6% 86.9%
Customer support,
maintenance and other
services.............. 9.3 16.2 14.8 8.6 16.7 10.4 13.1
----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Systems sales.......... 69.0 54.6 59.6 61.0 60.5 56.1 47.4
Customer support,
maintenance and other
services.............. 11.1 18.9 19.0 12.6 31.0 14.0 17.5
----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............. 80.1 73.5 78.6 73.6 91.5 70.1 64.9
----- ----- ----- ----- ----- ----- -----
Gross profit............ 19.9 26.5 21.4 26.4 8.5 29.9 35.1
Operating expenses:
Product development.... 7.0 14.5 13.9 9.2 18.5 8.8 8.8
Purchased research and
development costs..... -- -- -- -- -- 0.4 --
Sales and marketing.... 3.0 6.3 3.6 3.4 6.6 3.5 3.4
Depreciation and amor-
tization.............. 2.5 4.4 4.5 3.9 5.7 2.6 3.2
General and administra-
tive.................. 14.2 25.3 24.7 16.3 24.7 12.7 11.5
----- ----- ----- ----- ----- ----- -----
Income (loss) from oper-
ations................. (6.8) (24.0) (25.3) (6.4) (47.0) 1.9 8.2
Interest expense, net... 0.6 1.0 0.8 1.7 1.1 0.5 2.6
Other (income).......... -- (13.2) -- 0.7 (2.7) (3.5) (2.3)
----- ----- ----- ----- ----- ----- -----
Income (loss) before pro
forma income taxes..... (7.4) (11.8) (26.1) (7.4) (45.4) 4.9 7.9
Pro forma income tax
provision (benefit).... (2.8) (4.5) (9.9) (2.8) (16.8) 1.8 2.9
----- ----- ----- ----- ----- ----- -----
Pro forma net income
(loss)................. (4.6)% (7.3)% (16.2)% (4.6)% (28.6)% 3.1% 5.0%
===== ===== ===== ===== ===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through cash generated from operations and recently from financing obtained
during fiscal 1996. As of September 30, 1996, the Company had $882,000 in cash
and cash equivalents.
The Company's operating activities provided cash in fiscal 1993, 1994 and
1995 of $652,000, $844,000 and $841,000, respectively, while during the nine
months ended September 30, 1996 the Company's operating activities used cash
of $2.7 million. In fiscal 1993, cash flow from operating activities arose
principally from the Company's profitable operations, partially offset by an
increase in accounts receivable. Additionally, in both fiscal 1993 and 1994,
cash from operating activities was significantly increased due to customer
deposits received in advance of product shipment. In fiscal 1995, the
Company's operating cash was the result of extended payment terms with
vendors. During the first nine months of fiscal 1996, the Company's uses of
cash were the result of increased accounts receivables due to increased sales
somewhat offset by continued receipt of customer deposits in advance of sales.
Cash used in investing activities in fiscal 1993, 1994 and 1995 and the nine
months ended September 30, 1996 was $242,000, $537,000, $641,000 and $804,000,
respectively. Such investing activities primarily consisted of purchases of
property and equipment and capitalized software development costs.
Cash used in financing activities was $136,000, $249,000 and $402,000 in
fiscal 1993, 1994 and 1995, respectively, while $4.2 million was provided by
financing activities during the nine months ended September 30, 1996.
Financing activities during fiscal 1993, 1994 and 1995 consisted of
shareholder distributions and repayment of a shareholder note beginning in
fiscal 1995. Additionally, in fiscal 1994 and 1995 the Company's repayment of
borrowings under capital lease agreements increased as the Company
23
<PAGE>
purchased equipment under capital lease agreements of $599,000 and $218,000,
respectively, in those years. Financing activities in fiscal 1996 consisted
primarily of borrowings of $4.5 million from Sirrom Capital Corporation. These
loan proceeds were offset somewhat by payment of loan origination fees as well
as continued repayments of borrowings under capital lease agreements. See Note
6 of the combined financial statements of the Company.
Capital expenditures were approximately $242,000, $303,000, $312,000 and
$420,000 in fiscal 1993, 1994 and 1995 and the nine months ended September 30,
1996, respectively. These expenditures were primarily for purchases of
computer equipment, furniture and fixtures. The Company does not expect
significant capital expenditures in the near term.
In order to finance its recent growth, the Company in fiscal 1996 borrowed
$4.5 million from Sirrom Capital Corporation (the "Sirrom Debt"). Funds were
disbursed to the Company in two installments; the first in June 1996 ($3.0
million) and the second in September 1996 ($1.5 million), which borrowings
were utilized to finance the Company's working capital requirements. The
Sirrom Debt is secured by substantially all the assets of the Company, bears
interest at a fixed rate of 14.0% and is payable in equal monthly installments
of accrued interest to maturity (due June 2001 with respect to the $3.0
million tranche and due September 2001 with respect to the $1.5 million
tranche). As of December 1, 1996, the Sirrom Debt had a balance of $4.5
million. The Sirrom Debt will be repaid from the proceeds of this offering.
See "Use of Proceeds." In addition, in connection with this financing, the
Company granted to Sirrom Capital Corporation warrants to purchase 174,642
shares of Common Stock at an exercise price of $.01 per share, which will be
exercised prior to the completion of this offering. See "Principal and Selling
Shareholders."
In connection with the proposed acquisition of PrysmTech in December 1996
the Company will issue promissory notes in the principal amount of $3.0
million. These notes will be due December 1998 and bear interest at a rate of
8.5%. The PrysmTech Debt will be repaid from the proceeds of this offering.
See "Use of Proceeds."
The exercise of outstanding warrants to purchase 1,265,551 shares of Common
Stock prior to the completion of this offering will provide the Company with
proceeds of approximately $962,000. These proceeds, together with the net
proceeds of this offering, will be utilized for the purposes set forth in "Use
of Proceeds." Because the remaining 20,000 warrants have a nominal exercise
price, they will not represent a potential source of liquidity for the
Company.
The Company believes that the net proceeds from this offering and the
exercise of the warrants referred to above will provide adequate liquidity to
meet the Company's planned capital and operating requirements for at least the
twelve month period following this offering. Thereafter, if the Company's
spending plans change, the Company may find it necessary to seek to obtain
additional sources of financing to support its operations. There can be no
assurance that such financing will be available on commercially reasonable
terms, if at all.
ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The Company's adoption of SFAS No. 121 in the first quarter of 1996 did not
have a significant impact on the Company's combined financial statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position ("SOP") 91-1,
"Software Revenue Recognition." The adoption of the standards in the current
version of the exposure draft is not expected to have a significant impact on
the Company's combined financial statements.
24
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Company intends to purchase the remaining 50.0% interest in PrysmTech
for 300,000 shares of Common Stock and the PrysmTech Debt. The acquisition
will be accounted for as a purchase.
The accompanying unaudited pro forma condensed combined balance sheet as of
September 30, 1996, gives effect to the proposed acquisition as if it had
occurred on that date. The accompanying unaudited pro forma condensed combined
statement of operations for the nine months ended September 30, 1996, has been
prepared to reflect adjustments to the Company's historical results of
operations to give effect to the proposed acquisition as if it had occurred on
January 1, 1996. Pro forma condensed combined statement of operations for the
year ended December 31, 1995, have not been presented due to the
insignificance of PrysmTech's operations from November 27, 1995 (inception of
PrysmTech) to December 31, 1995.
The purchase price allocation reflected in the accompanying pro forma
condensed combined financial statements has been prepared on an estimated
basis. The effects resulting from any differences in the final allocation of
the purchase price are not expected to be material.
The accompanying pro forma statements are not necessarily indicative of the
results of operations which would have been attained had the acquisition been
consummated on the dates indicated or which may be attained in the future.
These pro forma statements should be read in conjunction with the historical
combined financial statements of the Company and related notes thereto, which
are included elsewhere in this Prospectus.
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
PRO FORMA FORMA
RADIANT PRYSMTECH ADJUSTMENTS COMBINED
------- --------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 882 $ 783 $ -- $ 1,665
Receivables, net................... 3,515 1,143 -- 4,658
Inventories........................ 2,422 555 -- 2,977
Other.............................. 462 23 -- 485
------- ------ ------- -------
Total current assets............... 7,281 2,504 -- 9,785
Property and equipment, net ........ 1,271 233 -- 1,504
Software development costs, net .... 598 -- -- 598
In process product development ..... -- -- 3,628 (1) --
(3,628)(1)
Investment in PrysmTech............. 471 -- (471)(2) --
Other assets ....................... 393 62 907 (1) 1,362
------- ------ ------- -------
Total assets....................... $10,014 $2,799 $ 436 $13,249
======= ====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Accounts payable and accrued lia-
bilities.......................... $ 3,922 $1,713 $ 50 (3) $ 5,685
Customer deposits and deferred rev-
enue.............................. 3,192 -- -- 3,192
Current portion of shareholder
loan.............................. 167 -- -- 167
Current portion long-term debt..... 554 -- -- 554
------- ------ ------- -------
Total current liabilities.......... 7,835 1,713 50 9,598
Shareholder loan, less current por-
tion............................... 44 -- -- 44
Long-term debt...................... 5,143 -- 3,000 (3) 8,143
------- ------ ------- -------
Total liabilities.................. 13,022 1,713 3,050 17,785
------- ------ ------- -------
Put warrants........................ 481 -- -- 481
Shareholders' equity (deficit)...... (3,489) 1,086 2,100 (3) (5,017)
(3,628)(4)
(1,086)(4)
------- ------ ------- -------
Total liabilities and shareholders'
equity............................ $10,014 $2,799 $ 436 $13,249
======= ====== ======= =======
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Reflects adjustments to record the fair market value of the identifiable
intangible assets acquired plus the resulting goodwill related to the excess
purchase price over the fair value of net assets acquired. The value
associated with the purchased research and development costs is written-off
immediately (in thousands).
<TABLE>
<S> <C>
Total consideration and transaction costs (Note 3).............. $5,150
Joint venture partner's interest in equity of PrysmTech ........ 615
------
Excess of purchase price over fair value of net assets acquired
............................................................... 4,535
Value associated with purchased research and development costs.. 3,628
------
Adjustments to goodwill......................................... $ 907
======
</TABLE>
(2) Reflects elimination of the Company's investment in PrysmTech.
(3) Reflects (i) issuance of 300,000 shares of Common Stock with a market
value of approximately $2.1 million as of the expected close date of December
31, 1996, (ii) the PrysmTech Debt, and (iii) transaction related expenses of
$50,000.
(4) Reflects the elimination of PrysmTech's shareholders' equity of $1.1
million and the immediate write-off of purchased research and development
costs of $3.6 million.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO
PRO FORMA FORMA
RADIANT PRYSMTECH ADJUSTMENTS COMBINED
------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Systems sales................... $17,472 $6,253 $ (382)(1) $23,343
Customer support, maintenance... 2,514 729 -- 3,243
------- ------ ------ -------
Total revenues................. 19,986 6,982 (382) 26,586
Cost of Revenue:
Systems sales................... 10,602 4,126 200 (2) 14,546
(382)(1)
Customer support, maintenance... 3,644 223 -- 3,867
------- ------ ------ -------
Total cost of revenues......... 14,246 4,349 (182) 18,413
------- ------ ------ -------
Gross profit.................... 5,740 2,633 (200) 8,173
Operating expenses:
Product development............. 2,078 -- 323 (2) 2,401
Purchased research and develop-
ment costs..................... 30 -- 3,628 (3) 30
(3,628)(4)
Sales and marketing............. 793 -- 96 (2) 889
Depreciation and amortization... 676 -- 33 (2) 777
68 (5)
General and administrative...... 2,825 -- 907 (2) 3,732
PrysmTech operating expenses.... -- 1,559 (1,559)(2) --
------- ------ ------ -------
Total operating expenses....... 6,402 1,559 (132) 7,829
------- ------ ------ -------
Income (loss) from operations.... (662) 1,074 (68) 344
Interest expense, net............ 305 -- 191 (6) 496
Equity in (earnings) of
PrysmTech....................... (537) -- 537 (7) --
Other income..................... (35) -- -- (35)
------- ------ ------ -------
Income (loss) before provision
for income taxes................ (395) 1,074 (796) (117)
Pro forma income tax provision
(benefit)....................... (146) -- 100 (8) (46)
------- ------ ------ -------
Pro forma net income (loss)...... $ (249) $1,074 $ (896) $ (71)
======= ====== ====== =======
Pro forma net income (loss) per
common and common equivalent
share........................... $ (.02) $ (.01)
======= =======
Weighted average common and
common equivalent shares
outstanding..................... 11,187 11,587 (9)
======= =======
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(1) Reflects elimination of sales from the Company to PrysmTech at cost.
(2) Reflects reclassification of PrysmTech statement of operations accounts
to conform with the Company's presentation.
(3) Reflects charge of $3.6 million related to the write-off of purchased
research and development costs. The allocation to purchased research and
development costs represents the estimated fair value related to incomplete
projects, determined by an independent appraisal. The development of these
projects had not yet reached technology feasibility and the technology has no
alternative future use. The technology acquired in the acquisition will
require substantial additional development by the Company.
(4) Reflects elimination from the pro forma information of one-time, non-
recurring charges for purchased research and development costs of $3.6 million
which will be recorded by the Company when the acquisition is consummated.
(5) Reflects additional amortization of goodwill of $907,000 over 10 years.
(6) Reflects interest expense on the PrysmTech Debt at an annual rate of
8.5%.
(7) Reflects elimination of the Company's equity in earnings of PrysmTech.
(8) Reflects benefit for income taxes for the tax effect of the pro forma
adjustments and a pro forma tax provision for PrysmTech as if PrysmTech were
liable for federal and state income taxes.
(9) Weighted average common shares outstanding is calculated assuming that
the 300,000 shares of Common Stock issued occurred January 1, 1996. In
addition, the weighted average common shares outstanding include the dilutive
effect of options to purchase 275,000 shares of Common Stock to be granted to
certain employees of PrysmTech.
27
<PAGE>
BUSINESS
Radiant provides enterprise-wide technology solutions to selected vertical
markets within the retail industry. The Company offers fully integrated retail
automation solutions including POS systems, consumer-activated ordering
systems, back office management systems and headquarters-based management
systems. The Company's products enable retailers to interact electronically
with consumers, capture data at the point of sale, manage site operations and
logistics and communicate electronically with their sites, vendors and credit
networks. In addition, the Company offers system planning, design and
implementation services that tailor the automation solution to each retailer's
specifications.
Radiant is currently a leading provider of integrated retail automation
solutions to the convenience store market and has a growing presence in the
entertainment market through its PrysmTech joint venture. In addition, the
Company intends to expand its presence in the QSR market in 1997. Since these
markets require many of the same product features and functionality, the
Company believes it can leverage its existing technology across these markets
with limited incremental product development efforts.
INDUSTRY BACKGROUND
Successful retailers increasingly require information systems that capture a
detailed picture of consumer activity at the point of sale and store that data
in an accessible fashion. Early technology innovators in the retail industry
deployed robust, integrated information systems at the point of sale and used
the information to react rapidly to changing consumer preferences, ultimately
gaining market share in the process. In addition, these integrated information
systems helped retailers achieve operational efficiencies. Many large national
retailers have followed suit by investing in proprietary information systems.
For many types of retailers, however, this type of automation did not make
economic or business sense. In particular, merchants with a large number of
relatively small sites, such as convenience stores, petroleum retailers,
restaurants and entertainment venues, generally have not been able to cost-
effectively develop and deploy sophisticated, enterprise-wide information
systems. Economic and standardization problems for these markets are
exacerbated by the fact that many sites operate as franchises, dealerships or
other decentralized ownership and control structures. Without an investment in
technology, these retailers continue to depend on labor and paper to process
transactions. Management believes that high labor costs, lack of centralized
management control of remote sites and inadequate informational reporting,
together with emerging technology trends, have caused many of these retailers
to reexamine how technology solutions can benefit their operations.
A large number of retail sites face these challenges. At the end of 1995,
there were more than 90,000 convenience stores nationwide, while the cinema
industry had approximately 27,000 screens at 6,500 sites nationwide. At the
end of 1994, the QSR industry had over 170,000 domestic units. Typically, the
existing systems in these industries consist of stand-alone devices such as
cash registers or other POS systems with little or no integration with either
the back office of the site or an enterprise-wide information system.
Implementation of such systems providing this functionality typically involves
three or more vendors and an independent systems integration firm. The
resulting proprietary solutions are often difficult to support and have
inherently high risks associated with implementation. Management believes that
technology solutions that are highly functional and scalable, relatively
inexpensive, and easy to deploy are critical for successful implementation in
these retail markets.
28
<PAGE>
In the absence of an integrated solution, retailers in these markets
typically rely on manual reporting to capture data on site activity and
disseminate it to different levels of management at the regional and national
headquarters. Basic information on consumers (i.e., who they are, when they
visit and what they buy) is not captured in sufficient detail, at the right
time or in a manner that can be communicated easily to others in the
organization. Similarly, information such as price changes does not flow from
headquarters to individual sites in a timely manner. In addition,
communications with vendors often remain manual, involving paperwork, delays
and related problems.
Recent trends in the retailing industry have accelerated the need for
enterprise-wide information and have heightened demand for integrated
retailing systems. The Company believes consumer preferences have shifted away
from retailer loyalty toward value and convenience, creating a greater need
for timely data concerning consumer buying patterns and preferences.
Management also believes that convenient consumer-activated ordering and
payment systems, such as ATMs, voice response units and "pay at the pump"
systems, have become important to retailers who wish to retain and build a
customer base. Additionally, retailers can improve operational and logistical
efficiencies through better management of inventory, purchasing,
merchandising, pricing, promotions and shrinkage control. Management believes
that the constant flow of information among the point of sale, the back
office, headquarters and the supply chain has become a key competitive
advantage in the retail industry, causing retailers to demand more
sophisticated, integrated solutions from their systems vendors.
In a parallel development, technological advances have improved the
capability of systems available to retailers. With the price of computing
power declining, technology investments have become economically feasible for
many retailers. Further, computing power has become increasingly flexible and
distributable, facilitating data capture and processing by applications
located at the point of sale. Also, new front-end graphical user interfaces
are making systems easier to use, which reduces training time and transaction
costs and facilitates more types of consumer-activated applications.
To meet increasing systems demands from retailers, providers of hardware and
software point of sale solutions are attempting to integrate existing
products. This process often requires independent systems integrators to
provide enterprise-wide data communications. These systems often are based on
proprietary, closed protocols and technology platforms from several different
vendors. As a result, the effort required to implement and maintain these
systems can be difficult, time consuming and expensive.
29
<PAGE>
THE RADIANT SOLUTION
The Company offers fully integrated technology solutions that enable
retailers to improve site operations, serve consumers better and route
information throughout their organization and supply chains. The Company
believes its core technology and solutions are applicable to a variety of
retail markets. The Company's suite of products links store level point of
sale information with centralized merchandising and financial functions that
ultimately drive replenishment communications with suppliers and vendors. The
Company believes that its site solutions are easy to implement, typically
requiring less than a week to install and a few hours to train individual
users. The following summarizes the solutions provided by Radiant:
A five segment diagram presenting in brief form the principal features and
functions of the company's primary technology solutions and services. The
diagram includes the text:
CONSUMER-ACTIVATED HEADQUARTERS
- ------------------ ------------
Touch Screen Interactive Executive Information
Video, Graphics, Audio Electronic Price Book
Credit/Cash Payment Vendor EDI
Compact, Enclosed Terminals Centralized Menu Management
Suggestive Selling
POINT OF SALE BACK OFFICE
- ------------- -----------
Touch Screen Interactive Inventory Control
Transaction Auditing Vendor Management
Credit Processing Purchasing/Receiving
Data Capture Employee Management
Peripheral Integration
Cash Reconciliation
SERVICES
- --------
Consulting
Training
Maintenance
Technical Support
Integration
The Company's technology solutions enable retailers to: allow consumers to
place their own orders for items such as food, movie tickets and concessions
through graphical touch screen interfaces; capture transaction information and
communicate with credit card networks; manage and analyze in-store inventory
movement, including electronic ordering; schedule and manage staffing; and
connect headquarters to each of the retailer's local sites and vendors,
enabling management to quickly change pricing and review operating performance
in a timely and efficient manner. The Company's products have been deployed
successfully in retail operations ranging in size from one to more than 600
sites.
Retailers derive the following benefits from Radiant's solutions:
Integrated information flows. The Company's technology solutions provide
retailers with tools for monitoring and analyzing sales data, stock status,
vendor relationships, merchandising and other important activities, both at
their sites and headquarters. These products further enable retailers to
communicate electronically with their suppliers in order to exchange
purchase orders, invoices and payments.
30
<PAGE>
Centralized management of highly decentralized operations. Information
provided by the Company's solutions enables headquarters management to
monitor site performance in a consistent manner on a near-real time basis,
implement price changes simultaneously throughout the enterprise and
rapidly initiate targeted marketing programs.
Tighter on-site control over operations. The Company's back office systems
enable site managers to closely manage inventory, reconcile accounts and
control issues such as shift scheduling and hourly wage calculations. The
Company's solutions incorporate sophisticated inventory management
techniques to help a retailer optimize its merchandising strategy.
Improved labor productivity. The Company incorporates user friendly
graphics within its solutions, reducing employee training and order
processing times which are important benefits in retail environments due to
high employee turnover. The Company's back office solutions can alleviate
extensive paperwork required of site managers, allowing them more time to
focus on operations.
Improved customer service. The Company's consumer-activated ordering
systems permit customers to place their own orders, answer surveys and
electronically communicate with the retailer. These systems can improve
customer service, reduce site labor costs and, through automating
suggestive selling concepts, help the retailer implement revenue
enhancement opportunities.
Lower cost of technology deployment. In addition to the cost savings
realized through better site management, the actual cost of deploying the
Company's multimedia networking platform is less than networked PC systems
due to platform efficiencies. Software modification requirements are
limited due to the high degree of functionality inherent in the core
applications, and systems integration problems are minimized because the
Company offers an integrated solution based on an open-architecture design
which facilitates integration with other systems.
COMPANY STRATEGY
The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the vertical retail markets it serves.
The Company is pursuing the following strategies to achieve this objective:
Expand existing position in selected markets. The Company believes that it
is in a strong position to expand its current market share in the
convenience store and cinema markets due to its highly functional solutions
and its practical experience in deploying and implementing retail
solutions. The Company has experience integrating all aspects of its
solutions into existing retail technology infrastructures. In particular,
the Company has developed interfaces with a number of the widely-used
electronic information and payment networks, including networks of certain
major petroleum retailers. The Company currently is developing interfaces
to credit networks of additional major petroleum retailers, which if
certified, will allow the Company access to a large number of potential
sites.
Introduce new products to current markets. The Company has introduced a
variety of new products and services in 1996, including consumer-activated
systems, a headquarters-based, enterprise-wide management system, a Windows
NT version of its local site-based products, consulting services and its
multimedia networking platform. Additional products and services, such as
on-line consumer loyalty systems and solutions utilizing the Internet, are
in development or under review.
Continue to develop sales and services infrastructure. To meet the
anticipated requirements of growth in its business, the Company intends to
continue expanding its direct sales force and its professional services
organization. The Company also plans to develop relationships with
additional distributors.
31
<PAGE>
Expand markets for the Company's solutions. The Company believes that its
core technology and solutions are applicable to a variety of retail
markets. The Company acquired LSI to accelerate its entry into the QSR
market, and the Company plans to expand its presence in the QSR market with
pilot installations of certain new solutions scheduled for the first half
of 1997. The Company believes that additional markets such as full service
restaurants, stadiums, arenas and amusement parks represent additional
opportunities for the Company's solutions.
Attract and retain outstanding personnel. The Company believes its
strongest asset is its people. To attract and retain top talent, the
Company intends to maintain its entrepreneurial culture and to continue
offering competitive benefit programs. The Company has granted stock
options to a majority of its employees and will strive to continue to align
employee interests with those of the Company's shareholders.
COMPANY OPERATIONS
The Company is a leading provider of integrated technology solutions to the
convenience store market, has a growing presence in the entertainment market
and currently has plans to apply its core technologies to the QSR market.
Substantially all of the Company's total revenues in 1995 and in the first
nine months of 1996 were related to the convenience store market. The Company
believes that its core technology may be adapted to provide solutions to a
variety of vertical markets, but it has concentrated its efforts to date in
these three markets. The Company's principal products, sales and marketing
efforts, customers and competitors are discussed below for each of these three
markets. The following table depicts the Company's main offerings and the
vertical markets served by those offerings:
<TABLE>
<CAPTION>
QUICK SERVICE
CONVENIENCE STORE ENTERTAINMENT RESTAURANT(1)
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Software:
Consumer-Activated
Ordering OrderPoint OrderPoint OrderPoint
Point of Sale Compu-Touch BoxMan, ConcMan (2)
Back Office Compu-Touch OfficeMan (3)
Headquarters Management Core-Tech Core-Tech(4) Core-Tech(4)
Services:
Consulting and Training Radiant Solutions Group Radiant Solutions Group Radiant Solutions Group
Integration and
Logistics Integration Services Integration Services Integration Services
Platform: Radiant Platform Radiant Platform Radiant Platform
</TABLE>
(1) Does not reflect products acquired with LSI.
(2) Under development, with planned release in the first half of 1997.
(3) To be developed.
(4) Modifications for these markets currently are under development.
CONVENIENCE STORE MARKET
In the United States, there currently are approximately 90,000 convenience
store sites which derive a significant portion of revenues from selling
products other than gasoline. The Company believes that the international
convenience store market represents a substantial opportunity for its
solutions. Management believes that the industry is currently under-invested
in technology. Only 16.1% of the industry's retail sites use scanning
equipment, compared to grocery stores, which have implemented scanning at
approximately 90.0% of their locations. Yet, in a recent convenience store
industry survey, 71.0% of respondents perceive integrated scanning and price
book management as being important for their operations and a majority of
respondents indicated that they were investigating whether to
32
<PAGE>
implement scanning at their retail locations. The same survey further reveals
that 54.0% of respondents plan to increase spending for technology solutions.
The Company thus believes that the demand for the Company's solutions for the
foreseeable future will remain strong.
This demand is fueled in part by the fact that many convenience store
operators are finding that their consumers prefer "pay at the pump" systems,
and many operators are upgrading their POS systems to interface with these
consumer-activated systems. Seventeen percent of convenience stores currently
utilize pay at the pump technology. Implementing this technology requires a
site to upgrade its system for controlling and managing fuel sales. Management
believes that installation of pay at the pump systems will remain strong for
the foreseeable future, encouraging additional investment in store automation.
The Company markets a variety of products and services as part of its
strategy to serve as an integrated solutions provider. From consumer-activated
ordering solutions to feature-rich, highly functional point of sale and back
office systems tied into headquarters through advanced client/server software,
the Company's enterprise-wide solutions interact with the consumer, site
employees and management and the senior management of a retailer's operations.
To help retailers optimize the impact these systems have on their operations,
the Company also offers a wide array of consulting, training and support
services provided by experienced professionals. The Company further provides
"ruggedized" hardware systems designed to cope with harsh retailing
environments.
Site-Based Products
Compu-Touch. Compu-Touch is the Company's principal product serving the
convenience store market. Compu-Touch, which can be licensed as modules or as
a complete system, is a comprehensive site-based solution that allows
retailers to process transactions and capture data at the point of sale, as
well as to manage other front and back office operations. Compu-Touch consists
of several modules, as described below. As of December 1, 1996, the Company
has licensed Compu-Touch systems to over 2,000 convenience store sites.
The following modules are offered with Compu-Touch:
CT POS -- provides point of sale functionality. Its PC-based architecture
allows non-POS functions (adding inventory and employees, changing fuel
prices, etc.) to be performed through a menu driven, user friendly
interface. In addition, CT POS produces reports that provide store managers
with valuable insight into their businesses. CT POS can be interfaced to
other systems using industry standard file formats.
CT Inventory -- allows convenience stores to manage inventory on an item
level basis, enabling two critical processes: item level audits and
electronic ordering. CT Inventory accepts sales data from either CT POS or
a third party system.
CT Fuel -- manages fuel inventory using the same closed loop approach as CT
Inventory. Real time fuel sales, received from CT POS, are combined with
deliveries, pump tests and stick readings, allowing for instant
reconciliation and analysis. CT Fuel includes a competitive survey feature
so fuel managers can set prices to maximize volume and margin.
CT Lottery -- utilizes the business logic embodied in CT Inventory. Lottery
sales, received from CT POS in real-time, are combined with deliveries
allowing for instant reconciliation.
CT Employee -- records and monitors key employee data such as hire date,
advanced payments and termination date. Operators can compare budgeted and
scheduled hours against actual hours worked with the labor schedule
feature. An electronic task list, complete with instructions, can be
scheduled to appear automatically on CT POS during an employee's shift.
33
<PAGE>
CT Money -- allows store managers quickly to compare funds collected against
safe drops, pay-ins and pay-outs and make adjustments as necessary.
Compu-Touch includes features such as a touch screen interface, user
friendly applications and flexibility in set-up and configuration to
accommodate operational variables at each site. The Compu-Touch system is
based on an open architecture and runs on either the Windows NT or Novell
platform. The application supports multiple POS terminals and a separate back
office system. The product is upgradable so that customers can phase in their
investment with additional hardware and software modules. It also offers
customers scalability, such that the same application can be run in chains
with widely varying numbers and sizes of sites; yet the enterprise solution
remains consistent and supportive of each site.
OrderPoint. Within the convenience store market, the trend toward increased
branded food service offerings has created a demand for consumer-activated
ordering systems. In response, the Company has developed its easy to use,
consumer-activated OrderPoint system. OrderPoint allows a consumer to place an
order, answer a survey, pay with a plastic card, make inquiries and view
promotions through the use of a touch screen. OrderPoint's development
environment and authoring tools allow various media, such as video clips,
logos, pictures and recordings, to be quickly integrated into a consumer-
friendly application.
Management believes OrderPoint allows a retailer to increase labor
productivity, increase revenues through suggestive selling, increase consumer
ordering speed and accuracy, capture consumer information at the point of sale
and respond quickly to changing consumer preferences. OrderPoint was
commercially released in the second quarter of 1996, and, to date, the Company
has sold systems or licensed software to a number of convenience store chains.
Headquarters-Based Product
Core-Tech. In 1996, the Company introduced Core-Tech, a client/server based
software application which allows retailers to better manage multiple
convenience store sites. As of December 1, 1996, the Company had installed
Core-Tech at several headquarters locations and connected it to POS systems at
an aggregate of over 800 retail sites. Current customers include Wawa, Inc.,
Sheetz, Inc., Conoco, Inc., Ultramar Diamond Shamrock Corporation and Petronas
Dagangan Berhad, the national petroleum company of Malaysia. The following is
a summary of the features and functionality of Core-Tech:
Price book -- allows retailers to set prices for products in a timely manner
on a site-by-site, zone-by-zone or system wide basis. Price book also
allows retailers to target prices based on a variety of different factors,
including markups based on cost, gross margins, and target margins.
Site configuration and management -- allows retailers to define and control
the parameters of site operations, such as prohibiting clerks from
authorizing fuel dispensing without prepayment.
Fuel management -- allows retailers to manage fuel inventory movement and
pricing. Such features allow management to define and regulate site pricing
and strategies, including responding to price changes at competitors'
sites.
Executive Information System ("EIS") -- supports headquarters analysis of
site operations, such as sales vs. cost analysis, sales vs. budget
analysis, labor productivity analysis and category management analysis. EIS
also facilitates "what if" analyses, allowing retailers to incorporate and
ascertain the sensitivities of operational variables such as price, cost
and volume.
Electronic Data Interchange -- supports the routing and analysis of purchase
orders and vendor invoices.
34
<PAGE>
The Company believes that Core-Tech is one of the most functional and
comprehensive headquarters management application widely marketed to
convenience store chains. The Core-Tech product is built with state of the art
software tools and is flexible and expandable based on application
architecture and database structure. The application is written in
PowerBuilder, and the database, Microsoft SQL Server, is highly scalable. The
user interface is intuitive and easy to use.
Sales and Marketing
The Company has independent sales efforts in each of its vertical markets.
The Company believes this strategy positions its sales force to understand its
customers' businesses, trends in the marketplace, competitive products and
opportunities for new product development and allows the Company to take a
consultative approach to working with customers.
Within the convenience store market, the Company's Director of National
Accounts manages a staff focusing on national accounts, including all major
petroleum companies. Further, the Company's Director of Sales manages two
distinct efforts: sales to large independent accounts via a geographically
dispersed sales force and sales to international accounts primarily through
distributors. The Company also has implemented a telemarketing effort directed
at chains with a limited number of sites. All sales personnel are compensated
with a base salary and commission based on gross margins and other
profitability measures.
To date, the Company's primary marketing objective has been to increase
awareness of all of the Company's technology solutions. To this end, the
Company has attended industry trade shows and selectively advertised in
industry publications. The Company intends to increase its sales and marketing
activities both domestically and internationally in 1997, and will expand its
advertising in relevant industry publications. Additionally, the Company
intends to continue developing an independent distribution network to sell and
service its products to certain segments of the domestic and international
markets.
Customers
Convenience store customers who have selected the Company as their
technology solutions provider operate over 7,000 sites. As of December 1,
1996, the Company has installed its technology solutions in over 2,000 of
these sites. In 1994 and 1995, two customers accounted for 75.9% and 59.4% of
the Company's total revenues, respectively In the first nine months of 1996,
four customers accounted for 62.9% of the Company's total revenues. The
following is a partial list of major convenience store customers who have
licensed and purchased the Company's products and services:
<TABLE>
<S> <C>
Boardman Petroleum (Smile Gas) Go-Mart, Inc.
Conoco, Inc. Petronas Dagangan Berhad
Dillon Companies, Inc. Sheetz, Inc.
Emro Marketing Company
(Speedway/Starvin' Marvin) Ultramar Diamond Shamrock Corporation
Giant Industries, Inc. Wawa, Inc.
</TABLE>
Competition
In marketing its technology solutions, the Company faces intense
competition, including internal efforts by potential customers. The Company
believes the principal competitive factors are product quality, reliability,
performance, price, vendor and product reputation, financial stability,
features and functions, ease of use, quality of support and degree of
integration effort required with other systems.
Within the convenience store market, the Company believes it is the only
integrated technology solution provider of POS, back office and headquarters
management systems. Within these product lines, the Company faces different
levels of competition. Verifone, Ltd., Dresser Industries, Inc., Gilbarco,
Inc.,
35
<PAGE>
Tokheim Corporation, Stores Automated Software, Inc., Matsushita Electric
Corporation of America (Panasonic), Auto-Gas Systems, Inc. and others provide
POS systems with varying degrees of functionality. Back office and
headquarters client/server software providers include The Software Works!,
Professional Datasolutions Inc. and JDA Software Group, Inc. In addition, the
Company faces competition from systems integrators and other companies such as
Tandem Computers, Inc. who offer an integrated technology solutions approach
by integrating other third party products.
The Company believes there are barriers to entry in the market for
convenience store automation solutions. The Company has invested a significant
amount of time and effort to create the functionality of Compu-Touch and Core-
Tech. The Company believes that the time required for a competitor to
duplicate the functionality of Compu-Touch or Core-Tech is substantial and
would require detailed knowledge of a retailer's operations at local sites and
headquarters. Also, developing a credit card network interface often can take
an additional six to nine months, as the certification process can be time
consuming. Moreover, the major petroleum companies are extremely selective
about which automation system providers are permitted to interface to their
credit networks. As of December 1, 1996, the Company was certified on seven
credit networks, and it currently has initiated the process to become
certified on four other major petroleum company credit networks.
ENTERTAINMENT MARKET
Within the entertainment market, the Company has focused on the cinema
market and plans to expand into amusement parks and stadiums. The Company
markets its products to the cinema market through its PrysmTech joint venture.
There are approximately 27,000 cinema screens in the United States. These
screens are operated at approximately 6,500 sites, with recent trends
emphasizing more screens per site.
The domestic cinema industry is concentrated, with the top six chains
operating approximately 33.0% of the cinema screens. In addition to increasing
screens per site, "megaplexes" have evolved, which combine restaurants, movies
and other forms of entertainment in one facility. While cinema sites typically
are operated in a decentralized manner, the Company believes cinema operators
are focused on implementing cost controls from headquarters.
The Company believes its core technology and products are easily adaptable
for other entertainment venues, such as amusement parks, stadiums and arenas.
To date, the Company has installed systems in one of these facilities and has
pilot installations scheduled for two other amusement parks. While fewer in
number than cinemas, these venues are typically much larger, and management
believes that technology solutions for such operators represents significant
revenue potential for the Company.
Site-Based Products
To date, a majority of the Company's sales to the entertainment market has
consisted of comprehensive site-based solutions that allow retailers to
process transactions and capture data at the point of sale and to manage other
front and back office operations. As of December 1, 1996, the Company had
installed these products at approximately 175 sites. These site-based
solutions are marketed under the "BoxMan," "ConcMan," "OrderPoint," and
"OfficeMan" names. These systems include features such as a touch screen
interface, user-friendly applications and flexibility in configuration to
accommodate operational variables at each site.
These systems are based on an open architecture and run on the Windows NT or
Novell platform. The applications are made to be highly configurable,
typically supporting multiple POS terminals and a separate back office system.
The products are upgradable so that customers can phase in their
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<PAGE>
investment with additional hardware and software modules. These solutions
offer customers scalability, such that the same application can be run in
chains with widely varying numbers and sizes of sites; yet the enterprise
solutions remain consistent and supportive of each site.
BoxMan. BoxMan processes ticket sales, incorporating touch screen technology
at the point of sale. BoxMan provides for a variety of ticket alternatives and
payment options (such as cash, credit card or coupons). Individual sales and
performance are easily tracked, and all of the information gathered at the
point of sale can be communicated throughout the system on a real-time basis.
BoxMan also provides for advanced ticketing and teleticketing, as well as
will-call and self-service ticketing.
ConcMan. ConcMan processes concession sales, incorporating touch screen
technology at the point of sale. ConcMan communicates real time information to
other POS and back office systems. In addition, ConcMan allows a number of
payment methods, such as cash, credit card or coupons, and tracks point of
sale performance data, such as average transaction value and rate of sales.
OrderPoint. OrderPoint is the Company's consumer-activated, multimedia
software. It utilizes graphics, full motion video and audio and allows
consumers to preview movies and purchase tickets and concessions by placing
orders through the use of a touch screen ordering system. It further allows
for remote ticketing and simple credit card purchases. By properly positioning
high profit items, retailers can use OrderPoint to promote combination sales
and implement suggestive selling programs. As of December 1, 1996, OrderPoint
is installed in over 50 cinema sites. See "--Convenience Store Market--Site-
Based Products" for a further description of the OrderPoint system.
OfficeMan. OfficeMan is a back office manager that provides the means for
cinemas to readily gather point of sale and management information. OfficeMan
provides real-time sales monitoring, with automatic updates of point of sale
information, thereby allowing cinemas to manage multiple sites more
effectively. Additionally, OfficeMan permits a cinema operator to define an
employee's security level, manage changes in movie schedules and manage
inventory. OfficeMan also provides an interface to other open systems and
credit card networks.
Headquarters-Based Product
Core-Tech. Core-Tech is the Company's client/server based solution that
permits retailers to manage individual sites from headquarters. Management
believes that there is demand within the entertainment market for a solution
with Core-Tech's features. As a result, the Company currently is adapting
Core-Tech for this market. See "--Convenience Store Market--Headquarters-Based
Product" for a description of the Core-Tech system.
Sales and Marketing
To date, the Company's sales and marketing efforts have consisted primarily
of involvement of senior management of PrysmTech. The Company's primary
marketing objective has been to increase awareness of all of the Company's
technology solutions. In November 1996, the Company hired a manager to plan
and manage the Company's efforts in the amusement park market. The Company
intends to increase its sales and marketing efforts in 1997.
Customers
Cinema customers who have selected the Company as their technology solutions
provider operate a total of 890 sites, or approximately 13.7% of the domestic
cinema sites. As of December 1, 1996, the Company has installed its technology
solutions in approximately 175 of these sites. The following is a partial list
of major cinema customers who have licensed and purchased the Company's
products and services:
Cobb Theatres
Loews Theatre Management Corporation
Mann Theatres
The Marcus Corporation
Regal Cinemas
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<PAGE>
Competition
The market for the Company's technology solutions is intensely competitive
and includes internal efforts by potential customers. The Company believes the
principal competitive factors are product quality, reliability, performance,
price, vendor and product reputation, financial stability, features and
functions, ease of use, quality of support and degree of integration effort
required with other systems. Within the cinema market, the Company faces
competition from Pacer/CATS, a subsidiary of Ticketmaster, Inc., and several
smaller software providers.
QUICK SERVICE RESTAURANT MARKET
The Company believes that its core technology and capabilities effectively
address the needs of the QSR market. To accelerate its entry into this market,
the Company in May 1996 acquired LSI -- an established provider of technology
solutions to the QSR market. LSI provided the Company with a team of
experienced QSR software developers, a functional product line and a customer
base that includes approximately 150 sites, including KFC Corporation and UNO
Restaurant Corporation (Pizzeria Uno). The Company does not intend to actively
market LSI's existing product line. However, the Company believes that its
core technology can be combined with LSI's industry expertise to create a
highly functional technology solution for the QSR market.
The QSR market is the largest and fastest growing segment in the food
service market. As of the end of 1994, there were over 170,000 QSRs in the
United States. Restaurants increasingly require real time information access
and management that permit employees to increase the speed and accuracy with
which they take an order, prepare the food and fill the order, and they must
accommodate numerous concurrent consumer orders at multiple counter top and
drive-through locations. Multiple order input devices, such as wireless, hand-
held terminals and touch screen monitors, may be required to handle high-order
volumes at peak periods.
The captured transaction data may be shared with store management, as well
as regional headquarters management. Such data can be analyzed to provide
performance, market and trend information. Such tasks are substantially
similar to those required in the convenience store and entertainment markets.
The Company is developing a new suite of products based on its Radiant
solution tailored to address the QSR market. Pilots for these products are
scheduled for the first half of 1997.
In marketing its technology solutions, the Company faces intense
competition, including internal efforts by potential customers. The Company
believes the principal competitive factors are product quality, reliability,
performance, price, vendor and product reputation, financial stability,
features and functions, ease of use, quality of support and degree of
integration effort required with other systems. Within the QSR market, the
Company faces competition from companies such as International Business
Machines Corporation, NCR Corporation, Matsushita Electric Corporation of
America (Panasonic), Par Technology Corporation, Compris Technologies, Inc.,
Progressive Software, Inc., Micros Systems, Inc. and many others who currently
deliver technology solutions to the market.
PROFESSIONAL SERVICES
In 1995, the Company determined that the integration, design,
implementation, application and installation of technology solutions were
critical to its ability to effectively market its solutions. Consequently, in
early 1996, the Company established its Radiant Solutions Group to provide
these services to its customers. The Radiant Solutions Group operates as a
stand-alone profit center. The following is a summary of some of the
professional services the Company provides:
Consulting. Business consultants, systems analysts and technical personnel
assist retailers in all phases of systems development, including systems
planning and design, customer-specific configuration of application
modules and on-site implementation or conversion from existing systems.
Directors in the Company's consulting organization typically have
significant consulting or
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retail technology experience. The Company's consulting personnel undergo
extensive training in retail operations and the Company's products.
Consulting services typically are billed on a per diem basis.
Customization. The Company provides custom application development work
for customers billed on a project or per diem basis. Such enhancements
remain the property of the Company.
Training. The Company has a formalized training program available to its
customers, which is provided on a per diem rate at the Company's offices
or at the customer's site.
Integration. Typically, as part of its site solution, the Company
integrates standard PC components for its customers. This is done as part
of the overall technology solution for the customers to protect the
quality of the overall site solution and to provide the customers with a
system that is easy to support over the long term.
The market for the Company's professional services is intensively
competitive. The Company believes the principal competitive factors are the
professional qualifications, expertise and experience of individual
consultants. In the market for professional services, the Company competes
with the consulting divisions of the big six accounting firms, Electronic Data
Systems, Inc. and other systems integrators.
MAINTENANCE AND CUSTOMER SUPPORT
The Company offers customer support on a 24-hour basis, a service which
historically has been purchased by a majority of its customers and also
entitles the customer to product upgrades. In some cases, hardware support is
provided by third parties. The Company can remotely access its customers'
systems in order to perform quick diagnostics and provide on-line assistance.
The annual support option is typically priced at a percentage of the software
and hardware cost.
PRODUCT DEVELOPMENT AND RADIANT TECHNOLOGY
The Company's product development strategy is focused on creating common
technology elements that can be leveraged in applications across various
vertical retail markets. The base technology architecture is designed so that
it can be integrated with products developed by other vendors and can be
phased into a retailer's operations. The Company has developed numerous
applications running on a Windows NT platform. The software architecture
incorporates Microsoft's Component Object Model, providing an efficient
environment for application development.
To implement its strategy, the Company has created Radiant Labs ("Labs"),
with responsibility for developing common technology elements intended for use
across the Company's vertical markets. In addition, the Company maintains
development groups for each of the convenience store, entertainment and QSR
markets. The vertical market development efforts focus on developing industry-
specific applications that leverage the common technology elements developed
by Labs. To facilitate new product development, teams are formed to combine
technical expertise from Labs and industry knowledge from the vertical groups.
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<PAGE>
The Company's Radiant platform, graphically depicted below, was developed
for use across the Company's various vertical markets. It allows multiple,
multimedia software applications to run on separate workstation clients
simultaneously, all driven by a single PC acting as a server. With a Radiant
platform, only one PC is required -- functionality is duplicated through
specialty peripherals ("Radiant Nodes") connected by a fiber optic ring. The
server is responsible for almost all data processing and functionality and
serves as a repository for multimedia data.
TITLE: DESCRIPTION OF RADIANT SYSTEMS, INC.
RADIANT PLATFORM DIAGRAM
STRUCTURE: Diagram illustrating the operating system of the Company's
Radiant platform. The diagram depicts a personal computer acting
as a host to nine nodes, all connected by a solid line
representing a fiber optic connection. The nodes are depicted as
rectangular boxes arranged in a loop to the right of the
depiction of the personal computer.
The diagram is meant to illustrate the fact that as many as 50
nodes may operate as specialty peripherals or workstations when
connected to the personal computer acting as a server. A brief
description is included of the host personal computer, the nodes
and the fibre optic line. Each of these descriptions point to the
relevant component with an arrow.
SUPPORTING
TEXT: Connected by an arrow to the personal computer:
"Radiant Host
. IBM PC compatible
. Windows NT
. Serves in excess of 50 nodes
. Second host provides redundancy"
Connected by an arrow to the nodes:
"Radiant Nodes
. Solid-state multimedia device
. MPEG I & II, SVGA
. Stereo/mono sound
. Intercom
. Mag stripe reader
. 8 Serial devices
. Compact, enclosed design"
Connected by an arrow to the line:
"Bidirectional
Fault-tolerant
Fiber-optic loop"
The Company's Radiant platform offers a number of advantages to the
retailer. Principally, it extends the processing power and functionality of a
PC throughout a dedicated network. A Radiant platform is highly scalable,
depending on the requirements of the customer. It reduces software and network
maintenance costs because the retailer only manages applications on one
server. Moreover, Radiant Nodes require substantially less space than a PC,
improve reliability and reduce cost of ownership.
PROPRIETARY RIGHTS
The Company's success and ability to compete is dependent in part upon its
proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure, copyright and patent law, which may afford only limited
protection. In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries. Although the Company
relies on the limited protection afforded by such intellectual property laws,
it also believes that factors such as the technological and creative skills of
its personnel, new product developments, frequent product enhancements, name
recognition and reliable maintenance are essential to establishing and
maintaining a technology leadership position. The Company presently has one
patent pending. The source code for the Company's proprietary software is
protected both as a trade secret and as a copyrighted work. The Company
generally enters into confidentiality or license agreements with its
employees, consultants and customers and generally controls access to and
distribution of its software, documentation and other proprietary information.
Although the Company restricts the use by the customer of the Company's
software and does not permit the re-sale, sublicense or other transfer of such
software, there can be no assurance that unauthorized use of the Company's
technology will not occur.
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Despite the measures taken by the Company to protect its proprietary rights,
unauthorized parties may attempt to reverse engineer or copy aspects of the
Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult. In addition, litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. These
licenses usually require the Company to pay royalties and fulfill
confidentiality obligations. The Company believes that there are alternative
resources for each of the material components of technology licensed by the
Company from third parties. However, the termination of any such licenses, or
the failure of the third-party licensors to adequately maintain or update
their products, could result in delay in the Company's ability to ship certain
of its products while it seeks to implement technology offered by alternative
sources. Any required replacement licenses could prove costly. Also, any such
delay, to the extent it becomes extended or occurs at or near the end of a
fiscal quarter, could result in a material adverse effect on the Company's
results of operations. While it may be necessary or desirable in the future to
obtain other licenses relating to one or more of the Company's products or
relating to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at all.
In the future, the Company may receive notices claiming that it is
infringing on the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims
or legal proceedings by third parties with respect to current or future
products. In addition, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Any such claim
could be time consuming, result in costly litigation, cause product shipment
delays or force the Company to enter into royalty or license agreements rather
than dispute the merits of such claims. Moreover, an adverse outcome in
litigation or similar adversarial proceedings could subject the Company to
significant liabilities to third parties, require the expenditure of
significant resources to develop non-infringing technology, require disputed
rights to be licensed from others or require the Company to cease the
marketing or use of certain products, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition. To the extent the Company desires or is required to obtain licenses
to patents or proprietary rights of others, there can be no assurance that any
such licenses will be made available on terms acceptable to the Company, if at
all. As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software developers may become increasingly subject to infringement claims.
Any such claims against the Company, with or without merit, as well as claims
initiated by the Company against third parties, can be time consuming and
expensive to defend, prosecute or resolve.
EMPLOYEES
As of December 1, 1996, the Company employed 213 persons. None of the
Company's employees is represented by a collective bargaining agreement nor
has the Company experienced any work stoppage. The Company considers its
relations with its employees to be good.
The Company's future operating results depend in significant part upon the
continued service of its key technical, consulting and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will retain its key managerial
or technical personnel or attract such personnel in the future. The Company
has at times experienced and continues to experience difficulty recruiting
qualified personnel, and there can be no assurance that the Company will not
experience such
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difficulties in the future. The Company, either directly or through personnel
search firms, actively recruits qualified product development, consulting and
sales and marketing personnel. If the Company is unable to hire and retain
qualified personnel in the future, such inability could have a material
adverse effect on the Company's business, operating results and financial
condition.
FACILITIES
The Company's principal facility occupies approximately 43,000 square feet
in Alpharetta, Georgia, under two lease agreements. These lease agreements
expire on January 31, 2000 and August 31, 2000, respectively. The Company is
currently negotiating to lease additional space at its current location. The
Company believes that suitable additional or alternative space is available on
commercially reasonable terms.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority. There are no material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company, or any associate of any of the foregoing is a
party or has an interest adverse to the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
December 1, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Erez Goren..................... 32 Co-Chairman of the Board and Chief
Executive Officer
Alon Goren..................... 31 Co-Chairman of the Board and Chief
Technology Officer
Eric B. Hinkle................. 36 President, Chief Operating Officer and
Director
John H. Heyman................. 35 Executive Vice President, Chief Financial
Officer and Director
Andrew S. Heyman............... 33 Vice President and Managing Director of
Radiant Solutions Group
Carlyle M. Taylor.............. 43 Vice President--Integration and Customer
Response Center
</TABLE>
Mr. Erez Goren has served as Co-Chairman of the Board and Chief Executive
Officer of the Company since its inception in 1985 and as its President from
1985 to October 1996. Mr. Goren attended State University of New York at Stony
Brook prior to devoting his full time and energy to the Company. He is the
brother of Alon Goren.
Mr. Alon Goren has served as Co-Chairman of the Board and Chief Technology
Officer of the Company since its inception in 1985. Mr. Goren has a B.S. in
Computer Systems Engineering from Rensselaer Polytechnic Institute. He is the
brother of Erez Goren.
Mr. Hinkle has served as President, Chief Operating Officer and a Director
of the Company since October 1996. Mr. Hinkle served in various capacities
with the Avionics Divisions of AlliedSignal Corporation from January 1994 to
October 1996, including most recently as Vice President of Communications and
Navigation Products. From 1991 to January 1994, Mr. Hinkle served as a Senior
Engagement Manager for McKinsey & Co., a consulting firm. Mr. Hinkle has an
M.B.A. from Harvard Business School, a M.S. degree in Electrical Engineering
from Stanford University, and a B.S. degree in Computer Engineering from Brown
University.
Mr. John H. Heyman has served as Executive Vice President, Chief Financial
Officer and a Director of the Company since September 1995. Mr. Heyman served
as Vice President and Chief Financial Officer of Phoenix Communications, Inc.,
a commercial printer, from March 1991 to August 1995. From 1989 to 1991, Mr.
Heyman served as Vice President, Acquisitions of Forsch Corporation, a
diversified manufacturing company. From 1983 to 1987, Mr. Heyman served in a
variety of capacities with Arthur Andersen LLP, where he worked primarily with
middle market companies and technology firms. Mr. Heyman has an M.B.A. from
Harvard Business School and a B.B.A. degree in Accounting from the University
of Georgia. He is the brother of Andrew S. Heyman.
Mr. Andrew S. Heyman has served as Vice President and Managing Director of
the Radiant Solutions Group of the Company since January 1996. Mr. Heyman
served as a senior manager with Andersen Consulting from 1987 to December
1995. He holds a M.S. degree in Computer Information Systems from Georgia
State University and a B.B.A. in Finance from the University of Georgia. He is
the brother of John H. Heyman.
Mr. Taylor has served as Vice President--Integration and Customer Response
Center of the Company since September 1995. Mr. Taylor served in various
capacities with NCR Corporation (formerly AT&T Global Information Solutions)
in the retail information systems area from 1978 to September 1995, including
most recently as Assistant Vice President of the scanner business unit. Mr.
Taylor received a B.S. degree in Mathematics from North Carolina Wesleyan
College.
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<PAGE>
The Company intends, within 90 days of this Prospectus, to appoint at least
two additional independent directors (not yet identified) who will be
unaffiliated with the Company.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at four. The
Company's Board of Directors will be divided into three classes, with members
of each class of directors serving for staggered three-year terms. The Board
will consist of two Class I Directors (Mr. Erez Goren and Mr. Alon Goren), one
Class II Director (Mr. John H. Heyman) and one Class III Director (Mr.
Hinkle), whose initial terms shall expire at the 1997, 1998 and 1999 annual
meetings of the shareholders, respectively.
After the consummation of this offering, there will be two standing
Committees of the Board of Directors: the Compensation Committee and the Audit
Committee. The Compensation Committee, which will be composed of the two
independent directors to be appointed following this offering, will review and
make recommendations to the Board of Directors regarding salaries,
compensation and benefits of executive officers and key employees of the
Company. In addition, the Compensation Committee will administer the Company's
1995 Incentive Stock Option Plan. The Audit Committee will be composed of the
two independent directors to be appointed following this offering. Among other
duties, the Audit Committee will review the internal and external financial
reporting of the Company, review the scope of the independent audit and
consider comments by the auditors regarding internal controls and accounting
procedures and management's response to these comments. The Board of Directors
does not have a nominating committee.
EXECUTIVE COMPENSATION
The following table presents certain information concerning compensation
earned for services rendered in all capacities by the Company's Chief
Executive Officer during the year ended December 31, 1995. None of the other
executive officers of the Company had total annual salary and bonus which
exceeded $100,000 during fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND ------------------
PRINCIPAL POSITION SALARY($) BONUS($)
------------------ --------- --------
<S> <C> <C>
Erez Goren ............................................... $60,714 $14,730
Co-Chairman and Chief
Executive Officer
</TABLE>
No stock options or stock appreciation rights have been granted to Mr.
Goren.
STOCK OPTION PLAN
On December 20, 1995, the Company's directors and shareholders adopted the
1995 Incentive Stock Option Plan (the "Plan") for employees who are
contributing significantly to the business of the Company or its subsidiaries
as determined by the Company's Board of Directors or the committee
administering the Plan. The Plan provides for the grant of options to purchase
up to 3,000,000 shares of Common Stock at the discretion of the Board of
Directors of the Company or a committee designated by the Board of Directors
to administer the Plan. The option exercise price must be at least 100.0%
(110.0% in the case of a holder of 10.0% or more of the Common Stock) of the
fair market value of the stock on the date the option is granted and the
options are exercisable by the holder thereof in full at any time prior to
their expiration in accordance with the terms of the Plan. Stock options
granted pursuant to the Plan will expire on or before (1) the date which is
the tenth anniversary of the date the option is granted, or (2) the date which
is the fifth anniversary of the date the option is granted in the event that
the option is granted to a key employee who owns more than 10.0% of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the Company. Options granted under the Plan typically vest over a period of
four to five years. As of December 1, 1996, options to purchase 2,555,750
shares of Common Stock were outstanding pursuant to the Plan. In addition,
non-qualified options to purchase 264,000 shares of Common Stock have been
granted by the Company outside of the Plan as of December 1, 1996.
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<PAGE>
AGREEMENTS WITH EMPLOYEES
All employees of the Company, including executive officers, are required to
sign a confidentiality and non-compete agreement with the Company restricting
the ability of the employee to compete with the Company during his or her
employment and for a period ranging from six months to two years thereafter,
restricting solicitation of customers and employees following employment with
the Company, and providing for ownership and assignment of intellectual
property rights to the Company. The agreements have an indefinite term, but
the employee may terminate employment with the Company at any time.
401(K) PROFIT SHARING PLAN
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan") which
is intended to be a tax-qualified defined contribution plan under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, all employees of the Company who have completed six months of service
and have attained age 21 are eligible to participate. The 401(k) Plan includes
a salary deferral arrangement pursuant to which participants may contribute,
subject to certain Code limitations, a minimum of 3.0% and a maximum of 15.0%
of their salary on a pre-tax basis (up to $9,500 per year). Subject to certain
Code limitations, the Company may make both matching and additional
contributions at the discretion of the Board of Directors of the Company each
year. To date, no contributions have been made by the Company to the 401(k)
Plan. A separate account is maintained for each participant in the 401(k)
Plan. The portion of a participant's account attributable to his or her own
contributions is 100.0% vested. Distributions from the 401(k) Plan may be made
in the form of a lump-sum cash payment or in installment payments.
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<PAGE>
CERTAIN TRANSACTIONS
On May 29, 1995, the Company repurchased 2,628,523 shares of Common Stock
(representing 24.7% of the Company's then outstanding shares of Common Stock)
from Thomas J. Barrella in exchange for certain assets and technology. In
connection therewith, Mr. Barrella resigned his positions as an executive
officer and director of the Company. The transferred assets and technology had
a value of approximately $616,000. As part of the transaction, Mr. Barrella
issued to the Company a note in the amount of $61,171 due in May 1997. As of
December 1, 1996, $17,000 remained outstanding under this note.
On June 7, 1996, Mr. Barrella granted to Erez Goren, the Chief Executive
Officer of the Company, an option to purchase all 600,033 remaining shares of
Common Stock held by Mr. Barrella. This option, exercisable for a period of
one year thereafter at an exercise price of $1.875 per share, will be assigned
to the Company by Mr. Goren for nominal consideration prior to the completion
of this offering. The Company will utilize a portion of the proceeds of this
offering to repurchase all of such shares from Mr. Barrella. See "Use of
Proceeds."
On October 31, 1994, the Company repurchased 3,085,700 shares of Common
Stock (representing 22.5% of the Company's then outstanding shares of Common
Stock) from Lawrence D. Parker in exchange for a note in the amount of
$473,086 due December 31, 1997, and bearing interest at a rate of 8.0%. As of
December 1, 1996, $184,000 remained outstanding under this note. The Company
will utilize a portion of the proceeds of this offering to repay this note.
See "Use of Proceeds." In connection with this transaction, Mr. Parker
resigned his positions as an executive officer and director of the Company and
entered into a five-year consulting agreement with the Company. In October
1995, the monthly consulting fees payable to Mr. Parker were reduced to $2,500
from $14,000. Consulting fees totalling $150,000, $131,000 and $28,000 were
paid by the Company to Mr. Parker in 1994, 1995 and the first eleven months of
1996, respectively.
On May 27, 1994, the Company entered into a Software License, Support and
Equipment Purchase Agreement (the "Emro License Agreement") with Emro
Marketing Company (Speedway/Starvin' Marvin) ("Emro") pursuant to which Emro
agreed to purchase licenses for Compu-Touch systems. Under the terms of the
Emro License Agreement, Emro is to receive a cash rebate upon purchasing a
defined number of software licenses. In the event the Company is unable to pay
the rebates when due, Emro has the option of applying the rebate to the
purchase of additional licenses or requiring the Company to deliver a
promissory note therefor. Accordingly, on March 27, 1996, the Company issued
to Emro a promissory note for accrued rebates in the amount of $873,000 due
March 2001, and bearing interest at a rate of 6.0%. As of December 1, 1996,
$914,000, including accrued interest, remained outstanding under this note.
The Company will utilize a portion of the proceeds of this offering to repay
this note. See "Use of Proceeds." Revenues of $3.4 million, $6.9 million and
$3.7 million were recorded by the Company for systems sales and customer
support, maintenance and other services pursuant to the Emro License Agreement
in 1994, 1995 and the first eleven months of 1996, respectively.
In connection with the Emro License Agreement, the Company granted to Emro a
stock purchase warrant (the "Emro Warrant") to purchase 10.0% of the
outstanding shares of Common Stock of the Company at an exercise price of
$80,000 per percentage unit exercised. The Emro Warrant was subsequently
amended to increase the number of shares of Common Stock issuable thereunder
to 12.0% of the outstanding shares of Common Stock of the Company and to
provide the Company with the right to repurchase 2.0% upon the exercise of the
Emro Warrant at a price equal to the average of the exercise price of the Emro
Warrant and the fair market value of the Common Stock. The Emro Warrant will
be exercised in full prior to the completion of this offering, whereupon
318,996 shares of Common Stock will be sold by Emro hereby, 181,818 shares of
Common Stock will be repurchased by the Company for $1.1 million from the
proceeds of this offering and 590,095 shares of Common Stock will be retained
by Emro. See "Principal and Selling Shareholders" and "Use of Proceeds."
46
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of shares of the Company's Common Stock as of December 1, 1996, and
as adjusted to reflect the sale of the shares offered hereby, by (i) the
Selling Shareholders; (ii) each director of the Company; (iii) each person
known by the Company to own beneficially more than 5.0% of the outstanding
shares of the Common Stock; and (iv) all executive officers and directors of
the Company as a group. Unless otherwise indicated, each shareholder has sole
voting and investment power with respect to the indicated shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(2)
-------------------------- SHARES --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- ------------------------ ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Erez Goren(3)........... 3,428,556 42.9% -- 3,428,556 31.2%
Alon Goren(3)........... 3,428,556 42.9 -- 3,428,556 31.2
Eric B. Hinkle.......... 55,000(4) * -- 55,000(4) *
John H. Heyman.......... 350,000(5) 4.3 -- 350,000(5) 3.1
Emro Marketing Company.. 1,090,909(6) 12.0 318,996 590,095(6) 5.4
Sirrom Capital
Corporation............. 174,642(7) 2.1 131,004 43,638 *
Executive officers and
directors
as a group (6
persons)............... 7,262,112 88.2 -- 7,262,112 64.8
</TABLE>
- --------
* Less than 1.0% of outstanding shares.
(1) Pursuant to the rules of the Commission, certain shares of the Company's
Common Stock that a beneficial owner has the right to acquire within 60
days pursuant to the exercise of stock options or warrants are deemed to
be outstanding for the purpose of computing the percentage ownership of
such owner but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
(2) If the over-allotment option is exercised, Mr. Erez Goren and Mr. Alon
Goren will each sell up to 100,000 shares of Common Stock, and Mr. John H.
Heyman will sell up to 10,000 shares of Common Stock. See "Underwriting."
(3) The address of Erez Goren and Alon Goren is 1000 Alderman Drive, Suite A,
Alpharetta, Georgia 30202.
(4) Represents 55,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(5) Includes 175,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(6) Represents shares of Common Stock issuable upon the exercise of
outstanding common stock purchase warrants which will be exercised prior
to the completion of this offering. Shares beneficially owned after the
offering exclude 181,818 shares of Common Stock which will be repurchased
by the Company upon completion of this offering. See "Use of Proceeds."
The address of Emro Marketing Company is P.O. Box 1500, Springfield, Ohio
45501.
(7) Represents shares of Common Stock issuable upon the exercise of
outstanding common stock purchase warrants, which will be exercised prior
to the completion of this offering.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, no par value per share and 10,000,000 shares of non-voting Class
A Common Stock, no par value per share. Simultaneously with the completion of
this offering, all shares of Class A Common Stock will automatically be
converted into shares of Common Stock. The following description is qualified
in its entirety by reference to the Company's Articles of Incorporation, as
amended (the "Articles"), and Bylaws (the "Bylaws"), which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
As of December 1, 1996, there were 6,857,112 shares of Common Stock
outstanding, held of record by two shareholders. The holders of Common Stock
are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders and shall vote with all other shares of
Common Stock as a single class. Cumulative voting in the election of directors
is not permitted. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of the Company, holders of Common Stock shall possess equal rights and
privileges on a share-for-share basis. Holders of Common Stock have no
conversion, preemptive or other rights to subscribe for additional shares or
other securities, and there are no redemption or sinking fund provisions with
respect to such shares. The issued and outstanding shares of Common Stock are,
and the shares offered hereby will be upon payment therefor, fully paid and
nonassessable.
CLASS A COMMON STOCK
As of December 1, 1996, there were 1,142,889 shares of Class A Common Stock
outstanding, held of record by four shareholders. The shares of Class A Common
Stock will automatically be converted into shares of Common Stock on a one-
for-one basis upon consummation of this offering. Except with respect to
voting rights, which (except as provided by law) are denied to the holders of
Class A Common Stock, the Class A Common Stock ranks pari passu with the
Common Stock and possesses equal rights and privileges.
PREFERRED STOCK
The Company proposes to amend its Articles to authorize the Board of
Directors, subject to certain limitations prescribed by law, without further
shareholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock in one or more series and to fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions on the shares of each such series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations
of such series. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change of control of the Company. No
shares of Preferred Stock are presently outstanding.
CERTAIN CHARTER AND BYLAW PROVISIONS
Shareholders' rights and related matters are governed by the Georgia
Business Corporation Code and the Company's Articles and Bylaws. Certain
current and proposed provisions of the Articles and Bylaws, which are
summarized below, could, either alone or in combination with each other, have
the effect of preventing a change in control of the Company or making changes
in management more difficult.
48
<PAGE>
Corporate Takeover Provisions. The Company's Bylaws will be amended to make
applicable to the Company provisions authorized by the Georgia Business
Corporation Code relating to business combinations with interested
shareholders ("Corporate Takeover Provisions"). The Corporate Takeover
Provisions are designed to encourage any person, before acquiring 10.0% of the
Company's voting shares, to seek approval of the Board of Directors for the
terms of any contemplated business combination. The Corporate Takeover
Provisions will prevent for five years certain business combinations with an
"interested shareholder" (as defined in the Corporate Takeover Provisions)
unless (i) prior to the time such shareholder became an interested shareholder
the Board of Directors approved either the business combination or the
transaction that resulted in the shareholder becoming an interested
shareholder, (ii) in the transaction that resulted in the shareholder becoming
an interested shareholder, the interested shareholder became the beneficial
owner of at least 90.0% of the outstanding voting shares of the Company
excluding, however, shares owned by the Company's officers, directors,
affiliates, subsidiaries and certain employee stock plans or (iii) subsequent
to becoming an interested shareholder, such shareholder acquired additional
shares resulting in the interested shareholder becoming the owner of at least
90% of the Company's outstanding voting shares and the business combination is
approved by the holders of majority of the Company's voting shares, excluding
from said vote the stock owned by the interested shareholder or by the
Company's officers, directors, affiliates, subsidiaries and certain employee
stock plans.
Shareholders of the Company who became interested shareholders prior to the
time of the adoption of the Corporate Takeover Provisions are not subject to
such provisions.
The Board of Directors will be divided into three classes, as nearly equal
in size as possible, with staggered three-year terms. One class is elected
each year. The classification of the Board of Directors could have the effect
of making it more difficult for a third party to acquire control of the
Company.
Constituency Considerations. The Company's Articles provide for the right of
the Board of Directors to consider the interests of various constituencies,
including employees, customers, suppliers and creditors of the Company, as
well as the communities in which the Company is located, in addition to the
interest of the Company and its shareholders, in discharging their duties in
determining what is in the Company's best interests.
Limitation of Directors' Liability. The Company's Articles eliminate,
subject to certain exceptions, the personal liability of directors to the
Company or its shareholders for monetary damages for breaches of such
directors' duty of care or other duties as a director. The Articles do not
provide for the elimination of or any limitation on the personal liability of
a director for (i) any appropriation, in violation of the director's duties,
of any business opportunity of the Company, (ii) acts or omissions that
involve intentional misconduct or a knowing violation of law, (iii) unlawful
corporate distributions or (iv) any transaction from which the director
received an improper benefit. In addition, the Company's Bylaws provide broad
indemnification rights to directors and officers so long as the director or
officer acted in a manner believed in good faith to be in or not opposed to
the best interests of the Company, and with respect to criminal proceedings,
if the director has no reasonable cause to believe his or her conduct was
unlawful. These provisions of the Articles and Bylaws will limit the remedies
available to a shareholder who is dissatisfied with a Board decision protected
by these provisions.
The Articles will be amended to provide for the affirmative vote of holders
of at least 75.0% of shares of Common Stock entitled to vote generally in the
election of directors, voting as a single voting group, is required to alter
or amend the provisions of the Articles providing for a staggered board of
directors, or to alter or amend the following provisions of the Bylaws:
indemnification of officers and directors, the vote required to amend the
Bylaws, fair price provisions, business combinations with interested
shareholders, special meetings of shareholders, the number of the Company's
directors, removal of directors, and who may fill vacancies within the board
of directors.
49
<PAGE>
REGISTRATION RIGHTS
Upon completion of this offering, the holder of 43,638 shares of Common
Stock will be entitled to piggyback registration rights with respect to such
shares.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is SunTrust Bank,
Atlanta.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
10,983,701 shares of Common Stock assuming no exercise of the Underwriters'
over-allotment option. See "Underwriting." Of these shares, all of the
2,950,000 shares of Common Stock sold in this offering will be freely
transferable without restriction or limitation under the Securities Act. The
remaining 8,033,701 shares are "restricted" shares within the meaning of Rule
144 adopted under the Securities Act (the "Restricted Shares"). The Restricted
Shares were issued and sold by the Company in private transactions in reliance
upon exemptions from registration under the Securities Act and may not be sold
except in compliance with the registration requirements of the Securities Act
or pursuant to an exemption from registration, such as the exemption provided
by Rule 144 under the Securities Act.
Beginning 90 days after the date of this Prospectus, approximately 7,199,968
Restricted Shares will be eligible for sale in the public market pursuant to
Rule 144. No other Restricted Shares will be eligible for sale under Rule 144
at that time. In general, under Rule 144 as currently in effect, any person
(or persons whose shares are aggregated), including an affiliate of the
Company, who has held shares for at least a two-year period (as computed under
Rule 144) is entitled to sell within any three-month period a number of shares
that does not exceed the greater of (i) 1.0% of the then outstanding shares of
the Company's Common Stock (approximately 110,000 shares after giving effect
to this offering) and (ii) the average weekly trading volume in the Company's
Common Stock during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain provisions relating to the
manner of sale, the filing of a notice of sale and the availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed an affiliate of the Company at any time during
the 90 days immediately preceding a sale, and who has held shares for at least
a three-year period (as computed under Rule 144), would be entitled to sell
such shares under Rule 144(k) without regard to the volume limitation and
other conditions described above. Rule 144A under the Securities Act permits
the immediate sale by the current holders of Restricted Shares of all or a
portion of their shares to certain qualified institutional buyers as defined
in Rule 144A.
Upon completion of this offering, the holder of 43,638 shares of Common
Stock will be entitled to piggyback registration rights with respect to such
shares.
Prior to this offering, there has been no market for the Common Stock and no
prediction can be made as to the effect, if any, that market sales of shares
or the availability of such shares for sale will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of Common Stock
in the public market may have an adverse impact on such market price.
The Company and its executive officers, directors and shareholders (who hold
an aggregate of 8,000,001 shares of Common Stock) have agreed not to offer,
sell, sell short or otherwise dispose of any of their shares of Common Stock
(other than the shares offered by the Company and the Selling Shareholders in
this offering) in the public market for a period of 180 days after the date of
this Prospectus without the prior consent of the Representatives of the
Underwriters (the "Lock-up Period"). Following the Lock-up Period, these
shares will be eligible for sale in the public market, subject to the
conditions and restrictions of Rule 144, as described above.
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Alex. Brown & Sons Incorporated, Deutsche Morgan Grenfell Inc. and The
Robinson-Humphrey Company, Inc. (the "Representatives"), have severally agreed
to purchase from the Company and the Selling Shareholders the following
respective numbers of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.......................................
Deutsche Morgan Grenfell Inc..........................................
The Robinson-Humphrey Company, Inc....................................
---------
Total................................................................. 2,950,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial
public offering, the public offering price and other selling terms may be
changed by the Representatives of the Underwriters.
The Company and certain of the Company's shareholders (the "Option Holders")
have granted to the Underwriters an option, exercisable not later than 30 days
after the date of this Prospectus, to purchase up to 442,500 additional shares
of Common Stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased
by each of them shown in the above table bears to 2,950,000, and the Company
and the Option Holders will be obligated, pursuant to the option, to sell such
shares to the Underwriters. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the Common Stock
offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 2,950,000 shares are being
offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company, the Selling Shareholders and the Option Holders
against certain liabilities, including liabilities under the Securities Act.
The Company has agreed not to offer, sell, sell short or otherwise dispose
of any shares of Common Stock for a period of 180 days from the date of this
Prospectus without the prior consent of Alex. Brown & Sons Incorporated,
except that the Company may issue and may grant options representing the right
to purchase shares of Common Stock under its current stock option plan and may
issue shares of Common
51
<PAGE>
Stock upon exercise of currently outstanding employee stock options.
Directors, executive officers and shareholders of the Company, owning in the
aggregate 8,000,001 shares of Common Stock and options representing the right
to purchase 945,000 shares of Common Stock, have agreed not to offer, sell,
sell short or otherwise dispose of any such shares of Common Stock
beneficially owned by them or any shares issuable upon exercise of stock
options for a period of 180 days from the date of this Prospectus without the
prior written consent of Alex. Brown & Sons Incorporated. See "Shares Eligible
for Future Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock has been determined by negotiations among the Company, the Selling
Shareholders and the Representatives of the Underwriters. Among the factors to
be considered in such negotiations will be prevailing market conditions, the
results of operations of the Company in recent periods, the capital structure
of the Company, the market capitalizations and stages of development of other
companies which the Company and the Representatives of the Underwriters
believe to be comparable to the Company, estimates of the business potential
of the Company, an assessment of the Company's management, the present state
of the Company's development and other factors deemed relevant.
From time to time in the ordinary course of their respective businesses, the
Representatives have provided and may in the future provide investment banking
or other services to the Company. In accordance with an agreement in July
1996, the Company will issue to The Robinson-Humphrey Company, Inc., a warrant
to purchase 20,000 shares of Common Stock for a term expiring in July 2001 at
an exercise price of $.01 per share as compensation for investment banking
services rendered in connection with financing provided to the Company by
Sirrom Capital Corporation.
The Company will apply for listing of the Common Stock on the Nasdaq
National Market.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
Certain legal matters in connection with this offering are being passed upon
for the Underwriters by Alston & Bird, Atlanta, Georgia.
EXPERTS
The combined financial statements of the Company as of December 31, 1994 and
1995 and for each of the three years in the period ended December 31, 1995
included herein have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included herein in reliance
upon the authority of such firm as experts in accounting and auditing in
giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which is part of the Registration Statement, does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement and such exhibits and schedules
filed as a part thereof, which
52
<PAGE>
may be inspected, without charge, at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at Seven
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the
Registration Statement may be obtained from the Public Reference Section of
the Commission, upon payment of prescribed fees. Such material also may be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are necessarily summaries of such
documents. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
53
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Combined Balance Sheets--December 31, 1994 and 1995,
September 30, 1996 (unaudited) and pro forma shareholders'
deficit at September 30, 1996 (unaudited)................................ F-3
Combined Statements of Operations--years ended December 31, 1993, 1994
and 1995 and nine months ended September 30, 1995 and 1996 (unaudited)... F-4
Combined Statements of Shareholders' Equity (Deficit)--years ended
December 31, 1993, 1994 and 1995 and nine months ended
September 30, 1996 (unaudited)........................................... F-5
Combined Statements of Cash Flows--years ended December 31, 1993, 1994 and
1995
and nine months ended September 30, 1995 and 1996 (unaudited)............ F-6
Notes to Combined Financial Statements.................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Radiant Systems, Inc.:
We have audited the accompanying combined balance sheets of RADIANT SYSTEMS,
INC. (a Georgia corporation) and LIBERTY SYSTEMS INTERNATIONAL, INC. (a
Georgia corporation) as of December 31, 1994 and 1995 and the related
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Radiant Systems, Inc. and
Liberty Systems International, Inc. as of December 31, 1994 and 1995 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 6, 1996
F-2
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DEFICIT AT
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996
---------- ---------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents............. $ 367,254 $ 164,550 $ 882,178
Accounts receivable, net
of allowances for
doubtful accounts of $0,
$41,500, and $50,000 in
1994, 1995, and 1996,
respectively............ 1,126,982 624,179 3,514,387
Inventories.............. 2,090,470 1,802,716 2,422,382
Other.................... 42,928 116,971 461,880
---------- ---------- -----------
Total current assets... 3,627,634 2,708,416 7,280,827
PROPERTY AND EQUIPMENT, net
of accumulated
depreciation of $220,827,
$670,266, and $1,183,459
in 1994, 1995, and 1996,
respectively.............. 1,055,022 1,030,669 1,271,197
SOFTWARE DEVELOPMENT COSTS,
net of accumulated
amortization of $22,183,
$121,365, and $279,538 in
1994, 1995, and 1996,
respectively.............. 110,912 340,630 597,960
INVESTMENT IN PRYSMTECH.... 0 32,274 471,513
OTHER ASSETS............... 24,136 122,950 392,735
---------- ---------- -----------
$4,817,704 $4,234,939 $10,014,232
========== ========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable......... $1,164,460 $2,298,068 $ 2,677,758
Accrued liabilities...... 116,744 1,264,465 1,243,863
Customer deposits and
deferred revenue........ 3,058,707 2,399,596 3,192,479
Current portion of
shareholder loan........ 145,302 157,361 167,059
Current portion of long
term debt............... 169,879 252,979 554,327
---------- ---------- -----------
Total current
liabilities........... 4,655,092 6,372,469 7,835,486
Accrued customer
rebates................. 132,804 457,317 0
Shareholder loan, less
current portion......... 327,784 170,423 43,887
Long term debt, less
current portion......... 424,455 389,044 5,142,845
---------- ---------- -----------
Total liabilities...... 5,540,135 7,389,253 13,022,218
---------- ---------- -----------
COMMITMENTS
PUT WARRANTS............... 0 0 481,200
---------- ---------- -----------
SHAREHOLDERS' EQUITY
(DEFICIT):
Common stock, no par
value; 20,000,000 shares
authorized; 10,285,668
issued and outstanding
in 1994 and 6,857,112
shares issued and
outstanding in 1995 and
1996.................... 94 63 63 $ 83
Class A common stock, no
par value; 10,000,000
shares authorized;
342,856 shares issued
and outstanding in 1994
and 1,142,889 shares
issued and outstanding
in 1995 and 1996........ 3 10 10 0
Additional paid-in
capital................. 0 0 0 1,279,000
Warrants................. 240,000 240,000 359,000 40,000
Deferred sales discount.. (202,500) (111,900) (146,800) 0
Accumulated deficit...... (760,028) (3,282,487) (3,701,459) (3,701,459)
---------- ---------- ----------- -----------
(722,431) (3,154,314) (3,489,186) $(2,382,376)
---------- ---------- ----------- ===========
$4,817,704 $4,234,939 $10,014,232
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-3
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEARS ENDED DECEMBER 31 ENDED SEPTEMBER 30
----------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Systems sales.......... $3,747,587 $13,528,808 $14,077,704 $ 9,446,622 $17,471,787
Customer support,
maintenance, and other
services.............. 552,048 918,801 1,804,291 1,366,196 2,514,443
---------- ----------- ----------- ----------- -----------
Total revenues......... 4,299,635 14,447,609 15,881,995 10,812,818 19,986,230
---------- ----------- ----------- ----------- -----------
COST OF REVENUES:
Systems sales.......... 2,306,481 9,459,034 9,862,477 6,769,258 10,601,909
Customer support,
maintenance, and other
services.............. 588,490 1,207,684 2,300,239 1,659,968 3,644,249
---------- ----------- ----------- ----------- -----------
Total cost of
revenues.............. 2,894,971 10,666,718 12,162,716 8,429,226 14,246,158
---------- ----------- ----------- ----------- -----------
GROSS PROFIT............ 1,404,664 3,780,891 3,719,279 2,383,592 5,740,072
---------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Product development.... 270,786 983,999 1,639,669 1,173,503 2,077,753
Purchased research and
development costs..... 0 0 0 0 30,000
Sales and marketing.... 208,498 470,177 606,658 436,243 792,667
Depreciation and
amortization.......... 46,233 177,790 583,483 387,071 676,384
General and
administrative........ 332,250 2,243,097 2,990,039 2,163,745 2,824,977
---------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 857,767 3,875,063 5,819,849 4,160,562 6,401,781
---------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM
OPERATIONS............. 546,897 (94,172) (2,100,570) (1,776,970) (661,709)
INTEREST EXPENSE, net... 18,899 81,748 166,478 82,975 305,565
EQUITY IN (EARNINGS) OF
PRYSMTECH.............. 0 0 (32,274) 0 (537,094)
OTHER (INCOME).......... 0 0 (374,018) (374,018) (35,408)
---------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PRO
FORMA INCOME TAXES..... 527,998 (175,920) (1,860,756) (1,485,927) (394,772)
PRO FORMA INCOME TAX
PROVISION (BENEFIT).... 205,721 (60,632) (709,165) (566,138) (145,635)
---------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME
(LOSS)................. $ 322,277 $ (115,288) $(1,151,591) $ (919,789) $ (249,137)
========== =========== =========== =========== ===========
PRO FORMA NET INCOME
(LOSS) PER COMMON AND
COMMON EQUIVALENT
SHARE.................. $ (0.10) $ (0.02)
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING..... 11,594,597 11,186,899
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK DEFERRED ACCUMULATED
------------------ ---------------- SALES EARNINGS
SHARES AMOUNT SHARES AMOUNT WARRANTS DISCOUNT (DEFICIT) TOTAL
---------- ------ --------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1992................... 13,714,224 $125 0 $ 0 $ 0 $ 0 $ (272,783) $ (272,658)
Distributions to
shareholders.......... 0 0 0 0 0 0 (110,000) (110,000)
Income before pro forma
income taxes.......... 0 0 0 0 0 0 527,998 527,998
---------- ---- --------- --- -------- --------- ----------- -----------
BALANCE, December 31,
1993................... 13,714,224 125 0 0 0 0 145,215 145,340
Issuance of customer
warrant............... 0 0 0 0 240,000 (240,000) 0 0
Sales of software
licenses under
customer warrant...... 0 0 0 0 0 37,500 0 37,500
Treasury stock
purchase.............. (3,428,556) (31) 342,856 3 0 0 (573,057) (573,085)
Distributions to
shareholders.......... 0 0 0 0 0 0 (156,266) (156,266)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 (175,920) (175,920)
---------- ---- --------- --- -------- --------- ----------- -----------
BALANCE, December 31,
1994................... 10,285,668 94 342,856 3 240,000 (202,500) (760,028) (722,431)
Sales of software
licenses under
customer warrants..... 0 0 0 0 0 90,600 0 90,600
Treasury stock
purchase.............. (3,428,556) (31) 800,033 7 0 0 (616,000) (616,024)
Distributions to
shareholders.......... 0 0 0 0 0 0 (45,703) (45,703)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 (1,860,756) (1,860,756)
---------- ---- --------- --- -------- --------- ----------- -----------
BALANCE, December 31,
1995................... 6,857,112 63 1,142,889 10 240,000 (111,900) (3,282,487) (3,154,314)
Issuance of customer
warrant............... 0 0 0 0 79,000 (79,000) 0 0
Sales of software
licenses under
customer warrants..... 0 0 0 0 0 44,100 0 44,100
Issuance of warrant for
loan origination
fees.................. 0 0 0 0 40,000 0 0 40,000
Accretion of put
warrants.............. 0 0 0 0 0 0 (13,200) (13,200)
Distributions to
shareholders.......... 0 0 0 0 0 0 (11,000) (11,000)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 (394,772) (394,772)
---------- ---- --------- --- -------- --------- ----------- -----------
BALANCE, September 30,
1996 (Unaudited)....... 6,857,112 $ 63 1,142,889 $10 $359,000 $(146,800) $(3,701,459) $(3,489,186)
========== ==== ========= === ======== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEARS ENDED DECEMBER 31 ENDED SEPTEMBER 30
------------------------------------- ----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Pro forma net income
(loss)............... $ 322,277 $ (115,288) $(1,151,591) $(919,789) $ (249,137)
Adjustments to
reconcile pro forma
net income (loss) to
net cash provided by
(used in) operating
activities:
Pro forma income tax
provision (benefit).. 205,721 (60,632) (709,165) (566,138) (145,635)
Depreciation and
amortization......... 46,233 177,790 583,483 387,071 676,384
Amortization of debt
discount............. 0 0 0 0 87,777
Gain on disposition of
assets............... 0 0 (374,018) (374,018) 0
Discounts earned on
software license
sales................ 0 37,500 90,600 49,200 44,100
Purchased research and
development costs.... 0 0 0 0 30,000
Equity in earnings of
PrysmTech............ 0 0 (32,274) 0 (537,094)
Changes in assets and
liabilities:
Accounts receivable.. (1,119,618) 294,010 255,303 500,377 (2,687,691)
Inventories.......... (634,339) (1,443,175) 287,754 777,700 (619,666)
Other assets......... (10,522) (37,618) (100,313) (85,825) (474,260)
Accounts payable..... 469,765 539,560 1,177,653 207,636 354,436
Accrued liabilities.. 0 116,744 1,147,721 0 (413,418)
Accrued customer
rebates............. 0 132,804 324,513 175,664 57,834
Customer deposits and
deferred revenue.... 1,372,062 1,201,922 (659,111) 309,733 1,150,233
----------- ----------- ----------- --------- -----------
Net cash provided by
(used in) operating
activities......... 651,579 843,617 840,555 461,611 (2,726,137)
----------- ----------- ----------- --------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment........ (241,573) (303,499) (312,104) (174,937) (419,812)
Capitalized software
development costs.... 0 (133,095) (328,900) (246,518) (415,505)
Purchase of treasury
stock................ 0 (100,000) 0 0 0
Purchase of LSI, net
of $30,919 cash
acquired............. 0 0 0 0 30,819
----------- ----------- ----------- --------- -----------
Net cash used in
investing
activities......... (241,573) (536,594) (641,004) (421,455) (804,498)
----------- ----------- ----------- --------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayments of
shareholder loan..... 0 0 (145,302) (107,884) (116,837)
Borrowings under long-
term debt............ 0 0 0 0 4,594,202
Repayments of long-
term debt............ 0 (92,928) (169,878) (131,894) (233,763)
PrysmTech (borrowings)
repayments........... 0 0 (25,000) 0 25,000
Dividends received
from PrysmTech....... 0 0 0 0 97,855
Payment of loan
origination fees..... 0 0 0 0 (129,638)
Distributions to
shareholders......... (110,000) (156,266) (45,703) (21,450) (11,000)
Repayments of note
from shareholder..... 0 0 13,628 8,972 22,444
Other................. (26,413) 0 (30,000) (30,000) 0
----------- ----------- ----------- --------- -----------
Net cash (used in)
provided by
financing
activities......... (136,413) (249,194) (402,255) (282,256) 4,248,263
----------- ----------- ----------- --------- -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS........... 273,593 57,829 (202,704) (242,100) 717,628
CASH AND CASH
EQUIVALENTS, beginning
of period............. 35,832 309,425 367,254 367,254 164,550
----------- ----------- ----------- --------- -----------
CASH AND CASH
EQUIVALENTS, end of
period................ $ 309,425 $ 367,254 $ 164,550 $ 125,154 $ 882,178
=========== =========== =========== ========= ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest.. $ 3,136 $ 81,748 $ 166,478 $ 82,975 $ 212,846
=========== =========== =========== ========= ===========
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment purchases
under capital lease
obligations.......... $ 72,905 $ 598,538 $ 217,568 $ 149,319 $ 230,208
=========== =========== =========== ========= ===========
Note issued for
treasury stock
purchase............. $ 0 $ 473,085 $ 0 $ 0 $ 0
=========== =========== =========== ========= ===========
Treasury stock
acquired on sale of
noncash assets....... $ 0 $ 0 $ 616,024 $ 0 $ 0
=========== =========== =========== ========= ===========
Warrants issued to
customer............. $ 0 $ 240,000 $ 0 $ 0 $ 79,000
=========== =========== =========== ========= ===========
Note payable issued
for customer
rebates.............. $ 0 $ 0 $ 0 $ 0 $ 872,501
=========== =========== =========== ========= ===========
Put warrants issued in
connection with
Sirrom Notes......... $ 0 $ 0 $ 0 $ 0 $ 468,000
=========== =========== =========== ========= ===========
Warrant issued for
loan origination
fees................. $ 0 $ 0 $ 0 $ 0 $ 40,000
=========== =========== =========== ========= ===========
Accretion of put
warrants............. $ 0 $ 0 $ 0 $ 0 $ 13,200
=========== =========== =========== ========= ===========
Assumption of net
liabilities in
connection with LSI
purchase............. $ 0 $ 0 $ 0 $ 0 $ 78,349
=========== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
1. ORGANIZATION AND BACKGROUND
Radiant Systems, Inc. (the "Company") provides enterprise-wide technology
solutions to selected vertical markets within the retail industry. The Company
offers fully integrated retail automation solutions, including point of sale
systems, consumer-activated order systems, back office management systems and
headquarters-based management systems. The Company's products enable retailers
to interact electronically with consumers, capture data at the point of sale,
manage site operations and logistics and communicate electronically with their
sites, vendors and credit networks. In addition, the Company offers system
planning, design and implementation services that tailor the automation
solution to each retailer's specifications.
The Company originally was organized under the laws of the state of New York
on August 1, 1985 and subsequently reincorporated under the laws of the state
of Georgia on October 27, 1995. The name of the Company was changed to Radiant
Systems, Inc. from Softsense Computer Products, Inc. on November 13, 1996. In
connection with the reincorporation of the Company in October 1995, each
outstanding share of Common Stock and Class A Common Stock of the Company was
exchanged for 109,714 shares of Common Stock and Class A Common Stock, as
applicable. The shares outstanding and all other references to shares of
Common Stock and Class A Common Stock reported have been restated to give
effect to the reincorporation.
In the first quarter of 1997, the Company is planning an initial public
offering (the "Offering") of its Common Stock. In connection with the planned
Offering, the Company will convert from an S corporation to a C corporation
and one of the Company's principal shareholders will contribute his 21%
ownership in Liberty Systems International, Inc. ("LSI") to the Company,
whereby LSI will become a wholly-owned subsidiary of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The accompanying combined financial statements include the accounts of
Radiant Systems, Inc. and, since May 1996, its 79%-owned subsidiary, LSI. The
remaining 21% ownership of LSI has been combined with the Company's financial
statements since it will be contributed to the Company in connection with the
planned Offering. All significant intercompany accounts have been eliminated.
Presentation
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The accompanying financial statements as of September 30, 1996 and for the
nine-month periods ended September 30, 1995 and 1996 are unaudited. In the
opinion of the management of the Company, these financial statements reflect
all adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of the financial statements. The results of
operations for the nine-month period ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the full year.
F-7
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
Revenue Recognition
The Company's revenue is generated primarily through software and system
sales, support and maintenance, and installation and training:
. Software and System Sales. The Company sells its products, which include
both hardware and software licenses, directly to end users. Revenue from
software licenses and system sales is generally recognized as products
are shipped, provided that no significant vendor and post-contract
support obligations remain, and the collection of the related receivable
is probable.
. Support and Maintenance. The Company offers to its customers post-
contract support in the form of maintenance, telephone support, and
unspecified software enhancements. Revenue from support and maintenance
is generally recognized as the service is performed.
. Installation and Training. The Company offers installation and training
services to its customers through its Radiant Solutions Group. Revenue
from installation and training is generally recognized at the time the
service is performed.
Payments received in advance are recorded as customer deposits and deferred
revenue in the accompanying balance sheets and are recognized as revenue when
the related product is shipped or related revenue is earned.
Inventories
Inventories consist principally of computer hardware and software media and
are stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over estimated useful lives of three to five years.
Property and equipment at December 31, 1994 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Computers and office equipment....................... $ 905,539 $1,201,747
Furniture and fixtures............................... 283,997 383,869
Purchased software................................... 86,313 115,319
---------- ----------
1,275,849 1,700,935
Less accumulated depreciation and amortization....... (220,827) (670,266)
---------- ----------
$1,055,022 $1,030,669
========== ==========
</TABLE>
Software Development Costs
Capitalized software development costs consist principally of salaries and
certain other expenses directly related to development and modification of
software products. Capitalization of such costs begins when a working model
has been produced as evidenced by the completion of design, planning, coding
and testing such that the product meets its design specifications and has
thereby established technological feasibility. Capitalization of such costs
ends when the resulting product is available for general release to the
public. Amortization of capitalized software development costs is provided at
the greater of the ratio of current product revenue to the total of current
and anticipated product revenue or on a straight-line basis over the estimated
economic life of the software, which the Company has determined is not more
than three years.
F-8
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
Purchased Research and Development Costs
In connection with the acquisition of LSI in May 1996, the Company allocated
$30,000 of the purchase price to incomplete research and development projects.
Accordingly, these costs were expensed as of the acquisition date. The
allocation represents the estimated fair value related to incomplete projects.
The development of these projects had not yet reached technological
feasibility, and the technology has no alternative future use. The technology
acquired in the acquisition will require substantial additional development by
the Company.
The Company intends to purchase 50% of PrysmTech, L.L.C. ("PrysmTech")
currently owned by Billmart, L.L.C. ("Billmart") (Note 4). The Company expects
to expense approximately $3,628,000 of the purchase price as purchased
research and development costs.
Income Taxes
The Company has elected to be treated as an S corporation for federal and
state income tax purposes. As a result, the income tax effects of the Company
accrue directly to its shareholders. Amounts are distributed to shareholders
for making applicable tax payments.
The accompanying combined financial statements reflect a provision for
income taxes on a pro forma basis as if the Company were liable for federal
and state income taxes as a taxable corporate entity throughout the years
presented. The pro forma income tax provision has been computed by applying
the Company's anticipated statutory tax rate to pretax income (loss), adjusted
for permanent tax differences.
Pro Forma Net Income (Loss) Per Share
Pro forma net income (loss) per share is computed using the weighted average
number of shares of common stock and dilutive common stock equivalent shares
("CSEs") from stock options and warrants (using the treasury stock method).
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common stock and CSEs issued at prices below the expected public offering
price during the 12-month period prior to the Company's planned Offering have
been included in the calculation as if they were outstanding for all periods
prior to the Offering presented, regardless of whether they are dilutive. Net
income is not reduced by the $13,200 provision for accretion of Put Warrants
redemption values because the calculation assumes the related Common Stock was
outstanding in lieu of the Put Warrants (Notes 6 and 8).
Historical net income per share has not been presented in view of the S
corporation status in prior periods and the anticipated change in capital
structure upon closing of the planned Offering.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade accounts payable,
and other financial instruments approximate their fair values principally
because of the short-term maturities of these instruments. The fair value of
the Company's long-term debt is estimated based on the current rates offered
to the Company for debt of similar terms and maturities. Under this method,
the Company's fair value of long-term debt was not significantly different
than the stated value at December 31, 1995.
Statement of Cash Flows
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash.
F-9
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
Significant Customer Concentration
A majority of the Company's customers operate within the convenience store
market, and a significant portion of the Company's revenues are derived from a
limited number of customers. During the nine months ended September 30, 1996,
sales to four customers accounted for 63% of the Company's total revenues. At
September 30, 1996, 29% of the Company's accounts receivable related to these
four customers.
During the years ended December 31, 1995 and 1994, sales to two customers
accounted for 59% and 76% of the Company's total revenues, respectively. At
December 31, 1995, 40% of the Company's accounts receivable related to these
two customers.
During the year ended December 31, 1993, sales to three customers accounted
for 64% of the Company's total revenues.
New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Company's adoption of SFAS No. 121 in the first quarter of 1996 did not
have a significant impact on the Company's combined financial statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position ("SOP") 91-1,
"Software Revenue Recognition." The adoption of the standards in the current
version of the exposure draft is not expected to have a significant impact on
the Company's combined financial statements.
3. PRODUCT DEVELOPMENT EXPENDITURES
Product development expenditures for the years ended December 31, 1994 and
1995 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Total development expenditures...................... $1,117,094 $1,968,569
Less additions to capitalized software development
costs prior to amortization.................... 133,095 328,900
---------- ----------
Product development expense......................... $ 983,999 $1,639,669
========== ==========
The activity in the capitalized software development account during 1994 and
1995 is summarized as follows:
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Balance at beginning of period, net................. $ 0 $ 110,912
Additions......................................... 133,095 328,900
Amortization expense.............................. (22,183) (99,182)
---------- ----------
Balance at end of period, net....................... $ 110,912 $ 340,630
========== ==========
</TABLE>
All capitalized software development costs at December 31, 1995, were
subject to amortization as products were available for general release.
F-10
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
4. INVESTMENT IN PRYSMTECH
In November 1995, the Company and Billmart formed PrysmTech to pursue the
development and sale of integrated site solutions to the entertainment market.
The Company contributed an exclusive license to market its software to the
entertainment market while Billmart contributed net assets of $143,253 and an
exclusive license to modify and market the Billmart software. Each party
received a 50% interest for its contribution. Net profits and losses of
PrysmTech are generally allocated pro rata. The investment in PrysmTech is
being accounted for using the equity method of accounting.
Simultaneously with the formation of PrysmTech, the Company made available
to PrysmTech a revolving line of credit of up to $350,000 under which
PrysmTech may make borrowings and repayments in accordance with certain
criteria based primarily on PrysmTech's inventory and eligible accounts
receivable, as defined within the loan agreement. All loans to PrysmTech are
secured by all of PrysmTech's existing assets and bear interest at the prime
rate (8.5% at December 31, 1995). At December 31, 1995, $25,000 was
outstanding under the line of credit.
Condensed financial information for PrysmTech is as follows (unaudited):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------------- -------------
<S> <C> <C>
Assets:
Current assets......................... $463,351 $2,503,817
Noncurrent assets...................... 158,441 294,618
-------- ----------
$621,792 $2,798,435
======== ==========
Liabilities and equity:
Liabilities............................ $413,991 $1,712,156
-------- ----------
Equity:
The Company.......................... 32,274 471,513
Other................................ 175,527 614,766
-------- ----------
207,801 1,086,279
-------- ----------
$621,792 $2,798,435
======== ==========
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(NOVEMBER 27, 1995) ENDED
TO DECEMBER 31, SEPTEMBER 30,
1995 1996
------------------- -------------
<S> <C> <C>
Total revenues........................... $322,853 $6,981,798
Cost of revenues and operational
expenses................................ 258,305 5,907,610
-------- ----------
Net income............................... $ 64,548 $1,074,188
======== ==========
Company interest in net income........... $ 32,274 $ 537,094
======== ==========
</TABLE>
The accompanying combined statement of operations includes approximately
$382,000 of sales from the Company to PrysmTech during the nine months ended
September 30, 1996. All sales to the joint venture are recorded at cost.
The Company intends to purchase Billmart's interest in PrysmTech for 300,000
shares of Common Stock and a $3,000,000 note. Total consideration, including
transaction costs of $50,000, is expected to
F-11
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
approximate $5,150,000 as of the scheduled closing date in December 1996.
Subject to completion of an independent appraisal, the Company expects to
allocate approximately $907,000 to intangibles and $3,628,000 to purchased
research and development costs. Intangibles will be amortized over 10 years.
Upon closing, the Company will retroactively consolidate PrysmTech pursuant to
Accounting Research Bulletin Opinion No. 51.
5. ACQUISITION
On May 17, 1996, the Company acquired LSI for $100 cash and assumed net
liabilities of $78,349. The transaction was accounted for as a purchase.
Intangibles of $48,349 were recorded, after adjusting for purchased research
and development costs (Note 2), which are being amortized over seven years.
The financial statements include the operating results of LSI from the date of
acquisition. Pro forma results of operations have not been presented because
the effect of this acquisition is not significant.
6. LONG-TERM DEBT
Long-term debt, including obligations under capital leases, consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to Sirrom Capital
Corporation ("Sirrom") ("Sirrom
Notes"), interest at 14%, $3,000,000
principal due June 2001, $1,500,000
due September 2001, secured by all of
the assets of the Company and all
shares of the Company's principal
shareholders.......................... $ 0 $ 0 $4,092,000
Note payable to Emro Marketing
Corporation, interest at 6%, due in
five annual installments of $174,500
through 2001.......................... 0 0 872,501
Capital lease obligations, interest
ranging from 5% to 31%, payable
monthly through 2000, secured by
equipment............................. 594,334 642,023 732,671
--------- --------- ----------
594,334 642,023 5,697,172
Less current portion................... (169,879) (252,979) (554,327)
--------- --------- ----------
$ 424,455 $ 389,044 $5,142,845
========= ========= ==========
</TABLE>
At December 31, 1995, aggregate maturities of long-term debt, including
obligations under capital leases, are as follows:
<TABLE>
<S> <C>
1996................................ $252,979
1997................................ 249,611
1998................................ 111,657
1999................................ 27,776
--------
$642,023
========
</TABLE>
The Sirrom Notes were issued in June 1996 and September 1996 for $3,000,000
and $1,500,000, respectively. As discussed in Note 8, warrants ("Put
Warrants") to purchase 174,642 shares at $.01 per share were issued with the
notes. The value of these warrants was determined to be $468,000 based on the
relative fair value of the warrants to the notes. A corresponding amount of
the proceeds that has been allocated to the warrants has been accounted for as
a debt discount and is being amortized over the
F-12
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
expected life of the related notes using the effective interest method. At
September 30, 1996, the unamortized debt discount amounted to $408,000.
On May 27, 1994, the Company entered into an agreement with a customer
whereby the customer would receive a cash rebate upon purchasing a defined
number of software licenses. In the event the Company was unable to pay the
rebates when due, the agreement provided the customer the option of applying
the rebate to the purchase of additional licenses or requiring the Company to
deliver a promissory note for any remaining portion of the rebate. At December
31, 1994 and 1995, the Company had recorded customer rebate accruals of
$132,804 and $457,317, respectively, as it was probable that such purchase
criteria would ultimately be met. During 1996, the customer met the purchase
criteria, at which time the Company delivered a promissory note in the amount
of $872,501.
7. INCOME TAXES
In connection with the planned Offering, the Company will convert from an S
corporation to a C corporation and, accordingly, will be subject to future
federal and state income taxes. Upon conversion to C corporation status, the
Company will record deferred taxes for which it will be responsible following
termination of S corporation status. The components of the pro forma net
deferred tax liability as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Depreciation................................................... $ (59,126)
Capitalized software........................................... (131,143)
---------
Total deferred tax liabilities............................... (190,269)
---------
Deferred tax assets:
Allowance for doubtful accounts................................ 15,987
Other.......................................................... 9,593
---------
Total deferred tax assets.................................... 25,580
---------
Net pro forma deferred tax liability............................. $(164,689)
=========
</TABLE>
The following summarizes the components of the pro forma income tax
provision (benefit):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Current taxes:
Federal........................... $ 215,896 $ 0 $ 0
State............................. 28,575 0 0
Deferred............................ (38,750) (60,632) (709,165)
---------- ---------- -----------
Pro forma income tax provision
(benefit).......................... $ 205,721 $ (60,632) $ (709,165)
========== ========== ===========
A reconciliation from the federal statutory rate to the pro forma tax
provision (benefit) is as follows:
<CAPTION>
1993 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Statutory federal tax rate.......... 34.0% (34.0)% (34.0)%
State income taxes, net of federal
tax benefit........................ 4.5 (4.5) (4.5)
Other............................... 0.5 4.0 0.4
---------- ---------- -----------
39.0% (34.5%) (38.1)%
========== ========== ===========
</TABLE>
F-13
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
8. SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock
In October 1995, the Company was reincorporated in Georgia, and the
Company's Articles of Incorporation and capital structure were amended. Among
other changes, the authorized capital of the Company was changed to consist of
30,000,000 shares of capital stock comprised of 20,000,000 shares of no par
Common Stock and 10,000,000 shares of no par Class A Common Stock. Both
classses of stock have a stated value of $.00001 per share. The Class A Common
Stock is nonvoting and is automatically convertible into Common Stock without
further action on the part of the Company or its shareholders, at a rate of
one share of Common Stock for one share of Class A Common Stock on the earlier
of (i) the closing time of an initial public offering by the Company, as
defined, or (ii) the closing time of a change in control of the Company, as
defined.
Options
In December 1995, the Company adopted the 1995 Stock Incentive Plan (the
"Plan"), under which the Company may grant up to 3,000,000 incentive Class A
Common Stock options to key employees. Options are granted at an exercise
price which is not less than fair market value as estimated by the Board of
Directors and become exercisable as determined by the Board of Directors,
generally over a period of four to five years. Options granted under the Plan
expire ten years from the date of grant. At September 30, 1996, options to
purchase 544,250 shares of Class A Common Stock were available for future
grant under the Plan.
The Company has granted 264,000 non-qualified stock options. Of these
options, 164,000 vest over four years. The remaining 100,000 options vest at
the end of eight years, subject to acceleration based on specified terms
within the agreement.
Transactions related to stock options for the year ended December 31, 1995
and for the nine months ended September 30, 1996 are as follows:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Options outstanding at December 31, 1994............ 0 $ 0.00
Granted........................................... 1,784,000 1.00
Exercised......................................... 0 0.00
--------- ------------
Options outstanding at December 31, 1995............ 1,784,000 1.00
Granted........................................... 980,750 1.00 - 4.50
Canceled.......................................... (45,000) 1.00
Exercised......................................... 0 0.00
--------- ------------
Options outstanding at September 30, 1996........... 2,719,750 $1.00 - 4.50
========= ============
Exercisable September 30, 1996...................... 270,300
=========
</TABLE>
During 1995, the Financial Accounting Standards Board issued SFAS No. 123
("Accounting for Stock-Based Compensation") which defines a fair value-based
method of accounting for an employee stock option plan or similar equity
instrument. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the accounting in APB
No. 25 must make pro forma disclosures of net income and, if presented,
F-14
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
earnings per share, as if the fair value-based method of accounting defined in
the statement had been applied.
The Company has elected to account for its stock-based compensation plan
under APB No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 1995 and 1996 using the Black
Sholes option pricing model as prescribed by SFAS No. 123 using the following
weighted average assumptions used for grants in 1995 and 1996:
<TABLE>
<S> <C>
Risk free interest rate........................................... 5.7%
Expected dividend yield........................................... 0%
Expected lives.................................................... 4 years
Expected volatility............................................... 56%
</TABLE>
The total value of the options granted during the year ended December 31,
1995 and the nine months ended September 30, 1996 were computed as
approximately $823,000 and $1,386,000, respectively, which would be amortized
over the vesting period of the options. If the Company had accounted for these
plans in accordance with SFAS No. 123, the Company's reported pro forma net
loss and pro forma net loss per share for the year ended December 31, 1995 and
for the nine months ended September 30, 1996 would have increased to the
following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Net loss:
As reported.............................. $(1,151,591) $(249,137)
Pro forma................................ (1,202,028) (700,296)
Primary EPS:
As reported.............................. $ (0.10) $ (0.02)
Pro forma................................ (0.10) (0.06)
</TABLE>
Warrants
Customer Warrants
In May 1994, the Company and one of its major customers (the "Customer")
entered into an agreement (the "Agreement") whereby the Customer was granted
the right (the "Customer Warrant") to acquire 10% of the Company's outstanding
Class A Common Stock for $800,000, provided the Customer meets certain
purchase criteria. The Customer Warrant may be exercised at any time on or
after May 27, 1999 or at the earlier of (i) the closing time of an initial
public offering or (ii) the closing time of a change in control of the
Company. The Customer Warrant terminates on the earlier of (i) May 27, 1999 in
the event the specified purchase criteria are not met, (ii) the closing time
of an initial public offering by the Company, or (iii) 5:00 p.m. eastern time
on May 27, 2014, the twentieth anniversary of the Agreement. A deferred sales
discount of $240,000 was charged on the date of grant, which represented the
fair market value of the Customer Warrant on such date, and is being amortized
as a reduction of sales as the Customer makes purchases under the Agreement.
In February 1996, the Company amended the Agreement such that the Customer
Warrant was increased to 12% of the Company's outstanding common shares. An
additional deferred sales discount of $79,000 was charged on the date of
grant, which represented the fair market value on the date of the increase of
the Customer Warrant. The Company has the option to repurchase one-sixth of
the shares issuable under the Customer Warrant at a price midway between the
Customer's exercise price and the fair market value of the shares.
F-15
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
Put Warrants
In connection with issuance of the Sirrom Notes (Note 6), the Company issued
Put Warrants to purchase 1.5% of the Company's outstanding Common Stock at an
exercise price of $.01. In the event that the notes remain outstanding on
March 31, 1997, Sirrom receives an additional warrant to purchase .5% of the
Company's shares, and if the notes remain outstanding on July 1, 1997, Sirrom
receives an additional warrant to purchase 1.5% of the Company's Common Stock.
Beginning July 1, 1998, warrants to purchase additional shares of Common Stock
accrue at 2% per year until prepayment or maturity of the notes.
Sirrom also has the option to require the Company to redeem the warrants
beginning in 2001 for fair value, as defined. The excess of the redemption
value over the carrying value is being accrued by periodic charges to retained
earnings in the absence of additional paid-in-capital over the redemption
period. This accretion amounted to $13,200 for the nine months ended September
30, 1996.
Loan Origination Warrant
In 1996, the Company issued warrants to purchase 20,000 shares of Class A
Common Stock at an exercise price of $.01 for payment of loan origination fees
("Loan Origination Warrant"). The fair value of the warrant was determined to
be $40,000 and has been capitalized as loan origination fees.
A summary of the warrants to purchase shares of Common Stock and Class A
Common Stock which remain outstanding (and for which shares of Common Stock
and Class A Common Stock are reserved for issuance) is as follows as of
September 30, 1996:
<TABLE>
<CAPTION>
PRICE PER
WARRANT SHARES SHARE EXPIRATION
------- --------- --------- ----------
<S> <C> <C> <C>
Customer Warrants............................. 1,090,909 $.88 2014
Put Warrants.................................. 174,642 .01 2001
Loan Origination Warrant...................... 20,000 .01 2001
</TABLE>
9. COMMITMENTS
Leases
The Company leases office space, equipment, and certain vehicles under
noncancelable operating lease agreements expiring on various dates through
2001. At December 31, 1995, future minimum rental payments for noncancelable
leases with terms in excess of one year were as follows:
<TABLE>
<S> <C>
1996................................ $493,192
1997................................ 477,544
1998................................ 466,388
1999................................ 460,978
2000................................ 201,590
</TABLE>
Total rent expense under operating leases was $125,027, $227,267, and
$374,206 for the years ended December 31, 1993, 1994, and 1995, respectively.
F-16
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
Benefit Plan
The Company has a 401(k) profit-sharing Plan (the "Plan") available to all
employees of the Company who have completed six months of service and have
attained age 21. The Plan includes a salary deferral arrangement pursuant to
which employees may contribute a minimum of 3% and a maximum of 15% of their
salary on a pretax basis. The Company may make both matching and additional
contributions at the discretion of the Board of Directors. The Company made no
such contributions during 1993, 1994 or 1995.
10. RELATED-PARTY TRANSACTIONS
In October 1994, the Company repurchased 3,085,700 shares of Common Stock
for a note in the amount of $473,086. The note is unsecured, bears interest at
8% per annum, and is payable in monthly installments of $14,825 through
December 31, 1997.
In connection with the share repurchase, the Company entered into an
agreement with the shareholder whereby the Company would pay the shareholder
an initial payment of $150,000 and a monthly payment of $14,000 for five years
in return for certain consulting services, as defined. In October 1995, this
agreement was amended in order to reduce the quantity of services and related
monthly payment. Fees paid under the consulting agreement were $150,000 and
$131,000 in 1994 and 1995, respectively.
In May 1995, the Company entered into an agreement with a shareholder to
transfer certain assets and technology to the shareholder in a tax-free
exchange in return for 2,628,523 shares of Common Stock. A gain of $374,018,
included in other income, was recorded in connection with the transaction
which represents the excess of the fair market value of the stock acquired
over the net assets distributed. As part of the transaction, the Company
recorded a note receivable in the amount of $61,171, which is payable in
monthly installments of $2,966 through May 1997.
In June 1996, a shareholder sold 200,000 shares of Class A Common Stock for
$1.875 per share. The shareholder also issued to one of the Company's
principal shareholders an option to repurchase the remaining 600,033 shares of
Class A Common Stock for $1.875 per share through June 1997. The principal
shareholder intends to assign this option to the Company prior to the planned
Offering.
11. SUBSEQUENT EVENTS
Initial Public Offering
In the first quarter of 1997, the Company is planning an initial public
offering of its Common Stock. The Company plans to issue 2,500,000 shares at
an estimated initial public offering price of between $10.00 and $12.00 per
share. There can be, however, no assurance that the offering will be completed
at a per share price within the estimated range, or at all.
Pro Forma Shareholders' Equity (Deficit)
The pro forma shareholders' equity (deficit) at September 30, 1996, gives
effect to the conversion of 1,142,889 shares of Class A Common Stock and
1,090,909 shares issuable under Customer Warrants into Class A Common Stock
upon the close of the Company's planned Offering.
Preferred Stock
Prior to the planned Offering, the Company will authorize 5,000,000 shares
of preferred stock with no par value. The Board of Directors will have the
authority to issue these shares and to fix dividends, voting and conversion
rights, redemption provisions, liquidation preferences, and other rights and
restrictions.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
SHAREHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors ............................................................ 7
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Combined and Pro Forma
Financial Data.......................................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Pro Forma Financial Information.......................................... 25
Business................................................................. 28
Management............................................................... 43
Certain Transactions..................................................... 46
Principal and Selling Shareholders....................................... 47
Description of Capital Stock............................................. 48
Shares Eligible for Future Sale.......................................... 50
Underwriting............................................................. 51
Legal Matters............................................................ 52
Experts.................................................................. 52
Additional Information................................................... 52
Index to Combined Financial Statements................................... F-1
</TABLE>
-----------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,950,000 Shares
LOGO
Common Stock
-----------
PROSPECTUS
-----------
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
The Robinson-Humphrey
Company, Inc.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All of the
amounts shown are estimated except for the registration fees of the Securities
and Exchange Commission and the National Association of Securities Dealers,
Inc.:
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY COMPANY
---------------
<S> <C>
SEC registration fee..................................... $12,337
NASD filing fee.......................................... 4,571
Nasdaq National Market listing fee....................... 17,500
Blue sky qualification fees and expenses................. 10,000
Printing and engraving expenses.......................... 100,000
Legal fees and expenses.................................. 125,000
Accounting fees and expenses............................. 125,000
Transfer agent and registrar fees........................ 10,000
Miscellaneous............................................ 95,592
-------
Total................................................... 500,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As provided under Georgia law, the Company's Articles of Incorporation
provide that a Director shall not be personally liable to the Company or its
shareholders for monetary damages, for breach of duty of care or any other
fiduciary duty owed to the Company as a Director, except that such provisions
shall not eliminate or limit the liability of a Director (a) for any
appropriation, in violation of his or her duties, of any business opportunity
of the Company; (b) for acts or omissions which involve intentional misconduct
or a knowing violation of law; (c) for unlawful corporate distributions; or
(d) for any transaction from which the Director received an improper personal
benefit. If applicable law is amended to authorize corporate action further
eliminating or limiting the liability of Directors, the liability of each
Director of the Company shall be eliminated or limited to the fullest extent
permitted by applicable law. These provisions apply to claims against
officers, employees, and agents of the Company as well. Article VI of the
Company's Bylaws provides that the Company shall indemnify a Director who has
been successful in the defense of any proceeding to which he or she was a
party or in defense of any claim, issue or matter therein because he or she is
or was a Director of the Company, against reasonable expenses incurred by him
or her in connection with such defense.
The Company's Bylaws also provide that the Company may indemnify any
Director, officer, employee or agent made a party to a proceeding because he
or she is or was a Director, officer, employee or agent against liability
incurred in the proceeding if he or she acted in a manner he or she believed
in good faith to be in or not opposed to the best interests of the Company
and, in the case of any criminal proceeding, he or she had no reasonable cause
to believe his or her conduct was unlawful. Determination concerning whether
or not the applicable standard of conduct has been met can be made by (a) a
disinterested majority of the Board of Directors; (b) a majority of a
committee of disinterested Directors; (c) independent legal counsel; or (d)
the shareholders. No indemnification may be made to or on behalf of a
Director, officer, employee or agent (1) in connection with a proceeding by or
in the right of the Company in which such person was adjudged liable to the
Company, or (2) in connection with any other proceeding in which such person
was adjudged liable on the basis that personal benefit was improperly received
by him or her.
The Company may, if authorized by its shareholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Articles
of Incorporation, indemnify or obligate itself to indemnify a Director,
officer, employee or agent made a party to a proceeding, including a
proceeding brought by or in the right of the Company.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On October 27, 1995, the Registrant issued 6,857,112 shares of Common Stock
and 1,142,889 shares of Class A Common Stock to the four shareholders of
Softsense Computer Products Inc., a New York corporation. These shares were
issued in connection with the reincorporation of the Registrant from the State
of New York to the State of Georgia.
Except as otherwise noted, all issuances of securities described above were
made in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933 as transactions by an issuer not involving a
public offering. All of the securities were acquired by the recipients thereof
for investment and with no view toward the resale or distribution thereof. In
each instance, the purchaser had a pre-existing relationship with the
Registrant or its founders, the offers and sales were made without any public
solicitation, the certificates bear restrictive legends and appropriate stop
transfer instructions have been or will be given to the transfer agent. No
underwriter was involved in the transactions and no commissions were paid.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits listed below are filed with this Registration Statement.
(a) Exhibits
NUMBER DESCRIPTION OF EXHIBIT
1.1 Form of Underwriting Agreement
3(i) Articles of Incorporation, as amended
3(ii) Bylaws
4.1 Specimen Certificate of Common Stock (to be provided by amendment)
5.1 Opinion of Smith, Gambrell & Russell, LLP (to be provided by
amendment)
10.1 Form of License, Support and Equipment Purchase Agreement
10.2 Stock Transfer and Redemption Agreement dated May 29, 1995 by
and between the Registrant and Thomas Barrella
10.3 1995 Incentive Stock Option Plan
10.4 Loan Agreement dated June 28, 1996 by and between the
Registrant and Sirrom Capital Corporation regarding $3.0
million term loan
10.4.1 First Amendment to Loan Agreement and Loan Documents dated
September 25, 1996 by and between the Registrant and Sirrom
Capital Corporation regarding $1.5 million term loan
10.5 Promissory Note dated March 27, 1996 from the Registrant to
Emro Marketing Company in the principal amount of $872,501
10.6 Promissory Note dated October 31, 1994 from the Registrant to
Lawrence D. Parker in the principal amount of $473,086
10.7 Consulting Agreement dated October 31, 1994, as amended on
October 24, 1995 by and between the Registrant and LP
Technologies, Inc.
10.8 Commercial Lease Agreement dated December 19, 1994 by and
between the Registrant and Digital Communications Associates,
Inc. for lease of office space in Alpharetta, Georgia
10.9 Office Lease dated June 30, 1995 by and between the Registrant
and Attachmate Corporation for lease of office space in
Alpharetta, Georgia
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Smith, Gambrell & Russell, LLP (included as part of
Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
27.1 Financial Data Schedule
II-2
<PAGE>
(b) The financial statements and schedules filed as a part of this
Registration Statement are as follows:
1. FINANCIAL STATEMENTS. See Index to Financial Statements on page F-1
of the Prospectus included in this Registration Statement.
2. FINANCIAL STATEMENT SCHEDULES. Financial statement schedules have
been omitted because they are not applicable or are not required, as
the information required to be set forth therein is included in the
combined financial statements of the registrant.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15, 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 that Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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 of 1933 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
of 1933, 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.
(c) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alpharetta, Georgia on
December 10, 1996.
RADIANT SYSTEMS, INC.
By: /s/ Erez Goren
--------------------------------
Erez Goren, Co-Chairman and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Erez Goren and John H. Heyman and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him, in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, including a
Registration Statement filed under Rule 462(b) of the Securities Act of 1933,
as amended, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Erez Goren Co-Chairman of the Board and December 10, 1996
_________________________________ Chief Executive Officer
EREZ GOREN
/s/ Alon Goren Co-Chairman of the Board and December 10, 1996
_________________________________ Chief Technology Officer
ALON GOREN
/s/ Eric Hinkle President, Chief Operating December 10, 1996
_________________________________ Officer and Director
ERIC HINKLE
/s/ John H. Heyman Executive Vice President, December 10, 1996
_________________________________ Chief Financial Officer and
JOHN H. HEYMAN Director
/s/ Paul Ilse Controller (Principal December 10, 1996
_________________________________ Accounting Officer)
PAUL ILSE
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT PAGE NUMBER
- ------- ---------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3(i) Articles of Incorporation, as amended
3(ii) Bylaws
10.1 Form of License, Support and Equipment Purchase
Agreement
10.2 Transfer and Redemption Agreement dated May 29, 1995
by and between the Registrant and Thomas Barrella
10.3 1995 Incentive Stock Option Plan
10.4 Loan Agreement dated June 28, 1996 by and between
the Registrant and Sirrom Capital Corporation
regarding $3.0 million term loan
10.4.1 First Amendment to Loan Agreement and Loan Documents
dated September 25, 1996 by and between the
Registrant and Sirrom Capital Corporation regarding
$1.5 million term loan
10.5 Promissory Note dated March 27, 1996 from the
Registrant to Emro Marketing Company in the principal
amount of $872,501
10.6 Promissory Note dated October 31, 1994 from the
Registrant to Lawrence D. Parker in the principal
amount of $473,086
10.7 Consulting Agreement dated October 31, 1994, as
amended on October 24, 1995 by and between the
Registrant and LP Technologies, Inc.
10.8 Commercial Lease Agreement dated December 19, 1994
by and between the Registrant and Digital
Communications Associates, Inc. for lease of
office space in Alpharetta, Georgia
10.9 Office Lease dated June 30, 1995 by and between
the Registrant and Attachmate Corporation for
lease of office space in Alpharetta, Georgia
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 1.1
2,950,000 Shares
Radiant Systems, Inc.
Common Stock
(No Par Value)
UNDERWRITING AGREEMENT
----------------------
_______________, 1997
Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
The Robinson-Humphrey Company, Inc.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Radiant Systems, Inc., a Georgia corporation (the "Company"), and certain
shareholders of the Company (the "Selling Shareholders") propose to sell to the
several underwriters (the "Underwriters") named in Schedule I hereto for whom
you are acting as representatives (the "Representatives") an aggregate of
2,950,000 shares of the Company's Common Stock, no par value (the "Firm
Shares"), of which 2,500,000 shares will be sold by the Company and 450,000
shares will be sold by the Selling Shareholders. The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Shareholders are sometimes referred to
herein collectively as the "Sellers." The Company and certain Selling
Shareholders also propose to sell at the Underwriters' option an aggregate of up
to 442,500 additional shares of the Company's Common Stock (the "Option Shares")
as set forth below.
<PAGE>
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and
the Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Shareholders.
------------
(a) The Company represents and warrants to each of the Underwriters
as follows:
(i) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus." Any reference
herein to any Prospectus shall be deemed to include any supplements or
amendments thereto, filed with the Commission after the date of filing of the
Prospectus under Rules 424(b) or 430A, and prior to the termination of the
offering of the Shares by the Underwriters.
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<PAGE>
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Georgia, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries
of the Company as listed in Exhibit 21 to Item 16(a) of the Registration
Statement (collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to own or
lease its properties and conduct its business as described in the Registration
Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of
the Company. The Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification or in which the failure to qualify would have a
materially adverse effect upon the business of the Company and the Subsidiaries
taken as a whole. The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company or another Subsidiary free and clear
of all liens, encumbrances and equities and claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the portion
of the Shares to be issued and sold by the Company have been duly authorized and
when issued and paid for as contemplated herein will be validly issued, fully
paid and non-assessable; and no preemptive rights of stockholders exist with
respect to any of the Shares or the issue and sale thereof. Neither the filing
of the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of Common Stock.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the jurisdiction of
the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform in all
material respects, to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and will
not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state any material fact required to be
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<PAGE>
stated therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not contain, and will
not contain, any untrue statement of material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representatives,
specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company. The pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(vii) Arthur Andersen LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or prevent the consummation
of the transactions contemplated hereby, except as set forth in the Registration
Statement.
(ix) The Company and the Subsidiaries have good and marketable
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<PAGE>
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the Subsidiaries
occupy their leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the Registration
Statement.
(x) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the financial statements of the
Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Company and its Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into or any material transaction that is probable
of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Articles of Incorporation or by-laws or under any agreement,
lease, contract, indenture or other instrument or obligation to which it is a
party or by which it, or any of its properties, is bound and which violation or
default is of material significance in respect of the condition, financial or
otherwise of the Company and its Subsidiaries taken as a whole or the business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party, or of
the Articles of Incorporation or by-laws of the Company or any order, rule or
regulation applicable to the Company or any Subsidiary of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
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<PAGE>
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xii) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company or any Subsidiary.
(xiii) Neither the Company, nor to the Company's knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(xiv) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
(xv) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xvi) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(xvii) The Company is in compliance in all material respects with
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<PAGE>
all presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(xviii) The Shares have been approved for listing, subject to
notice of issuance, on the Nasdaq National Market.
(b) Each of the Selling Shareholders severally represents and
warrants as follows:
(i) Such Selling Shareholder now has and at the Closing Date and the
Option Closing Date, as the case may be (as such dates are hereinafter defined)
will have good and valid title to the Firm Shares and the Option Shares to be
sold by such Selling Shareholder, without notice of any adverse claim, free and
clear of any liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares and Option Shares;
and upon the delivery of, against payment for, such Firm Shares and Option
Shares pursuant to this Agreement, the Underwriters will acquire good and valid
title thereto, free and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney, and the Custodian
Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation
by such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
-7-
<PAGE>
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein or the information contained in the Registration
Statement, such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect the
business of the Company or any of the Subsidiaries; and the sale of the Firm
Shares and the Option Shares by such Selling Shareholder pursuant hereto is not
prompted by any information concerning the Company or any of the Subsidiaries
which is not set forth in the Registration Statement. The information
pertaining to such Selling Shareholder under the caption "Selling Shareholders"
in the Prospectus is complete and accurate in all material respects.
(v) The Power of Attorney appointing certain individuals as such
Selling Shareholders' attorney-in-fact to the extent set forth therein and the
Custodian Agreement (as defined in Section 2) have been duly executed and
delivered by such Selling Shareholder and are the valid and binding agreements
of such Selling Shareholder.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
----------------------------------------------
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Sellers
agree to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ per share, the number of Firm Shares
set forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof. The number of Firm Shares to
be purchased by each Underwriter from each Seller shall be as nearly as
practicable in the same proportion to the total number of Firm Shares being sold
by each Seller as the number of Firm Shares being purchased by each Underwriter
bears to the total number of Firm Shares to be sold hereunder. The obligations
of the Company and of each of the Selling Shareholders shall be several and not
joint.
(b) Certificates in negotiable form for the total number of the
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with ____________________ as custodian (the "Custodian") pursuant to the
Custodian
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<PAGE>
Agreement executed by each Selling Shareholder for delivery of all
Firm Shares and any Option Shares to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that the
Firm Shares and any Option Shares represented by the certificates held in
custody for the Selling Shareholders under the Custodian Agreement are subject
to the interests of the Underwriters hereunder, that the arrangements made by
the Selling Shareholders for such custody are to that extent irrevocable, and
that the obligations of the Selling Shareholders hereunder shall not be
terminable by any act or deed of the Selling Shareholders (or by any other
person, firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including the death of an individual
Selling Shareholder or the dissolution of a corporate Selling Shareholder) or by
the occurrence of any other event or events, except as set forth in the
Custodian Agreement. If any such event should occur prior to the delivery to
the Underwriters of the Firm Shares or the Option Shares hereunder, certificates
for the Firm Shares or the Options Shares, as the case may be, shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such event has not occurred. The Custodian is authorized to
receive and acknowledge receipt of the proceeds of sale of the Shares held by it
against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company for the shares to be sold by it and to the order of each
Selling Shareholder for the shares to be sold by such Selling Shareholders, in
each case against delivery of certificates therefor to the Representatives for
the several accounts of the Underwriters. Such payment and delivery are to be
made at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore
Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on _______________,
1997, or at such other time and date not later than five business days
thereafter as you and the Company shall agree upon, such time and date being
herein referred to as the "Closing Date." (As used herein, "business day" means
a day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or executive
order to be closed.) The certificates for the Firm Shares will be delivered in
such denominations and in such registrations as the Representatives requests in
writing not later than the second full business day prior to the Closing Date,
and will be made available for inspection by the Representatives at least one
business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and certain Selling Shareholders listed on Schedule III hereto hereby
grant an option to the several Underwriters to purchase the Option Shares at the
price per share as set forth in the first paragraph of this Section 2. The
maximum number of Option Shares to be sold by the Company and the Selling
Shareholders is set forth opposite their respective names on Schedule III
hereto. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
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<PAGE>
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company, the Attorney-in-
Fact, and the Custodian setting forth the number of Option Shares as to which
the several Underwriters are exercising the option, the names and denominations
in which the Option Shares are to be registered and the time and date at which
such certificates are to be delivered. If the option granted hereby is
exercised in part, the respective number of Option Shares to be sold by the
Company and each of the Selling Shareholders listed in Schedule III hereto shall
be determined on a pro rata basis in accordance with the percentages set forth
opposite their names on Schedule II hereto, adjusted by you in such manner as to
avoid fractional shares. The time and date at which certificates for Option
Shares are to be delivered shall be determined by the Representatives but shall
not be earlier than three nor later than 10 full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The number
of Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number of
Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representatives of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company and the Attorney-in-Fact. To the extent, if any, that the option
is exercised, payment for the Option Shares shall be made on the Option Closing
Date in New York Clearing House funds by certified or bank cashier's check drawn
to the order of the Company for the Option Shares to be sold by it and to the
order of each Selling Shareholder for the Option Shares to be sold by such
Selling Shareholders against delivery of certificates therefor at the offices of
Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
(e) If on the Closing Date or Option Closing Date, as the case may
be, any Selling Shareholder fails to sell the Firm Shares or Option Shares which
such Selling Shareholder has agreed to sell on such date as set forth in
Schedule II or Schedule III hereto, the Company agrees that it will sell or
- ----------- ------------
arrange for the sale of that number of shares of Common Stock to the
Underwriters which represents Firm Shares or the Option Shares which such
Selling Shareholder has failed to so sell, as set forth in Schedule II or
-----------
Schedule III hereto, or such lesser number as may be requested by the
- ------------
Representatives.
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public
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<PAGE>
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will
offer them to the public on the foregoing terms in accordance with Section 2(a)
hereof.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company and the Selling Shareholders.
-----------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives promptly (A) when
the Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
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<PAGE>
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the
Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not
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<PAGE>
consolidated inthe Company's financial statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or a derivative of Common
Stock (or agreement for such) will be made for a period of 180 days after the
date of this Agreement, directly or indirectly, by the Company except pursuant
to the Company's 1995 Incentive Stock Option Plan, as otherwise provided
hereunder or with the prior written consent of Alex. Brown & Sons Incorporated.
(ix) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date of this
agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer, sell,
sell short or otherwise dispose of any shares of Common Stock of the Company or
other capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for Common Stock or a derivative of Common Stock
owned by such person or request the registration for the offer or sale of any of
the foregoing (or as to which such person has the right to direct the
disposition of) for a period of 180 days after the effective date of the
Registration Statement, directly or indirectly, except with the prior written
consent of Alex. Brown & Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
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<PAGE>
(i) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other capital stock of the Company or other
securities convertible, exchangeable or exercisable for Common Stock or a
derivative of Common Stock owned by the Selling Shareholder and no request for
registration for the offer or sale of any of the foregoing (or as to which the
Selling Shareholder has the right to direct the disposition of) will be made for
a period of 180 days after the date of this Agreement, directly or indirectly,
by such Selling Shareholder except as otherwise provided hereunder or with the
prior written consent of Alex. Brown & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
(iii) Such Selling Shareholder will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company and the
Selling Shareholders; the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees incident
to securing any required review by the National Association of Securities
Dealers, Inc. (the "NASD") of the terms of the sale of the Shares; the Listing
Fee of the Nasdaq National Market; and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws and the laws
of Canada. To the extent, if at all, that any of the Selling Shareholders
engage special legal counsel to represent them in connection with this offering,
the fees and expenses of such counsel shall be borne by such Selling
Shareholder. Any transfer taxes imposed on the sale of the Shares to the
several Underwriters will be paid by the Sellers pro rata. The Company agrees
to pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed shares of the Common Stock by the Underwriters
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<PAGE>
to employees and persons having business relationships with the Company and its
Subsidiaries. The Company shall not, however, be required to pay for any of the
Underwriters expenses (other than the filing fees incident to securing any
required review by the NASD and those related to qualification and State
securities or Blue Sky laws and the laws of Canada) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the Selling Shareholders to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on their part to be performed, unless such failure
to satisfy said condition or to comply with said terms be due to the default or
omission of any Underwriter, then the Company shall reimburse the several
Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
and the Selling Shareholders contained herein, and to the performance by the
Company and the Selling Shareholders of their covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company or the Selling Shareholders, shall be
contemplated by the Commission and no injunction, restraining order, or order of
any nature by a Federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Smith, Gambrell &
Russell, LLP, counsel for the Company and certain Selling Shareholders as
indicated on Schedule II, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the
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<PAGE>
effect that:
(i) The Company is duly organized and is validly existing as a
corporation in good standing under the laws of the State of Georgia, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to such counsel's knowledge, the outstanding shares of capital
stock of each of the Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants or other rights
to purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of ownership interests in
the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock, including the Shares to be sold by the
Selling Shareholders, have been duly authorized and validly issued and are fully
paid and non-assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares, assuming they are
in the form filed with the Commission, are in due and proper form; the shares of
Common Stock, including the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly issued,
fully paid and non-assessable when issued and paid for in accordance with this
Agreement; and no preemptive rights of stockholders exist with respect to any of
the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit
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<PAGE>
them to underwrite the sale of, any of the Shares or the right to have any
Common Stock or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
(iv) The Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order proceedings with respect
thereto have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).
(vi) The statements under the captions "Description of Capital Stock"
and "Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or by-laws of the
Company, or any agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the
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<PAGE>
consummation of the transactions herein contemplated (other than as may be
required by the NASD or as required by State securities and Blue Sky laws, as to
which such counsel need express no opinion) except such as have been obtained or
made, specifying the same.
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and application
of the net proceeds therefrom as described in the Prospectus, required to
register as an investment company under the 1940 Act.
(xiii) This Agreement has been duly authorized, executed and
delivered on behalf of such Selling Shareholders.
(xiv) Each such Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(xv) The Custodian Agreement and the Power of Attorney executed and
delivered by each such Selling Shareholder is a legal, valid and binding
obligation of such Selling Shareholder, enforceable in accordance with their
respective terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
to the exercise of judicial discretion in accordance with general principles of
equity.
(xvi) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code as adopted in the State of
Georgia) have acquired good and valid title to the Shares being sold by each
such Selling Shareholder on the Closing Date, and the Option Closing Date, as
the case may be, free and clear of all liens, encumbrances, equities and claims.
In rendering such opinion Smith, Gambrell & Russell, LLP may rely as
to matters governed by the laws of states other than Georgia or Federal laws on
local counsel in such jurisdictions, provided that in each case Smith, Gambrell
& Russell, LLP shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, at the time it became effective under the
Act (but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact
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<PAGE>
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading (except that with
respect to each of clause (i) and (ii) above such counsel need express no view
as to financial statements, schedules and statistical information therein). With
respect to such statement, Smith, Gambrell & Russell, LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of
________________________, and ___________________, counsel for certain Selling
Shareholders as indicated on Schedule II, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) This Agreement has been duly authorized, executed and
delivered on behalf of such Selling Shareholders.
(ii) Each such Selling Shareholder has full legal right, power
and authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(iii) The Custodian Agreement and the Power of Attorney executed
and delivered by each such Selling Shareholder is a legal, valid and binding
obligation of such Selling Shareholder, enforceable in accordance with their
respective terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
to the exercise of judicial discretion in accordance with general principles of
equity.
(iv) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code as adopted in the
State of Georgia) have acquired good and valid title to the Shares being sold by
each such Selling Shareholder on the Closing Date, and the Option Closing Date,
as the case may be, free and clear of all liens, encumbrances, equities and
claims.
(d) The Representatives shall have received from Alston & Bird,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, with respect to the incorporation of the
Company and the validity of the Shares being delivered at the Closing Date or
the Option Close Date. In rendering such opinion Alston & Bird may rely as to
all matters governed other than by the laws of the State of Georgia or Federal
laws on the opinion of counsel referred to in Paragraph (b) of this Section 6.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the
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<PAGE>
time it became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act) as of
the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact, necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to such
statement, Alston & Bird may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(e) The Representatives shall have received at or prior to the
Closing Date from Alston & Bird a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State securities
or Blue Sky laws of such jurisdictions as the Representatives may reasonably
have designated to the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Arthur Andersen LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
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(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
(h) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 4(x) are in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representatives and to Alston &
Bird, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholders of
such termination in writing or by telegram at or
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prior to the Closing Date or the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers.
--------------------------------------------
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
---------------
(a) The Company and the Selling Shareholders, jointly and severally,
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse each Underwriter and each such controlling person
upon demand for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or proceeding or in
responding to a subpoena or governmental inquiry related to the offering of the
Shares, whether or not such Underwriter or controlling person is a party to any
action or proceeding; provided, however, that the Company and the Selling
Shareholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. In no event, however, shall
the liability of any Selling Shareholder for indemnification under this Section
8(a) exceed the proceeds received by such Selling Shareholder from the
Underwriters in the offering. This indemnity agreement will be in addition to
any liability which the Company or the Selling Shareholders may otherwise have.
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(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing,
the indemnifying party shall pay as incurred (or within 30 days of presentation)
the fees and expenses of the counsel retained by the indemnified party in the
event (i) the indemnifying party and the indemnified party shall
-23-
<PAGE>
have mutually agreed to the retention of such counsel, (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have failed to
assume the defense and employ counsel acceptable to the indemnified party within
a reasonable period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by you in the case
of parties indemnified pursuant to Section 8(a) and by the Company and the
Selling Shareholders in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. In addition, the indemnifying party will
not, without the prior written consent of the indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding of which indemnification may be sought hereunder
(whether or not any indemnified party is an actual or potential party to such
claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be
-24-
<PAGE>
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Shareholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation, and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the lesser of (A) that
proportion of the total of such losses, claims, damages or liabilities
indemnified or contributed against equal to the proportion of the total Shares
sold hereunder which is being sold by such Selling Shareholder, or (B) the
proceeds received by such Selling Shareholder from the Underwriters in the
offering. The Underwriters' obligations in this Section 8(d) to contribute are
several in proportion to their respective underwriting obligations and not
joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any
-25-
<PAGE>
Underwriter, the Company, its directors or officers or any persons controlling
the Company, (ii) acceptance of any Shares and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to any Underwriter, or to
the Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and the
Selling Shareholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company or of the Selling Shareholders
except to the extent provided in Section 8 hereof. In the event of a default by
any Underwriter or Underwriters, as set forth in this Section 9, the Closing
Date or Option Closing Date, as the case may be, may be postponed for such
period, not exceeding seven days, as you, as Representatives, may determine in
order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. Notices.
-------
-26-
<PAGE>
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
________________; with a copy to Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202. Attention: General Counsel; if to
the Company or the Selling Shareholders, to: ________________________.
11. Termination.
-----------
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading
of the Company's common stock by the Commission on the Nasdaq National Market or
(viii) the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
-27-
<PAGE>
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the Registration
Statement consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters),
legends required by Item 502(d) of Regulation S-K under the Act and the
information under the caption "Underwriting" in the Prospectus.
14. Miscellaneous.
-------------
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
-28-
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Radiant Systems, Inc.
By
-----------------------------------------------------
President
[Selling Shareholders listed on Schedule II
By
-----------------------------------------------------
Attorney-in-Fact]
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
----------------------------------
Authorized Officer
-29-
<PAGE>
SCHEDULE I
Schedule of Underwriters
Number of Firm
Shares
Underwriter to be Purchased
----------- ---------------
Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
The Robinson-Humphrey Company, Inc.
-----------
Total 2,950,000
-30-
<PAGE>
SCHEDULE II
Schedule of Selling Shareholders
<TABLE>
<CAPTION>
Number of Firm Shares
Selling Shareholder to be Sold
- ------------------- ---------------------
<S> <C>
Emro Marketing Company........... 318,996
Sirrom Capital Corporation....... 131,004
-------
Total 450,000
</TABLE>
-31-
<PAGE>
SCHEDULE III
Schedule of Option Shares
<TABLE>
<CAPTION>
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
-------------- ---------------- ----------------
<S> <C> <C>
Erez Goren 100,000 22.6%
Alon Goren 100,000 22.6%
John H. Heyman 10,000 2.3%
The Company 232,500 52.5%
------- ----
Total 442,500 100%
---
</TABLE>
-32-
<PAGE>
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
SOFTSENSE OF GEORGIA, INC.
I.
The name of the Corporation is Softsense of Georgia, Inc.
II.
The authorized capital of the Corporation shall consist of 15,000,000 shares
of capital stock which shall be represented by the following securities:
A. 10,000,000 shares of no par value common stock designated as Common
Stock and having the following attributes:
(1) On all matters as to which the stockholders of the Corporation are
entitled to vote, and except as otherwise provided in these Articles of
Incorporation or by law, each share of Common Stock shall have one vote and
shall vote with all other shares of Common Stock as a single class.
(2) Except as specifically provided for otherwise in these Articles of
Incorporation, the Common Stock and Class A Common Stock shall rank pari
passu and shall possess equal rights and privileges on a share for share
basis, including any rights to liquidating or other distributions.
B. 5,000,000 shares of no par value common stock designated as Class A
Common Stock and having the following attributes:
(1) On all matters as to which holders of shares of Common Stock are
entitled to vote, and except as otherwise provided in these Articles of
Incorporation or by law, holders of Class A Common Stock shall have no right
to vote.
(2) The shares of Class A Common Stock shall be convertible into the
Corporation's Common Stock automatically, and without any further action on
the part of either the Corporation or the stockholders, at the rate of one
share of Common Stock for each share of Class A Common Stock on the earlier
to occur of (i) the closing time of an initial public offering by the
Corporation (as defined herein) or (ii) the closing time of a change in
control of the Corporation (as defined herein). The Corporation shall
promptly notify the holders of Class A Common Stock of any such conversion.
As used herein, the phrase "closing time of an initial public offering
by the Corporation" shall mean the closing time and date of the receipt by the
Corporation of
1
<PAGE>
not less than $8,000,000 in cash proceeds from a public offering of
securities registered by the Corporation with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended.
As used herein, the phrase "closing time of a change in control of the
Corporation" shall mean the closing time and date of: (i) any transaction,
whether by merger, consolidation, asset sale, tender offer, reverse stock
split or otherwise, which results in the acquisition or beneficial ownership
(as such term is defined under rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended) by any person or entity or any
group of persons or entities acting in concert, of 50% or more of the
outstanding shares of common stock of the Corporation, (ii) the sale of all
or substantially all of the assets of the Corporation, or (iii) the
liquidation of the Corporation. Notwithstanding the foregoing, a change of
control of the Corporation shall not be deemed to have occurred for purposes
of this Article II(B)(2) in the event the Corporation reincorporates into
another jurisdiction or in the event of any acquisition of Common Stock of
the Corporation by any one or more of the following shareholders of the
Corporation: Erez Goren, Thomas J. Barrella, Alon Goren or Lawrence D.
Parker.
III.
The street address of the initial registered office of the Corporation is
Suite 1800, East Tower, Atlanta Financial Center, 3343 Peachtree Road, N.E.,
Atlanta, Georgia 30326, located in Fulton County. The initial registered agent
of the Corporation at such office is Richard G. Greenstein.
IV.
The mailing address of the initial principal office of the Corporation is
1155 Hammond Drive, Suite E-5200, Atlanta, Georgia 30328.
V.
The name and address of the Incorporator of the Corporation are:
NAME ADDRESS
---- -------
Robert T. Molinet Suite 1800, East Tower
Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
VI.
No director of the Corporation shall be personally liable to the Corporation
or its shareholders for monetary damages for breach of duty of care or other
duty as a director; provided, however, that to the extent required by applicable
law, this Article shall not eliminate or limit the liability of a director
(i) for any appropriation, in violation of his duties, of any
2
<PAGE>
business opportunity of the Corporation, (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law, (iii) for the
types of liability set forth in Section 14-2-832 of the Georgia Business
Corporation Code, or (iv) for any transaction from which the director derived an
improper personal benefit. If applicable law is amended to authorize corporate
action further eliminating or limiting the liability of directors, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by applicable law, as amended. Neither the
amendment or repeal of this Article, nor the adoption of any provision of these
Articles of Incorporation inconsistent with this Article, shall eliminate or
reduce the effect of this Article in respect of any acts or omissions occurring
prior to such amendment, repeal or adoption of an inconsistent provision.
VII.
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the board of
directors, committees of the board of directors, and individual directors, in
addition to considering the effects of any action on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers,
and creditors of the Corporation and its subsidiaries, the communities in which
offices or other establishments of the Corporation and its subsidiaries are
located, and all other factors such directors consider pertinent; provided,
however, that this Article shall be deemed solely to grant discretionary
authority to the directors and shall not be deemed to provide to any
constituency any right to be considered.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation on March 31, 1995.
/s/ Robert T. Molinet
---------------------------
Robert T. Molinet
Incorporator
3
<PAGE>
ARTICLES OF AMENDMENT
OF
SOFTSENSE OF GEORGIA, INC.
I.
The name of the Corporation is Softsense of Georgia, Inc.
II.
The Articles of Incorporation of the Corporation shall be amended by
deleting Article II thereof in its entirety and substituting the following in
lieu of Article II:
"II.
The authorized capital of the Corporation shall consist of 30,000,000 shares
of capital stock which shall be represented by the following securities:
A. 20,000,000 shares of no par value common stock designated as Common
Stock and having the following attributes:
(1) On all matters as to which the stockholders of the Corporation are
entitled to vote, and except as otherwise provided in these Articles of
Incorporation or by law, each share of Common Stock shall have one vote and
shall vote with all other shares of Common Stock as a single class.
(2) Except as specifically provided for otherwise in these Articles of
Incorporation, the Common Stock and Class A Common Stock shall rank pari
passu and shall possess equal rights and privileges on a share for share
basis, including any rights to liquidating or other distributions.
B. 10,000,000 shares of no par value common stock designated as Class A
Common Stock and having the following attributes:
(1) On all matters as to which holders of shares of Common Stock are
entitled to vote, and except as otherwise provided in these Articles of
Incorporation or by law, holders of Class A Common Stock shall have no right
to vote.
(2) The shares of Class A Common Stock shall be convertible into the
Corporation's Common Stock automatically, and without any further action on
the part of either the Corporation or the stockholders, at the rate of one
share of Common Stock for each share of Class A Common Stock on the earlier
to occur of (i) the closing time of an initial public offering by the
Corporation (as defined herein) or (ii) the closing time of a change in
control of the Corporation (as defined herein). The Corporation shall
promptly notify the holders of Class A Common Stock of any such conversion.
1
<PAGE>
As used herein, the phrase "closing time of an initial public offering
by the Corporation" shall mean the closing time and date of the receipt by
the Corporation of not less than $8,000,000 in cash proceeds from a public
offering of securities registered by the Corporation with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended.
As used herein, the phrase "closing time of a change in control of the
Corporation" shall mean the closing time and date of: (i) any transaction,
whether by merger, consolidation, asset sale, tender offer, reverse stock
split or otherwise, which results in the acquisition or beneficial ownership
(as such term is defined under rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended) by any person or entity or any
group of persons or entities acting in concert, of 50% or more of the
outstanding shares of common stock of the Corporation, (ii) the sale of all
or substantially all of the assets of the Corporation, or (iii) the
liquidation of the Corporation. Notwithstanding the foregoing, a change of
control of the Corporation shall not be deemed to have occurred for purposes
of this Article II(B)(2) in the event the Corporation reincorporates into
another jurisdiction or in the event of any acquisition of Common Stock of
the Corporation by any one or more of the following persons: Erez Goren,
Thomas J. Barrella, Alon Goren or Lawrence D. Parker."
III.
The amendment set forth in Article II of these Articles of Amendment was
adopted on March 31, 1995.
IV.
The amendment set forth in Article II of these Articles of Amendment was
adopted by the Board of Directors without shareholder action. Because the
Corporation has no shareholders, shareholder action was not required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by Erez Goren, President of the Corporation, on this 19th day of
October, 1995.
SOFTSENSE OF GEORGIA, INC.
By: /s/ Erez Goren
____________________________
Erez Goren, President
2
<PAGE>
ARTICLES OF AMENDMENT
OF
SOFTSENSE COMPUTER PRODUCTS, INC.
I.
The name of the Corporation is Softsense Computer Products, Inc.
II.
The Articles of Incorporation of the Corporation shall be amended by
deleting Article I thereof in its entirety and substituting the following in
lieu of Article I:
"I.
The name of the Corporation is Radiant Systems, Inc."
III.
The amendment set forth in Article II of these Articles of Amendment was adopted
on October 25, 1996.
IV.
The amendment was adopted by action of the Corporation's Board of
Directors and the Corporation's Shareholders in accordance with Section 14-2-
1003 of the Georgia Business Corporation Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by its President, on this 25th day of October, 1996.
SOFTSENSE COMPUTER PRODUCTS,
INC.
By: /s/ Erez Goren
----------------------------
Erez Goren, President
3
<PAGE>
Exhibit 3(ii)
BY-LAWS
OF
SOFTSENSE COMPUTER PRODUCTS, INC.,
a Georgia corporation
(formerly known as Softsense of Georgia, Inc.)
<PAGE>
BY-LAWS
OF
SOFTSENSE COMPUTER PRODUCTS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. - DEFINITIONS................................................. 1
ARTICLE II. - GENERAL PROVISIONS REGARDING NOTICES....................... 1
Section 1. NOTICES...................................................... 1
Section 2. WAIVER OF NOTICE............................................. 2
ARTICLE III. - SHAREHOLDERS' MEETINGS.................................... 3
Section 1. PLACE OF MEETING............................................. 3
Section 2. ANNUAL MEETING............................................... 4
Section 3. SPECIAL MEETINGS............................................. 4
Section 4. NOTICE TO SHAREHOLDERS....................................... 4
Section 5. FIXING OF RECORD DATE........................................ 5
Section 6. QUORUM AND VOTING REQUIREMENTS............................... 6
Section 7. PROXIES...................................................... 7
Section 8. INFORMAL ACTIONS BY SHAREHOLDERS............................. 7
ARTICLE IV. - DIRECTORS.................................................. 7
Section 1. GENERAL POWERS............................................... 7
Section 2. NUMBER, TENURE, QUALIFICATIONS............................... 8
Section 3. VACANCIES, HOW FILLED........................................ 8
Section 4. PLACE OF MEETING............................................. 8
Section 5. COMPENSATION................................................. 8
Section 6. REGULAR MEETINGS............................................. 8
Section 7. SPECIAL MEETINGS............................................. 8
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND
WAIVER....................................................... 9
Section 9. QUORUM....................................................... 9
Section 10. MANNER OF ACTING............................................ 9
Section 11. COMMITTEES.................................................. 9
Section 12. ACTION WITHOUT FORMAL MEETING............................... 10
Section 13. CONFERENCE CALL MEETINGS.................................... 10
ARTICLE V. - OFFICERS.................................................... 10
Section 1. GENERALLY.................................................... 10
</TABLE>
(i)
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<TABLE>
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Page
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<S> <C> <C>
Section 2. COMPENSATION................................................. 11
Section 3. VACANCIES.................................................... 11
Section 4. CHIEF EXECUTIVE OFFICER...................................... 11
Section 5. SECRETARY.................................................... 11
Section 6. DEPUTY OFFICERS.............................................. 12
Section 7. ASSISTANT OFFICERS........................................... 12
ARTICLE VI. - INDEMNIFICATION............................................ 12
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS................... 12
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES................... 13
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION..................... 13
Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED
INDEMNIFICATION.............................................. 14
Section 5. SHAREHOLDER-APPROVED INDEMNIFICATION......................... 15
Section 6. ADVANCES FOR EXPENSES........................................ 16
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS........... 16
Section 8. INSURANCE.................................................... 16
Section 9. EXPENSES FOR APPEARANCE AS WITNESS........................... 16
ARTICLE VII. - REIMBURSEMENT OF NON-DEDUCTIBLE
PAYMENTS TO OFFICERS AND EMPLOYEES........................ 17
ARTICLE VIII. - FISCAL YEAR.............................................. 17
ARTICLE IX. - ANNUAL STATEMENTS.......................................... 17
ARTICLE X. - CAPITAL STOCK............................................... 18
Section 1. FORM......................................................... 18
Section 2. TRANSFER..................................................... 19
Section 3. RIGHTS OF HOLDER............................................. 19
Section 4. LOST OR DESTROYED CERTIFICATES............................... 19
ARTICLE XI. - SEAL....................................................... 19
ARTICLE XII. - REGISTERED OFFICE AND REGISTERED AGENT.................... 19
ARTICLE XIII. - AMENDMENTS............................................... 20
Section 1. AMENDMENTS GENERALLY......................................... 20
Section 2. BY-LAW INCREASING QUORUM OR VOTING
REQUIREMENTS................................................. 20
</TABLE>
(ii)
<PAGE>
BY-LAWS
OF
SOFTSENSE COMPUTER PRODUCTS, INC.
(formerly known as Softsense of Georgia, Inc.)
(ADOPTED: MARCH 31, 1995)
ARTICLE I.
DEFINITIONS
As used in these By-Laws, the terms set forth below shall have the meanings
indicated, as follows:
"Articles of Incorporation" means the Articles of Incorporation of the
-------------------------
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
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"Chief Executive Officer" shall mean the President of the Corporation, or
-----------------------
such other officer as shall be designated by the Board as having the duties of
the Chief Executive Officer, as described in Section 4 of Article V of these By-
Laws.
"Code" shall mean the Georgia Business Corporation Code, as amended from
----
time to time.
"Corporation" shall mean Softsense Computer Products, Inc., a Georgia
-----------
corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
---------
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 5 of Article V of these By-Laws.
"Secretary of State" shall mean the Secretary of State of Georgia.
------------------
"Voting group" shall have the meaning set forth in subsection (a) of Section
------------
6 of Article III of these By-Laws.
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these By-Laws, or as otherwise required by applicable law:
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(a) Any notice required by these By-Laws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph, teletype,
or other form of wire or wireless communication; or by mail or private carrier.
If these forms of personal notice are impracticable, notice may be communicated
by a newspaper of general circulation in the area where published, or by radio,
television, or other form of public broadcast communication.
(c) Written notice by the Corporation to any shareholder, if in a
comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown in
the Corporation's current record of shareholders; provided that if the
--------
Corporation has more than 500 shareholders of record entitled to vote at a
meeting, it may utilize a class of mail other than first class if the notice of
the meeting is mailed, with adequate postage prepaid, not less than 30 days
before the date of the meeting.
(d) Written notice to the Corporation may be addressed to its registered
agent at its registered office or to the Corporation or its Secretary at its
principal office shown in its most recent annual registration with the Secretary
of State.
(e) Except as provided in subsection (c) of this Section 1, written notice,
if in a comprehensible form, is effective at the earliest of the following:
(1) When received, or when delivered, properly addressed, to the addressee's
last known principal place of business or residence;
(2) Five days after its deposit in the mail, as evidenced by the postmark,
if mailed with first-class postage prepaid and correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
(f) Oral notice is effective when communicated if communicated in a
comprehensible manner.
(g) In calculating time periods for notice under these By-Laws, when a
period of time measured in days, weeks, months, years, or other measurement of
time is prescribed for the exercise of any privilege or the discharge of any
duty, the first day shall not be counted but the last day shall be counted.
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required by
the Articles of Incorporation, these By-Laws or applicable law:
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the
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shareholder entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the meeting,
unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; and
(2) Waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it
is presented.
(c) Neither the business transacted nor the purpose of the meeting need be
specified in the waiver, except that any waiver by a shareholder of the notice
of a meeting of shareholders with respect to an amendment of the Articles of
Incorporation, a plan of merger or share exchange, a sale of assets or any other
action which would entitle the shareholder to exercise statutory dissenter's
rights under the Code and obtain payment for his shares shall not be effective
unless:
(1) Prior to the execution of the waiver, the shareholder shall have been
furnished the same material that under the Code would have been required
to be sent to the shareholder in a notice of the meeting, including
notice of any applicable dissenters' rights as provided in the Code; or
(2) The waiver expressly waives the right to receive the material required
to be furnished.
(d) A director may waive any notice required to be given to such director by
the Code, the Articles of Incorporation, or these By-Laws before or after the
date and time stated in the notice. Except as provided by subsection (e) of
this Section 2, the waiver must be in writing, signed by the director entitled
to the notice, and delivered to the Corporation for inclusion in the minutes or
filing with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within or
outside the State of Georgia as the place of meeting for any annual or special
shareholders' meeting. A waiver
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of notice signed by all shareholders entitled to vote at a meeting may designate
any place within or outside the State of Georgia as the place for the holding of
such meeting. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the second Tuesday in April of each year, if not a legal holiday (and if
such is a legal holiday, then on the next following day not a legal holiday), at
such time and place as the Board shall determine, at which time the shareholders
shall elect a Board and transact such other business as may be properly brought
before the meeting. Notwithstanding the foregoing, the Board may cause the
annual meeting of shareholders to be held on such other date in any year as the
Board shall determine to be in the best interests of the Corporation, and any
business transacted at that meeting shall have the same validity as if
transacted on the date designated herein.
Section 3. SPECIAL MEETINGS. Except to the extent otherwise prescribed by
statute or the Articles of Incorporation, special meetings of the shareholders,
for any purpose or purposes, may be called by the Chief Executive Officer, or by
the presiding officer of the Board, if any. The Chief Executive Officer or the
Secretary shall call a special meeting when: (1) requested in writing by any two
or more of the directors; or (2) requested in writing by shareholders owning
shares representing at least twenty-five percent (25%) of all the votes entitled
to be cast on any issue proposed to be considered at such meeting. Any such
written request shall be signed and dated and shall state the purpose or
purposes of the proposed meeting.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these By-Laws.
(b) The Corporation shall give notice to each shareholder entitled to vote
thereat of the date, time and place of each annual and special shareholders'
meeting no fewer than ten (10) nor more than sixty (60) days before the meeting
date.
(c) Unless otherwise required by the Code with respect to meetings at which
specified actions will be considered (including but not limited to mergers,
certain share exchanges, certain asset sales by the Corporation, and dissolution
of the Corporation), notice of an annual meeting need not contain a description
of the purpose or purposes for which the meeting is called.
(d) Notice of a special meeting must include a description of the purpose or
purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by the terms
of these By-Laws to be set) therefor, notice of the date, time and place of any
adjourned meeting need not be given otherwise than by the announcement at the
meeting before adjournment. If a new record date for the
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adjourned meeting is or must be fixed, however, notice of the adjourned meeting
must be given in accordance with these By-Laws as if such adjourned meeting were
a newly-called meeting.
(f) If any corporate action proposed to be considered at a meeting of
shareholders would or might give rise to statutory dissenters' rights under the
Code, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Code.
(g) If any corporate action which would give rise to statutory dissenters'
rights under the Code is taken by written consent of shareholders without a
meeting, or is taken at a meeting with respect to which less than all
shareholders were entitled to receive notice, or is otherwise taken without a
vote of shareholders, the Corporation shall cause notice thereof, including the
information concerning statutory dissenters' rights contemplated by paragraph
(b) above, to be given, not more than ten (10) days after the adoption of such
action by shareholder vote at a meeting or by written consent to those
shareholders who did not execute such written consent or who were not entitled
to receive notice of such meeting, or to all shareholders if such action was
otherwise taken without a vote of shareholders.
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders, or shareholders entitled to demand a
special meeting of shareholders, or shareholders entitled to take any other
action, the Board may fix in advance (but not retroactively from the date the
Board takes such action) a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the meeting or action requiring such determination of shareholders. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, the close of business on the last
business day before the first notice of such meeting is delivered to
shareholders shall be the record date. If no record date is fixed for
determining shareholders entitled to take action without a meeting, the date the
first shareholder signs the consent shall be the record date for such purpose.
If no record date is fixed for determining shareholders entitled to demand a
special meeting, or to take other action, the date of receipt of notice by the
Corporation of demand for such meeting, or the date on which such other action
is to be taken by the shareholders, shall be the record date for such purpose.
(b) A separate record date may be established for each voting group entitled
to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to vote at a
shareholders meeting is effective for any adjournment of the meeting unless the
Board fixes a new record date, which it must do if the meeting is adjourned to a
date more than 120 days after the date fixed for the original meeting.
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(d) For the purpose of determining shareholders entitled to a distribution
by the Corporation (other than one involving a purchase, redemption or other
acquisition of the Corporation's shares), the record date shall be the date
fixed for such purpose by the Board, or if the Board does not fix such a date,
the date on which the Board authorizes such distribution.
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation or the
Code:
(i) A "voting group" with respect to any given matter means all shares
of one or more class or series which, under the Articles of
Incorporation or the Code, are entitled to vote and be counted
together collectively on that matter, and unless specified
otherwise in the Articles of Incorporation, the Code or these By-
Laws, all shares entitled to vote on a given matter shall be
deemed to be a single voting group for purposes of that matter.
(ii) Each outstanding share, regardless of class, is entitled to one
vote on each matter voted on at a shareholders' meeting.
(iii)A majority of the votes entitled to be cast on the matter by a
voting group constitutes a quorum of that voting group for action
on that matter.
(iv) The presence of a quorum of each voting group entitled to vote
thereon shall be the requisite for transaction of business on a
given matter.
(v) Action on a matter other than election of directors is approved
by a voting group if a quorum of such voting group exists and the
number of votes cast within such voting group in favor of such
action exceeds the number of votes cast within such voting group
against such action.
(vi) Except as otherwise provided in these By-Laws, all shares
entitled to vote for election of directors shall vote thereon as
a single voting group, and directors shall be elected by a
plurality of votes cast by shares entitled to vote in the
election in a meeting at which a quorum of such voting group is
present.
(b) Once a share is represented for any purpose other than solely to object
to holding a meeting or transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these By-Laws to be, set for that adjourned meeting.
(c) If a quorum for transaction of business shall not be present at a
meeting of shareholders, the shareholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock shall be present. No notice
other than announcements at the meeting before adjournment shall be required of
the new
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date, time or place of the adjourned meeting, unless a new record date for such
adjourned meeting is, or is required by law or these By-Laws to be, fixed. At
such adjourned meeting (for which no new record date is, or is required to be,
set) at which a quorum shall be present in person or by proxy, any business may
be transacted that might have been transacted at the meeting originally called.
Section 7. PROXIES. At every meeting of the shareholders, any shareholder
having the right to vote shall be entitled to vote in person or by proxy, but no
proxy shall be: (i) effective unless given in writing and signed, either
personally by the shareholder or his attorney-in-fact; or (ii) effective until
received by the Secretary or other officer or agent authorized to tabulate
votes; or valid after eleven months from its date, unless said proxy expressly
provides for a longer period.
Section 8. INFORMAL ACTIONS BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if written consent (which may take the form of one or more counterpart
copies), setting forth the action so taken, shall be signed by all the holders
of all the shares entitled to vote with respect to the subject matter thereof
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such consent shall have the same force and effect as a
unanimous vote of the shareholders; provided, however, that no such consent
which purports to be an approval of any plan of merger, share exchange, asset
sale or other transaction (i) as to which shareholder approval is required by
the Code and (ii) with respect to which specific disclosure requirements to
voting shareholders are imposed by the Code, shall be effective unless:
(1) prior to the execution of the consent, each consenting shareholder shall
have been furnished the same material which, under the Code, would have
been required to be sent to shareholders in a notice of a meeting at
which the proposed action would have been submitted to the shareholders
for action, including notice of any applicable dissenters' rights; or:
(2) the written consent contains an express waiver of the right to receive
the material otherwise required to be furnished.
ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. All corporate powers of the Corporation shall
be exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, its Board, subject to any limitation
set forth in the Articles of Incorporation, or any amendment to these By-Laws
approved by the shareholders of the Corporation, or any otherwise lawful
agreement among the shareholders of the Corporation.
Section 2. NUMBER, TENURE, QUALIFICATIONS. The Board shall consist of one
or more individuals, the precise number to be fixed by resolution of the Board
of Directors from time to time. Each member of the Board shall hold office
until the annual meeting of shareholders held
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next after his election and until his successor has been duly elected and has
qualified, or until his earlier resignation, removal from office, or death.
Directors shall be natural persons who are eighteen (18) years of age or older,
but need not be shareholders or residents of Georgia unless the Articles of
Incorporation require otherwise.
Section 3. VACANCIES, HOW FILLED. If any vacancy shall occur in the
membership of the Board by reason of the resignation, removal or death of a
director, the remaining directors shall continue to act, and such vacancies may
be filled by the affirmative vote of the majority of the directors then in
office, though less than a quorum, and if not therefore filled by action of the
directors, may be filled by the shareholders at any meeting held during the
existence of such vacancy. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.
Section 4. PLACE OF MEETING. The Board may hold its meetings at such
place or places within or without the State of Georgia as it may from time to
time determine.
Section 5. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by resolution
of the Board.
Section 6. REGULAR MEETINGS. A regular annual meeting of the Board shall
be held, without other notice than this By-Law, immediately after, and at the
same place as, the annual meeting of shareholders. The Board may provide, by
resolution, the time and place within or without the State of Georgia, for the
holding of additional regular meetings without other notice than such
resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chief Executive Officer or the presiding officer of the Board, if
different from the Chief Executive Officer, on not less than two (2) days'
notice to each director by mail, telegram, cablegram or other form of wire or
wireless communication, or personal delivery or other form of communication
authorized under the circumstances by the Code, and shall be called by the Chief
Executive Officer or the Secretary in like manner and on like notice on the
written request of any two (2) or more members of the Board. Such notice shall
state the time, date and place of such meeting, but need not describe the
purpose of the meeting. Any such special meeting shall be held at such time and
place as shall be stated in the notice of the meeting.
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these By-Laws.
Section 9. QUORUM. At all meetings of the Board, unless otherwise
provided in the Articles of Incorporation or other provisions of these By-Laws,
the presence of a majority of the Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum a majority of the Directors
present at any meeting may adjourn from time to time until a quorum be had.
Notice
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of the time and place of any adjourned meeting need only be given by
announcement at the meeting at which adjournment is taken.
Section 10. MANNER OF ACTING. Except as expressly otherwise provided by
the Articles of Incorporation or other provisions of these By-Laws, if a quorum
is present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board. A director who is present at a meeting when
corporate action is taken is deemed to have assented to the action unless:
(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
(2) His dissent or abstention from the action taken is entered in the
minutes of the meeting; or
(3) He does not vote in favor of the action taken and delivers written
notice of his dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting.
Section 11. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation, the Board
may create one or more committees and appoint members of the Board to serve on
them. Each committee may have one or more members, who serve at the pleasure of
the Board.
(b) The provisions of these By-Laws and of the Code which govern meetings,
action without meetings, notice and waiver of notice, and quorum and voting
requirements of the Board, shall apply as well to committees created under this
Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these By-Laws
and the resolution of the Board creating such committee, each committee may
exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action required by the
Code to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
(3) Exercise any authority which the Board may have to amend the Articles of
Incorporation;
(4) Adopt, amend, or repeal by-laws; or
(5) Approve a plan of merger not requiring shareholder approval.
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Section 12. ACTION WITHOUT FORMAL MEETING. Except as expressly otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if written consent thereto (which may take the form of one or
more counterparts) is signed by all members of the Board or of such committee,
as the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or committee. A consent executed in accordance
herewith has the effect of a meeting vote and may be described as such in any
document.
Section 13. CONFERENCE CALL MEETINGS. Members of the Board, or any
committee of the Board, may participate in a meeting of the Board or committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can simultaneously hear each
other during the meeting, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
ARTICLE V.
OFFICERS
Section 1. GENERALLY. The Board shall from time to time elect or appoint
such officers as it shall deem necessary or appropriate to the management and
operation of the Corporation, which officers shall hold their offices for such
terms as shall be determined by the Board and shall exercise such powers and
perform such duties as are specified in these By-Laws or in a resolution of the
Board. Except as specifically otherwise provided in resolutions of the Board,
the following requirements shall apply to election or appointment of officers:
(a) The Corporation shall have, at a minimum, the following officers, which
offices shall bear the titles designated therefor by resolution of the Board,
but in the absence of such designation shall bear the titles set forth below:
Office Title
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Chief Executive Officer President
Secretary Secretary
(b) All officers of the Corporation shall serve at the pleasure of the
Board, and in the absence of specification otherwise in a resolution of the
Board, each officer shall be elected to serve until the next succeeding annual
meeting of the Board and the election and qualification of his successor,
subject to his earlier death, resignation or removal.
(c) Any person may hold two or more offices simultaneously, and no officer
need be a shareholder of the Corporation.
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(d) If so provided by resolution of the Board, any officer may be delegated
the authority to appoint one or more officers or assistant officers, which
appointed officers or assistant officers shall have the duties and powers
specified in the resolution of the Board.
Section 2. COMPENSATION. The salaries of the officers of the Corporation
shall be fixed by the Board, except that the Board may delegate to any officer
or officers the power to fix the compensation of any other officer.
Section 3. VACANCIES. A vacancy in any office, because of resignation,
removal or death may be filled by the Board for the unexpired portion of the
term, or if so provided by resolution of the Board, by an officer of the
Corporation to whom has been delegated the authority to appoint the holder of
such vacated office.
Section 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have such title or titles designated by the Board and shall be the principal
executive officer of the Corporation. Subject to the control of the Board, the
Chief Executive Officer shall in general manage, supervise and control all of
the business and affairs of the Corporation. He shall, when present, preside at
all meetings of all of the stockholders. He may sign, individually or in
conjunction with any other proper officer of the Corporation thereunto
authorized by the Board, certificates for shares of the Corporation, any deeds,
mortgages, bonds, policies of insurance, contracts, investment certificates, or
other instruments which the Board has authorized to be executed, except in cases
where the execution thereof shall be expressly delegated by the Board or by the
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of the Chief Executive Officer of the Corporation
and such other duties as may be prescribed by the Board from time to time.
Section 5. SECRETARY. The Secretary may be designated by any such title
as determined by resolution of the Board, but shall have the duties of the
officer denominated the "Secretary" under the Code. Such officer shall:
(a) attend and keep the Minutes of the shareholders' meetings and of the Board's
meetings in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these By-Laws or as
otherwise required by law or the provisions of the Articles of Incorporation;
(c) be custodian of the corporate records and of the seal of the Corporation and
see that the seal of the Corporation is affixed to all documents, the execution
of which on behalf of the Corporation under its seal is duly authorized;
(d) maintain, or cause an agent designated by the Board to maintain, a record of
the Corporation's shareholders in a form that permits the preparation of a list
of the names and addresses of all shareholders in alphabetical order by class of
shares, showing the number and class of shares held by each; (e) have general
charge of the stock transfer books of the Corporation or responsibility for
supervision, on behalf of the Corporation, of any agent to which stock transfer
responsibility has been delegated by the Board; (f) have responsibility for the
custody, maintenance and preservation of those corporate records which the
Corporation is required by the Code or otherwise to create, maintain or
preserve; (g) in general perform all duties incident to the legal office of
"Secretary", as described in the Code, and such other duties as from time to
time may be assigned to him by the Board.
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Section 6. DEPUTY OFFICERS. The Board may create one or more deputy
officers whose duties shall be, among any other designated thereto by the Board,
to perform the duties of the officer to which such office has been deputized in
the event of the unavailability, death or inability or refusal of such officer
to act. Deputy officers may hold such titles as designated therefor by the
Board; however, any office designated with the prefix "Vice" or "Deputy" shall
be, unless otherwise specified by resolution of the Board, automatically a
deputy officer to the office with the title of which the prefix term is
conjoined. Deputy officers shall have such other duties as prescribed by the
Board from time to time.
Section 7. ASSISTANT OFFICERS. The Board may appoint one or more officers
who shall be assistants to principal officers of the Corporation, or their
deputies, and who shall have such duties as shall be delegated to such assistant
officers by the Board or such principal officers, including the authority to
perform such functions of those principal officers in the place of and with full
authority of such principal officers as shall be designated by the Board or (if
so authorized) by such principal officers. The Board may by resolution
authorize appointment of assistant officers by those principal officers to which
such appointed officers will serve as assistants.
ARTICLE VI.
INDEMNIFICATION
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS. As used in this
Article VI, the term:
(1) "Corporation" (when spelled with an initial capital letter) includes
any domestic or foreign predecessor entity of the "Corporation" (as
defined in Article I of these By-Laws) in a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.
(2) "director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation,
is or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. A director is considered to be serving an employee
benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve services by,
him to the plan or to participants in or beneficiaries of the plan.
Director includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "expenses" include attorneys' fees.
(4) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with respect to
a proceeding.
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(5) "party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(6) "proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES. Unless otherwise
provided by the Articles of Incorporation, to the extent that a director has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue, or matter therein,
because he is or was a director of the Corporation, the Corporation shall
indemnify the director against reasonable expenses incurred by him in connection
therewith.
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION.
(a) Except as provided in subsections (d) and (e) of this Section 3, or
as otherwise provided in the Articles of Incorporation, the Corporation may
indemnify or obligate itself to indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the Corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a) of this Section 3.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct set
forth in subsection (a) of this Section 3.
(d) The Corporation may not indemnify a director under this Section 3:
(1) In connection with a proceeding by or in the right of the Corporation
in which the director was adjudged liable to the Corporation; or
(2) In connection with any other proceeding in which he was adjudged
liable on the basis that personal benefit was improperly received by him.
(e) Indemnification permitted under this Section 3 in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
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Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED INDEMNIFICATION.
(a) The Corporation may not indemnify a director under Section 3 of this
Article VI unless a determination has been made in the specific case that
indemnification of the director is permissible in the circumstances because he
has met the standard of conduct set forth in subsection (a) of such Section 3.
(b) The determination required by subsection (a) hereof shall be made:
(1) By the Board by majority vote of a quorum consisting of directors not
at the time parties to the proceeding;
(2) If a quorum cannot be obtained under paragraph (1) of this subsection
(b), by majority vote of a committee duly designated by the Board (in
which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;
(3) By special legal counsel:
(A) Selected by the Board or its committee in the manner
prescribed in paragraph (1) or (2) of this subsection; or
(B) If a quorum of the Board cannot be obtained under paragraph
(1) of this subsection and a committee cannot be designated under
paragraph (2) of this subsection, selected by majority vote of the
full Board (in which directors who are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the control
of directors who are at the time parties to the proceeding may not be
voted on the determination.
(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, as set forth in
subsection (b) hereof, except that if such determination is made by special
legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled to select counsel
under paragraph (3) of subsection (b) of this Section 4.
Section 5. SHAREHOLDER-APPROVED INDEMNIFICATION.
(a) Without regard to any limitations contained in any other section of
this Article VI, the Corporation may, if authorized by its shareholders by a
majority of votes which would be entitled to be cast in a vote to amend the
Corporation's Articles of Incorporation (which authorization may take the form
of an amendment to the Articles of Incorporation or a contract, resolution or
by-law
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<PAGE>
approved or ratified by the requisite shareholder vote), indemnify or obligate
itself to indemnify a director made a party to a proceeding, including a
proceeding brought by or in the right of the Corporation.
(b) The Corporation shall not indemnify a director under this Section 5
for any liability incurred in a proceeding in which the director is adjudged
liable to the Corporation or is subjected to injunctive relief in favor of the
Corporation:
(1) For any appropriation, in violation of his duties, of any business
opportunity of the Corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) For any type of liability for unlawful distribution under Section 14-
2-832 of the Code, or any successor statute; or
(4) For any transaction from which he received an improper personal
benefit.
(c) Where approved or authorized in the manner described in subsection
(a) of this Section 5, the Corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
(1) The director furnishes the Corporation a written affirmation of his
good faith belief that his conduct does not constitute behavior of
the kind described in subsection (b) of this Section 5; and
(2) The director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification
under this Section 5.
Section 6. ADVANCES FOR EXPENSES.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(1) The director furnishes the Corporation a written affirmation of his
good faith belief that he has met the standard of conduct set forth
in subsection (a) of Section 3 of this Article VI; and
(2) The director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification
under this Article.
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(b) The undertaking required by paragraph (2) of subsection (a) of this
Section 6 must be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
repayment.
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS. Except as
otherwise provided in the Articles of Incorporation, an officer of the
Corporation who is not a director is entitled to mandatory indemnification under
Section 2 of this Article VI, and is entitled to permissive indemnification and
advancement of expenses under the standards and procedures set forth in Section
3, 4 and 5 of this Article VI, to the same extent as a director, consistent with
public policy.
Section 8. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of an individual who is or was a director, officer, employee, or agent
of the Corporation or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee, or agent,
whether or not the Corporation would have power to indemnify him against the
same liability under this Article VI or applicable law.
Section 9. EXPENSES FOR APPEARANCE AS WITNESS. Nothing contained in this
Article VI shall be deemed to limit the Corporation's power to pay or reimburse
expenses incurred by a director or officer in connection with his appearance as
a witness in a proceeding at a time when he has not been made a named defendant
or respondent to the proceeding.
ARTICLE VII.
REIMBURSEMENT OF NON-DEDUCTIBLE
PAYMENTS TO OFFICERS AND EMPLOYEES
In the event any payments to an officer or employee of the Corporation,
such as salary, commission, bonus, interest or rent expenses incurred by him, is
thereafter disallowed in whole or in part by the Internal Revenue Service as a
proper deduction for income tax purposes under Section 162 of the Internal
Revenue Code of 1986 (or disallowed under any similar statutory section which
may subsequently replace such Section 162), such disallowed payments shall be
deemed to be an obligation owed by such officer or employee to the Corporation.
Such disallowed payments shall be reimbursed by such officer or employee to the
Corporation on or before ninety (90) days following the final determination of
such disallowance by the Internal Revenue Service or entry of the final judgment
of such determination if adjudicated. It shall be the duty of the Board to
enforce reimbursement of each such amount disallowed, including the withholding
from future compensation payments to such officer or employee until the amount
owed to the Corporation has been recovered.
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ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board or, in
the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE IX.
ANNUAL STATEMENTS
(a) No later than four months after the close of each fiscal year, and in
any case prior to the next annual meeting of shareholders, the Corporation shall
prepare:
(i) A balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of the fiscal
year, and
(ii) A profit and loss statement showing the results of its
operation during the fiscal year.
Upon written request, the Corporation shall mail promptly to any
shareholder of record a copy of the most recent such balance sheet and profit
and loss statement. If prepared for other purposes, the Corporation shall also
furnish upon written request a statement of sources and applications of funds
and a statement of changes in shareholders' equity for the fiscal year. If
financial statements are prepared by the Corporation on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared, and disclose that they are prepared, on that basis. If financial
statements are prepared otherwise than on the basis of generally accepted
accounting principles, they must so disclose and must be prepared on the same
basis as other reports or statements prepared by the Corporation for the use of
others.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the Chief Executive Officer or the person
responsible for the Corporation's accounting records:
(1) Stating his reasonable belief whether the statements were prepared on
the basis of generally accepted accounting principles and, if not,
describing the basis of preparation; and
(2) Describing any respects in which the statements were not prepared on
a basis of accounting consistent with the statements prepared for the
preceding year.
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ARTICLE X.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this Section
1, the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
exhibit the holder's name, the number of shares and class of shares and series,
if any, represented thereby, the name of the Corporation and a statement that
the Corporation is organized under the laws of the State of Georgia. Each
certificate shall be signed by one or more officers of the Corporation specified
by resolution of the Board, but in the absence of such specifications, shall be
valid if executed by the Chief Executive Officer or any Deputy or Assistant
thereto, and such execution is countersigned by the Secretary, or any Deputy or
Assistant thereto. Each stock certificate may but need not be sealed with the
seal of the Corporation.
(b) If authorized by resolution of the Board, the Corporation may
issue some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these By-Laws, or by any legal agreement among the
shareholders of the Corporation.
Section 2. TRANSFER. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been lost,
stolen or destroyed, upon compliance with the provisions of Section 4, Article X
of these By-Laws.
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat
the holder of record of any share of the Corporation as the person entitled to
vote such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
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Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if the
Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE XI.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
ARTICLE XII.
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the corporation is Atlanta
Financial Center, 3343 Peachtree Road, N.E., Suite 1800, Atlanta, Georgia 30326
and the name of the initial registered agent is Richard G. Greenstein. The
corporation may amend this Article XII at any time to change its registered
office or registered agent, without further action of its officers or directors,
by filing with the Secretary of State a notice of such change, in accordance
with Section 14-2-502 of the Code, or any successor statute.
The corporation may have other offices at such places within or without the
State of Georgia as the Board may from time to time designate or the business of
the corporation may require or make desirable.
ARTICLE XIII.
AMENDMENTS
Section 1. AMENDMENTS GENERALLY.
(a) Except as otherwise provided in subsection (c) of this Section 1,
or in the Articles of Incorporation or by applicable law, the Board may amend or
repeal any provision of these By-Laws or adopt any new by-law, unless the
shareholders have adopted, amended or repealed a particular by-law provision
and, in doing so, have expressly reserved to the shareholders the right of
amendment or repeal therefor.
(b) The Corporation's shareholders have the right to amend or repeal
any provision of these By-Laws, or to adopt new By-Law provisions, even though
such provisions may also be adopted, amended or repealed by the Board.
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(c) Any provision of these By-Laws limiting the authority of the
Board or establishing staggered terms for directors may be adopted, amended or
repealed only by the shareholders.
Section 2. BY-LAW INCREASING QUORUM OR VOTING REQUIREMENTS.
(a) Except as provided in Section 14-2-1113 of the Code or any
successor statute thereto (relating to corporate business combinations with
statutorily defined "interested shareholders"), any by-law which sets a greater
quorum or voting requirement for shareholders (or voting groups of shareholders)
than the minimum required by the Code may not be adopted, amended or repealed by
the Board.
(b) Except as otherwise provided in the Articles of Incorporation, a
by-law that fixes a greater quorum or voting requirement for the Board than the
minimum required by the Code:
(1) May be adopted, amended, or repealed by the shareholders only by
the affirmative vote of a majority of the votes entitled to be
cast; or
(2) May be adopted, amended, or repealed by the directors only by a
majority of the entire Board.
(c) A by-law adopted or amended by the shareholders that fixes a
greater quorum or voting requirement for the Board may be amended or repealed
only by a specified vote of either the shareholders or the Board, if such by-law
provision so provides.
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EXHIBIT 10.1
SOFTSENSE COMPUTER PRODUCTS, INC. COMPU-TOUCH(R) LICENSE, SUPPORT AND EQUIPMENT
PURCHASE AGREEMENT
This Compu-Touch license, support and equipment purchase agreement (this
"Agreement") is entered into this ___ day of ____________, ______, between
Softsense computer products, Inc., a Georgia corporation, with its principal
place of business at 1000 Alderman Drive, Suite A, Alpharetta, Georgia 30202
(hereinafter "Softsense"), and ________________________________, a corporation,
organized and existing under the laws of the State of ______________, with its
principal place of business at _________________________________________________
(hereinafter "Customer").
Now therefore, for and in consideration of the mutual premises, warranties
and representations set forth in this Agreement and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. BACKGROUND Softsense is the developer and owner of several copyrighted
----------
computer programs (and associated copyrighted documentation) operable on certain
microcomputer equipment which are designed for use in managing convenience
stores and other retail establishments, and which are commonly referred to as
Compu-Touch. Softsense is also the developer of certain items of computer
equipment which are used in conjunction with these computer programs. Prior to
the date of this Agreement, Customer accepted a proposal dated __________,
199__, from Softsense whereby Customer agreed to license one or more of
Softsense's Compu-Touch programs from Softsense, purchase selected items of
computer equipment from Softsense and receive support and maintenance services
from Softsense with respect to such programs and equipment. The purpose of this
Agreement is to establish the terms and conditions which will apply to the
current and future licensing of the Compu-Touch programs, the purchase of
equipment and the support and maintenance of such programs and equipment,
whether such items are offered to Customer through one or more additional
proposals.
2. DEFINITIONS In this Agreement, the following terms shall have the
-----------
meanings set forth below:
2.1 "Enhancement" shall mean any change or addition to the
Software that, when made, adds new function or improves the Software's utility,
efficiency, functional capability or application. "Enhancement" shall not
include separately priced or separately marketed computer programs, even if such
computer programs are designed to interface with the Software. "Enhancement"
includes all Error Corrections and Additional Enhancements (as defined in
Section 6.2.2 herein).
2.2 "Equipment" shall mean the computer equipment, parts and
supplies which have been formally approved by Softsense to be used in
conjunction with the Software, and which are purchased by Customer from
Softsense. "Equipment" includes equipment designed and manufactured by
Softsense, equipment designed by Softsense and assembled by third parties
(collectively, the "Softsense Equipment") and equipment designed and
manufactured by third parties ("non-Softsense Equipment"). The Equipment is more
particularly described in the Proposal, as defined below.
<PAGE>
2.3 "Error" shall mean any failure of the Software to conform in
all material respects to the published specifications for the Software.
2.4 "Error Correction" shall mean either a modification or
addition that, when made, or added to the Software, establishes material
conformity of the Software to its published specifications, or a procedure or
routine that helps eliminate the practical adverse effect on Customer of such
nonconformity.
2.5 "Order" shall mean a Customer issued purchase order in
substantial conformity with the requirements of Section 3.6.2 herein, which when
accepted by Softsense (as specified in Section 3.6.1 herein) shall bind the
parties hereto to the terms on the face of the Order with respect to the
Software, Equipment and Professional Services listed thereon.
2.6 "Proposal" shall mean a written offer by Softsense made to
and accepted by Customer which relates to the licensing of Software, purchase of
Equipment and provision of Software Support and Equipment Maintenance Services.
The Proposal shall specify the Software and Equipment to be licensed and
purchased by Customer, the fees and charges associated with the Software,
Equipment, Software Support and Equipment Maintenance Services and other terms
and conditions pertaining to the business transaction between Customer and
Softsense. For purposes hereof, the proposal dated _____________, 19___ and
referred to in Section 1 shall be deemed a "Proposal," as well as any future
proposals offered to and accepted by Customer relating to the subject matter
hereof.
2.7 "Services" shall mean the Equipment maintenance services
that may be provided under an Equipment maintenance plan selected by Customer
("Equipment Maintenance Services"), Software support services that may be
provided under a Software support plan selected by Customer ("Software Support
Services"), and the professional services ("Professional Services") that may be
provided by Softsense hereunder.
2.8 "Software" shall mean only the Softsense developed and owned
computer programs licensed to Customer under this Agreement, consisting solely
of machine readable computer code, user manuals, specifications and other
materials in any form that relate to the Software. "Software" shall also include
all Upgrades and Enhancements that are made available to Customer as part of the
Software Support Services and Professional Services provided by Softsense
hereunder. The Software is more particularly described in the Proposal.
2.9 "System" shall mean the Software and certain non-Softsense
computer programs operating with the Equipment formally approved by Softsense.
2.10 "Upgrades" shall mean new versions or new releases of the
Software, which may include Enhancements or maintenance modifications to the
extent that such new versions and new releases are not developed to function
under a new operating system.
3. FEES, ORDERING AND PAYMENT
--------------------------
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3.1 System Pricing The fees for all Software and Equipment will
--------------
be specified in each Proposal. Customer shall adhere to the following payment
terms for any Accepted Orders (as defined in Section 3.6.1 herein) for Software
and Equipment placed hereunder:
(i) Customer will issue an Order to Softsense via
fax, overnight mail or any other mutually agreed upon mode of delivery and shall
remit with such Order a deposit for the purchase in the amount of eighty percent
(80%) of the purchase amount;
(ii) Softsense will deliver the Software and
Equipment to the Customer - designated location by the delivery date specified
on the Accepted Order;
(iii) Softsense will generate and deliver to Customer
an invoice for the unpaid purchase amount upon shipment of the System to the
Customer-designated location;
(iv) Customer will process the invoice and remit the
payment due to Softsense within thirty (30) days of Customer's receipt of the
invoice.
3.2 Services Fees
-------------------
3.2.1 Software Support Services Fees Customer shall
------------------------------
pay to Softsense an annual Software Support Services fee equal to ___ % of the
total license fees paid or to be paid by Customer for each copy of the Software
currently licensed and installed at each Licensed Site. Softsense will invoice
Customer in advance on a monthly basis for the Software Support Services, such
fee to be paid within thirty (30) days after Customer's receipt of Softsense's
invoice. To the extent Customer licenses and installs additional Software, the
monthly support fee will be recalculated based on the new total license fees
paid or to be paid by Customer.
3.2.2 Equipment Maintenance Services Fees Customer
-----------------------------------
shall pay to Softsense an annual Equipment Maintenance Services fee equal to ___
% of the total charges paid or to be paid by Customer for each item of Equipment
installed at each Licensed Site. Softsense will invoice Customer in advance on a
monthly basis for the Equipment Maintenance Services, such fee to be paid within
thirty (30) days after Customer's receipt of Softsense's invoice. To the extent
Customer purchases and installs additional Equipment items, the monthly
maintenance fee will be recalculated based on the new total charges paid or to
be paid by Customer.
3.2.3 Professional Services Fees Customer will pay for
--------------------------
the Professional Services at Softsense's then-current Professional Services
billing rates. Customer shall also pay all reasonable travel, meal and lodging
expenses incurred by Softsense in connection with providing such services.
Softsense will invoice Customer on a monthly basis for these expenses. Softsense
will also invoice Customer on a monthly basis for the Professional Services
unless the parties mutually agree to alternative payment terms. Customer shall
pay all fees and expenses within thirty (30) days after its receipt of
Softsense's invoices.
3.3 Softsense shall have the right, at any time, to change,
alter or amend the fees, charges and billing rates associated with the Software,
Equipment and Services upon sixty (60) days prior written notice to Customer.
3
<PAGE>
3.4 Any amount past due shall bear interest at a rate of 1.5
percent per month until paid in full.
3.5 Taxes In addition to the fees due under this Agreement,
-----
Customer agrees to pay the amounts equal to any federal, state and local taxes
and import and export duties, designated, levied or based on this Agreement or
any activities hereunder, exclusive of any taxes based on Softsense's net
income, including any taxes or duties levied subsequent to the effective date of
this Agreement. In regards to any applicable state and local sales and use
taxes, Customer shall provide Softsense with either a valid exemption
certificate or documentation indicating that Customer has self-assessed and paid
any such taxes.
3.6 Ordering
--------
3.6.1 Specific Software, Equipment and Professional Services
may be ordered by Customer under this Agreement by complying with the reasonable
ordering procedures established by Softsense, which, at a minimum, will require
Customer's submission of a signed Order to Softsense and Softsense's acceptance
thereof. Only those terms on the face (not back) of the Accepted Order shall be
enforceable. An Order for Professional Services which has been signed by an
authorized representative of Softsense and returned to Customer shall be deemed
accepted by Softsense ("Accepted Order"). An Order for Software and Equipment
which has been signed by Softsense and returned to Customer or upon which
Softsense has issued an invoice to Customer or upon which Softsense has
otherwise commenced performance, shall be deemed accepted by Softsense. Unless
otherwise agreed in writing by the parties, the Accepted Order listing the
Software programs licensed and the Customer locations ("Licensed Sites") where
the Software programs are to be installed, shall serve to conform and effectuate
Customer's license to the Software at such Licensed Sites, effective as to each
Licensed Site upon completion of payment of the charges stated in the Order for
such Licensed Site.
3.6.2 Orders for Software and Equipment shall identify: (i)
the subject Software and Equipment; (ii) the Customer location for the Software
and Equipment; and (iii) the mutually agreed upon delivery date. Orders for
Professional Services shall indicate: (i) the services requested; (ii) the
mutually agreed upon completion dates (including all milestone dates), where
applicable; (iii) the applicable billing rate; and (iv) the payment terms agreed
upon by the parties.
4. SOFTWARE
--------
4.1 License
-------
4.1.1 Subject to compliance by Customer with the terms set
forth herein, including payment of all license fees, Softsense hereby grants to
Customer a nonexclusive, nontransferable, nonassignable (except as permitted by
Section 17), limited and personal license to install, use and execute the
Software at each Licensed Site solely in support of Customer's internal business
activities. Customer acknowledges and agrees that a separate license from
Softsense is required for each Customer location where the Software will be
used, as designated in the applicable Accepted Orders. Customer may make one
copy of the Software for "archival" or "backup" purposes only, provided such
copy is
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labeled with Softsense's name and the version and serial number of the Software
and the label contains Softsense's copyright notices or other proprietary
markings designated by Softsense.
4.1.2 Notwithstanding the license granted in Section 4.1.1,
no license is granted to Customer to copy, reproduce or modify the Software, or
to adapt, transcribe or merge the Software or any portion thereof, except with
Softsense's express written consent. Customer has no right to market, sell,
sublicense, disseminate, distribute or otherwise transfer the Software or any
portion thereof, unless expressly authorized by Softsense in an addendum to this
Agreement signed by both parties. Customer shall not decompile, disassemble or
reverse engineer the Software, or attempt to do so.
4.1.3 With respect to the third-party computer programs
provided by Softsense for use in conjunction with the Software, Customer
acknowledges that any right and license to use such computer programs will be
specified on the license agreement provided by the manufacturer of such computer
programs.
4.1.4 The license granted to Customer hereunder is limited
to the United States and the Software shall not be used outside the United
States without first notifying and obtaining Softsense's consent, which consent
will not be unreasonably withheld by Softsense after taking into consideration,
among other factors, the extent of legal protection provided to intellectual
property by the country where Customer desires to use the Software.
4.2 Ownership of Software
---------------------
4.2.1 Customer acknowledges and agrees that, as between
Softsense and Customer, Softsense is the owner of the Software, including all
modifications, changes, updates and additions, whether made by Softsense or by a
third party with Softsense's permission.
4.2.2 Customer acknowledges and agrees that, except for
Customer's license described in Section 4.1 of this Agreement, Customer has no
right, title and interest in the Software, in any form, or in any copies
thereof, including all worldwide copyrights, trade secrets, patent rights and
any other Proprietary Information (as defined in Section 7.1) and confidential
information rights therein. In connection therewith, Customer agrees to at all
times hereafter keep the Software free of all security interests, liens,
encumbrances, mortgages and claims whatsoever, and Customer agrees that neither
it nor anyone at its direction shall file a financing statement, mortgage,
notice of lien, deed of trust, security agreement or any other agreement or
instrument creating or giving notice of an encumbrance or charge against the
Software. Additionally, the Software shall remain the property of Softsense even
if Customer, its employees or its contractors, may have contributed to the
conception of such work or helped in its development.
4.2.3 Except in the context of claims by third parties who
have established, by virtue of a final non-appealable judgment or order issued
by a court of competent jurisdiction, ownership rights to the Software, or to
any specific portion thereof, which are superior to those of Softsense, Customer
hereby agrees not to challenge the validity of or impair Softsense's ownership
of the Software, as well as not to challenge the
5
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copyrights, trade secret rights, patent rights or confidential and Proprietary
Information rights of Softsense therein.
4.2.4 Nothing herein shall be construed as granting
Customer any right, title or interest in, or to, the trade names or trademarks
owned or used by Softsense.
4.2.5 Nothing herein shall restrict Softsense from granting
similar rights and licenses to the Software to other individuals and entities.
4.3 Software Limited Warranty and Disclaimers
-----------------------------------------
4.3.1 Softsense hereby warrants to Customer that the
Software will conform, when shipped to Customer, to the published specifications
for the Software, provided that the Software is properly used in the minimum
operating environment recommended by Softsense. If Customer believes that there
is a defect in the Software such that it does not conform to this limited
warranty, Softsense must be notified immediately, but no later than ninety (90)
days following the delivery of the Software to Customer. As Customer's exclusive
remedy and sole measure of any recoverable damages by Customer and any third
party for breach of this limited express warranty with respect to the Software,
Softsense shall repair or replace, at Softsense's option and expense, the
nonconforming Software. Softsense shall have no obligation under this Section
4.3.1 should the Software be modified, altered, merged or subjected to misuse,
neglect, accident or improper use by Customer or any third party. Softsense does
not warrant that the Software will operate in conjunction with equipment or
software that is neither provided by nor formally approved by Softsense, or that
the operation of the Software will always be uninterrupted or problem or Error
free.
4.3.2 Customer understands and agrees that the limited
express warranty set forth above in Section 4.3.1 is exclusive and Softsense
disclaims any and all other warranties of any nature whatsoever with respect to
the Software and any Software Support Services and Professional Services
provided hereunder, whether oral or written, express or implied, particularly
including the implied warranties of merchantability and fitness for a particular
purpose.
4.4 Softsense will defend Customer against any claim that the
Software supplied infringes a United States patent or copyright and, subject to
the limitation of liability set forth in Section 8.1 herein, will pay all costs,
damages and attorneys' fees that a court finally awards as a result of a
determination of patent or copyright infringement. To qualify for such defense
and payment, Customer must: (i) provide Softsense with prompt written notice of
the initial claim and lawsuit relating thereto; (ii) permit Softsense the right
to defend, compromise or settle the lawsuit in the sole discretion of Softsense;
and (iii) provide Softsense with all available information, reasonable
assistance, authority and cooperation to enable Softsense to defend, compromise
or settle the lawsuit as provided herein. Customer, at its own expense, may
participate in any such lawsuit, compromise or settlement in an advisory
capacity. If such claim has occurred, or in Softsense's judgment, is likely to
occur, Customer agrees to allow Softsense, at Softsense's option and expense, to
modify the Software so that it becomes noninfringing, or to procure the right
for Customer to continue using the Software or to substitute the Software, and
if such remedies are not, in Softsense's judgment, reasonably available, then
upon written request, Customer will return the Software to Softsense for a
credit in the amount of the unamortized portion of the
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Software, using a five-year straight line amortization schedule. Softsense shall
not have any liability to Customer for any claim that the non-Softsense computer
programs infringes a United States patent or copyright. Customer's sole recourse
will be against the manufacturer of such non-Softsense computer programs to the
extent that the manufacturer assumes any responsibility for patent or copyright
infringement. The defense offered in this Section 4.4 shall not apply to any
claim based upon the combination, operation or use of the Software with data or
computer programs not provided, formally approved or manufactured by Softsense.
The foregoing states the entire obligation of Softsense for patent and copyright
infringement with respect to the Software.
4.5 Softsense hereby represents to Customer that Softsense is
the author of the Software and has full and exclusive right, title and interest
in the Software, including the exclusive right to grant the licenses and rights
granted herein to the Software and that the Software is free and clear of any
lien, claim or encumbrance whatsoever.
5. EQUIPMENT
---------
5.1 Title to the Equipment purchased hereunder will pass to
Customer upon payment to Softsense of all fees or charges hereunder related to
the Equipment.
5.2 Delivery of the Equipment will be made in accordance with
the Accepted Order therefor and the Equipment will be delivered to Customer's
location set forth in such Accepted Order. Softsense shall make all shipping
arrangements, and will invoice Customer for all shipping charges. Softsense will
assume all risk of loss, damage and destruction to the Equipment prior to the
delivery of the Equipment to the carrier. Upon delivery of the Equipment to the
carrier, Customer shall be responsible for and shall bear all risk of loss,
damage and destruction with respect to the Equipment.
5.3 Disclaimers
-----------
5.3.1 Customer acknowledges and agrees that the
Equipment Maintenance Services described in Exhibit A are the sole remedies
available to Customer for defects in the Equipment.
5.3.2 With respect to the non-Softsense Equipment,
Customer acknowledges and agrees that the sole warranty available to customer
shall be such warranty, if any, that is offered by the non-Softsense Equipment
manufacturer. Softsense disclaims all warranties of any nature with respect to
the non-Softsense Equipment, and the Equipment Maintenance Services provided
with respect to such Equipment, whether oral or written, express or implied,
particularly including the implied warranties of merchantability and fitness for
a particular purpose.
5.3.3 Customer further acknowledges and agrees that
the Softsense Equipment is provided without a warranty from Softsense. Softsense
disclaims all warranties of any nature with respect to the Softsense Equipment
and the Equipment Maintenance Services provided with respect to such Equipment,
whether oral or written, express or implied, particularly including the implied
warranties of merchantability and fitness for a particular purpose.
7
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5.4 Softsense will defend Customer against any claim that any
item of Softsense Equipment infringes a United States patent or copyright and,
subject to the limitation of liability set forth in Section 8.1 herein, will pay
all costs, damages and attorneys' fees that a court finally awards as a result
of a determination of patent or copyright infringement. To qualify for such
defense and payment, Customer must: (i) provide Softsense with prompt written
notice of the initial claim and lawsuit relating thereto; (ii) permit Softsense
the right to defend, compromise or settle the lawsuit in the sole discretion of
Softsense; and (iii) provide Softsense with all available information,
reasonable assistance, authority and cooperation to enable Softsense to defend,
compromise or settle the lawsuit as provided herein. Customer, at its own
expense, may participate in any such lawsuit, compromise or settlement in an
advisory capacity. If such claim has occurred, or in Softsense's judgment, is
likely to occur, Customer agrees to allow Softsense, at Softsense's option and
expense, to: (i) settle or defend against such claim; (ii) procure for Customer
the right the use such item of Softsense Equipment; (iii) replace or modify such
item of Softsense Equipment to avoid infringement; or (iv) remove such item of
Softsense Equipment and refund the purchase price less a reasonable amount for
depreciation. Softsense shall not have any liability to Customer for any claim
that the non-Softsense Equipment infringes a United States patent or copyright.
Customer's sole recourse will be against the manufacturer of such non-Softsense
Equipment to the extent that the manufacturer assumes any responsibility for
patent or copyright infringement. The defense offered in this Section 5.4 shall
not apply to any claim resulting from the modification of the Softsense
Equipment performed other than by Softsense or based upon the operation or use
of the Softsense Equipment with data, computer programs or equipment not
provided, formally approved or manufactured by Softsense. This Section 5.4
states Softsense's entire obligation regarding patent and copyright infringement
with respect to the Equipment.
6. SERVICES
--------
6.1 Software Support and Equipment Maintenance Services For each
---------------------------------------------------
System installed at a Licensed Site listed on an Accepted Order, Softsense will
provide, in connection with Customer's operation of the System, Software Support
Services and Equipment Maintenance Services pursuant to the terms of the
Software support and Equipment maintenance plans selected by Customer. The
aforementioned plans are more particularly described on Exhibit A attached
hereto. As of the date of execution of this Agreement (the "Effective Date"),
Customer elects to receive Equipment Maintenance Services under the
___________________ Plan and Software Support Services under the
___________________ Plan, such plans to be in effect at each Licensed Site for
the initial term described on Exhibit A. Upon expiration of the initial term and
each renewal term thereafter, Customer may receive such services under the
alternative plans offered by Softsense, such plans to be in effect at each
Licensed Site for the duration of each such renewal term, provided that Customer
provides Softsense with written notification of such election ninety (90) days
prior to the expiration of the then-current term.
6.2 Professional Services
---------------------
6.2.1 Customer may request and Softsense may provide,
Professional Services related to Customer's operation of the Software provided
hereunder, including, consultation services, user education services,
implementation services and development services, and such other services to
which the parties agree.
8
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6.2.2 Customer may from time to time request that
Softsense develop Enhancements or make modifications to the Software in addition
to the Enhancements or modifications made by Softsense as part of its Software
Support Services ("Additional Enhancements"). All such requests shall be made in
the form of an Order for Professional Services, subject to Softsense's
acceptance pursuant to Section 3.6.1 herein. Customer acknowledges and agrees
that all Additional Enhancements delivered under an Order for Professional
Services shall be deemed a part of the Software and shall be exclusively owned
by Softsense.
7. NONDISCLOSURE AND CONFIDENTIALITY
---------------------------------
7.1 For purposes of this Agreement, "Proprietary Information"
shall mean all ideas, concepts, techniques, know-how, technical information, or
other information or material, in whatever form, received by one party to this
Agreement from the other, that is either: (i) stamped or otherwise identified in
writing as proprietary, or (ii) if orally disclosed, identified by the
disclosing party as proprietary at the time of disclosure, although the failure
to make such identification under either (i) or (ii) shall not alone change the
classification of such information from Proprietary Information to non-
Proprietary Information. Proprietary Information shall include the Software.
7.2 Each party agrees to hold all Proprietary Information of the
other party in strictest confidence and not to copy, reproduce, distribute,
remanufacture, duplicate, reveal, publish, report, disclose, caused to be
disclosed, or otherwise transfer any such Proprietary Information to any third
party, except as authorized in writing by the disclosing party, or utilize any
such information for any purpose whatsoever other than specifically required
under this Agreement, except that each party may disclose Proprietary
Information of the other to its employees who have a specific need to know such
information and who are advised of the confidential nature of the information
and the provisions of this Section 7. The obligations under this Section 7 shall
last for the term of this Agreement and for a period of five (5) years
thereafter, except to the extent that the Proprietary Information disclosed
rises to the level of a trade secret under applicable law, in which case, the
obligations of this Section 7 shall continue for so long as such information
constitutes a trade secret under applicable law. Each party further acknowledges
and agrees that the Proprietary Information of the other party is and shall at
all times remain the sole and exclusive property of the other party, and in the
event of termination or expiration of this Agreement, for any reason, each party
shall immediately return to the other party all Proprietary Information in its
possession.
7.3 Each party agrees to neither discuss nor otherwise disclose
to any third party the terms of this Agreement, but each party has the right to
represent verbally or in any printed or visual promotion, advertisement or
informational brochure that Customer is a user of the Software and a customer of
Softsense, provided, however, that such representation is true, accurate and
correct.
8. LIMITATION OF LIABILITY AND DAMAGES
-----------------------------------
8.1 Customer acknowledges and agrees that in no event shall
Softsense, any affiliate or any officers, directors, employees, shareholders or
representatives of Softsense be liable to Customer or any third party for
special,
9
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indirect, incidental or consequential damage or loss of any nature,
including, but not limited to, damages resulting from delay, loss of profits,
injury to person or loss of goodwill which may arise in connection with the
Software, any copies thereof, the Equipment, the Services or otherwise
pertaining to this Agreement, even if Softsense has been notified of the
possibility or likelihood of such damages occurring. The parties agree that this
limitation of liability shall survive in full force and effect despite any
failure of any exclusive remedy.
8.2 Customer acknowledges and agrees that Softsense's liability
for damages to Customer or any third party for any cause whatsoever related to
this Agreement, the Software, the Equipment, the Services and regardless of the
form of action, whether in contract or in tort, including negligence or strict
liability, shall be limited to all payments received by Softsense from Customer
hereunder for the particular Software program, Equipment component, or Service
activity that caused the damage or that is the subject matter of or is directly
related to, the cause of action. This limitation of liability will not apply to
claims for personal injury or property damage caused by Softsense's gross
negligence or willful misconduct or to claims of patent or copyright
infringement as set forth in Sections 4.4 and 5.4. In no event will Softsense be
liable for any damages arising from performance or nonperformance of the
Software or Equipment caused by Customer's or any third party's failure to
perform its or their responsibilities.
8.3 Softsense shall not be held responsible for misuse or
incorrect operation of the Software or Equipment, use of the Software or
Equipment by untrained personnel or improper entry of data in connection with
the Software. Customer understands that the use of any Equipment outside the
manufacturer's recommended specifications may seriously effect the performance
of the Software. Softsense shall not be held liable or responsible for external
environmental conditions that may affect the performance of the Software or
Equipment, including, but not limited to, loss or interruption of power,
interruption or degradation of phone or data line service or integrity,
conflicting radio frequencies or other such factors.
9. TERMINATION
-----------
9.1 This Agreement is effective from the date on which it is
signed and accepted by the parties and will remain in effect until terminated by
Customer upon sixty (60) days written notice to Softsense, or by Softsense as
provided in Section 9.2 herein. This Agreement may be terminated by Customer
only when all Software and all associated documentation have been returned to
Softsense or destroyed upon instructions from Softsense.
9.2 Softsense may terminate this Agreement upon the occurrence
of a material breach hereof (including, without limitation, non-payment of fees
by Customer) which breach has not been cured, with respect to non-payment of
fees, within fifteen (15) days after the date of written notice thereof to
Customer by Softsense, and with respect to any other material breach, within
forty five (45) days after the date of written notice thereof to Customer by
Softsense. Said notice will identify and describe the basis for such
termination. If prior to the expiration of any cure period stated above,
Customer cures such default, termination shall not take place. The filing of
bankruptcy, voluntarily or
10
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involuntarily, by either party shall not be a cause for termination of this
Agreement, provided that such party continues to fully perform its obligations
hereunder.
9.3 Upon expiration or termination of this Agreement for any
reason, Customer shall return to Softsense all Softsense property including, but
not limited to, all copies of the Software, all documentation relating thereto
and all Equipment not fully paid for hereunder. Upon termination or expiration
of this Agreement, the provisions of this Agreement providing for payment of
charges to Softsense, protection of the parties' proprietary rights, Softsense's
limited express warranties, Softsense's limitation of liability and other
provisions of this Agreement concerning the ongoing interest of the parties,
including, but not limited to, the provisions of Sections 4.2, 4.3, 4.4, 5.3,
5.4, 7, 8, 9, 13, 15, 20 and 21, shall continue and survive in full force and
effect.
10. INDEPENDENT PRINCIPALS Softsense and Customer are independent
----------------------
principals in all actions contemplated by this Agreement. This Agreement shall
not be construed to create or authorize any partnership, joint venture or agency
relationship, nor to authorize either party to make any commitment or agreement
binding on the other party, without such other party's prior written consent.
11. FORCE MAJEURE Neither party shall be in default by reason of any
-------------
failure of performance of this Agreement if such failure arises, directly or
indirectly, out of causes reasonably beyond the control or forseeability of such
party including, but not limited to, default by suppliers, acts of God or of the
public enemy, United States or foreign governmental acts in either a sovereign
or contractual capacity, transportation contingencies, fire, flood, epidemic
restrictions and strikes.
12. WAIVER Neither party shall, by mere lapse of time without giving
------
notice or taking other action hereunder, be deemed to have waived any breach by
the other party of any of the provisions of this Agreement. Furthermore, the
waiver by either party of a particular breach of this Agreement by the other
party shall not be construed as, or constitute a continuing waiver of such
breach, or of other breaches of the same or other provisions of this Agreement.
13. EQUITABLE REMEDIES AND SPECIFIC PERFORMANCE Customer acknowledges
-------------------------------------------
that each provision of this Agreement providing for the protection of
Softsense's copyrights, patents, Proprietary Information, trade secrets and
other proprietary rights, is material to this Agreement. Customer acknowledges
that any threatened or actual breach of Softsense's copyright, patents,
proprietary rights or trade secrets shall constitute immediate and irreparable
harm to Softsense, for which equitable remedies may be awarded by a court of
competent jurisdiction.
14. NOTICES All notices and other communications required or permitted to
-------
be given under this Agreement shall be in writing and shall be considered
effective when: (i) mailed by registered or certified mail, postage pre-paid,
return receipt requested; or (ii) hand delivered. All such notices shall be
addressed as shown below or to such other address as may be designated by a
party hereto or by written notice to the other party. Addresses for notices are
as follows:
If to Softsense: If to Customer:
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Softsense Computer Products, Inc. _________________________
1000 Alderman Drive, Suite A _________________________
Alpharetta, Georgia 30202 _________________________
Attention: Legal Services Division _________________________
15. GOVERNING LAW This Agreement shall be governed, construed, and
-------------
interpreted in accordance with the laws of the State of Georgia. In any civil
action by either party relating to this Agreement, the prevailing party shall
recover from and be reimbursed by the other party for all costs, reasonable
attorneys' fees and related expenses. Customer hereby consents and submits to
the exclusive jurisdiction and venue over any action, suit, or other legal
proceeding that may arise out of, or in connection with this Agreement, by any
state or federal court located within Fulton County in the State of Georgia.
Customer stipulates and admits that it is transacting business in Fulton County
in the State of Georgia. Customer shall bring any action, suit or other legal
proceeding to enforce, directly or indirectly, this Agreement or any right based
upon it only in Fulton County in the State of Georgia.
16. AUTHORITY TO CONTRACT Each party warrants and represents to the other
---------------------
that it is legally free to enter into this Agreement, that its execution of this
Agreement has been duly authorized and that full performance of the terms and
conditions of this Agreement shall not conflict with or violate any terms or
conditions of any other agreement by which it is bound.
17. ASSIGNMENT Customer represents that it is acting on its own behalf
----------
and is not acting as an agent for or on behalf of any third party and further
agrees that it may not assign its rights or obligations under this Agreement
without the prior written consent of Softsense.
18. SEVERABILITY If any provision herein is declared invalid by a court
------------
of competent jurisdiction, such provision shall be ineffective only to the
extent of such invalidity so that the remainder of that provision and all
remaining provisions of this Agreement will continue in full force and effect
and be enforced to the maximum extent permitted by applicable law.
19. AMENDMENTS This Agreement can be amended or supplemented only by an
----------
instrument in writing signed by authorized representatives of both parties.
20. LIMITATIONS OF ACTIONS No action, regardless of form, whether based
----------------------
on contract, strict liability or tort, including any action based on negligence,
arising out of this Agreement, may be brought: (i) in the case of an action
arising out of a breach of the terms and conditions of Section 7 herein, more
than five (5) years after the cause of action has arisen; or (ii) in the case of
any other action, more than two (2) years after the cause of action has arisen,
except that in the case of an action for monies due, an action may be brought
within two (2) years of the date of the last payment.
21. GENERAL
-------
21.1 Each of the parties hereto acknowledge that it has read
this Agreement, understands and agrees to be bound by its terms. The parties
further agree that this
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Agreement and each Proposal is the complete and exclusive statement of the
agreement between the parties relating to the subject matter of the Agreement
and supersedes and cancels all previous understandings, representations,
conditions, warranties and all other communications between the parties relating
to the subject matter of this Agreement.
21.2 The terms and conditions of any Proposal and any Exhibits
attached to this Agreement are incorporated by reference and made a part of this
Agreement.
21.3 Variance from the terms and conditions of this Agreement in
any Order or other written communication shall be of no force or effect. In the
event of a conflict between the terms of this Agreement and the terms of a
Proposal, the terms and conditions specified in this Agreement shall take
precedence.
21.4 The Agreement is neither valid nor binding upon either
party until accepted by each party as evidenced by the execution of this
Agreement by each party's authorized representative.
In Witness Whereof, Softsense and Customer have caused this Agreement to be
executed by their respective duly authorized representatives as of the date
first above written.
Accepted by:
"Customer" "Softsense"
_______________________________ Softsense computer products, inc.
By:____________________________ By:________________________________
(Authorized Signature) (Authorized Signature)
Name (Print): __________________ Name (Print):______________________
Title___________________________ Title:_____________________________
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EXHIBIT A
EQUIPMENT MAINTENANCE AND SOFTWARE SUPPORT SERVICES
1. EQUIPMENT MAINTENANCE SERVICES
------------------------------
1.1. Express Depot Maintenance Plan
------------------------------
1.1.1 Under this plan, Softsense will provide a toll-free
telephone hotline 24-hours a day, seven days a week, which will enable Customer
to report Equipment malfunctions or defects to Softsense. Customer will be
responsible for notifying Softsense immediately upon discovering an Equipment
malfunction or defect. Upon receipt of such notification, a certified technical
support technician ("Support Specialist") will diagnose the Equipment problem
and make a determination as to whether a replacement component is required. If a
replacement component is required, the Support Specialist will issue a returned
merchandise authorization ("RMA") number to Customer, which number will
authorize Customer to return the failed Equipment component to Softsense, at
Customer's expense.
1.1.2 Softsense will dispatch replacement components to
Customer's Licensed Site, or such other mutually agreed upon location, in
accordance with one of the two following delivery options, as selected by
Customer:
(i) Normal Delivery Softsense will dispatch replacement
---------------
components via surface freight carrier on the same business day that the Support
Specialist determines that a replacement component is required if such
determination is made prior to 4:30 PM, EST, and by the next business day if
such determination is made after 4:30 PM, EST. Softsense agrees to pay all
shipping charges and bear all risk of loss, damage and destruction with respect
to the replacement components prior to the delivery of the components to
Customer, provided Customer pays to Softsense Softsense's then-current Normal
Delivery fee.
(ii) Expedited Delivery Softsense will dispatch
------------------
replacement components via overnight delivery on the same business day that the
Support Specialist determines that a replacement component is required if such
determination is made prior to 4:30 PM, EST, and by the next business day if
such determination is made after 4:30 PM, EST. Softsense agrees to pay all
shipping charges and bear all risk of loss, damage and destruction with respect
to the replacement components prior to the delivery of the components to
Customer, provided Customer pays to Softsense Softsense's then-current Expedited
Delivery fee.
As of the Effective Date, Customer elects to receive replacement components in
accordance with the _____________ Delivery option, such option to be in effect
at each Licensed Site for the duration of the initial maintenance term. Upon
expiration of the initial maintenance term and each renewal term thereafter,
Customer may receive replacement components under the alternative delivery
option offered by Softsense, provided that Customer provides Softsense with
written notification of such election 90 days prior to expiration of the then-
current term, such option to be in effect at each Licensed Site for the duration
of each such renewal term.
<PAGE>
1.1.3 Softsense will use reasonable efforts to dispatch the
replacement components within the above response times. Customer acknowledges
and agrees that there will be no penalties associated with Softsense's failure
to dispatch the replacement components within such response times.
1.1.4 The on-site labor required to replace the failed
Equipment components will not be provided by Softsense under this plan. Customer
may enter into an agreement with a third party for the replacement of such
failed Equipment components. A Support Specialist will assist, via telephone,
store or other Customer personnel or an agent of Customer in the replacement of
all "Non-Technical Components", but will only provide telephone support to a
third party or store or other Customer personnel who is a certified Softsense
maintenance provider for the replacement of "Technical Components." All
Technical and Non-Technical Components are set forth in the Softsense Equipment
Maintenance Document, which document shall be made available to Customer upon
Customer's request.
1.1.5 Customer will be required to return all items of failed
Equipment to Softsense at Customer's risk and expense. Customer must also
remove all funds contained in the failed Equipment prior to returning such items
to Softsense. Softsense will not be responsible for removing and returning any
funds left in the failed Equipment, or for backing-up, removing, protecting or
restoring programs, data or removable storage media contained in or operating on
any item of failed Equipment, unless agreed to by the parties in writing.
1.1.6 The cost of the replacement components will be included
in the base price of the plan, provided that: (i) the Equipment malfunction or
failure was not caused by any of the circumstances set forth in Section 1.3
herein; and (ii) Customer returns the failed components within 30 days of
Customer's receipt of an outstanding RMA Equipment notice from Softsense.
Softsense will issue such notice to Customer upon Customer's failure to return
all items of failed Equipment within 30 days from the date such items are
diagnosed as defective. If either of the events set forth in subsections (i) or
(ii) do so occur, Customer will be charged Softsense's retail price for the
replacement component, as set forth in the applicable Proposal.
1.2 On-Site Maintenance Plan
------------------------
1.2.1 Under this plan, Softsense will provide a toll-free
telephone hotline 24-hours a day, seven days a week, which will enable Customer
to report Equipment malfunctions or defects to Softsense. Customer will be
responsible for notifying Softsense immediately upon discovering an Equipment
malfunction or defect. Upon receipt of such notification, a Support Specialist
will diagnose the Equipment problem and make a determination as to whether a
replacement component is required. If a replacement component is required,
Softsense will send replacement components to Customer's Licensed Site as
follows:
(i) All replacement components stocked locally to the
Licensed Site ("Locally Stocked Components") will be delivered within four hours
of the Support Specialist's determination that a replacement component is
required. Customer
2
<PAGE>
acknowledges and agrees that Softsense may subcontract with a third party for
storage and delivery of Locally Stocked Components.
(ii) All replacement components stocked in the Softsense
Depot Center ("Centrally Stocked Components") will be sent by overnight delivery
on the same business day that the Support Specialist determines that a
replacement component is required if such determination is made prior to 4:30
PM, EST, and by the next business day if such determination is made after 4:30
PM, EST.
A listing of the Locally and Centrally Stocked Components is set forth in the
Softsense Equipment Maintenance Document, which document shall be made available
to Customer upon Customer's request.
1.2.2 The on-site labor required to replace the Technical
Components will be made available to Customer under this plan. The labor
required to replace all Non-Technical Components will be the responsibility of
Customer. Customer acknowledges and agrees that Softsense may subcontract with a
third party ("Third-Party Maintenance Provider") for the provision of on-site
labor in connection with the replacement of the Technical Components. In the
case of on-site labor provided by a Third-Party Maintenance Provider, Customer
acknowledges and agrees that Softsense will not be liable to Customer or any
third party for any losses or damages of any nature whatsoever arising from the
furnishing of services by the Third-Party Maintenance Provider.
1.2.3 Softsense will dispatch a Third-Party Maintenance
Provider or a Support Specialist, as the case may be, to perform the on-site
labor with respect to the Technical Components within four hours of the Support
Specialist's determination that a replacement component is required. The Support
Department will provide telephone support, via the toll-free support hotline, to
store or other Customer personnel or an agent of Customer for the replacement of
all Non-Technical Components.
1.2.4 Softsense will use reasonable efforts to: (i) send or
deliver, as the case may be, the replacement components within the response
times set forth in Section 1.2.1; and (ii) dispatch the Third-Party Maintenance
Provider or Support Specialist, as the case may be, within the response time set
forth in Section 1.2.3. Customer acknowledges and agrees that there shall be no
penalties associated with Softsense's failure to respond within such response
times.
1.2.5 Customer will be required, in the case of the Non-
Technical Components, to return all items of failed Equipment to Softsense at
Customer's risk and expense. Customer will also be required to remove all funds
contained in the failed Equipment prior to returning such items to Softsense.
Softsense will not be responsible for removing and returning any funds left in
the failed Equipment, or for backing-up, removing, protecting or restoring
programs, data or removable storage media contained in or operating on any item
of failed Equipment, unless agreed to by the parties in writing.
1.2.6 The cost of the replacement components will be included
in the base price of the plan, provided that: (i) the Equipment malfunction or
failure was not caused by any of the circumstances set forth in Section 1.3
herein; and (ii) Customer returns the failed components within 30 days of
Customer's receipt of an outstanding RMA Equipment notice from Softsense.
Softsense will issue such notice to Customer upon
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Customer's failure to return all items of failed Equipment within 30 days from
the date such items are diagnosed as defective. If either of the events set
forth in subsections (i) or (ii) do so occur, Customer will be charged the
Softsense's retail price for the replacement component, as set forth in the
applicable Proposal.
1.3 Equipment Maintenance Limitations
----------------------------------
1.3.1 Equipment returned for reasons other than malfunction or
defect, including, without limitation, reasons relating solely to physical
appearance, aesthetic quality or other cosmetic factors, will not be considered
by Softsense as qualifying for Equipment Maintenance Services, regardless of the
plan, at no additional charge hereunder.
1.3.2 Malfunctioning Equipment or damage to Equipment caused by
the following circumstances will not be considered by Softsense as qualifying
for Equipment Maintenance Services, regardless of the plan, at no additional
charge hereunder:
(i) Failure to operate the Equipment continually in a
suitable operating environment as designated by Softsense or the manufacturer of
the Equipment;
(ii) Use of the Equipment for other than data processing
purposes or neglect or abuse of the Equipment;
(iii) Accident, disaster (including, but not limited to,
flood, fire and lightning);
(iv) Alteration by Customer or any third party other than
Softsense.
1.4 Term and Termination
--------------------
1.4.1 The maintenance term shall commence as of the Effective
Date, and, subject to Section 1.4.2, shall remain in effect for an initial term
of one year and shall automatically renew thereafter for successive one-year
terms. The Effective Date or renewal date, as the case may be, will apply to all
items of Equipment purchased and installed at a Licensed Site during the then-
current term.
1.4.2 If Customer fails to pay any of the Equipment Maintenance
Service fees due hereunder, Softsense has the right to suspend or terminate such
Equipment Maintenance Services or any part thereof. The Equipment Maintenance
Services may also be terminated by either party, without cause, upon 60-days
prior written notice to the other party, such termination to take effect upon
expiration of the then-current term.
1.5 Withdrawal Softsense may withdraw certain items of Equipment
----------
from Equipment Maintenance Services at each Licensed Site: (i) upon 30-days
prior written notice to Customer, should any item of Equipment be discontinued
by the original equipment manufacturer, or if such item of Equipment is no
longer eligible for service by the original equipment manufacturer; or (ii) upon
60-days prior written notice to Customer, under all other circumstances,
provided that under both subsections (i) and (ii), Softsense makes a suitable
replacement available to Customer in the event of a malfunction or defect.
4
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2. SOFTWARE SUPPORT SERVICES
-------------------------
2.1 First Line Support Plan
-----------------------
2.1.1 Under this plan, Softsense will provide Software Support
Services directly to the Licensed Site. As part of these Services, Softsense
will provide a toll-free telephone hotline 24-hours a day, seven days a week,
which will enable Customer to report Software problems and receive assistance in
resolving Software problems from a Support Specialist. Customer will be
responsible for immediately notifying Softsense of any Software problems. Upon
receipt of such notification from Customer, Softsense will assign a severity
level to the reported Software problem in accordance with the below schedule.
Thereafter, Softsense will use best efforts to respond to Customer's call and
diagnose the Software problem within the estimated response period designated
below for the applicable severity level. In the event a problem with the
Software cannot be diagnosed via the toll-free hotline, Softsense may use a
computer modem to remotely control the Software at the Licensed Site. Software
problem diagnosis will include a determination as to whether:
(i) the reported Software problem constitutes an Error or a
Software irregularity, interruption or malfunction other than an Error;
(ii) the reported problem is excluded from Software Support
Services, as specified in Section 2.5 below.
2.1.2 In the event the reported problem is excluded from
Software Support Services under Section 2.5 below, Softsense shall notify
Customer promptly with its rationale for such a determination, and where
appropriate, will direct Customer to refer the problem to a Customer "support
representative" mutually selected by the parties.
2.1.3 If, in Softsense's opinion, the reported problem
constitutes an Error, Customer will be responsible for providing Softsense with
sufficient documentation, if any, in order for Softsense to reproduce the
reported Error. If the Error is verified, Softsense will use best efforts to
provide Customer with a temporary "fix" within the estimated resolution times
designated below for the applicable severity level and shall include the Error
correction in a future Upgrade. In the event that the verified Error is not, in
Softsense's opinion, valid or reproducible, Softsense shall notify Customer
promptly with its rationale for such a determination.
2.1.4 If, in Softsense's opinion, the reported problem
constitutes a Software irregularity, interruption, or malfunction other than an
Error, Softsense will provide Customer with the necessary technical assistance
to enable Customer to correct the problem or to otherwise become operational
within the estimated resolution times designated below for the applicable
severity level.
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Severity Level Definition
-------------------------
Severity 1 Customer is unable to use the Software or the
problem results in a critical impact on Customer's
operations.
Severity 2 Customer is able to use the Software, but in
Customer's reasonable determination, Customer is
severely restricted in doing so.
Severity 3 Customer is able to use the Software with limited
functions which are not critical to Customer's
overall operations.
Severity 4 There is no impact to running the Software.
Estimated Response Time
-----------------------
Severity 1 Softsense will respond within 10 minutes of
Customer's initial call.
Severity 2 Softsense will respond within 1 hour of Customer's
initial call.
Severity 3 Softsense will respond within 2 hours of
Customer's initial call.
Severity 4 Softsense will respond within 24 hours of
Customer's initial call.
Estimated Resolution Time
-------------------------
Severity 1 Softsense will provide a fix or bypass within 4
hours of its diagnosis.
Severity 2 Softsense will provide a fix or bypass within 24
hours of its diagnosis.
Severity 3 Softsense will provide a fix/correction in a
future Upgrade.
Severity 4 Softsense will provide a fix/correction in a
future Upgrade.
2.2 Second Line Support Plan Under this plan, Customer-designated
------------------------
representatives (the "Customer Help Desk") will provide the first line of
Software support
6
<PAGE>
directly to the Licensed Site. If the Customer Help Desk, using its best
efforts, is unable to resolve a Software problem after two attempts, the
Licensed Site or Customer Help Desk will notify Softsense and Softsense will
provide Software Support Services set forth in Section 2.1 above directly to the
Licensed Site. The determination as to whether the Licensed Site or Customer
Help Desk will notify Softsense shall be made by Softsense after taking into
consideration factors such as the technical capabilities of the Customer Help
Desk employees.
2.3 All Standard Upgrades Softsense will provide standard
---------------------
Upgrades for the Software installed at each Licensed Site, regardless of the
support plan chosen by Customer. The content and timing the Upgrades will be
determined by Softsense in its sole reasonable discretion. All requests for
Enhancements other than those included in a standard Upgrade shall be submitted
to Softsense in the form of an Order for Professional Services pursuant to
Section 6.2.2 of the Agreement, and shall be subject to Softsense's acceptance
pursuant to Section 3.6.1 of the Agreement.
2.4 Term and Termination
--------------------
2.4.1 The Software support term shall commence as of the
Effective Date, and, subject to Section 2.4.2, shall remain in effect for an
initial term of one year and shall automatically renew thereafter for successive
one-year terms. The Effective Date or renewal date, as the case may be, will
apply to all Software ordered and installed at a Licensed Site during the then-
current term.
2.4.2 If Customer fails to pay any of the fees for the Software
Support Services due hereunder, Softsense has the right to suspend or terminate
such Software Support Services or any part thereof. Customer may terminate the
Software Support Services upon 60-days prior written to Softsense, such
termination to take effect upon expiration of the then-current term. Customer
may request that Softsense reinstate Software Support Services at any time after
a termination by Customer, provided however, that Customer pays to Softsense the
per-site annual Software Support fee in effect during each year it did not
receive Software Support Services from Softsense.
2.5 Software Support Limitations:
-----------------------------
(i) Software defects, abnormal operation of the Software
or inability to operate the Software resulting from Customer's misuse or
improper use of the Software or Equipment, use of the Software or Equipment by
untrained personnel or personnel who require additional training from Customer,
improper entry of data in connection with the Software or from combining or
merging the Software with any computer equipment or computer programs not
supplied by Softsense (or not approved in writing by Softsense to be combined or
merged with the Software) will not be considered by Softsense as qualifying for
Software Support Services, at no additional charge hereunder;
(ii) Softsense shall not be responsible for providing
Software Support Services if the request for technical assistance arises solely
from the inability of Customer personnel to operate the Software in conformity
with store or Customer operational procedures, including, but not limited to
product pricing and cash management policies;
7
<PAGE>
(iii) Softsense shall not be responsible for providing
Software Support Services for any version of a Software program other than the
most recent Upgrade, provided, however, that Softsense shall continue to support
the most recent superseded Upgrade for 90 days from the date of the general
distribution of the most current Upgrade.
8
<PAGE>
Exhibit 10.2
STOCK TRANSFER AND REDEMPTION AGREEMENT
---------------------------------------
THIS STOCK TRANSFER AND REDEMPTION AGREEMENT ("Agreement") is made and
entered into as of the 29th day of May, 1995, by and between SOFTSENSE COMPUTER
PRODUCTS INC., a New York corporation (the "Company") and THOMAS BARRELLA
("Barrella"), an individual resident of the State of Georgia.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as of the 29th day of May, 1995, the Company, Barrella and Logic
Shop, Inc. ("LSI") executed and delivered that certain Agreement and Plan of
Reorganization and Distribution, a copy of which is annexed hereto as Exhibit A
---------
(the "Reorganization Agreement"), whereby the Company, Barrella and LSI agreed
to effect the transfer of the automotive systems division of the Company to LSI
and subsequent thereto to transfer to Barrella all of the issued and outstanding
capital stock of LSI in exchange for certain capital stock of the Company (the
"Split-Off"); and
WHEREAS, immediately prior to the execution of this Agreement, the Company
transferred to LSI certain assets, rights, properties and businesses relating to
the automotive systems division of Softsense, all as more fully described in
that certain Blanket Bill of Sale, Assignment and Assumption Agreement which was
executed and delivered by LSI and the Company, a copy of which is annexed hereto
as Exhibit B; and
---------
WHEREAS, the Company and Barrella intend that the Split-Off will constitute
a tax-free reorganization under Sections 368(a)(1)(D) and 355(a)(1) of the
Internal Revenue Code of 1986, as amended, and desire to consummate the Split-
Off in accordance with the terms and conditions more fully set forth below;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
1. Consummation of Split-Off.
-------------------------
1.1 Stock Transfer and Redemption. Simultaneously with the execution and
-----------------------------
delivery of this Agreement, Barrella shall deliver to the Company the
certificate or certificates representing 31.25 shares of the Common Stock, no
par value per share, of the Company (the "Softsense Common Stock"), duly
endorsed, or accompanied by a duly executed stock power, effectively
transferring the Softsense Common Stock to the Company, free and clear of any
and all liens, claims, charges and encumbrances. Simultaneously therewith the
Company shall deliver to Barrella (i) 7.292 shares of original issue Class A
Common Stock of the Company and (ii) the certificate or certificates
representing all 2,000,000 shares of the issued and outstanding common stock, no
par value per share, of LSI (the "LSI Stock"), duly endorsed, or accompanied by
a duly executed stock power, effectively transferring the LSI Stock to Barrella,
free and clear of any and all liens, claims, charges and encumbrances.
1.2 Further Assurance. Each of the parties shall, without further
-----------------
consideration or payments, execute such documents and other papers and take such
further actions as may be reasonably required or desired to evidence or more
effectively carry out the stock transfers referenced in Section 1.1 above or
such other transactions as are contemplated by this Agreement.
<PAGE>
1.3 Name Usage Agreement. Barrella hereby covenants and agrees that
--------------------
neither he nor LSI will now or hereafter, directly or indirectly, utilize the
"Softsense" name, or any name confusingly similar thereto or a derivative
thereof, as or in connection with a trademark, trade name, service mark,
certification mark, or corporate or other business name, without the Company's
prior written consent which may be granted, withheld or conditioned by the
Company in it sole discretion. Barrella, on behalf of himself and on behalf of
LSI, acknowledges and agrees that the "Softsense" name and the right to utilize
the same for commercial purposes is the exclusive property of the Company and
its affiliates, and for himself and for LSI hereby disclaims any right, title or
interest in or to the same. Barrella will not, and will not permit LSI to, do
or omit to do any act or thing, the doing or omission of which would contest,
assist others to contest or in any way impair or tend to impair the Company's
right, title or interest in or to the "Softsense" name or any registration
relating thereto.
1.4 Resignations. Barrella hereby resigns all offices and directorships
------------
held in the Company or any of its direct or indirect subsidiaries (other than
LSI), effective immediately upon the execution and delivery of this Agreement.
2. Representations and Warranties.
------------------------------
2.1 Representation and Warranties from Barrella. As an inducement to the
-------------------------------------------
Company's execution and delivery of this Agreement, and with knowledge that the
Company is relying thereon, Barrella hereby represents and warranties (i) that
Barrella is the sole owner of the Softsense Common Stock being transferred to
the Company by Barrella, (ii) such Common Stock evidences and constitutes all of
Barrella's equity interest in the Company or its direct or indirect
subsidiaries, and there are no outstanding options, warrants, rights,
commitments or agreements of any nature, kind or character relating to the
issuance or purchase of any additional shares of the capital stock of the
Company or any of its direct or indirect subsidiaries held legally or
beneficially by Barrella, (iii) Barrella has full right, power and capacity to
make, execute and perform this Agreement and the transactions contemplated
herein, (iv) this Agreement and the stock powers and other instruments or
documents delivered by Barrella hereunder constitute the valid and legally
binding obligations of Barrella enforceable in accordance with their respective
terms, and no further action on the part of Barrella is required in connection
with the consummation of the transactions contemplated by this Agreement, (v)
the Blanket Bill of Sale, Assignment and Assumption Agreement, a copy of which
is annexed hereto as Exhibit B, was duly executed and delivered by LSI and
---------
constitutes the valid and legally binding obligation of LSI enforceable in
accordance with its terms, and (vi) the Softsense Common Stock being transferred
and conveyed to the Company under this Agreement is being transferred and
conveyed free and clear of all liens, encumbrances, charges or claims of any
nature, kind, or character.
2.2 Representation and Warranties from the Company. As an inducement to
----------------------------------------------
Barrella's execution and delivery of this Agreement, and with knowledge that
Barrella is relying thereon, the Company hereby represents and warranties (i)
that the Company is the sole owner of the LSI Stock being transferred to
Barrella hereunder, (ii) the LSI Stock evidences and constitutes all of the
Company's equity interest in LSI, and there are no outstanding options,
warrants, rights, commitments or agreements of any nature, kind or character
relating to the issuance or purchase of any additional shares of the capital
stock of LSI held legally or beneficially by the Company, (iii) the authorized
capital stock of the Company consists of 400 shares of Common Stock, of which
93.75 shares are issued and outstanding and 200 shares of Class A Common Stock
of which 3.125 shares are issued and outstanding and to the knowledge of the
Company, except for the warrants granted Emro Marketing Company and certain
repurchase rights pursuant to the Stock Redemption Agreement between the Company
and Lawrence Parker, there are no
2
<PAGE>
outstanding options, warrants, rights, commitments, or agreements of any nature,
kind or character relating to the issuance or purchase of shares of capital
stock of the Company, (iv) the Company has full right, power and authority to
make, execute and perform this Agreement and the transactions contemplated
herein, (v) this Agreement and the stock powers and other instruments or
documents delivered by the Company hereunder constitute the valid and legally
binding obligations of the Company enforceable in accordance with their
respective terms, and no further action on the part of the Company is required
in connection with the consummation of the transactions contemplated by this
Agreement, (vi) the Blanket Bill of Sale, Assignment and Assumption Agreement, a
copy of which is annexed hereto as Exhibit B, was duly executed and delivered by
---------
the Company and constitutes the valid and legally binding obligations of the
Company enforceable in accordance with its terms, and (vii) the LSI Stock is
being transferred and conveyed to Barrella under this Agreement, free and clear
of all liens, encumbrances, charges or claims of any nature, kind or character.
3. Acquisition of Class A Common Stock. Barrella acknowledges that the
-----------------------------------
Class A Common Stock issued to Barrella by the Company pursuant to the terms
hereof, has not been registered under the Securities Act of 1933, as amended
(the "1933 Act") or the securities laws of any state, in reliance upon
exemptions from registration contained in the 1933 Act and applicable state
securities laws and that the Company's reliance upon such exemption is based in
part upon Barrella's representations, warranties and agreements contained in
this Agreement. To induce the Company to enter into this Agreement and to issue
the Class A Common Stock, Barrella warrants and represents, as of the date
hereof as follows:
(a) Barrella is acquiring the Class A Common Stock for his own account, with
the intention of holding the Class A Common Stock for investment, with no
present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating, directly or indirectly,
in a distribution of the Class A Common Stock; and Barrella shall not make any
sale, transfer or other disposition of the Class A Common Stock without
registration under the 1933 Act and any applicable securities laws of any state
or unless an exemption from registration is available under those laws.
(b) Except as otherwise noted, Barrella and/or his purchaser representative
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Class A
Common Stock.
(c) Barrella has been given the opportunity to ask questions of, and receive
answers from the Company concerning the business of the Company and has been
provided with such other information as Barrella desired in order to evaluate
the investment.
(d) Barrella is not purchasing the Class A Common Stock as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting, or any solicitation
of a subscription by a person not previously known to Barrella in connection
with investments in securities generally.
4. Release of Guarantees. The Company shall use its best efforts to
---------------------
obtain the release of Barrella from his personal guaranty of any outstanding
obligations of the Company, including without limitation Barrella's guaranty of
that certain Agreement for Wholesale Financing dated August 19, 1993, between
the Company and AT&T Commercial Finance Corporation and Barrella's guaranty of
any obligations of the Company to Lawrence D. Parker. In the event that the
Company is unable to obtain any
3
<PAGE>
such releases, the Company agrees to indemnify, defend and hold harmless
Barrella from and against the contingent liabilities represented thereby.
5. Survival of Representations and Warranties. All of the representations
------------------------------------------
and warranties of Barrella and the Company contained in this Agreement shall
survive the execution of this Agreement.
6. Restrictions Upon the Transfer of the Stock. Barrella agrees that he
-------------------------------------------
will not make any Disposition of Class A Common Stock, other than a Permitted
Disposition, except as provided in this Agreement. Any purported transfer in
violation of any provision of this Agreement shall be null and void and shall
not operate to transfer any interest or title to the purported transferee.
Whenever used in this Agreement, the following terms shall have the meanings
set forth below:
"Appraised Value" shall mean the value of each share of Class A Common Stock
---------------
as determined in accordance with Section 6.3.
"Disposition" shall mean any sale, gift, or other transfer, whether outright
-----------
or as security, inter vivos or at death, with or without consideration,
voluntary or involuntary, of all or any part of any right, title, or interest
(including but not limited to voting rights) in or to any Class A Common Stock
other than a Permitted Disposition.
"Permitted Disposition" shall mean any transfer of the Class A Common Stock
---------------------
of Barrella (i) to not more than three (3) members of his immediate family,
which shall be limited to Barrella's spouse and lineal descendants or (ii) upon
Barrella's death, to an heir or legatee; provided, however, that such family
member, heir or legatee acknowledges in writing that he, she or it will be bound
by, and the Class A Common Stock transferred will be subject to, this Agreement;
and further provided that, in the event of the death of Barrella, neither the
Company nor the other shareholders of the Company (the "Shareholders") have
elected to repurchase the Class A Common Stock pursuant to Section 6.2 hereof.
6.1 Right of First Refusal.
----------------------
6.1.1. Condition to Transfer. If Barrella desires to sell any Class A
---------------------
Common Stock (other than pursuant to a Permitted Disposition), he shall first
offer such Class A Common Stock to the Company and the other Shareholders by
giving them notice of his intention to sell the Class A Common Stock. Such
notice shall name the proposed transferee, the number of shares to be
transferred, the price per share, and the terms of payment. Following receipt of
such notice by the non-offering Shareholders and the Company, the non-offering
Shareholders and the Company may exercise an option in the manner provided by
subsection 6.1.2 to purchase all, but not less than all, of the offered Class A
Common Stock in the discretion of each purchaser, at a price equal to the price
specified in the notice.
6.1.2 Exercise of Option. The Company shall have first option to purchase
------------------
all of the offered Class A Common Stock (or any part provided one or more
Shareholders elect to purchase all offered Class A Common Stock that the Company
does not purchase). The Company may exercise its option by giving written
notice, which must state the number of shares the Company elects to purchase,
and the price and terms of purchase, to Barrella within 10 days after its
receipt of Barrella's notice. If the Company elects to purchase none or less
than all of the offered Class A Common Stock, the non-offering Shareholders
shall have an option to purchase all, but not less than all, of the offered
Class A Common Stock that the
4
<PAGE>
Company elects not to purchase, exercisable by giving notice to all Shareholders
and the Company within 30 days after its receipt of notice from Barrella. Each
non-offering Shareholder shall have the right to purchase a proportion of the
offered Class A Common Stock (to the extent not purchased by the Company) equal
to the ratio that the Common Stock and/or Class A Common Stock owned by such
non-offering Shareholder bears to the total Common Stock and/or Class A Common
Stock owned by all of the non-offering Shareholders who elect to exercise their
purchase option (or in such other proportion as is unanimously agreed to among
the Shareholders who elect to exercise their purchase option). The Company or
non-offering Shareholders or both may purchase all of the offered Class A Common
Stock but may not together purchase less than all of the offered Class A Common
Stock. If the Company elects to purchase more shares than any other offeree, it
shall state in its notice of exercise the date for the closing of the purchase,
which shall not be less than 45 nor more than 60 days after its receipt of
notice from Barrella. If any Shareholder exercises his option to purchase more
shares than any other offeree, including the Company, he shall state in his
notice of exercise, with a copy to the Secretary of the Company, the purchase
price of the shares and the terms of purchase and a date for the closing of the
purchase by all accepting offerees. Such date for closing shall be not less than
45 nor more than 60 days after the date of such accepting Shareholder's receipt
of notice from Barrella. The Secretary of the Company shall promptly mail a copy
of such notice of exercise to all accepting offerees to advise them of the time
of closing.
6.1.3 Failure to Exercise. If the right of first refusal provided above is
-------------------
not exercised as to all of the offered Class A Common Stock, if the exercise by
the non-offering Shareholders and the Company is not made within the time
specified in subsection 6.1.2, or if the purchase by the non-offering
Shareholders or the Company is not consummated within the time specified in
subsection 6.1.2 through no fault of Barrella, Barrella may transfer the offered
Class A Common Stock to the proposed purchaser, at the price and on the terms
and conditions set forth in the notice of intention sent by Barrella. As a
condition to such transfer, Barrella shall obtain the written acknowledgement of
the transferee that the transferee will be bound by, and the Class A Common
Stock transferred will be subject to, this Agreement. If the transfer of Class A
Common Stock by Barrella to the proposed purchaser named in the notice of
intention is not made within 30 days after the date Barrella became free to
transfer, the right to transfer in accordance with the notice shall expire. In
such event this Agreement, including without limitation this Article VI, shall
remain in full force and effect as to the offered Class A Common Stock.
6.1.4 Closing. At the closing the purchasers shall deliver the required
-------
consideration, and Barrella shall deliver the offered Class A Common Stock, duly
endorsed for transfer and with any and all required revenue stamps attached.
6.2 Company's Right of Repurchase Upon Death.
----------------------------------------
6.2.1 Optional Repurchase by the Company. The Company shall have the
----------------------------------
right, but not the obligation, to purchase all (but not less than all) of the
Class A Common Stock of Barrella in the event of his death at a price equal to
its Appraised Value, at any time following the death of Barrella. As used in
Sections 6.2 and 6.3 of this Agreement, the term "Barrella" shall be deemed to
include any transferee of the Class A Common Stock as a result of a Permitted
Disposition. The right of the Company set forth in this subsection 6.2.1 may be
exercised by written notice from the Company to the estate of Barrella,
specifying the amount of the Appraised Value and the time (which shall be not
more than ten business days following the date of giving such written notice)
and place for closing the Company's purchase of such shares. The Company's
purchase of such shares of Class A Common Stock shall take place in accordance
with such notice.
5
<PAGE>
6.2.2 Assignment of Option to Repurchase by Company. The Company may
---------------------------------------------
assign its rights under subsection 6.2.1 hereof to all of the Shareholders other
than the estate of Barrella, such that each such other Shareholder shall have
the right to purchase his pro rata share of the Class A Common Stock of
Barrella, or such other portion of the Class A Common Stock of Barrella as shall
be mutually agreed among the Company and all of the Shareholders, so long as, in
the aggregate, the Company and the other Shareholders purchase all of the Class
A Common Stock of Barrella.
6.2.3 Installment Payment of Purchase Price Upon Death. Any payment of the
------------------------------------------------
purchase price for the Class A Common Stock of Barrella may be made in cash or
in an initial installment, payable at the closing, of 20% of the total price,
with the balance to be paid in 5 equal annual installments of principal and
interest beginning on the first day of the thirteenth month following the date
of the closing. The obligation to pay the balance of the purchase price shall
be evidenced by a promissory note bearing interest at a fluctuating rate per
annum equal at all times to the rate published by the Wall Street Journal as its
-------------------
Corporate Prime Rate, plus two percent (2%). Such note shall provide for
acceleration upon the default in any installment payment which is not cured
within thirty (30) days after written notice and shall give the purchaser of the
Class A Common Stock the option of prepayment without premium or penalty in
whole at any time and in part from time to time after the calendar year of sale.
The purchaser shall pledge the purchased Class A Common Stock to secure payment
of the note, pursuant to a stock pledge agreement.
6.3 Determination of Appraised Value. For purposes of this Agreement the
--------------------------------
Appraised Value of the Class A Common Stock shall mean the fair market value as
determined by an independent appraiser mutually agreeable to the representative
of Barrella's estate and the Company. If the representative of Barrella's estate
and the Company are not able to agree on an independent appraiser within thirty
(30) days of the receipt by the representative of Barrella's estate of notice
that the Company desires to determine the Appraised Value then the Company and
the representative of Barrella's estate shall each promptly select an appraiser.
If either the Company or the representative of Barrella's estate fails to select
an appraiser within twenty (20) days of a written demand by the other, the fair
market value of the Class A Common Stock shall be determined solely by the
appraiser selected by the party giving the written demand. Each of the
appraisers, within ninety (90) of their appointment, shall determine the fair
market value of the Class A Common Stock. If the lower of the two appraisals is
equal to or in excess of the product of eighty-five one hundredths (.85) times
the higher appraisal, then the two appraisals shall be averaged, and the
averaged appraisal amount shall be the fair market value for purposes of this
Agreement. If the lower of the two appraised values is less than the foregoing
product, then the two selected appraisers shall, within twenty (20) days,
jointly select a third appraiser, who shall then have forty-five (45) days
within which to arrive at a fair market value, at which time the value
determined by the third appraiser shall be averaged with the closer of the two
previously determined values to determine the fair market value for purposes of
this Agreement. The cost of obtaining the appraisals shall be paid by the non-
offering Shareholders (and the Company if it is an offeree of the Class A Common
Stock) and fifty percent (50%) thereof shall be credited against the purchase
price for the shares of the Class A Common Stock.
7. Legend on Stock.
---------------
7.1 Form of Legend. Upon the execution of this Agreement, the Company's
--------------
Secretary shall endorse the Class A Common Stock certificate to be received by
Barrella with the following legend:
The shares of Class A Common Stock represented by this
certificate are held subject to, and transfer of such shares
6
<PAGE>
restricted by, the repurchase terms of a Stock Transfer and
Redemption Agreement, dated as of the 29th day of May, 1995, a
copy of which is on file at the office of the Company. No
transfer of any share represented by this certificate shall be
valid unless made in accordance with the terms of the Agreement.
A copy of this Agreement shall be filed with the Company's Secretary.
7.2 Intention of Parties. The parties to this Agreement intend that the
--------------------
legend conform to the provisions of section 8-204 of the Uniform Commercial Code
as adopted in the Company's state of incorporation. This legend may be modified
from time to time by the Board of Directors to conform to any amendments to this
Agreement or to section 8-204 of the Uniform Commercial Code as adopted in the
Company's state of incorporation.
8. Working Capital. To facilitate the orderly transfer of the
---------------
automotive systems division to LSI and to induce Barrella to enter into this
Agreement, at the closing of the transactions contemplated in this Agreement,
Softsense agrees to loan LSI $30,000 pursuant to a promissory note to be
executed and delivered by LSI in substantially the form of Exhibit C.
---------
9. Indemnification.
---------------
9.1 Indemnification by Barrella. Barrella hereby covenants and agrees
---------------------------
that he shall, and shall cause LSI to, now and forever indemnify, defend and
hold the Company, and its successors and assigns, harmless from and against any
and all losses, liabilities, costs, expenses and damages of any nature, kind or
character which are incurred in connection with or as a result of (i) any breach
of any representation or warranty contained in Section 2.1 of this Agreement,
(ii) any breach by Barrella of any covenant contained in this Agreement, (iii)
any breach by Barrella or LSI of any warranty, representation or covenant
contained in any of the agreements or documents entered into or provided in
connection with the Split-Off including the Blanket Bill of Sale, Assignment and
Assumption Agreement, a copy of which is annexed hereto as Exhibit B, (iv) the
---------
pending litigation filed by Sage Micro Systems, Inc. (but only to the extent, if
any, the defense thereof or any settlement or judgment is not covered and paid
for by insurance).
9.2 Indemnification by the Company. Company hereby covenants and agrees
------------------------------
that it shall now and forever indemnify, defend and hold Barrella, and his
successors and assigns, harmless from and against any and all losses,
liabilities, costs, expenses and damages of any nature, kind or character which
are incurred in connection with or as a result of any breach of any
representation or warranty contained in Section 2.2 of this Agreement, any
failure of the Company to obtain the releases of the personal guaranty(ies) of
Barrella referred to in Article 4, any breach by the Company of any covenant
contained in this Agreement or any breach by the Company of any warranty,
representation or covenant contained in any of the agreements or documents
entered into or provided in connection with the Split-Off including the Blanket
Bill of Sale, Assignment and Assumption Agreement, a copy of which is annexed
hereto as Exhibit B.
---------
10. Arbitration.
-----------
All disputes and claims relating to any provision hereof or relating to or
arising out of the parties relationship or creation or termination thereof
(including, without limitation, any claims that any provision
7
<PAGE>
of this Agreement or any obligation of Barrella or of Company is illegal or
otherwise unenforceable or voidable under law, ordinance or ruling) shall be
settled by arbitration at the office of the American Arbitration Association in
Atlanta, Georgia, in accordance with the United States Arbitration Act (9 USC,
(S) 1 et seq.) and the commercial arbitration rules of the American Arbitration
-- ---
Association. Barrella and the Company each consents and submits to the
jurisdiction and venue of the trial courts of Fulton County, Georgia, and also
to the jurisdiction and venue of the United States District Court for the
Northern District of Georgia for purposes of enforcing this provision. All
awards of the arbitration shall be binding and non-appealable except as
otherwise provided in the United States Arbitration Act. Judgment upon the award
of the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall take place at a time noticed by the American Arbitration
Association regardless of whether one of the parties fails or refuses to
participate. The foregoing provision shall not preclude either party from
bringing an action in any court of competent jurisdiction for injunctive or
other provisional relief as necessary or appropriate.
8
<PAGE>
11. Tax Matters.
-----------
11.1 Election. Barrella acknowledges that he and the Company have entered
--------
into this Agreement with the understanding and expectation that the Company will
be taxed as an "S corporation" under (i) the tax laws of the United States; (ii)
the tax laws of the State of Georgia; and (iii) unless otherwise agreed to by a
majority of the Shareholders, under the tax laws of each state where such status
(or similar status) is available and in which at any time the Company does
business or any Shareholder is resident. Barrella covenants and agrees that he
will use his best efforts not do any act or fail to do any act, the commission
or omission of which would cause the termination of the S corporation election
of the Company, unless such action or failure to act has the consent of each
other Shareholder. Barrella further covenants and agrees that, notwithstanding
any other provision of this Agreement, the Company shall have no obligation to
recognize or effect on the transfer records of the Company any transfer of any
security by Barrella which would, in the opinion of counsel to the Company,
cause or have the effect of termination of the S-corporation election of the
Company. Barrella (and his spouse) shall take all necessary and appropriate
steps and execute all necessary and appropriate consents and other documents
required to make each election to be taxed as an S corporation effective under
the laws of the United States and the respective states in which the Company
files an election to be an S corporation.
11.2 Inadvertent Termination of S Corporation Status. In the event of an
-----------------------------------------------
inadvertent termination of the Company's S corporation election, then Barrella
and the Company agree to take appropriate action under Section 1362(f) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder to request a determination of inadvertent termination from the
Commissioner of Internal Revenue allowing the Company to be treated as or
continuing to be an S corporation, and if a waiver of the terminating event is
not granted, to request consent for an early reelection of S corporation status
under Section 1362(g) of the Code and the regulations thereunder.
11.3 Shareholder Termination of Interest. In the event Barrella terminates
-----------------------------------
his entire interest in the stock of the Company, Barrella agrees to file an
election under Code Section 1377(a)(2) to close the tax year of the Company as
of the date of such termination for federal income tax accounting purposes.
11.4 Allocation of Income or Loss in S Termination Year. If the Company's S
--------------------------------------------------
election is terminated during any taxable year of the Company, Barrella agrees
to make such elections and sign such consent forms as may be required, and the
Company will allocate all tax items between the short tax year ending on the
date immediately prior to the terminating event and the short tax year beginning
with the date of the terminating event in accordance with Code Section
1362(e)(3).
11.5 Power of Attorney. Barrella (and his spouse) hereby irrevocably
-----------------
constitutes and appoints the President of the Company, or any successor, with
power of substitution, his or her true and lawful attorney-in-fact and agent, to
execute, acknowledge, verify, swear to, deliver, record and file, in his (or his
spouse's) name, place and stead, all consents, instruments, documents and
certificates that may from time to time be required by the laws of the United
States, the State of Georgia, or any other relevant state, to effectuate,
implement and continue the valid existence of the Company as an S corporation
(or similar status). This power of attorney is a special power and shall not be
terminated upon the incapacity, disability or incompetence of Barrella (or
spouse) and shall not be revoked and shall survive the assignment or transfer by
Barrella (or spouse) of all or part of his or her Stock in the Company. The
existence of this power shall not preclude execution of any such instrument by
Barrella (or spouse) individually on any such matter.
-9-
<PAGE>
12. Miscellaneous.
-------------
12.1 Waivers and Consents. All waivers and consents given hereunder shall
--------------------
be in writing. No waiver by any party hereto of any breach or anticipated breach
of any provision hereof by any other party shall be deemed a waiver of any other
contemporaneous, preceding or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
12.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been given only if and when (i) personally
delivered, or (ii) three (3) business days after mailing, postage prepaid, by
certified mail, or (iii) when delivered (and receipted for) by an overnight
delivery service, or (iv) when first sent by telex, telecopier or other means of
instantaneous communication provided such communication is promptly confirmed by
personal delivery, mail or an overnight delivery service as provided above,
addressed in each case as follows:
(a) If to Barrella:
Thomas Barrella
4035 North Stratford Road
Atlanta, Georgia 30342
(b) If to Company:
Softsense Computer Products Inc.
1155 Hammond Drive
Suite E-5200
Atlanta, Georgia 30328
Attention: President
Either Barrella or the Company may change the address(es) for the giving of
notices and communications to him or it, as the case may be, by written notice
to the other party in conformity with the foregoing.
12.3 Headings. The Article and Section headings contained in this Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.4 Governing Law. The interpretation and construction of this Agreement,
-------------
and all matters relating hereto, shall be governed by the laws of the State of
Georgia, without giving effect to the principles of conflicts of laws.
12.5 Parties in Interest. This Agreement shall inure to the benefit of, and
-------------------
be binding upon, Barrella and the Company, and their respective successors and
assigns.
12.6 Section References. Any reference in this Agreement to a section or
------------------
subsection shall be deemed to include a reference to any subsidiary sections
whenever the context requires.
12.7 Gender. Masculine, feminine and neuter terms shall be interchangeable
------
(and shall include a corporation, a partnership, or another entity), and shall
be singular and plural, where the context makes a change of gender or number
appropriate.
-10-
<PAGE>
12.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one and the same
instrument.
12.9 Entire Agreement. This Agreement, including all schedules annexed
----------------
hereto, contains the entire understanding of the parties hereto with respect to
the subject matter contained herein or therein, and supersedes all prior or
contemporaneous written or verbal arrangements or agreements regarding the same.
12.10 Amendments. This Agreement may not be changed orally. This
----------
Agreement may be changed only by an agreement in writing signed by Company and
Barrella.
12.11 Severability. In case any provision in this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
12.12 Attorneys' Fees. If any legal proceeding is brought for the
---------------
enforcement of this Agreement, or because of an alleged breach, default or
misrepresentation in connection with any provision of this Agreement or other
dispute concerning this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
proceeding, in addition to any other relief to which it may be entitled.
12.13 Interpretation. Should any provision of this Agreement require
--------------
judicial or arbitral interpretation, it is agreed that the court or arbitrator
interpreting or construing the same shall not apply the presumption that the
terms of any such provision shall be more strictly construed against one party
or the other by reason of the rule of construction that a document is to be
construed most strictly against the party who itself or through its agent
prepared the same, it being agreed that the agents of all parties have
participated in the preparation of this Agreement.
IN WITNESS WHEREOF, the Company and Barrella have executed this Agreement,
under seal, as of the day and year first above written.
"COMPANY"
SOFTSENSE COMPUTER PRODUCTS INC.
By: /s/ Erez Goren
---------------------------------------
Title: President
---------------------------------
Attest: Thomas Barrella
-----------------------------------
Title:
---------------------------------
[CORPORATE SEAL]
-11-
<PAGE>
"BARRELLA"
By: /s/ Thomas Barrella (SEAL)
-----------------------
Thomas Barrella
-12-
<PAGE>
EXHIBIT A
---------
AGREEMENT AND PLAN OF REORGANIZATION AND DISTRIBUTION
This AGREEMENT AND PLAN OF REORGANIZATION AND DISTRIBUTION (the "Agreement")
made as of the 29th day of May, 1995 among Softsense Computer Products Inc.
("Softsense"), a New York corporation, Logic Shop, Inc. ("LSI"), a Georgia
corporation, and Thomas Barrella ("Barrella"), an individual shareholder of
Softsense.
WHEREAS, LSI is a newly organized Georgia corporation;
WHEREAS, the parties desire to transfer to LSI the Softsense automotive
systems division, including the Compu-Car Care, Compu-Central and Compu-Local
products, in exchange for 2,000,000 shares of the common stock, no par value per
share, of LSI;
WHEREAS, thereafter the parties desire to split-off LSI to Barrella in
exchange for stock of Softsense in a manner intended to be a tax-free
reorganization and a tax-free split-off under Sections 368(a)(1)(D) and
355(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties agree as follows:
1. Transfer of Properties and Assumption of Liabilities. In exchange for
----------------------------------------------------
2,000,000 shares of capital stock of LSI, Softsense will transfer to LSI certain
assets used primarily in the Softsense automotive systems division, including
the Compu-Car Care, Compu-Central and Compu-Local products, and LSI will assume
or take subject to certain liabilities of such division.
2. Distribution of Controlled Stock. Immediately after the transfer of
--------------------------------
assets and liabilities set forth in Section 1 hereto, Softsense will immediately
distribute to Barrella all 2,000,000 shares of the issued and outstanding
capital stock of LSI and 7.292 shares of Softsense Class A Common Stock in
exchange for all 31.25 shares of Softsense Common Stock owned by Barrella. The
value of the LSI stock and Softsense Class A Common Stock and the value of the
Softsense Common Stock surrendered by Barrella will be determined as of the date
of the transfer by Softsense's Board of Directors using such independent
valuation advice as they deem necessary.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
3. Miscellaneous. This Agreement constitutes the entire agreement and
-------------
understanding between the parties and supersedes all prior agreements and
understandings related hereto. This Agreement shall be governed by the laws of
the State of Georgia.
IN WITNESS WHEREOF, the undersigned have executed this Agreement or caused
it to be executed by their duly authorized officers effective as of the date
first written above.
SOFTSENSE COMPUTER PRODUCTS INC.
By:
---------------------------------------
Its:
--------------------------------------
LOGIC SHOP, INC.
By:
---------------------------------------
Its:
--------------------------------------
------------------------------------------
THOMAS BARRELLA
-14-
<PAGE>
EXHIBIT B
---------
BLANKET BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS BLANKET BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
("Assignment") is made and entered into as of the 29th day of May, 1995, by and
between SOFTSENSE COMPUTER PRODUCTS INC., a New York corporation (the
"Transferor") and LOGIC SHOP, INC., a Georgia corporation (the "Transferee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Transferor is in the business of developing, licensing and
distributing computer software for use in the automotive care field under the
trade names Compu-Car Care, Compu-Central and Compu-Local (the "Subject
Business"); and
WHEREAS, Transferor is the sole shareholder of Transferee and the parties
hereto desire that Transferor transfer to the Transferee the Subject Business as
a going concern, any goodwill associated therewith, and those certain assets,
rights, properties and business of Transferor used by, or relating to, the
Subject Business and more specifically described in Exhibit A annexed hereto
---------
(collectively, the "Transferred Assets"), but specifically excluding, without
limitation, the assets, rights, properties and business described in Exhibit B
---------
attached hereto (collectively, the "Excluded Assets"); and
WHEREAS, the parties hereto further desire that Transferee assume all of the
liabilities and obligations relating to the Transferred Assets, if any, and
certain liabilities and obligations relating to the Subject Business, all as
more particularly described in Exhibit C annexed hereto (collectively, the
---------
"Assumed Liabilities"); and
WHEREAS, the aforementioned transaction is being effected as part of a tax
free split-off in accordance with the provisions of Sections 368(a)(1)(D) and
355(a)(1) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS THAT for and in consideration
of the premises, the mutual covenants contained herein, and other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged and confessed, the parties hereto covenant and agree as
follows:
1. Transfer of Transferred Assets. The Transferor does hereby grant,
------------------------------
bargain, sell, assign, transfer, convey and deliver to Transferee, and its
successors and assigns, forever, all of the Transferor's right, title and
interest in, to, and under the Transferred Assets.
2. Contingent Assets. Should the assignment of any of the Transferred
-----------------
Assets under this Assignment require a third party consent as a condition to
assignment and such consent has not been obtained as of the date hereof (any
such asset being referred to as a "Contingent Asset"), Transferor, for itself
and its successors and assigns, hereby covenants and agrees to take all
commercially reasonable steps and incur all reasonable and ordinary costs
necessary to obtain such consent promptly. Until such consents have been
obtained, the Transferred Assets assigned hereunder shall not include the
Contingent Assets, however, immediately upon obtaining such consent, the
Contingent Asset to which such consent relates
-15-
<PAGE>
shall be deemed, without further action of any kind, to be a Transferred Asset
that is assigned by Transferor to Transferee pursuant to this Assignment.
3. Assumption of Liabilities. The Transferee does hereby assume all of
-------------------------
the Assumed Liabilities, including, without limitation, the liabilities and
obligations relating to the leases and contracts included as part of the
Transferred Assets, and Transferee agrees that it shall fully and timely pay,
perform and discharge all of the Assumed Liabilities, when due in accordance
with their respective terms. Transferee shall indemnify and hold harmless the
Transferor from and against any and all claims, liabilities, losses, damages,
costs and expenses (including attorneys' fees and court costs) which Transferor
may suffer or incur arising out of the Transferee's failure to fulfill its
obligations under Sections 3 or 4 of this Assignment.
4. Contingent Obligations. Notwithstanding anything contained herein to
----------------------
the contrary, the Assumed Liabilities shall not include any obligation which
relates to a Contingent Asset for which a required third party consent has not
been obtained (any obligation relating thereto being referred to as a
"Contingent Obligation"). However, immediately upon obtaining such consent, the
Contingent Obligation to which such consent relates shall be deemed, without
further action of any kind, to be an obligation included within the Assumed
Liabilities. Notwithstanding the foregoing, Transferee shall fully pay and
discharge when due in accordance with their respective terms any and all
obligations accruing after the date hereof with respect to those certain
Contingent Obligations for which and during the period in which Transferee is
receiving the benefits of the Contingent Assets relating thereto; provided,
however, that Transferee may, at its election, exercised in good faith, void its
obligation to assume a Contingent Obligation if during the period in which
consent is being sought any material default occurs under the Contingent Asset
relating thereto and such material default results from the acts or omissions of
Transferor, and Transferee is willing to forego any additional benefit under or
with respect to such Contingent Asset and agrees that such Contingent Asset
shall not be included within the Transferred Assets.
5. Further Assurances. Each party covenants and agrees that from and
------------------
after the date hereof, each will execute, deliver and acknowledge (or cause to
be executed, delivered and acknowledged), from time to time, at the request of
the other and without further consideration, all such further instruments and
take all such further action as may be reasonably necessary or appropriate to
confirm or more effectively carry out the provisions and intent of this
Assignment; provided, however, that all recording and filing costs shall be the
responsibility of the requesting party.
6. Employee Matters. As of the date hereof, all employees employed by the
----------------
Transferor exclusively for the Subject Business and listed on Exhibit D (the
---------
"Transferred Employees") shall be made available to the Transferee for hire, and
the Transferee shall offer employment, as of the date hereof, to the Transferred
Employees at no less than the same compensation rate described on Exhibit D.
---------
The Transferee shall be solely responsible for severance pay obligations, if
any, arising on or after the date hereof with respect to all Transferred
Employees.
7. Disclaimer of Warranties. TRANSFEROR IS GRANTING, BARGAINING, SELLING,
------------------------
ASSIGNING, TRANSFERRING, CONVEYING AND DELIVERING THE TRANSFERRED ASSETS
HEREUNDER IN "AS IS" AND "WHERE IS" CONDITION. TRANSFEROR MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO AND
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
-16-
<PAGE>
8. Arbitration. All disputes and claims relating to any provision hereof
-----------
(including, without limitation, any claims that any provision of this Assignment
or any obligation of Transferor or of Transferee is illegal or otherwise
unenforceable or voidable under law, ordinance or ruling) shall be settled by
arbitration at the office of the American Arbitration Association in Atlanta,
Georgia, in accordance with the United States Arbitration Act (9 USC, (S) 1 et
--
seq.) and the commercial arbitration rules of the American Arbitration
- ---
Association. Transferee and Transferor each consents and submits to the
jurisdiction and venue of the trial courts of Fulton County, Georgia, and also
to the jurisdiction and venue of the United States District Court for the
Northern District of Georgia for purposes of enforcing this provision. All
awards of the arbitration shall be binding and non-appealable except as
otherwise provided in the United States Arbitration Act. Judgment upon the
award of the arbitrator may be entered in any court having jurisdiction thereof.
The arbitration shall take place at a time noticed by the American Arbitration
Association regardless of whether one of the parties fails or refuses to
participate. The foregoing provision shall not preclude either party from
bringing an action in any court of competent jurisdiction for injunctive or
other provisional relief as necessary or appropriate.
9. Entire Agreement. This Assignment, including all schedules and
----------------
exhibits annexed hereto, supersedes all prior agreements and undertakings
between the parties hereto with respect to the subject matter contained herein,
constitutes the entire agreement of the parties with respect to the subject
matter hereof, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Assignment signed by the party
to be so bound by such modification, amendment or termination.
10. Headings. The section headings contained in this Assignment are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Assignment.
11. Counterparts. This Assignment may be executed in two or more
------------
counterparts, all of which taken together shall constitute one and the same
instrument.
12. Time of the Essence. Time shall be of the essence with respect to the
-------------------
performance of any obligation or duty hereunder.
13. Governing Law. The interpretation and construction of this Assignment,
-------------
and all matters relating thereto, shall be governed by the internal laws of the
State of Georgia without giving effect to the principles of conflicts of laws.
14. Interpretation. Should any provision of this Assignment require
--------------
judicial or arbitral interpretation, it is agreed that the court or arbitrator
interpreting or construing the same shall not apply a presumption that the terms
of any such provision shall be more strictly construed against one party or the
other by reason of the rule of construction that a document is to be construed
most strictly against the party who itself or through its agent prepared the
same, it being agreed that the agents of all parties hereto have participated in
the preparation of this Assignment.
15. Parties in Interest. This Assignment shall be binding upon and shall
-------------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
executed and delivered, under seal, as of the date and year first above written.
-17-
<PAGE>
"Transferor"
Signed, sealed and delivered SOFTSENSE COMPUTER PRODUCTS INC.
in the presence of:
By:
------------------------------
Title:
- ---------------------- ---------------------------
Notary Public
Attest:
--------------------------
My Commission Expires: Title:
---------------------------
"Transferee"
Signed, sealed and delivered LOGIC SHOP, INC.
in the presence of:
By:
-----------------------------
Title:
- ---------------------- --------------------------
Notary Public
Attest:
--------------------------
My Commission Expires: Title:
---------------------------
-18-
<PAGE>
EXHIBIT C
PROMISSORY NOTE
$30,000 May 29, 1995
FOR VALUE RECEIVED, the undersigned (hereafter referred to as "Maker"),
promises to pay to the order of SOFTSENSE COMPUTER PRODUCTS INC. (hereafter
referred to as "Payee"; Payee, and any subsequent holder(s) hereof, being
hereafter referred to as "Holder"), at the address of Maker at 1155 Hammond
Drive, Suite E-5200, Atlanta, Georgia 30328, or at such other place as Holder
may designate to Maker in writing from time to time, the principal sum of THIRTY
THOUSAND AND NO/100 DOLLARS ($30,000), together with interest on so much thereof
as is from time to time outstanding and unpaid, at the rate hereinafter set
forth, in lawful money of the United States of America, such principal and said
interest to be paid in the following manner:
From and after the date hereof (until maturity) interest on the outstanding
principal indebtedness evidenced hereby shall accrue at the rate of eight
percent (8%) per annum and shall be computed on a simple interest basis.
The outstanding principal amount and accrued interest on this Note shall be
due and payable in full on August 31, 1995.
This Note may be prepaid in whole or in part at any time.
If the outstanding principal and all accrued interest is not paid when due,
interest shall accrue on the outstanding principal balance of this Note from the
due date and for so long as such default continues, at the rate equal to
eighteen percent (18%) per annum. Time is of the essence of this Note.
Presentment for payment, demand, protest and notice of demand, dishonor,
protest and non-payment and all other notices are hereby waived. No indulgences
granted from time to time shall be construed as a waiver of the right of Holder
thereafter to insist upon strict compliance with the terms of this Note, or any
other right granted hereunder or by the laws of the State of Georgia; and Maker
hereby expressly waives the benefit or any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note or any installment due hereunder, made by agreement with
any person now or hereafter liable for the payment of this Note, shall operate
to release, discharge, modify, change or affect the original liability of Maker
under this Note, either in whole or in part, unless Holder agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia.
If from any circumstances whatsoever, fulfillment of any provision of this
Note or of any other instrument evidencing or securing the indebtedness
evidenced hereby, at the time performance of such provision shall be due, shall
involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, the, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, so that in no event shall any
exaction be possible under this Note or under any other instrument evidencing or
securing the
-19-
<PAGE>
indebtedness evidenced hereby that is in excess of the current limit of such
validity, but such obligation shall be fulfilled to the limit of such validity.
This Note shall not be transferred or otherwise disposed of by the Holder
without the prior written consent of the Maker.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, Maker has executed this Note under seal on the date
first above written.
"Maker"
LOGIC SHOP, INC.
By:
------------------------------------------
Title:
-----------------------------------
-20-
<PAGE>
EXHIBIT 10.3
------------
SOFTSENSE COMPUTER PRODUCTS, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of Softsense Computer Products, Inc.'s 1995 Incentive Stock
Option Plan (the "Plan") is to encourage and enable eligible directors, officers
and employees of Softsense Computer Products, Inc. (the "Company") and its
subsidiaries to acquire proprietary interests in the Company through the
ownership of Common Stock of the Company. The Company believes that directors,
officers and key employees who participate in the Plan will have a closer
identification with the Company by virtue of their ability as shareholders to
participate in the Company's growth and earnings. The Plan also is designed to
provide motivation for participating directors, officers and key employees to
remain in the employ of and to give greater effort on behalf of the Company. It
is the intention of the Company to have the Plan qualify as an "incentive stock
option plan" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations promulgated thereunder. Accordingly, the
provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean an incentive stock option agreement between the
Company and an Eligible Employee pursuant to the terms of this Plan.
(b) "Average Market Price" shall mean the mean between the high "bid" and
low "ask" prices as of the close of business for the Company's shares of Common
Stock in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System (or other national quotation
service). If the Company's Common Stock is not regularly traded in the over-the-
counter market but is registered on a national securities exchange, "Average
Market Price" shall mean the closing price of the Company's Common Stock on such
national securities exchange.
(c) "Board of Directors" shall mean the Board of Directors of the Company
or the Executive Committee of such Board.
(d) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan.
(e) "Common Stock" shall mean the no par value Common Stock of the
Company.
(f) "Company" shall mean Softsense Computer Products, Inc., a Georgia
corporation.
<PAGE>
(g) "Current Value" shall mean the value of each Share as determined in
accordance with Section 9(c).
(h) "Disposition" shall mean any sale, gift, or other transfer, whether
outright or as security, inter vivos or at death, with or without consideration,
voluntary or involuntary, of all or any part of any right, title, or interest
(including but not limited to voting rights) in or to any Shares other than a
Permitted Disposition.
(i) "Eligible Employee(s)" shall mean a person or persons regularly
employed by the Company or a Subsidiary.
(j) "Optionee" shall mean an Eligible Employee having a right to purchase
Common Stock under an Agreement.
(k) "Option(s)" shall mean the right or rights granted to Eligible
Employees to purchase Common Stock under the Plan.
(l) "Permitted Disposition" shall mean any transfer of the Shares of
Optionee upon Optionee's death, to an heir or legatee; provided, however, that
such heir or legatee acknowledges in writing that he, she or it will be bound
by, and the Shares transferred will be subject to, the Plan; and further
provided that, the Company has not elected to repurchase the Shares pursuant to
Section 9(b) hereof.
(m) "Plan" shall mean this Softsense Computer Products, Inc. 1995
Incentive Stock Option Plan.
(n) "Shares," "Stock" or "Common Stock" shall mean shares of the no par
value Common Stock of the Company.
(o) "Subsidiary" shall mean any corporation, if the Company owns or
controls, directly or indirectly, a majority of the voting stock of such
corporation.
(p) "Ten Percent Owner" shall mean an individual who, at the time an
Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date the
Plan is adopted by the Board of Directors or the date the Plan is approved by
the shareholders of the Company, whichever is earlier. The Plan must be approved
by the affirmative vote of not less than a majority of the votes entitled to be
cast thereon, which shareholder vote must be taken within twelve (12) months
after the date the Plan is adopted by the Board of Directors. Such shareholder
vote shall not alter the Effective Date of the Plan. In the event shareholder
approval of the adoption of the Plan is not obtained within the aforesaid twelve
(12) month period, then any options granted in the intervening period shall be
void.
-2-
<PAGE>
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible Employees
under the Plan may at the election of the Board of Directors be either treasury
shares or shares originally issued for such purpose. The maximum number of
shares which shall be reserved and made available for sale under the Plan shall
be 2,500,000. Any shares subject to an Option which for any reason expires or is
terminated unexercised may again be subject to an Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company or
the Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members. No
member of the Board of Directors shall be appointed or serve as a member of the
Committee, and any such appointment or service immediately and automatically
shall terminate, in the event that such person is not a disinterested person. As
used herein, the term "disinterested person" means a director who is not, during
the one year prior to service as an administrator of the Plan, or during such
service, granted or awarded equity securities pursuant to the Plan or any other
plan of the Company or any of its affiliates (as such term is defined in the
General Rules and Regulations of the Securities Exchange Act of 1934, as
amended).
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees to whom Options will be granted, determine the number of shares to be
optioned to each Eligible Employee and interpret, construe and implement the
provisions of the Plan. Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of the
members of the Board of Directors shall constitute a quorum, and the act of a
majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
members of the Board of Directors shall be the acts of the Board of Directors.
If the Plan is administered by the Committee, the Committee shall select one of
its members as Chairman and shall hold its meetings at such times and places,
and pursuant to such rules consistent with the Plan, as it may determine. A
majority of the members of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the members of the
Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options may be granted only to Eligible Employees.
-3-
<PAGE>
7. DURATION OF THE PLAN
The Plan shall remain in effect until all shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options granted
under the Plan; provided that Options under the Plan must be granted within ten
(10) years from the Effective Date.
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under the Plan shall be qualified
incentive stock options under the provisions of Section 422 of the Code and the
regulations thereunder or corresponding provisions of subsequent revenue laws
and regulations in effect at the time such Options are granted. Such Options
shall be evidenced by stock option agreements in such form and not inconsistent
with this Plan as the Committee shall approve from time to time, which
agreements shall contain in substance the following terms and conditions:
(a) Price. The purchase price for shares purchased upon exercise will be
-----
the Average Market Price on the day the Option is granted, as determined by the
Board of Directors or the Committee, or, if the Stock is not traded in the
organized markets, then the price shall be the fair market value of the Stock as
determined in good faith by the Board of Directors or the Committee, but in no
case less than the par value of such stock; provided further that the purchase
price of stock deliverable upon the exercise of a qualified incentive option
granted to a Ten Percent Owner shall be not less than one hundred ten percent
(110%) of the Average Market Price or fair market value on the day the Option is
granted, as determined by the Board of Directors or the Committee, but in no
case less than the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of shares
----------------
which the Optionee may purchase under such Option.
(c) Exercise of Options. The shares subject to the Option may be
-------------------
purchased in whole or in part by the Optionee in accordance with the terms of
the Agreement, from time to time after shareholder approval of the Plan, but in
no event later than ten (10) years from the date of grant of the Option.
Notwithstanding the foregoing, shares subject to an Option granted to a Ten
Percent Owner shall be exercisable no later than five (5) years from the date of
grant of the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an Agreement
--------------------------
shall be paid for in full at the time of purchase. Payment of the purchase
price shall be in cash or shares of the Common Stock of the Company, or a
combination of cash and shares of the Common Stock of the Company. Upon receipt
of payment, the Company shall, without transfer or issue tax, deliver to the
Optionee (or other person entitled to exercise the Option) a certificate or
certificates for such shares.
(e) Rights as a Shareholder. An Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
-4-
<PAGE>
(f) Nonassignability of Option. No Option shall be assignable or
--------------------------
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death. In the event that an
--------------------------------------------
Optionee during his or her lifetime ceases to be an employee of the Company or
of any subsidiary of the Company for any reason (including retirement) other
than death or permanent and total disability, any Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of employment
shall expire unless exercised within a period of three (3) months from the date
on which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee's Agreement. In the event that an Optionee ceases to
be an employee of the Company or of any subsidiary of the Company for any reason
(including retirement) prior to the time that an Option is exercisable, his or
her Option shall terminate and be null and void.
In the event that an Optionee during his or her lifetime ceases to be an
employee of the Company or any subsidiary of the Company by reason of death or
permanent and total disability, any Option or unexercised portion thereof which
was otherwise exercisable on the date such Optionee ceased employment shall
expire unless exercised within a period of one (1) year from the date on which
the Optionee ceased to be an employee, but in no event after the term provided
in the Optionee's Agreement. Permanent and total disability as used herein is as
defined in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be exercisable
by his or her personal representatives, heirs or legatees, as provided herein.
(h) Recapitalization. In the event that dividends are payable in Common
-----------------
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased proportionately, as the
case may be, and the number of Shares deliverable upon the exercise thereafter
of any Option theretofore granted shall be increased or decreased
proportionately, as the case may be, without change in the aggregate purchase
price.
(i) Reorganization. In case the Company is merged or consolidated with
--------------
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee provide that the Option
(including the shares not then exercisable) must be exercised within sixty (60)
days of the date of such notice or it will be terminated.
-5-
<PAGE>
(j) General Restriction. Each Option shall be subject to the requirement
-------------------
that if at any time the Board of Directors shall determine, in its discretion,
that the listing, registration or qualification of the Shares subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of such Option or the
issue or purchase of Shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors.
9. RESTRICTIONS UPON THE TRANSFER OF SHARES
Optionees shall not make any Disposition of Shares, other than a Permitted
Disposition, except as provided in this Section 9. Any purported transfer in
violation of any provision of this Section 9 shall be null and void and shall
not operate to transfer any interest or title to the purported transferee.
(a) Right of First Refusal.
----------------------
(i) Condition to Transfer. If Optionee desires to make a
---------------------
Disposition of any Shares, he shall first offer such Shares to the Company by
giving it notice of his intention to dispose of the Shares. Such notice shall
name the type of Disposition, the proposed transferee, the number of shares to
be transferred, the price per share, and the terms of payment. Following receipt
of such notice by the Company, the Company may exercise an option in the manner
provided by subsection 9(a)(ii) to purchase all, but not less than all, of the
offered Shares, at a price equal to the price specified in the notice.
(ii) Exercise of Option. The Company may exercise its option by
------------------
giving written notice, which must state the number of shares the Company elects
to purchase, and the price and terms of purchase, to Optionee within 10 days
after its receipt of Optionee's notice. The Company may purchase all of the
offered Shares but may not purchase less than all of the offered Shares. If the
Company elects to purchase all the offered Shares, it shall state in its notice
of exercise the date for the closing of the purchase, which shall not be less
than 45 nor more than 60 days after its receipt of notice from the Optionee.
(iii) Failure to Exercise. If the right of first refusal provided
-------------------
above is not exercised as to all of the offered Shares, if the exercise by the
Company is not made within the time specified in subsection 9(a)(ii), or if the
purchase by the Company is not consummated within the time specified in
subsection 9(a)(ii) through no fault of the Optionee, the Optionee may transfer
the offered Shares to the proposed purchaser, at the price and on the terms and
conditions set forth in the notice of intention sent by the Optionee. As a
condition to such transfer, the Optionee shall obtain the written
acknowledgement of the transferee that the transferee will be bound by, and the
Shares transferred will be subject to, the terms of such Optionee's Agreement.
If the transfer of Shares by the Optionee to the proposed purchaser named in the
notice of intention is not made within 30 days after the date the Optionee
became free to transfer, the right to transfer in accordance with the notice
shall expire. In such event the provisions of this Section 9 shall remain in
full force and effect as to the offered Shares.
-6-
<PAGE>
(iv) Assignment of Option by Company. The Company may assign its
-------------------------------
rights under subsection 9(a)(ii) hereof to any of the then current shareholders
of the Company other than the Optionee, such that such shareholder shall have
the right to purchase the Shares of the Optionee, or such portion of the Shares
of the Optionee as shall be mutually agreed between the Company and such
shareholder, so long as, in the aggregate, the Company and such shareholder
purchase all of the Shares of the Optionee.
(v) Closing. At the closing the Company shall deliver the required
-------
consideration, and the Optionee shall deliver the offered Shares, duly endorsed
for transfer and with any and all required revenue stamps attached.
(b) Company's Right of Repurchase Upon Termination of Employment or Death.
---------------------------------------------------------------------
(i) Optional Repurchase by the Company. The Company shall have the
----------------------------------
right, but not the obligation, to purchase all (but not less than all) of the
Shares of Optionee in the event he ceases to be an employee of the Company or
any subsidiary of the Company for any reason (including retirement) or in the
event of his death (a "Termination Event"), at a price equal to its Current
Value, at any time following the Termination Event. The right of the Company set
forth in this subsection 9(b)(i) may be exercised by written notice from the
Company to the Optionee or the estate of the Optionee, as the case may be,
specifying the amount of the Current Value and the time (which shall be not more
than ten business days following the date of giving such written notice) and
place for closing the Company's purchase of such shares. The Company's purchase
of such Shares shall take place in accordance with, and at the time and place
specified in, such notice.
(ii) Assignment of Option to Repurchase by Company. The Company may
---------------------------------------------
assign its rights under subsection 9(b)(i) hereof to any of the then current
shareholders of the Company other than the Optionee or the estate of the
Optionee, as the case may be, such that such shareholder shall have the right to
purchase the Shares of the Optionee, or such portion of the Shares of the
Optionee as shall be mutually agreed between the Company and such shareholder,
so long as, in the aggregate, the Company and such shareholder purchase all of
the Shares of the Optionee.
(iii) Installment Payment of Purchase Price Upon Death. Any payment
------------------------------------------------
of the purchase price for the Shares of an Optionee may be made in cash or in an
initial installment, payable at the closing, of 20% of the total price, with the
balance to be paid in 4 equal annual installments of principal and interest
beginning on the first day of the thirteenth month following the date of the
closing. The obligation to pay the balance of the purchase price shall be
evidenced by a promissory note bearing interest at the rate of 9% per annum.
Such note shall provide for acceleration upon the default in any installment
payment which is not cured within thirty (30) days after written notice and
shall give the purchaser of the Shares the option of prepayment without premium
or penalty in whole at any time and in part from time to time after the calendar
year of sale. The purchaser shall pledge the purchased Shares to secure payment
of the note, pursuant to a stock pledge agreement.
(c) Determination of Current Value. The Current Value of each Share of
------------------------------
the Company shall be the Average Market Price on the date of the Termination
Event, as determined by the Board of Directors, or, if the Shares are not traded
in the organized markets, then the price shall be the fair
-7-
<PAGE>
market value of the Shares determined in good faith by the Board of Directors,
but in no case less than the par value of such stock.
(d) Termination of Restrictions on Shares. The restrictions imposed by
-------------------------------------
and the rights in favor of the Company set forth in Section 9 shall terminate in
full at such time as the Company's Common Stock is publicly traded on a national
securities exchange or on The Nasdaq Stock Market.
10. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the votes
entitled to be cast thereon by the Company's shareholders. The Board of
Directors may at any time and from time to time modify or amend the Plan in any
respect, except that without shareholder approval the Board of Directors may not
(1) increase the maximum number of shares for which Options may be granted under
the Plan either in the aggregate or to any Eligible Employee (other than
increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) reduce the option price or waiting period (except as otherwise
expressly provided in the Plan in the case of a reorganization of the Company as
referred to in Section 8(i) hereof), or (3) extend the period during which
Options may be granted or exercised, or (4) change the class of employees
eligible for incentive stock options under Section 6 hereof, or (5) to otherwise
materially modify (within the meaning of Rule 16b-3 of the Securities Exchange
Act of 1934, as amended) the requirements as to eligibility for participation in
the Plan, or (6) to otherwise materially increase (within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934, as amended) the benefits accruing
to participants under the Plan. The termination or any modification or amendment
of the Plan shall not, without the written consent of an Optionee, affect his or
her rights under an Option or right previously granted to him or her. With the
written consent of the Optionee affected, the Board of Directors or the
Committee may amend outstanding option agreements in a manner not inconsistent
with the Plan. Without employee consent, the Board of Directors may at any time
and from time to time modify or amend outstanding option agreements in such
respects as it shall deem necessary in order that Options granted hereunder
shall comply with the appropriate provisions of the Code and regulations
thereunder which are in effect from time to time respecting "Qualified Incentive
Options."
11. LIMITATION ON NUMBER OF SHARES THAT MAY BE PURCHASED
The aggregate fair market value (determined at the time the Option is
granted) of the shares with respect to which incentive stock options are
exercisable for the first time by an Optionee during any calendar year (under
all incentive stock option plans of the Company) shall not exceed $100,000.
12. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company, all Eligible Employees participating
in the Plan, and on all persons eligible or who become eligible to participate
in the Plan.
-8-
<PAGE>
EXHIBIT 10.4
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT ("Agreement"), dated as of the 28th day of June, 1996,
is made and entered into on the terms and conditions hereinafter set forth, by
and between SOFTSENSE COMPUTER PRODUCTS, INC., a Georgia corporation
("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation
("Lender").
RECITALS:
--------
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of Three Million Dollars and
No/100ths Dollars ($3,000,000.00) (the "Loan") on the terms and conditions
hereinafter set forth, and for the purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE 1
THE LOAN
--------
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and
-------------------------------------------
conditions hereof, Lender shall make the Loan to Borrower by wire transfer in
immediately available funds. The Loan shall be evidenced by a Secured
Promissory Note in the original principal amount of Three Million and No/100ths
Dollars ($3,000,000.00), substantially in the form of Exhibit A attached hereto
and incorporated herein by this reference (the "Note"), dated as of the date
hereof, executed by Borrower, in favor of Lender. The Loan shall be payable in
accordance with the terms of the Note. The Note, this Agreement and any other
instruments and documents executed by Borrower, any guarantor of Borrower, or
any shareholder of Borrower, now or hereafter evidencing, securing or in any way
related to the indebtedness evidenced by the Note are herein individually
referred to as a "Loan Document" and collectively referred to as the "Loan
Documents."
<PAGE>
1.2 Processing Fee. Borrower shall pay a processing fee of $75,000 to
--------------
Lender at closing.
1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan
--------------------------------------
shall be to provide working capital to Borrower, and to pay all costs and
expenses incurred by the parties hereto in connection with the making and
documenting of the Loan, including attorneys' fees and expenses. The proceeds
of the Loan shall not be used for any other purpose.
1.4 Prepayment. Borrower may prepay the indebtedness evidenced by the
----------
Note in whole or in part at any time and from time to time without premium or
penalty.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 Borrower's Representations. Borrower hereby represents and warrants
--------------------------
to Lender as follows:
(a) Corporate Status. Borrower is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of
Georgia; and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it
is a party. Borrower is duly qualified to do business and in good standing
in Georgia and each other state in which a failure to be so qualified and
in good standing would have a material adverse effect on (a) the property,
business, operations or financial condition of Borrower and its
Subsidiaries (as hereafter defined) taken as a whole or (b) the ability of
Borrower to perform its obligations under the Loan Documents (collectively,
a "Material Adverse Effect").
(b) Subsidiaries. Schedule 2.1(b) hereto is a complete list of each
------------
corporation, partnership, joint venture, limited liability company or other
business organization (the "Subsidiary" or, with respect to all such
organizations, the "Subsidiaries") in which Borrower or any Subsidiary
owns, directly or indirectly, any capital stock or other equity interest,
or with respect to which Borrower or any Subsidiary, alone or in
combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization and the percentage of
stock or other equity interest of each Subsidiary owned by Borrower. Each
Subsidiary which is a corporation is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation
and is duly qualified to transact business as a foreign corporation and is
in good standing in the jurisdictions listed in Schedule 2.1(b), which are
the only jurisdictions where the properties owned or leased or the business
transacted by it makes such licensing or qualification to do business as a
foreign corporation necessary, and no other jurisdiction has demanded,
requested or otherwise indicated that (or inquired
2
<PAGE>
whether) it is required so to qualify. Each Subsidiary which is not a
corporation is duly organized and validly existing under the laws of the
jurisdiction of its organization. The outstanding capital stock of each
Subsidiary which is a corporation is validly issued, fully paid and
nonassessable. Borrower and the Subsidiaries have good and valid title to
the equity interests in the Subsidiaries shown as owned by each of them on
Schedule 2.1(b), free and clear of all liens, claims, charges,
restrictions, security interests, equities, proxies, pledges or
encumbrances of any kind other than Permitted Liens (as hereafter defined)
and other than as set forth on Schedule 2.1(b). Except where otherwise
indicated herein or unless the context otherwise requires, any reference to
Borrower herein shall include Borrower and all of its Subsidiaries.
(c) Authorization. Borrower has full legal right, power and authority
-------------
to conduct its business and affairs. Borrower has full legal right, power
and authority to enter into and perform its obligations under the Loan
Documents, without the consent or approval of any other person, firm,
governmental agency or other legal entity. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of each
Loan Document to which Borrower is a party, and the performance by Borrower
of its obligations thereunder are within the corporate powers of Borrower
and have been duly authorized by all necessary corporate action properly
taken, have received all necessary governmental approvals, if any were
required, and do not and will not contravene or conflict with any material
provision of law, any applicable judgment, ordinance, regulation or order
of any court or governmental agency, the articles of incorporation or
bylaws of Borrower, or any material agreement binding upon Borrower. The
officer(s) executing this Agreement, the Note and all of the other Loan
Documents to which Borrower is a party are duly authorized to act on behalf
of Borrower.
(d) Validity and Binding Effect. This Agreement and the other Loan
---------------------------
Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. As of the date hereof, the authorized capital
--------------
stock of Borrower consists solely of 30,000,000 shares of capital stock
with 20,000,000 shares designated no par value per share ("Voting Common
Stock"), of which 6,857,132 shares are issued and outstanding (the "Voting
Common Shares") and 1,050,601 shares of which shall be reserved for
issuance upon exercise of the Stock Purchase Warrant dated as of the date
hereof and issued to Lender (the "Warrant") and with 10,000,000 shares
designated as Class A Common Stock, no par value per share ("Class A Common
Stock") (Voting Common Stock and Class A Common Stock are sometimes
referred to herein collectively as "Common Stock"), of which 1,142,889
shares are issued and outstanding ("Class A Shares") (the Voting Common
Shares and the Class A Shares are sometimes referred to herein collectively
as the "Shares"); provided, however, that the number of shares reserved for
issuance upon exercise of
3
<PAGE>
the Warrant shall be increased from time to time in accordance with the
terms of the Warrant. As of the date hereof, Borrower shall not have
outstanding any stock or securities convertible or exchangeable for any
shares of its Common Stock or containing any profit participation features,
nor shall it have outstanding any rights or options to subscribe for or to
purchase its Common Stock or any stock or securities convertible into or
exchangeable for its Common Stock or any stock appreciation rights or
phantom stock plans, except as set forth on Schedule 2.1(e) and for the
Warrant. Schedule 2.1(e) accurately sets forth the following with respect
---------------
to all outstanding options and rights to acquire the Common Stock from
Borrower: (i) the total number of shares issuable upon exercise of all
outstanding options, (ii) the range of exercise prices for all such
outstanding options, (iii) the number of shares issuable, the exercise
price and the expiration date for each such outstanding option and (iv)
with respect to all outstanding options, warrants and rights to acquire
Borrower's capital stock other than the Warrant, the holder, the number of
shares covered, the exercise price and the expiration date. As of the date
hereof, Borrower shall not be subject to any obligation (contingent or
otherwise) to repurchase, redeem, retire or otherwise acquire any shares of
its capital stock or any warrants, options or other rights to acquire its
capital stock, except as set forth in the Warrant or on Schedule 2.1(e). As
---------------
of the date hereof, all of the outstanding shares of Borrower's capital
stock shall be validly issued, fully paid and nonassessable. Except as set
forth on Schedule 2.1(e), there are no statutory or contractual preemptive
---------------
rights, rights of first refusal, anti-dilution rights or any similar
rights, held by stockholders or option holders of Borrower, with respect to
the issuance of the Warrant or the issuance of the Common Stock upon
exercise of the Warrant. All such rights granted in the documents listed
on Schedule 2.1(e) have been effectively waived with regard to the issuance
---------------
of the Warrant, the exercise of the Warrant and the issuance of the Common
Stock upon exercise of the Warrant. Assuming the accuracy of certain
representations to be made by the holder of the Warrant, Borrower has not
violated any applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Warrant hereunder does not require registration
under the Securities Act of 1933, as amended or any applicable state
securities laws. To the best of Borrower's knowledge, there are no
agreements among Borrower's stockholders with respect to any other aspect
of Borrower's affairs, except as set forth on Schedule 2.1(e).
---------------
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate and
------------------------
complete list of all patents, trademarks, tradenames, trademark
registrations, service names, service marks, copyrights, licenses, formulas
and applications therefor owned by Borrower or used or required by Borrower
in the operation of its business, title to each of which is, except as set
forth in Schedule 2.1(f) hereto, held by Borrower free and clear of all
adverse claims, liens, security agreements, restrictions or other
encumbrances other than Permitted Liens. To the knowledge of Borrower,
there is no infringement action, lawsuit, claim or complaint which asserts
that Borrower's operations violate or infringe the rights or the trade
names, trademarks, trademark
4
<PAGE>
registration, service name, service mark or copyright of others with
respect to any apparatus or method of Borrower or any adversely held
trademark, trade name, trademark registration, service name, service mark
or copyright, nor is Borrower in any way making use of any confidential
information or trade secrets of any person except with the consent of such
person.
(g) No Conflicts. Consummation of the transactions hereby
------------
contemplated and the performance of the obligations of Borrower under and
by virtue of the Loan Documents will not result in any breach of, or
constitute a default under, any mortgage, security deed or agreement, deed
of trust, lease, bank loan or credit agreement, corporate charter or
bylaws, agreement or certificate of limited partnership, partnership
agreement, license, franchise or any other instrument or agreement to which
Borrower is a party or by which Borrower, or its respective properties may
be bound or affected which, individually or in the aggregate, could have a
Material Adverse Effect or to which Borrower has not obtained an effective
waiver.
(h) Litigation. There are no actions, suits or proceedings pending,
----------
or, to the knowledge of Borrower, threatened, against or affecting Borrower
or involving the validity or enforceability of any of the Loan Documents at
law or in equity, or before any governmental or administrative agency which
if adversely determined could have a Material Adverse Effect; and to
Borrower's knowledge, Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or any governmental
authority.
(i) Financial Statements. The financial statements of Borrower, dated
--------------------
April 30, 1996, attached hereto as Schedule 2.1(i)(A), are true and correct
in all material respects have been prepared on the basis of accounting
principles consistently applied, and fairly present the financial condition
of Borrower as of the date(s) thereof. No material adverse change has
occurred in the financial condition of Borrower since the date(s) thereof,
and no additional borrowings have been made by Borrower since the date(s)
thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
-----------------------------
indentures, loan or credit agreements, leases or other agreements or
instruments, or subject to any articles of incorporation or corporate
restrictions that could have a Material Adverse Effect. Borrower is not in
default in any respect in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party, including but
not limited to this Agreement and the other Loan Documents where such
default, individually or in the aggregate with any other defaults, could
reasonably be expected to have a Material Adverse Effect, and no other
default or event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of default
under any of same.
5
<PAGE>
(k) Compliance With Law. Borrower has obtained all material
-------------------
licenses, permits and approvals and authorizations necessary or required in
order to conduct its business and affairs as heretofore conducted and as
hereafter intended to be conducted except where the failure to have any
such license, permit, approval or authorization would not have a Material
Adverse Effect. To Borrower's knowledge, Borrower is in compliance with all
laws, regulations, decrees and orders applicable to it (including but not
limited to laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust, monopoly,
restraint of trade or unfair competition), except to the extent that
noncompliance, in the aggregate, cannot reasonably be expected to have a
Material Adverse Effect.
(l) Debt. Schedule 2.1(l) is a complete and correct list of all
----
credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which Borrower, or any of the properties thereof is in any
manner directly or contingently obligated; and the maximum principal or
face amounts of the credit in question that are outstanding and that can be
outstanding are correctly stated, and all liens of any nature given or
agreed to be given as security therefor are correctly described or
indicated in such Schedule.
(m) Taxes. Except as set forth on Schedule 2.1(m), Borrower has
-----
filed or caused to be filed all tax returns that to Borrower's knowledge
are required to be filed (except for returns that have been appropriately
extended), and has paid, or will pay when due, all taxes shown to be due
and payable on said returns and all other taxes, impositions, assessments,
fees or other charges imposed on them by any governmental authority, agency
or instrumentality, prior to any delinquency with respect thereto (other
than taxes, impositions, assessments, fees and charges currently being
contested in good faith by appropriate proceedings, for which appropriate
amounts have been reserved). To the knowledge of Borrower, no tax liens
have been filed against Borrower, or any of the property thereof.
(n) Small Business Concern. Borrower, together with its "affiliates"
----------------------
(as that term is defined in Title 13, Code of Federal Regulations, (S)
121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended, and the regulations
promulgated thereunder. The information set forth in the Small Business
Administration Forms 480, 652 and Part A of Form 1031 regarding Borrower
upon delivery, pursuant to Section 4.1 hereof, will be accurate and
complete in all material respects. Borrower does not presently engage in,
and it will not hereafter engage in, any activities which, and Borrower
will not, directly or indirectly, use the proceeds from the Loan for any
purpose for which a Small Business Investment Company is prohibited from
providing funds by the Small Business Investment Act and the regulations
thereunder, including Title 13, Code of Federal Regulations (S)107.720.
6
<PAGE>
(o) Certain Transactions. Except as set forth on Schedule 2.1(o)
--------------------
hereto, Borrower is not indebted, directly or indirectly, to any of its
shareholders, officers, or directors or to their respective spouses or
children, in any amount whatsoever; none of said shareholders, officers or
directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm or
corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No officer or director of Borrower or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(p) Statements Not False or Misleading. No representation or
----------------------------------
warranty given as of the date hereof by Borrower contained in this
Agreement or any schedule attached hereto or any statement in any document,
certificate or other instrument furnished or to be furnished by Borrower to
Lender pursuant hereto, taken as a whole, contains or will (as of the time
so furnished) contain any untrue statement of a material fact, or omits or
will (as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein or herein, in
light of the circumstances under which they were made, not misleading.
(q) Margin Regulations. Borrower is not engaged in the business of
------------------
extending credit for the purpose of purchasing or carrying margin stock.
No proceeds received pursuant to this Agreement will be used to purchase or
carry any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) is a complete and correct
---------------------
list of all contracts, agreements and other documents pursuant to which
Borrower receives revenues in excess of $25,000 per fiscal year. To the
knowledge of Borrower, each such contract, agreement and other document is
in full force and effect as of the date hereof and Borrower knows of no
reason why such contracts, agreements and other documents would not remain
in full force and effect pursuant to the terms thereof.
(s) Environment. Borrower has duly complied with, and its business,
-----------
operations, assets, equipment, property, leaseholds or other facilities are
in compliance with, the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder, except to the extent that failure
to do so would not have a Material Adverse Effect. Borrower has been
issued and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (1) air emissions; (2)
discharges to surface water or groundwater; (3) noise emissions; (4) solid
or liquid waste disposal; (5) the use, generation, storage, transportation
or disposal of toxic or hazardous substances or wastes (which shall include
any and all
7
<PAGE>
such materials listed in any federal, state or local law, code or ordinance
and all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (6) other environmental, health or safety
matters, except to the extent that failure to do so would not have a
Material Adverse Effect. Borrower has not received notice of, or knows of,
facts which might reasonably be deemed to constitute a material violation
of any federal, state or local environmental, health or safety laws, codes
or ordinances, and any rules or regulations promulgated thereunder with
respect to its businesses, operations, assets, equipment, property,
leaseholds, or other facilities. To the knowledge of Borrower, except in
accordance with a valid governmental permit, license, certificate or
approval, there has been no emission, spill, release or discharge into or
upon (1) the air; (2) soils, or any improvements located thereon; (3)
surface water or groundwater; or (4) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises, of any toxic
or hazardous substances or wastes at or from any premises owned or leased
by Borrower in connection with the operation of its business. Borrower has
not received any complaint, order, directive, claim, citation or notice by
any governmental authority or any person or entity with respect to (1) air
emissions; (2) spills, releases or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health or safety matters
affecting Borrower or its business, operations, assets, equipment,
property, leaseholds or other facilities. Borrower has no indebtedness,
obligation or liability (absolute or contingent, matured or not matured),
with respect to the storage, treatment, cleanup or disposal of any solid
wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation, or liability with
respect to any current regulation, law or statute regarding such storage,
treatment, cleanup or disposal).
(t) Fees; Commissions. Except as set forth in Schedule 2.1(t),
-----------------
Borrower has not agreed to pay any finder's fee, commission, origination
fee (except for the processing and commitment fees due pursuant to Section
1.2) or other similar fee or charge to any person or entity with respect to
the Loan and investment transactions contemplated hereunder.
(u) ERISA. Borrower is in compliance in all material respects with
-----
all applicable provisions of ERISA (as defined in Section 3.11 hereof).
Neither a reportable event nor a prohibited transaction (as defined in
ERISA) has occurred and is continuing with respect to any Plan (as defined
in Section 3.11 hereof); no notice of intent to terminate a Plan has been
filed nor has any Plan been terminated; no circumstances exist which
constitute grounds entitling the Pension Benefit Guaranty Corporation
(together with any entity succeeding to or all of its functions, the
"PBGC") to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings;
neither Borrower nor any commonly controlled entity (as defined in ERISA)
has completely or partially
8
<PAGE>
withdrawn from a multiemployer plan (as defined in ERISA); Borrower and
each commonly controlled entity has met its minimum funding requirements
under ERISA with respect to all of its Plans and the present fair market
value of all Plan property exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the
Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of Borrower or any
commonly controlled entity to the PBGC or the Plan under Title IV of ERISA;
and neither Borrower nor any commonly controlled entity has incurred any
liability to the PBGC under ERISA.
(v) Title to Properties. Borrower has good, marketable and insurable
-------------------
title to, or valid leasehold interests in, all its real properties and good
title to its other assets, free and clear of all liens other than Permitted
Liens (as defined in Section 3.15 hereof) and the liens set forth on
Schedule 2.1(v).
(w) Material Adverse Effect. Since April 30, 1996, no event has
-----------------------
occurred which has resulted or which Borrower reasonably believes could be
expected to result in a Material Adverse Effect. No default or event of
default under any other material agreement will occur as a result of the
transactions contemplated by this Agreement or by the Warrant.
(x) Financial Solvency. Borrower is not entering into the
------------------
arrangements contemplated by this Agreement and the other Loan Documents
with actual intent to hinder, delay or defraud either present or future
creditors. On and as of the date hereof on a pro forma basis after giving
effect to the transactions contemplated by the Loan Documents and to all
debts incurred or to be created in connection herewith:
(i) the present fair salable value of the assets of Borrower
(on a going concern basis) will exceed the probable liability of
Borrower on its debts (including its contingent obligations);
(ii) Borrower has not incurred, nor does it intend to or
believe that it will incur, debts (including contingent obligations)
beyond its ability to pay such debts as such debts mature (taking into
account the timing and amounts of cash to be received from any source,
and of amounts to be payable on or in respect of debts); and the
amount of cash available to Borrower after taking into account all
other anticipated uses of funds is anticipated to be sufficient to pay
all such amounts on or in respect of debts, when such amounts are
required to be paid; and
(iii) Borrower will have sufficient capital with which to
conduct its present and proposed business and the property of Borrower
does not constitute unreasonably small capital with which to conduct
its current business at present levels of operations.
9
<PAGE>
For purposes of this Section 2.1(y) "debt" means any liability on a
(i) right to payment whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such a right to an equitable remedy is reduced to
judgment, fixed, contingent, unmatured, disputed, undisputed, secured, or
unsecured.
(y) Offering of Note and Warrant. Neither Borrower nor anyone acting
----------------------------
on its behalf has offered the Note, the Warrant or any similar securities
for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof, with, any person
other than Lender and not more than 35 other institutional investors.
Neither Borrower nor anyone acting on its behalf has taken, or will take,
any action which would subject the issuance or sale of the Note and Warrant
to Section 5 of the Securities Act of 1933, as amended, or the registration
or qualification provisions of the blue sky laws of any state.
(z) Registration Rights. Except as described in the Warrant,
-------------------
Borrower is not under any obligation to register under the Securities Act
of 1933, as amended, or the Trust Indenture Act of 1939, as amended, any of
its presently outstanding securities or any of its securities that may
subsequently be issued.
(aa) Employees. Borrower has no current labor problems or disputes
---------
which have resulted, or Borrower reasonably believes could reasonably be
expected to result in, Material Adverse Effect.
(ab) Issuance Taxes. All taxes imposed on Borrower in connection with
--------------
the issuance, sale and delivery of the Note, the Warrant and the capital
stock issuable upon exercise of the Warrant have been or will be fully
paid, and all laws imposing such taxes have been or will be fully satisfied
by Borrower.
(ac) List of Deposit Institutions. Schedule 2.1(ac) hereto sets forth
---------------------------- ----------------
a true and complete list of all deposit institutions at which Borrower has
or maintains an account or deposits of any kind.
(ad) Locations and Names. Except as set forth on Schedule 2.1(ad)(A)
-------------------
Borrower has not, during the five years preceding the date of this
Agreement, been known as or used any other corporate, trade or fictitious
name, nor acquired all or substantially all of the assets, capital stock or
operating units of any person. Borrower has not, during the five years
preceding the date of this Agreement, had a business location at any
address other than addresses set forth on Schedule 2.1(ad)(B).
10
<PAGE>
ARTICLE 3
COVENANTS AND AGREEMENTS
------------------------
Borrower covenants and agrees that during the term of this Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced
----------------------
by the Note according to the terms thereof, and shall timely pay or perform, as
the case may be, all of the other obligations of Borrower to Lender, direct or
contingent, however evidenced or denominated, and however and whenever incurred,
including but not limited to indebtedness incurred pursuant to any present or
future commitment of Lender to Borrower, together with interest thereon, and any
extensions, modifications, consolidations and/or renewals thereof and any notes
given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lender
--------------------------------
(i) as soon as practicable and in any event within ninety (90) days after the
end of each fiscal year of Borrower, a consolidated balance sheet of Borrower as
of the close of such fiscal year, a consolidated statement of earnings and
retained earnings of Borrower as of the close of such fiscal year and a
consolidated statement of cash flows for Borrower for such fiscal year, prepared
in accordance with generally accepted accounting principles consistently applied
("GAAP"), audited by an independent certified public accountant acceptable to
Lender and certified by an officer of Borrower and accompanied by a certificate
of the President of Borrower, stating that to the best of the knowledge of such
officer, Borrower has kept, observed, performed and fulfilled each covenant,
term and condition of this Agreement and the other Loan Documents during the
preceding fiscal year and that no Event of Default, as herein defined, has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Borrower has taken or proposes to take in connection therewith), (ii)
within fifteen business (15) days of the end of each calendar month, a
consolidated balance sheet of Borrower as of the close of such month and a
consolidated statement of earnings and retained earnings of Borrower as of the
close of such month, all in reasonable detail (including financial information
for the preceding six (6) months), and prepared substantially in accordance with
GAAP (except for the absence of footnotes and subject to year-end adjustments),
and (iii) with reasonable promptness, such other financial data as Lender may
reasonably request.
3.3 Maintenance of Books and Records; Inspection. Borrower shall
--------------------------------------------
maintain its books, accounts and records in accordance with GAAP, and after
reasonable notice from Lender, shall permit Lender, its officers, employees and
any professionals designated by Lender in writing, at Borrower's expense, to
visit, inspect and/or audit any of its properties, books and financial records,
and to discuss its accounts, affairs and finances with Borrower or the principal
officers of Borrower during reasonable business hours, all at such times as
Lender may reasonably request; provided that such visit, inspection and/or audit
shall not (i) occur more frequently than annually unless an Event of Default
shall have occurred and be continuing and (ii) no such visit, inspection and/or
audit shall materially interfere with the
11
<PAGE>
conduct of Borrower's business. Borrower shall reimburse Lender for all
reasonable fees and costs incurred in connection with such visits, audits or
inspections.
3.4 Insurance. Without limiting any of the requirements of any of the
---------
other Loan Documents, Borrower shall maintain in amounts customary for entities
engaged in comparable business activity (i) to the extent required by applicable
law, worker's compensation insurance (or maintain a legally sufficient amount of
self insurance against worker's compensation liabilities, with adequate
reserves, under a plan approved by Lender, such approval not to be unreasonably
withheld or delayed) and (ii) fire and "all risk" casualty insurance on its
properties against such hazards and in at least such amounts as are customary in
Borrower's business. Borrower will make reasonable efforts to obtain and
maintain public liability insurance in an amount, and at a cost, deemed
reasonable to the Borrower's Board of Directors. At the request of Lender,
Borrower will deliver forthwith a certificate specifying the details of such
insurance in effect.
3.5 Taxes and Assessments. Borrower shall (i) file all tax returns and
---------------------
appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Borrower upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Borrower in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained
with respect thereto.
3.6 Corporate Existence. Borrower shall maintain its corporate existence
-------------------
and good standing in the state of its incorporation, and its qualification and
good standing as a foreign corporation in each jurisdiction in which such
qualification is necessary pursuant to applicable law.
3.7 Compliance with Law and Other Agreements. Except where the failure to
----------------------------------------
do so would not have a Material Adverse Effect, Borrower shall maintain its
business, operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
and ordinances governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which Borrower is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing, Borrower shall pay all of
its indebtedness promptly in accordance with the terms thereof, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
3.8 Notice of Default. Borrower shall give written notice to Lender of
-----------------
the occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon the occurrence thereof.
12
<PAGE>
3.9 Notice of Litigation. Borrower shall give notice, in writing, to
--------------------
Lender of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower, or affecting any of the assets of Borrower, wherein
the amount at issue is in excess of Twenty-Five Thousand and No/100ths Dollars
($25,000.00), and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower on the one hand and any governmental
regulatory body on the other hand, which dispute, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
3.10 Conduct of Business. Borrower will continue to engage in a business
-------------------
of the same general type and manner as conducted by it on the date of this
Agreement. Without Lender's prior written consent, Borrower shall not modify or
change any terms or conditions of any contracts and/or agreements to which
Borrower is a party on the date hereof which modification or change could
reasonably be expected to have a Material Adverse Effect.
3.11 ERISA Plan. If Borrower has in effect, or hereafter institutes, a
----------
pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. (S) 1001 et seq. (1975), as amended from time to time
------
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (i) Borrower
hereby warrants that no fact that could reasonably be expected to constitute
grounds for the involuntary termination of the Plan, or for the appointment by
the appropriate United States District Court of a trustee to administer the
Plan, exists at the time of execution of this Agreement, (ii) Borrower hereby
covenants that throughout the existence of the Plan, Borrower's contributions
under the Plan will meet the minimum funding standards required by ERISA and
Borrower will not institute a distress termination of the Plan, and (iii)
Borrower covenants that it will send to Lender a copy of any notice of a
reportable event (as defined in ERISA) required by ERISA to be filed with the
Labor Department or the Pension Benefit Guaranty Corporation, at the time that
such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Borrower shall not
--------------------------------------------
declare or pay any dividend of any kind (other than stock dividends payable to
all holders of any class of capital stock), in cash or in property, on any class
of the capital stock of Borrower, or purchase, redeem, retire or otherwise
acquire for value any shares of such stock, nor make any distribution of any
kind in cash or property in respect thereof, nor make any return of capital of
shareholders, nor make any payments in cash or property in respect of any stock
options, stock bonus or similar plan (except as required or permitted
hereunder), nor grant any preemptive rights with respect to the capital stock of
Borrower, without the prior written consent of Lender, except for (i) cash
dividends or distributions made to Borrower's shareholders in amounts not to
exceed federal and state tax liability owned by each such shareholder on account
of the net income of Borrower as long as the Borrower is and remains and
"electing small business corporation" for purposes of Subchapter S of the
Internal Revenue Code of 1986, as amended, (ii) scheduled payments to Mr.
Lawrence D. Parker pursuant to that certain Stock Repurchase Agreement dated as
of October 31, 1994, (iii) the exercise of Borrower's right to repurchase shares
held by Mr. Thomas Barrella at
13
<PAGE>
a price not to exceed $1.88/per share; (iv) the exercise of the Borrower's
rights of first refusal and repurchase pursuant to the Borrower's rights of
first refusal and repurchase pursuant to the Borrower's 1995 Incentive Stock
Option Plan (up to but not exceeding $100,000 per year); provided that no
payments shall be made pursuant to the foregoing if at the time such payment is
to be made an Event of Default exists or existed within the previous six (6)
months.
3.13 Guaranties; Loans; Payment of Debt. Without Lender's prior express
----------------------------------
written consent, Borrower shall not guarantee nor be liable in any manner,
whether directly or indirectly, or become contingently liable after the date of
this Agreement in connection with the obligations or indebtedness of any person
or entity whatsoever, except for (i) the endorsement of negotiable instruments
payable to Borrower for deposit or collection in the ordinary course of
business, and (ii) guaranties of obligations of Subsidiaries incurred in the
ordinary course of business (other than guaranties with respect to money
borrower). Without Lender's prior express written consent, Borrower shall not
(i) make any loan, advance or extension of credit to any person other than in
the normal course of its business, or (ii) make any payment on any debt for
money borrowed (other than (A) regularly scheduled payments, without
acceleration, made in the ordinary course of business and (B) regularly
scheduled payments with respect to that certain Promissory Note issued by the
Borrower to Mr. Lawrence D. Parker).
3.14 Debt. Without the express prior written consent of Lender, Borrower
----
shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, (excluding (i) the indebtedness evidenced by the Note,
(ii) the endorsement of negotiable instruments payable to Borrower for deposit
or collection in the ordinary course of business, (iii) indebtedness incurred in
the ordinary course of business (each of which, individually, does not exceed
$25,000), (iv) the indebtedness listed on Schedule 2.1(l) hereto, (v) purchase
money indebtedness incurred after the date hereof in an aggregate principal
amount at any time not exceeding $150,000, and (vi) additional indebtedness of
Borrower up to but not exceeding $150,000 at any time outstanding).
3.15 No Liens. Borrower shall not create, incur, assume or suffer to exist
--------
any lien, security interest, security title, mortgage, deed of trust or other
encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Lender;
(b) liens for taxes or assessments or other governmental charges or
levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in favor of the
Lessor of such equipment;
(d) liens described on Schedule 2.1(l) hereto;
14
<PAGE>
(e) carriers, warehousemen's, mechanic's materialmen's, repairmen's
or other like liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith;
(f) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(g) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business;
(h) easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on use
of property or minor imperfection in title thereto;
(i) additional liens upon real and/or personal property acquired
after the date hereof (by purchase, construction or otherwise), each of
which liens (a) existed on such property prior to the time of its
acquisition or (b) was created solely for the purposes of securing
indebtedness representing, or incurred to finance, refinance or refund, the
cost of such property;
(j) additional liens upon real and/or personal property created after
the date hereof, provided that the aggregate indebtedness secured thereby
and incurred on or after the date hereof shall not exceed $150,000 in the
aggregate at any time outstanding; and
(k) any, extension, renewal or replacement of the foregoing, provided
that the liens permitted hereunder shall not be permitted to spread to
cover any additional indebtedness or property (other than the substitution
of like property).
3.16 Mergers, Consolidations, Acquisitions and Sales. Except as set forth
-----------------------------------------------
on Schedule 3.16 hereto, without the prior written consent of Lender, Borrower
-------------
shall not (a) be a party to any merger, consolidation or corporate
reorganization, nor (b) purchase or otherwise acquire all or substantially all
of the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, nor (c) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (d) create
any Subsidiaries nor convey any of its assets to any Subsidiary.
3.17 Transactions With Affiliates. Except as set forth on Schedule 3.17
---------------------------- -------------
hereto, Borrower shall not enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than Borrower would obtain in a comparable
arm's length transaction with a person not an affiliate; provided that any
affiliate who is an
15
<PAGE>
individual may serve as a director, officer or employee of Borrower or any of
its Subsidiaries and receive reasonable compensation for his or her service in
such capacity. For the purposes of this Section 3.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Borrower.
3.18 Environment. Borrower shall be and remain in compliance in all
-----------
material respects with the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all rules and
regulations issued thereunder; notify Lender promptly of any notice of a
hazardous discharge or environmental complaint received from any governmental
agency or any other party; notify Lender promptly of any hazardous discharge
from or affecting Borrower's premises; proceed with due diligence to contain and
remove the same, in compliance with all applicable laws; promptly pay any fine
or penalty assessed in connection therewith; permit Lender to inspect the
premises, to conduct tests thereon, and to inspect all books, correspondence,
and records pertaining thereto; and at Lender's request, and at Borrower's
expense, provide a report of a qualified environmental engineer, satisfactory in
scope, form, and content to Lender, and such other and further assurances
reasonably satisfactory to Lender that the condition has been corrected.
ARTICLE 4
CONDITIONS TO CLOSING
---------------------
4.1 Closing of the Loan. The obligation of Lender to fund the Loan on the
-------------------
date hereof (the "Closing Date") is subject to the fulfillment, on or prior to
the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lender shall have received an opinion of the Borrower's counsel,
Smith, Gambrell & Russell, dated the Closing Date, in form and substance
satisfactory to Lender's counsel, Chambliss & Bahner, PLLC.
(c) Borrower shall have delivered to Lender the Note executed by
Borrower.
(d) Borrower shall have delivered to Lender a Stock Purchase Warrant
executed by Borrower, in a form acceptable to Lender.
(e) Borrower shall have delivered to Lender a Security Agreement
executed by Borrower (in form acceptable to Lender) and related UCC-1
Financing Statement(s) (in form acceptable to Lender) executed by Borrower.
(f) Borrower shall have delivered to Lender Pledge and Security
Agreements (all in a form acceptable to Lender) and related stock proxies,
stock powers, and stock certificates (all in form acceptable to Lender),
executed by each shareholder of
16
<PAGE>
Borrower, respectively, and related stock pledge letters (all in form
acceptable to Lender) executed by Borrower.
(g) Borrower shall have delivered to Lender a Pledge and Security
Agreement (in a form acceptable to Lender) and related stock proxy, stock
power, and stock certificate (all in form acceptable to Lender), executed
by Borrower, and related stock pledge letter (in a form acceptable to
Lender) executed by Borrower's subsidiary.
(h) Borrower shall have delivered to Lender the Small Business
Administration Forms 480, 652 and 1031 (Parts A and B) completed by
Borrower.
(i) Borrower shall have delivered to Lender a Small Business
Administration Economic Impact Assessment completed by Borrower, in a form
acceptable to Lender.
(j) Borrower shall have delivered to Lender a Landlord's Consent and
Subordination of Lien, executed by Borrower's landlord, in a form
acceptable to Lender.
(k) Lender shall have received copies of the articles of
incorporation and other publicly filed organizational documents of
Borrower, certified by the Secretary of State or other appropriate public
official in the jurisdiction in which Borrower is incorporated.
(l) Lender shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by Borrower, including
resolutions of its Board of Directors, authorizing the execution, delivery
and performance of the Loan Documents.
(m) Lender shall have received a certificate as to the legal
existence and good standing of Borrower, issued by the Secretary of State
or other appropriate public official in the jurisdiction in which Borrower
is incorporated.
(n) Lender shall have received certificates of the Secretaries of
State or other appropriate public officials as to Borrower's qualification
to do business and good standing in each jurisdiction in which a failure to
be so qualified would have a material adverse effect on its financial
positions or its ability to conduct its business in the manner now
conducted and as hereafter intended to be conducted.
(o) Borrower shall have delivered to Lender a Collateral Assignment
of Membership Interest executed by Borrower (in form acceptable to Lender)
and related UCC-1 Financing Statement(s) (in form acceptable to Lender)
executed by Borrower with respect to Borrower's membership interest in
Prysm Tech, L.L.C.
(p) Borrower shall have delivered to Lender a Trademark and Patent
Security Agreement executed by Borrower (in form acceptable to Lender) and
related UCC-1 Financing Statement(s) (in form acceptable to Lender)
executed by Borrower.
17
<PAGE>
(q) Borrower shall have delivered to Lender a Collateral Assignment
of Note executed by Borrower, in a form acceptable to Lender, together with
all original promissory notes held by Borrower.
(r) Borrower shall have delivered to Lender a Copyright and Royalty
Security Agreement executed by Borrower (in form acceptable to Lender).
ARTICLE 5
DEFAULT AND REMEDIES
--------------------
5.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance with the
terms of the Note, which default is not cured within five (5) days;
(b) Any misrepresentation by Borrower, any guarantor of Borrower, or
any shareholder of Borrower as to any material matter hereunder or under
any of the other Loan Documents, or delivery by Borrower of any schedule,
statement, resolution, report, certificate, notice or writing to Lender
that is untrue in any material respect on the date as of which the facts
set forth therein are stated or certified;
(c) Failure of Borrower, any guarantor of Borrower, or any
shareholder of Borrower to perform any of its material obligations,
covenants or agreements under this Agreement, the Note or any of the other
Loan Documents;
(d) Borrower (i) shall generally not pay or shall be unable to pay
its debts as such debts become due; or (ii) shall make an assignment for
the benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
by any act or intentional and purposeful omission, its consent to, approval
of or acquiescence in any such petition, application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a
period of sixty (60) days or more;
(e) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the charter thereof shall expire or be revoked;
18
<PAGE>
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Borrower shall default in the timely payment or performance of
any obligation now or hereafter owed to Lender in connection with any other
indebtedness of Borrower now or hereafter owed to Lender;
(h) Borrower shall have defaulted and continue to be in default in
the timely payment or performance of any other indebtedness or obligation,
which in the aggregate exceeds Seventy-Thousand and No/100ths Dollars
($75,000.00) or materially adversely affects Borrower's financial
condition;
(i) Neither Erez Goren nor Alon Goren shall be significantly involved
in the management and/or daily operations of Borrower.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (fifteen (15) days, if such Curable Default may be cured
by payment of a sum of money) of notice thereof to Borrower given in accordance
with the provisions hereof; provided, however, that this provision shall not
require notice to Borrower and an opportunity to cure any Curable Default of
which Borrower has had actual knowledge for the requisite number of days set
forth.
5.2 Acceleration of Maturity; Remedies. Upon the occurrence of any Event
----------------------------------
of Default described in subsection 5.1(d), the indebtedness evidenced by the
Note as well as any and all other indebtedness of Borrower to Lender shall be
immediately due and payable in full; and upon the occurrence of any other Event
of Default described above, Lender at any time thereafter may at its option
accelerate the maturity of the indebtedness evidenced by the Note as well as any
and all other indebtedness of Borrower to Lender; all without notice of any
kind. Upon the occurrence of any such Event of Default and the acceleration of
the maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note
and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
------------------------------
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power
19
<PAGE>
and remedy given hereunder, under any of the other Loan Documents or now or
hereafter existing at law, in equity or by statute. No delay or omission by
Lender to exercise any right, power or remedy accruing upon the occurrence of
any Event of Default shall exhaust or impair any such right, power or remedy or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein, and every right, power and remedy given by this Agreement
and the other Loan Documents to Lender may be exercised from time to time and as
often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the exercise
--------------------
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without limitation,
reasonable attorney's fees incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
Third, to the payment of the obligations of Borrower under the Loan
Documents (the "Obligations"), including but not limited to the payment of
the principal of and interest on the indebtedness evidenced by the Note, in
such order of priority as Lender shall determine in its sole discretion;
and
Fourth, the remainder, if any, to Borrower.
ARTICLE 6
TERMINATION
-----------
6.1 Termination of this Agreement. This Agreement shall remain in full
-----------------------------
force and effect until the later of (i) the Maturity Date (as defined in the
Note), or (ii) the payment by Borrower of all amounts owed to Lender, at which
time Lender shall cancel the Note and deliver it to Borrower; provided, however,
that if at any time Borrower has satisfied all obligations to Lender, Borrower
may terminate this Agreement by providing written notice to Lender.
ARTICLE 7
MISCELLANEOUS
-------------
7.1 Performance By Lender. If Borrower shall default in the payment,
---------------------
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith
20
<PAGE>
(including but not limited to reasonable attorney's fees), with interest thereon
at the highest default rate provided in the Note (if none, then at the maximum
rate from time to time allowed by applicable law), shall be immediately repaid
to Lender by Borrower and shall constitute a part of the Obligations. Lender
shall be the sole judge of the necessity for any such actions and of the amounts
to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this
------------------------------------------
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives, successors-in-
title and assigns, whether so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
------------------
expenses incurred by Lender in connection with the making of the Loan, including
but not limited to filing fees, recording taxes, indebtedness taxes, and
reasonable attorneys' fees, promptly upon demand of Lender. Borrower further
agrees to pay all premiums for insurance required to be maintained by Borrower
pursuant to the terms of the Loan Documents and all of the out-of-pocket costs
and expenses incurred by Lender in connection with the collection of the Loan,
amendment to the Loan Documents, or prepayment of the Loan, including but not
limited to reasonable attorneys' fees, promptly upon demand of Lender.
7.4 Assignment. The Note, this Agreement and the other Loan Documents may
----------
be endorsed, assigned and/or transferred in whole or in part by Lender, and any
such holder and/or assignee of the same shall succeed to and be possessed of the
rights and powers of Lender under all of the same to the extent transferred and
assigned. Lender may grant participations in all or any portion of its interest
in the indebtedness evidenced by the Note, and in such event Borrower shall
continue to make payments due under the Loan Documents to Lender and Lender
shall have the sole responsibility of allocating and forwarding such payments in
the appropriate manner and amounts. Borrower shall not assign any of its rights
nor delegate any of its duties hereunder or under any of the other Loan
Documents without the prior express written consent of Lender.
7.5 Time of the Essence. Time is of the essence with respect to each and
-------------------
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the
------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
--------------------------------------------------------------
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the
21
<PAGE>
Loan, acceleration of the maturity of the unpaid balance of the Loan or
otherwise, shall the interest and loan charges agreed to be paid to Lender for
the use of the money advanced or to be advanced hereunder exceed the maximum
amounts collectible under applicable laws in effect from time to time. It is
understood and agreed by the parties that, if for any reason whatsoever the
interest or loan charges paid or contracted to be paid by Borrower in respect of
the indebtedness evidenced by the Note shall exceed the maximum amounts
collectible under applicable laws in effect from time to time, then ipso facto,
----------
the obligation to pay such interest and/or loan charges shall be reduced to the
maximum amounts collectible under applicable laws in effect from time to time,
and any amounts collected by Lender that exceed such maximum amounts shall be
applied to the reduction of the principal balance of the indebtedness evidenced
by the Note and/or refunded to Borrower so that at no time shall the interest or
loan charges paid or payable in respect of the indebtedness evidenced by the
Note exceed the maximum amounts permitted from time to time by applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered and titled
-------------------------------------------
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
7.9 Notices. Any and all notices, elections or demands permitted or
-------
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, or sent by certified mail or overnight via
nationally recognized courier service (such as Federal Express), to the other
party at the address set forth below, or at such other address as may be
supplied in writing and of which receipt has been acknowledged in writing. The
date of personal delivery, telecopy or telex or two (2) business days after the
date of mailing (or the next business day after delivery to such courier
service), as the case may be, shall be the date of such notice, election or
demand. For the purposes of this Agreement:
The Address of Lender is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Kathy Harris
Telecopy: 615/726-1208
with a copy to: Chambliss & Bahner, PLLC
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy, Esq.
Telecopy: 423/265-9574
22
<PAGE>
The Address of Borrower is: Softsense Computer Products, Inc.
1000 Alderman Drive
Suite A
Alpharetta, GA 30202
Attention: John Heyman
Telecopy: 770/772-3057
with a copy to: Smith, Gambrell & Russell
Promenade II, Suite 3100
1230 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: John R. Schneider, Esq.
Telecopy: 404/815-3509
7.10 Entire Agreement. This Agreement and the other written agreements
----------------
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
----------------------------
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State except to
the extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
7.12 Survival of Representations and Warranties. All covenants,
------------------------------------------
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
7.13 Jurisdiction and Venue. Borrower hereby consents to the non-exclusive
----------------------
jurisdiction of the United States District Court for the Middle District of
Tennessee, as well as to the jurisdiction of all courts from which an appeal may
be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this Agreement or
any other Loan Documents or with respect to the transactions contemplated
hereby, and expressly waives any and all objections it may have as to venue in
any of such courts.
23
<PAGE>
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
-----------------------
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
-------------------------------
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
------
SIRROM CAPITAL CORPORATION, a Tennessee
corporation
By: /s/ Kathy Harris
-----------------------------------------
Title: Vice President
--------------------------------------
BORROWER:
--------
SOFTSENSE COMPUTER PRODUCTS, INC., a Georgia
corporation
By: /s/ John Heyman
-----------------------------------------
Title: VP/CFO
--------------------------------------
24
<PAGE>
EXHIBIT 10.4.1
FIRST AMENDMENT TO
LOAN AGREEMENT AND LOAN DOCUMENTS
---------------------------------
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND LOAN DOCUMENTS ("Amendment")
dated as of the 25th day of September, 1996, is made and entered into on the
terms and conditions hereinafter set forth, by and between SOFTSENSE COMPUTER
PRODUCTS, INC., a Georgia corporation ("Borrower"), and SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Lender").
W I T N E S S E T H:
-------------------
WHEREAS, Lender made a term loan to Borrower in the original principal
amount of Three Million and No/100ths Dollars ($3,000,000.00) (the "Loan") on
the terms and conditions set forth in that certain Loan Agreement dated as of
June 28, 1996, by and between Lender and Borrower (as now or hereafter amended,
the "Loan Agreement"); capitalized terms used herein but not otherwise defined
shall have the meanings ascribed thereto in the Loan Agreement; and
WHEREAS, the Loan is further evidenced and secured by certain agreements,
documents and instruments as more particularly described in the Loan Agreement
and defined therein as the "Loan Documents"; and
WHEREAS, Borrower desires to borrow from Lender and Lender desires to lend
to Borrower One Million Five Hundred Thousand and No/100ths Dollars
($1,500,000.00) (the "Additional Loan"), all on the terms and conditions set
forth in the Loan Agreement, secured and evidenced by among other things (a) a
security interest in certain personal property granted pursuant to that certain
Security Agreement dated as of June 28, 1996, by and between Lender and Borrower
(the "Security Agreement"); and (b) a security interest in certain intellectual
property granted pursuant to that certain Trademark and Patent Security
Agreement dated as of June 28, 1996, by and between Lender and Borrower.
WHEREAS, this Amendment shall amend the Loan Documents.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. The second sentence of Section 1.1 of the Loan Agreement is hereby
amended to read in its entirety as follows:
The Loan shall be evidenced by (i) a promissory note (the "First Note") in
the original principal amount of $3,000,000, substantially in the form of
Exhibit A attached hereto and incorporated herein by this reference, dated
June 28, 1996,
<PAGE>
executed by Borrower in favor of Lender, and (ii) a promissory note (the
"Second Note") in the original principal amount of $1,500,000,
substantially in the form of Exhibit A attached to the Amendment and
incorporated herein by this reference, of even date with the Amendment,
executed by Borrower in favor of Lender (the First Note and the Second Note
shall be referred to herein collectively as the "Note").
2. The obligations of Borrower in connection with and/or relating to the
Additional Loan are further evidenced and/or secured by the Loan Documents.
3. Upon satisfaction of the conditions set forth in Section 9 hereof,
Lender shall immediately disburse the proceeds of the Additional Loan to
Borrower by wire transfer upon instructions therefor given to Lender.
4. Borrower hereby represents and warrants to Lender that all of the
representations made in Section 2.1 of the Loan Agreement are (i) now applicable
to Borrower and (ii) true and correct as of the date hereof, except as modified
or supplemented by Schedule A attached hereto and incorporated herein by this
----------
reference.
5. The covenants and agreements in Article III of the Loan Agreement
shall remain in full force and effect.
6. Borrower hereby represents and warrants to Lender that all
representations regarding Borrower's location(s) set forth in Section 3(f) of
the Security Agreement are true and correct as of the date hereof.
7. Borrower shall pay to Lender a processing fee of $15,000 in connection
with the Additional Loan.
8. Borrower shall use the proceeds of the Additional Loan for working
capital.
9. The obligation of Lender to fund the Additional Loan on the date
hereof is subject to Borrower's satisfaction of each of the following:
(a) delivery to Lender of a Secured Promissory Note executed by Borrower,
substantially in the form of Exhibit A attached hereto;
(b) delivery to Lender of a Stock Purchase Warrant executed by Borrower,
substantially in the form of Exhibit B attached hereto, together with a warrant
valuation letter in form and substance acceptable to Lender;
(c) delivery to Lender of an opinion of Smith, Gambrell & Russell, as
Borrower's counsel, of even date herewith, in form and substance acceptable to
Lender's counsel, Chambliss & Bahner; and
2
<PAGE>
(d) delivery to Lender of resolutions of Borrower, Board of Directors
authorizing the Additional Loan, the issuance of the stock purchase warrant in
connection therewith and the reservation of the shares to be issued in
connection with such warrant.
10. The terms "Loan Document" and "Loan Documents" as defined in the Loan
Agreement are amended to include this Amendment and any and all other documents
relating to the Loan or the Additional Loan (i) by and between Borrower or any
other person or entity and Lender or (ii) executed by Borrower or any other
person or entity in favor of Lender.
11. Except as modified and amended hereby, the Loan Documents shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or
have caused this Amendment to be executed by their duly authorized officers, as
of the day and year first above written.
BORROWER: LENDER:
- ------ ------
SOFTSENSE COMPUTER SIRROM CAPITAL CORPORATION,
PRODUCTS, INC., a Tennessee corporation
a Georgia corporation
By: /s/ John Heyman By: /s/ Kathy Harris
------------------------------ ----------------------------
Title: VP/CFO Title: Vice President
------------------------- -------------------------
3
<PAGE>
EXHIBIT 10.5
------------
PROMISSORY NOTE
FOR VALUE RECEIVED, Softsense Computer Products, Inc. ("Softsense"), a
Georgia corporation, with offices at 1000 Alderman Drive, Suite A, Alpharetta,
Georgia 30202, does hereby promise to pay to Emro Marketing Company ("Emro"), a
Delaware corporation, with offices at 500 Speedway Drive, Enon, Ohio 45323, the
sum of Eight Hundred Seventy-Two Thousand Five Hundred One Dollars and No Cents,
($872,501.00) with interest accruing on any unpaid principal amount, from
February 16, 1996 until the principal amount is paid in full, at a rate of 6%
per annum.
The principal amount of this Note shall be paid in five (5) equal
installments of One Hundred Seventy Four Thousand Five Hundred Dollars and
Twenty Cents ($174,500.20), each due on the five (5) succeeding anniversary
dates of the date of execution of this Note. Accrued and unpaid interest shall
be due and paid no less frequently than at such time as installments of
principal are due. Prepayments of principal and/or interest may be made without
penalty; provided, however, that no prepayment shall reduce the principal
installment amount (except to the extent that all principal shall have been
paid) or interest due on any due date for such payments. Any payment hereunder
received by Emro Marketing Company or any subsequent holder of this Note shall
first be applied to any accrued and unpaid interest and then to any outstanding
principal balance. Unless Softsense is advised otherwise by written notice sent
to Softsense at its address as first written above, by certified mail, return
receipt requested, postage prepaid, payments shall be made by Wire Transfer to
Emro's account at National City Bank, Cleveland, Ohio, Account No. 2856689 (Emro
Marketing Collections), ABA Routing Number 041000124.
In the event of non-payment or incomplete payment of any installment of
principal or interest when due, Emro shall advise Softsense of such by written
notice sent to Softsense at its address first written above, by certified mail,
return receipt requested, postage prepaid. Such notice shall be deemed delivered
to Softsense upon the earlier of receipt by Softsense or five (5) days after
mailing by Emro. If payment of all amounts then due are not made within five (5)
days of delivery of such notice, Softsense shall be deemed to be in default of
its obligations under this Note. In such event Emro, at its option and without
further notice to Softsense, shall be entitled to declare all amounts of unpaid
principal and interest owed under this Note immediately due and payable and
shall be entitled to proceed with legal action to collect such amounts plus its
reasonable attorney's fees and costs of collection.
This Note is given pursuant to the provisions of Section 8 of Addendum No.
1 to the Softsense Computer Products, Inc. Compu-Touch Software License Support
and Equipment Purchase Agreement dated May 27, 1994, between Softsense and Emro
and the provisions of a certain Letter of Understanding dated February 16, 1996,
signed by the parties and represents a rebate due to Emro from Softsense for the
purchase of Nine Hundred and Forty Five (945) Software sets by Emro on and after
May 27, 1994.
This Note shall be governed by and construed in accordance with the laws of
the State of Georgia.
IN WITNESS WHEREOF, Softsense Computer Products, Inc., by and through its
duly authorized representative, with full corporate authority to do so, does
cause this Note to be executed at Alpharetta, Georgia this 27th day of March,
1996.
SOFTSENSE COMPUTER PRODUCTS, INC.
Attest: /s/ Alon Goren By: /s/ John Heyman
-------------------------- -------------------------------------
Its Secretary
Name: John Heyman
-----------------------------------
(seal) Title: Vice President and Chief Financial
----------------------------------
Officer
-------
<PAGE>
EXHIBIT 10.6
------------
PROMISSORY NOTE
$473,086 October 31, 1994
FOR VALUE RECEIVED, the undersigned (hereafter referred to as "Maker"),
promises to pay to the order of LAWRENCE D. PARKER (hereafter referred to as
"Payee"; Payee, and any subsequent holder(s) hereof, being hereafter referred to
as "Holder"), at the address of Maker at 1155 Hammond Drive, Suite E-5200,
Atlanta, Georgia 30328, or at such other place as Holder may designate to Maker
in writing from time to time, the principal sum of FOUR HUNDRED SEVENTY-THREE
THOUSAND EIGHTY-SIX AND NO/100 DOLLARS ($473,086), together with interest on so
much thereof as is from time to time outstanding and unpaid, at the rate
hereinafter set forth, in lawful money of the United States of America, such
principal and said interest to be paid in the following manner:
From and after the date hereof (until maturity, whether by acceleration or
otherwise) interest on the outstanding principal indebtedness evidenced
hereby shall accrue at the rate of eight percent (8%) per annum and shall
be computed on a simple interest basis.
During the period from November 1, 1994 to December 31, 1994 accrued
interest on this Note shall be due and payable on November 30, 1994 and on
December 31, 1994 ($3,154 per month). Thereafter, the outstanding principal
amount and accrued interest of this Note shall be due and payable in
thirty-six (36) equal installments of $14,824.80 per month on the last day
of each month during the period from January 1, 1995 through December 31,
1997.
This Note may not be prepaid in whole or in part.
This Note is the "Note" referred to in, and is entitled to the benefits of,
the Stock Repurchase Agreement and the Guaranty dated as of the date hereof by
and between the Payee and the Maker and its affiliates, the terms of which by
this reference are incorporated herein.
It is hereby expressly agreed that should any default be made in the
payment of any installment as stipulated above, then, and in such event, the
principal indebtedness evidenced hereby, together with all unpaid interest
accrued thereon, shall, at the option of Holder and without notice or demand to
Maker, at once become due and payable and may be collected forthwith, regardless
of the stipulated date of maturity. A default in the payment of any installment
shall not be deemed to have occurred until thirty (30) days after written notice
to the Maker by the Holder of his failure to receive any installment when due.
Interest shall accrue on the outstanding principal balance of this Note from the
date of any default hereunder and for so long as such default continues,
regardless of whether or not there has been an acceleration of the indebtedness
evidenced hereby as set forth herein, at the rate equal to eighteen percent
(18%) per annum. Time is of the essence of this Note.
Presentment for payment, demand, protest and notice of demand, dishonor,
protest and non-payment and all other notices are hereby waived. No failure to
accelerate the debt evidenced hereby by reason of default, acceptance of a past
due installment, or indulgences granted from time to time shall be construed (i)
as a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or of the right of Holder
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by the laws of the State of Georgia; and Maker hereby expressly
waives the benefit of any statute or rule of law or equity now provided, or
which may hereafter be provided, which would produce a result contrary to or in
<PAGE>
conflict with the foregoing. No extension of the time for the payment of this
Note or any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note, shall operate to release,
discharge, modify, change or affect the original liability of Maker under this
Note, either in whole or in part, unless Holder agrees otherwise in writing.
This Note may not be changed orally, but only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia.
If from any circumstances whatsoever, fulfillment of any provision of this
Note or of any other instrument evidencing or securing the indebtedness
evidenced hereby, at the time performance of such provision shall be due, shall
involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, so that in no event shall any
exaction be possible under this Note or under any other instrument evidencing or
securing the indebtedness evidenced hereby that is in excess of the current
limit of such validity, but such obligation shall be fulfilled to the limit of
such validity.
This Note shall not be transferred or otherwise disposed of by the Holder
without the prior written consent of the Maker.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, Maker has executed this Note under seal on the date
first above written.
"Maker"
SOFTSENSE COMPUTER PRODUCTS INC.
By: /s/ Erez Goren
--------------------------
Title: President
--------------------
-2-
<PAGE>
EXHIBIT 10.7
------------
CONSULTING AGREEMENT
This Consulting Agreement is made and entered into as of the 31st day of
October, 1994, by and between LP TECHNOLOGIES, INC., a Florida corporation
(hereinafter referred to as the "Consultant") and SOFTSENSE COMPUTER PRODUCTS
INC., a New York corporation (hereinafter referred to as the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of designing, developing,
manufacturing and marketing software application products for the convenience
store and fast food industries and for the quick-lube and oil change marketplace
(the "Business"); and
WHEREAS, the Company desires to engage the Consultant to provide certain
consulting services to the Company all as more fully set forth in this
Agreement; and
WHEREAS, Consultant has agreed to provide certain consultation services,
all upon the terms and conditions more fully set forth herein; and
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
1. Consultant Services. Subject to the terms and conditions of this
-------------------
Agreement, the Company hereby engages Consultant as an independent consultant,
and Consultant hereby accepts said engagement with the Company. During the term
hereof, the Consultant shall render to the Company such services (hereinafter
referred to as the "Services") of an advisory or consultative nature as the
Company may reasonably request, so that the Company may have the benefit of
Consultant's experience and knowledge of the affairs of the Company and of
Consultant's reputation and contacts in the Business, and Consultant will be
available for advice and counsel to the officers and directors of the Company.
The Services to be provided by Consultant to the Company hereunder shall include
the following:
(a) Select the best technology to exploit the growing fields of
virtual reality, multimedia and computer simulations.
(b) Create a platform consisting of "building blocks" which the
Company can use to create new products;
(c) Keep current on developing technologies and present its findings
to the Company's senior management at the Company's headquarters on a quarterly
basis (and reduce the content of the presentation to hard copy); and
<PAGE>
(d) Perform an audit of the Company's development program not less
than twice annually, in accordance with the following:
(i) Review backup procedures: Verify that the Company's
-------------------------
development program has been making sufficient backups and that these backups
are in a secure place. To ensure that this is being done, one or more backups
will be restored into a temporary directory to confirm that they have been made
properly and are in working order. This will also ensure that the restoration
process is functioning.
(ii) Review version control: Ensure version control is being used
----------------------
for all major development projects. To ensure that version control is being
used, one or more previously checked in versions will be restored to a temporary
directory and compiled to make sure that the code is synchronized, and that the
development environment needed to compile the code is readily available.
(iii) Review third party software: Review the number of third party
---------------------------
development software products in use, and ensure that the proper number of
licenses have been purchased, and that the products are being used in accordance
with the terms of the license agreements.
(iv) Development manager interviews: Interview development managers
------------------------------
to gain their perspective on the development function.
(v) Summary report: Compile and present a summary report to senior
---------------
management.
Consultant shall devote not less than 40 hours per audit of the Company's
development program.
(e) Consultant shall provide such services, and other duties for
which Consultant is qualified by knowledge or experience, as the Company may
from time to time request. Consultant's services and duties shall be performed
in a competent and professional manner but the Company shall not direct the
Consultant in the manner in which it performs its services or duties hereunder.
2. Compensation. For all the Services to be performed under this
------------
Agreement, the Company shall pay to the Consultant (i) the sum of One Hundred
and Fifty Thousand Dollars ($150,000) on or before November 30, 1994 and (ii)
the sum of Fourteen Thousand Dollars ($14,000) per month (the "Monthly Fee") on
the last day of each month during the five (5) year period beginning on January
31, 1995 and ending on December 31, 1999. Notwithstanding the foregoing, on
January 1, 1996 and on each January 1 thereafter during the term of this
Agreement, Consultant may, in its discretion, increase the Monthly Fee by an
amount not to exceed 5% per year.
-2-
<PAGE>
Consultant shall be solely responsible for payment of any and all expenses
incurred by Consultant in the performance of its services hereunder and
Consultant shall not be entitled to reimbursement from the Company for any such
expenses.
3. Policies. If Consultant performs Services at the Company's offices,
--------
Consultant shall observe business hours, holiday schedules and all policies and
security rules of the Company in connection with the performance of the Services
hereunder.
4. Rights and Product. Except as otherwise agreed to by the parties, all
------------------
information, reports, studies, object or source codes (including computer
program platforms which may be used to create various application software
products), flow charts, diagrams, ideas, inventions and improvements, and any
other tangible or intangible material of any nature whatsoever produced by or as
a result of any of the Services, and all copies or derivations of any of the
foregoing ("Work Product"), shall be jointly owned by the Company and
Consultant, it being the intention of the parties that all Work Product be
deemed jointly conceived and developed by the parties hereto, and the parties
shall jointly own all related patent, trademark, copyright or other tangible or
intangible rights whatsoever. Both during and after Consultant's engagement
under this Agreement, each party agrees to execute, at no additional
consideration, any documents, applications or other instruments reasonably
requested by the other party in order to make any patent, trademark or copyright
applications with respect to the Work Product, or otherwise to perfect, evidence
or defend the parties' ownership of such Work Product. The parties agree to
share the expenses related to the foregoing.
5. Warranty and Indemnification by Consultant. The Consultant represents
------------------------------------------
and warrants to the Company that none of the Services rendered or Work Product
provided to the Company will in any way violate or infringe upon any patent,
trademark, copyright or other rights of third parties or violate any laws.
Consultant shall indemnify the Company and hold it harmless against any claim or
action which alleges that the use of the Work Product in the manner suggested by
Consultant infringes any patent, trademark, copyright, or other proprietary
right of any third party or violates any law, and Consultant shall pay all costs
and damages of the Company (including reasonable attorneys' fees) provided that
the Company notifies Consultant promptly of any such claims. Notwithstanding
anything contained in this Paragraph 5 to the contrary, Consultant shall have no
liability or indemnification obligations hereunder with respect to any act or
omission done at the express direction of the Company, and the Company shall
indemnify Consultant and hold it harmless from and against any claim or action
which results from any act or omission of the Consultant which is taken at the
express direction of the Company.
6. Confidential Information. The Consultant acknowledges and agrees that
------------------------
all tangible and intangible information obtained or developed (i) in connection
with the prior employment with the Company of any affiliate of Consultant and
(ii) in connection with the performance and execution of this Agreement, is
deemed by the Company and shall be considered to be confidential and proprietary
information ("Confidential Information") containing valuable business
information
-3-
<PAGE>
and trade secrets of the Company relating to its business practices
and critical to its competitive position in the marketplace. Confidential
Information shall not include information which is or becomes information in the
public domain through no action on the part of Consultant. Confidential
Information may include, but is not limited to, technical information such as
formulas, patterns, devices, computer program source and object codes,
compositions, inventions, processes, specifications, research, methods and know-
how; business information such as financial statements, sales reports, cost-
price information, sales policies, employee lists, margins, expenses, profits,
sources of supply and distribution, lists of customers and active prospective
clients or suppliers and matters related to the Company's future development or
strategy. The Consultant shall not disclose, directly or indirectly, any
Confidential Information or use Confidential Information in any way except for
the purpose of rendering the Services under this Agreement. All lists,
printouts, reports, files, records, documents, computer program source and
object codes, drawings, blueprints, specifications, manuals, letters, notes,
notebooks, sketches, formulas, memoranda, codes, and similar items, whether in
tangible form or stored by electronic means, coming into Consultant's possession
during the term of this Agreement, shall remain the exclusive property of the
Company (and if prepared by Consultant, the joint property of the Company and
Consultant), and, upon termination of this Agreement, the Consultant agrees to
deliver all tangible materials containing Confidential Information (including
all copies thereof) which are in Consultant's possession or control and to
delete or destroy any Confidential Information maintained by Consultant on
electronic media (other than jointly owned materials, a copy of which may be
retained by Consultant). The Consultant agrees to ensure that any consultant,
employee, agent or subcontractor of a Consultant permitted access to any portion
of the Confidential Information in the course of his or her employment is
advised of the proprietary and confidential nature of the Confidential
Information and that any such person shall be required by a Consultant as a
condition of his or her assignment to the Company to sign a Confidentiality and
Nondisclosure Agreement agreeing personally to abide by the restrictions
contained herein. The Consultant agrees to notify the Company promptly and in
writing of any circumstances of which Consultant has knowledge relating to any
possession, use or knowledge of any portion of the Confidential Information by
any authorized person. Consultant's obligations hereunder shall survive the
expiration or termination of this Agreement for a period of three (3) years;
provided, however, that with respect to any item of Confidential Information
which rises to the level of a trade secret under applicable law, the
Consultant's obligations hereunder shall, to the fullest extent permitted by
applicable law, survive the expiration of said three (3) year period and forever
remain in full force and effect. The Company's rights under this Agreement are
in addition to those rights the Company has under the common laws or applicable
statutes for the protection of trade secrets. Nothing contained herein shall be
deemed to prohibit Consultant from making any disclosure required by law;
provided, however, that prior to making any such disclosure Consultant shall
provide the Company with reasonable notice in order that the Company may seek a
protective order should it so desire.
7. Remedies, Injunction. The Consultant acknowledges that any breach or
--------------------
threatened breach by Consultant of paragraph 6 above could cause the Company
irreparable harm which cannot be compensated by payment of damages.
Accordingly, in the event of any breach or
-4-
<PAGE>
threatened breach by Consultant of paragraph 6 of this Agreement, Consultant
agrees that the Company, in addition to any other rights, remedies or damages
available to the Company at law or in equity, should be entitled to injunctive
relief in order to prevent or restraint any such breach or threatened breach by
Consultant. Consultant further acknowledges and agrees that the covenants
contained in paragraph 6 of this Agreement are necessary for the protection of
the Company's legitimate business interests, are reasonable in scope and
content, and will not prevent the Consultant from earning a livelihood.
8. Indemnity and Insurance. The Consultant agrees to indemnify the
-----------------------
Company for any liability or expense incurred by the Company due to claims for
personal injury or property damage arising out of or in connection with
Consultant's performance of the Services, as well as from any claim for payment
of compensation, salary, taxes, or other benefits asserted by or with respect to
any employee of Consultant. Consultant agrees to maintain worker's compensation,
general liability and automobile liability insurance in an amount sufficient to
protect against all reasonably foreseeable risks in connection with the
performance of the Services.
9. Term and Termination. This Agreement shall commence on the date shown
--------------------
above and shall continue in full force and effect thereafter until December 31,
1999. The Company may immediately terminate this Agreement for cause at any
time. "Cause" as used herein shall be limited to non-compliance by Consultant
with the requirements of paragraph 1(d) of this Agreement.
The expiration, cancellation or termination of this Agreement, for whatever
reason, will not discharge or relieve either party from any obligation which
accrued prior to such expiration, cancellation or termination, will not relieve
any party that has breached this Agreement from liability for damages resulting
from such breach and will not destroy or diminish the binding force and effect
of any of the provisions of this Agreement that expressly, or by reasonable
implication, come into or continue in effect on or after cancellation or
termination hereof.
10. Independent Contractor. The parties each acknowledge that their
----------------------
relationship under this Agreement is that of independent contractors. Neither
party shall have authority to bind the other party to any contract or agreement
of any kind, and shall not hold itself out to any party as having such
authority. Consultant shall be solely responsible for and shall pay when due
all worker's compensation, payroll, income, social security and other taxes of
any kind whatsoever due with respect to the work performed by Consultant or any
subcontractor of Consultant.
11. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been given only if and when (i) personally
delivered, or (ii) three (3) business days after mailing, postage prepaid, by
certified mail, or (iii) when delivered (and receipted for) by an overnight
delivery service, or (iv) when first sent by telex, telecopier or other means of
instantaneous communication provided such communication is promptly confirmed by
personal delivery, mail or an overnight delivery service as provided above,
addressed in each case as follows:
-5-
<PAGE>
(a) If to the Consultant to:
LP Technologies, Inc.
101 South Old Coachman Road
Apartment 222
Clearwater, Florida 34625
Attention: Lawrence D. Parker, President
with a copy in like manner to:
Thomas E. Raines, Esq.
3941 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30092
(b) If to the Company to:
Softsense Computer Products Inc.
1155 Hammond Drive, Suite E-5200
Atlanta, Georgia 30328
Attention: President
with a copy in like manner to:
Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326
Attention: Richard G. Greenstein, Esq.
The Consultant, on the one hand, and the Company, on the other hand, may change
the address(es) for the giving of notices and communications to them or to it,
as the case may be, and/or copies thereof, by written notice to the other
parties in conformity with the foregoing.
12. Miscellaneous.
-------------
(a) This Agreement shall not be amended or modified except by a writing
executed by both parties.
(b) A waiver of any default by either party of any of the terms and
conditions of this Agreement shall not be deemed to be a continuing waiver or a
waiver of any other provisions of this Agreement, but shall apply solely to the
instances to which such waiver is granted.
(c) This Agreement shall be binding upon and inure to the benefit of the
Company and Consultant and their respective successors and assigns.
-6-
<PAGE>
(d) This Agreement shall be governed by the laws of the State of Georgia
without regard to its rules governing conflicts of law.
(e) This Agreement represents the entire understanding of the parties
concerning the subject matter hereof and supersedes all prior or contemporary
communications, agreements and understandings, whether oral or written, relating
to the subject matter hereof.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. The
parties shall use their reasonable efforts to substitute the illegal, invalid,
or unenforceable provision by a legal, valid or enforceable one approximating as
closely as possible the original intent of the parties.
(g) No liability shall result to either party from delay in performance or
from nonperformance caused by circumstances beyond the reasonable control of the
party affected, including but not limited to, acts of God, fire, flood,
explosion, war, action or request of governmental authority, accident, labor
trouble or shortage, inability to obtain material, power, equipment or
transportation, or any other circumstances of a similar or different nature
beyond the reasonable control of the party so failing; provided, however, that
the party suffering the force majeure shall diligently attempt to remove such
cause or causes and shall promptly notify the other party of its extent and
probable duration; and further provided that events of force majeure shall not
affect or delay the Company's obligation to pay, when due, any sum owing under
this Agreement.
(h) Should any provision of this Agreement require judicial or arbitral
interpretation, it is agreed that the court or arbitrator interpreting or
construing the same shall not apply the presumption that the terms of any such
provision shall be more strictly construed against one party or the other by
reason of the rule of construction that a document is to be construed most
strictly against the party who itself or through its agent prepared the same, it
being agreed that both parties or their respective agents have participated in
the preparation of this Agreement.
(i) All disputes and claims relating to any provision hereof or relating
to or arising out of the parties relationship or creation or termination thereof
(including, without limitation, any claims that any provision of this Agreement
or any obligation of Consultant or of the Company is illegal or otherwise
unenforceable or voidable under law, ordinance or ruling) shall be settled by
arbitration at the office of the American Arbitration Association in Atlanta,
Georgia, in accordance with the United States Arbitration Act (9 USC, (S) 1 et
seq.) and the rules of the American Arbitration Association. The Consultant
consents and submits to the personal jurisdiction and venue of the trial courts
of DeKalb County, Georgia, and also to the personal jurisdiction and venue of
the United States District Court for the Northern District of Georgia for
purposes of enforcing this provision. All awards of the arbitration shall be
binding and non-appealable except as otherwise provided in the United States
Arbitration Act. Judgment upon the award of the arbitrator may be entered in any
court having jurisdiction thereof. The arbitration
-7-
<PAGE>
shall take place at a time noticed by the American Arbitration Association
regardless of whether one of the parties fails or refuses to participate. The
foregoing provision shall not preclude either party from bringing an action in
any court of competent jurisdiction for injunctive or other provisional relief
as necessary or appropriate. Each party hereto shall pay any and all expenses,
including attorneys' fees, incurred by such party in connection with such
arbitration proceeding, unless otherwise determined by the arbitrator. The
parties agree that the arbitration proceedings, and the amount of any award
thereunder, shall be confidential and shall not be disclosed to third parties,
except with the prior written approval of the other party to this Agreement or
as required by law.
(j) Any reference in this Agreement to a section shall be deemed to
include a reference to any subsidiary sections whenever the context requires.
(k) The captions of the sections and subsidiary sections of this Agreement
are included for reference purposes only and are not intended to be a part of
the Agreement or in any way to define, limit or describe the scope or intent of
the particular provision to which they refer.
(l) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement, under seal,
as of the date first written above.
"COMPANY"
SOFTSENSE COMPUTER PRODUCTS INC.
By: /s/ Erez Goren
-------------------------------------
Title: President
"CONSULTANT"
LP TECHNOLOGIES, INC.
By: /s/ Lawrence D. Parker
-------------------------------------
Lawrence D. Parker, President
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<PAGE>
AMENDMENT NO. 1
TO
CONSULTING AGREEMENT
This Amendment ("Amendment No. 1") to the Consulting Agreement (the
"Agreement") between LP Technologies, Inc. ("Consultant") and Softsense Computer
Products Inc. (the "Company") dated October 31, 1994 is entered into as of the
24th day of October, 1995.
WHEREAS, under the Agreement, Consultant has agreed to provide certain
consulting services (the "Services") for the Company during the five year period
between October 31, 1994 and December 31, 1999;
WHEREAS, Consultant desires to suspend providing Services under the
Agreement between September 30, 1995 and December 31, 1997, which suspension the
Company has approved, provided Consultant resumes providing Services on January
1, 1998 and continues providing Services through December 31, 2001;
WHEREAS, to ensure Consultant resumes providing Services, the Company
agrees to pay Consultant a nominal monthly fee during the suspension period.
NOW, THEREFORE, for and in consideration of the mutual premises and
representations contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
to amend the Agreement as follows:
1. Capitalized terms used but not otherwise defined herein shall have the
meaning as set forth in the Agreement.
2. Notwithstanding anything to the contrary in the Agreement, Services to
be provided by Consultant hereunder shall be suspended during the period
beginning September 30, 1995 and concluding December 31, 1997 (the "Suspension
Period"). Upon conclusion of the Suspension Period, Consultant shall resume
providing Services under the Agreement and shall continue through December 31,
2001.
3. Section 2, Compensation, is hereby modified by deleting the first full
------------
paragraph thereof in its entirety and replacing it with the following:
"For all the Services to be performed under this Agreement, the
Company shall pay to Consultant: (i) the sum of One Hundred and Fifty
Thousand Dollars ($150,000) on or before November 30, 1994; (ii) the sum of
Fourteen Thousand Dollars ($14,000) per month (the "Monthly Fee") on the
last day of each month during the period beginning on January 31, 1995 and
ending on September 30, 1995; (iii) a Monthly Fee of Two Thousand Five
Hundred Dollars ($2,500) on the last day of each month during the
Suspension Period; (iv) the sum of Sixteen Thousand Two Hundred and Seven
Dollars ($16,207) on the last day of each month during the calendar year
1998; (v) the sum of Seventeen Thousand and Seventeen Dollars
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<PAGE>
($17,017) on the last day of each month during the calendar year 1999; (vi)
the sum of Seventeen Thousand Eight Hundred and Sixty Eight Dollars
($17,868) on the last day of each month during the calendar year 2000; (vi)
and Eighteen Thousand Seven Hundred and Sixty One Dollars ($18,761) on the
last day of each month during the calendar year 2001."
4. Section 9, Term and Termination, is hereby modified by deleting the
--------------------
first sentence in its entirety and replacing it with the following:
"This Agreement shall commence on the date shown above and shall continue
in full force and effect thereafter until December 31, 2001."
5. Except as expressly amended herein, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of
the date first written above.
"Company"
Softsense Computer Products Inc.
By: /s/ John Heyman
-------------------------------------
John Heyman
Title: Vice President and Chief Financial
Officer
"Consultant"
LP Technologies, Inc.
By: /s/ Lawrence D. Parker
--------------------------------------
Lawrence D. Parker
Title: President
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<PAGE>
EXHIBIT 10.8
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GREATER ATLANTA COMMERCIAL BOARD OF REALTORS, INC.
COMMERCIAL LEASE AGREEMENT
May 1994
THIS LEASE is made by and among Digital Communications Associates, Inc.,
(hereinafter called "Landlord"), and Softsense Computer Products, Inc.
(hereinafter celled ("Tenant"), and Bryant & Associates, Inc. (hereinafter
called "Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises"), to wit: See Exhibit "B" and being known as Building B, 1000
Alderman Drive, Alpharetta, GA 30202. No easement for light or air is included
in the Premises, comprised of 25,000 +/- square feet.
TERM
2. The Tenant shall have and hold the Premises for a term of five (5)
years beginning on the 1 day of February, 1995, and ending on the 31 day of
January, 2000, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay to Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or setoff, an annual rental of
$181,250.00 payable in equal monthly installments of $15,104.17 in advance on
the first day of each calendar month during the term hereof. Upon execution of
this Lease, Tenant shall pay to Landlord the first full month's rent due
hereunder. Rental for any period during the term hereof which is for less than
one month shall be a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (l0) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of such late payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease one
month's rent $15,104.17 as a security deposit which shall be held by Landlord,
without liability to Tenant for any interest thereon, as security for the full
and faithful performance by Tenant of each and every term, covenant and
condition of this Lease of Tenant. If any of the rents or other charges or sums
payable by Tenant to Landlord shall be overdue and unpaid or should Landlord
make payments on behalf of Tenant, or should Tenant fail to perform any of the
terms of this Lease, then Landlord may, at its option, appropriate and apply the
security deposit, or so much thereof as may be necessary to compensate Landlord
toward the payment of the rents, charges or other sums due from Tenant, or
towards any loss, damage or expense sustained by Landlord resulting from such
default on the part of Tenant; and in such event Tenant shall upon demand
restore the security deposit to the original sum deposited. In the event Tenant
furnishes Landlord with proof that all utility bills have been paid through the
date of Lease termination, and performs all of Tenant's other obligations under
this Lease, the security deposit shall be returned in full to Tenant within
thirty (30) days after the date of the expiration or sooner termination of the
term of this Lease and the surrender of the Premises by Tenant in compliance
with the provisions of this Lease.
<PAGE>
UTILITY BILLS
6. Tenant shall pay all charges for garbage collection or other sanitary
services.
COMMON AREA COSTS; RULES AND REGULATIONS
7. The Rules and Regulations attached hereto are made a part of this
Lease. Tenant agrees to perform and abide by those Rules and Regulations and
such other Rules and Regulations as may be made from time to time by Landlord,
and the Windward Business Center.
USE OF PREMISES
8. The Premises shall be used for light assembly, distribution and
general office purposes only and no other. The Premises shall not be used for
any illegal purposes, nor in any manner to create any nuisance or trespass, nor
in any manner to vitiate the insurance or increase the rate of insurance on the
Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term of
this Lease and agrees to use the Premises for the purposes herein leased until
the expiration hereof.
TAX AND INSURANCE ESCALATION
10. Tenant shall pay upon demand by Landlord as additional rental during
the term of this Lease, and any extension of renewal thereof, the amount by
which all taxes (including but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises for each tax
year exceed all taxes on the Premises for the tax year 1995. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on the basis that the rentable floor area of the
Premises bears to the rentable floor area of the entire property assessed. If
the final year of the Lease term fails to coincide with the tax year, then any
excess for the tax year during which the term ends shall be reduced by the pro
rata part of such tax year beyond the Lease term. If such taxes for the year in
which the Lease terminates are not ascertainable before payment of the last
month's rental, then the amount of such taxes assessed against the Property for
the previous tax year shall be used as a basis for determining the pro rata
share, if any, to be paid by Tenant for that portion of the last Lease year.
Tenant shall further pay, upon demand, its pro rata share of the excess cost of
fire and extended coverage insurance including any and all public liability
insurance on the building over the cost for the first year of the Lease term for
each subsequent year during the term of this Lease. Tenant's pro rata portion of
increased taxes or share of excess cost of fire and extended coverage and
liability insurance, as provided herein, shall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord harmless
against all claims for damages to persons or property by reason of Tenant's use
or occupancy of the Premises, and all expenses incurred by Landlord because
thereof, including attorney's fees and court costs. Supplementing the foregoing
and in addition thereto, Tenant shall during the term of this Lease and any
extension or renewal thereof, and at Tenant's expense, maintain in full force
and effect comprehensive general liability insurance with limits of $500,000.00
per person and $l,000,000.00 per incident, and property damage limits of
$100,000.00, which insurance shall contain a special endorsement recognizing and
insuring any liability accruing to Tenant under the first sentence of this
paragraph 11, and naming Landlord as additional insured. Tenant shall provide
evidence of such insurance to Landlord prior to the commencement of the term of
this Lease. Landlord and Tenant each hereby release and relieve the other, and
waive its right of recovery, for loss or damage arising out of or incident to
the perils insured against which perils occur in, on or about the Premises,
whether due to the negligence of Landlord or Tenant or their Brokers, employees,
contractors and/or invitees, to the extent that such loss or damage is within
the policy limits of said comprehensive general liability insurance. Landlord
and Tenant shall, upon obtaining the policies of insurance required, give notice
to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
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<PAGE>
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the mowing of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord any
defective condition known to it such Landlord is required to repair and failure
so to report such conditions shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as suited
for the uses intended by Tenant. Tenant shall, throughout the trial term of this
Lease, and any extension or renewal thereof, at its expense, maintain in good
order and repair the Premises, including the building, heating and air
conditioning equipment (including but not limited to replacement of parts,
compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder. Unless the grounds are common areas of a building(s) larger than the
Premises, Tenant further agrees to care for the grounds around the building,
including paving, the mowing of grass, care of shrubs and general landscaping.
Tenant agrees to return the Premises to Landlord at the expiration, or prior to
termination of this lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lightning, earthquake or
other casualty one excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements to
the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written request. All approved alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord, free of any liens or encumbrances. Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) at the termination of this Lease and to
restore the Premises to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Premises. Tenant shall repair, at Tenant's expense, any damage to the
Premises caused by the removal of any such machinery or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of the Premises has
been destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply promptly
with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the
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<PAGE>
case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination becomes effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
CONDEMNATION
18. If the whole of the Premises. or such portion thereof as will make the
Premises unusable for the purposes herein leased, are condemned by any legally
constituted authority for any public use or purposes, then in either of said
events the term hereby granted shall cease from the date when possession thereof
is taken by public authorities, and rental shall be accounted for as between
Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is
further understood and agreed that neither the Tenant nor Landlord shall have
any rights in any award made by the other by any condemnation authority
notwithstanding the termination of the Lease as herein provided. Broker may
become a party to the condemnation proceeding for the purpose of enforcing his
rights under this paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord, which
shall not be unreasonably withheld, assign this Lease or any interest hereunder,
or sublet the Premises or any part thereof, or permit the use of the Premises by
any party other than the Tenant. Consent to any assignment or sublease shall
not impair this provision and all later assignments or subleases shall be made
likewise only on the prior written consent of Landlord. The assignee of Tenant,
at the option of Landlord, shall become liable to Landlord for all obligations
of Tenant hereunder, but no sublease or assignment by Tenant shall relieve
Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events (hereinafter
any one of which may be referred to as an "Event of Default") during the term of
this Lease, or any renewal or extension thereof, shall constitute a breach of
this Lease on the part of the Tenant: (A) Tenant fails pay the rental as
provided for herein; (B) Tenant abandons or vacates the Premises; (C) Tenant
fails to comply with or abide by and perform any other obligation imposed upon
Tenant under this Lease; (D) Tenant is adjudicated bankrupt; (E) a permanent
receiver is appointed for Tenant's property and such receiver is not removed
within sixty (60) days after written notice from Landlord to Tenant to obtain
such removal; (F) Tenant either voluntarily or involuntarily, takes advantage of
any debt or relief proceedings under the present or future law, whereby the rent
or any part thereof is, or is proposed to be reduced or payment thereof
deferred; (G) Tenant makes an assignment for benefit of creditors; or (H)
Tenant's effects are levied upon or attached under process against Tenant, which
is not satisfied or dissolved within thirty (30) days after written notice from
Landlord to Tenant to obtain satisfaction thereof.
REMEDIES UPON DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition to
any and all other rights or remedies it may have at law or in equity, shall have
the option of pursuing any one or more of the following remedies:
(A) Landlord may terminate this Lease by giving notice of termination, in
which event this Lease shall expire and terminate on the date specified in such
notice of termination, with the same force and effect as though the date so
specified were the date herein originally fixed as the termination date of the
term of this Lease, and all rights of Tenant under this Lease and in and to the
Premises shall expire and terminate, and Tenant shall remain liable for all
obligations under this Lease arising up to the date of such termination and
Tenant shall surrender the Premises to Landlord on the date specified in such
notice;
(B) Landlord may terminate this Lease as provided in paragraph 21(A)
hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the
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period commencing with the day following the date of such termination and ending
with the date hereinbefore set for the expiration of the full term hereby
granted, or (ii) the aggregate reasonable rental value of the Premises (less
reasonable brokerage commissions, attorneys' fees and other costs relating to
the reletting of the Premises) for the same period, all of which excess sum
shall be deemed immediately due and payable;
(C) Landlord may, without terminating this Lease, declare immediately due
and payable all monthly rental and additional rent due and coming due under this
Lease for the entire remaining term hereof, together with all other amounts
previously due, at once; provided, however, that such payment shall not be
deemed a penalty or liquidated damages but shall merely constitute payment in
advance of rent for the remainder of said term; upon making such payment, Tenant
shall be entitled to receive from Landlord all rents received by Landlord from
other assignees, tenants and subtenants on account of the Premises during the
term of this Lease, provided that the monies to which Tenant shall so become
entitled shall in no event exceed the entire amount actually paid by Tenant to
Landlord pursuant to this clause (C) less all costs, expenses and attorneys'
fees of Landlord incurred in connection with the reletting of the Premises; or
(D) Landlord may, from time to time without terminating this Lease, and
without releasing Tenant in whole or in part from Tenant's obligation to pay
monthly rental and additional rent and perform all of the covenants, conditions
and agreements to be performed by Tenant as provided in this Lease, make such
alterations and repairs as may be necessary in order to relet the Premises, and,
after making such alterations and repairs, Landlord may, but shall not be
obligated to, relet the Premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this Lease) at such rental
or rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable or acceptable; upon each reletting, all rentals
received by Landlord from such reletting shall be applied first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord,
second, to the payment of any costs and expenses of such reletting, including
brokerage fees and attorneys' fees, and of costs of such alterations and
repairs, third, to the payment of the monthly rental and additional rent due and
unpaid hereunder, and the residue, if any, shall be held by Landlord and applied
against payments of future monthly rental and additional rent as the same may
become due and payable hereunder; in no event shall Tenant be entitled to any
excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and additional rent; if
such rental received from such reletting during any month are less than those to
be paid during the month by Tenant hereunder, including monthly rental and
additional rent, Tenant shall pay any such deficiency to Landlord, which
deficiency shall be calculated and paid monthly; Tenant shall also pay Landlord
as soon as ascertained and upon demand all costs and expenses incurred by
landlord in connection with such reletting and in making any alterations and
repairs which are not covered by the rentals received from such reletting;
notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial
purposes, and Tenant expressly waives the protections and rights set forth in
Official Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, as well as Windward
Business Center rules and regulations, and Tenant shall be responsible to
Landlord for any damage caused by installation, use or maintenance of said
signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
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SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall remain
subject and subordinate to all present and future mortgages, deeds to secure
debt or other security instruments (the "Security Deeds") affecting the Building
or the Premises, and Tenant shall promptly execute and deliver to Landlord such
certificate or certificates in writing as Landlord may request, showing the
subordination of the Lease to such Security Deeds, and in default of Tenant so
doing, Landlord shall be and is hereby authorized and empowered to execute such
certificate in the name of and as the act and deed of Tenant, this authority
being hereby declared to be coupled with an interest and to be irrevocable.
Tenant shall upon request from Landlord at any time and from time to time
execute, acknowledge and deliver to Landlord a written statement certifying as
follows: (A) that this Lease is unmodified and in full force and effect (or if
there has been modification thereof, that the same is in full force and effect
as modified and stating the nature thereof); (B) that to the best of its
knowledge there are no uncured defaults on the part of Landlord (or if any such
default exists, the specific nature and extent thereof); (C) the date to which
any rent and other charges have been paid in advance, if any; and (D) such other
matters as Landlord may reasonably request. Tenant irrevocably appoints
Landlord as its attorney-in-fact, coupled with an interest, to execute and
deliver, for and in the name of Tenant, any document or instrument provided for
in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and agreements
contained herein, it shall at all times during the Lease term peacefully and
quietly have and enjoy possession of the Premises, but always subject to the
terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises after expiration of
the term hereof, with Landlord's acquiescence and without any express agreement
of the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEY'S FEES
29. In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of Landlord or Tenant, the
prevailing party in such litigation shall be entitled to recover reasonable
attorney's fees to be fixed by the court in such action or proceeding, in an
amount at least equal to fifteen percent of any damages due from the non-
prevailing party. Furthermore, Landlord and Tenant agree to pay the attorney's
fees and expenses of (A) the other party to this Lease (either Landlord or
Tenant) if it is made a party to litigation because of its being a party to this
Lease and when it has not engaged in any wrongful conduct itself, and (B) Broker
if Broker is made a party to litigation because of its being a party to this
Lease and when Broker has not engaged in any wrongful conduct itself.
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
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WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord hereunder
or to insist upon strict compliances by Tenant of its obligations hereunder and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Landlord's right to demand exact compliance with the
terms hereof.
AGENCY DISCLOSURE
32. Landlord and Tenant hereby acknowledge that Broker has acted as an
agent for both parties in this transaction and will be paid a real estate
commission by Landlord.
BROKER'S COMMISSION
33. Broker has rendered valuable service by assisting in the creation of
the landlord-tenant relationship hereunder. The commission to be paid in
conjunction with the creation of the relationship by this Lease has been
negotiated between Landlord and Broker and Landlord hereby agrees to pay Broker
as compensation for Broker's services in procuring this Lease and creating the
aforesaid landlord-tenant relationship pursuant to a separate commission
agreement.
LIMITATION OF BROKER'S SERVICES AND DISCLAIMER
34. Broker is a party to this Lease for the purpose of enforcing its
rights under Paragraph 33 above. Tenant must look solely to Landlord in regards
to all covenants, agreements and warranties herein contained, and Broker shall
never be liable to Tenant in regard to any matter which may be by virtue of this
Lease. It is understood and agreed that the commissions payable to Broker under
Paragraph 33 above are compensation solely for Broker's services in assisting in
the creation of the landlord-tenant relationship hereunder; accordingly, Broker
is not obligated hereunder on account of payment of such commissions to furnish
any management services for the Premises. Landlord and Tenant acknowledge that
the Greater Atlanta Commercial Board of REALTORS, Inc. has furnished this
Commercial Lease Agreement form to its members as a service and that it makes no
representation or warranty as to the enforceability of this Commercial Lease
Agreement form.
PURCHASE OF PROPERTY BY TENANT
35. In the event that Tenant and/or its subsidiaries or affiliates
acquires title to the Premises or any part thereof, or any premises as an
expansion of, addition to or substitution for the Premises at any time during
the term of this Lease, or any renewals thereof, or within six (6) months after
the expiration of the term hereof or the extended term hereof, Landlord shall
pay Broker a commission on the sale of the Premises in lieu of any further
commission which otherwise would have been due under this Lease. Such
commission, as negotiated between the parties, shall be two (2) percent (2%) of
the gross sales price, payable in full at closing.
ENVIRONMENTAL LAWS
36. Landlord represents to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as defined by the Environmental Protection Agency) of
radon, toxic waste or hazardous substances on the Premises. Tenant represents
and warrants that Tenant shall comply with all applicable environmental laws and
that Tenant shall not permit any of his employees, brokers, contractors or
subcontractors, or any person present on the Premises to generate, manufacture,
store, dispose or release on, about or under the Premises any toxic waste or
hazardous substances which would result in the Premises not complying with any
applicable environmental laws. Tenant agrees to provide Landlord a list of
hazardous substances used by Tenants to conduct its business. Tenant agrees to
notify Landlord of changes to such list in the future conduct of business. The
hazardous substances list is made part of this agreement and is shown as
Attachment ( ).
TIME OF ESSENCE
37. Time is of the essence of this Lease.
-7-
<PAGE>
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, it shall
include also Tenant's assignees or subtenants as to the Premises covered by such
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in writing
and shall be personally delivered or sent by U.S. Certified Mail, return receipt
requested, postage prepaid. Broker shall be copied with all required or
permitted notices. Notices to Tenant shall be delivered or sent to the address
shown below, except that upon Tenant's taking possession of the Premises, then
the Premises shall be Tenant's address for notice purposes. Notices to Landlord
and Broker shall be delivered or sent to the addresses hereinafter stated, to
wit:
Landlord:DCA Attention: Bill Pritts - 1000 Alderman Dr. - Alpharetta, GA
30202
Tenant: Softsense Computer Products, Inc. - Attn: Legal Services Division
1155 Hammond Drive, Suite E-S200, Atlanta, GA 30328
Broker:Bryant & Associates - 3350 Peachtree Road, Suite 1250, Atlanta, GA
30326
All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment, change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord and Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit A.
Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
Tenant acknowledges that Tenant has read and understands the terms of this Lease
and has received a copy of it.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals,
in triplicate.
LANDLORD:
/s/ W.E. Putta (SEAL)
-----------------------------------------
_________________________________________(SEAL)
Date and time executed by Landlord: 12/19/94
-------------
-8-
<PAGE>
TENANT:
/s/ Thomas J. Barrella (SEAL)
------------------------------------------
__________________________________________(SEAL)
Date and time executed by Tenant: 12/19/94
--------------
BROKER:
/s/ Jeff Pugh (SEAL)
------------------------------------------
__________________________________________(SEAL)
Date and time executed by Broker: 12/19/94
--------------
-9-
<PAGE>
EXHIBIT A
SPECIAL STIPULATIONS
1. TENANT'S AND LANDLORD'S RIGHT OF EARLY TERMINATION. Either Landlord
--------------------------------------------------
or Tenant reserves the right to terminate this lease upon the following terms
and conditions: (a) If Tenant is unable to secure expansion space of at least
25,000 SF in the second or third anniversary then Tenant, at its option, may
elect to cancel this lease by written notice with no further liability or
penalty to Tenant; (b) Should Tenant, by written notice to Landlord, elect to
cancel this Lease at the end of the second anniversary of this Lease. Upon
cancellation of the Lease, Tenant will reimburse Landlord for all remaining
unamortized leasehold allowances as provided by Landlord one (1) month's
security deposit, plus any outstanding commissions due to broker based upon the
cancelable portion of the Lease; (c) Should Landlord elect to recapture Tenant's
lease space, by written notice, Tenant shall have no further liability to
Landlord. All written notices of Lease cancellation or expansion options shall
be no less than nine (9) months prior to date of cancellation, delivery by
certified mail with return receipt requested.
2. RIGHT OF REFUSAL ON EXPANSION SPACE. So long as there is no event of
-----------------------------------
default or event or condition which, with giving of notice, the passage of time,
or both, could mature into an event of default on the part of Tenant under this
Lease, Landlord agrees that Tenant shall have the first right to lease
additional space to allow the Tenant to consolidate its operations on one
contiguous floor on terms and conditions mutually acceptable to Tenant and
Landlord. Landlord and Tenant will make its best efforts to satisfy all of the
lease terms and conditions.
3. TENANT IMPROVEMENT ALLOWANCE. Landlord and Tenant agree that
----------------------------
Landlord's architect shall complete the design of the proposed office floor
plans. The cost of preparing the drawings, specifications, finish schedules and
the like will be part of the Tenant Costs outlined below. Landlord agrees to
deliver to Tenant, as soon as is reasonably possible, the proposed final working
drawings, specifications, and finish schedules for the Tenant Improvements, and
Tenant shall have the right to approve or disapprove such drawings and make
changes as required by Tenant. Once Tenant notifies Landlord that the drawings
and specifications are acceptable, then Landlord will proceed to obtain a price
schedule for the completion of the Tenant Improvements.
Landlord and Tenant agree that Landlord's contractor shall construct the
Tenant Improvements. Upon Landlord's receipt of acceptance drawings and
specifications, Landlord shall obtain from Landlord's contractor a detailed
price schedule for the Tenant Improvements, and will submit the same to Tenant
for its approval. If Tenant disapproves such price schedule, Tenant agrees to
work promptly with Landlord's architect to alter the drawings and specifications
as necessary to cause the price schedule to be acceptable to Tenant. The
aggregate cost for the Tenant Improvements, once approved by Tenant, shall be
referred to as the "Tenant Improvement Costs."
Landlord shall pay the Tenant Improvements Costs equal to the amount of
$100,000. Tenant Costs shall include the Tenant Improvement Cost; the cost of
preparing and finalizing all drawings, specifications, finish schedules and the
like; fees for architects, engineers and interior designers incurred by Landlord
in connection with the Tenant Improvement; the cost of making any and all
changes in and to the drawings and specifications and any increase or decrease
cost in the Tenant Improvement Cost resulting therefrom through the term of this
Lease. In the event that the Tenant Costs exceed $100,000, then such excess
cost shall be the responsibility of Tenant. Tenant shall pay to Landlord's
contractor any such amount in excess of $100,000 pursuant to the terms mutually
agreed upon by Tenant and Landlord's contractor.
4. OCCUPANCY. Provided the Lease space is suitable of occupancy, Tenant
---------
shall have the right to occupy the space on January 15, 1995.
5. ADDITIONAL RENT. Commencing with the second year of the Lease, Tenant
---------------
will pay as additional rent to Landlord the lesser of (a) one-half ( 1/2) of the
preceding calendar year's increase in Consumer Price Index (CPI); or (b) two and
one-half percent (2.5%) of the net annual rent. For the purposes of this lease
escalation, both Tenant and Landlord agree that the net annual rent is $6.00 per
square foot.
6. EVIDENCE OF INSURANCE. By the Beginning Date and upon each renewal of
---------------------
its insurance policies, Tenant shall give certificates of insurance to Landlord.
If Tenant fails to give the required certificate within thirty (30)
<PAGE>
days after notice of demand for it, the Landlord may obtain and pay for that
insurance and receive reimbursement from the Tenant.
7. (A) TERMINATION BY LANDLORD. Landlord may terminate this Lease at any
-----------------------
time without penalty by giving nine (9) months advance written notice to Tenant.
This Lease shall end on the date specified in the termination notice, which date
shall be at least nine (9) months after the date notice is given.
In the event that the Premises is partially damaged, but not wholly
destroyed, by any casualty and the Landlord determines, in its sole judgement,
that restoration of the Premises is impractical, Landlord may terminate this
Lease as of the date of the damage.
(B) RENT ADJUSTMENT. If the Lease is canceled as provided above, then the
---------------
Rent, Additional Rent, and other charges shall be payable up to the cancellation
date. Landlord shall promptly refund to Tenant any prepaid, unaccrued Rent,
Additional Rent plus Security Deposit, if any, less any sum then owing by Tenant
to Landlord.
8. CONDEMNATION AWARDS AND DAMAGES. Landlord reserves all rights to
-------------------------------
damages paid because of any partial or entire taking of the Premises. Tenant
assigns to Landlord any right Tenant may have to the damages or award. Further,
Tenant shall not make claims against Landlord or the condemning authority for
damages. Broker shall have no rights under any condemnation proceeding.
Notwithstanding anything else in Paragraph 8, Tenant may claim and recover from
the condemning authority a separate award for Tenant's moving expenses, business
dislocation damages, Tenant's personal property and fixtures, the unamortized
costs of leasehold improvements paid for by Tenant, excluding the Landlord's
Buildout described in this Lease, and any other award that would not
substantially reduce the award payable to Landlord. Each party shall seek its
own award, as limited by this Paragraph 8, at its own expense, and neither shall
have the right to the award made to the other.
9. COMPLIANCE WITH LAWS. Tenant shall comply with all Applicable Laws:
--------------------
(i) regarding the physical condition of the Premises, but only to the extent the
Applicable Laws pertain to the particular manner in which Tenant uses the
Premises; or (ii) that do not relate to the physical condition of the Premises
but relate to the lawful use of the Premises and with which only the occupant
can comply, such as laws governing maximum occupancy, workplace smoking, and
illegal business operations, such as gambling.
10. RIGHT TO ENTER.
--------------
PERMITTED ENTRIES. Landlord and its agent, servants, and employees
-----------------
may enter the Premises at reasonable times, and at any time if an emergency,
without charge, liability, or abatement of Rent, to:
(i) examine the Premises;
(ii) make repairs, alterations, improvements, and additions either
required by the Lease or advisable to preserve the integrity, safety, and good
order of part or all of the Premises or Building;
(iii) provide janitorial and other services required by the Lease;
(iv) comply with Applicable Laws under Paragraph 10;
(v) show the Premises to prospective lenders or purchasers and
during the ninety (90) days immediately before this Lease ends to prospective
Tenants, accompanied, if requested by Tenant, by a Tenant representative;
(vi) post notices of nonresponsibility; and
(vii) remove any Alterations made by Tenant in violation of Paragraph
14 of the Lease.
11. PARTIAL INVALIDITY. If any Lease provision is invalid or
------------------
unenforceable to any extent, then that provision and the remainder of this Lease
shall continue in effect and be enforceable to the fullest permitted by law.
12. GOVERNING LAW. This Lease shall be governed by the laws of the state
-------------
in which the Building is located.
A-2
<PAGE>
13. LEASE NOT AN OFFER. Landlord gave this Lease to Tenant for review. It
------------------
is not an offer to lease. This Lease shall not be binding unless signed by both
parties and an originally signed counterpart is delivered to Tenant by December
31, 1994.
14. RECORDING. Recording of this Lease is prohibited except as allowed in
---------
this paragraph. Landlord may execute and record, at the cost of the Landlord, a
short form memorandum describing the Premises and stating this Lease's Term, its
Beginning and Ending Dates, and other information the Landlord may include.
15. HOLDOVER.
--------
(A) HOLDOVER STATUS. If Tenant continues occupying the Premises
---------------
after the Term ends (Holdover) then:
(i) If the Holdover is with Landlord's written consent, it
shall be a month-to-month tenancy, terminable on thirty (30) days advance notice
by either party. Tenant shall pay at the beginning of each month Rent and
Additional Rent that is five (5) percent higher than the amount due in the last
full month immediately preceding the Holdover period unless Landlord specifies a
lower or higher Rent and Additional Rent in the written consent;
(ii) If the Holdover is without Landlord's written consent, then
Tenant shall be a tenant-at-sufferance. Tenant shall pay by the first day of
each month twice the amount of Rent and Additional Rent due in the last full
month immediately preceding the Holdover period and shall be liable for any
damages suffered by Landlord because of Tenant's Holdover. Landlord shall retain
its remedies against Tenant who holds over without written consent.
(B) HOLDOVER TERMS. The Holdovers in Paragraph 10.4(a) shall be on
--------------
the same terms and conditions of the Lease except:
(i) the Term;
(ii) Rent and Additional Rent;
(iii) the Quiet Possession provision is deleted;
(iv) Landlord's obligation for services and repairs is deleted;
(v) the Holdover provision is deleted; and
(vi) the Tenant Improvement provision is deleted.
16. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this Lease or any
-------------------------
interest hereunder, or sublet the Premises or any part thereof, or permit the
use of the Premises by any other party other than the Tenant.
17. MORTGAGES APPROVAL REQUIRED. This Lease shall be subject to and
---------------------------
contingent upon Landlord's receiving the approval of all of the terms and
conditions contained herein by NationsBank, N.A. Landlord agrees to use its
reasonable efforts to secure such approval. If such approval cannot be
obtained, Landlord shall notify Tenant, Landlord shall return to Tenant the
first month's rent and security deposit delivered to Landlord pursuant to
Paragraph 3 and 5 of the Lease, and this Lease shall terminate and all rights,
obligations and liabilities of the parties hereunder shall be released and
discharged.
A-3
<PAGE>
EXHIBIT 10.9
------------
OFFICE LEASE
- ----------------------------------------------------------------------
OFFICE LEASE
BETWEEN
ATTACHMATE CORPORATION
-----------------------------------------------------------------
LANDLORD
AND
SOFTSENSE COMPUTER PRODUCTS, INC.
-----------------------------------------------------------------
TENANT
PREMISES
18,047 +/- Usable Sq. Ft.
1000 Alderman Drive
Alpharetta, GA 30202
<PAGE>
SECTION -- BASIC LEASE PROVISIONS
1.01. Date and parties. This lease (Lease) is made June 30, 1995, between
ATTACHMATE CORPORATION (Landlord) and SOFTSENSE COMPUTER PRODUCTS, INC.
(Tenant). Landlord is a corporation, organized under the laws of Washington,
with principal offices at 3617 131st Avenue SE, Bellevue, WA 98006 and a
business office at 1000 Alderman Drive, Alpharetta, GA 30202. Tenant is a
corporation organized under the laws of New York, with offices at 1000 Alderman
Drive, Alpharetta, GA 30202.
1.02. Premises. Landlord leases to Tenant certain office space (Premises) as
shown cross-hatched on the attached floor plans (Exhibit A) that contains 18,047
+/- total usable square feet in the building known as 1000 Alderman Drive,
Alpharetta, GA (Building). The Premises contain the fixtures and any
improvements now installed plus any improvements required by paragraph 1.05, but
excluding any artwork, furniture and equipment now installed.
Tenant and its agents, employees, and invitees have the non-exclusive
right with others designated by Landlord to the free use of the common areas in
the Building for the common areas' intended and normal purpose. Common areas
include elevators, sidewalks, parking areas, driveways, hallways, stairways,
public bathrooms, common entrances, lobby, cafeteria, and other similar public
areas and access ways. Landlord may change the common areas if the changes do
not materially and unreasonably interfere with Tenant's access to the Premises
or use of them.
1.03. Use. Tenant shall use the Premises as a general office for the
development and sale of computer systems only, unless Landlord gives its advance
written consent to another use and the applicable laws, ordinances, regulations,
or restrictive covenants do not permit the Premises to be used by Tenant for
such general offices. Tenant shall not create a nuisance or use the Premises for
any immoral or illegal purposes. Tenant agrees to perform and abide by the then-
current Rules and Regulations, a copy of which are attached hereto and hereby
made a part of this Lease, as promulgated by the Landlord and as reasonably
amended from time to time by the Landlord. Tenant also agrees to perform and
abide by such rules and regulations as may be issued from time to time by
Windward Business Center.
1.04. Term.
1.04(a). Term. The Lease Term begins September 1, 1995 or the date
the Premises are substantially completed, whichever is later
(Commencement Date). Tenant may take possession and occupy
the Premises after the Premises are substantially completed
according to paragraph 1.04(c) and Landlord delivers actual
possession of the Premises. All of the terms and conditions
shall apply to Tenant when Tenant takes possession of the
Premises, however, Rent shall not commence until the
Commencement Date. The Lease ends (Ending Date) 60 months
from the Commencement Date, unless ended earlier under this
Lease.
1.04(b). Holdover Status. If Tenant continues occupying the Premises
after the Term ends (Holdover), then all terms and
conditions of this Lease shall continue to apply except
that:
(i) if the Holdover is with Landlord's written
consent, it shall be a month-to-month tenancy,
terminable on thirty (30) days advance notice by
either party and Tenant shall pay to Landlord at
the beginning of each month Rent and Additional
Rent that is five (5) percent higher than the
amount due in the last full month immediately
preceding the Holdover period unless Landlord
specifies a lower or higher Rent and Additional
Rent in the written consent; or
(ii) if the Holdover is without Landlord's written
consent, then (A) Tenant (1) shall be a tenant-
at-sufferance; (2) shall pay to Landlord by the
first day of each month twice the amount of Rent
and Additional Rent due in the last full month
immediately preceding the Holdover period; and
(3) shall be liable for any damages suffered by
Landlord because of Tenant's Holdover and (B)
Landlord shall retain its remedies against
Tenant who holds over without written consent.
-1-
<PAGE>
1.04(c). Substantial completion. Landlord shall use its best efforts
to substantially complete the Premises by September 1, 1995.
Substantially complete means:
(i) completing Tenant's Improvements (paragraph
1.05) so that (A) Tenant can use the Premises
for their intended purposes without material
interference to Tenant conducting its ordinary
business activities and (B) the only incomplete
items are minor or insubstantial details of
construction, mechanical adjustments, or
finishing touches like touch-up plastering or
painting;
(ii) Tenant, its employees, agents, and invitees,
have ready access to the Building and Premises
through the lobby, entranceways, elevators, and
hallways;
(iii) the decoration, fixtures, and equipment to be
installed by Landlord are installed and in good
operating order; and
(iv) the Premises are ready for the installation of
any equipment, furniture, fixtures, or
decoration by Tenant that Tenant will install.
1.04(d). Inspection and Punchlist. Before the Commencement Date, the
parties shall inspect the Premises and prepare a punchlist.
The punchlist shall list incomplete, minor, or insubstantial
details of construction; necessary mechanical adjustments;
and needed finishing touches. Landlord will complete the
punchlist items within thirty (30) days after the
Commencement Date.
1.05. Improvements. Landlord will provide at its expense a Tenant
Improvement Allowance of $5.00 per rentable square foot, within which Landlord
shall make improvements to the Premises in accord with Exhibit B (Improvements).
The Improvements shall be completed in a good and workmanlike manner and comply
with all applicable laws, ordinances, rules, and regulations of governmental
authorities.
1.06. Parking and Use. The Tenant shall have the right to use the parking
spaces serving the building of which the Premises is a part on a non-exclusive
basis, in common with the other tenants thereof, and to use the access driveways
and allocated parking spaces for its business purposes and those of its agents,
employees or invitees. The Landlord reserves the right to allocate designated
parking spaces if Landlord chooses, provided that Landlord assigns no fewer than
8.72% of the available parking spaces to Tenant. The Landlord and Tenant
mutually agree that they will not block, hinder or otherwise obstruct the access
driveways and parking areas so as to impede the free flow of vehicular traffic
in and out of the Premises. The tenant may not utilize any portion of the land
outside of the Premises for any use, including but not limited to outside
storage of raw materials or finished products. Tenant shall place no signs upon
the outside land, walls or roof of the Premises except with the express, prior
written consent of the Landlord. Any and all signs placed of the Premises by the
Tenant, subject to the Landlord's permission as described above, shall be
maintained in compliance with governmental rules and regulations governing
signs, as well as the Landlord's then-current Rules and Regulations and the
Windward Business Center rules and regulations, and Tenant shall be responsible
to Landlord for any damage caused by installation, use or maintenance of said
signs, and all damage incident to such removal.
SECTION 2 -- RENT AND SECURITY
2.01. Rent. Tenant shall pay to Landlord a fee of $ 1,398,642.00 for the
Term as rent (Rent), payable in monthly installments of $23,310.70. Commencing
with the payment due on the thirteenth (13th) month of the Lease, Tenant will
pay as additional monthly rent (Additional Rent) to Landlord the sum of the
following fees:
(i) the amount by which all taxes, including but not
limited to ad valorem taxes, special assessments
and any other governmental charges, on the
Premises, or on the pro rata portion of the
entire property that can be allocated to the
Premises, which at time of execution of this
Lease is 8.72%, for each tax year of the Term
exceed taxes on the Premises for the tax year
1995;
(ii) its pro rata share of the excess cost of fire
and extended coverage insurance, including any
and all public liability insurance on the
Building over the cost for the first year of the
Term
-2-
<PAGE>
for each subsequent of the term, although it
will be Landlord's responsibility to carry a
comtomary level of fire and extended coverage
insurance; and
(ii) the lesser of (a) one-half (1/2) of the
preceding calendar year's increase in the
Consumer Price Index (CPI); or (b) two and one-
half percent (2.5%) of the net annual rent. For
purposes of the preceding sentence, the parties
agree that the net annual rent is based on
$15.50 per square foot. The Rent and Additional
Rent shall be paid:
(i) without advance notice, demand, offset,
or deduction;
(ii) by the first day of each month during the
Term; and
(iii) to Landlord at 3617 131st Avenue SE,
Bellevue, Washington 98006, or as
Landlord may specify in writing to
Tenant.
If the Term does not begin on the first day or end on the last day of
a month, the Rent or Additional Rent for that partial month shall be prorated by
multiplying the monthly Rent or Additional Rent by a fraction, the numerator of
which is the number of days of the partial month included in the Term and the
denominator of which is the total number of days in the full calendar month.
If Tenant fails to pay part or all of the Rent or Additional Rent
(paragraph 2.02(e)) within ten (10) days after it is due, the Tenant shall also
pay:
(i) a late charge equal to 3 percent of the unpaid
Rent and Additional Rent, plus
(ii) interest at 12 percent per annum or the maximum
then allowed by applicable law, whichever is
less, on the remaining unpaid balance,
retroactive to the date originally due until
paid, but the interest accumulation shall stop
after thirty (30) days unless Landlord gives
Tenant notice within 30 days of the date payment
was due of Tenant's failure to pay Rent or
Additional Rent.
2.02. Personal Property Tax. Before delinquency, Tenant shall pay taxes
assessed during the Term against trade fixtures or personal property placed by
Tenant in or on the Premises. If these taxes are assessed against the Building,
Tenant shall pay its share of the taxes to Landlord within ten (10) days after
receiving Landlord's written statement setting forth the amount of taxes
applicable to Tenant's property and the basis for the charge to Tenant. Tenant's
failure to pay within the ten-day period shall entitle Landlord to the same
remedies it has upon Tenant's failure to pay Rent or Additional Rent.
2.03. Security Deposit. Upon execution of this Lease, the Tenant shall
deposit $23,310.70 (Security Deposit) with Landlord to secure Tenant's
performance of its Lease obligations. If Tenant defaults Landlord may, after
giving five (5) days advance notice to Tenant, without prejudice to Landlord's
other remedies, apply part or all of the Security Deposit to cure Tenant's
default. If Landlord so uses part or all of the Security Deposit, then Tenant
shall within ten (10) days after written demand, pay Landlord the amount used to
restore the Security Deposit to its original amount. Landlord may mix the
Security Deposit with its own funds and is without liability to Tenant for any
interest on the Security Deposit.
Any part of the Security Deposit not used by Landlord as permitted by
this paragraph shall be returned to Tenant within thirty (30) days after the
Lease ends.
If Landlord sells, transfers, conveys or assigns the Building, then
Landlord shall be relieved of any liability or obligation for the Security
Deposit, except with regard to Landlord's transfer obligation of the Security
Deposit under paragraph 5.03(a).
SECTION 3 -- AFFIRMATIVE OBLIGATIONS
3.01. Compliance with Laws. Tenant shall comply with all applicable laws,
ordinances, rules, and regulations of governmental authorities (Applicable Laws)
(i) regarding the physical condition of the Premises, but only to the extent the
Applicable Laws pertain to the particular manner in which Tenant uses the
Premises; or (ii) that do not relate to the
-3-
<PAGE>
physical condition of the Premises but relate to the lawful use of the Premises
and with which only the occupant can comply, such as laws governing maximum
occupancy, workplace smoking, and illegal business operations, such as gambling.
3.02. Services and Utilities.
3.02.(a). Services. Landlord shall provide at its expense:
(i) heating, ventilation, and air conditioning
(HVAC) for the Premises to maintain temperatures
for comfortable use and occupancy and will
cooperate with Tenant to insure comfortable
working conditions in those areas where Tenant
personnel will be working 24 hours per day,
seven days per week;
(ii) hot and cold water sufficient for drinking,
lavatory, toilet, and ordinary cleaning purposes
to be drawn from approved fixtures in the
Premises;
(iii) electricity, except as provided in paragraph
3.02(c), to the Premises that provides electric
current in reasonable amounts necessary for
normal office use, lighting, and HVAC;
(iv) maintenance of common areas which shall include
cleaning, HVAC, illumination, lawn care, and
landscaping; and
(v) security for the building common areas provided
that (A) Tenant utilizes Landlord's then current
security system; (B) the security available in
no way replaces, but only supplements, Tenants
own security; and (C) Landlord is not
responsible, nor will be held responsible by
Tenant, its agents, employees or invitees, for
security of any kind, including but not limited
to security from any criminal acts such as
arson, theft, sabotage, looting, vandalism,
destruction of property, riot, assault, battery,
murder or any other act of like violence, to the
Premises or for the protection of Tenant, its
agents, employees or invitees.
3.02.(b). 24 Hour Access. Tenant, and its employees, shall have access
to the Premises twenty-four (24) hours a day, seven (7) days
a week. Landlord may restrict access by requiring persons to
show a badge or identification card issued by Landlord.
Landlord shall not be liable for denying entry to any person
unable to show the proper identification.
Landlord may temporarily close the Building if
required because of a life-threatening or Building-
threatening situation. Landlord shall use its best
efforts to close the Building during nonbusiness hours
only. If, however, the Building must be closed during
business hours, then the Rent and Additional Rent shall
abate during any closing that lasts more than eight (8)
hours.
3.02.(c). Extra Services. Tenant is responsible for paying for all
additional services that it receives, including but not
limited to office cleaning or other sanitary services.
Whenever Tenant is using excess services because of high
electricity consumption installations, Landlord will
directly charge Tenant for the extra use.
Landlord may require that special, high
electricity consumption installations of Tenant such as
computer or reproduction facilities (except personal
computers or normal office photocopy machines) be
separately sub-metered for electrical consumption at
Tenant's cost. Tenant's charges for the utilities
provided above shall be Landlord's actual cost of labor
and utilities.
Tenant's failure to pay the charges above within
thirty (30) days of receiving a proper and correct
invoice shall entitle Landlord to the same remedies it
has upon Tenant's failure to pay Rent or Additional
Rent.
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3.02.(d). Interruption of Services.
(i) Interruptions. Landlord does not warrant that
any services Landlord supplies will not be
interrupted. Services may be interrupted because
of accidents, repairs, alterations,
improvements, or any reason beyond the
reasonable control of Landlord. Except as noted
in (ii) below, any interruption (except for
those caused by willful misconduct or gross
negligence by Landlord) shall not:
(A) be considered an eviction or disturbance of
Tenant's use and possession of the
Premises;
(B) make Landlord liable to Tenant for damages;
(C) abate Rent or Additional Rent; or
(D) relieve Tenant from performing Tenant's
Lease obligations.
(ii) Remedy. If any essential services (such as HVAC,
electricity, water) supplied by Landlord are
interrupted, and the interruption does not
result from the negligence or willful misconduct
of Tenant, its employees, invitees, or agents,
Tenant shall be entitled to an abatement of Rent
and Additional Rent. The abatement shall begin
on the fifth consecutive business day of the
interruption. The abatement shall end when the
services are restored. If any interruption under
(i) above prohibits Tenant from occupying space
for more than 30 consecutive days, Tenant may
cancel the lease without further liability.
3.03. Repairs and Maintenance.
3.03(a). Tenant's Care of Premises. Tenant shall:
(i) keep the Premises and fixtures in good order;
(ii) make or request Landlord to make at Tenant's
expense repairs and replacements to the Premises
or Building needed because of Tenant's misuse or
primary negligence;
(iii) repair and replace special equipment or
decorative treatments installed by or at
Tenant's request and that serve the Premises
only; and
(iv) not commit waste.
3.03(b). Surrendering the Premises. Upon the Ending Date or the date
of the last extension Term, if any, ends, whichever is later
or upon earlier termination of this Lease, Tenant shall
surrender the Premises to Landlord in the same broom clean
condition as they existed on the Commencement Date, except
for ordinary wear and tear or loss due to casualty or
condemnation.
On surrender, Tenant shall remove from the
Premises its personal property, trade fixtures, and any
alterations required to be removed under paragraph 4.01
and repair any damage to the Premises caused by the
removal. Any items not removed by Tenant as required
above shall be considered abandoned. Landlord may
dispose of abandoned items as Landlord chooses and bill
Tenant for the cost of their disposal, minus any
revenues received by Landlord for their disposal.
SECTION 4 -- NEGATIVE OBLIGATIONS
4.01 Alterations.
4.01(a). Definitions. "Alterations" means alterations, additions,
substitutions, installations, changes, and improvements, but
excludes minor decorations and the Improvements Landlord is
to make under paragraph 1.05 and Exhibit B.
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4.01(b). Consent. Tenant shall not make Alterations without the
Landlord's prior written consent. Any alterations made by
Tenant under this paragraph shall be at Tenant's expense and
will be accomplished in a good and workmanlike manner and in
conformity with all applicable laws, regulations and
ordinances. The Alterations shall belong to Landlord when
this Lease ends. Nevertheless, Tenant may remove its trade
fixtures, furniture, equipment, and other personal property
if Tenant promptly repairs any damage caused by their
removal.
4.02. Assignment and Subleasing. Tenant shall not transfer, mortgage,
encumber, assign, permit the use of or sublease all or part of the Premises
without the express written consent of Landlord. For the purposes of this Lease,
a substantial change in control of the business decision making authority or
voting rights of the Tenant shall constitute a transfer, along within all other
reasonable constructions of the word transfer, and Landlord agrees to not
unreasonably withhold its consent in the event that a control of business
transfer as defined above occurs.
SECTION 5 -- INSURANCE
5.01 Insurance.
5.01(a). Property Insurance. Tenant shall keep its personal property
and trade fixtures in the Premises insured with "all risks"
insurance in an amount to cover one hundred (100) percent of
the replacement cost of the property and fixtures. Tenant
shall also keep any non-Building standard improvements made
to the premises at Tenant's request insured to the same
degree as Tenant's personal property.
5.01(b). Liability Insurance. Tenant shall maintain contractual and
comprehensive general liability insurance, including public
liability and property damage, with a minimum combined
single limit of liability of one million dollars
($1,000,000.00) for personal injuries or deaths of persons
occurring in or about the Building and Premises.
5.01(c). Wavier of Subrogation. Tenant waives claims arising in any
manner in its favor and against the Landlord for loss or
damage to Tenant's property located within the Building.
5.01(d). Insurance Criteria. Insurance policies required by this
Lease shall:
(i) be issued by insurance companies licensed to do
business in the state of Georgia with general
policyholder's ratings of at least "A" and a
financial rating of at least "XI" in the most
current Best's Insurance Reports available as of
the date in paragraph 1.01, and if the Best's
ratings are changed or discontinued, the parties
shall agree to an equivalent method of rating
insurance companies or in the event that the
parties cannot agree, they shall submit the
dispute to arbitration under paragraph 10.01;
(ii) name the Landlord party as an additional insured
as its interest may appear;
(iii) provide that the insurance may not be canceled
or materially changed in the scope or amount of
coverage unless fifteen (15) days' advance
notice is given to the Landlord;
(iv) be primary policies--not as contributing with,
or in excess of, the coverage that the Landlord
may carry;
(v) be permitted to be carried through a "blanket
policy" or "umbrella" coverage; and
(vi) be maintained during the entire Term and any
extension Terms.
5.01(e). Evidence of Insurance. By the Commencement Date, and upon
each renewal of its insurance policies, Tenant shall give
certificates of insurance to the Landlord. The certificate
shall specify amounts, types of coverage, the waiver of
subrogation, and the insurance criteria listed in paragraph
5.0l(d). The policies shall be renewed or replaced and
maintained by the Tenant. If Tenant fails to give the
required certificate within thirty (30) days after notice of
demand for it, the Landlord may obtain and pay for that
insurance and receive reimbursement from the Tenant.
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5.02. Tenant's Indemnity. Tenant indemnifies, defends, and holds Landlord
harmless from claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises
or Building; and
(iii) caused by the negligence or willful misconduct
of Tenant, its agents, employees, or invitees.
The above indemnity obligations include, but are not
limited to, the Tenant's obligation to indemnify and
hold the Landlord harmless against any claim, damage,
liability, cost, penalty or fine which the Landlord may
suffer as a result of air, water or ground pollution
caused by the Tenant in its use of the Premises. When a
claim, if any, is caused by the joint negligence or
willful misconduct of Tenant and Landlord or Tenant and
a third party unrelated to Tenant, except Tenant's
agents, employees, or invitees, Tenant's duty to
defend, indemnify, and hold Landlord harmless shall be
in proportion to Tenant's allocable share of the joint
negligence or willful misconduct.
5.03. Limitation of Landlord's Liability.
5.03.(a). Transfer of Premises. Landlord may transfer, assign and/or
convey any part of or interest in the Building where the
Premises are located, or any of Landlord's rights under this
Lease. If Landlord assigns its interest in such building or
its rights under this Lease, Landlord shall be released from
any further obligations under this Lease; Landlord shall
transfer the Tenant's Security Deposit to the new owner or
new landlord, provided that the Landlord is not required to
lay claim against the Security Deposit because of damage to
the Premises by Tenant; and Tenant shall look sold to
Landlord's successor in interest for performance of said
obligations.
5.03.(b). Liability for Money Judgment. If Landlord, its employees,
officers, or partners are ordered to pay Tenant a money
judgment because of Landlord's default, Tenant's sole remedy
to satisfy the judgment shall be limited to:
(i) Landlord's interest in the Building and Land
including the rental income and proceeds from
sale; and
(ii) any insurance or condemnation proceeds received
because of damage or condemnation to, or of, the
Building or Land that are available for use by
Landlord.
SECTION 6 -- LOSS OF PREMISES
6.01. Damages.
6.01(a). Definition. "Relevant Space" means:
(i) the Premises as defined in paragraph 1.02,
excluding Tenant's non-Building-Standard
fixtures;
(ii) access to the Premises; and
(iii) any part of the Building that provides essential
services to the Premises.
6.01(b). Repair of Damage. If the Relevant Space is damaged in part
or whole from any cause and the Relevant Space can be
substantially repaired and restored within one hundred and
twenty (120) days from the date of the damage using standard
working methods and procedures, Landlord shall at its
expense promptly and diligently repair and restore the
Relevant Space to substantially the same condition as
existed before the damage. This repair and restoration shall
be made within one hundred
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and twenty days (120) from the date of the damage unless the
delay is due to causes beyond Landlord's reasonable control.
If the Relevant Space cannot be repaired and
restored within the one hundred and twenty (120) day
period, then either party may, within ten (10) days
after determining that the repairs and restoration
cannot be made within one hundred and twenty (120) days
(as prescribed in paragraph 6.01(c)), cancel the Lease
by giving notice to the other party. Nevertheless, if
the Relevant Space is not repaired and restored within
one hundred and twenty (120) days from the date of the
damage, then Tenant may cancel the Lease at any time
after the one hundred and twentieth (120th) day and
before the later of when the premises are restored or
the one hundred and fiftieth (150th) day following the
date of damage. Tenant shall not be able to cancel this
Lease if its willful misconduct causes the damage
unless Landlord is not promptly and diligently
repairing and restoring the Relevant Space.
6.01(c). Determining the Extent of Damage. If the parties cannot
agree in writing whether the repairs and restoration
described in paragraph 6.01(b) will take more than one
hundred and twenty (120) days to make, then the
determination will be submitted to arbitration under
paragraph 10.01.
6.01(d). Abatement. Unless the damage is caused by Tenant's willful
misconduct, the Rent or Additional Rent shall abate in
proportion to that part of the Premises that is unfit for
use in Tenant's business. The abatement shall consider the
nature and extent of interference to Tenant's ability to
conduct business in the Premises and the need for access and
essential services. The abatement shall continue from the
date the damage occurred until the date that the Landlord
completes the repairs and restoration to the Relevant Space
or the part rendered unusable and notice to Tenant that the
repairs and restoration are completed, or until Tenant again
uses the Premises or the part rendered unusable, whichever
is first.
6.01(e). Tenant's Property. Notwithstanding anything else in Section
6, Landlord is not obligated to repair or restore damage to
Tenant's trade fixtures, furniture, equipment, or other
personal property, or any Tenant improvements other than
those listed in Exhibit B, except for damages caused by
Landlord's willful misconduct or gross negligence and only
to the extent not covered by Tenant's insurance.
6.01(f). Damage to Building. If:
(A) more than forty (40) percent of the
Building is damaged and the Landlord
decides not to repair and restore the
Building;
(B) any mortgagee of the Building shall not
allow adequate insurance proceeds for
repair and restoration;
(C) the damage is not covered by Landlord's
insurance (which Landlord will use
reasonable commercial efforts to maintain
coverage comparable to what Landlord is
currently carrying); or
(D) the Lease is in the last twelve (12)
months of its Term,
then Landlord may cancel this Lease. To cancel,
Landlord must give notice to Tenant within thirty (30)
days after the Landlord knows of the damage. The notice
must specify the cancellation date, which shall be at
least thirty (30) but not more than sixty (60) days
after the date notice is given.
6.01(g). Cancellation. If either party cancels this Lease as
permitted by paragraph 6.01, then this Lease shall end on
the day specified in the cancellation notice. The Rent,
Additional Rent, and other charges shall be payable up to
the cancellation date and shall account for any abatement.
Landlord shall promptly refund to Tenant any prepaid,
unaccrued Rent or Additional Rent, accounting for any
abatement, plus security deposit, if any, less any sum then
owing by Tenant to Landlord.
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If Landlord cancels this lease as permitted by
paragraph 6.01, then Landlord must also cancel all
other similarly affected Tenant leases in the Building.
6.02 Condemnation.
6.02(a). Definitions. The terms "eminent domain," "condemnation,"
"taken," and the like in paragraph 6.02 include (A) taking
for public or quasi-public use and (B) private purchases in
place of condemnation by any authority authorized to
exercise the power of eminent domain.
6.02(b). Entire Taking. If the entire Premises or the portions of the
Building required for reasonable access to, or the
reasonable use of, the Premises are taken by eminent domain,
this Lease shall automatically end on the earlier of:
(i) the date title vests; or
(ii) the date Tenant is dispossessed by the
condemning authority.
6.02(c). Partial Taking. If the taking of a part of the Premises
materially interferes with Tenant's ability to continue its
business operations in substantially the same manner and
space then Tenant may end this Lease on the earlier of:
(i) the date when title vest;
(ii) the date Tenant is dispossessed by the
condemning authority; or
(iii) sixty (60) days following notice to Tenant of
the date when vesting or dispossession is to
occur.
If there is a partial taking and this Lease continues,
then the Lease shall end as to the part taken and the
Rent and Additional Rent shall abate in proportion to
the part of the Premises taken and Tenant's pro rata
share shall be equitably reduced.
6.02(d). Termination by Landlord. If title to a part of the Building
other than the Premises is condemned, and in the Landlord's
reasonable opinion, the Building should be restored in a
manner that materially alters the Premises, Landlord may
cancel this Lease by giving notice to Tenant. Cancellation
notice shall be given within sixty (60) days following the
date title vested. This Lease shall end on the date
specified in the cancellation notice, which date shall be at
least thirty (30) days but not more than ninety (90) days
after the date notice is given.
6.02(e). Rent Adjustment. If the Lease is canceled as provided in
paragraphs 6.02(b), (c), or (d), then the Rent, Additional
Rent and other charges shall be payable up to the
cancellation date, and shall account for any abatement.
Landlord, considering any abatement, shall promptly refund
to Tenant any prepaid, unaccrued Rent plus Security Deposit,
if any, less any sum then owing by Tenant to Landlord.
6.02(f). Repair. If the Lease is not canceled as provided for in
paragraphs 6.02(b), (c), or (d), then Landlord at its
expense shall promptly repair and restore the Premises to
the condition that existed immediately before the taking,
except for the part taken, to render the Premises a complete
architectural unit, but only to the extent of the
condemnation award received for the damage.
6.02(g). Awards and Damages Landlord reserves all rights to damages
paid because of any partial or entire taking of the
Premises. Tenant assigns to Landlord any right Tenant may
have to the damages or award. Further, Tenant shall not make
claims against Landlord or the condemning authority for
damages.
Notwithstanding anything else in Paragraph
6.02(g), Tenant may claim and recover from the
condemning authority a separate award for Tenant's
moving expenses, business dislocation damages, Tenant's
personal property and fixtures, the unamortized costs
of leasehold improvements paid for by Tenant, excluding
the Landlord's Buildout described in paragraph 1.05
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and Exhibit B. Each party shall seek its own award, as
limited by paragraph 6.02(g), at its own expense, and
neither shall have any right to the award made to the
other.
6.02(h). Temporary Condemnation. If part or all of the Premises are
condemned for a limited period of time (Temporary
Condemnation), this Lease shall remain in effect. The Rent
or Additional Rent and Tenant's obligations for the part of
the Premises taken shall abate during the Temporary
Condemnation in proportion to the part of the Premises that
Tenant is unable to use in its business operations as a
result of the Temporary Condemnation. Landlord shall receive
the entire award for any Temporary Condemnation.
SECTION 7 -- DEFAULT
7.01. Tenant's Default.
7.01(a). Defaults. Each of the following, whether alone or together,
constitutes a default (Default):
(i) Tenant's failure to pay Rent or Additional Rent
within seven (7) days after Tenant receives
notice from Landlord of Tenant's failure to pay
Rent or Additional Rent;
(ii) Tenant's failure to pay Rent or Additional Rent
by the due date, at any time during a calendar
year in which Tenant has already received three
notices of its failure to pay Rent or Additional
Rent by the due date;
(iii) Tenant's failure to perform or observe any other
Tenant obligation after a period of thirty (30)
business days or the additional time, if any,
that is reasonably necessary to promptly and
diligently cure the failure after receiving
notice from Landlord setting forth in reasonable
detail the nature and extent of the failure and
identifying the applicable Lease provision(s);
(iv) Tenant's abandoning or vacating the Premises if
Tenant fails to timely pay the Rent or
Additional Rent by the due date; and
(v) Tenant's failure to vacate or stay any of the
following within ninety (90) days after they
occur:
(A) petition in bankruptcy is filed by, or
against, Tenant;
(B) Tenant is adjudicated as bankrupt or
insolvent;
(C) a receiver, trustee, or liquidation is
appointed for all or a substantial part
of Tenant's property; or
(D) Tenant makes an assignment for the
benefit of creditors.
7.02. Landlord's Remedies
7.02(a). Remedies. Landlord, in addition to the remedies given in
this Lease or under the law, may do any one or more of the
following if Tenant commits a Default under paragraph 7.01:
(i) end this Lease, and Tenant shall then surrender
the Premises to Landlord; and
(ii) with process of law enter and take possession of
the Premises, alter locks and other security
devices at the Premises and/or remove Tenant,
with or without having ended the Lease.
Tenant waives claims for damages by reason of
Landlord's reentry, repossession, or alteration of
locks or other security devices and for damages by
reason of any legal process.
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7.02(b). No Surrender. Landlord's exercise of any of its remedies or
its receipt of Tenant's keys shall not be considered an
acceptance or surrender of the Premises by Tenant. A
surrender must be agreed to in a writing signed by both
parties.
7.02(c). Rent. If Landlord ends this Lease or ends Tenant's right to
possess the Premises because of a Default, Landlord may hold
Tenant liable for Rent, Additional Rent and other
indebtedness accrued to the date the Lease ends. Tenant
shall also be liable for the Rent, Additional Rent and other
indebtedness that otherwise would have been payable by
Tenant during the remainder of the Term had there been no
Default, reduced by any sums Landlord receives by reletting
the Premises during the Term.
7.02(b). Other Expenses. Tenant shall also be liable for that part of
the following sums paid by Landlord and attributable to that
part of the Term ended due to Tenant's Default:
(i) reasonable broker's fees incurred by Landlord
for reletting part or all of the Premises
prorated for that part of the reletting Term
ending concurrently with the then current Term
of this Lease;
(ii) the cost of removing and storing Tenant's
property;
(iii) the cost of minor repairs, alterations, and
remodeling necessary to put the Premises in a
condition reasonably acceptable to a new Tenant;
and
(iv) other necessary and reasonable expenses incurred
by Landlord in enforcing its remedies.
7.02(e). Payment. Tenant shall pay the sums due in paragraphs 7.02(c)
and (d) within thirty (30) days of receiving Landlord's
proper and correct invoice for the amounts. Landlord is not
entitled to accelerated Rent or Additional Rent. During each
action to collect, Landlord shall be limited to the amount
of (A) any sums due under paragraph 7.02(c) that would have
accrued had the Lease not been ended and (B) sums due under
paragraph 7.02(d) that have been incurred by Landlord and
are now payable by Landlord.
7.03. Exception to Cure Periods. The cure period in paragraph 7.01 (a)(iii)
does not apply to failure to maintain the insurance required by paragraph 5.01.
7.04. Self-Help. If Tenant defaults, the Landlord may, without being
obligated and without waiving the Default, cure the Default. The Landlord may
enter the Premises to cure the Default. The Tenant shall pay the Landlord, upon
demand, all costs, expenses, and disbursements incurred by the Landlord to cure
the Default.
7.05. Survival. The remedies permitted by Section 7 and the indemnities in
paragraph 5.02 shall survive the ending of this Lease.
SECTION 8 -- NONDISTURBANCE
8.01. Subordination.
8.01(a). Mortgages. Subject to paragraph 8.01(b), this Lease is
subordinate to existing or subsequent mortgages covering the
Building.
8.01(b). Mortgages Approval Required. This Lease shall be subject to,
and contingent upon, Landlord's receiving the approval of
all of the terms and conditions contained herein by Bank of
America National Trust and Savings Association. Landlord
agrees to use its reasonable efforts to secure such
approval. If such approval cannot be obtained, Landlord
shall notify Tenant before Tenant occupies space, Landlord
shall return to Tenant the first month's rent and security
deposit delivered to Landlord pursuant to Paragraph 2.03 of
the Lease, and this Lease shall terminate and all rights,
obligations and liabilities of the parties hereunder shall
be released and discharged.
8.01(c). Foreclosures. If any mortgage is foreclosed, then:
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(i) this Lease shall continue;
(ii) Tenant's quiet possession shall not be disturbed
provided that Tenant is not in Default;
(iii) Tenant will attorn to and recognize the
mortgagee or purchaser at foreclosure sale
(Successor Landlord) as Tenant's landlord for
the remaining Term; and
(iv) the Successor Landlord shall not be bound by:
(A) any payment of Rent or Additional Rent
for more than one month in advance,
except the Security Deposit and free
rent, if any, specified in the Lease,
(B) any amendment, modification, or ending of
this Lease without Successor Landlord's
consent after the Successor Landlord's
name is given to Tenant unless the
amendment, modification, or ending is
specifically authorized by the original
Lease and does not require Landlord's
prior agreement or consent, and
(C) any liability for any act or omission of
a prior Landlord.
8.01(d). Self-Operating. Paragraph 8.01 is self-operating. However,
Tenant shall promptly execute and deliver any documents
needed to confirm this arrangement.
8.02. Estoppel Certificate.
8.02(a). Obligation. Tenant shall from time to time, within ten (10)
business days after receiving a written request by the
Landlord, execute and deliver to the Landlord a written
statement. This written statement, which may be relied upon
by the Landlord and any third party with whom the Landlord
is dealing, shall certify:
(i) the accuracy of the Lease document;
(ii) the Commencement and Ending Dates of the Lease;
(iii) that the Lease is (A) unmodified and in full
effect, or (B) in full effect as modified,
stating the date and nature of any and all
modifications;
(iv) whether, to the Tenant's knowledge, the Landlord
is in default or whether the Tenant has any
claims or demands against the Landlord and, if
so, specifying the Default, claim or demand; and
(v) to other correct and reasonably ascertainable
facts that are covered by the Lease terms.
8.02(b). Remedy. The Tenant's failure to comply with its obligation
in paragraph 8.02(a) shall be a Default. Notwithstanding
paragraphs 7.01(a)(iii) and 7.03, the cure period for this
Default shall be five (5) business days after the Tenant
receives notice of the Default.
8.03. Quiet Possession. If Tenant is not in default and subject to the Lease
terms and the above encumbrances, Landlord warrants that Tenant's peaceable and
quiet enjoyment of the Premises shall not be disturbed by the Landlord or anyone
acting for or through the Landlord.
SECTION 9 -- LANDLORD'S RIGHTS
9.01. Mechanic's Liens
9.01(a). Discharge Lien. Tenant shall, within twenty (20) days after
receiving notice of any mechanic's lien for material or work
claimed to have been furnished to the Premises on Tenant's
behalf and at Tenant's request, except for work contracted
by Landlord including the Improvements described in
paragraph 1.05 and Exhibit B:
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(i) discharge the lien; or
(ii) post a bond equal to the amount of the disputed
claim with companies reasonably satisfactory to
Landlord.
If Tenant posts a bond, it shall contest the validity
of the lien. Tenant shall indemnify, defend, and hold
Landlord harmless from losses incurred from these
liens.
9.01(b). Landlord's Discharge. If Tenant does not discharge the lien
or post the bond within the twenty (20) day period, Landlord
may pay any amounts, including interest and legal fees, to
discharge the lien. Tenant shall then be liable to Landlord
for the amounts paid by Landlord.
9.01(c). Consent not Implied. Paragraph 9.01 is not a consent to
subject Landlord's property to these liens.
9.02. Right to Enter.
9.02(a). Permitted Entries. Landlord and its agents, servants, and
employees may enter the Premises at reasonable times, and at
any time if an emergency, without charge, liability, or
abatement of Rent or Additional Rent, to:
(i) examine the Premises;
(ii) make repairs, alterations, improvements, and
additions either required by the Lease or
advisable to preserve the integrity, safety, and
good order of part or all of the Premises or
Building;
(iii) provide janitorial and other services;
(iv) comply with Applicable Laws;
(v) show the Premises to prospective lenders or
purchasers and during the ninety (90) days
immediately before this Lease ends to
prospective tenants, accompanied, if requested
by Tenant, by a Tenant representative;
(vi) post notices of nonresponsibility;
(vii) remove any Alterations made by Tenant in
violation of paragraph 4.01; and
(viii) post "For Sale. signs and, during the one
hundred and twenty (120) days immediately before
this Lease ends, post "For Lease" signs.
9.02(b). Entry Conditions. Notwithstanding paragraph 9.02(a), entry
is conditioned upon Landlord causing the least practical
interference to Tenant's business.
9.03. Right to Terminate. Landlord may terminate this Lease at any time
without penalty by giving nine (9) months advance written notice to Tenant. This
lease shall end on the date specified in the termination notice, which date
shall be at least nine (9) months after the date that the notice was sent. If
the Lease is terminated as provided above, then the Rent, Additional Rent and
other charges shall be payable up to the termination date. Landlord shall
promptly refund to Tenant any prepaid, unaccrued Rent, Additional Rent plus
Security Deposit, if any, less any sum then owing by Tenant to Landlord.
SECTION 10 -- DISPUTES
10.01. Arbitration.
10.01(a). Procedure. For disputes subject to arbitration under
paragraph 10.01(c) that are not resolved by the parties
within ten (10) days after either party gives notice to the
other of its desire to arbitrate
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the dispute, the dispute shall be settled by binding
arbitration by the American Arbitration Association in
accord with its then-prevailing rules. Judgment upon the
arbitration award may be entered in any court having
jurisdiction. The arbitrators shall have no power to change
the Lease provisions. The arbitration panel shall consist
of three arbitrators, one of whom shall be selected by the
Tenant, one of whom shall be selected by the Landlord, and
one of whom shall be mutually agreed upon by the parties
and who must be a real estate attorney actively engaged in
the practice of law for at least the last five (5) years.
Both parties shall continue performing their Lease
obligations pending the award in the arbitration
proceeding. The arbitrators shall award the prevailing
party reasonable expenses and costs, including reasonable
attorneys' fees pursuant to paragraph 11.02, plus interest
on the amount due at eighteen (18) percent per annum or the
maximum amount then allowed by applicable law, whichever is
less.
10.01(b). Payment. The losing party shall pay to the prevailing party
the amount of the final arbitration award. If payment is
not made within ten (10) business days after the date the
arbitration award is no longer appealable, then in addition
to any remedies under the law:
(i) if Landlord is the prevailing party, it shall have
the same remedies for failure to pay the arbitration
award as it has for Tenant's failure to pay the Rent
or Additional Rent; and
(ii) if Tenant is the prevailing party, it may deduct any
remaining unpaid award from its monthly payment of
Rent, Additional Rent, or other charges.
10.01(c). Arbitration. The following disputes are subject to
arbitration:
(i) any disputes that the parties agree to submit to
arbitration;
(ii) the date when the Premises arc substantially
completed;
(iii) the amount of any abatement of Rent and Additional
Rent because of damage or condemnation;
(iv) determination of the party that must comply with
Applicable Laws under paragraph 3.01;
(v) whether the utilities are being provided in the
quality and quantity required by paragraph 3.02;
(vi) whether Tenant may abate Rent and Additional Rent or
cancel the Lease under paragraph 3.02(e)(ii);
(vii) whether Landlord's withholding of consent is
unreasonable or unduly delayed under paragraph
4.01(a) and (b);
(viii) whether either party can cancel the Lease under
Sections 6 or 7; and
(ix) any allocation required under paragraph 2.02.
SECTION 11 -- MISCELLANEOUS
11.01. Broker's Warranty. The parties warrant that Bryant & Associates is the
only broker they dealt with on this Lease. The party who breaches this warranty
shall defend, hold harmless and indemnify the nonbreaching party from any claims
or liability arising from the breach. Landlord is solely responsible for paying
the commission of Bryant & Associates.
11.02. Attorneys' Fees. In any litigation or arbitration between the parties
regarding this Lease, the losing party shall pay to the prevailing party all
reasonable expenses and court costs including attorneys' fees actually incurred
by the prevailing party. A party shall be considered the prevailing party if:
-14-
<PAGE>
(i) it initiated the litigation and substantially
obtains the relief it sought, either through a
judgment or the losing party's voluntary action
before arbitration (after it is scheduled),
trial, or judgment;
(ii) the other party withdraws its action without
substantially obtaining the relief it sought; or
(iii) it did not initiate the litigation and judgment
is entered for either party, but without
substantially granting the relief sought.
11.03. Notices. All notices under this Lease shall be in writing and sent by
registered or certified mail, postage prepaid, as follows:
To Tenant: At the Premises
To Landlord: c/o Attachmate Corporation, 3617 131st Ave. SE, Bellevue, WA
98006, Attn: Legal Department
Either party may change these persons or addresses by giving notice as
provided above. Tenant shall also give required notices to Landlord's mortgagee
after receiving notice from Landlord of the mortgagee's name and address.
Notice shall be considered given and received on the latest original delivery or
attempted delivery date as indicated on the postage receipt(s) of all persons
and addresses to which notice is to be given.
11.04. Partial Invalidity. If any Lease provision is invalid or unenforceable
to any extent, then that provision and the remainder of this Lease shall
continue in effect and be enforceable to the fullest extent permitted by law.
11.05. Waiver. The failure of either party to exercise any of its rights is
not a waiver of those rights. A party waives only those rights specified in
writing and signed by the party waiving its rights.
11.06. Construction.
11.06(a). Construction Against Drafter. The parties chose this Lease
document because it is fair to both parties and shall be
construed as if both parties were equally responsible for
drafting the provision. If any Lease provision is modified
or added by the parties, then the rule of construction of
construing against the drafter shall apply to the modified
or added provision. If the Lease's fairness is materially
affected because of the cumulative effect of the changes,
additions, or deletions (paragraph 11.06(b)), then
paragraph 11.06 shall be void.
11.06(b). Deletions. If the parties delete any provision or part of a
provision, the Lease will be interpreted as if the deleted
language was never part of the Lease. This paragraph is
subject to the rule in paragraph 11.06(a) concerning any
changes, additions or deletions that materially affect the
Lease's fairness.
11.07. Binding on Successors. This Lease shall bind the parties' heirs,
successors, representatives, and permitted assigns.
11.08. Governing Law. This Lease shall be governed by the laws of the state
in which the Building is located.
11.09. Insurance Increase. If due to Tenant's particular use of the Premises
the Landlord's insurance rates are increased, Tenant shall pay the increase.
11.10. Lease not an Offer. Landlord gave this Lease to Tenant for review. It
is not an offer to lease. This Lease shall not be binding unless signed by a
duly authorized representative of both parties and an originally signed
counterpart is delivered to Tenant by June 30, 1995. This Lease shall create the
relationship of Landlord and Tenant between the parties hereto. No estate shall
pass out of Landlord. Tenant has only a usufruct not subject to levy or sale and
not assignable by Tenant except by Landlord's prior, written consent.
11.11. Recording. Recording of this Lease is prohibited except as allowed in
this paragraph. At the request of either party, the parties shall promptly
execute and record, at the cost of the requesting party, a short form memorandum
-15-
<PAGE>
describing the Premises and stating this Lease's Term, its Commencement and
Ending Dates, and other information the parties agree to include.
11.12. Survival of Remedies. The parties' remedies shall survive the ending
of this Lease when the ending is caused by the Default of the other party.
11.13. Authority of Parties. Each party warrants that it is authorized to
enter into the Lease, that the person signing on its behalf is duly authorized
to execute the Lease, and that no other signatures are necessary.
11.14. Business Days. Business days means Monday through Friday inclusive,
excluding the following holidays or the days on which the holidays are
designated for observance: New Year's Day, President's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving Day
and Christmas Day.. Throughout this Lease, wherever "days" are used the term
shall refer to calendar days. Wherever the term "business days" is used the
term shall refer to business days.
11.15. Early Termination. Either Landlord or Tenant reserves the right to
terminate this lease under the following terms and conditions: (a) by Tenant at
the end of the second anniversary of this Lease upon 9 months written notice
prior to the second anniversary of this Lease; or (b) by Landlord in the event
that Landlord elects to recapture the Premises upon 9 months written notice
prior to such recapture. Upon any termination of the Lease by Tenant, Tenant
shall (a) reimburse Landlord for all unamortized Tenant Improvement Allowance in
accordance with the schedule on Exhibit C, (b) pay a termination fee equal to
one months rent, and (c) pay Landlord all outstanding commissions due to the
Broker based upon the canceled portion of this Lease.
11.16. Entire Agreement. This Lease contains the entire agreement between the
parties about the Premises and Building. Except for the Rules and Regulations
document, this Lease shall be modified only by a writing signed by both parties.
11.17. Definition of Lease. This Lease consists of the following:
(i) Title Page;
(ii) Sections 1 through 11;
(iii) Signature Page;
(iv) Rules and Regulations; and
(v) Exhibits A through C.
11.18. Time. Time is of the essence of this Lease.
TENANT ACKNOWLEDGES THAT TENANT HAS READ AND UNDERSTANDS THE TERMS AND
CONDITIONS OF THIS LEASE AND HAS RECEIVED A COPY OF IT.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals.
LANDLORD: ATTACHMATE CORPORATION
/s/ Scott L. Dumma SIGNATURE /s/ W.E. Pritts
- ------------------------------ -------------------------------
WITNESS
________________________________________
NAME W.E. Pritts
-----------------------------------
TITLE Vice President
-----------------------------------
-16-
<PAGE>
TENANT: SOFTSENSE, INC.
/s/ W.J. Zudall SIGNATURE /s/ Erez Goren
- ----------------------------- -------------------------------
WITNESS
________________________________________
NAME Erez Goren
-----------------------------------
TITLE President
-----------------------------------
-17-
<PAGE>
RULES AND REGULATIONS
1. Signs. Landlord retains the right to regulate the manner of display of the
-----
exterior signs, placards, pictures, advertisements, names or notices. Landlord
shall have the right to remove any exterior sign, placard, picture,
advertisement, name or notice which has not been approved by Landlord or is
being displayed in a non-acceptable manner without notice to and at the expense
of the Tenant. All approved signs or lettering on doors shall be printed,
painted, affixed or inscribed at the expense of Tenant, except as provided
otherwise in Exhibit B. Tenant shall not place anything or allow anything to be
placed near the glass of any window, door partition or wall which may appear
unsightly from outside of the Premises. Without the written consent of
Landlord, Tenant shall not use the name of the Building in connection with or in
promotion or advertising the business of Tenant except as Tenant's address.
2. Nuisance. Tenant shall not use, keep or permit to be used or kept noxious
--------
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or
others by reason of noise, odors and/or vibrations. No animals or birds shall be
brought in or kept in or about the Premises or the Building. No Tenant shall
make or permit to be made any disturbing noises or disturb or interfere with
neighboring Buildings, or with those having business with such occupants by the
use of any musical instrument, radio, phonograph, alarm, or unusual noise. No
Tenant shall throw anything out of doors or down the passageways.
3. Permitted Use. The Premises shall not be used except as otherwise
-------------
specified in the Lease Agreement. No Tenant shall occupy or permit any portion
of the Premises to be occupied for the manufacture or sale of liquor, narcotics,
or tobacco in any form. The Premises shall not be used for lodging or sleeping
or for any retail sales on premises or for illegal purposes.
4. Premises Closure. Tenant shall see that the doors of the Premises are
----------------
closed and securely locked before leaving the Building and that all water
faucets, water apparatus and Electricity within the Premises are entirely shut
off before Tenant or Tenant's employees leave the Building, except to the extent
necessary to the operation of Tenant's business and monitored. Tenant shall be
responsible for any damage to the Building or other Tenants caused by Tenant's
negligent failure to entirely shut off all water faucets, water apparatus and
electricity.
5. Disorderly Conduct. Landlord reserves the right to exclude or expel from
------------------
the Building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of these Rules and Regulations.
6. Fire Regulations. Tenant agrees that it shall comply with all fire
----------------
regulations that may be issued from time to time by Landlord and Tenant also
shall provide Landlord with the names of a designated responsible employee to
represent Tenant in all matters pertaining to fire regulations.
7. Emergency Information. Upon written request of Landlord, Tenant will
---------------------
provide Landlord with names and telephone numbers to contact in case of
emergency.
8. No Antennas. Tenant shall not install any radio or television antenna,
-----------
loudspeaker or other devices on the roof or exterior walls of the Building,
without Landlord's prior knowledge and written consent which shall not be
unreasonably withheld or delayed. Tenant shall not interfere with radio or
television broadcasting or reception from or in the Building or the Project.
9. Prohibited Uses. No cooking shall be done or permitted on the Premises
---------------
without Landlord's consent, except that use by Tenant of Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages or use of refrigerators or microwave ovens for employee use shall be
permitted, provided that all use of Tenant's equipment is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.
10. Security of Premises. Tenant assumes any and all responsibility for and
--------------------
agrees to use its best efforts to protect its Premises from theft, robbery and
pilferage, which includes keeping doors locked and other means of entry to the
Premises closed.
<PAGE>
11. Lease. These Rules and Regulations are in addition to and shall be made a
-----
part of, the terms, covenants, agreements and conditions of Tenant's Lease, and
shall be construed consistent with the Lease, if possible, however, if
provisions of this
Rules and Regulations are otherwise inconsistent with the specific terms and
provisions of the Lease Agreement, such terms and conditions of the Lease
Agreement shall supersede and take precedence over these Rules and Regulations.
12. Additional Rules. Landlord reserves the right to make such other
----------------
reasonable Rules and Regulations as, in its reasonable judgment, may from time
to time be needed for safety and security, for care and cleanliness of the
Building and for the preservation of good order therein. Tenant agrees to abide
by all such Rules and Regulations hereinabove stated and any additional or
modified Rules and Regulations which are adopted by Landlord. Said additional
or modified Rules and Regulations shall be delivered by Landlord to Tenant and
upon delivery shall be immediately enforceable.
13. Parking.
-------
a. Landlord hereby grants to Tenant, its employees and invitees a nonexclusive
license to use the designated parking areas on an unreserved, first come, first
serve basis for the parking of motor vehicles during the term of this Lease.
Parking is prohibited in such areas as may be reasonably designated by Landlord
or Landlord's agent from time to time.
b. Landlord shall not be liable for damage to vehicles, persons, or any
consequential loss suffered by Tenant, its employees, invitees, licensees,
suppliers, agents, the driver or owner.
c. Tenant or its customers, suppliers, employees or invitees shall not use
motor homes or other similar vehicles in the parking areas and shall not leave
vehicles in the parking area overnight or for any extended period of time, nor
park any vehicles in the parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks not more than
20 feet in length. Provided that, from time to time, Tenant may park passenger
automobiles overnight.
d. All directional signs and arrows must be observed. The speed limit within
all parking areas shall be 5 miles per hour.
e. Landlord or its agents shall have the right to cause to be removed any car
of Tenant, its employees, invitees, licensees, or agents, that may be parked in
unauthorized areas or in violation of governmental authority. Tenant agrees to
be liable to Landlord, for any and all claims, losses, damages and attorneys'
fees and costs of litigation asserted or arising in respect to or in connection
with the removal of Tenant's, its employees' or guest's vehicle and for all
expenses incurred by Landlord in connection with such removal.
f. Landlord reserves the right to modify and/or adopt such other Rules and
Regulations for the parking facilities. Landlord may refuse to permit any
person who violates these rules and Regulations to park in the parking
facilities, and any violation shall subject the car to removal at the owner's
expense. Landlord agrees to work with appropriate representatives of Tenant in
carrying out any of the above which requires removal of any vehicles.
-2-
<PAGE>
Exhibit 21.1
Subsidiares of the Registrant
Liberty Systems International, Inc., a Georgia corporation
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 10, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 164,550 882,178
<SECURITIES> 0 0
<RECEIVABLES> 665,679 3,564,387
<ALLOWANCES> 41,500 50,000
<INVENTORY> 1,802,716 2,422,382
<CURRENT-ASSETS> 2,708,416 7,280,827
<PP&E> 1,700,935 2,454,656
<DEPRECIATION> 670,266 1,183,459
<TOTAL-ASSETS> 4,234,939 10,014,232
<CURRENT-LIABILITIES> 6,372,469 7,835,486
<BONDS> 0 0
0 0
0 0
<COMMON> 73 73
<OTHER-SE> (3,154,387) 3,489,259
<TOTAL-LIABILITY-AND-EQUITY> 4,234,939 10,014,232
<SALES> 15,881,995 19,986,230
<TOTAL-REVENUES> 15,881,995 19,986,230
<CGS> 12,162,716 14,246,158
<TOTAL-COSTS> 12,162,716 14,246,158
<OTHER-EXPENSES> 5,819,849 6,401,781
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 166,478 305,565
<INCOME-PRETAX> (1,860,756) (394,772)
<INCOME-TAX> (709,165) (145,635)
<INCOME-CONTINUING> (1,151,591) (249,137)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,151,591) (249,137)
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