<PAGE>
As filed with the Securities and Exchange Commission on January 17, 1997
Registration No. 333-17723
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, no par value....... $40,710,000 $12,337
- ------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(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.
(3) Previously paid.
--------------
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
January 17, 1997
2,950,000 Shares
LOGO
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 $9.00 and $11.00 per share. See "Underwriting"
for the factors to be considered in determining the initial public offering
price. The Company has applied 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......................... $ $ $ $
- -------------------------------------------------------------------------------
Total(2).......................... $ $ $ $
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(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>
[inside front cover graphics]
TITLE: The Convenience Store Solution
GRAPHIC: A picture of a computer terminal and keyboard. Displayed on the
terminal is a screen from the Company's Core-Tech software
application entitled "6 Month Margin Summary by Department." The
screen displays financial data in tabular form, as well as
graphically on a pie chart and a bar chart.
A second picture shows one of the Company's Compu-Touch point of
sale terminals. The terminal screen shows a series of "buttons"
ranging from "Drawer Totals," "Tank Reading," and "Select Pump" to
"Lottery" and "Money Order." The touch screen capability of the
terminal is demonstrated by a human finger which is shown touching
the "Lottery" button.
SUPPORTING
TEXT: "Core-Tech Headquarters-Based Management System. Compu-Touch POS."
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>
GATE
- ----
TITLE: The Radiant Solution
GRAPHIC: 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 based 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 based systems, etc.) upon
that disc. 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 toward the center, representing
the Company's consulting and implementation services, connected with
each disc with a dotted line.
<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 division. 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 including 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 MediaClient platform. This platform
allows multiple multimedia software applications to operate on separate
terminals simultaneously, all driven by a single PC. As of December 31, 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 MediaClient, 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....................................... 11,317,792 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) 3,383,762 shares of Common Stock issuable upon the exercise of
stock options outstanding as of January 15, 1997, of which options to
purchase 413,512 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) 788,669 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>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
PRO FORMA
CONSOLIDATED
1992 1993 1994 1995 1996 1996 (1)
------ ------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Systems sales.......... $1,079 $3,748 $13,529 $14,078 $35,888 $35,888
Customer support,
maintenance and other
services.............. 412 552 919 1,804 5,055 5,055
------ ------ ------- ------- ------- -------
Total revenues.......... 1,491 4,300 14,448 15,882 40,943 40,943
Cost of revenues:
Systems sales........... 462 2,307 9,459 9,863 22,270 22,270
Customer support,
maintenance and other
services.............. 366 588 1,208 2,300 5,465 5,465
------ ------ ------- ------- ------- -------
Total cost of revenues.. 828 2,895 10,667 12,163 27,735 27,735
------ ------ ------- ------- ------- -------
Gross profit............ 663 1,405 3,781 3,719 13,208 13,208
Income (loss) from
operations before
purchased research and
development costs...... 26 547 (94) (2,101) 1,781 1,608
Purchased research and
development costs...... -- -- -- -- 3,930 30
Income (loss) from
operations............. 26 547 (94) (2,101) (2,149) 1,578
Interest expense, net... 3 19 82 166 712 980
Other (income).......... -- -- -- (406) -- --
Minority interest in
earnings of PrysmTech.. -- -- -- -- 628 --
------ ------ ------- ------- ------- -------
Income (loss) before
provision
for income taxes....... 23 528 (176) (1,861) (3,489) 598
Pro forma income tax
provision
(benefit)(2)........... 11 206 (61) (709) (1,333) 233
------ ------ ------- ------- ------- -------
Pro forma net income
(loss)................. $ 12 $ 322 $ (115) $(1,152) $(2,156) $ 365
====== ====== ======= ======= ======= =======
Pro forma net income
(loss) per common and
common equivalent
share(3)............... $ (0.19) $ 0.03
======= =======
Weighted average common
and common equivalent
shares outstanding..... 11,139 11,816
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED(4)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $ 812 $13,284
Total assets ........................................... 14,616 27,475
Long-term debt and shareholder loans,
including current portion ............................. 9,174 715
Shareholders' equity (deficit).......................... (4,500) 17,504
</TABLE>
5
<PAGE>
- --------
(1) Pro forma consolidated data is presented assuming that the purchase of
PrysmTech had been consummated on January 1, 1996. Pro forma adjustments
were recorded to include increased interest and amortization expense,
elimination of one-time purchased research and development costs ($3.9
million), elimination of minority interest in earnings, income tax effects
and the effect of dilutive common stock equivalents. See Note 4 to the
combined financial statements of the Company.
(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 $(.16) for the year
ended December 31, 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 $10.00
per share and the exercise of outstanding warrants to purchase 1,306,460
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. 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, MediaClient(TM) 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 December 31, 1996,
the Company had an accumulated deficit of $7.7 million. The Company incurred
net losses of $2.2 million, $1.2 million and $115,000 for fiscal 1996, 1995
and 1994, respectively. There can be no assurance that the Company will be
able to achieve profitability for fiscal 1997 and beyond. The Company
anticipates that completing its products under development, including those
purchased from PrysmTech, 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. With a limited number of customers,
fluctuations in their purchasing patterns resulting from budgeting or other
considerations can have a significant effect on the Company's quarterly
results. For example, in the fourth quarter of 1995 a large customer
accelerated its purchase of the Company's products, which resulted in higher
revenues and earnings for the Company in that quarter. As a result, systems
sales to this customer were lower in the following quarter. Any significant
cancellation or deferral of customer orders could also 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 74.8% of the Company's total revenues in 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 1996, approximately 60.2% 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 has a
substantial ongoing commitment to research and development. In this regard,
the Company is currently designing, coding and testing a number of new
products and developing expanded functionality of its current products that
will be important for the Company to remain competitive. The cost of the
Company's research and development efforts are expected to approximate $6.0
million in 1997. 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
8
<PAGE>
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
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 Technology Platform."
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 59.3% of the Common Stock then outstanding (approximately 56.3%
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."
Payments to Affiliates; Broad Discretion over Use of Proceeds. The net
proceeds of this Offering (estimated to be approximately $22.8 million at an
assumed initial public offering price of $10.00 per share) will be used to
repay indebtedness, repurchase outstanding shares of Common Stock and for
general corporate purposes. Included in the foregoing uses of proceeds are
payments to certain affiliates of the Company, as follows: (i) the repayment
of approximately $8.7 million of indebtedness to five shareholders of the
Company; and (ii) the repurchase of 788,669 shares of Common Stock for a total
of approximately $2.1 million from two shareholders of the Company. See "Use
of Proceeds" and "Certain Transactions." Approximately 52.1% of the net
proceeds to the Company of this offering ($11.9 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 has applied 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 11,317,792 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
8,367,792 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 certain 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 holders of 343,638 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 holders pursuant to the exercise of
their 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's Amended and Restated Articles of
Incorporation 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 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 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 $10.00 per share, are estimated to be approximately $22.8 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 31, 1996) (the "Sirrom
Debt"), (ii) to repay debt incurred in connection with the acquisition of
PrysmTech ($3.2 million at December 31, 1996) (the "PrysmTech Debt"), (iii) to
repay an outstanding note to Emro Marketing Company, a customer of the Company
(approximately $918,000 at December 31, 1996) (the "Emro Note"), (iv) to repay
an outstanding note to Lawrence D. Parker, a shareholder of the Company (the
"Shareholder Note") (approximately $170,000 at December 31, 1996), (v) to
repurchase 788,669 shares of Common Stock for a total of approximately $2.1
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 was incurred in connection with the
acquisition of PrysmTech in December 1996, bears interest at a rate of 8.5%
and is 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 $11.9 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, provides that the Company may not
pay dividends (other than certain S-corporation distributions), without the
prior consent of Sirrom. 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 (i) the actual indebtedness and
capitalization of the Company as of December 31, 1996, (ii) pro forma to
reflect the issuance of 1,131,818 shares of Common Stock upon the exercise of
outstanding stock purchase warrants which terminate if not exercised upon the
completion of this offering and the receipt by the Company of net proceeds
therefrom of $960,000, and (iii) pro forma as adjusted to reflect the issuance
of 174,642 shares of Common Stock upon the exercise of additional outstanding
stock purchase warrants and the receipt by the Company of proceeds of $2,000,
the repurchase of 788,669 shares of Common Stock for a total of approximately
$2.1 million and the sale by the Company of 2,500,000 shares of Common Stock
offered hereby (at an assumed initial public offering price of $10.00 per
share) and the application of the estimated net proceeds therefrom as
described under "Use of Proceeds." See also "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>
DECEMBER 31, 1996
-------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and
shareholder loans............................. $ 709 $709 $ 408
------ ------ -------
Long-term debt and shareholder loans.......... $8,465 $8,465 $ 307
Put Warrants.................................. 513 513 --
Shareholders' equity (deficit):
Common stock, no par value per share,
30,000,000 shares
authorized, 8,300,001 shares issued and
outstanding;
9,431,819 pro forma shares issued and
outstanding;
11,317,792 pro forma as adjusted shares
issued and
outstanding (1)(2).......................... -- -- --
Additional paid-in capital................... 2,100 4,205(3) 25,321(4)
Warrants..................................... 1,185 40 40
Deferred sales discount...................... (132) -- --
Accumulated deficit.......................... (7,653) (7,653) (7,857)(5)
------ ------ -------
Total shareholders' equity (deficit)....... (4,500) (3,408) 17,504
------ ------ -------
Total capitalization...................... $4,478 $5,570 $17,812
====== ====== =======
</TABLE>
- --------
(1) Actual, pro forma and pro forma as adjusted shares issued and outstanding
exclude (i) an aggregate of 4,000,000 shares of Common Stock reserved for
issuance under the Company's Amended and Restated 1995 Stock Option Plan,
of which 3,069,750 shares were subject to outstanding stock options as of
December 31, 1996, and (ii) 264,000 shares of Common Stock issuable upon
the exercise of non-qualified stock options which were outstanding on
December 31, 1996. Actual shares issued and outstanding exclude 1,326,460
shares of Common Stock issuable upon the exercise of stock purchase
warrants which were outstanding on December 31, 1996. Options to purchase
337,500 shares of Common Stock were exercisable as of December 31, 1996.
See "Management - Stock Option Plan" and Note 7 to the combined financial
statements of the Company.
(2) Pro forma issued and outstanding shares includes 1,131,818 shares of
Common Stock issuable upon the exercise of stock purchase warrants which
will be exercised by Emro Marketing Company upon the completion of this
offering (the "Emro Shares"). Pro forma as adjusted issued and outstanding
shares (i) 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 the Emro
Shares, and (ii) excludes 788,669 shares of Common Stock which will be
repurchased by the Company with the proceeds of this offering. See "Use of
Proceeds" and "Principal and Selling Shareholders."
(3) Includes $960,000 to be received upon the exercise of the stock purchase
warrants by Emro Marketing Company.
(4) Includes $962,000 to be received upon the exercise of the stock purchase
warrants referred inNote 2, above.
(5) Includes the write-off of unamortized loan origination costs and debt
discount of $60,000 and $144,000, respectively, at December 31, 1996, net
of tax benefit.
13
<PAGE>
DILUTION
The net tangible book value of the Company at December 31, 1996, was
approximately ($6.3 million) or $(0.76) 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 $10.00 per share, the exercise of
outstanding stock purchase warrants to purchase 1,306,460 shares of Common
Stock (the "Warrants") and the repurchase by the Company of 788,669 shares of
Common Stock (the "Stock Repurchase"), the pro forma net tangible book value
of the Company at December 31, 1996 would have been $15.7 million or $1.39 per
share of Common Stock. This represents an immediate increase in net tangible
book value of $2.15 per share to existing shareholders and an immediate
dilution in net tangible book value of $8.61 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............. $10.00
Net tangible book value per share at December 31, 1996..... $(0.76)
Increase per share attributable to new investors........... 2.15
------
Pro forma net tangible book value per share after this
offering.................................................... 1.39
------
Net tangible book value dilution per share to new
investors................................................... $ 8.61
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
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 shareholders and by new investors purchasing the shares of Common
Stock offered hereby, assuming an initial public offering price of $10.00 per
share:
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
------------------ ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 9,606,461 79.3% $ 3,062,000 10.9% $ .32
New investors.............. 2,500,000 20.7 25,000,000 89.1 $10.00
---------- ----- ----------- -----
Total..................... 12,106,461 100.0% $28,062,000 100.0%
========== ===== =========== =====
</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 December 31, 1996 to be reduced to 8,367,792 shares,
or 73.9% 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
December 31, 1996 to be 2,950,000 shares, or 26.1% 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 December 31, 1996. As of December 31, 1996, there were options
outstanding to purchase a total of 3,333,750 shares of Common Stock (including
options to purchase 264,000 shares issued outside of the 1995 Stock Option
Plan) at a weighted average exercise price of $2.59 per share and 930,250
additional shares were reserved for grant of future options under the
Company's 1995 Stock Option Plan. See "Management--Stock Option Plan" and Note
7 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 FINANCIAL DATA
The following table sets forth selected combined financial data of the
Company for the periods indicated, which data has been derived from the
combined financial statements of the Company. The combined financial
statements of the Company as of December 31, 1994, 1995 and 1996, and for each
of the years in the four-year period ended December 31, 1996, have been
audited by Arthur Andersen LLP, independent public accountants. This selected
combined financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the combined financial statements of the Company and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1992 1993 1994 1995 1996
------ ------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Systems sales....................... $1,079 $3,748 $13,529 $14,078 $35,888
Customer support, maintenance and
other services..................... 412 552 919 1,804 5,055
------ ------ ------- ------- -------
Total revenues..................... 1,491 4,300 14,448 15,882 40,943
Cost of revenues:
Systems sales....................... 462 2,307 9,459 9,863 22,270
Customer support, maintenance and
other services..................... 366 588 1,208 2,300 5,465
------ ------ ------- ------- -------
Total cost of revenues............. 828 2,895 10,667 12,163 27,735
------ ------ ------- ------- -------
Gross profit......................... 663 1,405 3,781 3,719 13,208
Operating expenses:
Product development................. 196 271 984 1,640 3,328
Purchased research and development
costs............................... -- -- -- -- 3,930
Sales and marketing................. 203 209 470 607 1,487
Depreciation and amortization....... 19 46 178 583 948
General and administrative.......... 219 332 2,243 2,990 5,664
------ ------ ------- ------- -------
Income (loss) from operations........ 26 547 (94) (2,101) (2,149)
Interest expense, net................ 3 19 82 166 712
Minority interest in earnings of
PrysmTech............................ -- -- -- -- 628
Other (income)....................... -- -- -- (406) --
------ ------ ------- ------- -------
Income (loss) before provision for
pro forma income taxes.............. 23 528 (176) (1,861) (3,489)
Pro forma income tax provision
(benefit)(1)......................... 11 206 (61) (709) (1,333)
------ ------ ------- ------- -------
Pro forma net income (loss).......... $ 12 $ 322 $ (115) $(1,152) $(2,156)
====== ====== ======= ======= =======
Pro forma net income (loss) per
common and
common equivalent shares(2)......... $ (0.19)
=======
Weighted average common and common
equivalent
shares outstanding.................. 11,139
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1992 1993 1994 1995 1996
----- ----- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $(310) $(102) $(1,027) $(3,664) $ 812
Total assets....................... 409 2,716 4,818 4,235 14,616
Long-term debt and shareholder
loan,
including current portion......... 7 89 1,067 970 9,174
Shareholders' equity (deficit)..... (273) 145 (722) (3,154) (4,500)
</TABLE>
- --------
(1) 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.
(2) 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 $(.16)
for the year ended December 31, 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 18.3% of the Company's total
revenues in 1994, 1995 and 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. On December 31, 1996,
the Company purchased the remaining interest in PrysmTech. Accordingly, the
operations of PrysmTech are reflected in the 1996 financial statements of the
Company. 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 has resulted in
profitability since the second quarter of 1996, before accounting for one-
time, nonrecurring purchased research and development costs.
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>
YEAR ENDED DECEMBER 31,
---------------------------
<S> <C> <C> <C>
1994 1995 1996
------- ------- -------
Revenues:
Systems sales................................... 93.6 % 88.6 % 87.7 %
Customer support, maintenance and other
services....................................... 6.4 11.4 12.3
------- ------- -------
Total revenues................................ 100.0 100.0 100.0
Cost of revenues:
Systems sales................................... 65.4 62.1 54.4
Customer support, maintenance and other
services....................................... 8.4 14.5 13.3
------- ------- -------
Total cost of revenues........................ 73.8 76.6 67.7
------- ------- -------
Gross profit..................................... 26.2 23.4 32.3
Operating expenses:
Product development............................. 6.8 10.3 8.1
Purchased research and development costs........ -- -- 9.6
Sales and marketing............................. 3.3 3.8 3.6
Depreciation and amortization................... 1.3 3.7 2.3
General and administrative...................... 15.5 18.8 13.9
------- ------- -------
Income (loss) from operations.................... (0.7) (13.2) (5.2)
Interest expense, net............................ 0.5 1.0 1.7
Minority interest................................ -- -- 1.6
Other (income)................................... -- (2.5) --
------- ------- -------
(Loss) before pro forma income taxes............. (1.2) (11.7) (8.5)
Pro forma income tax (benefit)................... (0.4) (4.4) (3.3)
------- ------- -------
Pro forma net (loss)............................. (0.8)% (7.3)% (5.2)%
======= ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 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 154.9% to $35.9 million for the year ended December 31, 1996
("fiscal 1996"), compared to $14.1 million for the year ended December 31,
1995 ("fiscal 1995"). The increase related to sales and license fees from new
and existing customers, as well as the acquisition and consolidation of
PrysmTech that contributed $9.1 million to system sales in fiscal 1996.
Additionally, the Company introduced several new products in fiscal 1996,
including Core-Tech, OrderPoint, its MediaClient 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 180.2% to $5.1 million for fiscal 1996, compared to $1.8 million for
fiscal 1995. The increase was due to increased support, maintenance and
services revenues, including $1.1 million related to PrysmTech, and the
establishment and expansion of Company's Radiant Solutions Group.
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
17
<PAGE>
increased 125.8% to $22.3 million for fiscal 1996, compared to $9.9 million
for fiscal 1995. The increase was directly attributable to the increase in
systems sales, including PrysmTech's sales. Cost of systems sales as a
percentage of total revenues declined to 54.4% from 62.1%. Cost of systems
sales as a percentage of systems revenues declined to 62.1% from 70.1%. The
decreases were due to increased sales of existing and newly introduced and
acquired products, such as Core-Tech and the PrysmTech product line, which
have higher margins than site-based systems sold by the Company in prior
years.
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 137.6% to $5.5
million for fiscal 1996 from $2.3 million for fiscal 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, as well
as the inclusion of PrysmTech's results. Cost of customer support, maintenance
and other services as a percentage of total revenues declined to 13.3% from
14.5%. Cost of customer support, maintenance and other services as a
percentage of customer support, maintenance and other services revenues
declined to 108.1% from 127.5%. These declines reflect higher service margins
from PrysmTech operations, partially offset by the Company's investment in the
Radiant Solutions Group.
Product Development Expenses. Product development expenses consist primarily
of wages and materials expended on product development efforts. Product
development expenses increased 102.9% to $3.3 million for fiscal 1996,
compared to $1.6 million for fiscal 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, as well as the inclusion of
PrysmTech's results. Product development expenses as a percentage of total
revenues declined to 8.1% from 10.3% because total revenues increased at a
faster pace than product development expenses. The Company capitalizes a
portion of its software development costs. In fiscal 1996, software
development costs of $635,000 were capitalized by the Company, as compared to
$329,000 for fiscal 1995. The Company capitalized 16.0% of its product
development costs in fiscal 1996, as compared to 16.7% for fiscal 1995.
Purchased Research and Development Costs. Purchased research and development
costs were $3.9 million for fiscal 1996. These one-time, nonrecurring costs
represent in-process research and development costs expensed by the Company in
connection with its acquisition of PrysmTech.
Sales and Marketing Expenses. Sales and marketing expenses increased 145.1%
to $1.5 million during fiscal 1996, compared to $607,000 for fiscal 1995. The
increase was associated with the Company's expansion of its sales force, the
inclusion of PrysmTech's results and increased commission expense attributable
to higher sales. Sales and marketing expenses as a percentage of total
revenues declined to 3.6% from 3.8%.
Depreciation and Amortization. Depreciation and amortization expenses
increased 62.5% to $948,000 for fiscal 1996, compared to $583,000 for fiscal
1995. The increase resulted from an increase in computer equipment and other
assets required to support an increased number of employees, as well as the
inclusion of PrysmTech's results. Depreciation and amortization as a
percentage of total revenues declined to 2.3% from 3.7% during the period,
primarily because revenues increased at a faster pace than associated
personnel support costs. Additionally, amortization of capitalized software
development costs increased 140.8% to $239,000 for fiscal 1996, compared to
$99,000 for fiscal 1995 as a result of higher capitalized software development
costs.
General and Administrative Expenses. General and administrative expenses
increased 89.4% to $5.7 million for fiscal 1996, compared to $3.0 million for
fiscal 1995. The increase was due primarily to personnel increases in fiscal
1996, as well as the inclusion of PrysmTech's results. General and
administrative expenses as a percentage of total revenues declined to 13.9%
from 18.8% as a result of higher sales volumes.
18
<PAGE>
Interest Expense. Interest expense increased 327.6% to $712,000 for fiscal
1996, compared to $166,000 for fiscal 1995. The increase resulted from the
Company borrowing $4.5 million in the second and third quarters of fiscal 1996
and the borrowing costs associated therewith. Interest expense as a percentage
of total revenues increased to 1.7% from 1.0% due to the increase in
borrowings.
Minority Interest in Earnings of PrysmTech. In fiscal 1996, the minority
interest in earnings of PrysmTech was $628,000, compared to none in fiscal
1995. This amount reflects the pro rata ownership interest not owned by the
Company.
Other Income. In fiscal 1996, the Company recognized no other income. In
fiscal 1995, the Company recognized $406,000 in other income, which primarily
represented a gain on the sale of Company assets.
Pro Forma Income Tax Provision (Benefit). The pro forma effective tax rate
for fiscal 1996 was a benefit of 38.2%, compared to a benefit of 38.1% for
fiscal 1995.
Pro Forma Net Income (Loss). Pro forma net loss increased 87.2% to $2.2
million for fiscal 1996, compared to $1.2 million for fiscal 1995. The
increase in net loss resulted primarily from one-time, nonrecurring charges
for purchased research and development costs, partially offset by increased
revenues and improved margins in fiscal 1996 over fiscal 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 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 96.4% 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 declined 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 of 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.
20
<PAGE>
QUARTERLY INFORMATION
The following tables set forth certain unaudited financial data for each of
the Company's last eight 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, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Systems sales.......... $4,521 $2,377 $2,549 $4,631 $3,849 $9,752 $9,741 $12,546
Customer support,
maintenance and other
services.............. 461 461 444 438 698 1,097 1,448 1,812
------ ------ ------ ------ ------ ------ ------ -------
Total revenues........ 4,982 2,838 2,993 5,069 4,547 10,849 11,189 14,358
Cost of revenues:
Systems sales.......... 3,436 1,549 1,784 3,093 2,768 6,331 5,592 7,579
Customer support,
maintenance and other
services.............. 555 538 568 640 1,003 1,215 1,600 1,646
------ ------ ------ ------ ------ ------ ------ -------
Total cost of
revenues............. 3,991 2,087 2,352 3,733 3,771 7,546 7,192 9,225
------ ------ ------ ------ ------ ------ ------ -------
Gross profit............ 991 751 641 1,336 776 3,303 3,997 5,133
Operating expenses:
Product development.... 347 409 417 467 701 768 900 959
Purchased research and
development costs..... -- -- -- -- -- 30 -- 3,900
Sales and marketing.... 149 179 109 170 285 292 311 599
Depreciation and
amortization.......... 128 126 133 196 194 224 265 265
General and administra-
tive.................. 706 719 738 827 1,010 1,407 1,394 1,854
------ ------ ------ ------ ------ ------ ------ -------
Income (loss) from oper-
ations................. (339) (682) (756) (324) (1,414) 582 1,127 (2,444)
Interest expense, net... 31 27 25 84 39 40 229 404
Other (income).......... -- (374) -- (33) -- -- -- --
Minority interest in
earnings of PrysmTech.. -- -- -- -- 55 215 206 152
------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before pro
forma income taxes..... (370) (335) (781) (375) (1,508) 327 692 (3,000)
Pro forma income tax
provision (benefit).... (141) (128) (297) (143) (576) 125 264 (1,146)
------ ------ ------ ------ ------ ------ ------ -------
Pro forma net income
(loss)................. $ (229) $ (207) $ (484) $ (232) $ (932) $ 202 $ 428 $(1,854)
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems sales.......... 90.7% 83.8% 85.2% 91.4% 84.7% 89.9% 87.1% 87.4%
Customer support,
maintenance and other
services.............. 9.3 16.2 14.8 8.6 15.3 10.1 12.9 12.6
----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Systems sales.......... 69.0 54.6 59.6 61.0 60.9 58.4 50.0 52.8
Customer support,
maintenance and other
services.............. 11.1 18.9 19.0 12.6 22.1 11.2 14.3 11.5
----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............. 80.1 73.5 78.6 73.6 83.0 69.6 64.3 64.3
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 19.9 26.5 21.4 26.4 17.0 30.4 35.7 35.7
Operating expenses:
Product development.... 7.0 14.5 13.9 9.2 15.4 7.1 8.0 6.7
Purchased research and
development costs..... -- -- -- -- -- 0.2 -- 27.2
Sales and marketing.... 3.0 6.3 3.6 3.4 6.3 2.7 2.8 4.1
Depreciation and amor-
tization.............. 2.5 4.4 4.5 3.9 4.2 2.1 2.4 1.8
General and administra-
tive.................. 14.2 25.3 24.7 16.3 22.2 12.9 12.4 12.9
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from oper-
ations................. (6.8) (24.0) (25.3) (6.4) (31.1) 5.4 10.1 (17.0)
Interest expense, net... 0.6 1.0 0.8 1.7 0.9 0.4 2.1 2.8
Other (income).......... -- (13.2) -- -- -- -- -- --
Minority interest....... -- -- -- -- 1.2 2.0 1.8 1.1
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before pro
forma income taxes..... (7.4) (11.8) (26.1) (7.4) (33.2) 3.0 6.2 (20.9)
Pro forma income tax
provision (benefit).... (2.8) (4.5) (9.9) (2.8) (12.7) 1.1 2.4 (8.0)
----- ----- ----- ----- ----- ----- ----- -----
Pro forma net income
(loss)................. (4.6)% (7.3)% (16.2)% (4.6)% (20.5)% 1.9% 3.8% (12.9)%
===== ===== ===== ===== ===== ===== ===== =====
</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 December 31, 1996, the Company had $2.3 million in
cash and cash equivalents.
The Company's operating activities provided cash in fiscal 1994 and 1995 of
$844,000 and $841,000, respectively, while during fiscal 1996 the Company's
operating activities used cash of $1.4 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 fiscal 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 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 1994, 1995 and 1996 was
$537,000, $641,000 and $727,000, respectively. Such investing activities
primarily consisted of purchases of property and equipment and capitalized
software development costs.
Cash used in financing activities was $249,000 and $402,000 in fiscal 1994
and 1995, respectively, while $4.3 million was provided by financing
activities during fiscal 1996. Financing activities during fiscal 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 purchased equipment under capital lease agreements
22
<PAGE>
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 and $3.2 million in connection with the PrysmTech
acquisition. 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.
Purchases of property and equipment were approximately $303,000, $312,000
and $493,000 in fiscal 1994, 1995 and 1996, respectively. These expenditures
were primarily for purchases of computer equipment, furniture and fixtures.
Total product development expenditures were $1.1 million, $2.0 million and
$4.0 million in fiscal 1994, 1995 and 1996, respectively. The cost of research
and development is expected to approximate $6.0 million in 1997.
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 31, 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 acquisition of PrysmTech in December 1996 the Company
issued promissory notes in the principal amount of $3.2 million. These notes
are 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 1,306,460 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, research and development 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.
23
<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 division. 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.
24
<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. Based in part upon industry association reports and other
studies, as well as the Company's experience in marketing its products, 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.
25
<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:
LOGO
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.
26
<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.
27
<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 approximately
74.8% of the Company's total revenues in 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-Based 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: MediaClient MediaClient MediaClient
</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
28
<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 31, 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.
29
<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 31, 1996, the Company had installed
Core-Tech at several headquarters locations, including those at 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.
30
<PAGE>
The Company believes that Core-Tech is one of the most functional and
comprehensive headquarters management applications 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 31,
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, as follows: Conoco, Inc. (52.1% in
1994 and 15.8% in 1995) and Emro Marketing Company (23.8% in 1994 and 43.6% in
1995). During 1996, four convenience store customers accounted for 51.5% of
the Company's total revenues, as follows: Ultramar Diamond Shamrock
Corporation (21.5%), Emro Marketing Company (13.2%), Sheetz, Inc. (11.7%) and
Conoco, Inc. (5.1%). 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.,
31
<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 31, 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 division.
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 31, 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
32
<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 31, 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 31, 1996, the Company has installed its
technology solutions in approximately 175 of these sites. In 1996, Loews
Theatre Management Corporation accounted for 13.8% of the Company's total
revenues. 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
33
<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
34
<PAGE>
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 TECHNOLOGY PLATFORM
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.
35
<PAGE>
The Company's MediaClient 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
MediaClient platform, only one PC is required -- functionality is duplicated
through specialty peripherals ("MediaClient 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.
LOGO
The Company's MediaClient 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 MediaClient 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, MediaClient 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.
36
<PAGE>
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 31, 1996, the Company employed 265 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
37
<PAGE>
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.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
December 31, 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 Support
H. Martin Rice................ 44 Vice President and Managing Director of
PrysmTech Division
Christopher Lybeer............ 35 Vice President--Convenience Store Division
</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 of the Company since September 1995 and as a director of the Company
since June 1996. 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 Support of the
Company since September 1995. Mr. Taylor served in various capacities with NCR
Corporation (formerly AT&T Global Information
39
<PAGE>
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.
Mr. Rice has served as Vice President of the Company and the Managing
Director of its PrysmTech Division since December 1996. From September 1994
until its acquisition by the Company in December 1996, Mr. Rice served as
President and Chief Executive Officer of PrysmTech, LLC. From 1989 to
September 1994, Mr. Rice served as President of The R.L. Sterling Company, a
consulting company. Prior to 1989, Mr. Rice served as Chief Financial Officer
of MerryLand Realty Trust, a publicly traded REIT, and as a staff accountant
for Price Waterhouse LLP.
Mr. Lybeer has served as Vice President--Convenience Store Division of the
Company since February 1996. From 1994 to 1995, Mr. Lybeer served as Assistant
Vice President--Software Solutions of AT&T Corporation, a telecommunications
company. From 1991 to 1995, Mr. Lybeer served as a Director of Product
Development of NCR Corporation (formerly AT&T Global Information Solutions),
in the retail information systems area.
The Company intends, within 90 days of the date of this Prospectus, to
appoint at least two 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 is divided into three classes, with members of
each class of directors serving for staggered three-year terms. The Board
consists 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 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 and the two other executive officers of the Company whose
total annual salary and bonus exceeded $100,000 during fiscal 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
NAME AND COMPENSATION AWARDS
-------- ------------------ ---------------------------------
PRINCIPAL POSITION SALARY($) BONUS($) SECURITIES UNDERLYING OPTIONS
------------------ --------- -------- -----------------------------
<S> <C> <C> <C> <C>
Erez Goren ............. $ 80,769 $11,197 --
Co-Chairman and Chief
Executive Officer
Carlyle M. Taylor ...... 80,000 28,000 --
Vice President
H. Martin Rice.......... 100,000 98,504 137,500
Vice President
</TABLE>
40
<PAGE>
STOCK OPTION PLAN
On December 20, 1995, the Company's directors and shareholders adopted the
1995 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 currently provides for the grant of
options to purchase up to 4,000,000 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 January 15, 1997, options to purchase
3,119,762 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 January 15, 1997.
The following table provides certain information concerning individual
grants of stock options made during fiscal 1996 to each of the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS EXERCISE ANNUAL RATES
UNDERLYING GRANTED TO OR STOCK PRICE
OPTIONS EMPLOYEES BASE EXPIRATION APPRECIATION FOR
NAME GRANTED IN FISCAL YEAR PRICE DATE OPTION TERM (2)
- ---- ---------- -------------- -------- ---------- ---------------------
5% 10%
--------- -----------
<S> <C> <C> <C> <C> <C> <C>
Erez Goren.............. -- -- -- -- -- --
Carlyle M. Taylor....... -- -- -- -- -- --
H. Martin Rice(1)....... 137,500 8.57% $7.00 2006 $ 605,311 $ 1,533,977
</TABLE>
- --------
(1) Of the total, 57,140 are incentive stock options and 80,360 are non-
qualified stock options. Subject to acceleration upon the occurrence of
certain events, the incentive stock options vest in increments of 14,285
on each of the first, second, third and fourth anniversaries of the date
of grant, December 31, 1996. The non-qualified stock options vest on
December 31, 2004, subject to acceleration upon the attainment of certain
performance targets. See "--Employment Agreement."
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the
5.0% and 10.0% annual rates prescribed by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the price of
the Company's Common Stock.
The following table provides certain information concerning the value of
unexercised options held by the Named Executive Officers under the Company's
1995 Stock Option Plan as of December 31, 1996. No stock options were
exercised during fiscal 1996 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
END FISCAL YEAR END (1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Erez Goren ................. -- -- -- --
Carlyle M. Taylor........... -- 200,000 -- $1,800,000
H. Martin Rice.............. -- 137,500 -- $ 412,500
</TABLE>
- --------
(1) Dollar values were calculated by determining the difference between the
assumed public offering price of $10.00 per share and the exercise price
of the options.
41
<PAGE>
EMPLOYMENT AGREEMENT
On December 31, 1996, in connection with the acquisition of PrysmTech, the
Company entered into an Employment Agreement with H. Martin Rice to serve as
Managing Director of the PrysmTech Division of the Company (the "Agreement").
The term of the Agreement is four years subject to a one-year automatic
extension under certain circumstances. Under the Agreement, Mr. Rice will be
entitled to a base salary of $100,000 per year or a higher amount equal to
that of the Company's highest paid executive officer plus a bonus based upon
the PrysmTech division's net income (as defined in the Agreement), provided
that the base compensation and bonus payable to Mr. Rice under the Agreement
is limited to the greater of $200,000 and the maximum non-contingent and
potential contingent compensation available to any other executive officer of
the Company. The Agreement also provides (i) that Mr. Rice will receive a loan
from the Company in the amount of $165,000 on the closing date of this
offering, which loan will be payable, together with interest at the rate of
7.0% per annum, on December 31, 2001 or earlier out of the proceeds of the
sale of shares of the Company's Common Stock received by Mr. Rice in the
PrysmTech acquisition and (ii) certain insurance, automobile allowance and
other benefits. Under the Agreement, Mr. Rice has been granted options to
purchase 137,500 shares of the Company's Common Stock (the "Stock Options").
See "--Stock Option Plan".
Upon termination of the Agreement (other than voluntarily by Mr. Rice, or by
the Company for cause or upon the death of Mr. Rice), Mr. Rice will be
entitled to a termination payment equal to $16,666 for each partial and full
calendar month then remaining in the term of the Agreement, less any amount
payable to Mr. Rice under any long-term disability insurance maintained by the
Company.
The Agreement provides that if Mr. Rice's employment is terminated during
the term of the Agreement (other than voluntarily by Mr. Rice, or by the
Company for cause or upon the death of Mr. Rice) the Stock Options shall fully
vest on the date of such termination. Also upon such termination Mr. Rice may
require the Company to pay an income tax related bonus and to lend him the
amount payable upon the exercise of his remaining Stock Options.
The Agreement also contains provisions restricting Mr. Rice's ability to
compete with the Company and solicit its customers and employees and
obligating him to protect the confidentiality of the Company's information
following termination of his employment.
AGREEMENTS WITH EMPLOYEES
All employees of the Company, including executive officers, are required to
sign a confidentiality and noncompete 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
42
<PAGE>
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.
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 $61,000 due in May 1997 and
bearing interest at a rate of 8.0%. As of December 31, 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
$473,000 due December 31, 1997, and bearing interest at a rate of 8.0%. As of
December 31, 1996, $170,000 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 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 31, 1996,
$918,000, 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
$5.4 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 1996, respectively.
43
<PAGE>
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, 188,636 shares of Common
Stock will be repurchased by the Company for $1.1 million from the proceeds of
this offering and 624,186 shares of Common Stock will be retained by Emro. See
"Principal and Selling Shareholders" and "Use of Proceeds."
On December 31, 1996, the Company, which previously owned a 50.0% interest in
PrysmTech, acquired the remaining 50.0% interest of PrysmTech from its owners,
including H. Martin Rice, a Vice President of the Company and the Managing
Director of the Company's PrysmTech division. In connection therewith, Mr. Rice
received 150,000 shares of Common Stock of the Company and the Company issued
to Mr. Rice and his affiliates promissory notes totalling $1.5 million. These
notes bear interest at a rate of 8.5% and are due on the earlier of (i)
December 31, 1998 or (ii) the closing of this offering. The Company will
utilize a portion of the proceeds of this offering to repay these notes. See
"Use of Proceeds." The Company has also entered into an employment agreement
with Mr. Rice. See""-- Employment Agreement."
44
<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 31, 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 Named
Executive Officer; (iv) each person known by the Company to own beneficially
more than 5.0% of the outstanding shares of the Common Stock; and (v) 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 NUMBER OF SHARES BENEFICIALLY
OWNED SHARES OWNED
NAME OF BENEFICIAL OWNER PRIOR TO OFFERING(1) OFFERED(2) AFTER OFFERING(2)
- ------------------------ -------------------------- ---------- --------------------------
NUMBER PERCENT NUMBER PERCENT
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Erez Goren(3)........... 3,353,556 40.4% -- 3,353,556 29.6%
Alon Goren(3)........... 3,353,556 40.4 -- 3,353,556 29.6
Eric B. Hinkle.......... 55,000(4) * -- 55,000(4) *
John H. Heyman.......... 350,000(5) 4.1 -- 350,000(5) 3.0
Carlyle M. Taylor....... -- -- -- -- --
H. Martin Rice.......... 150,000 1.8 -- 150,000 1.3
Emro Marketing Company.. 1,131,818(6) 12.0 318,996 624,186(6) 5.5
Sirrom Capital
Corporation............. 174,642(7) 2.1 131,004 43,638 *
Executive officers and
directors
as a group (8
persons)............... 7,272,112(8) 85.2 -- 7,272,112(8) 62.9
</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 188,636 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.
(8) Includes 240,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 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 and will thereafter cease to be
authorized. The following description is qualified in its entirety by reference
to the Company's Amended and Restated Articles of Incorporation (the
"Articles"), and Amended and Restated Bylaws (the "Bylaws"), which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
As of December 31, 1996, there were 6,857,112 shares of Common Stock
outstanding, held of record by five 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 31, 1996, there were 1,442,889 shares of Class A Common Stock
outstanding, held of record by nine 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 and will thereafter cease to be
authorized. 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 Articles 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 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.
46
<PAGE>
Corporate Takeover Provisions. The Company's Bylaws 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 is 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.
The Articles 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, to alter or amend the provisions
of the Articles providing for a staggered board of directors, or to alter or
amend the Bylaws.
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 limit the remedies
available to a shareholder who is dissatisfied with a Board decision protected
by these provisions.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 343,638 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.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
11,317,792 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 8,367,792 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 113,000 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 holders of 343,638 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 certain shareholders
(who will hold an aggregate of 8,349,792 shares of Common Stock upon completion
of this offering) 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.
48
<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
49
<PAGE>
Stock upon exercise of currently outstanding employee stock options.
Directors, executive officers and certain shareholders of the Company, who
will own upon the completion of this offering an aggregate of 8,349,792 shares
of Common Stock and options representing the right to purchase 1,750,100
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. The Company has issued to The Robinson-
Humphrey Company, Inc. a warrant to purchase 20,000 shares of Common Stock for
a term expiring in June 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 in June 1996.
The Company has applied 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, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
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
50
<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.
51
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Combined Balance Sheets--December 31, 1995 and 1996 and pro forma
shareholders' deficit at December 31, 1996.............................. F-3
Combined Statements of Operations for the years ended December 31, 1994,
1995, and 1996.......................................................... F-4
Combined Statements of Shareholders' Equity (Deficit) for the years ended
December 31, 1994, 1995, and 1996 ...................................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1994,
1995, and 1996 ......................................................... 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, 1995 and 1996 and the related
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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, 1995 and 1996 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 15, 1997
F-2
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DEFICIT AT
DECEMBER 31,
1995 1996 1996
---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 164,550 $ 2,342,079
Accounts receivable, net of allowances
for doubtful accounts of $41,500, and
$120,000 in 1995 and 1996,
respectively......................... 624,179 4,885,209
Inventories........................... 1,802,716 3,304,933
Other................................. 116,971 417,351
---------- -----------
Total current assets................ 2,708,416 10,949,572
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $670,266
and $1,438,681 in 1995 and 1996,
respectively........................... 1,030,669 1,517,902
SOFTWARE DEVELOPMENT COSTS, net of
accumulated amortization of $121,365,
and $360,203 in 1995 and 1996,
respectively........................... 340,630 736,418
INTANGIBLES............................. -- 957,405
OTHER ASSETS............................ 155,224 454,579
---------- -----------
$4,234,939 $14,615,876
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable...................... $2,298,068 $ 4,400,654
Accrued liabilities................... 1,264,465 1,975,909
Customer deposits and deferred
revenue.............................. 2,399,596 3,052,518
Current portion of shareholder loans.. 157,361 126,536
Current portion of long term debt..... 252,979 582,230
---------- -----------
Total current liabilities........... 6,372,469 10,137,847
Accrued customer rebates.............. 457,317 0
Shareholder loans, less current
portion.............................. 170,423 3,193,888
Long term debt, less current portion.. 389,044 5,271,368
---------- -----------
Total liabilities................... 7,389,253 18,603,103
---------- -----------
COMMITMENTS
PUT WARRANTS............................ 0 513,200
---------- -----------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, no par value; 20,000,000
shares authorized; 6,857,112 shares
issued and outstanding in 1995 and
1996................................. 63 63 76
Class A common stock, no par value;
10,000,000 shares authorized;
1,142,889 shares issued and
outstanding in 1995 and 1,442,889
shares issued and outstanding in
1996................................. 10 13
Additional paid-in capital............ 0 2,099,997 4,204,997
Warrants.............................. 240,000 1,185,000 40,000
Deferred sales discount............... (111,900) (132,105) 0
Accumulated deficit................... (3,282,487) (7,653,395) (7,653,395)
---------- ----------- ------------
(3,154,314) (4,500,427) $ (3,408,322)
---------- ----------- ============
$4,234,939 $14,615,876
========== ===========
</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, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Systems sales.......................... $13,528,808 $14,077,704 $35,888,342
Customer support, maintenance, and
other services........................ 918,801 1,804,291 5,054,979
----------- ----------- -----------
Total revenues......................... 14,447,609 15,881,995 40,943,321
----------- ----------- -----------
COST OF REVENUES:
Systems sales.......................... 9,459,034 9,862,477 22,270,161
Customer support, maintenance, and
other services........................ 1,207,684 2,300,239 5,464,533
----------- ----------- -----------
Total cost of revenues................. 10,666,718 12,162,716 27,734,694
----------- ----------- -----------
GROSS PROFIT............................ 3,780,891 3,719,279 13,208,627
----------- ----------- -----------
OPERATING EXPENSES:
Product development.................... 983,999 1,639,669 3,327,630
Purchased research and development
costs................................. 0 0 3,930,000
Sales and marketing.................... 470,177 606,658 1,487,087
Depreciation and amortization.......... 177,790 583,483 948,385
General and administrative............. 2,243,097 2,990,039 5,664,246
----------- ----------- -----------
Total operating expenses............... 3,875,063 5,819,849 15,357,348
----------- ----------- -----------
(LOSS) FROM OPERATIONS.................. (94,172) (2,100,570) (2,148,721)
INTEREST EXPENSE, net................... 81,748 166,478 711,848
MINORITY INTEREST IN EARNINGS OF
PRYSMTECH.............................. 0 0 628,137
OTHER (INCOME).......................... 0 (406,292) 0
----------- ----------- -----------
(LOSS) BEFORE PRO FORMA INCOME TAXES.... (175,920) (1,860,756) (3,488,706)
PRO FORMA INCOME TAX (BENEFIT).......... (60,632) (709,165) (1,333,142)
----------- ----------- -----------
PRO FORMA NET (LOSS).................... $ (115,288) $(1,151,591) $(2,155,564)
=========== =========== ===========
PRO FORMA NET (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE................ $ (0.19)
===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING.......... 11,139,109
===========
</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, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK DEFERRED ACCUMULATED
------------------ ---------------- SALES EARNINGS
SHARES AMOUNT SHARES AMOUNT APIC WARRANTS DISCOUNT (DEFICIT) TOTAL
---------- ------ --------- ------ --------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993................... 13,714,224 125 0 0 0 0 0 145,215 145,340
Issuance of customer
warrant............... 0 0 0 0 0 240,000 (240,000) 0 0
Sales of software
licenses under
customer warrant...... 0 0 0 0 0 0 37,500 0 37,500
Treasury stock
purchase.............. (3,428,556) (31) 342,856 3 0 0 0 (573,057) (573,085)
Distributions to
shareholders.......... 0 0 0 0 0 0 0 (156,266) (156,266)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 0 (175,920) (175,920)
---------- --- --------- --- --------- ---------- --------- ----------- -----------
BALANCE, December 31,
1994................... 10,285,668 94 342,856 3 0 240,000 (202,500) (760,028) (722,431)
Sales of software
licenses under
customer warrants..... 0 0 0 0 0 0 90,600 0 90,600
Treasury stock
purchase.............. (3,428,556) (31) 800,033 7 0 0 0 (616,000) (616,024)
Distributions to
shareholders.......... 0 0 0 0 0 0 0 (45,703) (45,703)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 0 (1,860,756) (1,860,756)
---------- --- --------- --- --------- ---------- --------- ----------- -----------
BALANCE, December 31,
1995................... 6,857,112 63 1,142,889 10 0 240,000 (111,900) (3,282,487) (3,154,314)
Issuance of customer
warrant............... 0 0 0 0 0 79,000 (79,000) 0 0
Sales of software
licenses under
customer warrants..... 0 0 0 0 0 0 58,795 0 58,795
Shares issued in
PrysmTech
acquisition........... 0 0 300,000 3 2,099,997 0 0 0 2,100,000
Issuance of warrant for
loan origination
fees.................. 0 0 0 0 0 40,000 0 0 40,000
Accretion of put
warrants.............. 0 0 0 0 0 0 (45,200) (45,200)
Accretion of customer
warrant............... 0 0 0 0 0 826,000 0 (826,000) 0
Distributions to
shareholders.......... 0 0 0 0 0 0 0 (11,002) (11,002)
Loss before pro forma
income taxes.......... 0 0 0 0 0 0 0 (3,488,706) (3,488,706)
---------- --- --------- --- --------- ---------- --------- ----------- -----------
BALANCE, December 31,
1996 .................. 6,857,112 $63 1,442,889 $13 2,099,997 $1,185,000 $(132,105) $(7,653,395) $(4,500,427)
========== === ========= === ========= ========== ========= =========== ===========
</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, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Pro forma net (loss)............... $ (115,288) $(1,151,591) $(2,155,564)
Adjustments to reconcile pro forma
net (loss) to net cash provided by
(used in) operating activities:
Pro forma income tax (benefit).... (60,632) (709,165) (1,333,142)
Depreciation and amortization..... 177,790 583,483 948,385
Amortization of debt discount..... 0 0 305,731
Gain on disposition of assets..... 0 (374,018) 0
Discounts earned on software
license sales.................... 37,500 90,600 58,795
Purchased research and development
costs............................ 0 0 3,930,000
Minority interest in earnings of
PrysmTech........................ 0 0 (628,137)
Changes in assets and liabilities:
Accounts receivable.............. 294,010 255,303 (3,229,660)
Inventories...................... (1,443,175) 287,754 (774,048)
Other assets..................... (37,618) (132,587) (502,992)
Accounts payable................. 539,560 1,177,653 562,634
Accrued liabilities.............. 116,744 1,147,721 711,444
Accrued customer rebates......... 132,804 324,513 57,834
Customer deposits and deferred
revenue......................... 1,201,922 (659,111) 673,790
----------- ----------- -----------
Net cash provided by (used in)
operating activities............ 843,617 840,555 (1,374,930)
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment......................... (303,499) (312,104) (492,650)
Capitalized software development
costs............................. (133,095) (328,900) (634,642)
Purchase of treasury stock......... (100,000) 0 0
Net cash acquired upon purchase of
PrysmTech......................... 0 0 369,950
Purchase of LSI, net of $30,919
cash acquired..................... 0 0 30,819
----------- ----------- -----------
Net cash used in investing
activities...................... (536,594) (641,004) (726,523)
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayments of shareholder loans.... 0 (145,302) (157,361)
Borrowings of long-term debt....... 0 0 4,594,203
Repayments of long-term debt....... (92,928) (169,878) (328,072)
Dividends received from PrysmTech.. 0 0 255,355
Payment of loan origination fees... 0 0 (129,639)
Distributions to shareholders...... (156,266) (45,703) (11,002)
Repayments of note from
shareholder....................... 0 13,628 30,500
Other.............................. 0 (55,000) 25,000
----------- ----------- -----------
Net cash (used in) provided by
financing activities............ (249,194) (402,255) 4,278,982
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................ 57,829 (202,704) 2,177,529
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 309,425 367,254 164,550
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 367,254 $ 164,550 $ 2,342,079
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest.......................... $ 81,748 $ 166,478 $ 432,042
=========== =========== ===========
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Equipment purchases under capital
lease obligations................. $ 598,538 $ 217,568 $ 306,945
=========== =========== ===========
Note issued for treasury stock
purchase.......................... $ 473,085 $ 0 $ 0
=========== =========== ===========
Treasury stock acquired on sale of
noncash assets.................... $ 0 $ 616,024 $ 0
=========== =========== ===========
Warrants issued to customer........ $ 240,000 $ 0 $ 79,000
=========== =========== ===========
Note payable issued for customer
rebates........................... $ 0 $ 0 $ 872,501
=========== =========== ===========
Put warrants issued in connection
with Sirrom Notes................. $ 0 $ 0 $ 468,000
=========== =========== ===========
Warrant issued for loan origination
fees.............................. $ 0 $ 0 $ 40,000
=========== =========== ===========
Accretion of Put Warrants.......... $ 0 $ 0 $ 45,200
=========== =========== ===========
Assumption of net liabilities in
connection with LSI purchase...... $ 0 $ 0 $ 78,349
=========== =========== ===========
Notes payable issued on purchase of
PrysmTech......................... $ 0 $ 0 $ 3,150,000
=========== =========== ===========
Stock issued on purchase of
PrysmTech......................... $ 0 $ 0 $ 2,100,000
=========== =========== ===========
</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, 1995 AND 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.
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.
F-7
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
. 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. Revenues
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, 1995 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Computers and office equipment...................... $1,201,747 $ 2,295,579
Furniture and fixtures.............................. 383,869 488,961
Purchased software.................................. 115,319 172,043
---------- -----------
1,700,935 2,956,583
Less accumulated depreciation and amortization...... (670,266) (1,438,681)
---------- -----------
$1,030,669 $ 1,517,902
========== ===========
</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, 1995 AND 1996
Purchased Research and Development Costs
In connection with the acquisition of LSI in May 1996 and PrysmTech, L.L.C.
("PrysmTech") in December 1996 (Note 4), the Company allocated $30,000 and
$3,900,000, respectively, of the purchase prices to incomplete research and
development projects as determined by independent appraisal. Accordingly,
these costs were expensed as of the acquisition dates. These allocations
represent the estimated fair value based on risk adjusted cash flows 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 these acquisitions will require substantial
additional development by the Company.
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 $45,200 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 5 and 7).
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, 1996.
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, 1995 AND 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 years ended December 31, 1994, 1995,
and 1996, the following clients individually accounted for more than 10% of
the Company's revenue:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A............................................... 52.1% 15.8% * %
Customer B............................................... 23.8 43.6 13.2
Customer C............................................... * * 21.5
Customer D............................................... * * 11.7
Customer E............................................... * * 13.8
</TABLE>
- --------
* Accounted for less than 10% of total revenues for the period indicated.
At December 31, 1996, 57.2% of the Company's accounts receivable related to
these 5 customers.
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.
Reclassifications
Certain reclassifications have been made to prior year financial statements
to conform the current year presentation.
3. PRODUCT DEVELOPMENT EXPENDITURES
Product development expenditures for the years ended December 31, 1995 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Total development expenditures........................ $1,968,569 $3,962,272
Less additions to capitalized software development
costs prior to amortization....................... 328,900 634,642
---------- ----------
Product development expense........................... $1,639,669 $3,327,630
========== ==========
</TABLE>
F-10
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
The activity in the capitalized software development account during 1995 and
1996 is summarized as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Balance at beginning of period, net...................... $110,912 $340,630
Additions............................................... 328,900 634,642
Amortization expense.................................... (99,182) (238,854)
-------- --------
Balance at end of period, net............................ $340,630 $736,418
======== ========
</TABLE>
4. ACQUISITIONS
PrysmTech
In November 1995, the Company and Billmart, L.L.C. ("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.
On December 31, 1996, the Company acquired Billmart's interest in PrysmTech
for 300,000 shares of Common Stock and $3,150,000 in notes. Total
consideration, including transaction costs of approximately $100,000, was
$5,350,000. The transaction was accounted for as a purchase. Based on the
preliminary purchase price allocation, intangibles of $869,000 were recorded,
after adjusting for purchased research and development costs (Note 2), which
are being amortized over five years. The accompanying financial statements
include the operating results of PrysmTech since January 1, 1995 with
deductions for minority interest earnings. Results for 1995 include $32,274 of
earnings from the Company's investment in PrysmTech, which is included in
other income.
The Company's unaudited pro forma results of operations are presented
assuming that the purchase had been consummated January 1, 1996 and are not
necessarily indicative of the results of operations which would have actually
been attained during the year ended December 31, 1996.
<TABLE>
<S> <C>
Pro forma revenue............................................ $40,943,321
===========
Pro forma net income......................................... $ 364,745
===========
Pro forma earnings per share................................. $ 0.03
===========
</TABLE>
Pro forma adjustments were recorded to include (i) increased interest
expense to reflect interest expense on long-term debt that would have been
incurred to finance the purchase and (ii) increased amortization expense as a
result of the excess of the purchase price over the book value (iii)
elimination of minority interest in earnings (iv) elimination of the one-time,
non-recurring charge for purchased research and development costs of
$3,900,000 (v) income taxes for the tax effect of pro forma adjustments and a
pro forma tax provision for PrysmTech as if PrysmTech were liable for federal
and state income taxes using the Company's effective tax rate of 39%. Weighted
average shares were adjusted to give effect to the 300,000 shares issued and
the dilutive effect of CSEs outstanding before the 12-month period prior to
the planned Offering.
LSI
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.
F-11
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
5. LONG-TERM DEBT
Long-term debt, including obligations under capital leases, consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- ----------
<S> <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 $4,266,000
Note payable to Emro Marketing Corporation, interest
at 6%, due in five annual installments of $174,500
through 2001........................................ 0 872,501
Capital lease obligations, interest ranging from 5%
to 31%, payable monthly through 2000, secured by
equipment........................................... 642,023 715,097
-------- ----------
642,023 5,853,598
Less current portion................................. (252,979) (582,230)
-------- ----------
$389,044 $5,271,368
======== ==========
</TABLE>
At December 31, 1996, aggregate maturities of long-term debt, including
obligations under capital leases, are as follows:
<TABLE>
<S> <C>
1997........................................ $ 582,230
1998........................................ 410,559
1999........................................ 226,496
2000........................................ 193,813
2001........................................ 4,440,500
----------
$5,853,598
==========
</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 7, 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 expected life of the related
notes using the effective interest method. At December 31, 1996, the
unamortized debt discount amounted to $234,000.
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, 1995, the Company had recorded a customer rebate accrual of $457,317, 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.
F-12
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
6. 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 asset as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts.............................. $ 46,200
Intangibles.................................................. 1,027,565
Other........................................................ 9,593
----------
Total deferred tax assets.................................. 1,083,358
----------
Deferred tax liabilities:
Depreciation................................................. $ (78,376)
Capitalized software......................................... (283,521)
----------
Total deferred tax liabilities............................. (361,897)
----------
Net pro forma deferred tax asset............................... $ 721,461
==========
</TABLE>
The following summarizes the components of the pro forma income tax
(benefit):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Current taxes:
Federal................................. $ 0 $ 0 $ 0
State................................... 0 0 0
Deferred.................................. (60,632) (709,165) (1,333,142)
-------- --------- -----------
Pro forma income tax (benefit)............ $(60,632) $(709,166) $(1,333,142)
======== ========= ===========
</TABLE>
A reconciliation from the federal statutory rate to the pro forma tax
provision (benefit) is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<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................... 4.0 0.4 .3
----- ----- -----
(34.5)% (38.1)% (38.2)%
===== ===== =====
</TABLE>
7. SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock
As of January 15, 1997, the authorized capital of the Company consists of
40,000,000 shares of capital stock comprised of 30,000,000 shares of no par
Common Stock and 10,000,000 shares of no par Class A Common Stock. Both
classes 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
F-13
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
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. Upon completion of the planned Offering,
the Class A Common Stock will cease to be authorized.
Options
In December 1995, the Company adopted the 1995 Stock Option Plan, as amended
(the "Plan"), under which the Company may grant up to 4,000,000 incentive
Class A Common Stock options to key employees. Options are granted at an
exercise price which is not less than fair 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 December 31, 1996, options to
purchase 930,250 of Class A Common Stock were available for future grant under
the Plan.
The Company has granted 264,000 nonqualified stock options outside the Plan.
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 years ended December 31, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
--------- ----------
<S> <C> <C>
Options outstanding at December 31, 1994............. 0 $ 0.00
Granted............................................. 1,774,000 1.00
Exercised........................................... 0 0.00
---------
Options outstanding at December 31, 1995............. 1,774,000 1.00
Granted............................................. 1,623,750 1.00-7.00
Canceled............................................ (64,000) 1.00-4.50
Exercised........................................... 0 0.00
--------- ----------
Options outstanding at December 31, 1996............. 3,333,750 $1.00-7.00
========= ==========
Exercisable December 31, 1996........................
337,500
=========
</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,
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
Scholes 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........................................... 5.8%
Expected dividend yield........................................... 0.0%
Expected lives.................................................... 4 years
Expected volatility............................................... 56.0%
</TABLE>
F-14
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
The total value of the options granted during the years ended December 31,
1995 and 1996 were computed as approximately $867,000 and $3,527,000,
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 years ended December 31, 1995 and 1996 would have increased to the
following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Net loss:
As reported...................................... $(1,151,591) $(2,155,564)
Pro forma........................................ (1,202,028) (2,984,410)
Primary EPS:
As reported...................................... -- $ (0.19)
Pro forma........................................ -- (0.27)
</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. The Company
is accreting to the expected redemption value of the shares, subject to the
call option. For the year ended December 31, 1996, accretion of $876,000 was
recorded.
Put Warrants
In connection with issuance of the Sirrom Notes (Note 5), 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.
F-15
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
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 $45,200 for the year ended December 31,
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 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 December 31, 1996:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE EXPIRATION
--------- --------- ----------
<S> <C> <C> <C>
Customer warrants............................. 1,131,818 $.85 2014
Put warrants.................................. 174,642 .01 2001
Loan origination warrant...................... 20,000 .01 2001
</TABLE>
8. COMMITMENTS
Leases
The Company leases office space, equipment, and certain vehicles under
noncancelable operating lease agreements expiring on various dates through
2000. At December 31, 1996, future minimum rental payments for noncancelable
leases with terms in excess of one year were as follows:
<TABLE>
<S> <C>
1997................................ $490,242
1998................................ 466,883
1999................................ 460,979
2000................................ 201,589
</TABLE>
Total rent expense under operating leases was $227,267, $374,206, and
$503,530 for the years ended December 31, 1994, 1995, and 1996, respectively.
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 1994, 1995, or 1996.
Employment Agreements
The Company has entered into employment agreements with two employees. Under
each agreement, in the event employment is terminated (other than voluntarily
by the employee or by the Company for cause or upon the death of the
employee), the Company is committed to pay certain benefits, including $16,666
per month from the date of termination to December 31, 2000.
9. 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.
F-16
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1996
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 $131,000 and
$27,500 in 1995 and 1996, 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.
In connection with the acquisition of Billmart's interest in PrsymTech, the
Company issued notes in the amount of $3,150,000 to the former owners of
Billmart (Note 4). These notes are secured by the assets of PrysmTech, bear
interest at 8.5% per annum, and are payable on the earlier of December 31,
1998 or the tenth day following the closing of a stock offering, as defined.
10. 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 $9.00 and $11.00 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 December 31, 1996, gives
effect to the conversion of 1,442,889 shares of Class A Common Stock and
1,131,818 shares issuable under Customer Warrants into Common Stock upon the
close of the Company's planned Offering.
Preferred Stock
In January 1997, the Company authorized 5,000,000 shares of preferred stock
with no par value. The Board of Directors has 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>
INSIDE BACK COVER GRAPHICS
Graphic: A picture of one of the Company's Order Point point of sale terminals
designed for use in the cinema market. The terminal shows a screen for
ordering popcorn, with touch screen "buttons" for "Large," "Medium,"
"Small," and "Collector Tub."
A second picture shows one of the Company's BoxMan point of sale
terminals in use in the ticketing booth of a movie theater. The
terminal screen shows a series of touch screen "buttons" including
buttons for movie titles offered and a number key pad, as well as a
display of the customer's movie order. The touch screen capability
of the terminal is demonstrated by a human hand shown touching a
"button" for a specific movie in response to an order from a customer
shown through the booth's glass front.
A third picture shows one of the Company's Order Point point of sale
terminals designed for use in the quick service restaurant industry.
The terminal shows a series of "buttons" ranging from "Entrees,"
"Salads," "Drinks," and "Deserts" to "Cancel Item" and "Complete
Order," as well as a display of a customer's order by item and price.
Supporting
Text: "Order Point/Cinema. BoxMan Ticketing System. Order
Point/Quick Service Restaurant.
<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 Financial Data......................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 24
Management............................................................... 39
Certain Transactions..................................................... 43
Principal and Selling Shareholders....................................... 45
Description of Capital Stock............................................. 46
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 49
Legal Matters............................................................ 50
Experts.................................................................. 50
Additional Information................................................... 50
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....................... 46,376
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............................................ 66,716
-------
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 conducted himself or herself in good
faith and reasonably believed, in the case of conduct in his or her official
capacity, that such conduct was in the best interests of the Company; in all
other cases, that such conduct was at least not opposed to the best interests
of the Company; and in the case of any criminal proceeding, that he or she had
no reasonable cause to believe such conduct was unlawful. An officer who is
not a director, or an officer who is also a director and is made a party to a
proceeding on the sole basis of an act of omission in his or her capacity as
an officer, may be indemnified as provided by the Articles, Bylaws, a
resolution of the Board or contract; except for liability arising out of
conduct that constitutes (i) an appropriation, in violation of his or her
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 officer received an improper personal benefit. Determination
concerning whether or not
II-1
<PAGE>
the applicable standard of conduct has been met can be made by (a) a majority
of all of the disinterested members of the Board; (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, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the Director has met the relevant standard
of conduct, or (2) in connection with any other proceeding with respect to
conduct for which such person was adjudged liable on the basis that personal
benefit was improperly received by him or her, whether or not involving action
in his or her official capacity.
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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On December 31, 1996, the Registrant issued 300,000 shares of Common Stock
to the two principals of Billmart, LLC in connection with the acquisition by
the Registrant of Billmart's interest in PrysmTech, LLC.
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
1.1Form of Underwriting Agreement
3(i)Amended and Restated Articles of Incorporation
3(ii)Amended and Restated Bylaws
4.1Specimen Certificate of Common Stock
5.1Opinion of Smith, Gambrell & Russell, LLP
*10.1Form 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
10.3Amended and Restated 1995 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
II-2
<PAGE>
NUMBER DESCRIPTION OF EXHIBIT
*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
10.10 Software License, Support and Equipment Purchase Agreement
dated May 27, 1994, as amended, by and between the Registrant
and Emro Marketing Company (confidential treatment requested)
10.11 Acquisition Agreement and Plan of Merger dated December 31,
1996 regarding acquisition of PrysmTech, LLC by the Registrant
10.12 Employment Agreement dated December 31, 1996 by and between
the Registrant and H. Martin Rice
11.1Statement regarding computation of per share earnings
*21.1Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2Consent of Smith, Gambrell & Russell, LLP (included as part of
Exhibit 5.1)
*24.1Powers of Attorney (included on the signature page of this
Registration Statement)
27.1Financial Data Schedule
--------
* Previously filed
(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.
II-3
<PAGE>
(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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement (Amendment No. 1) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Alpharetta, Georgia on January 16, 1997.
RADIANT SYSTEMS, INC.
By: /s/ Erez Goren
---------------------------------
Erez Goren, Co-Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement (Amendment No. 1) 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 January 16, 1997
_________________________________ Chief Executive Officer
EREZ GOREN
* Co-Chairman of the Board and January 16, 1997
_________________________________ Chief Technology Officer
ALON GOREN
* President, Chief Operating January 16, 1997
_________________________________ Officer and Director
ERIC HINKLE
/s/ John H. Heyman Executive Vice President, January 16, 1997
_________________________________ Chief Financial Officer and
JOHN H. HEYMAN Director
/s/ Paul Ilse Controller (Principal January 16, 1997
_________________________________ Accounting Officer)
PAUL ILSE
</TABLE>
* By: /s/ Erez Goren
------------------------------
EREZ GOREN AS ATTORNEY-IN-FACT
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT PAGE NUMBER
------- ---------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3(i) Amended and Restated Articles of Incorporation
3(ii) Amended and Restated Bylaws
4.1 Specimen Certificate of Common Stock
5.1 Opinion of Smith, Gambrell & Russell, LLP
10.3 Amended and Restated 1995 Stock Option Plan
10.10 Software License, Support and Equipment Purchase Agreement
dated May 27, 1994, as amended, by and between the Registrant
and Emro Marketing Company
10.11 Acquisition Agreement and Plan of Merger dated December 31,
1996 regarding acquisition of PrysmTech, LLC by the Registrant
10.12 Employment Agreement dated December 31, 1996 by and between the
Registrant and H. Martin Rice
11.1 Statement regarding computation of per share earnings
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 1.1
ALSTON & BIRD DRAFT
DATED 1/16/97
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
<PAGE>
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.
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. 333-17723) 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
-2-
<PAGE>
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.
(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 and 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 have been duly
authorized and validly issued and are fully paid and non-assessable; the shares
to be sold by the Selling Shareholders, when properly issued pursuant to the
exercise of warrants held by the Selling Shareholders, will be 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 shareholders 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.
-3-
<PAGE>
(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 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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.
(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.
(xiv) 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, to the Company's knowledge,
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
-6-
<PAGE>
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.
(xv) 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.
(xvi) 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.
(xvii) 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.
(xviii) 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.
(xix) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV 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
-7-
<PAGE>
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.
(xx) 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, 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.
(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
-8-
<PAGE>
Selling Shareholder will not distribute any prospectus or other offering
material in connection with the offering of the Shares.
(iv) 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.
(c) Each of the Selling Shareholders listed on Schedule III severally
----------------------
represents and warrants that, 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 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.
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
-9-
<PAGE>
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
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 request in
writing not later than the
-10-
<PAGE>
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 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 5 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
-11-
<PAGE>
Shareholders against delivery of certificates therefor at the offices of Alex.
Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
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 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
-12-
<PAGE>
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.
(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
-13-
<PAGE>
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 three 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 consolidated in the
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 Stock Option Plan, pursuant to the exercise of stock purchase
warrants by the Selling Shareholder, or 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
-14-
<PAGE>
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 date
of this Agreement, 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:
(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.
-15-
<PAGE>
(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.
-16-
<PAGE>
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 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.
-17-
<PAGE>
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 those Selling Shareholders indicated
on Schedule III, 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) 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
-18-
<PAGE>
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 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.
-19-
<PAGE>
(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 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.
-20-
<PAGE>
(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
-21-
<PAGE>
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 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 Mr. Ralph B. Williams,
Esq., Senior Counsel of Emro Marketing Company and Ms. Maria Caldwell, Esq.,
counsel for Sirrom Capital Corporation, each a Selling Shareholder 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 Shareholder.
(ii) 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 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) Upon payment of the purchase price, the Underwriters (assuming that
they are bona fide purchasers within the meaning of the Uniform Commercial Code
as adopted in the State of Georgia) will have acquired good and valid title to
the Shares being sold by 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.
-22-
<PAGE>
(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 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
-23-
<PAGE>
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;
(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.
-24-
<PAGE>
(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 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, agree
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,
-25-
<PAGE>
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; and, provided, further, that
-------- -------
the Selling Shareholders indicated on Schedule II shall be liable in any such
case only 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 such Selling Shareholders 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.
(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
-26-
<PAGE>
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 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
-27-
<PAGE>
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
-28-
<PAGE>
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 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.
-29-
<PAGE>
(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 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, any Selling Shareholder listed on Schedule II, 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
-30-
<PAGE>
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.
--------
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:
David W. Weaver; 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 indicated on Schedule III, to: Radiant
Systems, Inc., 1000 Alderman Drive, Suite A, Alpharetta, Georgia 30302,
Attention: John H. Heyman; if to Emro Marketing Company, to: Emro Marketing
Company, P.O. Box 1500, Springfield, Ohio, 45501, Attention: Vice President of
Finance; if to Sirrom Capital Corporation, 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 the Company for trading on the Nasdaq National Market, 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
-31-
<PAGE>
(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
(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
-32-
<PAGE>
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.
-33-
<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
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
-34-
<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
=========
-1-
<PAGE>
SCHEDULE II
Schedule of Selling Shareholders
Number of Firm
Shares
Selling Shareholder to be Sold
------------------- ----------
Emro Marketing Company....................... 318,996
Sirrom Capital Corporation................... 131,004
-------
Total.............................. 450,000
=======
2
<PAGE>
SCHEDULE III
Schedule of Option Shares
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
- -------------- ---------- -------------
Selling Shareholders:
Erez Goren........... 100,000 22.6%
Alon Goren........... 100,000 22.6%
John H. Heyman....... 10,000 2.3%
------- -----
Subtotal..... 210,000 47.5%
The Company............ 232,500 52.5%
------- -----
Total........ 442,500 100.0%
======= =====
-3-
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
RADIANT SYSTEMS, INC.
I.
The name of the Corporation is Radiant Systems, Inc.
II.
The authorized capital of the Corporation shall consist of 45,000,000
shares of capital stock which shall be represented by the following securities:
A. 30,000,000 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 ( the closing time of an initial public offering by the
Corporation (as defined herein) or ( the closing time of a change in
control of the Corporation (as defined herein). Upon such conversion, the
Class A Common Stock shall cease to be authorized. The Corporation shall
promptly notify the holders of Class A Common Stock of any such conversion.
<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
shareholders of the Corporation: Erez Goren, Thomas J. Barrella, Alon Goren
or Lawrence D. Parker.
C. 5,000,000 shares of preferred stock designated as Preferred Stock and
having the following attributes:
(1) The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of
each series of Preferred Stock, including any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption and liquidation shall
be as set forth in resolutions adopted by the Board of Directors, and
articles of amendment shall be filed with the Georgia Secretary of State as
required by law to be filed with respect to issuance of such Preferred
Stock, prior to the issuance of any such shares.
(2) The Board of Directors is expressly authorized at any time to adopt
resolutions providing for the issuance of, or providing for a change in the
number of shares of any particular series of Preferred Stock and, if and to
the extent from time to time required by law, to file articles of amendment
which are effective without shareholder action to increase or decrease the
number of shares included in each series of Preferred Stock (but not to
decrease the number of shares in any series below the number of shares then
issued) and, prior to the issuance of any shares of the class or shares of
the series so affected, to set or change in any one or more respects the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption and liquidation relating to the shares of each
series.
-2-
<PAGE>
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
1000 Alderman Drive, Suite A, Alpharetta, Georgia 30202.
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.
A. Number, Election and Terms. The business and affairs of the Corporation
shall be managed by or under the direction of a board of directors which, except
as otherwise fixed by or pursuant to the provisions of Article II hereof
relating to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, shall consist of not less
than three (3) nor more than fifteen (15) persons. The exact number of directors
within the minimum and maximum limitations specified in the preceding sentence
shall be fixed from time to time by the board of directors pursuant to a
resolution adopted by a majority of the entire board of directors. The directors
shall be divided into three classes, as nearly equal in number as possible, with
the term of office of the first class of directors to expire at the annual
meeting of stockholders of the Corporation to be held in 1997, the term of
office of the second class of directors to expire at the annual meeting of
stockholders of the Corporation to be held in 1998, and the term of office of
the third class of directors to expire at the annual meeting of stockholders of
the Corporation to be held in 1999. At each annual meeting of the stockholders
of the Corporation following such initial classification and election, and
except as otherwise so fixed by or pursuant to the provisions of Article II
hereof relating to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, directors elected to
succeed those directors whose terms expire at such annual meeting shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders of the Corporation after their election.
B. Vacancies and Newly Created Directorships. Subject to the rights of the
holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors or any
vacancies occurring in the board of directors resulting from death, resignation,
-3-
<PAGE>
retirement, disqualification, removal from office or other cause shall be filled
by the affirmative vote of a majority of the remaining directors then in office,
although less than a quorum of the board of directors, or by the sole remaining
director. A director so chosen shall hold office until the next annual meeting
of stockholders of the Corporation. No decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
C. Continuances in Office. Notwithstanding the foregoing provisions of
this Article VI, any director whose term of office has expired shall continue to
hold office until his successor shall be elected and qualify.
D. Removal. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire board of
directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least seventy-five percent (75%) of
the total number of votes entitled to be cast by the holders of all of the
shares of capital stock of the Corporation then entitled to vote generally in
the election of directors. The holder of each share of capital stock entitled to
vote thereon shall be entitled to cast the same number of votes as the holder of
such shares is entitled to cast generally in the election of each director.
E. Amendment, Repeal, Etc. Notwithstanding any other provisions of these
Articles of Incorporation or the By-laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, these Articles of
Incorporation or the By-laws of the Corporation), the affirmative vote of the
holders of at least seventy-five percent (75%) of the total number of votes
entitled to be cast by the holders of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors shall
be required to amend, alter, change or repeal, or to adopt any provision as part
of these Articles of Incorporation inconsistent with, this Article VI. The
holder of each share of capital stock entitled to vote thereon shall be entitled
to cast the same number of votes as the holder of such shares is entitled to
cast generally in the election of each director.
VII.
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 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.
-4-
<PAGE>
VIII.
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 Amended and Restated
Articles of Incorporation on January 13, 1997.
/s/ John H. Heyman
--------------------------------
John H. Heyman
Executive Vice President
-5-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
RADIANT SYSTEMS, INC.,
a Georgia corporation
Adopted December 10, 1996
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
RADIANT SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <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, ELECTION AND TERMS........................ 7
Section 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS......... 8
Section 4. CONTINUANCES IN OFFICE............................ 8
Section 5. REMOVAL........................................... 8
Section 6. PLACE OF MEETING.................................. 8
Section 7. COMPENSATION...................................... 9
Section 8. REGULAR MEETINGS.................................. 9
Section 9. SPECIAL MEETINGS.................................. 9
Section 10. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER.... 9
Section 11. QUORUM............................................ 9
Section 12. MANNER OF ACTING.................................. 9
Section 13. COMMITTEES....................................... 10
Section 14. ACTION WITHOUT FORMAL MEETING.................... 10
Section 15. CONFERENCE CALL MEETINGS......................... 10
Section 16. NOMINATIONS AND NOTIFICATION OF NOMINATIONS
FOR DIRECTORS.................................... 11
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE V. - OFFICERS.............................................. 11
Section 1. GENERALLY......................................... 11
Section 2. COMPENSATION...................................... 12
Section 3. VACANCIES......................................... 12
Section 4. CHIEF EXECUTIVE OFFICER........................... 12
Section 5. SECRETARY......................................... 13
Section 6. DEPUTY OFFICERS................................... 13
Section 7. ASSISTANT OFFICERS................................ 13
ARTICLE VI. - INDEMNIFICATION...................................... 13
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS........ 13
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES........ 14
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION.......... 14
Section 4. DETERMINATION AND AUTHORIZATION OF
PERMITTED INDEMNIFICATION....................... 15
Section 5. SHAREHOLDER APPROVED INDEMNIFICATION.............. 16
Section 6. ADVANCES FOR EXPENSES............................. 17
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND
AGENTS.......................................... 17
Section 8. INSURANCE......................................... 17
Section 9. EXPENSES FOR APPEARANCE AS WITNESS................ 17
ARTICLE VII. - FAIR PRICE REQUIREMENTS............................. 18
Section 1. DEFINITIONS....................................... 18
Section 2. ADDITIONAL BUSINESS COMBINATION APPROVAL.......... 21
Section 3. "INTERESTED SHAREHOLDER" DEFINED AND EXCEPTION
TO VOTE REQUIREMENT OF ARTICLE VII, SECTION 2... 21
Section 4. REPEAL OF ARTICLE VII AND LIMITATIONS............. 23
ARTICLE VIII. - BUSINESS COMBINATIONS WITH INTERESTED
SHAREHOLDER..................................... 24
Section 1. DEFINITIONS....................................... 24
Section 2. BUSINESS COMBINATIONS WITH INTERESTED
SHAREHOLDERS.................................... 26
Section 3. REPEAL OF ARTICLE VIII............................ 27
ARTICLE IX. - REIMBURSEMENT OF NONDEDUCTIBLE PAYMENTS TO
OFFICERS AND EMPLOYEES.......................... 27
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE X. - FISCAL YEAR........................................... 27
ARTICLE XI. - ANNUAL STATEMENTS.................................... 28
ARTICLE XII. - CAPITAL STOCK...................................... 28
Section 1. FORM.............................................. 28
Section 2. TRANSFER.......................................... 29
Section 3. RIGHTS OF HOLDER.................................. 29
Section 4. LOST OR DESTROYED CERTIFICATES.................... 29
ARTICLE XIII. - SEAL............................................... 30
ARTICLE XIV. - REGISTERED OFFICE AND REGISTERED AGENT.............. 30
ARTICLE XV. - AMENDMENT TO BYLAWS.................................. 30
Section 1. AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS......... 30
Section 2. SUPERMAJORITY REQUIRED FOR AMENDMENT BY
SHAREHOLDERS.................................... 30
</TABLE>
(iii)
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
RADIANT SYSTEMS, INC.
(ADOPTED: DECEMBER 10, 1996)
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.
-----
"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 Radiant Systems, 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:
(a) Any notice required by these By-Laws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
<PAGE>
(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 shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
-2-
<PAGE>
(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 of notice signed by all shareholders entitled to
-3-
<PAGE>
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 only be called by the Chairman of the Board,
the Chief Executive Officer, or the board of directors pursuant to resolution
adopted by a majority of the entire board of directors.
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 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.
-4-
<PAGE>
(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.
(d) For the purpose of determining shareholders entitled to a distribution
by the Corporation (other than one involving a purchase, redemption or other
-5-
<PAGE>
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 date, time or place of the adjourned meeting, unless a new record date
-6-
<PAGE>
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, ELECTION AND TERMS. The business and affairs of the
Corporation shall be managed by or under the direction of a board of directors
-7-
<PAGE>
which, except as otherwise fixed by or pursuant to the provisions of the
Articles of Incorporation relating to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
shall consist of not less than three (3) nor more than fifteen (15) persons. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the board of
directors pursuant to a resolution adopted by a majority of the entire board of
directors. The directors shall be divided into three classes, as nearly equal in
number as possible, with the term of office of the first class of directors to
expire at the annual meeting of shareholders of the Corporation to be held in
1997, the term of office of the second class of directors to expire at the
annual meeting of shareholders of the Corporation to be held in 1998, and the
term of office of the third class of directors to expire at the annual meeting
of shareholders of the Corporation to be held in 1999. At each annual meeting of
the shareholders of the Corporation, and except as otherwise so fixed by or
pursuant to the provisions of the Articles of Incorporation relating to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, directors elected to succeed those
directors whose terms expire at such annual meeting shall be elected for a term
of office to expire at the third succeeding annual meeting of shareholders of
the Corporation after their election.
Section 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the number of directors or
any vacancies occurring in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office, although less than a quorum of the board of directors, or by the
sole remaining director. A director so chosen shall hold office until the next
annual meeting of shareholders of the Corporation. No decrease in the number of
directors constituting the board of directors shall shorten the term of any
incumbent director.
Section 4. CONTINUANCES IN OFFICE. Notwithstanding the foregoing
provisions of this Article IV, any director whose term of office has expired
shall continue to hold office until his successor shall be elected and qualify.
Section 5. REMOVAL. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire board of
directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least seventy-five percent (75%) of
the total number of votes entitled to be cast by the holders of all of the
shares of capital stock of the Corporation then entitled to vote generally in
the election of directors. The holder of each share of capital stock entitled
to vote thereon shall be entitled to cast the same number of votes as the holder
of such shares is entitled to cast generally in the election of each director.
Section 6. 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.
-8-
<PAGE>
Section 7. 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 8. 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 9. 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 10. 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 11. 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 of the time and place of any adjourned meeting need only be given by
announcement at the meeting at which adjournment is taken.
Section 12. 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
-9-
<PAGE>
(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 13. 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.
Section 14. 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 15. 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.
-10-
<PAGE>
Section 16. NOMINATIONS AND NOTIFICATION OF NOMINATIONS FOR DIRECTORS.
Nominations for election to the Board may be made by the Board, any nominating
committee thereof or by any holder of any outstanding class of capital stock of
the Corporation entitled to vote for the election of directors. Any shareholder
entitled to vote for the election of directors may nominate a person or persons
for election as a director only if written notice of such shareholder's
intention to make any such nomination is given either by personal delivery or
mailed by the United States Mail, postage prepaid, certified and return receipt
requested, to the Secretary of the Corporation not later than the later of (i)
the close of business on the seventh (7th) calendar day following the date on
which notice of the meting of shareholders for the election of directors is
first given to shareholders (any such notice of meeting of shareholders shall
not be given earlier than the record date for the meeting of shareholders) and
(ii) a date ninety (90) days prior to the date of the meeting of shareholders.
Each such notice shall set forth: (a) the name and address of the shareholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board; and (e)
the consent of each nominee to serve as a director of the Corporation if so
elected.
The notification shall be signed by the nominating shareholder and shall
include or be accompanied by a signed written consent of each person to be named
as a nominee for election as a director. Purported nominations not made in
compliance with these procedures may be disregarded by the chairman of the
meeting, and upon his instructions, the inspectors of election shall disregard
all votes cast for each such nominee. The Board may also refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedures.
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:
-11-
<PAGE>
(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
------ -----
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.
(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.
-12-
<PAGE>
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.
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:
-13-
<PAGE>
(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.
(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. The Corporation
shall indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director of the Corporation against reasonable expenses incurred by the
director in connection with the proceeding.
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION.
(a) Except as otherwise provided in this Section, the Corporation may
indemnify an individual who is a party to a proceeding because he is or was a
director against liability incurred in the proceeding if he conducted himself in
good faith and reasonably believed, in the case of conduct in his official
capacity, that such conduct was in the best interests of the Corporation; in all
other cases, that such conduct was at least not opposed to the best interests of
the Corporation; and in the case of any criminal proceeding, that he had no
reasonable cause to believe such conduct was unlawful.
-14-
<PAGE>
(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 the director reasonably believed
was at least not opposed to the best interests of the Corporation; and
(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
described in 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; except for
reasonable expenses incurred in connection with the proceeding if it is
determined that the director has met the relevant standard of conduct
under this Section 3; or
(2) In connection with any other proceeding with respect to conduct for
which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his
official capacity.
Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED INDEMNIFICATION.
(a) The Corporation may not indemnify a director under Section 3 of this
Article VI unless authorized thereunder and a determination has been made for a
specific case proceeding that indemnification of the director is permissible in
the circumstances because he has met the relevant standard of conduct set forth
in such Section 3.
(b) The determination shall be made:
(1) If there are two or more disinterested directors, by the Board by a
majority vote of all the disinterested directors (a majority of whom
shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors appointed
by such a vote;
(2) By special legal counsel:
(A) Selected in the manner prescribed in paragraph (1) of this
subsection; or
(B) If there are fewer than two disinterested directors, selected
by the Board (in which selection directors who do not qualify as
disinterested directors may participate); or
-15-
<PAGE>
(3) By the shareholders, but shares owned by or voted under the control of a
director who at the time does not qualify as a disinterested director
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, except that if there are
fewer than two disinterested directors or if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(b)(2)(B) of this Section 4 to select special legal counsel.
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 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, but shares owned or voted under
the control of a director who at the time does not qualify as a disinterested
director with respect to any existing or threatened proceeding that would be
covered by the authorization may not be voted on the authorization.
(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:
-16-
<PAGE>
(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 because he is a director
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 relevant standard of conduct set forth
in subsection (a) of Section 3 of this Article VI or that the proceeding
involves conduct for which liability has been eliminated under a
provision of the Articles as authorized by paragraph (4) of subsection
(b) of Code Section 14-202; and
(2) The director furnishes the Corporation a written undertaking to repay
any funds advanced if it is ultimately determined that he is not
entitled to indemnification under this Article.
(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.
(c) Authorizations under this Section 5 shall be made:
(1) By the Board:
(A) When there are two or more disinterested directors, by a
majority vote of all the disinterested directors (a majority of whom
shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors
appointed by such a vote; or
(B) When there are fewer than two disinterested directors, by
the vote necessary for action by the Board in accordance with
subsection (c) of Code Section 14-2-824, in which authorization
directors who do not qualify as disinterested directors may
participate; or
-17-
<PAGE>
(2) By the shareholders, but shares owned or voted under the control of a
director who at the time does not qualify as a disinterested director
with respect to the proceeding may not be voted on the authorization.
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.
(a) The Corporation may indemnify and advance expenses under this part to an
officer of the Corporation who is a party to a proceeding because he is an
officer of the Corporation:
(1) To the same extent as a director; and
(2) If he is not a director, to such further extent as may be provided by
the Articles of Incorporation, the By-Laws, a resolution of the Board,
or contract except for liability arising out of conduct that
constitutes:
(A) Appropriation, in violation of his duties, of any business
opportunity of the Corporation;
(B) Acts or omissions which involve intentional misconduct or a
knowing violation of law;
(C) The types of liability set forth in Code Section 14-2-832;
or
(D) Receipt of an improper personal benefit.
(b) The provisions of paragraph (2) of subsection (a) of this Section 6
shall apply to an officer who is also a director if the sole basis on which he
is made a party to the proceeding is an act or omission solely as an officer.
(c) An officer of the Corporation who is not a director is entitled to
mandatory indemnification under Section 2, and may apply to a court under Code
Section 14-2-854 for indemnification or advances for expenses, in each case to
the same extent to which a director may be entitled to indemnification or
advances for expenses under those provisions.
(d) The Corporation may also indemnify and advance expenses to an employee
or agent who is not a director to the extent, consistent with public policy,
that may be provided by its Articles of Incorporation, By-Laws, general or
specific action of its Board, or contract.
Section 8. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of an individual who is a director, officer, employee, or agent of the
Corporation or who, while a director, officer, employee, or agent of the
Corporation, serves 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 entity
against liability asserted against or incurred by him in that capacity or
-18-
<PAGE>
arising from his status as a director, officer, employee, or agent, whether or
not the Corporation would have power to indemnify or advance expenses to him
against the same liability under this part.
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 is not a party.
ARTICLE VII.
FAIR PRICE REQUIREMENTS
Section 1. DEFINITIONS.
As used in this Article VII, the term:
(1) "Affiliate" means a person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled By or is Under Common Control
With a specified person.
(2) "Announcement Date" means the date of the first general public
announcement of the proposal of the Business Combination.
(3) "Associate," when used to indicate a relationship with any person,
means:
(A) Any corporation or organization, other than the Corporation or a
subsidiary of the Corporation, of which such person is an officer, director,
or partner or is the Beneficial Owner of ten percent (10%) or more of any
class of equity securities;
(B) Any trust or other estate in which such person has a beneficial
interest of ten percent (10%) or more or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(C) Any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person.
(4) "Beneficial Owner" means a person shall be considered to be the
beneficial owner of any equity securities:
(A) Which such person or any of such person's Affiliates or Associates
owns, directly or indirectly;
(B) Which such person or any of such person's Affiliates or Associates,
directly or indirectly, has:
-19-
<PAGE>
(i) The right to acquire, whether such right is exercisable
immediately or only after the passage of time, pursuant to any
agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
or
(ii) The right to vote pursuant to any agreement, arrangement, or
understanding; or
(C) Which are owned, directly or indirectly, by any other person with
which such person or any of such person's Affiliates or Associates has any
agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of equity securities.
(5) "Business Combination" means:
(A) Any merger of the Corporation or any subsidiary with:
(i) Any Interested Shareholder; or
(ii) Any other corporation, whether or not itself an Interested
Shareholder, which is, or after the merger would be, an Affiliate of
an Interested Shareholder that was an Interested Shareholder prior to
the consummation of the transaction;
(B) Any share exchange with (i) any Interested Shareholder or (ii) any
other corporation, whether or not itself an Interested Shareholder, which
is, or after the share exchange would be, an Affiliate of an Interested
Shareholder that was an Interested Shareholder prior to the consummation of
the transaction;
(C) Any sale, lease, transfer, or other disposition, other than in the
ordinary course of business, in one transaction or in a series of
transactions in any 12-month period, to any Interested Shareholder or any
Affiliate of any Interested Shareholder, other than the Corporation or any
of its subsidiaries, of any assets of the Corporation or any subsidiary
having, measured at the time the transaction or transactions are approved by
the board of directors of the Corporation, an aggregate book value as of the
end of the Corporation's most recently ended fiscal quarter of ten percent
(10%) or more of the net assets of the Corporation as of the end of such
fiscal quarter;
(D) The issuance or transfer by the Corporation, or any subsidiary, in
one transaction or a series of transactions in any 12-month period, of any
equity securities of the Corporation or any subsidiary which have an
aggregate market value of five percent (5%) or more of the total market
value of the outstanding common and preferred shares of the Corporation
whose shares are being issued to any Interested Shareholder or any Affiliate
of any Interested Shareholder, other than the Corporation or any of its
-20-
<PAGE>
subsidiaries, except pursuant to the exercise of warrants or rights to
purchase securities offered pro rata to all holders of the Corporation's
Voting Shares or any other method affording substantially proportionate
treatment to the holders of Voting Shares;
(E) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation in which anything other than cash will be
received by an Interested Shareholder or any Affiliate of any Interested
Shareholder; or
(F) Any reclassification of securities, including any reverse stock
split, or recapitalization of the Corporation, or any merger of the
Corporation with any of its subsidiaries, or any share exchange with any of
its subsidiaries, which has the effect, directly or indirectly, in one
transaction or a series of transactions in any 12-month period, of
increasing by five percent (5%) or more the proportionate amount of the
outstanding shares of any class or series of equity securities of the
Corporation or any subsidiary which is directly or indirectly beneficially
owned by any Interested Shareholder or any Affiliate of any Interested
Shareholder.
(6) "Continuing Director" means any member of the board of directors who is
not an Affiliate or Associate of an Interested Shareholder or any of its
Affiliates, other than the Corporation or any of its subsidiaries, and who was a
director of the Corporation prior to the Determination Date, and any successor
to such Continuing Director who is not an Affiliate or an Associate of an
Interested Shareholder or any of its Affiliates, other than the Corporation or
its subsidiaries, and is recommended or elected by a majority of all of the
Continuing Directors.
(7) "Control," including the terms "Controlling," "Controlled By," and
"Under Common Control With," means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract, or
otherwise, and the beneficial ownership of shares representing ten percent (10%)
or more of the votes entitled to be cast by the Corporation's Voting Shares
shall create an irrebuttable presumption of control.
(8) "Determination Date" means the date on which an Interested Shareholder
first became an Interested Shareholder.
(9) "Fair Market Value" means:
(A) In the case of securities, the highest closing sale price, during
the period beginning with and including the Determination Date and for 29
days prior to such date, of such a security on a principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such securities are listed, or, if such securities are not listed on
any such exchange, the highest closing sales price or, if none is available,
the average of the highest bid and asked prices reported with respect to
such a security, in each case during the 30-day period referred to above, on
the National Association of Securities Dealers, Inc., Automatic Quotation
-21-
<PAGE>
System, or any system then in use, or, if no such quotations are available,
the fair market value on the date in question of such a security as
determined in good faith at a duly called meeting of the board of directors
by a majority of all of the Continuing Directors, or, if there are no
Continuing Directors, by the entire board of directors; and
(B) In the case of property other than securities, the fair market
value of such property on the date in question as determined in good faith
at a duly called meeting of the board of directors by a majority of all of
the Continuing Directors, or, if there are no Continuing Directors, by the
entire board of directors of the Corporation.
(10) "Interested Shareholder" means any person, other than the Corporation,
its subsidiaries, Erez Goren, Alon Goren or any of their Affiliates, that:
(A) Is the Beneficial Owner of ten percent (10%) or more of the voting
power of the outstanding Voting Shares of the Corporation; or
(B) Is an Affiliate of the Corporation and, at any time within the
two-year period immediately prior to the date in question, was the
Beneficial Owner of ten percent (10%) or more of the voting power of the
then outstanding Voting Shares of the Corporation.
For the purpose of determining whether a person is an Interested Shareholder,
the number of Voting Shares deemed to be outstanding shall not include any
unissued Voting Shares which may be issuable pursuant to any agreement,
arrangement, or understanding, or upon exercise of conversion rights, warrants,
or options, or otherwise.
(11) "Net Assets" means the amount by which the total assets of the
Corporation exceed the total debts of the Corporation.
(12) "Voting Shares" means shares entitled to vote generally in the election
of directors.
Section 2. ADDITIONAL BUSINESS COMBINATION APPROVAL.
In addition to any vote otherwise required by law or the Articles of
Incorporation of the Corporation, a Business Combination shall be:
(1) Unanimously approved by the Continuing Directors, provided that
the Continuing Directors constitute at least three members of the board of
directors at the time of such approval; or
(2) Recommended by at least two-thirds of the Continuing Directors and
approved by a majority of the votes entitled to be cast by holders of Voting
-22-
<PAGE>
Shares, other than Voting Shares beneficially owned by the Interested
Shareholder who is, or whose Affiliate is, a party to the Business
Combination.
Section 3. "INTERESTED SHAREHOLDER" DEFINED AND EXCEPTION TO VOTE
REQUIREMENT OF ARTICLE VII, SECTION 2.
(a) As used in this Article VII, Section 3, the term "Interested
Shareholder" refers to the Interested Shareholder which is party to, or an
Affiliate of which is party to, the Business Combination in question, other than
Erez Goren, Alon Goren or any of their Affiliates.
(b) The vote required by Section 2 of this Article VII does not apply to a
Business Combination if each of the following conditions is met:
(1) The aggregate amount of the cash, and the Fair Market Value as of
five days before the consummation of the Business Combination of
consideration other than cash, to be received per share by holders of any
class of common shares or any class or series of preferred shares in such
Business Combination is at least equal to the highest of the following:
(A) The highest per share price, including any brokerage
commissions, transfer taxes, and soliciting dealers' fees, paid by the
Interested Shareholder for any shares of the same class or series
acquired by it:
(i) Within the two-year period immediately prior to the
Announcement Date; or
(ii) In the transaction in which it became an Interested
Shareholder, whichever is higher;
(B) The Fair Market Value per share of such class or series as
determined on the Announcement Date or as determined on the
Determination Date, whichever is higher; or
(C) In the case of shares other than common shares, the highest
preferential amount per share to which the holders of shares of such
class or series are entitled in the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the
Corporation, provided that this subparagraph shall only apply if the
Interested Shareholder has acquired shares of such class or series
within the two-year period immediately prior to the Announcement Date;
(2) The consideration to be received by holders of any class or series
of outstanding shares is to be in cash or in the same for as the Interested
Shareholder has previously paid for shares of the same class or series. If
the Interested Shareholder has paid for shares of any class or series of
shares with varying forms of consideration, the form of consideration for
-23-
<PAGE>
such class or series of shares shall be either cash or the form used to
acquire the largest number of shares of such class or series previously
acquired by it;
(3) After the Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(A) Unless approved by a majority of the Continuing Directors,
there shall have been:
(i) No failure to declare and pay at the regular date
therefor any full periodic dividends, whether or not cumulative,
on any outstanding preferred shares of the Corporation;
(ii) No reduction in the annual rate of dividends paid on
any class of common shares, except as necessary to reflect any
subdivision of the shares;
(iii) An increase in such annual rate of dividends as is
necessary to reflect any reclassification, including any reverse
share split, recapitalization, reorganization, or any similar
transaction which has the effect of reducing the number of
outstanding shares; and
(iv) No increase in the Interested Shareholder's
percentage ownership of any class or series of shares of the
Corporation by more than one percent (1%) in any 12-month
period;
(B) The provisions of divisions (i) and (ii) of subparagraph (A)
of this paragraph shall not apply if the Interested Shareholder or an
Affiliate or Associate of the Interested Shareholder did not vote as a
director of the Corporation in a manner inconsistent with divisions
(i) and (ii) of subparagraph (A) of this paragraph and the Interested
Shareholder, within ten (10) days after any act or failure to act
inconsistent with divisions (i) and (ii) of subparagraph (A) of this
paragraph, notified the board of directors of the Corporation in
writing that the Interested Shareholder disapproved thereof and
requested in good faith that the board of directors rectify the act or
failure to act; and
(4) After the Interested Shareholder has become an Interested
Shareholder, the Interested Shareholder has not received the benefit, directly
or indirectly, except proportionately as a shareholder, of any loans, advances,
guarantees, pledges, or other financial assistance or any tax credits or other
tax advantages provided by the Corporation or any of its subsidiaries, whether
in anticipation of or in connection with such Business Combination or otherwise.
-24-
<PAGE>
Section 4. REPEAL OF ARTICLE VII AND LIMITATIONS.
(a) This Article VII shall be irrevocable except that it may be repealed by
the affirmative vote of at least two-thirds of the Continuing Directors and a
majority of the votes entitled to be cast by the voting shares of the
Corporation, other than shares beneficially owned by any Interested Shareholder
and affiliates and associates of any Interested Shareholder, in addition to any
other vote required by the Articles of Incorporation or By-Laws to amend these
By-Laws.
(b) The requirement of Section 2 of this Article VII shall not apply to
Business Combinations with an Interested Shareholder or its Affiliates if,
during the three-year period immediately preceding the consummation of the
Business Combination, the Interested Shareholder has not at any time during such
period:
(1) Ceased to be an Interested Shareholder; or
(2) Increased its percentage ownership of any class or series of common or
preferred shares of the Corporation by more than one percent (1%) in any
12-month period.
ARTICLE VIII.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Section 1. DEFINITIONS.
For purposes of this Article VIII, the definitions contained in Article VII,
Section 1 shall be applicable with the following exceptions:
(1) For purposes of this part, a person shall not be considered to be
the "Beneficial Owner," as that term is defined Article VII, Section 1, of:
(A) Stock tendered pursuant to a tender or exchange offer made
by such person or any of such person's Affiliates or Associates until
such tendered stock is accepted for purchase or exchange; or
(B) Any equity securities which such person or such person's
Affiliates or Associates have the right to vote pursuant to any
agreement, arrangement, or understanding if the agreement,
arrangement, or understanding to vote such stock arises solely from a
revocable proxy or consent given in response to a proxy or consent
solicitation made to ten or more persons;
(2) For purposes of this part, "Business Combination" means:
-25-
<PAGE>
(A) Any merger or consolidation of the Corporation or any
subsidiary with (i) any Interested Shareholder; or (ii) any other
corporation, whether or not itself an Interested Shareholder, which
is, or after the merger or consolidation would be, an Affiliate of an
Interested Shareholder that was an Interested Shareholder prior to the
consummation of the transaction other than as a result of the
Interested Shareholder's ownership of the Corporation's voting stock;
(B) Any sale, lease, transfer, or other disposition, other than
in the ordinary course of business, in one transaction or in a series
of transactions, to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder, other than the Corporation or
any of its subsidiaries, of any assets of the Corporation or any
subsidiary having, measured at the time the transaction or
transactions are approved by the board of directors of the
Corporation, an aggregate book value as of the end of the
Corporation's most recently ended fiscal quarter of ten percent (10%)
or more of the Net Assets of the Corporation as of the end of such
fiscal quarter;
(C) The issuance or transfer by the Corporation, or any
subsidiary, in one transaction or a series of transactions, of any
equity securities of the Corporation or any subsidiary which have an
aggregate market value of five percent (5%) or more of the total
market value of the outstanding common and preferred shares of the
Corporation whose shares are being issued to any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder, other than the Corporation or any of its subsidiaries,
except pursuant to the exercise of warrants or rights to purchase
securities offered pro rata to all holders of the Corporation's Voting
Shares or any other method affording substantially proportionate
treatment to the holders of Voting Shares, and except pursuant to the
exercise or conversion of securities exercisable for or convertible
into shares of the Corporation, or any subsidiary, which securities
were outstanding prior to the time that any Interested Shareholder
became such;
(D) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation;
(E) Any reclassification of securities, including any reverse
stock split, or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its subsidiaries, which
has the effect, directly or indirectly, of increasing by five percent
(5%) or more the proportionate amount of the outstanding shares of any
class or series of equity securities of the Corporation or any
subsidiary which is directly or indirectly beneficially owned by any
Interested Shareholder or any Affiliate of any Interested Shareholder;
(F) Any receipt by the Interested Shareholder, or any Affiliate
or Associate of the Interested Shareholder, other than in the ordinary
-26-
<PAGE>
course of business, of the benefit, directly or indirectly (except
proportionately as a shareholder of the Corporation), of any loans,
advances, guarantees, pledges, or other financial benefits or
assistance or any tax credits or other tax advantages provided by or
through the Corporation or any of its subsidiaries; and
(G) Any share exchange with (i) any Interested Shareholder or
(ii) any other corporation, whether or not itself an Interested
Shareholder, which is, or after the share exchange would be, an
Affiliate of an Interested Shareholder that was an Interested
Shareholder prior to the consummation of the transaction; and
(3) For purposes of this Article VIII, the presumption of control
created by paragraph (7) of Article VII, Section 1 shall not apply where such
person holds voting stock, in good faith and not for the purpose of
circumventing this Article VIII, as an agent, bank, broker, nominee, custodian,
or trustee for one or more owners who do not individually or as a group have
Control of the Corporation.
Section 2. BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS.
(a) The Corporation shall not engage in any Business Combination with any
Interested Shareholder for a period of five years (5) following the time that
such shareholder became an Interested Shareholder, unless:
(1) Prior to such time, the Corporation's board of directors approved
either the Business Combination or the transaction which resulted in the
shareholder becoming an Interested Shareholder;
(2) In the transaction which resulted in the shareholder becoming an
Interested Shareholder, the Interested Shareholder became the Beneficial
Owner of at least ninety percent (90%) of the voting stock of the
Corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned
by: (A) persons who are directors or officers, their Affiliates, or
Associates; (B) subsidiaries of the Corporation; and (C) any employee stock
plan under which participants do not have the right (as determined
exclusively by reference to the terms of such plan and any trust which is
part of such plan) to determine confidentially the extent to which shares
held under such plan will be tendered in a tender or exchange offer; or
(3) Subsequent to becoming an Interested Shareholder, such shareholder
acquired additional shares resulting in the Interested Shareholder being the
Beneficial Owner of at least ninety percent (90%) of the outstanding voting
stock of the Corporation, excluding for purposes of determining the number
of shares outstanding those shares owned by (A) persons who are directors or
officers of the Corporation, their Affiliates, or Associates; (B)
subsidiaries of the Corporation; and (C) any employee stock plan under
-27-
<PAGE>
which participants do not have the right (as determined exclusively by
reference to the terms of such plan and any trust which is part of such
plan) to determine confidentially the extent to which shares held under such
plan will be tendered in a tender or exchange offer, and the Business
Combination was approved at an annual or special meeting of shareholders by
the holders of a majority of the voting stock entitled to vote thereon,
excluding from said vote, for the purpose of this paragraph only, the voting
stock beneficially owned by the Interested Shareholder or by (A) persons who
are directors or officers of the Corporation, their Affiliates, or
Associates; (B) subsidiaries of the Corporation; and (C) any employee stock
plan under which participants do not have the right (as determined
exclusively by reference to the terms of such plan and any trust which is
part of such plan) to determine confidentially the extent to which shares
held under such plan will be tendered in a tender or exchange offer.
(b) The restrictions contained in this Section 2 shall not apply if a
shareholder: (1) becomes an Interested Shareholder inadvertently; (2) as soon
as practicable divests sufficient shares so that the shareholder ceases to be an
Interested Shareholder; and (3) would not, at any time within the five-year
period immediately prior to a Business Combination between the Corporation and
such shareholder, have been an Interested Shareholder but for the inadvertent
acquisition.
Section 3. REPEAL OF ARTICLE VIII.
This Article VIII shall be irrevocable except that it may be repealed by the
affirmative vote of at least two-thirds of the Continuing Directors and a
majority of the votes entitled to be cast by the voting shares of the
Corporation, other than shares beneficially owned by any Interested Shareholder
and affiliates and associates of any Interested Shareholder, in addition to any
other vote required by the Articles of Incorporation or By-Laws to amend these
By-Laws.
ARTICLE IX.
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
-28-
<PAGE>
from future compensation payments to such officer or employee until the amount
owed to the Corporation has been recovered.
ARTICLE X.
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 XI.
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.
-29-
<PAGE>
ARTICLE XII.
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
-30-
<PAGE>
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.
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 XIII.
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 XIV.
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 XIII 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 XV.
AMENDMENT TO BY-LAWS
Section 1. AMENDMENT OF BY-LAWS BY BOARD OF DIRECTORS. Except as
otherwise provided in the Articles of Incorporation, by applicable law or by the
provisions of this Article XV, the board of directors may amend or repeal any
provision of the By-Laws of the Corporation 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. The board of directors may adopt, amend, alter or
repeat the By-Laws of the Corporation only by the vote of a majority of the
entire Board.
-31-
<PAGE>
Section 2. SUPERMAJORITY REQUIRED FOR AMENDMENT BY SHAREHOLDERS. The
shareholders of the Corporation have the right, in accordance with the voting
requirements set forth in this Section 2 of Article XV, 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. Except as may
otherwise specifically be required by law, the affirmative vote of the holders
of not less than seventy-five percent (75%) of the total number of votes
entitled to be cast by the holders of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors shall
be required for the shareholders to adopt, amend, alter or repeal any provision
of the By-Laws of the Corporation.
-32-
<PAGE>
EXHIBIT 4.1
<TABLE>
<S> <C>
********** **********
C O M M O N S T O C K C O M M O N S T O C K
No Par Value
Radiant Systems, Inc.
CUSIP 75025N-10-2
-------------
SEE REVERSE FOR
CERTAIN DEFINITIONS
Incorporated Under The THIS IS TO CERTIFY THAT SPECIMEN
-Laws- -----------------------------------------------
Of The State is the owner of
-Of- --------------------------------
Georgia
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Radiant Systems, Inc. transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This
certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
------------------------
----------------------------- -------------------------------
Secretary Chief Executive Officer
</TABLE>
<PAGE>
The Corporation will furnish without charge to each stockholder who
so requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof of
the Corporation, and the qualifications, limitations as restrictions of such,
preferences and/or rights. Such request may be made to the Corporation or the
Transfer Agent.
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE OF
THIS CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - AS TENANTS IN COMMON UNIF GIFT MIN ACT- _____________ CUSTODIAN _______________,
TEN ENT - AS TENANTS BY THE ENTIRETIES (CUST) (MINOR)
JT TEN - AS JOINT TENANTS WITH RIGHT OF UNDER THE UNIFORM GIFT TO MINORS
SURVIVORSHIP AND NOT AS TENANTS ACT/(STATE)
IN COMMON
</TABLE>
For value received, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
+-------------------------------------------+
| |
+-------------------------------------------+
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:
- ----------------------------
X
------------------------------------
X
------------------------------------
(NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.)
Signature(s) Guaranteed
By:
-----------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCK BROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO SEC RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
January 14, 1997
Board of Directors
Radiant Systems, Inc.
1000 Alderman Drive
Suite A
Alpharetta, Georgia 30202
Re: Radiant Systems, Inc.
Registration Statement on Form S-1
Registration Number 333-17723
2,950,000 Shares
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Radiant Systems, Inc. (the "Company") in
connection with the proposed public offering of 2,950,000 Shares of Common
Stock, no par value per share (the "Common Stock"), covered by the above-
described Registration Statement (as amended through the date hereof, the
"Registration Statement").
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Georgia;
(2) The By-Laws of the Company, certified as complete and correct by the
Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by
the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued by the
Secretary of State of the State of Georgia; and
<PAGE>
Board of Directors
Radiant Systems, Inc.
January 14, 1997
Page 2
(5) The Registration Statement.
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the State of
Georgia and is validly existing and in good standing under the laws of
that state, and
(B) The shares of Common Stock covered by the Registration Statement have
been legally authorized and, when issued and sold in accordance with
the terms described in the Registration Statement, will be legally
issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the prospectus contained in said Registration Statement. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Robert T. Molinet
---------------------------------------
Robert T. Molinet
RTM:wp[corpbh82724]
2
<PAGE>
EXHIBIT 10.3
RADIANT SYSTEMS, INC.
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1. PURPOSE
The purpose of Radiant Systems, Inc.'s Amended and Restated 1995 Stock
Option Plan (the "Plan") is to encourage and enable eligible directors,
officers, employees and consultants of Radiant Systems, 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, key employees and consultants 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, key
employees and consultants 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.
This Plan amends and restates the Company's 1995 Incentive Stock Option
Plan, as amended.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the Company and
an Eligible Employee or Eligible Participant 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.
<PAGE>
(f) "Company" shall mean Radiant Systems, Inc., a Georgia corporation.
(g) "Consultant" means any person who is engaged by the Company or any
Subsidiary to render consulting or advisory services and is compensated for such
services.
(h) "Current Value" shall mean the value of each Share as determined in
accordance with Section 9(c).
(i) "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.
(j) "Eligible Employee(s)" shall mean a person or persons regularly
employed by the Company or a Subsidiary.
(k) "Eligible Participant" shall mean an Eligible Employee, a Consultant
or a director of the Company who is not a regular salaried employee of the
Company or a Subsidiary.
(l) "Optionee" shall mean an Eligible Employee or Eligible Participant
having a right to purchase Common Stock under an Agreement.
(m) "Option(s)" shall mean the right or rights granted to Eligible
Employees or Eligible Participants to purchase Common Stock under the Plan.
(n) "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.
(o) "Plan" shall mean this Radiant Systems, Inc. Amended and Restated
1995 Stock Option Plan.
(p) "Shares," "Stock" or "Common Stock" shall mean shares of the no par
value Common Stock of the Company.
(q) "Subsidiary" shall mean any corporation, if the Company owns or
controls, directly or indirectly, a majority of the voting stock of such
corporation.
(r) "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.
-2-
<PAGE>
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.
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible Employees
and Eligible Participants 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 4,000,000. 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 (the "Exchange Act")).
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant 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
-3-
<PAGE>
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 granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 10 shall be granted only to
Eligible Participants.
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 pursuant to this Section
8 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
-4-
<PAGE>
price shall be in (i) cash, (ii) shares of the Common Stock of the Company which
have been owned by the Optionee for more than six months on the date of
surrender and which have a fair market value on the date of surrender equal to
the aggregate exercise price of the shares as to which such option shall be
exercised, or (iii) 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.
(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.
-5-
<PAGE>
(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.
(j) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
----------
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(k) 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.
-6-
<PAGE>
(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.
(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.
-7-
<PAGE>
(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 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 this 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. NON-QUALIFIED OPTIONS
The Committee may grant to Eligible Participants options under the Plan
which are not qualified incentive stock options under the provisions of Section
422 of the Code. Such non-qualified options shall be evidenced by Agreements in
such form and not inconsistent with this Plan as the Board of Directors or the
Committee shall approve from time to time, which Agreements shall contain in
substance the same terms and conditions as set forth in Section 8 hereof with
respect to qualified incentive options; provided, however, that the limitations
set forth in Sections 8(a), 8(c) and 8(g) need not, at the discretion of the
Board of Directors or the Committee, be applicable to non-qualified options
granted pursuant to this Section 10.
11. 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
-8-
<PAGE>
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 Exchange Act) 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 Exchange
Act) 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."
12. 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. To
the extent that the aggregate fair market value of shares subject to an
Optionee's incentive stock options granted by the Company which become
exercisable for the first time during any calendar year (under all plans of the
Company) exceeds $100,000, such excess Options shall be treated as non-qualified
stock options. For purposes of this Section 12, incentive stock options shall
be taken into account in the order in which they were granted. The fair market
value of the shares shall be determined as of the time the Option with respect
to such shares is granted.
13. 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 and Eligible
Participants participating in the Plan, and on all persons eligible or who
become eligible to participate in the Plan.
-9-
<PAGE>
EXHIBIT 10.10
S0FTSENSE COMPUTER PRODUCTS INC. COMPU-TOUCH/(R)/
S0FTWARE LICENSE, SUPPORT AND EQUIPMENT PURCHASE AGREEMENT
----------------------------------------------------------
THIS SOFTWARE LICENSE, SUPPORT AND EQUIPMENT PURCHASE AGREEMENT (this
"Agreement") is entered into this 27th day of May, 1994, (the "Execution Date")
between SOFTSENSE COMPUTER PRODUCTS INC., a New York corporation, with its
principal place of business at 1155 Hammond Drive, Suite E-5200, Atlanta,
Georgia 30328 (hereinafter "Softsense"), and Emro Marketing Company, a
corporation organized and existing under the laws of the State of Delaware, with
its principal place of business at 500 Speedway Drive, Enon, Ohio 45323
(hereinafter "Customer"). Except as may otherwise be stated herein or as
hereafter may be agreed by the parties, this Agreement shall be deemed effective
as of August 13, 1993 (the "Effective Date"). Without limiting the applicability
of this Agreement to transactions occurring on or after the Execution Date, all
transactions of the type contemplated by this Agreement having occurred on or
after the Effective Date and before the Execution Date shall be deemed to be,
and have been, subject to the terms and conditions hereof.
NOW, THEREFORE, for and in consideration of the mutual promises,
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 copyrighted Open
----------
Architecture computer programs (and associated copyrighted documentation)
operable on Open Architecture, IBM compatible microcomputer equipment, which are
designed for use in managing convenience stores and similar retail
establishments and which together are commonly referred to as Compu-Touch
Software. The purpose of this Agreement is to establish terms and conditions
which will apply, as appropriate, to the current and future licensing of Compu-
Touch Software, support of Compu-Touch Software and the purchase, staging,
support and maintenance of computer Equipment to be used in conjunction with
Compu-Touch Software.
2. DEFINITIONS. In this Agreement, the following terms shall have the
-----------
meanings set forth below:
2.1 "Enhancement" shall mean any minor change or addition to the
Software that, when made, adds new function or improves the Software's utility,
efficiency, functional capability or application, but that does not constitute
solely an Error Correction. "Enhancement" does not include separately priced or
separately marketed computer programs, even if such computer programs are
designed to interface with the Software.
2.2 "Equipment" shall mean the computer equipment, parts and supplies
purchased from Softsense by the Customer hereunder.
2.3 "Error" shall mean any failure of the Software to conform in all
material respects to the specifications for the Software published from time to
time by Softsense and provided to the Customer.
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 specifications, or a procedure or routine that helps eliminate
the practical adverse effect on the Customer of such nonconformity.
<PAGE>
2.5 "Releases" shall mean new versions of the Software, which new
versions may include both Error Corrections and Enhancements.
2.6 "Order" shall mean a Customer issued purchase order in substantial
conformity with the purchase order attached hereto and marked as Exhibit A which
when accepted by Softsense shall bind the parties hereto to the terms of this
Agreement and the terms on the face of the purchase order with respect to
Software and/or Equipment listed thereon. An Order 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
considered accepted by Softsense ("Accepted Order"). In addition to identifying
subject Software and Equipment, the Order shall identify the applicable pricing
Addendum to this Agreement and shall detail delivery date and Customer location
for Software and/or staged Equipment. Only those terms on the face (not back) of
the Accepted Order shall be enforceable and a statement thereon shall so note.
2.7 "Software" shall mean only the Softsense developed and owned
computer programs designed for use in managing convenience stores and similar
retail establishments licensed to the Customer under this Agreement, consisting
solely of machine readable computer code for operation with Open Architecture,
IBM-compatible computer equipment. "Software" is intended to include Softsense's
copyrighted user manuals and other written materials including specifications
relating to the Software. "Software" shall also include Enhancements, Releases,
Error Corrections, modifications, revisions, conversions, upgrades, or additions
to the Software that are made available to the Customer as part of the support
services provided by Softsense hereunder. "Software" shall not include computer
programs developed by Softsense at the specific request of Customer, for use
either in conjunction with Software or otherwise, and in respect of which
Softsense and Customer have specifically agreed in writing on a case-by-case
basis that ownership rights, as between Softsense and Customer, shall be in
Customer.
2.8 "Open Architecture", in relation to Equipment and third party
hardware, shall mean that any and all components of Equipment can be replaced by
third-party hardware components which at a minimum meet the specifications and
protocols, as designated by Softsense, for the Equipment and that such
replacement components will function in a manner equal to or better than would
the Equipment in running the Software or other Open Architecture computer
program applications which are IBM compatible. "Open Architecture", in relation
to Software and other computer program applications, shall mean that the
Software or other computer programs shall be capable of operating to their
fullest potential on third-party Open Architecture IBM compatible hardware, and
components thereof, which at a minimum meet the specifications and protocols for
the Equipment which are provided to Customer pursuant to this Agreement.
3. S0FTWARE AND EQUIPMENT; ORDERING AND PAYMENT. Specific Software and
--------------------------------------------
Equipment may be ordered by the Customer under this Agreement by complying with
the ordering procedures mutually agreed upon by Softsense and the Customer,
which, at a minimum, will require Customer's submission of a signed Order to
Softsense and Softsense's acceptance thereof pursuant to Paragraph 2.6 above.
Unless otherwise agreed to by the parties, the Accepted Order shall serve to
perfect licensing of the Software at each Customer location ("Licensed Site")
listed in the Accepted Order effective as to each Licensed Site upon delivery of
the Software to such Licensed Site. Except as may otherwise be agreed by the
parties, payment terms shall be net 30 days from date of invoice but, unless
-2-
<PAGE>
delivery is delayed beyond that set forth in the Accepted Order at the request
or by other actions of Customer, no earlier than 10 days after delivery.
4. SOFTWARE.
--------
4.1 Licenses.
--------
4.1.1 Subject to compliance by the Customer with the terms hereof,
including payment of all license fees set forth herein, Softsense hereby grants
to the Customer, a nonexclusive, nontransferable and nonassignable (except as
permitted by Section 19), limited license to install, use and execute the
Software at each Licensed Site solely in support of the Customer's business
activities and, with respect to the Software program titled "Home Office
Application Module", to use such program at its office location(s) and, as
appropriate and as contemplated by said Software, at Licensed Sites where other
Software programs are licensed. The 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 applicable Accepted Orders. The Customer
may make one master copy of the Software for "archival" or "back-up" purposes
only, which Customer may use with respect to any Licensed Site provided such
copy is labeled with Softsense's name and the version of the Software copied and
the label contains Softsense's copyright notices.
4.1.2 Notwithstanding the license granted in Paragraph 4.1.1, no
license is granted to the 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. The 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. The Customer shall not decompile, disassemble or reverse engineer the
Software, or attempt to do so.
4.1.3 With respect to computer programs provided by Softsense
other than the Software, and other than computer programs owned by Customer for
which no license shall be required, any right and license to use such computer
programs will be specified on the license agreement provided by the manufacturer
of such computer programs which Softsense shall cause to be issued and delivered
or transferred to Customer.
4.1.4 The licenses for Software granted to the 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 the Customer desires to use the
Software.
4.2 SOFTWARE SOURCE CODE.
--------------------
4.2.1 Subject to compliance by the Customer with the terms hereof,
Softsense hereby grants to the Customer, a non-exclusive, nontransferable and
non-assignable (except as permitted by Section 19) limited license in the source
code versions of the Software, all protocols regarding Software and Equipment
not otherwise provided to Customer pursuant to this Agreement and all associated
documentation (collectively, the "Source Code"), for the purposes of supporting
customer's internal use of the Software licensed to Customer under Paragraph
4.1.1 hereof under those circumstances
-3-
<PAGE>
where Customer would be entitled to receive copies of the Source Code versions
of the Software and all associated documentation. Nothing in the limited
license granted in this Paragraph 4.1.5 shall entitle Customer to make copies of
the Software other than as may be permitted under the terms of this Agreement
without paying the appropriate license fee to Softsense or to its successors or
assigns. Customer shall be entitled to receive a copy of the Source Code version
of each Software program then currently licensed and installed at Licensed Sites
and at its office location(s) (along with any protocols and associated
documentation) only in the event that Softsense is unable or unwilling to (i)
substantially fulfill its obligations under the terms of its warranty set forth
in Paragraph 4.4.1 hereof or (ii) substantially fulfill its obligations to
provide Software support services under the provisions of Section 6 hereof
including, without limitation, Softsense's termination, pursuant to Section 11
hereof, of the Software maintenance and support provisions other than for cause,
and fulfillment of such obligations are not available from a successor or
assignee of Softsense acceptable to Customer (which acceptance shall be in
writing and which acceptance shall not be unreasonably withheld) under terms
and conditions substantially the same as set forth herein as pertains to the
fulfillment of such obligations. Upon receipt of the Source Code version of any
Software program, Customer agrees to protect same in accordance with the
provisions of Section 8 hereof, specifically taking such action as may be
reasonably required to preserve the confidential and trade secret nature of any
Source Code.
4.2.2 Until such time as Customer shall become entitled to receive
the Source code version of any or all Software licensed and installed at a
Licensed Site or at Customer's office location(s), as applicable, appropriate
Source Code versions of the Software shall be placed in escrow, at Softsense's
sole cost with an escrow agent mutually acceptable to both parties under such
terms and conditions that are in conformity with the provisions of this
Agreement and which otherwise are mutually agreeable to the parties and the
escrow agent. Within two (2) days of delivery of the Source Code version or
versions of the Software (including any protocols or associated documentation
and any modifications or upgrades to the Source Code, protocols or associated
documentation) to the escrow agent, Softsense shall notify Customer in writing
as to which Source Code version or versions have been so delivered. Customer may
confirm delivery of the Source Code version or versions to the escrow agent by
any reasonable means at Customer's sole cost and expense; provided, however that
confirmation by inspection of the Source Code by Customer or its agent shall
only be with the written consent of Softsense, which consent shall not be
unreasonably withheld.
4.2.3 Customer shall be entitled to give the escrow agent a
written Notice of Instructions to Release Source Code ("Release Notice") upon
the occurrence of any event described in Paragraph 4.2.1 hereof that would
entitle Customer to receive any Source Code version or versions. Such Release
Notice shall be delivered to the escrow agent with a copy sent to Softsense. In
order for a Release Notice to be effective it must be in substantial compliance
with the following requirements:
(i) Be clearly and conspicuously labeled "Notice of Instructions to
Release Source Code";
(ii) Specifically refer to this Agreement by Execution Date and by
identification of the parties;
(iii) Specifically refer to any written escrow agreement executed in
connection herewith by Execution Date and by identifying the
parties and the escrow agent;
-4-
<PAGE>
(iv) Specify the nature and circumstances of the event(s) or
condition(s) described in Paragraph 4.2.1 hereof that entitle
Customer to receive the source code version or versions of the
Software;
(v) Specifically identify the Software and version or versions
thereof for which the Source Code is being sought;
(vi) Demand delivery of the relevant Source Code version or versions.
4.2.4 Customer shall provide escrow agent with evidence of Softsense's
receipt of the Release Notice, including evidence of the date of such receipt,
or, alternatively, evidence of Customer's good faith attempts to provide such
Release Notice to Softsense pursuant to the terms of Section 16 hereof when
receipt of such Release Notice is either refused by Softsense or otherwise such
Release Notice was undeliverable to Softsense. Except as may be otherwise
provided hereafter in this Section 4.2, twenty-one (21) days after the earlier
of (a) Softsense's receipt of the Release Notice, (b) the date upon which
Softsense refused receipt of the Release Notice or (c) the date upon which the
escrow agent received evidence from Customer of Customer's good faith attempt
to deliver the Release Notice to Softsense which Release Notice was
undeliverable, escrow agent shall distribute, deliver and transfer the Source
Code version or versions demanded in the Release Notice to Customer and shall
simultaneously deliver to Softsense a written notice evidencing such delivery.
4.2.5 Softsense shall have twenty-one (21) days after receipt of its
copy of the Release Notice (the "Cure Period") to use its reasonable efforts to
determine the grounds upon which Customer claims it is entitled to the demanded
Source Code version or versions and to cure any problems giving rise to the
Release Notice. To such ends, Customer shall co-operate with any reasonable
request of Softsense during the Cure Period. In the event that Softsense, in
good faith, believes it has cured or corrected the event(s) or condition(s)
allegedly giving rise to the Release Notice, Softsense shall deliver to the
escrow agent a letter specifying the cure or correction to the event(s) or
condition(s) allegedly giving rise to the Release Notice ("Cure Notice") with a
copy of such Cure Notice being sent or delivered to Customer. If upon receipt of
the Release Notice Softsense believes, in good faith, that the event(s) or
condition(s) alleged in the Release Notice giving rise to such Release Notice
did not occur or do not exist or otherwise are events or conditions that are not
sufficient to entitle Customer to receive the demanded Source Code version or
versions, Softsense shall deliver to the escrow agent, prior to the expiration
of the Cure Period, a letter stating specifically the basis and reasons for
which it believes that Customer is not entitled to the demanded Source Code
version or versions ("Objection Notice") with a copy of such Objection Notice to
be sent or delivered to Customer. In the event that Softsense has refused
receipt of a Release Notice or in the event that a Release Notice to Softsense
was undeliverable after Customer's good faith efforts to deliver such Release
Notice, the Cure Period shall commence on either the date receipt of the Release
Notice was refused or the date upon which Customer provided escrow agent with
evidence that the Release Notice was undeliverable, whichever is appropriate.
4.2.6 Notification to the escrow agent as called for in this Section 4.2
shall be either by hand delivery or by certified mail, postage prepaid, return
receipt requested. Notification to either party as called for in this Section
4.2 shall be in accordance with the provisions of Section 16 hereof. Where such
notice or notification to a party is a copy of a notice or notification to the
escrow agent it shall be delivered or mailed no later than two (2) business days
after notification has been delivered or sent to the escrow agent. Either party
may withdraw its Release Notice, Cure Notice or
-5-
<PAGE>
Objection Notice at any time by giving written notice of such withdrawal to the
escrow agent with a copy of such withdrawal sent to the other party. The parties
agree to act in good faith and reasonably with respect to the issuance of any
Release Notice, Cure Notice or Objection Notice and to use their best efforts to
insure that there is a justifiable basis for issuing such notices and that such
justification is reasonably set forth in such notices.
4.2.7 In the event that the escrow agent has received a Release Notice
and, in a timely manner, has received either a Cure Notice or an Objection
Notice and if neither Customer's or Softsense's notice is withdrawn within ten
(10) days of the escrow agent's receipt of the later of such notices, the escrow
agent shall immediately refer the dispute to binding arbitration as provided
herein. The arbitration proceeding shall be conducted, in accordance with the
commercial rules of the American Arbitration Association then prevailing, by a
panel of not less than three (3) arbitrators appointed by the American
Arbitration Association, at least one of whom must have substantial experience
in the field of computer software technology and licensing. The sole issue(s)
for arbitration shall be whether an event or condition giving rise to a Release
Notice has occurred, whether Customer correctly provided the escrow agent and
Softsense with the Release Notice and, when appropriate, whether Softsense
properly and timely cured or corrected the event(s) or condition(s) allegedly
giving rise to the Release Notice.
4.2.8 If the arbitrators determine that event(s) or condition(s)
giving rise to a Release Notice occurred and that Customer acted correctly in
providing the escrow agent and Softsense with copies of the Release Notice and
that Softsense did not properly and timely cure or correct the event(s) or
condition(s) allegedly giving rise to the Release Notice then the arbitrators
shall notify the parties and the escrow agent shall immediately distribute,
deliver and transfer the demanded Source Code version or versions to Customer.
Alternatively, if the arbitrators determine that the event(s) or condition(s)
allegedly giving rise to the Release Notice did not occur or that Customer did
not act correctly in providing either the escrow agent or Softsense with copies
of the Release Notice or that Softsense did properly and timely cure or correct
the event(s) or condition(s) giving rise to the Release Notice and that Customer
did not act correctly in failing to withdraw the Release Notice, then the
arbitrators shall notify the parties and the escrow agent shall not distribute,
deliver or transfer the demanded Source Code version or versions of the Software
to Customer and the Release Notice shall be deemed extinguished.
4.2.9 The decision of the arbitrators shall be final and binding on
Softsense and Customer and may be entered and enforced in any court of competent
jurisdiction by either party. Unless the arbitrator shall, for good cause,
determine otherwise, the prevailing party in the arbitration proceeding shall be
awarded reasonable attorneys' fees, expert witness costs and expenses and all
other reasonable costs and expenses incurred directly or indirectly in
connection with the proceeding after the escrow agent referred the dispute to
arbitration.
4.3 OWNERSHIP OF SOFTWARE.
---------------------
4.3.1 The Customer acknowledges and agrees that as between the
Customer and Softsense, Softsense is the owner of the Software and all portions
thereof, including all modifications, changes, Enhancements, Releases, Error
Corrections, upgrades, updates and additions, whether made by Softsense or by a
third party with Softsense's permission.
-6-
<PAGE>
4.3.2 The Customer acknowledges and agrees that, except for the
Customer's licenses described in Section 4.1 of this Agreement, which licenses
are not coupled with an interest, the 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 Paragraph 8.1) and confidential information rights therein.
Additionally, the Software shall remain the property of Softsense even if the
Customer, its employees or its contractors may have contributed to the
conception of such work or helped in its development. Anything in this Paragraph
4.3.2 to the contrary notwithstanding, with respect to any computer program
developed by Softsense at the specific request of Customer, for use either in
conjunction with Software or otherwise, and in respect of which Softsense and
Customer have specifically agreed that, as between Customer and Softsense, such
computer program is owned by Customer, Softsense shall execute and deliver to
Customer any document which Customer may reasonably request to evidence such
ownership in Customer.
4.3.3 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 Softsense's ownership of the
Software as well as not to challenge the copyrights or patent rights or
confidential and proprietary information rights of Softsense and the Customer
shall not otherwise impair the rights and interest of Softsense therein.
4.3.4 Nothing herein shall be construed as granting the Customer any
right, title or interest in or to the trade names or trademarks owned or used by
Softsense.
4.3.5 Nothing herein shall restrict Softsense from granting similar
rights and licenses to the Software to other individuals and entities.
4.4 SOFTWARE LIMITED WARRANTY AND DISCLAIMERS.
-----------------------------------------
4.4.1 Softsense hereby warrants to the Customer that the Software (i)
is of Open Architecture design, (ii) will conform, when shipped to the Customer,
to the product features, functionality and specifications generally published by
Softsense from time-to-time and (iii) can be loaded into, and be made
operational in, the Equipment or Open Architecture third-party hardware
components without assistance from Softsense. If Customer believes there is a
defect in the Software such that it does not meet at a minimum the product
features and functionality as ever published by Softsense, Softsense must be
notified immediately, but no later than ninety (90) days following delivery of
the Software or of any subsequent Release to the Customer. As the Customer's
exclusive remedy and the sole measure of any recoverable damages incurred by the
Customer or any third party for breach of this limited express warranty with
respect to the Software (including any subsequent Release), Softsense shall
repair or replace, at Softsense's option, the defective Software or defective
Release such that Customer is provided with Software or a Release which is not
defective. Such repair or replacement shall be at Softsense's risk and expense.
Softsense shall have no obligation under this Paragraph 4.4.1 should the
Software be modified, altered, merged or subjected to misuse, neglect, accident
or improper use by the Customer or any third party. Softsense does not warrant
that the Software will operate in conjunction with non-Softsense computer
programs not recommended or approved by Softsense.
4.4.2 THE CUSTOMER UNDERSTANDS AND AGREES THAT THE LIMITED EXPRESS
WARRANTY SET FORTH ABOVE IN PARAGRAPH 4.4.1 IS EXCLUSIVE
-7-
<PAGE>
AND SOFTSENSE DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY NATURE WHATSOEVER
WITH RESPECT TO THE SOFTWARE, ANY REVISIONS OR ADDITIONS TO THE SOFTWARE AND ANY
SUPPORT SERVICES PROVIDED TO CUSTOMER PURSUANT TO PARAGRAPH 6.1 OF THIS
AGREEMENT, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, PARTICULARLY INCLUDING
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
4.5 Softsense will defend the Customer against any claim that such
Software supplied infringes a United States patent or copyright and, subject to
the limitation of liability set forth in Paragraph 9.1 herein, pay all fines,
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, the 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 (provided that Customer may participate in the defense and settlement
of any such lawsuit in the event that Softsense is unable or unwilling to
adequately defend Customer or to pay any liability that may be determined), and
(iii) provide Softsense with all available and relevant information, and with
reasonable assistance, authority and cooperation to enable Softsense to defend,
compromise or settle the lawsuit as provided herein. If such claim has occurred
or in Softsense's judgment is likely to occur, the Customer agrees to allow
Softsense, at Softsense's option and expense, to modify the Software so that it
becomes non-infringing, or to procure the right for the 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, the
Customer will return the Software to Softsense for a credit as mutually
determined by Softsense and the Customer. The defense offered in this Paragraph
4.5 shall not apply to any claim to the extent based upon the combination,
operation or use of the Software with data or computer programs not manufactured
by Softsense. THE FOREGOING STATES THE ENTIRE OBLIGATION OF SOFTSENSE FOR PATENT
AND COPYRIGHT INFRINGEMENT WITH RESPECT TO THE SOFTWARE.
4.6 Softsense hereby warrants and represents to the 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 the Software is free and
clear of any lien, claim or encumbrance whatsoever.
4.7 The parties acknowledge that as of the Effective Date Softsense is
using Foxpro, Clipper and Microsoft C as developmental application tools in
designing the Software which is contemplated by this Agreement and that the
Software is designed to operate with Microsoft DOS and Novell LAN operational
packages. Softsense agrees to provide Customer with a minimum of six (6) months
prior written notice before it makes operational any Software or any Releases
requiring a change or upgrade to the existing operational or application
packages including, but not limited to Foxpro, Clipper and Microsoft C.
4.8 License fees associated with the license of Software will be
specified by this Agreement and detailed, by reference or otherwise, on Accepted
Orders.
-8-
<PAGE>
5. EQUIPMENT.
---------
5.1 Title to all the Equipment purchased hereunder will pass to the
Customer upon the earlier of payment to Softsense of all charges related to the
Equipment and identification of the Equipment to the Agreement or delivery of
the Equipment to Emro. Softsense shall retain a security interest in any
particular piece of Equipment until all charges due hereunder for such piece of
Equipment are paid in full. The Customer will execute any financing statements
reasonably deemed necessary by Softsense to perfect its security interest. This
Agreement shall serve as a security agreement and the customer authorizes
Softsense at Softsense's expense to file a copy of this Agreement or any
financing statements reasonably deemed necessary to protect Softsense's security
interest. Third-party peripherals delivered to Softsense for staging shall at
all times be titled in Customer and Softsense shall have the duties of a bailee
with respect to such peripherals. Without limiting the foregoing sentence,
Softsense agrees that upon delivery of third-party peripherals to Softsense's
offices, it will perform a commercially reasonable inspection to determine if
there is any evidence of damage having occurred to the peripherals while in
transit. Softsense shall advise the carrier of such damage by noting the damaged
condition of any peripheral or of the shipping container or carton on the bill
of lading at the time that Softsense signs for receipt of the peripherals.
Softsense shall advise Customer as soon as reasonably possible whenever third-
party peripherals in its custody or control are damaged.
5.2 Within a reasonable time after the Effective Date, Softsense shall
provide Customer with all specifications for any Equipment, and components
thereof, which may be contemplated for sale and purchase pursuant to this
Agreement. Specifications to be provided shall include, without limitation, PC
specifications, storage requirements, input/output interface requirements, touch
screen specifications and modem specifications. Specifications for new
Equipment, and components thereof, which come within the contemplation of this
Agreement for sale and purchase subsequent to the Effective Date shall be
provided by Softsense to Customer within a reasonable time after such Equipment
and components come within the contemplation of this Agreement. Softsense shall
notify Customer of any material changes in Equipment, including without
limitation any changes in any specifications previously provided, within a
reasonable time of such changes being made. In no event will Softsense provide
notification of Equipment changes less than ninety (90) days prior to shipment
of Equipment and Customer shall be entitled to cancel its Accepted Order for any
or all of such Equipment, and for associated Software, third-party computer
programs and related services, if any, prior to shipment if any Equipment
changes are unacceptable.
5.3 Delivery of the staged Equipment and third-party peripherals will
be made in accordance with the Accepted Order therefor and the Equipment and
third-party peripherals will be delivered to the Customer's location set forth
in the Accepted Order. Softsense shall make all shipping arrangements, subject
to Customer's right to approve the carrier, but shall invoice Customer for
shipping charges. Softsense assumes all risk of loss, damage and destruction to
the Equipment prior to delivery of the Equipment to the Customer, regardless of
the carrier.
5.4 Softsense warrants that it is authorized to sell and transfer title
of any Equipment (including authorization to assign any licenses for any
associated computer programs not part of the Software) delivered to Customer
pursuant to this Agreement and to any Accepted Order. Softsense shall assign to
Customer any licenses, as well as any warranties of title and rights of
indemnification for claims of patent or copyright infringement, which Softsense
may have respecting the Equipment and any associated computer programs. In the
alternative, Softsense shall use reasonable efforts to cause the
-9-
<PAGE>
manufacturers, suppliers or owners, as appropriate, of the Equipment and any
associated computer programs to convey to Customer appropriate licenses,
warranties of title and indemnifications. In the event of any claim against
Customer by any third party based on infringement of any patent or copyright,
Softsense shall cooperate with any reasonable request from Customer for help and
support in Customer's defense of such claim or in Customer's efforts to obtain
recourse from the manufacturers, suppliers or owners, as appropriate, of the
Equipment and any associated computer programs. Except as stated in this
Section 5.4, for any Equipment and any associated computer programs not part of
the Software, Softsense shall have no obligations or liability to the Customer
for any claim that the Equipment or such computer programs infringe a United
States patent or copyright. The Customer's sole recourse will be against the
manufacturer of such Equipment or computer programs to the extent that the
manufacturer assumes any responsibility for patent or copyright infringement.
This Paragraph 5.4 states Softsense's entire obligation regarding patent and
copyright infringement with respect to the Equipment and computer programs other
than the Software.
5.5 Equipment Warranties.
--------------------
5.5.1 [ ] "Live Operation" shall mean that point of time at which the
Equipment is successfully used on an ongoing basis in conjunction with the
Software as part of Customer's Point of Sale system in the selling of
convenience store and motor fuel products. The Equipment Warranty Plan shall not
apply to consumable parts or supplies which are used up or which wear out in the
normal day-to-day operation of the Equipment (receipt printer paper, ribbons
etc.) in the time frame which such parts and supplies would be reasonably
expected to be consumed. Malfunctioning Equipment or damage to Equipment caused
by the following circumstances may not be considered by Softsense as qualifying
for coverage under the Equipment Warranty Plan:
(i) Failure to operate continually the Equipment in an operating
environment similar to current Emro operations;
(ii) Use of the Equipment other than for purposes contemplated by
Softsense as generally described in materials published by Softsense
respecting the Compu-Touch System;
(iii) Accident, disaster (including flood, fire and lightning) or
transportation;
(iv) Alteration by the Customer or any third party other than Softsense;
and
(v) Misuse or abuse of the Equipment or Customer's failure to properly
fulfill any maintenance requirements for which the Customer may be
responsible.
5.5.2 Under this Equipment Warranty Plan, Softsense will:
(a) Work with the Customer Employees at Customer's Licensed
Sites and/or home office help desk to determine failing Equipment components.
(b) Provide support for third-party computer programs
associated with the Equipment and provided by or through Softsense at the time
the Equipment is delivered to Customer. Such support shall not include providing
new Releases of such programs nor providing Error Corrections
-10-
<PAGE>
or Enhancements which would not be permitted by the manufacturer or owner of
such third-party programs.
(c) Accept failing Equipment components from Customer. (All
costs associated with delivering failing Equipment to Softsense's Atlanta office
shall be the responsibility of Customer.)
(d) Repair or replace the failing Equipment component (at its
own discretion), and provide replacement Equipment to Customer using standard
overnight shipment methodology in Severity Level 1 and Severity Level 2
problems, and three day shipping methodology for problems other than Severity
Level 1 or Severity Level 2. Severity levels as used herein are as defined in
Paragraph 6.1 hereof. With respect to any particular Equipment defect or
malfunction covered under the Equipment Warranty Plan, Customer and Softsense
will assign a Severity Level in accordance with the schedule set forth in
Paragraph 6.1 hereof.
(e) Pay for all costs associated with delivering the repaired
or replaced Equipment to the Licensed Site.
5.5.3 [ ] Customer may exercise each option for coverage under such
Extended Equipment Warranty Plan by giving written notice to Softsense of its
desire for continual coverage for an additional period prior to the end of any
current Equipment Warranty Plan period. Should Customer fail to timely exercise
its option to enroll in the Extended Equipment Warranty Plan for any particular
period, its option to enroll in any subsequent Extended Equipment Warranty Plan
period shall be terminated.
5.5.4 In consideration for Softsense providing Extended Equipment
Warranty Plan coverage hereunder, Customer agrees to pay a monthly Extended
Equipment Warranty Plan fee equal to .625% (based on an annual percentage of
7.5%) of the total charges paid or to be paid by the Customer for each Equipment
item (excluding costs of staging, shipping and any taxes which Customer may have
paid pursuant to Paragraph 23.4 hereof) for which Extended Equipment Warranty
Plan coverage applies. To the extent the Customer purchases additional Equipment
items for which it desires to receive Extended Equipment Warranty Plan coverage,
the monthly support fee will be recalculated based upon the new total charges
paid or to be paid by the Customer for Equipment items (excluding costs of
staging, shipping and taxes which Customer may have paid pursuant to Paragraph
23.4 hereof) qualifying for Extended Equipment Warranty Plan coverage. Extended
Equipment Warranty Plan fees will be invoiced in advance by Softsense on a
monthly basis as of the beginning of each calendar month that the Extended
Equipment Warranty Plan is in effect. The Customer shall pay all invoiced
amounts according to the terms specified therein, which will be at least net 30
days. For any Equipment item which qualifies for coverage under the Extended
Equipment Warranty Plan and which is installed by the Customer for a period of
twelve months or more, the Extended Equipment Warranty Plan fee associated with
such Equipment item may be adjusted by Softsense on the 1st day of February of
each year based on the change up or down in the United States Producer Price
Index For All Commodities (1982=100) as published by U.S. Department of Labor -
Bureau of Labor Statistics or successor index, in each case measured by
Softsense on January 1 as compared with January 1 of the previous year.
5.5.5 If the Customer fails to pay any Extended Equipment Warranty
Plan fees due hereunder for any reasons other than due cause, Softsense has the
right to suspend or terminate
-11-
<PAGE>
Extended Equipment Warranty Plan coverage or any part thereof but only after
Softsense has given Customer thirty (30) days prior written notice and then only
if Customer has not made payment of all past due extended Equipment Warranty
Plan fees.
5.5.6 In addition to any warranties extended to Customer by
Softsense under this Section 5.5 hereof, to the extent that the Equipment and
any associated computer programs are covered by warranties against defects,
malfunction or non-function from the manufacturer or supplier of such Equipment
and associated computer programs which warranties are broader in scope or
duration than the warranties extended by Softsense herein, Softsense agrees to
use reasonable efforts to obtain the benefits of such warranties for Customer
including, where permitted, the assignment by Softsense to Customer of any
applicable warranties that have been extended to Softsense. The issuance of
similar warranties by the manufacturer or supplier directly to Customer will
relieve Softsense from any obligation to secure for Customer the benefits of
warranties that have been extended to Softsense.
5.6 Charges associated with the purchase of Equipment will be
specified by this Agreement and detailed, by reference or otherwise, on Accepted
Orders.
5.7 Nothing in this Agreement shall be construed as an obligation
on Customer's part to purchase Equipment for any reason including, without
limitation, in order to be entitled to purchase Software or licenses therefor or
in order to run Software.
6. S0FTWARE SUPPORT SERVICES.
-------------------------
6.1 For each Software program licensed and installed at a Licensed
Site, Softsense will provide the following maintenance and support services:
(i) 24-hour toll-free remote assistance via telephone and/or modem;
(ii) All Enhancements and Releases to the Software to which the
support services apply;
(iii) All Software specifications and all documentation concerning
transmission file layouts, database file layouts, protocols
between any and all peripheral devices, and Software related
information which Customer may require to effectively support its
locations;
(iv) Training materials for all Software including, without
limitation, Quick Reference Guides, Prevention Maintenance
Guides, Trouble Shooting Guides, User Manuals and System Manuals
as any of such may be available from time-to-time;
(v) Periodically published newsletters (Compu-News and Touch-Talk);
(vi) Access to Softsense personnel during normal business hours via
electronic mail;
(vii) Correction of verifiable and reproducible Errors when reported to
Softsense by the Customer; and
-12-
<PAGE>
(viii) Reports respecting all calls made to Softsense's help desk including,
without limitation, number of calls, date and time of calls,
identification of Licensed Sites for which calls were received and
services provided in respect of such calls, such reports to be made
to Customer no less frequently than each calendar quarter.
After verifying an Error, the Customer will be responsible for logging the
Error, for notifying Softsense immediately of such Error by facsimile
transmission to Softsense a Compu-Touch Change Request form (a copy of which is
attached hereto as Exhibit B) setting forth appropriate details respecting the
Error, and for providing sufficient documentation, if available, to Softsense
via the 24-hour toll free remote assistance hot line or via electronic mail in
order for Softsense to reproduce the alleged Error. If the Error is verified,
the Customer and Softsense will assign a Severity Level to the verified Error in
accordance with the schedule set forth below. Thereupon, Softsense will use
reasonable diligence to attempt to provide the Customer with a fix/Error
Correction of the verified Error by providing the Customer with the corrected
computer program code in accordance with the response time designated below for
each Severity Level. In the event that the verified Error is not valid,
Softsense shall notify the Customer promptly with its rationale for such a
determination.
Severity Level Definitions
--------------------------
SEVERITY 1 -
The Customer is unable to use the Software and/or the Equipment and the
problem, in Customer's reasonable determination, results in a critical
impact on the Customer's operations consisting of, but not limited to,
Customer's inability to sell fuel and/or other merchandise or inability to
close a shift, site controller inoperability or system error message or, in
connection with Customer's monthly closeouts, Customer's inability to
transmit Daily Sales Reports or otherwise report correctly at the end of
any calendar month for any day of that month.
SEVERITY 2 -
The Customer is able to use the Software and/or the Equipment but, in
Customer's reasonable determination, Customer is severely restricted in
doing so including, but not limited to, Customer's inability to receive
merchandise or to transmit Daily Sales Reports or otherwise report
correctly (except that Customer's inability to transmit Daily Sales Reports
or otherwise report correctly in connection with Customer's monthly
closeouts shall be a Severity Level 1 Error, as provided above), Customer
being limited to only one POS or Customer's back office down, the failure
of credit card interface or intermittent system lock up or failure.
SEVERITY 3 -
The Customer is able to use the Software and/or Equipment with limited
functions which limitations, as determined by Customer, are not critical to
the Customer's overall operations.
SEVERITY 4 -
-13-
<PAGE>
There is no impact to running the Software.
Softsense shall respond to a verified Error based on the Severity Level as
follows:
SEVERITY 1 -
Softsense shall use its best efforts to provide an emergency fix or bypass
to allow the Customer to become operational within twenty-four (24) hours
of Softsense's receipt of notice of the verified Error. The Customer will
provide user data when possible.
SEVERITY 2 -
Softsense will provide an emergency fix or bypass within seventy-two (72)
hours of Softsense's receipt of notice of the verified Error, with an Error
Correction due to the Customer within five (5) days of such receipt.
SEVERITY 3 -
Softsense will provide an Error Correction to the Customer within forty-
five (45) days of Softsense's receipt of notice of the verified Error.
SEVERITY 4 -
Softsense will provide an Error Correction at times mutually agreeable to
Softsense and the Customer.
Support services for Software licensed hereunder will be deemed initiated as of
the date of delivery of the Software to the Licensed Site specified on the
applicable Accepted Order.
6.2 Support services provided by Softsense under this Agreement are
subject to the following limitations:
(a) Software defects or abnormal operation of the Software
resulting from the Customer's misuse or improper use of the Software or
Equipment, or from combining or merging the Software with any computer equipment
not meeting the specifications provided by Softsense for the Equipment or
computer programs not supplied by Softsense (or not approved by Softsense to be
combined or merged with the Software) may not be considered Errors by Softsense
for which maintenance and support services will be provided at no additional
charge hereunder.
(b) Softsense shall be responsible for providing support services
for any version of a Software program that Customer may choose to use in its
operations; provided, however, that Softsense's responsibility for support
services for any particular version of a Software program shall not extend
beyond five (5) years from the date that the next version of such Software was
available to Customer. Customer will endeavor to use the most recent Release so
long as its use is compatible with Customer's business objectives.
-14-
<PAGE>
(c) The Customer acknowledges that unless it provides an
operational telephone line tied into a modem, Softsense will be unable to
provide remote modem assistance.
(d) Additional support services requested by the Customer
(including custom development of computer programs) may be provided by Softsense
for an additional fee mutually agreed upon by the Customer and Softsense.
6.3 Except as may pertain to Error Corrections or Enhancements that are
made and installed by Softsense in response to Severity Level 1 situations,
Customer shall have the right to test and verify any version of the Software and
all changes to the Software before such versions of or changes to the Software
are distributed to and installed at any Customer locations. The foregoing
notwithstanding, Softsense will ensure that each Enhancement, Error Correction
and Release provided by Softsense and installed at any Licensed Site will not
cause loss of any then existing functionality nor any loss of Open Architecture
capability.
6.4 In consideration for Softsense providing Software support services
hereunder, the Customer agrees to pay a monthly support fee equal to 1.25%
(based on an annual percentage of 15%) of the total one-time license fees paid
or to be paid by the Customer for each copy of each Software program currently
licensed and installed by the Customer. To the extent the Customer licenses and
installs additional Software, the monthly support fee will be recalculated based
upon the new total one-time license fees paid or to be paid by the Customer.
Support service fees for each Software program will be invoiced in advance by
Softsense on a monthly basis as of the beginning of each calendar month
commencing with the use of the Software in Live Operation as that term is
defined in Paragraph 5.5.1 above. The Customer shall pay all invoiced amounts
according to the terms specified therein, which will be at least net 30 days.
For any Software program which is licensed and installed for a period of twelve
months or more, the support fee associated with such Software program may be
adjusted by Softsense on the 1st day of February of each year based on the
change up or down in the United States Producer Price Index For All Commodities
(1982=100) as published by the U.S. Department of Labor - Bureau of Labor
Statistics or successor index, in each case measured by Softsense on January 1
as compared with January 1 of the previous year.
6.5 CUSTOMER'S HELP DESK AND CREDIT HOURS.
-------------------------------------
6.5.1 It is the understanding of Softsense that Customer intends to
staff and maintain its own help desk which will be accessible to all of
Customer's store employees. The purpose of this help desk will be to provide
first 1ine support for Software and Equipment related questions and problems.
Customer shall identify to Softsense, from time to time, those of Customer's
help desk representatives and certain other of Customer's Computer Services
Organization personnel ("Authorized Representatives") who shall be entitled to
contact Softsense directly to initiate, monitor and otherwise be involved in,
from Customer's side, Softsense's Software maintenance and support service and
Softsense's Equipment Warranty Plan (including Extended Equipment Warranty Plan)
support and repair and replacement service. Customer's store employees will be
instructed to contact Customer's help desk for Software support and assistance
and with respect to any Equipment problems before any support is sought from
Softsense on any particular question or problem. In no event shall any of
Customer's employees, except Authorized Representatives, initiate Software
support service or Equipment Warranty Plan service directly from Softsense or
otherwise be in direct communication with Softsense support service personnel
regarding Software or Equipment support or service without the approval of one
of Customer's
-15-
<PAGE>
Authorized Representatives and only after appropriate arrangements are made by
such Authorized Representative with Softsense support service personnel.
Procedures for providing Software support and Equipment Warranty Plan support
and service shall hereafter be agreed to, from time to time, by Softsense and
Customer's Manager of Computer Services, with respect to general procedures, and
by Softsense and the appropriate Customer Authorized Representative(s), with
respect to any particular question or problem, with such procedures in all
events to be in conformity with the requirements and provisions of this
Agreement.
6.5.2 For so long as Customer maintains a help desk as described
hereinabove, Softsense will provide credit hours to Customer which Customer may
use to have Softsense: (a) consult with Customer or vendors of Customer on
matters within the expertise of Softsense which would not be considered Software
maintenance and support services as described in Paragraph 6.1 above, (b)
develop Customer-specific computer programs or training programs or (c) provide
other services as the parties may hereafter mutually agree. Credit hours to
which Customer shall become entitled as provided in this Paragraph 6.5.1 shall
be computed based on the number of Software licenses in effect during any
Contract Year so long as such licenses are for Software that is entitled to
Software support under Section 6 hereof during any part of the Contract Year.
For purposes of this Section 6.5, Contract Years shall be those twelve (12)
month periods commencing on the Effective Date and on those anniversaries of the
Effective Date so long as this Agreement shall be in effect. Credit hours shall
be calculated as follows:
[ ]
Credit hours shall be earned by Customer with respect to any Software license as
soon as the criteria set forth in this Paragraph 6.5.2 have been met for any
particular Software license. Once earned, credit hours may be accrued and used
at any time while this Agreement is in effect. Nothing herein shall be construed
to limit the use of credit hours for use in respect to services rendered solely
at or for the Customer location where such credit hour or hour(s) were earned.
The following are examples of the foregoing provisions and are not modifications
of, or additions to, any term, condition or provision of this Paragraph 6.5.2:
[ ]
-16-
<PAGE>
6.5.3 The existence of Customer's own help desk as provided in
Paragraph 6.5.1 above shall in no way reduce or alter the support service fee as
provided in Paragraph 6.4 hereof nor reduce the obligation of Softsense to
provide all support services called for under this Agreement for so long as
support service fees are paid. Without limiting anything in this Section 6.5,
Softsense agrees in all events that so long as support service fees are properly
paid, it will be available to provide Software support services to Customer 24
hours per day, seven days per week, 52 weeks per year.
6.6 If the Customer fails to pay any Software support fee due hereunder
for any reason other than for due cause, Softsense has the right to suspend or
terminate such support services or any part thereof but only after Softsense has
given Customer thirty (30) days prior written notice and then only if Customer
has not made payment of all past due Software support fees.
7. SYSTEM STAGING.
--------------
7.1 At Customer's option, as shall be indicated on Accepted Orders,
Softsense shall stage, as necessary, Equipment, Software, third-party
peripherals, and computer programs associated with the Equipment and/or the
third-party peripherals prior to shipment of such items to Customer by
Softsense. Except as may otherwise be agreed, staging shall include the
following:
(i) Installation of disk drives and electronic circuit boards in
Equipment.
-17-
<PAGE>
(ii) Building and labeling all cables for easy on-site
installation and maintenance.
(iii) Installation of third-party computer programs.
(iv) Installation of Software.
(v) Setup of site specific parameters (i.e. pump types, layout,
number of registers, store operating hours, etc.).
(vi) Testing of individual components and overall system as it
will be used at the site.
(vii) Installation and testing of third-party peripherals.
(viii) Repacking of all Equipment and third-party peripherals for
shipping.
7.2 Staging of third-party peripherals shall be dependent upon such
items being delivered to Softsense for integration. Customer shall be
responsible for shipping such third-party peripherals (including responsibility
for costs associated with such shipping) to Softsense's Atlanta offices.
7.3 Charges associated with the system staging will be specified by
this Agreement and detailed, by reference or otherwise, on Accepted Orders
issued by Customer and accepted by Softsense.
8. NONDISCLOSURE AND CONFIDENTIALITY.
---------------------------------
8.1 For purposes of this Agreement, the term "Proprietary
Information" shall mean all ideas, concepts, techniques, know-how, technical
information, business information or other data, information or material of a
non-public nature, in whatever form, which belongs to one of the parties hereto
and which is received by the other party hereto. Without limiting the foregoing,
Proprietary Information of Softsense shall include the Software and Proprietary
Information of Customer shall include Customer-owned computer programs which are
developed for Customer by Softsense. Each party shall endeavor to identify its
Proprietary Information as such prior to its being communicated to the other
party; however, failure to make such identification shall not alone change the
classification of information from Proprietary Information to non proprietary
information. The foregoing definitions of "Proprietary Information"
notwithstanding, in no event shall the term "Proprietary Information" include:
(i) information which at the time of disclosure is in the public
domain;
(ii) information which, after disclosure, enters the pubic domain
except where such entering is a result of a breach of this
agreement or any other agreement of confidentiality; and
(iii) information which is otherwise independently obtained by either
party free from any obligation of confidentiality.
-18-
<PAGE>
8.2 Each party shall:
a. hold in strict confidence all Proprietary Information of the
other party, using at a minimum the same degree of care to avoid disclosure of
such Proprietary Information as would be used with respect to its own
confidential information of like importance; and
b. use the Proprietary Information of the other party solely for
the purpose of computer program (including Software) and hardware (including
Equipment and third-party peripheral) development and implementation
specifically for Customer use. Each party shall only disclose Proprietary
Information of the other party to its employees or advisors as such individuals
have a need to know the Proprietary Information for the purposes specifically
allowed herein and shall only make such disclosures after advising such
employees and advisors of the confidential nature of the information and of the
provisions of this Section 8 and after obtaining such individuals acknowledgment
of and agreement to the terms of this Section 8. Each party agrees not to
disclose to anyone other than those individuals to whom disclosure may be made
in accordance with this Paragraph 8.2 that any Proprietary Information is being
furnished to either party by or on behalf of the other party.
8.3 If either party is required by legal process to disclose any of
the Proprietary Information of the other party, the party so required to
disclose agrees to provide the other party with prompt notice of such
requirements so that the other party may seek an appropriate protective order
and/or waive compliance by and with the provisions hereof, as such other party
in its sole discretion deems appropriate.
8.4 Each party agrees to return or destroy all documents and other
materials which incorporate Proprietary Information of the other party upon
demand by the other party. Each party shall also deliver to the other party or
shall destroy, at such time as the other party shall instruct, all other written
or computer stored material containing, reflecting or based on any data or
information contained in the Proprietary Information of the other party (whether
prepared by either party hereto or otherwise) and the party requested to return
or destroy documents and materials will retain no copies, extracts or other
reproductions, in whole or in part, of such Proprietary Information.
8.5 In the event that Softsense, or any individual to whom Proprietary
Information of Customer may be disclosed by Softsense, fails to observe the
terms and conditions hereof, Customer, in addition to any other available
remedy, may obtain an order restraining Softsense, or any individual to whom
Proprietary Information of Customer may have been disclosed by Softsense, from
breaching these terms and conditions. Softsense agrees to protect, defend,
indemnify and hold harmless Customer and its employees, officers and members of
its Board of Directors from any claims, damages, personal injuries, losses,
costs or expenses which Customer or its employees, officers or directors may
incur due to the improper use or disclosure of Customer's Proprietary
Information by Softsense or by its employees, agents or contractors or by any
other person or entity to whom Softsense discloses, directly or indirectly, such
Proprietary Information. The failure of Customer to pursue its rights hereunder
or any remedy available to enforce such rights shall not be deemed a waiver with
respect to any past, continuing or future breach or default by Softsense or any
individual or entity to whom Customer's Proprietary Information may have been
disclosed by Softsense, directly or indirectly. In the event that Customer, or
any individual to whom Proprietary Information of Softsense may be disclosed by
Customer, fails to observe the terms and conditions hereof, Softsense, in
addition to any other available remedy, may obtain an order restraining
Customer, or any individual to whom Proprietary Information
-19-
<PAGE>
of Softsense may have been disclosed by Customer, from breaching these terms and
conditions. Customer agrees to protect, defend, indemnify and hold harmless
Softsense and its employees, officers and members of its Board of Directors from
any claims, damages, personal injuries, losses, costs or expenses which
Softsense or its employees, officers or directors may incur due to the improper
use or disclosure of Softsense's Proprietary Information by Customer or by its
employees, agents or contractors or by any other person or entity to whom
Customer discloses, directly or indirectly, such Proprietary Information. The
failure of Softsense to pursue its rights hereunder or any remedy available to
enforce such rights shall not be deemed a waiver with respect to any past,
continuing or future breach or default by Customer or any individual or entity
to whom Softsense's Proprietary Information may have been disclosed by Customer,
directly or indirectly.
8.6 All confidentiality agreements set forth in any subsequent
agreements between the parties hereto regarding the subject matter hereof shall
be cumulative in addition to the terms and conditions stated herein. The
provisions of this Section 8 shall survive the expiration or termination of this
Agreement.
9. LIMITATION OF LIABILITY AND DAMAGES.
-----------------------------------
9.1 THE 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 THE CUSTOMER OR ANY THIRD PARTY FOR
ANY SPECIAL, 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 (EXCLUDING BODILY INJURY OR DEATH), OR LOSS OF GOODWILL WHICH
MAY ARISE IN CONNECTION WITH THE SOFTWARE, ANY REVISIONS OR ADDITIONS THERETO,
ANY COPIES THEREOF, THE EQUIPMENT, SOFTWARE SUPPORT SERVICES, EQUIPMENT WARRANTY
PLAN OR OTHERWISE PERTAINING TO THIS AGREEMENT, EVEN IF SOFTSENSE HAS BEEN
NOTIFIED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES OCCURRING, BUT
EXCLUDING SPECIFICALLY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR
LOSSES ARISING FROM OR RELATED TO SOFTSENSE'S BREACH, IF ANY, OF ITS OBLIGATIONS
UNDER SECTION 8 OF THIS AGREEMENT. THE PARTIES AGREE THAT ANY LIMITATION OF
LIABILITY SET FORTH IN THIS PARAGRAPH 9.1 SHALL SURVIVE IN FULL FORCE AND EFFECT
DESPITE ANY FAILURE OF AN EXCLUSIVE REMEDY.
9.2 THE CUSTOMER AGREES THAT SOFTSENSE'S LIABILITY FOR DAMAGES TO THE
CUSTOMER OR ANY THIRD PARTY FOR ANY CAUSE WHATSOEVER RELATED TO THIS AGREEMENT,
THE SOFTWARE, EQUIPMENT, SOFTWARE SUPPORT SERVICES, OR EQUIPMENT WARRANTY PLAN
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 THE CUSTOMER HEREUNDER (NET OF EXPENSES, INCLUDING
LICENSE FEES, PAID TO THIRD PARTIES ON BEHALF OF CUSTOMER) FOR THE PARTICULAR
SOFTWARE PROGRAM, EQUIPMENT COMPONENT OR SUPPORT 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 PATENT OR
COPYRIGHT INFRINGEMENT AS SET FORTH IN PARAGRAPH 4.5 NOR TO CLAIMS FOR BODILY
-20-
<PAGE>
INJURY, DEATH OR DAMAGE OR DESTRUCTION OR REAL OR PERSONAL PROPERTY NOR TO
CLAIMS ARISING FROM OR RELATED TO ANY BREACH BY SOFTSENSE OF ITS OBLIGATIONS
UNDER SECTION 8 OF THIS AGREEMENT. IN NO EVENT WILL SOFTSENSE BE LIABLE FOR ANY
DAMAGES ARISING FROM PERFORMANCE OR NONPERFORMANCE OF THE SOFTWARE OR EQUIPMENT
CAUSED BY THE CUSTOMER'S OR ANY THIRD PARTY'S FAILURE TO PERFORM ITS OR THEIR
RESPONSIBILITIES.
9.3 SOFTSENSE SHALL NOT BE HELD LIABLE OR RESPONSIBLE FOR MISUSE OF
THE SOFTWARE OR USE OF THE SOFTWARE BY UNTRAINED PERSONNEL, FOR IMPROPER ENTRY
OF DATA BY CUSTOMER OR BY ITS EMPLOYEES OR AGENTS IN CONNECTION WITH THE
SOFTWARE OR FOR ANY PROBLEMS ENCOUNTERED IN CONNECTION WITH EQUIPMENT SUPPLIED
BY SOFTSENSE OR ANY THIRD PARTY, INCLUDING, WITHOUT LIMITATION, MISUSE OR
INCORRECT OPERATION. THE CUSTOMER UNDERSTANDS THAT THE USE OF ANY EQUIPMENT
OUTSIDE THE MANUFACTURER'S RECOMMENDED SPECIFICATIONS MAY SERIOUSLY AFFECT 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 LINE SERVICE OR INTEGRITY, OR OTHER
SUCH FACTORS.
10. PROMOTIONAL MATERIAL. Only upon the review, as appropriate, and
--------------------
express written approval of a party to this Agreement may the other party to
this Agreement represent verbally, electronically or in any printed or visual
promotion, advertisement, or informational brochure that the Customer is a user
of the Software and a customer of Softsense. No representation shall be deemed
approved, regardless of any purported approval, unless such representation is
true, accurate and correct.
11. TERMINATION.
-----------
11.1 This Agreement is effective from the Effective Date and will
remain in effect until terminated by the Customer upon sixty (60) days' written
notice, or otherwise as provided in this Paragraph 11, or by Softsense as set
forth in this Paragraph 11. Termination of this Agreement may be partial as to
Equipment purchase provisions or Software maintenance and support provisions or
Extended Equipment Warranty Plan provisions; provided, however, that any such
partial termination or terminations shall not otherwise affect Customer's
Software licenses (including its rights with respect to documentation and other
items included in the definition of Software set forth in Paragraph 2.7 hereof)
or its obligations thereunder. The licenses granted by this Agreement may be
terminated by the Customer effective only when all Software (including
documentation, and other items included in the definition of Software set forth
in Paragraph 2.7 hereof which have been provided by Softsense hereunder) has
been returned to Softsense or destroyed upon instructions from Softsense.
Termination of the use of the Software by the Customer at one or more Licensed
Sites shall not be deemed a termination of this Agreement provided the Customer
continues to use the Software at other Licensed Sites.
11.2 Softsense may terminate this Agreement upon the occurrence of a
material breach hereof (including, without limitation, non-payment of fees) by
the Customer, which breach, unless otherwise agreed, has not been cured, with
respect to nonpayment of fees, within fifteen (15) days after the date of
-21-
<PAGE>
written notice thereof to the Customer by Softsense, and with respect to any
other material breach, within forty five (45) days after the date of written
notice thereof to the Customer by Softsense. Said notice will identify and
describe the basis for such termination. If prior to expiration of any cure
period, as stated above, the Customer cures such default, termination shall not
take place. Unless the material breach giving rise to termination of this
Agreement under this Paragraph 11.2 pertains to breach of the terms of the
Software license, failure to pay license fees or unauthorized disclosure of the
Software pursuant to the terms of the Software license or the terms of Section 8
of this Agreement, termination of this Agreement shall not terminate any
Software license previously granted and perfected. Termination of support
services hereunder will not otherwise affect the Customer's licenses to the
Software.
11.3 Either party may terminate this Agreement immediately upon the
filing by the other party of a voluntary petition in bankruptcy or a voluntary
petition or answer seeking reorganization, arrangement, or readjustment of its
debts, or any agreement by the other party indicating its consent to, approval,
or acquiescence in any petition or proceeding, or the application by the other
party for or the consent or acquiescence of the other party to the appointment
of a receiver or trustee or the filing of an involuntary petition against the
other party seeking reorganization, rearrangement or readjustment of its debts
or for any other relief under any insolvency act or law, now or hereafter
existing, or the involuntary appointment of a receiver or trustee for all or a
substantial part of the other party's property or assets. Termination of this
Agreement under the provisions of this Paragraph 11.3 shall not terminate any
Software license previously granted and perfected for which the Software license
fee has been previously paid and the terms of which have not otherwise been
breached.
11.4 Upon expiration or termination of this Agreement for any reason,
each party shall use its best efforts to return to the other party all property
belonging to the other party including, but not limited to, as appropriate, all
copies of the Software and other computer programs together with documentation
or other materials related 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' respective proprietary rights including Proprietary Information,
Softsense's warranties, the parties' respective limitations of liability and
other provisions of this Agreement concerning the ongoing interest of the
parties including, but not limited to, the provisions of Sections 4.3, 4.5, 4.6,
5.5, 8, 9, 15, 17, 18, 22, 23, shall continue and survive in full force and
effect.
12. INDEPENDENT PRINCIPALS. Softsense and the 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 hereto to make any commitment or
agreement binding on the other party hereto, without such other party's prior
written consent. In addition, each party hereto acknowledges that neither it nor
its employees are eligible to participate in any employee benefit programs
offered by the other party hereto. Each party hereto further understands that
neither it nor its employees are covered under the other party's workers'
compensation insurance or unemployment insurance coverage.
13. FORCE MAJEURE. Neither party shall be in default by reason of any
-------------
failure in performance of this Agreement if such failure arises, directly or
indirectly, out of causes reasonably beyond the control or foreseeability of
Softsense including, but not limited to, default by suppliers, acts of God or of
the public enemy, U.S. or foreign governmental acts in either a sovereign or
contractual capacity, transportation contingencies, fire, flood, epidemic,
restrictions, and strikes.
-22-
<PAGE>
14. NO WAIVER. Except as limited by any applicable Statute of Limitation
---------
or Statute of Repose or by any other provision of this Agreement, 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.
15. EQUITABLE REMEDIES AND SPECIFIC PERFORMANCE. Both parties acknowledge
-------------------------------------------
that each provision in this Agreement providing for the protection of a parties
copyrights, patents, Proprietary Information, trade secrets and other
proprietary rights, is material to this Agreement. The parties acknowledge that
any threatened or actual breach of such copyrights, patents, proprietary rights
or trade secrets or the threatened or actual disclosure of Proprietary
Information shall constitute immediate and irreparable harm to the party owning
such rights, patents, secrets or Proprietary Information, for which equitable
remedies may be awarded by a court of competent jurisdiction.
16. 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 by written notice to the other party. Addresses for notices are as
follows:
<TABLE>
<CAPTION>
If to Softsense: If to the Customer:
--------------- ------------------
<S> <C>
Softsense Computer Products Inc. Emro Marketing Company
1155 Hammond Drive P.O. Box 1500
Suite E-5200 Springfield, OH 45501
Atlanta, Georgia 30328 ATTENTION: Corporate Manager,
ATTENTION: Director of Operations Commercial and Development
With a courtesy copy to: With a courtesy copy to:
----------------------- -----------------------
Richard G. Greenstein, Esquire As may hereafter be designated by
Smith, Gambrell & Russell, LLP Customer from time-to-time.
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326
</TABLE>
17. GOVERNING LAW. This Agreement shall be governed, construed, and
-------------
interpreted in accordance with the laws of the State of Georgia. The Customer
stipulates and admits that it is transacting business in Fulton County in the
State of Georgia.
18. AUTHORITY TO CONTRACT. Each party warrants and represents to the
---------------------
other that to the best of its knowledge 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.
-23-
<PAGE>
19. ASSIGNMENT. The 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, except to a successor
of all or substantially all of the business assets and properties which are
associated with the use of the Software and Equipment licensed and purchased
hereunder (e.g. sale by the Customer of those Licensed Sites where the Software
is operated) and provided such successor agrees in writing to be bound by the
terms of this Agreement and all Accepted Orders executed in connection with the
Customer's use of the Software. Nothing herein shall preclude the Customer from
transferring the Software and Software license to a different location owned and
operated by the Customer provided the Customer executes and delivers to
Softsense a notice respecting the transfer and use of the Software and Software
license at such different location which notice shall identify both the Licensed
Site from which the Software and Software license are being transferred and the
different location to which the Software and Software license are being
transferred. Delivery of such notice will be effective to designate the
different location as a Licensed Site and to remove such designation from the
location from which the Software and Software license are transferred. Finally,
the Customer may transfer its license to one or more Software programs without
the prior written consent of Softsense if the transferee is the successor of the
Customer's business where the Software is installed (e.g. the Licensed Site
where the Software programs to be transferred are installed) and the transferee
executes an agreement with Softsense substantially similar to this Agreement,
provided, however, that such a transfer shall not relieve the Customer of its
obligation to fulfill the terms and conditions hereof.
20. SEVERABILITY. If any provision hereof 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.
21. AMENDMENTS. This Agreement can be amended or supplemented only by an
----------
instrument in writing signed by authorized representatives of both parties.
22. LIMITATION 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 Paragraph 8 herein, more
than five years after such cause of action has arisen or (ii) in the case of any
other action, more than two 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 years of the date of the last payment.
23. GENERAL.
-------
23.1 Each of the parties hereto acknowledges that it has read this
Agreement, understands it, and agrees to be bound by its terms. The parties
further agree that this Agreement and the Accepted Orders are the complete and
exclusive statement of agreement between the parties relating to the subject
matter of this Agreement and supersede and cancel all previous understandings,
representations, conditions, warranties and all other communications between the
parties relating to the subject matter of this Agreement.
23.2 The terms and conditions of any Exhibits or Addenda and now or
hereafter attached to this Agreement are incorporated by this reference and made
a part of this Agreement.
-24-
<PAGE>
23.3 Variance from the terms and conditions of this Agreement in any Order
or other written communication shall be of no force or effect except to the
extent accepted or agreed to by Softsense. In the event of a conflict between
the terms of this Agreement and the terms of a written communication from
Softsense other than as contemplated hereby, the terms and conditions specified
in this Agreement shall take precedence.
23.4 In addition to the charges due under this Agreement, the Customer
agrees to pay amounts equal to any federal, state and local taxes designated,
levied or based on this Agreement or any activities hereunder, exclusive of
taxes based on Softsense's net income. Any personal property taxes assessable on
the Equipment after delivery to Customer shall be paid by the Customer. Any
amount owed by Customer to Softsense which becomes overdue may, at Softsense's
option, bear interest equal to .66% per month.
23.5 The Agreement is not valid or binding upon Softsense until accepted
by Softsense as evidenced by the execution of this Agreement by an authorized
representative.
23.6 Softsense shall secure and maintain in force, while this Agreement
remains in effect, insurance with a financially responsible insurance company or
companies acceptable to Customer, of the kinds and in the minimum amounts stated
below, provided that such amounts are minimum limits only:
(a) Worker's Compensation as required by the laws of the State in
which services subject of this Agreement and any Accepted Order are to be
performed. Employer's Liability Insurance shall have a limit of at least five
hundred thousand dollars ($500,000) per occurrence.
(b) Public liability insurance applying to all operations pursuant to
or in connection with this Agreement, including any and all amendments or
changes hereto, with a combined single limit of at least five hundred thousand
dollars ($500,000) per occurrence, and covering, without limitation,
premises/operations, completed operations, and independent contractors,
contractual liability.
(c) Automobile liability insurance with a combined single limit of at
least five hundred thousand dollars ($500,000) per occurrence.
(d) Such other or increased insurance coverage(s) as may be required
by law. Softsense shall also require each and every of its subcontractors which
shall do work hereunder to maintain insurance in force meeting all of the
requirements specified above. Except for the Worker's Compensation policy,
Customer shall be named as additional insured under all policies of insurance,
and all policies shall waive all rights of subrogation against Customer, its
parent or affiliated corporation(s), and its or their agents, employees and
underwriters with respect to all claims arising out of, or in any way connected
with, this Agreement and Accepted Orders in respect hereof. Before commencing
Work, Softsense shall furnish Customer with Certificates of Insurance verifying
that all insurance required of Softsense is in force. The Certificates shall
include the stipulation that no change in, or cancellation of, any policy or
policies will be made without written notice to Customer at least thirty (30)
days prior to such change or cancellation. If requested by Customer, Softsense
shall have its subcontractors furnish the same evidence of insurance required of
Softsense. The minimum insurance required by Customer herein shall not limit or
diminish in any way the respective rights and obligations of the parties under
-25-
<PAGE>
this Agreement, nor shall such coverage be construed as a limit or extension of
Softsense's liability under this Agreement or otherwise. The purchase of
insurance by Softsense shall, in no event, relieve Softsense from liability
hereunder.
23.7 Softsense agrees to notify its employees, subcontractors, agents and
representatives of Customer's Drug and Alcohol Policy (The Policy). The Policy
prohibits Softsense's employees, subcontractors, agents and representatives
from:
(a) using, possessing, distributing or selling drugs while on
Customer's premises or while engaged in business related thereto;
(b) consuming or possessing alcohol in an unsealed or open container
while on the Customer's premises;
(c) reporting to perform work for Customer with unauthorized drugs in
his or her body or while under the influence of alcohol; or
(d) refusing to submit to routine searches of their person, their
personal property, and Customer or Softsense assigned property, while entering,
on, or leaving the premises.
Softsense agrees to remove and replace, for the purpose of fulfilling its
obligations to Customer under this Agreement any of its employees,
subcontractors, agents or representatives found to be in violation of The
Policy, or those employees that Customer believes to be in violation of The
Policy whose compliance with The Policy cannot be certified to by Softsense
based upon laboratory testing acceptable to Customer. The foregoing
notwithstanding, no employee, subcontractor, agent or representative of
Softsense shall be required to submit to searches which are not permitted by
law.
23.8 The possession of alcohol in an unsealed or open container, drugs or
drug-related paraphernalia, firearms, explosives, weapons, and hazardous
substances or articles is prohibited on the premises of Customer. Entry onto
said premises by Softsense, its employees, agents, representatives or
subcontractors constitutes consent to and recognition of the right of Customer
and its authorized representatives to search the person, automobile, and other
property of individuals while entering, on, or departing said premises.
Softsense agrees to inform its employees, agents representatives and
subcontractors of this implied consent prior to such individual's entry onto
Customer's premises.
IN WITNESS WHEREOF, Softsense and the Customer have caused this Agreement
to be executed by their respective duly authorized representatives as of the
date first above written.
-26-
<PAGE>
ACCEPTED BY:
"CUSTOMER" "SOFTSENSE"
EMRO MARKETING COMPANY SOFTSENSE COMPUTER PRODUCTS INC.
By: /s/ R.N. Yammine By: /s/ Thomas J. Barrella
------------------------------ -----------------------------------
(Authorized Signature) (Authorized Signature)
Name (Print): R.N. Yammine Name (Print): Thomas J. Barrella
-------------------- -------------------------
Title: President Title: Treasurer
--------------------------- --------------------------------
-27-
<PAGE>
ADDENDUM NO. 1
TO
SOFTSENSE COMPUTER PRODUCTS INC. COMPU-TOUCH(R)
SOFTWARE LICENSE, SUPPORT AND EQUIPMENT PURCHASE AGREEMENT
This Addendum ("Addendum No. 1") to the Softsense Computer Products Inc.
Compu-Touch(R) Software License, Support and Equipment Purchase Agreement dated
May 27, 1994, ("Agreement") between Softsense Computer Products Inc.
(.Softsense") and Emro Marketing Company ("Customer") is entered into on the
27th day of May, 1994. The terms "Effective Date" and "Execution Date" as used
in this Addendum No. 1 shall mean those dates as identified in the Agreement by
such terms, respectively, notwithstanding the date upon which this Addendum No.
1 may be signed. Except as may otherwise be specifically provided herein, the
terms and conditions of this Addendum shall be deemed effective on and after the
Effective Date.
1. The parties agree that any conflict between the terms of the Agreement
and those of this Addendum No. 1 shall be resolved in favor of the terms of this
Addendum No. 1 so long as this Addendum No. 1, or any term hereof subject of
such conflict, remains in effect.
2. This Addendum No. 1 shall serve as formal price confirmation to
Customer for specified Equipment and Software licenses and for system staging,
installation and training as more fully set forth herein. Any Order issued by
Customer and accepted by Softsense referencing Addendum No. 1, while Addendum
No. 1 remains in effect, shall be deemed to have incorporated the prices and
terms hereof applicable to such Accepted Order except to the extent otherwise
set forth on the face of such Accepted Order.
3. This section of Addendum No. 1 describes all possible Equipment and
components thereof and their related costs. These components can be combined in
a variety of ways depending on the layout and volume of each Licensed Site. At
a minimum a Site Controller, Point-of-Sale station and a Back Office station
must be configured. Hardware required to run Software at the home office is not
included in this Addendum No. 1. These Equipment prices are valid for one year
from the date this Addendum No. 1 is entered into.
SITE CONTROLLER [ ]
- --------------------------------------------------------------------------
486SX-25MHz Cached Compu-Touch Server PC
1.44MB 3.5" Floppy disk Drive
8MB Random Access Memory
Monochrome Card
120MB SCSI Hard Disk Drive
120MB SCSI Novell Back Up Hard Drive
120MB Point-of-Sale Back Up Hard Drive
SCSI Host Adapter for Primary Hard Drive
SCSI Host Adapter for Backup Hard Drive
Novell Netware V4.XX 5-user license
Ethernet network card and hub
Sound Capability
8 port serial port board
Co-Session remote communications software
9600 Baud Modem for home office communications
2400 Baud Modem for Credit Authorization
Credit Card slip printer
<PAGE>
Speakers for sound board
Uninterruptible Power Supply
Monochrome monitor
Keyboard
A/B Switch for pump redundancy
80 column report printer
Label printer
All necessary cables
POINT-OF-SALE STATION [ ]
- --------------------------------------------------------------------------
486SX-25MHz Compu-Touch POS PC
4MB Random Access Memory
1MB SVGA Card
Monochrome Card
Ethernet Card
Touch screen controller card
8 Port serial port board
Sound Capability
Boot PROM
MS DOS 6.XX
Uninterruptible Power Supply (UPS)
Mini Keyboard
Magnetic Stripe reader
Touch-Screen Monitor
Monochrome Monitor
Receipt Printer
Automatic Cash Drawer w/ open/close sensor
Speakers for sound board
All necessary cables
BACK OFFICE STATION [ ]
- --------------------------------------------------------------------------
486SX-25MHz Compu-Touch Back Office PC
4MB Random Access Memory
VGA Card
Ethernet Card
Boot PROM
MS DOS 6.XX
Keyboard
Uninterruptible Power Supply
VGA Monitor
All necessary cables
-2-
<PAGE>
HAND-HELD TERMINAL [ ]
- --------------------------------------------------------------------------
Norand RT1020 Package with Integrated Scanner
Terminal with battery
Multiplexer
Radio Base
Remote Charger
Extra Battery
Softsense will work with Customer, Gilbarco, and Tokheim to provide an interface
between the Software and electronic fuel dispensers manufactured by these
companies without the use of a pump controller, if this is technically possible
and the appropriate information is provided to Softsense by these companies
(i.e. PAM1000, DHC). Until that interface is completed, Customer will be
responsible for supplying the PAM or DHC. Once the direct interface is complete,
Softsense will provide the direct interface through a current loop to RS232
converter at a price to be agreed upon separately.
4. This section of Addendum No. 1 describes Compu-Touch Software and the
license fees therefor. [ ] The Compu-Touch Software set may only be
licensed as a complete set. The Set includes the following modules:
a. BASE SOFTWARE
This module is the heart of Compu-Touch. All point-of-sale functions
are controlled through this module. This includes all touch-screen
capabilities, scanning, receipt printing, etc. Softsense will make
available to Customer a menu on the Base Software that will allow for
the execution of third-party, Open Architecture computer program
applications which are compatible with the Software. Softsense does
not make any warranty regarding such third-party applications but any
DOS based program that can run on a standard DOS compatible machine
should work without error. Softsense will make available to Customer
all Software generated data for use with third-party program
applications. This data will be available on a read-only basis.
Softsense is not responsible for any corruption to Software data files
as a result of Customer's use of any third-party application except
with respect to proper use of third-party programs provided by or
through Softsense or recommended by Softsense.
b. ADVANCED CONTROL MODULE
This module provides for real-time, item-level inventory control. It
supports the hand-held computer, allowing Direct Store Delivery and
physical audit recording.
c. FUEL CONTROL MODULE
The Fuel Control Software module allows for complete control of fuel
transactions through the point-of-sale touch-screen. All fuel
transactions are billed out through the
-3-
<PAGE>
touch-screen and are recorded on the electronic journal. The fuel
control module also manages fuel inventory and interfaces to various
electronic tank monitors.
d. HOME OFFICE APPLICATION MODULE
The Home Office Application Module includes communication capability
between the Licensed Site and the home office including a remote
assistance program. It also includes office price book maintenance,
and store reporting. The Home Office Application Module includes
Software that will be loaded on the system located at the Licensed
Site and the system located at the home office.
The license fee for the Compu-Touch Software Set is based on the number of sets
installed. The following chart describes the license fee for various
installation levels:
<TABLE>
<CAPTION>
# OF LICENSED SITES INSTALLED DIS. PRICE
- -------------------------------------------------------------------------
<S> <C> <C>
1-300 [
301-500
501-1000
> 1000 ]
</TABLE>
The parties agree that Software support service fees contemplated by and
provided for in Paragraph 6.4 of the Agreement shall be determined and
calculated in conformity with the license fees set forth in the chart
immediately above notwithstanding that Customer may be entitled to, and may
take, the special discount provided for in Paragraph 6 of this Addendum No. 1
and notwithstanding that Paragraph 6.4 of the Agreement provides that Software
support service fees are to be calculated as a percentage of the one-time
license fee actually paid or to be paid by the Customer.
5. At no additional cost to Customer, upon the execution of the Agreement
by both parties, Softsense will provide Customer with the standalone computer
programs, including the source codes therefor, developed by Softsense and
Customer to support Customer's Daily Sales Report, Payroll and Distributor order
entry. For purposes of this Addendum Section 5, the term "standalone" means that
the computer programs subject hereof are capable of reading Open Architecture
data bases, including without limitation the Software data bases, and are
capable of accepting keyed-in data. As between Customer and Softsense, title to
these programs will be in Customer and Softsense will execute any document which
Customer may reasonably request to perfect title thereof in Customer. Customer
acknowledges that at some time in the future Softsense may desire to reacquire
an ownership interest in the standalone computer programs subject of this
Paragraph 5 or otherwise may wish to have the right to resell versions of these
programs to third parties. The parties agree that in such event or events that
they will renegotiate ownership rights or other interests in such programs on a
case-by-case basis. Anything to the contrary above notwithstanding, so long as
they are used in conjunction with the Software and are not modified by Customer
or by a third-party not an agent for Softsense, the programs subject of this
Addendum Section 5 shall be supported by Softsense pursuant to the terms and
conditions of Section 6 of the Agreement as if such programs were Software;
provided, however, that Enhancements made to the subject programs at the
specific request of Customer and which are not made solely for the purpose of
making the subject programs compatible with new Releases shall be subject to
additional fees to be
-4-
<PAGE>
separately negotiated by the parties. Additionally Softsense agrees to provide
support for unmodified programs subject of this Addendum Section 5 upon mutually
agreed terms and conditions should Customer use any of the programs solely in
conjunction with computer program applications other than the Software.
Softsense agrees to provide programming level support to Customer should
Customer wish to modify the programs subject of this Addendum Section 5;
provided, however, that no programming level support for such programs will be
provided by Softsense until after the rollout of Customer's first sixty (60)
store locations.
6. Based on Customer's fulfillment of the conditions set forth in
Paragraph 7 hereof, Softsense will grant an additional flat rate discount of
$1,000 to each Software license fee ordered prior to the Execution Date.
Applying this discount results in the following net Software license fee at each
discount level:
<TABLE>
<CAPTION>
# OF STORES INSTALLED NET PRICE
- --------------------------------------------------------------------
<S> <C>
1-300 [
301-500
501-1000
> 1000 ]
</TABLE>
In the event that Customer becomes entitled to and takes the discount provided
for in this Paragraph 6 with respect to any particular Software license, the
provisions of Paragraph 4 of this Addendum respecting the computation of
Software support service fees shall prevail with respect to all Software
support. The Software encompassed by this proposal does not include a computer
based training module or an entry level back office system. However, in the
event that Softsense develops a computer based training module, and Customer
decides that the module would suit its business needs, Customer may choose to
have the training module included in the system [ ] The computer based
training module will consist of a CD ROM player and Softsense Software which
will allow Customer to prepare computer based training suited to its needs.
7. [ ]
a. DOWN PAYMENT
Customer shall have made or shall make a down payment at the time this
Addendum No. 1 is signed by both parties equal to the Compu-Touch
Software Set price for the first 30 stores to be installed. [ ]
Anything in the Agreement to the contrary notwithstanding, tender of
the down payment and any subsequent prepayment of license fees shall
effectuate, subject to the terms and conditions of Section 4 of the
Agreement, the immediate grant to Customer of a Software license, as
set forth in Paragraph 4.1.1 of the Agreement, with respect only to
those licenses for which Customer has prepaid but for which Customer
has not yet received the Software program, regardless of whether or
not Customer has issued an Order for such Software and whether or not
a specific Licensed Site has been designated for such Software license
or licenses. In the event that at the time of prepayment a Licensed
Site has not been determined for a license, Customer shall
subsequently issue an Order which shall determine the Licensed Site
for such license.
-5-
<PAGE>
b. EQUIPMENT ORDER
Equipment upon which Software subject of Paragraphs 6 and 7 hereof is
to run shall be ordered at the same time such Software is ordered.
c. PAYMENT POLICY
Customer shall adhere to the following payment policy for Equipment
and Software:
i. Customer will issue an Order to Softsense via FAX.
ii. Softsense will generate a corresponding invoice and FAX it to
Customer.
iii. Customer will process the invoice and remit payment to Softsense
within 15 business days of receiving the invoice.
iv. Softsense will deliver the Equipment and Software to Customer
within 45 days of Order date unless a later delivery date is
indicated by Customer.
8. Notwithstanding anything to the contrary in the Agreement or in this
Addendum No. 1, Softsense agrees to provide Customer with a cash rebate for each
complete Software set (as described in Section 4 of this Addendum No. 1) ordered
based on the number of Software sets ordered and license fees therefor paid
(each such order and payment being referred to hereinafter as a, "Software set
purchased") by Customer on or after the Execution Date. The cash rebate amounts
will be as follows:
<TABLE>
<CAPTION>
NO. OF SOFTWARE SETS PURCHASED CASH REBATE PER SOFTWARE SET PURCHASED
- -------------------------------- --------------------------------------
<S> <C>
1-700 [
700 and above ]
</TABLE>
Rights to the cash rebate for each Software set purchased shall accrue
immediately upon Customer's payment of the license fee therefor. Except in the
event of Softsense's inability to perform, materially, its obligations under the
Software purchase and sale provisions or the Software maintenance and support
provisions of the Agreement and under any addendum or amendment thereto (in
which event Customer shall become entitled to demand and to receive immediate
payment of all cash rebates accrued), Customer shall not be entitled to payment
of cash rebates until a total of seven hundred (700) Software sets have been
purchased by Customer on or after the Execution Date and, thereafter, until each
additional one hundred (100) Software sets have been purchased by Customer. The
cash rebates shall be paid by Softsense within twenty (20) days after Customer
has purchased the threshold number of Software sets. In the event that Softsense
is unable to pay the cash rebates when due, Customer shall have the option of
using any or all of the amount due to purchase additional Software licenses and
of requiring Softsense to deliver a promissory note in the amount of any cash
rebates which have not been used to purchase additional Software. The
aforementioned note shall bear simple interest on the unpaid principal at the
rate of six percent (6%) per annum from the date Customer purchased the last of
threshold number of Software sets which triggered the obligation of Softsense to
pay accrued cash rebates. The principal balance of the note shall be paid in
five (5) equal installments due and payable annually, commencing on
-6-
<PAGE>
the first anniversary date of the execution of the note, with any accrued and
unpaid interest due and payable upon the payment of each annual installment
payment of the principal balance.
9. In order to be entitled to accrual and payment of the cash rebates set
forth above in Section 8, Customer shall comply with the following:
a. MINIMUM ORDERS
Contemporaneously with the execution of this Addendum No 1, Customer
shall issue an Order for three Hundred (300) Software license sets.
Additionally, subject to normal approval procedures for Customer's
budget, within ten (10) business days of Customer receiving formal
notification from its parent approving Customer's 1995 capital budget,
Customer shall issue an Order which, at a minimum, shall be for the
lesser of three hundred fifty (350) Software sets or the number of
Software sets approved in Customer's 1995 capital budget. Subject to
reasonably anticipated business conditions and prudent business
judgement, Customer agrees to use good faith efforts to seek approval
for the purchase of at least three hundred fifty (350) Software sets in
its 1995 capital budget. Anything in the Agreement to the contrary
notwithstanding, payment of license fees prior to the delivery of
Software to a Licensed Site shall effectuate, subject to the terms and
conditions of Section 4 of the Agreement, the immediate grant to
Customer of a Software license, as set forth in Paragraph 4.1.1 of the
Agreement, with respect only to those licenses for which Customer has
paid but which Customer but has not yet received the Software,
regardless of whether or not Customer has issued an Order for such
Software and whether or not a specific Licensed Site has been designated
for such Software license or licenses. In the event that at the time of
prepayment a Licensed Site has not been determined for a license,
Customer shall subsequently issue an Order which shall determine the
Licensed Site for such license.
b. PAYMENT POLICY
Customer shall adhere to the following payment policy for Software:
i. Customer will issue an Order to Softsense via FAX.
ii. Softsense will generate a corresponding invoice and FAX it to
Customer.
iii. Customer will process the invoice and remit payment to Softsense
within 15 business days of receiving the invoice.
iv. Softsense will deliver the Software within 15 days of the Order
date unless a later delivery date is indicated by the Customer;
provided, however, that if the Software is ordered in conjunction
with Equipment upon which it is to be run, Softsense will deliver
the Equipment and Software to Customer within 45 days of the Order
date unless a later delivery date is indicated by Customer.
-7-
<PAGE>
10. The cost of system staging indicated in this Section 10 is based on
the Software and Equipment components described above and the third-party
peripherals purchased by Customer from another supplier set forth in the
itemization below:
<TABLE>
<CAPTION>
EQUIPMENT STAGING COST
- ------------------------------------------------------------------------
<S> <C>
Site Controller $111
Point-of-Sales Station $ 78
Dedicated Back Office Station $ 38
Hand-Held Terminal $ 20
Point-of-Sale Scanner (third-party peripheral) $ 15
Automatic Change Dispenser (third-party peripheral) $ 15
</TABLE>
11. At Customer's option, as shall be indicated on an Accepted Order,
Softsense shall provide installation and/or training services at a rate of
[ ] per installer/trainer plus travel related expenses.
12. This section of Addendum No. 1 pertains to related sales of Equipment
and Software to Information Resources Inc. ("IRI").
a. Softsense acknowledges that Customer has entered into a separate
agreement with IRI wherein IRI has agreed to provide Customer with
Software and staged Equipment (along with associated computer
programs) and third-party peripherals as such may be defined or
described in the Agreement and this Addendum No. 1. Except as may be
otherwise set forth in this Section 12, Softsense agrees, as
applicable, to sell, stage and deliver Equipment and third-party
peripherals to and/or at the direction of IRI, as appropriate, at the
prices and costs set forth in this Addendum No. 1 for the purpose of
IRI fulfilling its obligations under the terms of its agreement with
Customer. Except as may be otherwise set forth in this Section 12,
Softsense agrees that for the purpose of IRI fulfilling its
obligations under the terms of its agreement with Customer, Softsense
will permit IRI to purchase Software licenses at license fees set
forth in this Addendum No. 1 with the understanding that licenses so
purchased shall be granted directly to Customer in accordance with the
terms and conditions of the Agreement including, specifically, the
terms and conditions of Section 4 thereof. Anything in the Agreement
or in this Addendum No. 1 to the contrary notwithstanding, the cash
rebate provisions and the conditions for receiving same, as set forth
in Sections 8 and 9 hereof, shall not apply to any purchases of
Software made by IRI and all purchases of Software by IRI, whether
before or after the Execution Date, shall be entitled to the flat rate
discount set forth in Section 6 hereof if the appropriate conditions
of Section 7 shall have been met by IRI. With respect to any Software
purchased by IRI but licensed to Customer, the provisions of Section 6
of the Agreement, including all rights and obligations stated therein,
shall apply to Softsense and Customer.
b. Softsense shall make all shipping arrangements for Equipment purchased
by IRI, as contemplated hereby, subject to Customer's right to approve
the carrier. Softsense shall invoice IRI for shipping charges relating
to such purchases.
-8-
<PAGE>
c. Anything in this Addendum No. 1 to the contrary notwithstanding, the
purchase price to IRI for the Hand-Held Terminal described in Section
3 above shall be $2,500.00. The warranty coverage on Equipment sold to
IRI, as contemplated hereby, as such warranty coverage is described in
Section 5 of the Agreement, shall only be enforceable by Customer. IRI
shall be charged a Warranty Transfer fee of $300.00 which will result
in the transfer to Customer of all rights and obligations of the
Equipment Warranty Plan with respect to Equipment purchased by IRI
including the right to exercise options for Extended Equipment
Warranty Plan coverage as set forth in Paragraph 5.5.3 of the
Agreement. The determination of charges for Extended Equipment
Warranty Plan coverage for Equipment purchased by IRI shall be based
on charges paid by IRI for each Equipment item (excluding the costs of
staging, shipping and any taxes which IRI may have paid pursuant to
terms similar to those in Paragraph 23.4 of the Agreement) subject of
the Extended Equipment Warranty Plan.
d. IRI shall be entitled to the flat rate discount on Software license
fees as set forth in Section 6 hereof on the condition that IRI
complies with the Payment Policy provisions for Equipment and Software
set forth in Section 7 above.
IN WITNESS WHEREOF, Softsense and Customer have caused this Addendum No. 1
to be executed by their respective duly authorized representative.
EMRO MARKETING COMPANY SOFTSENSE COMPUTER PRODUCTS
("CUSTOMER") INC. ("SOFTSENSE")
By: /s/ R.N. Yammine By: /s/ Thomas J. Barrella
------------------------------ -----------------------------------
Name: R.N. Yammine Name: Thomas J. Barrella
---------------------------- ---------------------------------
Title: President Title: Treasurer
--------------------------- --------------------------------
-9-
<PAGE>
EXHIBIT 10.11
ACQUISITION AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RADIANT SYSTEMS, INC.
3 BS ENTERPRISES, INC.
5 RS ENTERPRISES, INC.
THE WILLIAM J. BUDWITZ CHARITABLE REMAINDER UNITRUST
THE H. MARTIN RICE CHARITABLE REMAINDER UNITRUST
AND
H. MARTIN RICE
AND
WILLIAM J. BUDWITZ
DECEMBER 31, 1996
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
SECTION 1. THE MERGERS.................................................... 2
1.1. The Mergers.............................................. 2
1.2. Effective Time of the Mergers............................ 3
1.3. Closing.................................................. 3
1.4. Effect of the Merger..................................... 3
1.5. Articles of Incorporation; Bylaws........................ 3
1.6. Directors and Officers................................... 4
1.7. Shareholders' Meetings of 3Bs and 5Rs.................... 4
SECTION 2. THE ASSET SALES................................................ 4
2.1. The Asset Sales.......................................... 4
2.2. Effective Time of the Asset Sales........................ 5
SECTION 3. CONSIDERATION.................................................. 5
3.1. Total Consideration...................................... 5
3.2. Consideration for Profits Interest Sale.................. 6
3.3. Consideration for Trust Asset Sales...................... 6
3.4. Merger Consideration..................................... 7
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND.............. 8
THE SHAREHOLDERS
4.1. Corporate or Entity Representations as to Sellers........ 8
4.2. Shareholders............................................. 10
4.3. Billmart Entity Representations and Warranties........... 10
4.4. PrysmTech Entity Representations and Warranties.......... 11
4.5. Distribution of Schedule 4.5 Assets and Certain
Other Assets............................................. 12
4.7. Statements of Assets and Liabilities and
Financial Statements..................................... 13
4.8. Tax Matters.............................................. 14
4.9. Absence of Certain Changes............................... 14
4.10. Absence of Undisclosed Liabilities....................... 14
4.11. Litigation and Claims.................................... 15
4.12. Title to and Condition of Properties..................... 15
4.13. Nature of the Businesses; Contracts...................... 15
4.14. Employment Matters....................................... 16
4.15. Trade Rights............................................. 16
4.16. Bank Accounts............................................ 17
4.17. Conveyance of Profits Interest........................... 17
4.18. Securities Law Matters................................... 17
4.19. No Brokers or Finders.................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
4.20. Disclosure............................................... 18
SECTION 5. REPRESENTATIONS AND WARRANTIES OF RADIANT...................... 18
5.1. Corporate................................................ 18
5.2. Authority................................................ 19
5.3. No Brokers or Finders.................................... 19
5.4. Disclosure............................................... 19
SECTION 6. COVENANTS...................................................... 19
6.1. Tax Treatment: Securities Law Matters.................... 19
6.2. Notification............................................. 20
6.3. Best Efforts............................................. 20
6.4. Exclusive Dealing........................................ 20
6.5. Further Assurances....................................... 20
6.6. Operation in Ordinary Course............................. 20
6.7. Employment Agreements of Budwitz and Rice................ 21
6.8. Grant of Options to Budwitz and Rice..................... 21
SECTION 7. POST-CLOSING COVENANTS......................................... 21
7.1. Termination of Public Offering Rights
in PrysmTech Operating Agreement......................... 21
7.2. Shareholders' Put Right Relating to Radiant IPO.......... 22
7.3. Shareholders' Post-IPO Registration Rights
with Respect to Radiant Common Stock..................... 23
7.4. Restrictions on Transfer................................. 27
7.5. Tax Matters.............................................. 30
7.6. Dissolution of Billmart and PrysmTech.................... 32
7.7. Transition Loans to Rice and Budwitz..................... 32
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RADIANT................. 32
8.1. Representations and Warranties True as of the
Closing Date............................................. 32
8.2. Compliance With Agreement................................ 32
8.3. Absence of Suit.......................................... 33
8.4. Consents and Approvals................................... 33
8.5. Exemption................................................ 33
SECTION 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
AND THE SHAREHOLDERS........................................... 33
9.1. Representations and Warranties True on
the Closing Date......................................... 33
9.2. Compliance With Agreement................................ 33
9.3. Absence of Suit.......................................... 33
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 10. SECTION SURVIVAL OF REPRESENTATIONS AND WARRANTIES/
INDEMNITY...................................................... 34
10.1. Survival of Representations and Warranties............... 34
10.2. Indemnification by Shareholders.......................... 34
10.3. Indemnification by Radiant............................... 34
10.4. Set-Off.................................................. 35
10.5. Conditions of Indemnification............................ 35
10.6. Payment.................................................. 35
10.7. No Waiver................................................ 36
10.8. Adjustment of Liability.................................. 36
10.9. Non-Exclusive Remedy..................................... 36
SECTION 11. CLOSING........................................................ 36
11.1. Documents to be Delivered by the Sellers
and the Shareholders..................................... 36
11.2. Documents to be Delivered by Radiant..................... 38
SECTION 12. TERMINATION.................................................... 39
12.1. Termination.............................................. 39
SECTION 13. MISCELLANEOUS.................................................. 40
13.1. Expenses................................................. 40
13.2. Entire Agreement......................................... 40
13.3. Waivers and Consents..................................... 40
13.4. Notices.................................................. 40
13.5. Gender................................................... 41
13.6. Governing Law............................................ 41
13.7. Arbitration.............................................. 41
13.8. Parties in Interest...................................... 42
13.9. Severability............................................. 42
13.10 Counterparts............................................. 42
13.11 Confidentiality.......................................... 42
</TABLE>
<TABLE>
<C> <S>
EXHIBITS:
Exhibit 1 - Names, Addresses and Shareholdings of Shareholders of
3Bs and 5Rs
Exhibit "A" - Form of Term Note
Exhibit "B" - Form of Security and Agency Agreement
Exhibit "C" - Form of Transition Loan Note
Exhibit "D" - Form of Budwitz Employment Agreement
Exhibit "E" - Form of Rice Employment Agreement
Exhibit "F" - Form of ISO Agreement
Exhibit "G" - Form of NQO Agreement
</TABLE>
iii
<PAGE>
<TABLE>
<C> <S>
Exhibit "H" - Form of Assignment and Transfer of Limited Liability
Company Membership Interest
Exhibit "I" - Form of Assignment and Transfer of Profits Interest
Exhibit "J" - Form of Certificate of Shareholder
Exhibit "K" - Form of Secretary's Certificate
Exhibit "L" - Form of Officer's Certificate
Exhibit "M" - Form of Certificate of Trustee
Exhibit "N" - Form of Manager's Certificate of Billmart
Exhibit "O" - Form of Manager's Certificate of PrysmTech
Exhibit "P" - Form of Opinion of Sellers' and Shareholders' Counsel
Exhibit "Q" - Form of Sirrom Intercreditor Agreement
Exhibit "R" - Form of Certificate of Merger
Exhibit "S" - Form of Secretary's Certificate of Radiant
Exhibit "T" - Form of Officer's Certificate of Radiant
Exhibit "U" - Form of Opinion of Counsel of Radiant
</TABLE>
iv
<PAGE>
SCHEDULES
---------
<TABLE>
<C> <S>
Schedule 4.1.(f) - Capitalization of 3Bs and 5Rs
Schedule 4.3(e) - Billmart Members, Managers and Officers
Schedule 4.4(e) - PrysmTech Managers and Officers
Schedule 4.4(f) - Capitalization of PrysmTech
Schedule 4.5(a) - Schedule 4.5 Assets and Holders Thereof
Schedule 4.6 - Exceptions to No Violations or Conflicts
Schedule 4.7 - Financial Statements
Schedule 4.9 - Absence of Certain Changes
Schedule 4.10 - Off Balance Sheet and Undisclosed Liabilities
Schedule 4.12 - Lien
Schedule 4.13 - Billmart License Agreement; Contracts
Schedule 4.15 - Trade Rights
Schedule 4.16 - Bank Accounts
</TABLE>
v
<PAGE>
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of December 31, 1996, by and among RADIANT SYSTEMS, INC., a Georgia corporation
("Radiant"), 3BS ENTERPRISES, INC., a Georgia corporation ("3Bs"), 5RS
ENTERPRISES, INC., a Georgia corporation ("5Rs"), THE WILLIAM J. BUDWITZ
CHARITABLE REMAINDER UNITRUST, a Georgia trust having as its trustee William J.
Budwitz (the "Budwitz Trust"), THE H. MARTIN RICE CHARITABLE REMAINDER
UNITRUST, a Georgia trust having as its trustee H. Martin Rice (the "Rice
Trust"), H. MARTIN RICE, an individual resident of Georgia ("Rice") and WILLIAM
J. BUDWITZ, an individual resident of Georgia ("Budwitz").
RECITALS
WHEREAS, Budwitz is the sole shareholder of 3Bs and is the settlor and a
trustee of the Budwitz Trust, and Rice is the sole shareholder of 5Rs and is the
settlor and a trustee of the Rice Trust (Budwitz and Rice collectively referred
to as the "Shareholders"); and
WHEREAS, 3Bs, 5Rs, the Budwitz Trust and the Rice Trust collectively are
the only owners of the entire outstanding membership interest in Billmart, LLC,
a Georgia limited liability company ("Billmart") (3Bs, 5Rs, the Budwitz Trust
and the Rice Trust hereinafter sometimes collectively referred to as the
"Sellers"); and
WHEREAS, Billmart has offered to grant to Sony Theatre Management
Corporation, a Delaware corporation ("Sony"), a two percent (2%) profits
interest in Billmart (the "Profits Interest"), which (if accepted and issued)
will be the only outstanding interest in capital or profits of Billmart other
than the membership interests held by the Sellers; and
WHEREAS, Billmart and Radiant collectively are the owners of the entire
outstanding membership interest in PrysmTech, LLC, a Georgia limited liability
company ("PrysmTech"); and
WHEREAS, substantially the entire business of Billmart consists of
Billmart's ownership of its respective interest in PrysmTech and ownership of
certain software which is exclusively licensed to PrysmTech (collectively, the
"Billmart Business"); and
WHEREAS, PrysmTech is engaged in the business of developing and marketing
automated point-of-sale ticketing, back office and headquarters office systems
for the entertainment industry, which include proprietary and other software
incorporated with computer hardware (the "PrysmTech Business"); and
WHEREAS, Radiant desires to acquire from the Sellers and Sony, on the terms
and conditions set forth herein, the entire ownership interest in Billmart
(including both the membership interests therein and the Profits Interest) as
well as certain other assets related to the PrysmTech Business which are held by
1
<PAGE>
the Sellers as of the date hereof, and thereby to acquire the Billmart Business
and the PrysmTech Business, and the Sellers desire to convey to Radiant, on the
terms and conditions set forth herein, such entire ownership interest in
Billmart and to procure conveyance to Radiant of the Profits Interest; and
WHEREAS, the respective Boards of Directors of 3Bs and Radiant have
approved the merger of 3Bs with and into Radiant (the "3Bs Merger"), the
Respective Boards of Directors of 5Rs and Radiant have approved the merger of
5Rs with and into Radiant (the "5Rs Merger") (the 3Bs Merger and the 5Rs Merger
collectively referred to herein as the "Mergers") and the Board of Directors of
Radiant and the respective trustees of the Rice Trust and the Budwitz Trust have
approved the sale by each such respective trust of its respective membership
interest in Billmart to Radiant (the "Trust Asset Sales", and collectively with
the sale to Radiant by Sony of the Profits Interest, the "Asset Sales"), all
pursuant to this Agreement and their respective articles of incorporation and
bylaws or their respective trust agreements, as applicable, and the applicable
corporation or trust laws or their respective jurisdictions of organization; and
WHEREAS, the respective Boards of Directors of Radiant, 3Bs and 5Rs, as
well as the Rice Trust, the Budwitz Trust and the Shareholders (individually)
believe that the proposed Mergers and Asset Sales, and the exchange of
promissory notes and shares of Radiant's no par value, nonvoting Class A common
stock ("Class A Stock") for all the shares of 3Bs common stock (the "3Bs
Shares") and 5Rs common stock (the "5Rs Shares") and for the Billmart membership
interests owned by the trusts and for the Profits Interest, pursuant to and
subject to the terms of this Agreement, are desirable and in the best interests
of the respective entities and Shareholders; and
WHEREAS, each of Radiant, 3Bs, 5Rs, the Budwitz Trust, the Rice Trust and
the Shareholders desire to make certain representations and warranties and
agreements in connection with the Mergers and Asset sales and the other
transactions contemplated herein and to prescribe various conditions to such
transactions;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. THE MERGERS
1.1. The Mergers. Subject to the terms and conditions of this Agreement
-----------
and at the Effective Time (as hereinafter defined):
(a) 3Bs Merger. 3Bs shall merge with and into Radiant in accordance
----------
with the Georgia Business Corporation Code (the "GBCC"), as a result of which
the separate corporate existence of 3Bs will cease and Radiant shall be the
surviving corporation under the laws of the State of Georgia;
2
<PAGE>
(b) 5Rs Merger. 5Rs shall merge with and into Radiant in accordance
----------
with the GBCC, as a result of which the separate corporate existence of 5Rs will
cease and Radiant shall be the surviving corporation under the laws of the State
of Georgia. (References to the "Surviving Corporation" herein are to Radiant as
the corporation surviving the 3Bs Merger and the 5Rs Merger, as the context
requires.)
1.2. Effective Time of the Mergers.
-----------------------------
Promptly after the Closing (as hereinafter defined) and subject to the
provisions of this Agreement:
(i) a certificate of merger shall be duly prepared and executed by
Radiant and 3Bs and thereafter delivered to the Secretary of State of the State
of Georgia for filing as provided in the GBCC (the "3Bs Certificate of Merger").
The 3Bs Merger shall become effective upon the filing of the 3Bs Certificate of
Merger with the Secretary of State of the State of Georgia or at such time
within two business days thereafter as is provided in the 3Bs Certificate of
Merger (the "3Bs Effective Time"); and
(ii) a certificate of merger shall be duly prepared and executed by
Radiant and 5Rs and thereafter delivered to the Secretary of State of the State
of Georgia for filing as provided in the GBCC (the "5Rs Certificate of Merger").
The 5Rs Certificate of Merger shall be filed such that the 5Rs Merger shall
become effective at the 3Bs Effective Time.
1.3. Closing. The Closing of the Mergers ("Closing") will take place
-------
at 11 o'clock a.m. on December 31, 1996 at the offices of Smith, Gambrell &
Russell, LLP, counsel to Radiant, Suite 1800, 3343 Peachtree Road, NE,
Atlanta, Georgia 30326, unless another date or place is agreed to in
writing by the parties hereto (the "Closing Date"). Notwithstanding the
foregoing, if the Closing does not take place on the date referred to in
the preceding sentence because any condition to the obligations of Radiant,
on the one hand, or any of the Sellers and/or the Shareholders, on the
other hand, to close under this Agreement is not met on that date, then
subject to the provisions of Section 10 herein, the other parties may
postpone the Closing from time to time to any designated subsequent
business day not more than five business days after the original or
postponed date on which such Closing was to occur by delivering notice of
such postponement not later than the day prior to the day the Closing was
to occur.
1.4. Effect of the Merger. At or immediately after the Effective Time,
--------------------
the Mergers shall have the effects set forth in the GBCC. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
properties, rights, privileges, powers and franchises of 3Bs and 5Rs shall vest
in the Surviving Corporation, and all debts, liabilities and duties of 3Bs and
5Rs shall become the debts, liabilities and duties of the Surviving Corporation.
1.5. Articles of Incorporation; Bylaws. At the Effective Time, (i) the
---------------------------------
Articles of Incorporation of the Surviving Corporation, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation, and (ii) the Bylaws of the Surviving Corporation, as in
3
<PAGE>
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, in each case until duly amended in accordance with
applicable law.
1.6. Directors and Officers. At the Effective Time, the directors of the
----------------------
Surviving Corporation immediately prior to the Effective Time shall become the
directors of the Surviving Corporation, and the officers of the Surviving
Corporation immediately prior to the Effective Time shall become the officers of
the Surviving Corporation, each such director and officer to hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the articles of incorporation
and bylaws of the Surviving Corporation and applicable law.
1.7. Shareholders' Meetings of 3Bs and 5Rs. 3Bs and 5Rs each will take
-------------------------------------
all action necessary, in accordance with the GBCC and other applicable law and
its respective articles or certificate of incorporation and bylaws, to either
take action by the unanimous written consent of their respective Shareholders
or to convene a special meeting of their respective Shareholders ( a "Meeting")
as promptly as practicable for the purpose of considering and taking action upon
the 3Bs Merger or the 5Rs Merger, as the case may be, and this Agreement. The
Board of Directors of each of 3Bs and 5Rs will recommend that their respective
Shareholders vote in favor of and approve the 3Bs Merger or the 5Rs Merger, as
the case may be, and this Agreement and will take all action necessary to obtain
the unanimous written consent of their respective Shareholders to the foregoing
or to obtain such approval at the applicable Meeting.
SECTION 2. THE ASSET SALES
2.1. The Asset Sales. Subject to the terms and conditions of this
---------------
Agreement, on the Closing Date:
(i) The Rice Trust shall sell to Radiant all of the outstanding
membership interest in Billmart owned by the Rice Trust (the "Rice Trust
Units"), which sale shall be effected by delivery to Radiant at the Closing of a
document of assignment and transfer of limited liability company membership
interest with respect to the Rice Trust Units, in form and substance
satisfactory to Radiant, duly executed by a trustee or other validly authorized
agent of the Rice Trust; and
(ii) The Budwitz Trust shall sell to Radiant all of the outstanding
membership interest in Billmart owned by the Budwitz Trust (the "Budwitz Trust
Units"), which sale shall be effected by delivery to Radiant at the Closing of a
document of assignment and transfer of limited liability company membership
interest with respect to the Budwitz Trust Units, in form and substance
satisfactory to Radiant, duly executed by a trustee or other validly authorized
agent of the Budwitz Trust; and
(iii) Simultaneously with the effectuation of the Trust Asset Sales,
the Sellers and the Shareholders shall cause to be delivered to Radiant either:
(A) a document of assignment and transfer of profits interest, with respect to
4
<PAGE>
the Profits Interest, or a release of Billmart, its members and Radiant (as
successor thereto) of any claims which Sony may have in respect of the Profits
Interest (the "Profits Interest Release") in either case in form and substance
satisfactory to Radiant and duly executed by a duly authorized executive officer
or other validly authorized agent of Sony; or (B) a written undertaking
addressed to Radiant and executed by each of the Shareholders, in form and
substance reasonably satisfactory to Radiant (the "Profits Interest
Undertaking"), agreeing to the withholding by Radiant of the Profits Interest
Consideration (as defined in Section 3.2 hereof) until Radiant has received
either of the agreements described in clause (A) of this Section 2.1(iii), and
undertaking to use their best efforts to obtain delivery to Radiant of either of
the two agreements described in clause (A) hereof, duly executed by Sony.
2.2. Effective Time of the Asset Sales. All of the Asset Sales shall take
---------------------------------
place at the Closing (as defined in Paragraph 1.3, above), and shall be deemed
to be effective on the Closing Date (as defined in Paragraph 1.3, above).
SECTION 3. CONSIDERATION
3.1. Total Consideration. The aggregate total consideration which will be
-------------------
paid by Radiant for the Mergers and the Asset Sales ("Total Consideration")
shall be:
(i) $3,000,000 payable in the form of promissory notes
(collectively, the "Term Notes"), each of which shall be in the form attached
hereto as Exhibit "A" and which shall:
-----------
(x) bear interest at the rate of eight and one-half percent
(8.5%) per annum, cumulative but not compounded, with interest
accruing and payable monthly, and with principal and any accrued
but unpaid interest payable in full on the second anniversary of
the date of issuance thereof, provided that the maturity of each
Term Note shall accelerate in full on the effective date of a
Qualified Public Offering (as defined in Section 7.2(a)(i)
hereof); and
(y) collectively, be secured by the pledge of the assets
constituting the PrysmTech Business, as operated as a division
or a subsidiary of Radiant, subject to and under the terms and
conditions of a Security and Agency Agreement in the form
attached hereto as Exhibit "B"; and
-----------
(ii) 300,000 shares of the Class A Stock (the "Merger Shares").
Solely for the purpose of this Agreement (and not for any other purpose), in
calculating the value of the Total Consideration, or any portion thereof, the
Term Notes shall be deemed to have a value equal to the principal face amount
thereof, and the Merger Shares shall be deemed to have a value of $7.00 per
share (which amount does not give effect to any applicable discount attributable
to absence of marketability or control status in the hands of any holder).
5
<PAGE>
3.2. Consideration for Profits Interest Sale.
---------------------------------------
(a) In the event of delivery to Radiant at the Closing of either of
the agreements described in clause (A) of Section 2.1(iii) hereof, duly executed
by Sony, Sony shall receive at the Closing, as consideration for its sale to
Radiant of (or its release of claims, as described in Section 2.1, in respect
of) the Profits Interest, one or more Term Notes having an aggregate principal
face amount equal to two percent (2%) of the value of the Total Consideration
(the "Profits Interest Consideration"), together with an agreement (the "Sony
Option"), in form and substance reasonably satisfactory to Radiant, executed in
favor of Sony by each of the Shareholders, providing for the grant to Sony by
each Shareholder of an option to purchase, at an exercise price of $7.00 per
share, up to 3,000 shares of the Merger Shares issued to such Shareholder
pursuant to this Agreement, provided that such option (i) may be: exercisable
only upon the consummation of a Qualified Public Offering (as defined in Section
7.2(a)(i) hereof); (ii) shall expire on the earlier to occur of (A) March 31,
1999, or (B) the exercise by the Shareholders of the Shareholders' Put Right
pursuant to Section 7.2 hereof; and (iii) may be exercised by requiring payment
to Sony from each Shareholder, in exchange for endorsement to both the
Shareholders of any Term Note or Term Notes then held by Sony, of a cash amount
determined by multiplying the Put Valuation Price (as defined in Section 7.2
hereof) by 3,000.
(b) In the event of delivery to Radiant at the Closing of the Profits
Interest Undertaking (as described in clause (B) of Section 2.1(iii) hereof):
(i) Radiant shall deliver to an escrow agent mutually agreed upon among Radiant
and Shareholders (the "Escrow Agent") the Term Note or Term Notes representing
the Profits Interest Consideration, duly executed in favor of Sony by Radiant,
and each of the Shareholders shall deliver to the Escrow Agent the agreements,
duly executed by such Shareholder, representing his respective Sony Option (as
defined in clause 3.2(a) above); and (ii) each of the Shareholders, Radiant and
the Escrow Agent shall enter into an escrow agreement, dated the Closing Date
(the "Escrow Agreement"), in form and substance reasonably satisfactory to each
of Radiant and the Shareholders, providing among other things that the Escrow
Agent shall hold the Term Notes described in clause (ii) of this subsection
3.2(b) and the Sony Options pending, and shall deliver such instruments and
agreements to Sony upon, Sony's delivery to the Escrow Agent of either of the
agreements described in clause (A) of Section 2.1(iii) hereof, and further
providing for, in the absence of earlier delivery thereof to Sony pursuant to
the terms of the Escrow Agreement, the Escrow Agent's redelivery of such Term
Note(s) to Radiant and of such Sony Options to the respective signatory
Shareholder thereto, on the second anniversary of the date of Closing.
3.3. Consideration for Trust Asset Sales. As used herein, "Adjusted
-----------------------------------
Total Consideration" shall mean the value of the Total Consideration reduced by
the value of the Profits Interest Consideration (as determined pursuant to
Section 2.2, above). Each of the Trusts will be entitled to receive the
following respective amounts of consideration for its respective Asset Sale:
6
<PAGE>
(i) as consideration for its sale to Radiant of the Rice Trust
Units, the Rice Trust shall receive a principal amount of the Term Notes
equal to $510,000 (the "Rice Trust Consideration"); and
(ii) as consideration for its sale to Radiant of the Budwitz Trust
Units, the Budwitz Trust shall receive a principal amount of the Term Notes
equal to $1,250,000 (the "Budwitz Trust Consideration").
3.4. Merger Consideration.
--------------------
(a) Merger Consideration. At the Effective Time, by virtue of the
--------------------
3Bs Merger and the 5Rs Merger, and without any action on the part of the 3Bs
Shareholders, or the 5Rs Shareholders, the 3Bs Shares and 5Rs Shares which are
issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive in the aggregate (i) Term
Notes having an aggregate principal face amount equal to the remainder of
subtracting from $3,000,000 the aggregate Value of the Profits Interest
Consideration, the Rice Trust Consideration and the Budwitz Trust Consideration;
and (ii) subject to the proviso set forth in the following sentence, the Merger
Shares (the consideration in clauses (i) and (ii) hereof hereinafter referred to
as the "Merger Consideration"). Upon surrender to the Surviving Corporation of
the certificate or certificates representing the 3Bs Shares and the 5Rs Shares,
as the case may be, accompanied by such other documents as the Surviving
Corporation may reasonably request, the Surviving Corporation shall promptly
deliver to the Shareholders the portion of the Merger Consideration to which
such Shareholder is entitled with respect to the certificate or certificates
delivered, and such certificates shall forthwith be retired and canceled.
(b) Allocation of Merger Consideration. The Merger Consideration,
----------------------------------
both that payable by delivery of Term Notes and that payable by delivery of the
Merger Shares, shall be as follows: (i) the Term Notes comprising the Merger
Consideration shall be allocated (by principal amount) $199,000 to 3Bs and
$939,000 to 5Rs; and (ii) the Merger Shares shall be allocated 50% to 3Bs and
50% to 5Rs. Subject to the provisions of the last subsection hereof, each
holder of issued and outstanding 3Bs Shares, and/or 5Rs Shares, as the case may
be, shall be entitled to receive his pro rata share of the Merger Consideration
allocable to the 3Bs Shares and/or 5Rs Shares, as the case may be, determined by
dividing the number of such 3Bs Shares or 5Rs Shares, as the case may be,
represented by the certificate or certificates appropriately surrendered for
cancellation by such Shareholder by the total number of the issued and
outstanding shares of 3Bs Shares or 5Rs Shares, as the case may be, issued and
outstanding.
(c) Right to Receive Merger Consideration. Until surrendered and
-------------------------------------
exchanged in accordance with this Section 3.4, each such certificate
representing 3Bs Shares, or 5Rs Shares, as the case may be, shall after the
Effective Time represent solely the right (as set forth in this Section 3.4) to
receive the Merger Consideration in respect of the shares evidenced by such
certificate, and shall have no other rights. Except as set forth in the terms
of the Term Notes, no interest shall accrue or be payable on any Merger
Consideration.
7
<PAGE>
(d) No Fractional Shares. Anything in this Agreement to the
--------------------
contrary notwithstanding, (i) neither certificates nor scrip for fractional
shares of Radiant stock will be issued in the Mergers, and no dividend or
distributions of Radiant shall be payable on or with respect to any fractional
share, but in lieu thereof each Shareholder who otherwise would have been
entitled to a fraction of a share of Radiant Class A Stock pursuant to this
Agreement, will be paid in cash equivalent an amount equal to the product of
$7.00 multiplied by such fraction of a share (carried out to two decimal
places).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE SHAREHOLDERS
As an inducement to Radiant to enter into this Agreement and to consummate
the transactions contemplated hereby, and with the knowledge that they will rely
thereon, each of 3Bs, 5Rs, the Budwitz Trust, the Rice Trust and Budwitz and
Rice, severally (but not jointly), make the following representations and
warranties to Radiant, each of which is true and correct on the date hereof, and
shall survive the Closing of the transactions provided for herein for a period
of one year following the Closing Date. Representations and warranties with
respect to PrysmTech and the PrysmTech Business contained in Sections 4.4 and
4.6 through 4.17 are (i) to the extent made by any of 5Rs, the Rice Trust or
Rice, limited solely to the Actual Knowledge (as hereinafter defined) of Rice,
and (ii) to the extent made by any of 3Bs, the Budwitz Trust or Budwitz, limited
solely to the Actual Knowledge of Budwitz. As used in this Agreement, the term
"Actual Knowledge" shall mean, with respect to any person, actual knowledge of
such person obtained through direct communication (whether written or oral) and
without independent investigation.
4.1. Corporate or Entity Representations as to Sellers.
-------------------------------------------------
(a) Organization. Each of 3Bs and 5Rs is a corporation duly
------------
organized, validly existing and in good standing under the laws of the state of
Georgia. No other entity has been merged or consolidated with or into 3Bs or
5Rs. Each of the Budwitz Trust and the Rice Trust is a trust duly and validly
organized and existing under the laws of the state of Georgia.
(b) Corporate Power or Entity. Each of 3Bs, 5Rs, the Budwitz Trust
-------------------------
and the Rice Trust has all requisite corporate or trust power and authority (i)
to enter into this Agreement and the Ancillary Documents (as hereinafter
defined) to be executed and delivered by 3Bs, 5Rs the Budwitz Trust and/or the
Rice Trust, as the case may be, and to carry out the transactions contemplated
hereby and thereby and (ii) to own and its properties and to carry on its
business as and where such is now being conducted.
(c) Qualification. None of 3Bs, 5Rs, the Budwitz Trust or the Rice
-------------
Trust owns any properties or conducts any business such as to require it to
qualify in any jurisdiction as a foreign corporation or Trust.
8
<PAGE>
(d) Subsidiaries. Except for its respective ownership interest in
------------
Billmart, none of 3Bs, 5Rs, the Budwitz Trust or the Rice Trust owns, directly
or indirectly, any capital stock, or other equity securities of any corporation
or has any direct or indirect equity or other ownership interest in any other
entity or business.
(e) Corporate Documents, etc. The copies of the respective articles
------------------------
of incorporation and by-laws of 3Bs and 5Rs, and of the respective trust
agreements of the Budwitz Trust and the Rice Trust, including any amendments
thereto, which have been delivered to Radiant are true, correct and complete
copies of such instruments as presently in effect. The corporate minute book
and stock records of each of 3Bs and 5Rs which have been furnished to Radiant
for inspection are true, correct and complete and accurately reflect all
material corporate action taken by such corporations, as the case may be. The
sole director and officer of 3Bs is Budwitz, and the sole director and sole
officer of 5Rs is Rice.
(f) Capitalization. The authorized and outstanding capital stock of
--------------
each of 3Bs and 5Rs consists solely of the 3Bs Shares and the 5Rs Shares,
respectively, as more fully set forth in Schedule 4.1.(f). No shares of such
----------------
capital stock are issued or outstanding except for shares identified in Schedule
--------
4.1.(f). The shares of capital stock of 3Bs and 5Rs are owned of record and
- -------
beneficially by the Shareholders in the respective numbers set forth in Exhibit
-------
1. All such shares of capital stock are validly issued, fully paid and
- -
nonassessable. Except as set forth on Schedule 4.1.(f), there are no (A)
----------------
securities convertible into or exchangeable for any of the capital stock or
other securities of 3Bs or 5Rs, (B) options, warrants or other rights to
purchase or subscribe to capital stock or other securities of 3Bs or 5Rs or
securities which are convertible into or exchangeable for capital stock or other
securities of 3Bs or 5Rs, or (C) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance, sale or
transfer of any capital stock or other equity securities of 3Bs or 5Rs, any such
convertible or exchangeable securities or any such options, warrants or other
rights.
(g) Authorization: Validity. The execution and delivery of this
-----------------------
Agreement and the other agreements, instruments and documents contemplated
hereby (such other agreements, instruments and documents sometimes referred to
herein as the "Ancillary Documents") to be executed by 3Bs and/or 5Rs and full
performance thereunder, have been duly authorized by the Board of Directors of
each of 3Bs and/or 5Rs, as the case may be, and no other or further corporate
act on the part of such corporations is necessary therefor except as
contemplated by Section 1.7. The execution and delivery of this Agreement and
of such Ancillary Documents to which they are respectively parties, and the
full performance of their respective obligations thereunder, have been duly
authorized by the respective trustees of each of the Budwitz Trust and the Rice
Trust, as the case may be, and no other action on the part of either such trust
is necessary therefor. This Agreement has been duly and validly executed and
delivered by each of the Sellers and is, and when executed and delivered the
Ancillary Documents to be executed and delivered by the Sellers pursuant hereto
will be, the legal, valid and binding obligation of such corporations,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
9
<PAGE>
4.2. Shareholders.
------------
(a) Power. Each Shareholder has full power, legal right and
-----
authority to enter into, execute and deliver this Agreement and the Ancillary
Documents to be executed by such Shareholder and to carry out the transactions
contemplated hereby and thereby.
(b) Validity. This Agreement has been duly and validly executed and
--------
delivered by each Shareholder and is, and when executed and delivered each
Ancillary Document to be executed by a Shareholder will be, the legal, valid and
binding obligation of such Shareholder enforceable in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally, and by general equitable principles.
(c) Title. Each Shareholder has good and marketable title to the
-----
3Bs Shares and/or 5Rs Shares, shown on Exhibit 1 as owned by such Shareholder,
---------
and at the Closing each Shareholder will have good and marketable title to such
shares of 3Bs Common Stock and/or 5Rs Common Stock, in each case free and clear
of all liens, security interests, pledges, assessments, levies, restrictions,
options, encumbrances, voting trusts or agreements, proxies, marital or
community property interests or other claims or other charges of any nature
whatsoever.
4.3. Billmart Entity Representations and Warranties.
----------------------------------------------
(a) Organization. Billmart is a limited liability company, validly
------------
existing and in good standing under the laws of the state of Georgia, which was
duly organized on October 18, 1994, under the name "PrysmTech, L.L.C." The name
of Billmart was changed to "Billmart, L.L.C." by Articles of Amendment filed
with the Secretary of State of Georgia effective November 28, 1995. Except for
Billmart's acquisition of the assets of Prysm Technology, Inc. in October, 1994,
no other entity has been merged or consolidated with or into Billmart.
(b) Power and Authority. Billmart has all requisite entity power
-------------------
and authority to own and operate its properties and to carry on the Billmart
Business as and where such is now being conducted.
(c) Qualification. Billmart is duly licensed or qualified to do
-------------
business and is in good standing in each jurisdiction wherein the character of
the properties owned or leased by it, or the nature of the Billmart Business,
makes such licensing or qualification necessary, except where the lack of such
licensing or qualifications would not have a material adverse effect on the
financial condition of Billmart and PrysmTech taken as a whole.
(d) Subsidiaries. Except for its ownership of a membership interest
------------
in PrysmTech, Billmart does not own, directly or indirectly, any capital stock,
or other equity securities of any corporation or have any direct or indirect
equity or other ownership interest in any entity or business.
10
<PAGE>
(e) Organic Documents, etc. The copies of the articles of
----------------------
organization and operating agreement of Billmart, including any amendments
thereto, which have been delivered to Radiant are true, correct and complete
copies of such instruments as presently in effect. The members, managers and
officers of Billmart are listed in Schedule 4.3 (e).
----------------
(f) Capitalization. The authorized membership interest in Billmart
--------------
consists entirely of 10,000 units of membership interest, and the issued and
outstanding membership interest in Billmart consists entirely of 1,500 of such
units of membership interest (the "Billmart Units") which are owned by the
Sellers as set forth in Schedule 4.3.(f). No membership interest in Billmart
----------------
is issued or outstanding except for the Billmart Units. All such Billmart Units
are validly issued, fully paid and nonassessable. Except for the Billmart Units
and the Profits Interest, there are no (A) securities convertible into or
exchangeable for any of the membership interest, or rights to participate in the
capital or profits of, or other securities of Billmart, (B) options, warrants or
other rights to purchase or subscribe to membership interests, or rights to
participate in capital or profits in, Billmart or other securities of Billmart
or securities which are convertible into or exchangeable for membership interest
in, or rights to participate in the capital or profits of, or other securities
of Billmart or (C) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer of any
membership interest in, or rights to participate in the capital or profits of,
or other securities of Billmart.
4.4. PrysmTech Entity Representations and Warranties.
-----------------------------------------------
(a) Organization. PrysmTech is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of the state of
Georgia. No other entity has been merged or consolidated with or into
PrysmTech.
(b) Power and Authority. PrysmTech has all requisite entity power
-------------------
and authority to own and operate its properties and to carry on its business as
and where such is now being conducted.
(c) Qualification. PrysmTech is duly licensed or qualified to do
-------------
business and is in good standing in each jurisdiction wherein the character of
the properties owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary, except where the lack of such licensing or
qualification would not have a material adverse effect on the financial
condition of PrysmTech.
(d) Subsidiaries. PrysmTech does not own, directly or indirectly,
------------
any capital stock, or other equity securities of any corporation or have any
direct or indirect equity or other ownership interest in any entity or business.
(e) Organic Documents, etc. The copies of the articles of
----------------------
organization and operating agreement of PrysmTech, including any amendments
thereto, which have been delivered to Radiant are true, correct and complete
11
<PAGE>
copies of such instruments as presently in effect. The managers and officers of
PrysmTech are listed in Schedule 4.4(e).
---------------
(f) Capitalization. The authorized membership interest in PrysmTech
--------------
consists entirely of 1,000 Units and the issued and outstanding membership
interest in PrysmTech consists entirely of 200 Units (the "PrysmTech Units"), of
which 100 Units are owned by Radiant and 100 Units are owned by Billmart. No
membership interest in PrysmTech is issued or outstanding except for the
PrysmTech Units. All such PrysmTech Units are validly issued, fully paid and
nonassessable. Except for the PrysmTech Units, there are no (A) securities
convertible into or exchangeable for any membership interest in, or rights to
participate in the capital or profits of PrysmTech, (B) options, warrants or
other rights to purchase or subscribe to membership interest in, or rights to
participate in the capital or profits of, or other securities of PrysmTech or
securities which are convertible into or exchangeable for membership interest
in, or rights to participate in the capital or profits of or other securities of
PrysmTech or (C) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer of any
membership interest in, or rights to participate in the capital or profits of or
other equity securities of PrysmTech.
4.5. Distribution of Schedule 4.5 Assets and Certain Other Assets.
------------------------------------------------------------
(a) Immediately prior to the execution of this Agreement by the
parties hereto: (i) PrysmTech caused to be distributed to each of its members an
undivided fifty percent interest (each a "Primary Distribution Interest") in the
assets of PrysmTech listed on Schedule 4.5(a) (the "Schedule 4.5 Assets"), (ii)
---------------
Billmart caused to be distributed to each of its then-members (being 3Bs, 5Rs,
Budwitz and Rice) a pro-rata portion (each a "Secondary Distribution Interest")
of Billmart's Primary Distribution Interest in the Schedule 4.5 Assets, (iii)
Budwitz contributed to the capital of 3Bs his respective Secondary Distribution
Interest in the Schedule 4.5 Assets, and (iv) Rice contributed to the capital of
5Rs his respective Secondary Distribution Interest in the Schedule 4.5 Assets.
The distributions described in this subsection 4.5(a) are collectively referred
to as the "Schedule 4.5 Asset Distribution." Schedule 4.5(a) also sets forth
the identity of each owner of the Schedule 4.5(a) Assets as of the date hereof,
and a description of those Schedule 4.5 Assets owned by each such owner as of
the date hereof.
(b) Subsequent to the completion of the Schedule 4.5 Asset
Distributions, Rice contributed the Rice Trust Units to the Rice Trust, and
Budwitz contributed the Budwitz Trust Units to the Budwitz Trust.
(c) At the date of this Agreement, except for the Primary
Distribution Interest therein distributed by PrysmTech to Radiant, all right,
title and interest in and to the Schedule 4.5 Assets is held by 3Bs and 5Rs,
free and clear of liens, claims or encumbrances permitted or imposed by Billmart
or any of the Sellers.
(d) Prior to the date of this Agreement but subsequent to the
effective date of the Recent Financial Statements (as defined in Section 4.7
hereof), PrysmTech effected a cash distribution to its members in the aggregate
12
<PAGE>
amount of $315,000 (the "PrysmTech Tax Payment Distribution"), with the intent
that each member utilize the proceeds thereof to fund payment of such member's
respective income tax liability arising from its allocable share of 1996 profits
from operations of PrysmTech. Simultaneously, Billmart distributed to its then-
members (being 3Bs, 5Rs, Budwitz and Rice) its proportionate share of the
PrysmTech Tax Distribution, with the same intent, and each of 3Bs and 5Rs
simultaneously distributed its share of that distribution to its respective sole
shareholder. The distributions described in this subsection 4.5(d) are referred
to in this Agreement as the "1996 Tax Payment Distributions."
4.6 No Violation. Except as set forth on Schedule 4.6, neither the
------------ ------------
execution and delivery of this Agreement or any of the Ancillary Documents, nor
the consummation of the transactions contemplated hereby and thereby, does or
will violate, conflict with, result in a breach of any material provision of,
constitute a default under, result in the termination of or permit any third
party to terminate the charter or bylaws of 3Bs or 5Rs, or the trust agreements
of either the Budwitz Trust or the Rice Trust, or the organizational documents
of Billmart or any material agreement or instrument to which the Sellers,
Billmart or PrysmTech is a party or by which the Sellers, Billmart or PrysmTech
or any of their respective assets is subject or bound, or result in the creation
or imposition of any mortgages, liens (statutory or otherwise), security
interests, claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, mineral rights, charges or
encumbrances of any nature whatsoever on or security interest in (collectively,
"Liens") the use of any of the properties or assets of the Sellers, Billmart
and/or PrysmTech.
4.7. Statements of Assets and Liabilities and Financial Statements.
-------------------------------------------------------------
Included as Schedule 4.7 are true and complete copies of the following: (i) a
------------
statement on behalf of 3Bs and a statement on behalf of 5Rs, each executed by
the chief executive officer of such corporation, specifying all the assets and
all the liabilities of such corporation, in each case as of December 15, 1996
(the "Corporate Sellers' Asset and Liability Statements"); and (ii) a statement
on behalf of Billmart, executed by the chief executive officer of Billmart,
specifying all the assets and all the liabilities of Billmart as of December 31,
1996 (the "Billmart Asset and Liability Statement"); and (iii) the unaudited
balance sheet of PrysmTech as of October 31, 1996, and the related statements of
income and cash flows of PrysmTech for the 10-month period then ended (the
"PrysmTech Financials") (the Corporate Sellers' Asset and Liability Statements,
the Billmart Asset and Liability Statements and the PrysmTech Financials
collectively referred to as the "Financial Representations"). The Corporate
Sellers' Asset and Liability Statements and the Billmart Asset and Liability
Statement, respectively, are true, complete and accurate in all material
respects, and fairly present the assets and liabilities of 3Bs, 5Rs and
Billmart, respectively, as of the dates indicated. The PrysmTech Financials are
true, complete and accurate in all material respects, have been prepared on a
consistent basis, have been prepared in accordance with the books and records of
PrysmTech, and fairly present the assets, liabilities and financial position,
the results of operations and cash flows of PrysmTech, as of the date and for
the periods indicated.
13
<PAGE>
4.8. Tax Matters.
-----------
(a) Provision For Taxes. Each of 3Bs, 5Rs, Billmart and PrysmTech
-------------------
has filed all federal, state, and local tax returns required to be filed and
each has made timely payment of all taxes which are due and payable, including
any and all employment taxes of every nature, kind and character except where
the failure to file or timely pay would not have a material adverse effect on
the business, operations or financial condition of such entity, and none of such
parties has received notice of any tax Liens on any of its properties.
(b) Tax Audits. Neither the federal or state income tax returns of
----------
either Billmart or PrysmTech have been audited by the Internal Revenue Service
or any state taxing authorities for any periods, and neither such entity has
received from the Internal Revenue Service, or from the tax authorities of any
state, county, local or other jurisdiction, any notice of any material
underpayment of taxes or other deficiency which has not been paid.
4.9. Absence of Certain Changes. Except as and to the extent set forth
--------------------------
in Schedule 4.8, since the respective dates of the applicable Financial
------------
Representations there has been no:
(a) Adverse Change. Material adverse change in (i) the financial
--------------
condition or assets, except to the extent that the Schedule 4.5 Asset
Distribution or the 1996 Tax Payment Distributions, or distributions by
PrysmTech in December of 1996 of employee bonuses not exceeding $250,000 (of
which $231,000 is reflected as accrued liabilities on the PrysmTech Financials),
may be deemed material adverse changes, or (ii) the liabilities, business,
prospects or operations of 3Bs, 5Rs, Billmart and PrysmTech taken as a whole;
(b) Damage. Loss, damage or destruction, whether covered by
------
insurance or not, affecting the business or properties (owned or leased) of 3Bs,
5Rs, Billmart or PrysmTech which has a material adverse impact on such business
or properties taken as a whole;
(c) Commitments. Material commitment or transaction by 3Bs, 5Rs,
-----------
Billmart or PrysmTech (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent with past
practice;
(d) Indebtedness. Indebtedness for borrowed money incurred, assumed
------------
or guaranteed by 3Bs, 5Rs, or Billmart in a material amount; or
(e) Liens. Lien made on any of the properties or assets of 3Bs,
-----
5Rs, or Billmart, of which such party has received notice, which has a material
adverse impact on the properties or business of such entity, taken as a whole;
4.10. Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
specifically disclosed in the Financial Representations, or in Schedule 4.10,
-------------
or as otherwise specifically disclosed in this Agreement, neither 3Bs, 5Rs,
Billmart or PrysmTech has any liabilities, commitments or obligations (secured
14
<PAGE>
or unsecured, and whether accrued, absolute, contingent, direct, indirect or
otherwise), other than commercial liabilities and obligations incurred since the
date of the Financial Representations in the ordinary course of business and
consistent with past practice and none of which has or will have a material
adverse effect on the business, financial condition or results of operations of
3Bs, 5Rs, Billmart or PrysmTech.
4.11. Litigation and Claims. There are (a) no legal, administrative,
---------------------
arbitration, or other proceedings pending against 3Bs, 5Rs, Billmart or
PrysmTech and none of 3Bs, 5Rs, Billmart or PrysmTech or the Shareholders know
of any basis therefor, and (b) no (i) governmental investigations or (ii)
proposed or threatened claims of any such entity not fully covered by insurance.
4.12. Title to and Condition of Properties.
------------------------------------
Each of 3Bs, 5Rs, Billmart or PrysmTech has good and marketable title to
all of its respective assets, businesses and properties, including, without
limitation, all such properties (tangible and intangible) reflected in the
Financial Representations, except for inventory disposed of in the ordinary
course of business since the date of such Financial Representations, free and
clear of all Liens except those described in Schedule 4.12 (a) or specifically
-----------------
disclosed elsewhere in this Agreement. None of the assets, businesses or
properties of 3Bs, 5Rs, Billmart or PrysmTech are subject to any restrictions
with respect to the transferability thereof and title thereto will not be
affected in any way by the transactions contemplated hereby.
4.13. Nature of the Businesses; Contracts. Attached as Schedule 4.13
----------------------------------- -------------
hereto is a true, complete and correct copy of that certain Exclusive License
Agreement, dated as of November 27, 1995, between Billmart and PrysmTech (the
"Billmart License"). As of the date of this Agreement, the Billmart Business
consists entirely of (i) Billmart's ownership of 100 Units of membership
interest in PrysmTech, and (ii) Billmart's ownership of, and exclusive licensing
to PrysmTech of, the Billmart Software (as defined in the Billmart License).
The sole business of each of 3Bs and 5Rs is, and has been since inception of
such respective corporation, the ownership of the Billmart Units held by such
respective corporation as of the date hereof and the ownership of its respective
undivided percentage interest in the Schedule 4.5 Assets described in Section
4.5 hereof. As used herein, the term Contract includes any written or oral
agreement, commitment, understanding or arrangement, including purchase or sales
of goods or services, commitments and letters of credit or their equivalent.
Except as set forth in Schedule 4.13, neither 3Bs, 5Rs, Billmart or PrysmTech is
-------------
party to any Contract:
(a) with any Person containing any provision or covenant prohibiting
or materially limiting the ability of 3Bs, 5Rs, or Billmart, respectively, to
engage in its business as described in this Section 4.13;
(b) other than this Agreement, relating to the future disposition or
acquisition of any assets individually or in the aggregate material to the
condition of the respective businesses of 3Bs, 5Rs, Billmart or PrysmTech;
(c) of warranty, guaranty, surety and/or other similar undertakings;
15
<PAGE>
(d) constituting powers of attorney that are currently effective and
outstanding;
(e) pursuant to which 3Bs, 5Rs or Billmart is required to provide
goods or services; and
(f) with respect to each of the Billmart Business or the respective
businesses of 3Bs or 5Rs that (A) involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to such respective entity of
more than $5,000 annually or (B) cannot be terminated within ninety (90) days
after giving notice of termination without resulting in any material cost or
penalty to such respective entity, including promissory notes, loan, credit or
other financing agreements or arrangements or evidence of indebtedness.
Each of 3Bs, 5Rs and Billmart has performed in all respects all contractual
obligations required to be performed by it to date under each Contract to which
it is a party and is not in default under any Contract to which it is a party or
by which it is bound and no other party to any such Contract is in material
default in the performance of its obligations thereunder or has taken any action
which constitutes, or with notice or lapse of time would constitute, a breach or
anticipatory breach thereof.
4.14. Employment Matters. There are not now, and have not since
------------------
November 28, 1995 been, any employees of 3Bs, 5Rs or Billmart.
4.15. Trade Rights.
------------
(a) The Billmart Software (as defined in Section 4.13) constitutes
the only Trade Rights (as defined below) owned, controlled, used or held (under
license or otherwise) by Billmart which are material to the Billmart Business or
the PrysmTech Business, or to the financial condition of Billmart.
(b) To the Actual Knowledge of the Sellers and the Shareholders:
(i) to conduct the Billmart Business and the PrysmTech Business, as such are
currently being conducted or proposed to be conducted, Billmart does not require
any Trade Rights that it does not already have; (ii) Billmart is not infringing
and has not infringed any Trade Rights of another in the operation of the
Billmart Business or the PrysmTech Business, nor is any other person infringing
the Trade Rights of Billmart or PrysmTech; (iii) except as set forth on Schedule
--------
4.14, Billmart has not granted any license or made any assignment of, or entered
- ----
into any settlement, consent, covenant not to sue or similar agreement with
respect to, any of its Trade Rights, nor does Billmart or PrysmTech pay any
royalties or other consideration to any Person for the right to use any Trade
Rights of others; (iv) there are no inquiries, investigations or claims or
litigation challenging or threatening to challenge the right, title and interest
of Billmart with respect to any Trade Rights of Billmart; and (v) all Trade
Rights of Billmart are valid and enforceable.
16
<PAGE>
(c) As used herein, the term "Trade Rights" shall mean and include:
(i) all United States, state and foreign trademark rights, business identifiers,
trade dress, service marks, trade names and brand names, including all claims
for infringement, and all registrations thereof and applications therefor and
all goodwill associated with the foregoing accruing from the dates of first use
thereof; (ii) all United States and foreign copyrights, copyright registrations
and copyright applications, including all claims for infringement, and all other
rights associated with the foregoing and the underlying works of authorship;
(iii) all United States and foreign patents and patent applications, including
all claims for infringement and all international proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title, license
or privilege under the intellectual property rights of any third party; and (v)
all inventions, mask works and mask work registrations, know-how, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee and
third party covenants and agreements respecting confidentiality, intellectual
property and non-competition (including without limitation agreements executed
by potential purchasers of the Billmart Business or the PrysmTech Business or
any part thereof), and all other types of intellectual property.
4.16. Bank Accounts. Schedule 4.16 sets forth the names and locations of
------------- -------------
all banks, trust companies, savings and loan associations and other financial
institutions at which 3Bs, 5Rs or Billmart maintains a safe deposit box, lock
box or checking, savings, custodial or other account of any nature, the type and
number of each such account and the signatories therefore, a description of any
compensating balance arrangements, and the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto.
4.17. Conveyance of Profits Interest. To the Actual Knowledge of the
------------------------------
Shareholders, Sony holds the Profits Interest (to the extent accepted by Sony
and issued and outstanding) free of liens, claims and encumbrances, and has all
requisite corporate and other right, power and authority to convey to radiant
all Sony's right, title and interest in and to the Profits Interest.
4.18. Securities Law Matters. Each Shareholder acquiring Radiant Common
----------------------
Stock pursuant to this Agreement is acquiring such stock for investment for such
Shareholder's own account, not on behalf of others and not with a view to resell
or otherwise distribute such Radiant Common Stock. Each Shareholder
acknowledges that the Radiant Common Stock has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and, therefore, cannot be resold unless registered under the
Securities Act and applicable state securities laws or unless an exemption from
registration is available and, as a result, such Shareholder must bear the risk
of an investment in Radiant Common Stock for an indefinite period of time. The
financial condition of each such Shareholder is currently adequate to bear the
substantial economic risk of an investment in Radiant Common Stock. Each such
Shareholder has sufficient knowledge and experience in investment and business
matters to understand the economic risk of such an investment and the risk
involved in a commercial enterprise such as Radiant. Each Shareholder is a bona
fide resident of the State of Georgia, and all communications and information,
written or oral, concerning the Radiant Common Stock and this Agreement have
been directed to such Shareholders and have been received in such State. Each
17
<PAGE>
Shareholder has received, and had the opportunity to review, the Registration
Statement (as defined in Section 5.4, below), including Radiant's most recent
financial statements for its last fiscal year and its unaudited financial
statements for the interim period ended September 30, 1996. Each Shareholder
acknowledges that the Merger Shares are not included within the Registration
Statement, and are therefore subject to the restrictions on transferability set
forth above in this Section 4.18. Each Shareholder further acknowledges that,
in addition to his receipt of the information contained in the Registration
Statement, he has been given the opportunity to ask questions of, and receive
answers from, officers of Radiant concerning Radiant and the Radiant Common
Stock and to obtain any additional information which such Shareholder reasonably
requested. Each Shareholder is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
4.19. No Brokers or Finders. Neither the Sellers nor Billmart, nor any of
---------------------
their respective directors, officers, employees, shareholders or agents, have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
4.20. Disclosure. No representation or warranty by the Sellers or the
----------
Shareholders in this Agreement, nor any statement, certificate, schedule or
exhibit hereto furnished or to be furnished by or on behalf of such respective
person or entity, pursuant to this Agreement, nor any document or certificate
delivered to Radiant pursuant to this Agreement or in connection with
transactions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading. There is no fact known to the
Sellers or any of the Shareholders which materially and adversely affects the
Billmart Business and the PrysmTech Business, and their respective financial
conditions, taken as a whole, or the prospects or financial condition of 3Bs,
5Rs or Billmart or their respective properties or assets, which has not been set
forth in this Agreement or in the schedules or certificates in writing furnished
in connection with the transactions contemplated by this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF RADIANT
As an inducement to the Sellers and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that the Sellers and Shareholders will rely thereon, Radiant as of the
date hereof represents and warrants to the Sellers and the Shareholders, the
following as of the date hereof, which shall be unaffected by any investigation
heretofore or hereafter made by the Sellers or the Shareholders, and shall
survive the Closing of the transactions provided for herein.
5.1. Corporate.
---------
(a) Organization. Radiant is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Georgia.
18
<PAGE>
(b) Corporate Power. Radiant has all requisite corporate power to
---------------
enter into this Agreement and the Ancillary Documents to be executed and
delivered by Radiant and to carry out the transactions contemplated hereby and
thereby.
5.2. Authority. The execution and delivery of this Agreement and the
---------
Ancillary Documents to be executed and delivered by Radiant pursuant hereto and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors of Radiant. No other corporate act or
proceeding on the part of Radiant or its shareholders is necessary to authorize
this Agreement or the Ancillary Documents to be executed and delivered by
Radiant pursuant hereto or the consummation of the transactions contemplated
hereby and thereby. This Agreement constitutes, and when executed and
delivered, the Ancillary Documents to be executed and delivered by Radiant
pursuant hereto will constitute, valid and binding agreements of Radiant,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
5.3. No Brokers or Finders. Neither Radiant nor any of its directors,
---------------------
officers, employees or agents has retained, employed or used any broker or
finder in connection with the transaction provided for herein or in connection
with the negotiation thereof.
5.4. Disclosure.
----------
(a) Radiant has delivered to each of the Sellers and to each of the
Shareholders a copy of the Registration Statement on Form S-1(Registration File
No. 333-17723), filed by Radiant with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on December 12, 1996 with respect
to certain shares of Radiant common stock (the "Registration Statement"), and
hereby undertakes to provide to any Seller or Shareholder, upon request, a
complete copy of the exhibits thereto. The information contained in the
Registration Statement is, in all material respects, true, complete and correct
as of the date of such Registration Statement, and there has been no material
change in such information, since the date of such information, which would,
considered in the aggregate, have a material adverse outcome on the financial
condition, business or operations of Radiant.
(b) No representation or warranty by Radiant in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of Radiant pursuant to this Agreement, nor any
document or certificate delivered by Radiant to the Sellers or the Shareholders
pursuant to this Agreement or in connection with transactions contemplated
hereby, contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained therein
not misleading.
SECTION 6. COVENANTS
6.1. Tax Treatment: Securities Law Matters.
-------------------------------------
19
<PAGE>
(a) Qualification as Reorganization. The Sellers and the
-------------------------------
Shareholders shall use their respective best efforts to cause each of the
Mergers to qualify as reorganizations under Section 368(a)(2)(D) of the Code.
Prior to the Closing, neither the Sellers nor the Shareholders will take any
action that could in any manner adversely affect such qualification.
(b) Prohibition of Sales. Each Shareholder agrees not to sell or
--------------------
otherwise distribute Radiant Class A Stock (or any shares of the no par value
voting common stock of Radiant ("Radiant Common Stock") into which such shares
of Class A Stock may be converted) received in the Mergers over which he has
direct or indirect control without registration under the Securities Act and
applicable state securities laws unless either (i) in the opinion of counsel
reasonably acceptable to Radiant, such sale is exempt from the registration
requirements of federal and applicable state securities laws, or (ii) such sale
has the prior written consent of Radiant, which will not be unreasonably
withheld.
6.2. Notification. From the date hereof until the Closing, each of the
------------
Sellers and the Shareholders on the one hand, and Radiant, on the other, shall
promptly notify the other of (i) any event, condition or circumstance occurring
from the date hereof through the Closing Date which would constitute a violation
or breach of this Agreement and (ii) any lawsuits, claims, proceedings or
investigations which after the date hereof are threatened or commenced against
such party or any officer, director, employee, consultant, agent or shareholder
thereof with respect to the affairs of 3Bs, 5Rs, Billmart or PrysmTech or
Radiant.
6.3. Best Efforts. Each party hereto covenants to utilize its best
------------
efforts to obtain, prior to the Closing Date, all consents, approvals and
waivers of third parties required as a condition precedent to the obligations to
close hereunder or that may otherwise be necessary or desirable to permit the
consummation of the transactions contemplated in this Agreement and to satisfy
all the conditions necessary to Closing.
6.4. Exclusive Dealing. So long as this Agreement remains in effect,
-----------------
neither the Sellers nor the Shareholders shall directly or indirectly take any
action to encourage, initiate or engage in discussions or negotiations with, or
provide any information to, any corporation, partnership, person, or other
entity or group, other than Radiant, concerning the purchase and sale of any
assets of any of the Sellers, Billmart or PrysmTech, the purchase and sale of
any equity or profit interest in any of the Sellers, Billmart or PrysmTech, or
any transaction similar to the foregoing involving any of the Sellers, Billmart
or PrysmTech and/or the Shareholders.
6.5. Further Assurances. Each Shareholder and each Seller covenants and
------------------
agrees that from and after the Closing he or it, as the case may be, will
execute, deliver and acknowledge (or cause to be executed, delivered and
acknowledged), from time to time at the request of Radiant and without further
consideration, all such further instruments and take all such further action as
may be reasonably necessary or appropriate to transfer more effectively to
confirm or carry out the provisions and intent of this Agreement. In
particular, and without limitation of the foregoing, each such Shareholder or
20
<PAGE>
Seller shall cooperate with Radiant in executing, delivering, filing or causing
to be filed, such documents, instruments or agreements as are necessary or
advisable, in the opinion of Radiant or its counsel, in order to effect the
dissolution of Billmart and PrysmTech, and to effect the transfer to Radiant, in
accordance with the transactions contemplated by this Agreement, of the title
of, or rights of such entities in, the assets, rights and privileges of such
entities.
6.6. Operation in Ordinary Course. From the date hereof to the Closing
----------------------------
Date, each of the Sellers, Billmart and PrysmTech shall, and each Shareholder
shall cause the Sellers, Billmart and PrysmTech to, (i) conduct their respective
businesses only in the ordinary course and in substantially the same manner as
conducted at the date hereof, (ii) use their respective best efforts to preserve
their respective business organizations intact and to retain the services of
their respective present officers, key employees, purchasing and sales personnel
and representatives, (iii) use their respective best efforts to preserve their
respective favorable relationships with their respective employees, customers,
suppliers and others having business relations with them, (iv) use their
respective best efforts to comply with all laws, ordinances and regulations
applicable to it in the conduct of their respective businesses, (v) not amend
their respective articles of incorporation or bylaws, or enter into, amend in
any material respect or terminate any contract, agreement or lease, (vi) not
declare, set aside or pay any dividend or make any distribution in respect of
the capital stock or membership interest in the Sellers, Billmart and PrysmTech
or redeem, purchase or acquire any capital stock or membership in or related
security of the Sellers, Billmart and PrysmTech, and (vii) conduct their
respective businesses in such a manner so that the representations and
warranties contained in Section 4 hereof shall continue to be true and correct
on and as of the Closing Date as if made on and as of the Closing Date.
6.7. Employment Agreements of Budwitz and Rice. Simultaneously with the
-----------------------------------------
Closing of the Mergers, Radiant shall enter into (a) an employment agreement
with Budwitz substantially in the form of Exhibit "D" hereto (the "Budwitz
-----------
Employment Agreement"), and (b) an employment agreement with Rice substantially
in the form of Exhibit "E" hereto (the "Rice Employment Agreement").
-----------
6.8. Grant of Options to Budwitz and Rice. Simultaneously with the entry
------------------------------------
by the parties thereto into the Budwitz Employment Agreement and the Rice
Employment Agreement, Radiant shall grant to each of Budwitz and Rice: (a)
options granted pursuant to Radiant's 1995 Incentive Stock Option Plan covering
57,140 shares of Radiant Common Stock, exercisable at a purchase price of $7.00
per share (the "ISO's"), each of which options shall be evidenced by an
Incentive Option Agreement substantially in the form of Exhibit "F" hereto (the
-----------
"ISO Agreement"); and (b) non-qualified stock options covering 80,360 shares of
Radiant Common Stock, exercisable at a purchase price of $7.00 per share (the
"NQO's"), each of which options shall be evidenced by a Nonqualified Stock
Option Agreement substantially in the form of Exhibit "G" hereto (the "NQO
-----------
Agreement").
SECTION 7. POST-CLOSING COVENANTS
21
<PAGE>
7.1. Termination of Public Offering Rights in PrysmTech Operating
------------------------------------------------------------
Agreement. The Sellers and the Shareholders (on behalf of
---------
themselves and on behalf of Billmart) and Radiant hereby agree, in addition to
and without limitation of any other consequences of the transactions
contemplated hereby, that immediately upon consummation of the Closing of the
transactions contemplated hereby, and without further action on the part of any
party, all the rights of any party set forth in Section 7.13 ("Billmart's Rights
Occasioned by Public Offering by Softsense of its Stock") of the Operating
Agreement, dated November 27, 1995, of PrysmTech, shall be terminated and
without further force or effect.
7.2. Shareholders' Put Right Relating to Radiant IPO.
-----------------------------------------------
(a) As used in this Section 7.2: (i) the term "Qualified Public
Offering" shall mean a firm-commitment underwritten public offering of Radiant
Common Stock yielding gross offering proceeds to Radiant of not less than
$15,000,000; (ii) "Eligible Shares" shall mean, with respect to holdings of
Radiant stock by any Shareholder, any of the Merger Shares, any shares of
Radiant Common Stock into which such Merger Shares shall be converted and any
shares of Radiant Common Stock issued to either Budwitz or Rice pursuant to the
exercise of any of the Employee Options; (iii) "Employee Options" shall mean
collectively the ISO's and the NQO's issued to such Shareholder pursuant to
Section 6.9 hereof; (iv) the "Put Period" shall mean the period beginning
January 1, 1999 and ending March 31, 1999; (v) "Put Valuation Price" shall mean
a price per share calculated in accordance with subsection (d) hereof; (vi)
"Acquired Business" shall mean the business of PrysmTech as operated as a
division or subsidiary of Radiant as at the time of valuation made pursuant to
subsection (e) hereof; and (vi) "Fair Market Value" shall mean the value of the
Acquired Business as determined in accordance with subsection (e)(i) hereof.
(b) If Radiant has not effected a Qualified Public Offering on or
before December 31, 1998, the Shareholders shall be entitled, by written notice
(the "Put Notice") executed by both Shareholders and delivered to Radiant prior
to the expiration of the Put Period, to require that Radiant purchase all (but
not less than all) the Eligible Shares, at a price per share equal to the Put
Valuation Price. If Radiant has not received a properly executed and delivered
Put Notice prior to the expiration of the Put Period, the Shareholders shall be
deemed to have waived their rights under this Section 7.2, and all such rights
shall automatically terminate. Not later than five business days following
Radiant's receipt of a properly executed and delivered Put Notice, Radiant shall
initiate the process of appraisal for determination of Fair Market Value of the
Acquired Business, in accordance with subsection (e) hereof. Not later than
five business days following the earlier of the agreement of Radiant and the
Shareholders as to Fair Market Value or Radiant's receipt of the report of
appraisers setting forth the Fair Market Value as determined in accordance with
subsection (e) hereof, Radiant shall give written notice to each Shareholder of
the place and time (which shall be no fewer than ten nor more than thirty days
following the date of Radiant's giving of such notice) of closing (the "Put
Closing") for Radiant's purchase of the Eligible Shares in accordance with this
Section 7.2. At the Put Closing, Radiant shall deliver to the Shareholders (or
such other parties as the Shareholders shall designate in writing to radiant not
less than two business days prior to the Put closing) payment of the aggregate
purchase price for the Eligible Shares, in the form provided in subsection (c)
22
<PAGE>
hereof, and the Shareholders shall cause to be delivered to Radiant
certificates evidencing all the Eligible Shares, duly endorsed for transfer to
Radiant by the record owners thereof.
(c) The purchase price for its purchase of the Eligible Shares
pursuant to this Section 7.2 shall be payable in cash or certified or bankers
check, or by wire transfer.
(d) The Put Valuation Price shall be determined by dividing: (a) the
remainder of subtracting from (x) the Fair Market Value of the Acquired
Business, (y) the aggregate sum of all principal actually paid by Radiant under
the Term Notes (as defined in Section 3.1 hereof) to and through the date of
such determination, provided that there shall also be subtracted the amount of
unpaid principal under any outstanding Term Note which is not surrendered and
marked as "Satisfied" prior to the payment of the Put Valuation Price; by (b)
the total number of Eligible Shares.
(e) (i) The "Fair Market Value" of the Acquired Business for purposes
of this Section 7.2 means the appraised value of the Acquired Business, as
operated as a going concern as a division or a subsidiary of Radiant, as of the
date of Radiant's receipt of a Put Notice, as determined (i) by mutual
agreement among Radiant and the Shareholders within five business days following
the date of Radiant's receipt of the Put Notice, or in the absence of such
agreement (ii) by an independent appraiser mutually agreeable to Radiant and the
Shareholders. If Radiant and the Shareholders are not able to agree on an
independent appraiser, then the Shareholders, as a group, and Radiant shall each
promptly select an appraiser. Each of the appraisers so selected, within ninety
(90) days of their appointment, shall determine the fair market value of the
Acquired Business, by such method as they shall independently determine as
appropriate to the industry including such Acquired Business. If the lower of
the two appraisals is equal to or in excess of the product of eighty five
hundredths (0.85) times the higher appraisal, then the two appraisals shall be
averaged, and the averaged amount shall be the fair market value of the Acquired
Business for purposes of this Section 7.2. 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.
(ii) The costs of obtaining the appraisals for this Section 7.2(e)
shall be paid by Radiant.
7.3. Shareholders' Post-IPO Registration Rights with Respect to Radiant
------------------------------------------------------------------
Common Stock.
------------
(a) As used in this Section 7.3: (i) the term "Registrable
Securities" shall mean any of the Merger Shares, any shares of Radiant Common
Stock into which such Merger Shares may be converted and any shares issued to
either Budwitz or Rice pursuant to the exercise of any of the Employee Options
(as defined in Section 7.2(a), above); (ii) the term "Act" shall mean the
23
<PAGE>
federal Securities Act of 1933, as amended; and (iii) the term "Initial Public
Offering" shall mean the first public offering by Radiant of its common stock
pursuant to an effective registration statement under the Act.
(b) If at any time following its IPO, Radiant proposes to register
any of its Common Stock under the Act in connection with the public offering of
such securities for its own account or for the accounts of other shareholders,
solely for cash, on a form that would also permit the registration of the
Registrable Securities, Radiant shall, on each such occasion, promptly give each
Shareholder written notice of such determination. Upon the written request of
the Shareholder made within thirty (30) days after the effective date of such
notice (as determined in accordance with Article 8 hereof), Radiant shall,
subject to subsection (f) below, use its best efforts to cause to be registered
under the Act all of the Registrable Securities that the Shareholder has
requested be registered.
(c) Whenever required under subsection (a) to use its best efforts
to effect the registration of any Registrable Securities, Radiant shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement including such
Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Shareholder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as the
Shareholder may reasonably request in order to facilitate the
disposition of Registrable Securities covered by such registration
statement.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered
by the registration statement, provided that Radiant shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the securities
shall be qualified shall require that expenses incurred in connection
with the qualification of the securities in that jurisdiction be
borne by selling shareholders, then such expenses shall be payable by
selling shareholders (including the Shareholder) pro rata, to the
extent required by that jurisdiction.
24
<PAGE>
(v) Provide a transfer agent for the Common Stock no later
than the effective date of the first registration of any Registrable
Securities.
(d) It shall be a condition precedent to the obligations of Radiant
to take any action pursuant to this Section 7.3 that the Shareholder shall
furnish to Radiant such information regarding the Shareholder, the Registrable
Securities, and the intended method of disposition of such securities as Radiant
shall reasonably request and as shall be required in connection with the action
to be taken by Radiant.
(e) All expenses (excluding underwriters' discounts and commissions)
incurred in connection with a registration pursuant to subsection (a) including,
without limitation, any additional registration and qualification fees and any
additional fees and disbursements of counsel to Radiant that result from the
inclusion of securities held by the Shareholder in such registration and the
reasonable fees and disbursements of counsel for the Shareholder, shall be borne
by Radiant; provided, however, that if the registration is of exclusively a
secondary offering, the respective sellers of the securities covered thereby
shall bear their proportionate share of the expenses incurred in connection with
any registration (provided all sellers registering shares thereunder bear their
proportionate share of expenses), except expenses which Radiant would have
incurred whether or not the securities held by such sellers were included in
such registration (including, without limitation, the expenses of preparing
normal audited or unaudited financial statements).
(f) (i) In connection with any offering involving an underwriting of
shares being issued by Radiant, Radiant shall not be required to include
any of the Registrable Securities in such underwriting unless the
Shareholder accepts the terms of the underwriting as agreed upon between
Radiant and the underwriters selected by it, and enters into an
underwriting agreement, custody agreement, power of attorney and other
agreements customarily incident to the offering of shares by selling
Shareholders, each containing such representations, warranties, covenants
and indemnities as are reasonable and customary under the circumstances,
and then only in such quantity as will not, in the reasonable opinion of
the underwriters, jeopardize the success of the offering by Radiant.
(ii) If the total amount of securities that all proposed selling
securityholders request to be included in an underwritten offering exceeds
the amount of securities that the underwriters reasonably believe
compatible with the success of the offering, Radiant shall only be required
to include in the offering so many of the securities of such proposed
selling securityholders, including the Shareholder, as the underwriters
reasonably believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among such selling
securityholders according to the total amount of securities owned by such
proposed selling securityholders, including the Registrable Securities
owned by the Shareholder, or in such other proportions as shall mutually be
agreed to by such proposed selling securityholders), provided that no such
reduction shall be made with respect to any securities offered by Radiant
for its own account.
25
<PAGE>
(iii) If requested by the underwriters of any public offering of
securities by Radiant, the Shareholder shall agree not to sell publicly any
of such Registrable Securities or other securities of Radiant (other than
shares registered in such offering) without the consent of such
underwriters for a period of not more than one hundred eighty (180) days
following the date on which such offering commences.
(g) The Shareholder shall have no right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 7.3
(h) In the event any Registrable Securities are included in a
registration statement under this Agreement:
(i) To the extent permitted by law, Radiant will indemnify and hold
harmless the Shareholder, any underwriter (as defined in the Act) for it,
and each person, if any, who controls the Shareholder, or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based on
any untrue or alleged untrue statement of any material fact contained in
such registration statement, including, without limitation, any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading or
arise out of any violation by Radiant of any rule or regulation promulgated
under the Act applicable to Radiant and relating to action or inaction
required of Radiant in connection with any such registration; and will
reimburse the Shareholder, such underwriter, or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action, provided, however, that the indemnity agreement contained in this
subsection (h)(i) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of Radiant (which consent shall not be unreasonably
withheld or delayed) nor shall Radiant be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in connection with such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by the Shareholder or such underwriter or controlling person.
(ii) To the extent permitted by law, the Shareholder will
indemnify and hold harmless Radiant, each of its directors, each of its
officers who has signed the registration statement, each person, if any,
who controls Radiant within the meaning of the Act, and each agent and any
underwriter for Radiant (within the meaning of the Act) against any losses,
26
<PAGE>
claims, damages or liabilities to which Radiant or any such director,
officer, controlling person, agent, or underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon 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, in such
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished by the Shareholder expressly for use in
connection with such registration; and the Shareholder will reimburse any
legal or other expenses reasonably incurred by Radiant or any such
director, officer, controlling person, agent, or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection (h)(ii) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Shareholder (which consent shall not be
unreasonably withheld) and provided further that the Shareholder shall have
liability under this subsection (h)(ii)in excess of the net proceeds
actually received by the Shareholder in the relevant public offering.
(iii) Promptly after receipt by an indemnified party under this
subsection (h) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this subsection (h) notify the indemnifying
party in writing of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory
to the parties. The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to his ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this subsection (h) but the omission so to notify
the indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this subsection (h).
(i) The registration rights of a Shareholder under this Section 7.3
may be transferred to any transferee who acquires (otherwise than in a
registered public offering or in a transfer made pursuant to Rule 144 under the
Act) shares of Registrable Securities, provided, however, that Radiant is given
written notice by the Shareholder at the time of such transfer stating the name
and address of the transferee and identifying the securities with respect to
which the rights under this Agreement are being assigned.
7.4. Restrictions on Transfer.
------------------------
27
<PAGE>
(a) Neither Shareholder, nor any Permitted Transferee, shall
transfer any of the Registrable Securities (as defined in Section 7.3 hereof) to
any person or entity whatsoever, except in a Permitted Transfer (in accordance
with subsection (c) hereof) or in a transfer complying with the terms set forth
in subsection (d) hereof, provided that the prohibition of this Section 7.4 (a)
shall be inapplicable to any transfer which is effected following the closing of
a Qualified Public Offering (as defined in Section 7.2 (a) hereof).
(b) Any purported transfer of Registrable Securities by any
Shareholder without full compliance with this Section 7.4 shall be void and of
no effect, and the purported transferee shall be entitled to no rights as a
Shareholder of Radiant as a result thereof. In addition to any other legal or
equitable remedy which may be available, Radiant shall be entitled to injunctive
relief against any such noncomplying transfer by the Shareholder.
(c) (i) Subject to the satisfaction of the condition set forth in
subsection (c)(ii), below, the prohibition of subsection (a) shall not
apply to any of the following transfers of Registrable Securities (each a
"Permitted Transfer"):
(A) if the Shareholder is an individual, transfers by gift by the
Shareholder, or by will or intestacy upon the death of the
Shareholder, to the spouse, lineal descendants, parents or siblings
of the Shareholder or to a trust for the benefit of such spouse,
lineal descendants parents or siblings which is created by the
Shareholder's will or of which the Shareholder during his lifetime
served as trustee, provided that the trust instrument governing any
such latter type of trust shall provide that the Shareholder, as
trustee, shall retain sole and exclusive control over the voting and
disposition of such Securities until the termination of this
Agreement;
(B) transfers of Securities between the Shareholder and the
Shareholder's guardian or conservator;
(C) transfers of Securities to Radiant by the Shareholder upon
the death, disability, retirement or termination of employment by
Radiant of the Shareholder, in each case if made pursuant to a
written stock repurchase agreement approved by the Board of Directors
of Radiant, or any other transfer by the Shareholder to Radiant if
made with the express approval of a majority of the total number of
members of the Board of Directors of Radiant;
(D) any other transfer made by the Shareholder with the express
written consent of at least a majority of the members of the Board of
Directors of Radiant.
(ii) Any Security transferred in any transaction described in
subsection (c)(i) shall remain subject to the transfer restriction of
subsection (a) hereof. As a condition to such a transfer, each Permitted
Transferee shall execute and deliver to Radiant an agreement with Radiant
in respect of the transferred Registrable Securities, containing all the
28
<PAGE>
same terms and conditions of this Agreement, reflecting such transferee's
ownership of the Registrable Securities so transferred, which execution and
delivery shall evidence the agreement of such Permitted Transferee that the
Registrable Securities intended to be transferred shall continue to be
subject to the same terms and restrictions on transfer as contained in this
Section 7.4, and that as to such Registrable Securities such Permitted
Transferee shall be bound by such terms and conditions.
(d) (i) If the Shareholder (for purposes of this subsection (d)
referred to as the "Offering Shareholder") desires to make a transfer of
any Registrable Securities, unless such transfer is made in a Permitted
Transfer, the Offering Shareholder shall offer such Securities to Radiant
and to each other holder of shares of Radiant Common Stock (the "Offeree
Shareholders"), in accordance with the terms set forth in this subsection
(d), by giving them notice of the Shareholder's intention to dispose of the
Registrable Securities. Such notice shall name the type of transfer, the
proposed transferee, the number of shares to be transferred (the "Offered
Securities"), the price per share (or other comparable price information),
and the terms of payment, and shall be accompanied by a copy of the
binding, bona fide written offer of the proposed transferee to acquire such
securities upon the terms specified in the notice. Following receipt of
such notice by the Offeree Shareholders and Radiant, the Offeree
Shareholders and Radiant shall have an option, that may be exercised in the
manner provided by subsection (d)(ii) hereof, to purchase all, but not less
than all, of the Offered Securities in the discretion of each purchaser, at
the price and on terms specified in the notice.
(ii) Radiant shall have first option to purchase all of the Offered
Securities (or any lesser part thereof, provided one or more Offeree
Shareholders elect to purchase all Offered Securities that Radiant does not
purchase). Radiant may exercise its option by giving written notice, which
must state the number of shares of the Offered Securities which Radiant
elects to purchase, and the price and terms of purchase, to the Shareholder
and each Offeree Shareholder, within ten (10) days after its receipt of the
Offering Shareholder's notice. The Offering Shareholder shall not
participate in the determination reached by Radiant with respect to such
issue. If Radiant elects to purchase none or less than all of the Offered
Securities, the Offeree Shareholders shall have an option to purchase all,
but not less than all, of the Offered Securities that Radiant elects not to
purchase, exercisable by giving notice to the Offering Shareholder and each
other Offeree Shareholder and to Radiant within thirty (30) days after such
Offeree Shareholder's receipt of notice from the Offering Shareholder.
Each Offeree Shareholder shall have the right to purchase a proportion of
the Offered Securities (to the extent not purchased by Radiant) equal to
the ratio that the number of shares of radiant Common Stock owned by such
Offeree Shareholder bears to the total number of shares of radiant common
Stock owned by all of the Offeree Shareholders who elect to exercise their
purchase option (or in such other proportion as is unanimously agreed to
among the Offeree Shareholders who elect to exercise their purchase
option). Radiant or Offeree Shareholders or both may purchase all of the
Offered Securities but may not together purchase less than all of the
29
<PAGE>
Offered Securities. If Radiant elects to purchase a greater percentage of
the Offered Securities 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 forty-five (45) nor more than sixty (60) days after its receipt
of notice from the Offering Shareholder. If any Offeree Shareholder
exercises his or its option to purchase a greater percentage of the Offered
Securities than any other offeree, including Radiant, such Offeree
Shareholder shall state in his or its notice of exercise, with a copy to
the Secretary of Radiant the purchase price of the Securities and the terms
of purchase and a date for the closing of the purchase by all accepting
offerees. Such date for closing shall not be less than forty-five (45) nor
more than sixty (60) days after the date of such accepting Shareholder's
receipt of notice from the Offering Shareholder. The Secretary of Radiant
shall promptly mail a copy of such notice of exercise to all accepting
offerees to advise them of the time of closing.
(iii) If the right of first refusal provided above is not exercised
as to all of the Offered Securities, if the exercise by the Offeree
Shareholders and Radiant is not made within the time specified in
subsection (d)(ii), or if the purchase by the Offeree Shareholders or
Radiant is not consummated within the time specified in subsection (d)(ii),
above, through no fault of the Offering Shareholder, the Offering
Shareholder may transfer the Offered Securities to the proposed purchaser,
at the price and on the terms and conditions set forth in the notice of
intention sent by the Offering Shareholder. As a condition to such
transfer, the Offering Shareholder shall obtain the written acknowledgement
of the transferee (addressed to Radiant) that the transferee will be bound
by, and the Securities transferred will be subject to, the terms of this
Section 7.4, as if such transferee were a Shareholder. If the transfer of
Securities by the Offering Shareholder to the proposed purchaser named in
the notice of intention is not made within thirty (30) days after the date
the Offering Shareholder became free to transfer, the right to transfer in
accordance with the notice shall expire. In such event this Section 7.4
shall remain in full force and effect as to the offered Securities.
(e) At the closing the purchasers shall deliver the required
consideration, and (if applicable) the written undertaking specified in
subsection (c) hereof, and the selling Shareholder shall deliver the Offered
Securities, duly endorsed for transfer and with any and all required revenue
stamps attached.
(f) The Shareholder shall bear Shareholder's own costs and expenses
incurred in connection with any transfer or proposed transfer of Securities
covered by subsection (c) or (d) hereof, and shall, in addition, reimburse
Radiant for any expenses reasonably incurred by Radiant in the exercise of its
rights or fulfillment of its obligations pursuant to subsection (c), in
connection with such transfer. Radiant shall pay its own expenses, however, in
connection with the exercise of its rights or fulfillments of its obligations
pursuant to subsection (d) hereof.
30
<PAGE>
7.5. Tax Matters.
-----------
(a) Each Shareholder acknowledges that he and Radiant have entered
into this Agreement with the understanding and expectation that until the
earlier to occur ("Election Termination Date") of (x) the election by holders of
not less than fifty one percent (51%) of the issued and outstanding Radiant
Common Stock to terminate such "S corporation" status, or (y) the effective date
of a Qualified Public Offering (as defined in Section 7.2(a)(i) hereof), Radiant
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 all of the shareholders, under the tax laws of each state where such status
(or similar status) is available and in which at any time Radiant does business
or any shareholder is resident. Each Shareholder 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 Radiant, unless such action or failure to act has the consent of each other
shareholder. Each Shareholder further covenants and agrees that,
notwithstanding any other provision of this Agreement, prior to the Election
Termination Date, Radiant shall have no obligation to recognize or effect on the
transfer records of Radiant any transfer of any security by Shareholder which
would, in the opinion of counsel to Radiant, cause or have the effect of
termination of the S-corporation election of Radiant. Each Shareholder (and
such Shareholder's 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 Radiant files an election
to be an S corporation.
(b) In the event of an inadvertent termination of Radiant's
S corporation election, prior to the Election Termination Date then each
Shareholder and Radiant 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 Radiant 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.
(c) In the event either Shareholder terminates his entire interest
in the stock of Radiant prior to the Election Termination Date, such Shareholder
agrees to file an election under Code Section 1377(a)(2) to close the tax year
of Radiant as of the date of such termination for Federal income tax accounting
purposes.
(d) If, prior to the Election Termination Date, Radiant's S election
is terminated during any taxable year of Radiant, each Shareholder agrees to
make such elections and sign such consent forms as may be required, and Radiant
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).
31
<PAGE>
(e) Each Shareholder (and such Shareholder's spouse) hereby
irrevocably constitutes and appoints the President of Radiant, 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 Radiant 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 such
Shareholder (or spouse) and shall not be revoked and shall survive the
assignment or transfer by such Shareholder (or spouse) of all or part of his or
her Stock. The existence of this power shall not preclude execution of any such
instrument by such Shareholder (or spouse) individually on any such matter.
(f) Each Shareholder and Radiant acknowledges that, with respect to
any tax year in the period from the date hereof until the Election Termination
Date, Radiant will use its best efforts to make pro rata distributions of money
with respect to the Radiant Class A Stock and Radiant Common Stock in an amount
sufficient to pay the federal and state income taxes on the income that passes
through to the Shareholders from Radiant under Section 1366 of the Code for each
taxable year, net of any tax benefits produced by losses, deductions and credits
that pass through under Section 1366 of the Code. Radiant will use its best
efforts to make such distributions no later than ninety (90) days after the end
of each taxable year. For purposes of this subsection, a distribution shall be
treated as made with respect to a particular tax year of Radiant if (a) it is
made during the taxable year and not designated by Radiant as made with respect
to another taxable year, or (b) it is specifically designated by Radiant as made
with respect to that particular taxable year. The foregoing distribution
requirement set forth in this subsection is subject, however, to (i) the duty of
Radiant to maintain sufficient funds for working capital and business needs so
as not to impair the ability of Radiant to continue its business operations, and
(ii) any applicable restrictions contained in loan documents with Radiant's
creditors.
7.6. Dissolution of Billmart and PrysmTech. Promptly following the
-------------------------------------
Closing, Radiant shall take such action, in its capacity as sole member of each
of Billmart and of PrysmTech, to cause to be filed with the Secretary of State
of Georgia appropriate certificates or other documents to effect the dissolution
of each of Billmart and PrysmTech.
7.7. Transition Loans to Rice and Budwitz. Not later than the earlier to
------------------------------------
occur of the closing date of a Qualified Public Offering (as defined in Section
7.2(a) hereof) or April 15, 1997, Radiant will loan to each of Rice and Budwitz
the principal sum of $165,000 (each a "Transition Loan"). Each Transition Loan,
which shall be represented by a promissory note in the form attached hereto as
Exhibit "C" (a "Transition Loan Note"), will bear interest at seven percent (7%)
- -----------
per annum, cumulative but not compounding, with principal and interest payable
in full on the fifth (5th) anniversary of the making of the loan (the
"Transition Loan Maturity Date"), provided that in the event that the obligor
under such Transition Loan makes any sale prior to the Transition Loan Maturity
Date of any of the Merger Shares (as defined in Section 3.1(ii) hereof) received
by such obligor pursuant to this Agreement (for purposes of this Section 7.7,
32
<PAGE>
the "Prepayment Shares"), such obligor shall be obligated to apply any net
proceeds of such sale in reduction of the obligor's obligations to Radiant under
such Transition Loan Note.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RADIANT
Each and every obligation of Radiant to be performed on the Closing Date
shall be subject to the satisfaction or the waiver in writing by Radiant, prior
to or at the Closing, of each of the following conditions:
8.1. Representations and Warranties True as of the Closing Date. Each of
----------------------------------------------------------
the representations and warranties made by the Sellers and the Shareholders in
this Agreement, in the statements contained in the Schedule or in any
instrument, list, certificate or writing delivered by the Sellers and/or the
Shareholders pursuant to this Agreement, shall be true and correct when made and
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by Radiant.
8.2. Compliance With Agreement. The Sellers and the Shareholders shall
-------------------------
have in all material respects performed and complied with all of their
respective agreements and obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, including
the delivery of the closing documents specified in Section 11.1.
8.3. Absence of Suit. No action, suit or proceeding before any court or
---------------
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Radiant, the Sellers or any of the shareholders, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
8.4. Consents and Approvals. All approvals, consents and waivers that are
----------------------
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to
Radiant, including, without limitation, all approvals and consents, whether
governmental or private, necessary for Radiant's continuation of the PrysmTech
Business as a division or wholly-owned subsidiary of Radiant. The Sellers and
the Shareholders shall cooperate with Radiant in obtaining, and take all actions
necessary to obtain, any such consents or approvals.
8.5. Exemption. Radiant shall have received evidence reasonably
---------
satisfactory to it that the issuance of the Merger Shares in the Mergers is
exempt from registration under the Securities Act.
33
<PAGE>
SECTION 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS AND THE
SHAREHOLDERS
Each and every obligation of the Sellers and the Shareholders to be
performed on the Closing Date shall be subject to the satisfaction or the waiver
in writing by the Sellers and the Shareholders, prior to or at the Closing, of
the following conditions:
9.1. Representations and Warranties True on the Closing Date. Each of the
-------------------------------------------------------
representations and warranties made by Radiant in this Agreement shall be true
and correct when made and shall be true and correct in all material respects at
and as of the Closing Date as though such representations and warranties were
made or given on and as of the Closing Date.
9.2. Compliance With Agreement. Radiant shall have in all material
-------------------------
respects performed and complied with all of Radiant's agreements and obligations
under this Agreement which are to be performed or complied with by Radiant prior
to or on the Closing Date, including the delivery of the closing documents
specified in Section 11.2.
9.3. Absence of Suit. No action, suit or proceeding before any court or
---------------
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced, against Radiant, the Sellers or any of the shareholders, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
SECTION 10. SECTION SURVIVAL OF REPRESENTATIONS AND WARRANTIES/INDEMNITY
10.1. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Sellers and the Shareholders, on the one
hand, and Radiant on the other hand, contained in this Agreement shall survive
the Closing for a period of one year following the Closing Date. No party
hereto shall be entitled to indemnification, payment of any damages, expenses or
other remedy based on such representations, warranties, covenants, and insofar
as, and to the extent that, such party had Actual Knowledge prior to the Closing
Date, of the inaccuracy of, or of noncompliance with, any such representation,
warranty, covenant or obligation. The waiver by the party seeking
indemnification of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of damages,
expenses or other remedy based on such representations, warranties, covenants
and obligations.
10.2. Indemnification by Shareholders. Each of the Shareholders shall,
-------------------------------
severally (but not jointly), defend, indemnify and hold harmless Radiant and its
successors and permitted assigns (and its directors, officers, employees, agents
and affiliates) from and against any and all direct or indirect requests,
demands, claims, payments, defenses, obligations, recoveries, deficiencies,
fines, penalties, interest, assessments, actions, liens, causes of action,
34
<PAGE>
suits, proceedings, judgments, losses, damages, liabilities, costs and expenses
of any kind or nature (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder, whether or not resulting in any liability), and interest on any
amount payable as a result of the foregoing, whether accrued, absolute,
contingent, known, unknown, or otherwise as of the Closing Date or thereafter
(collectively "Claims") asserted against, imposed upon or incurred by Radiant or
its successors or permitted assigns or any of its directors, officers,
employees, agents or affiliates based upon, awarded or asserted against in
respect of or otherwise in respect of: (a) the inaccuracy or breach of any
representation or warranty of such Shareholder or, in the case of Budwitz, 3Bs
or the Budwitz Trust, and in the case of Rice, 5Rs or the Rice Trust, contained
in or made pursuant to this Agreement or any of the closing certificates or
documents of assignment delivered at the Closing described in Sections 11.1(i)
hereof (the "Closing Documents") (but not including any other Ancillary
Agreements), or (b) the breach of any covenant or agreement of such Shareholder
or, in the case of Budwitz, 3Bs or the Budwitz Trust, and in the case of Rice,
5Rs or the Rice Trust, contained in this Agreement or any of the Closing
Documents.
10.3. Indemnification by Radiant. Subject to the terms and conditions of
--------------------------
this Section 10, Radiant, hereby agree to indemnify, defend and hold harmless
each Shareholder from and against all Claims asserted against, resulting to,
imposed upon or incurred by any such Shareholder, directly or indirectly, by
reason of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of Radiant contained in or made pursuant to this
Agreement or any Ancillary Document (regardless of whether such breach is deemed
"material" for purposes hereof), or (b) the breach of any covenant or agreement
of Radiant contained in this Agreement or any of the Ancillary Documents.
10.4. Set-Off. Radiant shall have the right to set-off and apply against
-------
all amounts due and owing to the Shareholders pursuant to (i) this Agreement, or
(ii) any of the Term Notes issued to the Shareholders pursuant hereto, all sums
in respect of which the Shareholder is finally determined (by final and non-
appealable judgment, or settlement or compromise or other mutual agreement) to
be liable to Radiant, including without limitation as a result of a breach of
any representation or warranty contained in Section 4 hereof or pursuant to the
indemnification agreement contained herein. Such right of set-off shall be in
addition to, and not in lieu of, or an election against, any and all other
remedies available to Radiant at law or in equity. The exercise of such right
of set-off by Radiant in good faith will not constitute an event of default
under any Note issued to the Shareholders pursuant hereto or any instrument
securing such Notes.
10.5. Conditions of Indemnification. The obligations and liabilities of
-----------------------------
the parties hereunder with respect to Claims resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) The party hereby seeking indemnification (the "Indemnitee")
will give the other party hereto (the "Indemnitor") notice of any such claims
promptly after the Indemnitee receives notice thereof, and the Indemnitor will
35
<PAGE>
accept the defense thereof by counsel of its own choosing reasonably acceptable
to the Indemnitee; provided, however, the failure to give such notice shall not
relieve the Indemnitor of its obligations hereunder except and to the extent he
or it is prejudiced thereby.
(b) In the event that the Indemnitor, within a reasonable time
after notice of any such claim, fails to defend against such claim, the
Indemnitee (upon further notice to the Indemnitor) will have the right to
undertake the defense, compromise or settlement of such claim on behalf of and
for the account and risk of the Indemnitor, subject to the right of the
Indemnitor to assume the defense of such claim at any time prior to the
settlement, compromise or final determination thereof;
(c) Anything in this Section 10.5 to the contrary notwithstanding,
(i) if the Indemnitee shall so elect, the Indemnitee shall have the right, at
its sole cost and expense, to defend, compromise or settle such claim or to
participate in the defense of any such claim being defended by the Indemnitor,
(ii) the Indemnitor shall not, without the Indemnitee's written consent, settle
or compromise any such claim or consent to entry of any judgment which does not
include an unconditional term thereof giving the Indemnitee a release from all
liability in respect of such claim by the claimant or the plaintiff, and (iii)
the Indemnitor agrees to act in good faith with due regard to the Indemnitee's
on-going business interests to the extent compatible with an efficient and cost
effective resolution of the dispute.
10.6. Payment. The Indemnitor shall promptly pay the Indemnitee any
-------
amount due under this Section 10. Upon judgment, determination, settlement or
compromise of any third party Claim, the Indemnitor shall pay promptly on behalf
of the Indemnitee, and/or to the Indemnitee in reimbursement of any amount
theretofore finally determined (by final judgment, settlement, compromise or
other mutual agreement) to be required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnitee with respect thereto, unless in the case of a judgment
an appeal is made from the judgment. If the Indemnitor desires to appeal from an
adverse judgment, then the Indemnitor shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal. Upon the
payment in full by the Indemnitor of such amounts, the Indemnitor shall succeed
to the rights of such Indemnitee, to the extent not waived in settlement,
against the third party who made such third party claim.
10.7. No Waiver. The closing of the transactions contemplated by this
---------
Agreement shall not constitute a waiver by any party of its rights to
Indemnification hereunder, under the party seeking Indemnification had knowledge
before the execution and delivery of this Agreement or the Closing Date, of the
breach, violation or failure of condition constituting the basis of any claim.
10.8. Adjustment of Liability. In the event an Indemnitor is required to
-----------------------
make any payment under this Section 10 in respect of any Claim, such Indemnitor
shall pay the Indemnitee an amount (the "Adjusted Amount") which is equal to the
sum of (i) the amount of such Claim, minus (ii) the amount of any insurance
-----
proceeds the Indemnitee actually receives with respect thereto, minus (iii) any
-----
36
<PAGE>
third party payments actually received by the Indemnitee with respect to such
damages, liability, obligation, loss, claim or other amount after demand or
notice to such third party from the Indemnitor (with the consent of the
Indemnitee which will not be unreasonably withheld).
10.9. Non-Exclusive Remedy. The rights and remedies of the parties hereto
--------------------
pursuant to this Section 10 are in addition to and not in lieu of other rights
and remedies available at law or in equity.
SECTION 11. CLOSING
11.1. Documents to be Delivered by the Sellers and the Shareholders. At
-------------------------------------------------------------
the Closing, the Sellers and/or the Shareholders, as the case may be, shall
deliver to Radiant the following documents, in each case duly executed or
otherwise in proper form:
(a) Stock Certificate(s). Stock certificates representing the 3Bs
--------------------
Shares and 5Rs Shares, together with stock powers executed in blank, and such
other documents, instruments and agreements with respect thereto as may be
reasonably requested by Radiant.
(b) Assignment of Billmart Units. Forms of Assignment and
----------------------------
Transfer of Limited Liability Company Membership Units, each in substantially
the form of Exhibit "H" hereto, executed by each of the Budwitz Trust and the
-----------
Rice Trust, respectively, with respect to the Rice Trust Units and the Budwitz
Trust Units respectively.
(c) Assignment of Profits Interest or Profits Interest Release.
----------------------------------------------------------
Either: (i) an Assignment and Transfer of Profits Interest, in substantially the
form of Exhibit "I" hereto, or the Profits Interest Release (as defined in
-----------
Section 2.1(iii) hereof) in form and substance reasonably acceptable to Radiant,
in either case executed by Sony with respect to the Profits Interest; or
alternatively (ii) the Profits Interest Undertaking (as defined in Section
2.1(iii)(B) hereof), executed by each of the Shareholders, accompanied by the
Escrow Agreement (as defined in Section 3.2(b) hereof) executed by each of the
Shareholders and the Escrow Agent.
(d) Sony Option. The Sony Option (as defined in Section 3.2
-----------
hereof), in form and substance reasonably acceptable to Radiant, executed in
favor of Sony by each of Rice and Budwitz.
(e) Shareholder's Certificates. A certificate of each Shareholder,
--------------------------
dated as of the Closing Date, substantially in the form of Exhibit "J" hereto.
-----------
(f) Secretary's Certificates. A certificate of the Secretary of
------------------------
each of 3Bs and 5Rs, dated as of the Closing Date, substantially in the form of
Exhibit "K" hereto.
- -----------
(g) Officer's Certificates. A certificate of an executive
----------------------
officer of each of 3Bs and 5Rs, dated as of the Closing Date, substantially in
the form of Exhibit "L" hereto.
-----------
37
<PAGE>
(h) Trustee's Certificate. A certificate of each of the Trustees
---------------------
of the Budwitz Trust and the Rice Trust, respectively, dated as of the Closing
Date, substantially in the form of Exhibit "M" hereto.
-----------
(i) Billmart Manager's Certificate. A certificate of a Manager of
------------------------------
Billmart, dated as of the Closing Date, substantially in the form of Exhibit "N"
-----------
hereto.
(j) PrysmTech Manager's Certificate. A certificate of a Manager of
-------------------------------
PrysmTech, dated as of the Closing Date, substantially in the form of Exhibit
-------
"O" hereto.
- ---
(k) Opinion of Counsel. A written opinion of Morris, Manning &
------------------
Martin, LLP, counsel to the Sellers and the Shareholders, dated as of the
Closing Date, addressed to Radiant, substantially in the form of Exhibit "P"
-----------
hereto.
(l) Budwitz Employment Agreement. The Budwitz Employment
----------------------------
Agreement, executed by Budwitz.
(m) Rice Employment Agreement. The Rice Employment Agreement,
-------------------------
executed by Rice.
(n) Option Agreements. The ISO Agreement and the NQO Agreement in
-----------------
favor of Budwitz, and the ISO Agreement and the NQO Agreement in favor of Rice,
each executed by Budwitz and Rice, respectively.
(o) Security and Agency Agreement. A Security and Agency
-----------------------------
Agreement in the form of Exhibit "B" hereof, executed in favor of Radiant by
-----------
each Shareholder and each of the Budwitz Trust and Rice Trust, or will as by the
Agent named therein.
(p) Sirrom Capital Intercreditor Agreement. An intercreditor
--------------------------------------
agreement, substantially in the form of Exhibit "Q" hereto (the "Sirrom
-----------
Intercreditor Agreement"), among Radiant, Sirrom Capital Corporation ("Sirrom")
and an Agent for the holders of the Term Notes, executed on behalf of such
Agent.
(q) Articles of Merger. The certificates of merger contemplated by
------------------
Section 1.2 duly executed on behalf of 3Bs and 5Rs.
(r) Redemption of PrysmTech Profits Interests. Evidence
-----------------------------------------
satisfactory to Radiant and its counsel of the complete redemption by PrysmTech,
prior to the effectuation of the Schedule 4.5 Assets Distribution, of all
profits interests in PrysmTech held by each of Steve Marsh ("Marsh") and Kevin
McAfferty ("McAfferty"), and the release by each of Marsh and McAfferty of all
claims which he may have against PrysmTech or its members in respect of such
profits interests.
38
<PAGE>
(s) Releases of PrysmTech by Unvested Employees. A release
-------------------------------------------
executed in favor of PrysmTech and its members by each of John Underwood, Craig
Chapin, Mike Kessler, Sean Miller and Mimi McAneny (each an "Unvested Employee")
may have to, or in respect of, any participation (whether past, present or
future) in profits, equity or cash flow of PrysmTech.
(t) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Radiant at or prior to the Closing pursuant to this
Agreement and such other certificates of authority, documents, instruments or
writings as Radiant may reasonably request.
11.2. Documents to be Delivered by Radiant. At the Closing, Radiant
------------------------------------
shall deliver to the Sellers and/or the Shareholders, as appropriate, the
following documents, in each case duly executed or otherwise in proper form:
(a) Non-Stock Consideration. The non-stock portion of the Total
-----------------------
Consideration, in the form of the Term Notes executed by Radiant and payable in
accordance with Section 3.1(i) hereof, and in the event of delivery of the
documents described in Section 11.1(c)(ii) hereof, an executed counterpart of
the Escrow Agreement.
(b) Security and Agency Agreement. The Security and Agency
-----------------------------
Agreement described in Section 11.1(p), executed by Radiant.
(c) Stock Certificates. Stock certificates evidencing the Merger
------------------
Shares, executed by appropriate officers of Radiant and registered in the names
of the Shareholders.
(d) Secretary's Certificates. A certificate of the Secretary of
------------------------
Radiant, dated as of the Closing Date, substantially in the form of Exhibit "S"
-----------
hereto.
(e) Officer's Certificates. A certificate of an executive officer
----------------------
of each of Radiant, dated as of the Closing Date, substantially in the form of
Exhibit "T" hereto.
- -----------
(f) Opinion of Counsel. A written opinion of Smith, Gambrell &
------------------
Russell, counsel to Radiant, dated as of the Closing Date, addressed to the
Shareholders, and substantially in the form of Exhibit "U" hereto.
-----------
(g) Articles of Merger. The articles of merger and/or
------------------
certificates of merger contemplated by Section 1.2 duly executed on behalf of
Radiant.
(h) Employment Agreements. Counterparts of the Budwitz Employment
---------------------
Agreement and the Rice Employment Agreement, executed on behalf of Radiant.
(i) Option Agreements. The Option Agreements described in Section
-----------------
11.1(n), each executed by Radiant.
39
<PAGE>
(j) Sirrom Capital Intercreditor Agreement. The Sirrom Capital
--------------------------------------
Intercreditor Agreement, described in Section 11.1(p), executed on behalf of
Sirrom and Radiant.
(k) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to the Sellers and/or the Shareholders at or prior to
the Closing pursuant to this Agreement and such other certificates of authority
and documents as the Sellers or the Shareholders may reasonably request.
SECTION 12. TERMINATION
12.1. Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) By mutual agreement of Radiant, and the Sellers, and the
Shareholders;
(b) By the Shareholders, if they discover that any representation
or warranty made by Radiant herein is false in any material respect or if
Radiant shall have breached any of its material agreements and covenants
contained herein in any material respect;
(c) By Radiant, if Radiant shall discover that any representation
or warranty made by the Sellers and/or the Shareholders herein is false in any
material respect or if the Sellers and/or the Shareholders shall have breached
any of its material agreements and covenants contained herein in any material
respect;
(d) By Radiant, provided that Radiant is not in default hereunder,
if the Closing shall not have occurred on or before December 31, 1996.
(e) By Radiant if at any time Radiant shall determine that the
conditions herein cannot be satisfied.
SECTION 13. MISCELLANEOUS
13.1. Expenses. Except as otherwise specifically provided herein Radiant,
--------
on the one hand, and the Shareholders, on the other hand, shall pay their own
respective expenses (and with respect to the Shareholders those of the Sellers),
in connection with the negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated hereby, except that
Radiant shall, at the Closing, pay the reasonable fees and expenses of counsel
to the Sellers and the Shareholders incurred directly in connection with and
directly relating to the transactions contemplated hereby. This Section 13.1
shall expressly survive the termination of this Agreement.
13.2. Entire Agreement. This Agreement, including all schedules and
----------------
exhibits hereto, 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 Agreement signed by the
party against whom enforcement is sought.
40
<PAGE>
13.3. 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.
13.4. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been given only if (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, addressed in each case as follows:
(a) If to Radiant to:
Radiant Systems, Inc.
Suite A, 1000 Alderman Drive
Alpharetta, Georgia 30202
Attn: John H. Heyman, Executive Vice President
with a copy in like manner to
Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326-1010
Attn: Richard G. Greenstein
(b) If to any of the Sellers or the Shareholders to:
H. Martin Rice
608 Old Lathemtown Road
Canton, Georgia 30015
with a copy in like manner to:
Morris, Manning & Martin, LLP
1600 Atlanta Financial Center, East Tower
3343 Peachtree Road, NE
Atlanta, Georgia 30326
Attention: Richard L. Haury, Esquire
Radiant, on the one hand, and the Sellers or the Shareholders, on the other, may
change the address(es) for the giving of notices and communications to them or
to it, as the case may be, by written notice to the other parties in conformity
with the foregoing.
41
<PAGE>
13.5. Gender. All pronouns and any variations thereof refer to the
------
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
13.6. Governing Law. The interpretation and construction of this
-------------
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Georgia, except with respect to the filing of the articles
and/or certificates of merger in which case the governing law shall be the
jurisdiction in which the applicable party hereto is incorporated.
13.7. Arbitration.
-----------
(a) Any dispute, controversy or claim arising out of or relating to
this Agreement or any contract or agreement entered into pursuant hereto or the
performance by the parties of its or their terms shall be settled by binding
arbitration held in Atlanta, Georgia in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, except
as specifically otherwise provided in this Section 13.7. The interpretation and
enforceability of this Section 13.7 shall be governed exclusively by the Federal
Arbitration Act, 9 U.S.C. (S)(S) 1-16.
(b) If the matter in controversy (exclusive of attorney fees and
expenses) shall appear, as at the time of the demand for arbitration, to exceed
$100,000, then the panel to be appointed shall consist of three neutral
arbitrators; otherwise, one neutral arbitrator.
(c) The arbitrator(s) shall allow such discovery as the
arbitrator(s) determine appropriate under the circumstances and shall resolve
the dispute as expeditiously as practicable, and if reasonably practicable,
within 120 days after the selection of the arbitrator(s). The arbitrator(s)
shall give the parties written notice of the decision, with the reasons therefor
set out, and shall have 30 days thereafter to reconsider and modify such
decision if any party so requests within 10 days after the decision. Thereafter,
the decision of the arbitrator(s) shall be final, binding, and nonappealable
with respect to all persons, including (without limitation) persons who have
failed or refused to participate in the arbitration process.
(d) The arbitrator(s) shall have authority to award relief under
legal or equitable principles, including interim or preliminary relief, and to
allocate responsibility for the costs of the arbitration and to award recovery
of attorneys fees and expenses in such manner as is determined to be appropriate
by the arbitrator(s).
(e) Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having in personam and subject matter jurisdiction.
(f) All proceedings under this Section 13.7, and all evidence
given or discovered pursuant hereto, shall be maintained in confidence by all
parties.
(g) The fact that the dispute resolution procedures specified in
this Section 13.7 shall have been or may be invoked shall not excuse any party
from performing its obligations under this Agreement and during the pendency of
42
<PAGE>
any such procedure all parties shall continue to perform their respective
obligations in good faith, subject to any rights to terminate this Agreement
that may be available to any party and to the right of set-off provided herein.
(h) All applicable statutes of limitation shall be tolled while the
procedures specified in this Section 13.7 are pending. The parties will take
such action, if any, required to effectuate such tolling.
13.8. Parties in Interest. This Agreement may not be transferred,
-------------------
assigned, pledged or hypothecated by any party hereto, other than with the
written consent of the other parties hereto and any attempted transfer,
assignment, pledge or hypothecation without such consent shall be null and void
and of no effect. Subject to the foregoing restrictions, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
13.9. 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.
13.10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
13.11. Confidentiality. From the date hereof to the Closing Date, the
---------------
parties hereto shall maintain in confidence and not divulge or disclose, and,
shall cause their respective directors, officers, employee, agents, and
advisors, if any, to maintain in confidence and not divulge or disclose the
existence of, and any written, oral or other information obtained in confidence
from any other party in connection with, this Agreement, any Ancillary Document
or the transactions contemplated hereby unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereunder, or (c) the furnishing or use of such
information is required by legal proceedings.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
RADIANT SYSTEMS, INC.
By: /s/ John H. Heyman
------------------------------------
Title: Executive Vice President and
Chief Excutive Officer
---------------------------------
43
<PAGE>
3Bs ENTERPRISES, INC.
By: /s/ William J. Budwitz
------------------------------------
Title: President
---------------------------------
5Rs ENTERPRISES, INC.
By: /s/ H. Martin Rice
------------------------------------
Title: President
---------------------------------
THE WILLIAM J. BUDWITZ CHARITABLE
REMAINDER UNITRUST
By: /s/ William J. Budwitz
------------------------------------
Title: Trustee
---------------------------------
THE H. MARTIN RICE CHARITABLE
REMAINDER UNITRUST
By: /s/ H. Martin Rice
------------------------------------
Title: Trustee
---------------------------------
/s/ William J. Budwitz (L.S.)
----------------------------------
WILLIAM J. BUDWITZ, Individually
/s/ H. Martin Rice (L.S.)
----------------------------------
H. MARTIN RICE, Individually
44
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of December 31, 1996 (the "Effective Date"), by and
between RADIANT SYSTEMS, INC., a Georgia corporation (the "Company"), and H.
MARTIN RICE (the "Executive").
WHEREAS, the Company desires to employ the Executive and to assure itself
of the continued services of the Executive for the term of employment provided
for in this Agreement, and the Executive desires to be employed by the Company
for such period, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) General. The Company hereby employs the Executive, effective as of the
-------
Effective Date, and the Executive agrees upon the terms and conditions herein
set forth to serve, effective as of the Effective Date, as a Vice President of
the Company and as a Managing Director of the PrysmTech Division of the Company
(the "Division"). The Executive shall have responsibility for the
administration and management of the Division's Business (as defined in Section
5 of this Agreement); and all operations and affairs of the Division as well as
for marketing the Division's business and products and engaging in sales of the
Division's products, and shall perform such duties in a diligent, professional,
competent and reasonable manner. Without limiting the foregoing Executive's
duties and responsibilities shall include the duties and responsibilities listed
on EXHIBIT A attached hereto. The Company covenants and agrees that all
---------
activities and operations of the Company that fall within the scope of the
Business (as defined in Section 5 of this Agreement) shall be operated as part
of the Division and accounted for separately by the Company as activities of the
Division, with the Executive having access to all books and records of the
Division as well as those books and records of the Company which relate to (i)
compensation of Employees (as hereinafter defined); (ii) the Company's various
lines of business; (iii) the basis for determining charges or costs directly
charged or allocated to the Division pursuant to EXHIBIT B attached hereto and
---------
(iv) all other information reasonably necessary to confirm compliance with the
terms and provisions of this Agreement. The Executive's place of employment
shall be within a twenty-five (25) mile radius of the Company's present office
located at Suite A, 1000 Alderman Drive, Alpharetta, Georgia 30202.
(b) Exclusive Services. The Executive shall devote his full-time working
------------------
hours to his duties hereunder and shall use his best efforts to promote and
serve the interests of the Division in a diligent, professional, competent and
reasonable manner; provided, however, that nothing herein shall prohibit the
Executive from devoting time to civic and community activities, or the
management of personal investments, so long as such activities do not interfere
-1-
<PAGE>
with the performance of his duties hereunder; and provided further, that the
Executive shall not, directly or indirectly, render services to any other person
or organization for which he receives compensation in excess of One Thousand and
No/100 Dollars ($1,000.00) per year without the consent of the Board.
2. TERM OF EMPLOYMENT.
The initial term of the Executive's employment under this Agreement shall
commence on the Effective Date and, if not sooner terminated as provided in
Section 4(b), shall end on December 31, 2000, except that, Executive's
employment shall automatically be extended for one additional twelve (12) month
period if the non-qualified stock options awarded pursuant to Section 3(c) of
this Agreement have not fully vested by their terms on or prior to December 31,
2000.
3. COMPENSATION AND OTHER BENEFITS.
Subject to the provisions of this Agreement, the Company shall pay and
provide the following compensation to the Executive as compensation for services
rendered hereunder:
(a) Base Salary. The Executive's salary in each calendar year (the
-----------
"Salary") shall be the greater of: (a) an amount of salary equal to the sum of
the highest salary and guaranteed bonus paid to any other Employee for such
calendar year, or (b) One Hundred Thousand and No/100 Dollars ($100,000.00).
The Salary shall be payable in substantially equal installments at such
intervals (not less frequently than monthly) as may be determined by the Company
in accordance with its payroll practices as established, from time to time. The
Salary may be increased in such amounts and at such times as determined by the
Board in its sole discretion.
(b) Bonus. In addition to the Salary, the Executive shall be entitled to
-----
an annual bonus for each of the first four (4) calendar years of his employment,
payable within ninety (90) days following the completion of such calendar year,
equal to fifty percent (50%) of the "Bonus Pool" (as defined below) for such
calendar year subject to the qualifications set forth in Section 3(g) below.
For the purposes of this Section, the "Bonus Pool" in each year shall mean
the sum of (a) the first Fifty Thousand and No/100 Dollars ($50,000.00) of
Division Net Income in excess of the Division Base Earnings for the fiscal year
-2-
<PAGE>
set out below, plus (b) fifty percent (50%) of the excess of all Division Net
Income over the Division Base Plus Earnings for the fiscal year set out below:
<TABLE>
<CAPTION>
Year Base Earnings Base Plus Earnings
-----------------------------------------
<S> <C> <C>
1997 $1,540,000 $1,590,000
1998 $1,694,000 $1,744,000
1999 $1,863,000 $1,913,000
2000 $2,050,000 $2,100,000
</TABLE>
As an example, if Division Net Income in 1997 is One Million Five Hundred
Fifty Thousand and No/100 Dollars ($1,550,000.00), the Bonus Pool will be Ten
Thousand and No/100 Dollars ($10,000.00) and Executive's Bonus would be Five
Thousand and No/100 Dollars ($5,000.00). If Division Net Income in that year
was One Million Six Hundred Seventy Thousand and No/100 Dollars ($1,670,000.00),
the Bonus Pool would be the sum of (a) Fifty Thousand and No/100 Dollars
($50,000.00), plus (b) fifty percent (50%) of Eighty Thousand and No/100 Dollars
($80,000.00) (or Forty Thousand and No/100 Dollars ($40,000.00)) or a total of
Ninety Thousand and No/100 Dollars ($90,000.00) and Executive's Bonus will be
Forty-Five Thousand and No/100 Dollars ($45,000.00) (i.e., fifty percent (50%)
----
of the Bonus Pool).
Division Net Income shall be determined as set on in EXHIBIT B.
---------
(c) Stock Options. Executive has received simultaneously with the
-------------
execution of this Agreement qualified stock options for fifty-seven thousand one
hundred forty (57,140) shares of Company stock and non-qualified stock options
for eighty thousand three hundred sixty (80,360) shares of Company stock, all
issued under the Company's stock option plans on such terms as Executive and the
Company have set forth in the option contracts. The Company covenants and
agrees that, as soon as practicable following the Company's effectuation of a
public offering (a "Qualified IPO") of its common stock pursuant to an effective
registration statement under the federal Securities Act of 1933, as amended (the
"1933 Act"), and the Company's becoming (as a result thereof) a reporting
company under the terms of the federal Securities Exchange Act of 1934, as
amended, the Company will cause to be filed, and will for so long as any of the
options described in this subsection (c) remain outstanding and unexercised
maintain the effectiveness of, a registration statement on Form S-8 under the
1933 Act with respect to the Plan and the shares of common stock covered
thereby. The options for one hundred thirty-seven thousand five hundred
(137,500) shares awarded Executive pursuant to this Agreement shall fully vest
on the termination of his employment unless (i) Executive voluntarily terminates
his employment pursuant to Section 4(b)(v) or in violation of the terms of this
Agreement; (ii) Executive is terminated for cause pursuant to Section 4(b)(iii)
below; (iii) Executive's employment is terminated by reason of his death or (iv)
Executive's employment terminates due to expiration of this Agreement as
provided in Section 4(b)(vi) below. Notwithstanding the foregoing or any
provision in such option contracts to the contrary, the Company may voluntarily
-3-
<PAGE>
elect (the "Voluntary Acceleration"), by delivering written notice of such
election to the Executive, to treat all then remaining unvested options under
this Section 5(c) as fully vested as of the date of such notice.
Upon a Voluntary Acceleration or termination of Executive's employment
under this Agreement for any reason other than (i) termination for "cause," as
provided in Section 4(b)(iii) below; (ii) termination due to the death of
Executive; (iii) voluntary termination by Executive prior to the end of the term
hereof as provided in Section 4(b)(v) below or (iv) termination due to the
expiration, without renewal (excluding automatic renewal as provided in Section
2 above) of the term hereof as provided in Section 4(b)(vi) below, Executive
shall have the following rights (which shall survive the termination of
Executive's employment, if applicable) in respect of any of the options
described in the first sentence of this subsection (c) which are, or become, on
the date of such Voluntary Acceleration or termination of employment, as the
case may be, vested but unexercised ("Termination Shares"):
(A) Not less than two (2) business days prior to the date on which
Executive elects to exercise any such option, Executive may give written
notice to the Company (the "Option Notice") of Executive's intent to
exercise such option, specifying the number of shares as to which such
option will be exercised (the "Exercise Shares"), and may require that the
Company loan to the Executive, on the terms and conditions set forth in
this subparagraph (A), an amount (to be specified in such written notice)
(the "Loan Amount") up to the aggregate option-exercise price for the
Exercise Shares. Upon its receipt of an Option Notice, the Company shall
deliver to the Executive, not later than the date specified in the Option
Notice for exercise of the options, an amount in cash, or by certified or
cashiers check equal to the Loan Amount, provided that the Executive shall
simultaneously deliver to the Company: (1) an executed promissory note (a
"Shares Note"), in form and substance reasonably satisfactory to the
Company, in principal amount equal to the Loan Amount, bearing interest at
the rate of eight and one-half percent (8-1/2%) per annum, cumulative, but
not compounded, with any accrued interest thereunder payable monthly and
principal thereunder due and payable on the third (3rd) anniversary of the
date of such Shares Note, but with mandatory prepayments thereunder
required to be made upon, and from the Net Proceeds of, any sale by
Executive of any of the Exercise Shares; (2) an executed stock pledge
agreement (the "Shares Pledge Agreement"), in form and substance reasonably
satisfactory to the Company, pursuant to which Executive pledges to the
Company, as security for Executive's payment and performance of the Shares
Note, a first priority security interest in a number of shares (the
"Pledged Shares") of common stock of the Company determined by dividing the
principal amount of the Shares Note by the fair market value per share of
the common stock of the Company on the date of the Shares Note, provided
that the Exercise Shares need not be included among the Pledged Shares (and
to the extent that the number of shares of common stock of the Company,
other than the Exercise Shares, owned by the Executive is less than the
-4-
<PAGE>
number required for the Pledged Shares, Executive may satisfy the
requirement of this clause (2) by pledging all the shares of common stock
of the Company owned by Executive other than the Exercise Shares, and
covenanting to pledge supplementally any subsequently-acquired shares of
Company common stock, up to the aggregate required to equal the number
constituting the Pledged Shares, but excluding any shares which are
acquired pursuant to exercise of any of the options described in the first
sentence of this subsection (c) of Section 3); (3) a stock certificate or
certificates representing the Pledged Shares, as registered in the name of
the Executive, duly endorsed for transfer in blank by Executive or
accompanied by stock transfer powers duly endorsed in blank by Executive.
As used in this subsection (A), the term "Net Proceeds" shall mean, with
respect to any sale of Exercise Shares by the Executive, the gross proceeds
of sale of such shares, reduced by the amount of any applicable brokerage
commission actually paid in respect of such sale ("Applicable Commission"),
and further reduced by an amount determined by multiplying (x) the maximum
combined federal and State of Georgia individual income tax rates
applicable to long-term capital gains, by (y) an amount determined by
subtracting from gross proceeds of such sale both the amount of Applicable
Commission and the amount of option-exercise price paid by Executive upon
Executive's purchase of such Exercise Shares.
(B) With respect to any of the Termination Shares which were among the
fifty-seven thousand one hundred forty (57,140) shares covered by the tax-
qualified stock options described in the first sentence of this subsection
(c) and which, by virtue of acceleration of vesting upon Voluntary
Acceleration or termination of Executive's employment hereunder, as the
case may be, become ineligible for tax-qualified incentive stock option
treatment ("Disqualified Option Shares"), Executive may, at the time of his
exercise of the option covering such Disqualified Option Shares, require
the Company to pay Executive a compensatory cash bonus ("Compensatory
Bonus"), determined in accordance with this subsection (B), by giving
written notice to the Company specifying the number of Disqualified Option
Shares as to which Executive is exercising such options and the date of
such exercise. Not later than the tenth day following its receipt of such
notice, the Company shall deliver to the Executive, as a Compensatory
Bonus, a cash amount determined by multiplying the Gain Component (as
hereinafter defined) by the Rate Differential (as hereinafter defined), and
multiplying that product by the Gross-up Factor (as hereinafter defined).
As used herein: (1) the "Gain Component" shall mean the difference between
the fair market value, on the date of option exercise, of the Disqualified
Option Shares, and the aggregate option exercise price paid for such
Disqualified Option Shares; (2) the "Rate Differential" shall mean the
remainder of subtracting the maximum combined federal and State of Georgia
personal income tax rates applicable to long-term capital gains (expressed
as a decimal fraction) from the maximum combined federal and state personal
income tax rates applicable to ordinary income (expressed as a decimal
fraction), both as determined at the date of the exercise of the
Disqualified Option Shares and (3) the "Gross Up Factor" shall mean a
fraction, the numerator of which is one (1) and the denominator of which is
-5-
<PAGE>
remainder of subtracting from one hundred percent (100%) the percentage
(expressed as a decimal fraction) the maximum combined federal and State of
Georgia personal income tax rates applicable to ordinary income.
(d) Transition Loan. The Company agrees to loan to Executive, on the
---------------
earlier to occur of (i) April 15, 1996 or (ii) the closing date of a Qualified
IPO, the sum of One Hundred Sixty-Five Thousand and No/100 Dollars ($165,000.00)
on such terms as are set out in the promissory note evidencing such loan.
(e) Life Insurance. The Company agrees to reimburse Executive promptly for
--------------
the reasonable premium costs on a term life insurance policy insuring
Executive's life for Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00) during the period from the date hereof to December 31, 2000.
(f) Other Benefits. Executive shall be eligible to participate in any
--------------
pension, welfare, life insurance, health, disability and other fringe benefit
plan or program maintained by the Company which has any Employee as a
participant, and such participation shall be at a level of eligibility for
benefits no less favorable than that of any other Employee. In addition to
being eligible to participate in any such plans, the Executive shall be entitled
to paid vacation in an amount at least equal to the amount provided the most
favored Employee and an allowance for Executive's automobile of Six Hundred and
No/100 Dollars ($600.00) per month plus reimbursement for all insurance, taxes,
maintenance, repairs, oil, gasoline and any other expenses relating to
Executive's ownership, operation and use of such automobile, provided that such
allowance shall in no event be less than the amount of any similar allowance
paid by the Company to any other Employee.
(g) Compensation Qualifications. The provisions regarding Executive's non-
---------------------------
contingent compensation are intended to insure that Executive's non-contingent
compensation for each calendar year during the period of his employment prior to
January 1, 2001, is equal to or greater than that of the non-contingent
compensation of any other Employee (whether salary, or guaranteed bonus, or
both).
Notwithstanding the provisions of Section 3(b) above, the Executive's
bonus compensation for any calendar year shall be limited to the greater of (a)
One Hundred Thousand and No/100 Dollars ($100,000.00) or (b) the maximum amount
of bonus compensation to which any other Employee would be entitled for such
calendar year if such Employee fulfilled all of the contingencies required to
earn contingent bonus compensation for such calendar year.
-6-
<PAGE>
Notwithstanding any provision in this Agreement to the contrary, in no
event shall the total contingent and non-contingent compensation available to
Executive pursuant to Section 3(a) and 3(b) above for any such calendar year
exceed in the aggregate the greater of: (a) Two Hundred Thousand and No/100
Dollars ($200,000.00), with at least the amount due Executive pursuant to
Section 3(a) above payable as Salary or (b) the maximum aggregate amount of non-
contingent compensation and potential contingent compensation available to any
other Employee for such calendar year.
(h) Definition of Employee. As used herein, the term "Employee" shall mean
----------------------
the following persons, whether serving as Company common law employees or not,
and their successors in office for the offices (or offices of a substantially
comparable nature) they hold at the date of this Agreement: Eric Hinkle
(President and Chief Operating Officer), John Heyman (Executive Vice President
and Chief Financial Officer), Alon Goren (Co-Chairman and chief Technical
Officer), and Erez Goren (Co-Chairman and Chief Executive Officer); provided,
however Eric Hinkle shall not be deemed an Employee hereunder for calendar year
1997 only.
(i) Special Annual Election. Prior to the commencement of each calendar
-----------------------
year during the term of this Agreement, the Company shall provide Executive with
detailed information concerning any stock options, stock grants, phantom stock
awards, or like arrangements which the Company proposes to offer during such
calendar year to any Employee, or any changes or modifications with respect to
any such options, grants or awards which the Company proposes to make for the
benefit of any Employee during such calendar year (such contingent and non-
contingent compensation and related options, grants or awards hereinafter
referred to collectively as the "Total Compensation Package"). Upon receipt of
such information relating to such Employee, and all other details of such
Employee's Total Compensation Package with respect to such calendar year,
Executive shall have ten (10) business days in which Executive may elect, by
delivery of written notice to the Company, to accept, with respect to such
calendar year, the Total Compensation Package available to any Employee with
respect to such calendar year in lieu of any amounts otherwise available to
Executive under Section 3(a) and 3(b) above with respect to such calendar year.
To the extent any of the options, grants or awards referenced in a Total
Compensation Package selected by Executive involve performance based vesting
contingencies, the Company shall modify such performance features on a
comparable, fair and equitable basis to reflect performance features that are
tied to the PrysmTech Division.
(j) Termination of Certain Rights. In addition, the Company and Executive
-----------------------------
agree that once (i) all of the options referenced in Section 3(c) of the
Agreement are fully vested (whether by Voluntary Acceleration as described in
Section 3(c) or otherwise) and (ii) a Qualified IPO has closed, the powers and
rights of Executive set forth in this EXHIBIT A, and the contingent and non-
---------
-7-
<PAGE>
contingent compensation and privileges provided to Executive pursuant to
Sections 3(a), 3(b), 3(g), 3(h) and 3(i) shall thereupon become null and void,
in which event Company and Executive will negotiate in good faith a new
compensation arrangement which shall be comparable to compensation paid in the
marketplace for similarly situated executives who perform duties comparable to
the duties to be performed by Executive.
4. TERMINATION OF EMPLOYMENT.
(a) Payments. If, prior to December 31, 2000, the Executive's employment
--------
is terminated for any reason, including, without limitation, total and permanent
disability pursuant to Section 4(b)(ii) below, other than termination for cause
by the Company pursuant to Section 4(b)(iii) below, voluntary termination by the
Executive pursuant to Section 4(b)(v) below, or death of the Executive, then the
Company shall pay the Executive within thirty (30) days of the date of
Executive's termination (a) an amount equal to Sixteen Thousand Six Hundred
Sixty-Six and 66/100 Dollars ($16,666.66) for each full or partial calendar
month remaining in the period from the date of termination to December 31, 2000,
as termination pay and (b) Executive's salary and all benefits up to the date of
termination. The foregoing termination pay shall be in lieu of any partial year
Bonus to which Executive might otherwise be entitled; provided, however, in
calculating such termination pay, by reason of Executive's termination of
employment pursuant to Section 4(b)(ii) below, the Sixteen Thousand Six Hundred
Sixty-Six and 66/100 Dollar ($16,666.66) figure referenced above shall be
reduced by the monthly amount actually payable to Executive pursuant to any
Company maintained long-term disability insurance.
(b) Termination. The employment of the Executive hereunder shall be
-----------
terminated by reason of any of the following:
(i) Death of the Executive; or
(ii) Total and permanent disability of the Executive upon thirty
(30) days written notice to Executive; or
(iii) Termination of the Executive's employment by the Company for
"cause" (as defined below), immediately upon written notice to
the Executive; or
-8-
<PAGE>
(iv) Termination of the Executive's employment by the Company without
cause or by the Company for any reason other than the reasons
listed in Subsections (i), (ii) or (iii) above of this Section
4(b);
(v) Termination of the Executive's employment voluntarily by the
Executive; or
(vi) Termination due to expiration, without renewal (excluding
automatic renewal pursuant to Section 2 above), of the term
hereof.
For purposes of this Section 4(b), "total and permanent disability" shall
be deemed to occur when the Executive is unable to engage in his regular duties,
or other duties supportive of the Company, for a continuous period of one
hundred and twenty (120) days, and a duly licensed medical doctor selected by
both parties shall certify such inability results from injury or sickness. In
the event that the parties are unable to agree upon a medical doctor, one shall
be selected as follows: each of the parties shall select one (1) medical doctor
and the two (2) doctors selected shall in turn select a third medical doctor who
shall determine whether Executive is permanently disabled for purposes of this
Agreement.
For purposes of this Section 4, "cause" shall mean any of the following:
(i) Deliberate and material injury or deliberate attempted material
injury to the Company;
(ii) the commission or perpetration by the Executive of any criminal
act upon the Company, or any fraud upon the Company;
(iii) Gross misconduct or gross negligence in connection with the
performance of the Executive's services to the Company which
has a material adverse effect on the business or operations of
the Company; or
(iv) Failure of Executive to correct any material violation by the
Executive of his obligations under this Agreement within thirty
(30) days following receipt by Executive of written notice from
the Company of the same.
-9-
<PAGE>
If Executive or Company is entitled under this Agreement to notice of
termination of Executive's employment, then that employment shall terminate at
the end of the last day of the notice period.
5. NONCOMPETITION.
(a) During Employment. The Executive agrees that during the period of his
-----------------
employment, the Executive shall not, within any of the forty-nine (49) states of
the continental United States (the "Territory"), on the Executive's own behalf
or on behalf of any person, firm, partnership, association, corporation or
business organization, entity or enterprise, perform services substantially
similar to the services described in Section 1(a) of this Agreement, in
connection with the conduct or performance of the business (the "Business") of
developing and marketing, for the Entertainment Industry, automated point of
sale ticketing, back office and headquarters office systems which include
proprietary and other software and hardware.
As used herein, the term "Entertainment Industry" means movie theatres,
stadiums, arenas, amusement parks and similar entertainment facilities and
venues and the business of operating such facilities and venues.
By execution hereof, the Executive hereby acknowledges that the Company is,
as of the date hereof, actively conducting the Business in, and has identified
customers and active prospects of which the Executive is aware and with which
the Executive will have active contact in, the Territory.
(b) Post Employment. Executive also agrees not to engage in the activities
---------------
prohibited to him in Section 5(a) above for a period of twelve (12) months
following the termination of his employment. If Executive's employment is
terminated by the Company for "cause" or if Executive terminates his employment
voluntarily pursuant to Section 4(b)(v) above or in violation of this Agreement,
then Executive agrees not to engage in the activities prohibited to him in
Section 5(a) above for a period of twenty-four (24) months following the
termination of his employment.
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) Ownership and Use. The Company may disclose to the Executive certain
-----------------
Trade Secrets and Confidential Information (defined below). The Executive
-10-
<PAGE>
acknowledges and agrees that the Trade Secrets and Confidential Information are
the sole and exclusive property of the Company, or a third party providing such
information to the Company, and that the Company or such third party owns all
worldwide rights therein under patent, copyright, trade secret, confidential
information, or other property rights. The Executive acknowledges and agrees
that the disclosure of the Trade Secrets and Confidential Information to the
Executive does not confer upon the Executive any license, interest or rights of
any kind in or to the Trade Secrets or Confidential Information. The Executive
may use the Trade Secrets and Confidential Information solely for the benefit of
the Company while the Executive is employed or retained by the Company. The
Executive will hold in confidence and not disclose, reproduce, distribute,
transmit, reverse engineer, decompile, disassemble, or transfer, directly or
indirectly, in any form, by any means, or for any purpose, the Trade Secrets or
the Confidential Information or any portion thereof except, Executive may
disclose such matters (a) in the performance of services for the Company and (b)
to Executive's advisers in connection with any dispute arising out of this
Agreement, provided such advisers undertake to maintain the same degree of
confidentiality as Executive is required to maintain and for the same period of
time. The Executive agrees to return to the Company, upon request by the
Company, the Trade Secrets and Confidential Information and all materials
relating thereto.
(b) Length of Restriction. The Executive's obligations under this
----------------------
Agreement with regard to the Trade Secrets shall remain in effect for as long as
such information shall remain a trade secret under applicable law. The
Executive acknowledges that its obligations with regard to the Confidential
Information shall remain in effect while the Executive is employed or retained
by the Company, and for 24 months thereafter.
(c) Definitions. As used herein, "Trade Secrets" means information of the
------------
Company, its licensors, suppliers, customers, or prospective licensors or
customers, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans, or a list
of actual or potential customers or suppliers, which (a) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use and (b) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy. As used herein, "Confidential
Information" means information, other than Trade Secrets, that is of value to
its owner and is treated as confidential, including, but not limited to, future
business plans, licensing strategies, advertising campaigns, information
regarding executives and employees, and the terms and conditions of this
Agreement.
7. CUSTOMER NON-SOLICITATION.
The Executive agrees that, for a period of twelve (12) months immediately
following termination of the Executive's employment with the Company, the
-11-
<PAGE>
Executive shall not, on the Executive's own behalf or on behalf of any person,
firm, partnership, association, corporation or business organization, entity or
enterprise, solicit, contact, call upon, communicate with, or attempt to
communicate with, any customer or prospect of the Company, or any representative
of any customer or prospect of the Company, with a view to sale or providing of
any product, equipment, or service competitive or potentially competitive with
any product, equipment, or service sold or provided or under development by the
Company during the two (2) years immediately preceding cessation of the
Executive's employment with the Company, provided that the restrictions set
forth in this Section shall apply only to customers or prospects of the Company,
or representatives of customers or prospects of the Company, with which the
Executive had contact during such two (2) year period.
The actions prohibited by this Section shall not be engaged in by the
Executive, directly or indirectly, whether as manager, salesperson, agent,
technical support, sales, or service representative, or otherwise. The
Executive acknowledges that the Company provides products and services to small
and large customers throughout the United States, and that a territorial
restriction on the non-solicitation provisions of this Section would not
adequately protect the legitimate interests of the Company.
If Executive's employment is terminated by the Company for "cause" or if
Executive terminates his employment voluntarily pursuant to Section 4(b)(v)
above or in violation of the terms of this Agreement, then Executive agrees not
to engage in the activities prohibited to him by this Section 7 for a period of
twenty-four (24) months following the termination of his employment.
8. EMPLOYEE NON-SOLICITATION.
The Executive agrees that for a period of twelve (12) months immediately
following the termination of his employment with the Company the Executive shall
not call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting, any person who is or was an employee of the Company for the purpose
of having such person work in any other corporation, association, entity, or
business engaged in providing services of the same or similar kind as offered by
the Company.
If Executive's employment is terminated by the Company for "cause" or if
Executive terminates his employment voluntarily pursuant to Section 4(b)(v)
above or in violation of the terms of this Agreement, then Executive agrees not
to engage in the activities prohibited to him by this Section 8 for a period of
twenty-four (24) months following the termination of his employment.
9. REMEDIES.
The Executive acknowledges that a breach of any of the terms or conditions
of this Agreement may result in material irreparable injury to the Company, or
-12-
<PAGE>
its affiliates or subsidiaries, for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely, and
that, in the event of such a breach or threat thereof, the Company shall be
entitled, in addition to any other rights or remedies it may have, to obtain a
temporary restraining order and/or a preliminary or permanent injunction
enjoining or restraining the Executive from committing such a breach, or such
other equitable remedy as a court of competent jurisdiction may provide.
Nothing contained herein shall be construed to limit the Company's right to any
remedies at law, including the recovery of damages for breach of this Agreement.
10. INDEMNIFICATION.
The Company will indemnify the Executive to the fullest extent permitted by
the laws of the State of Georgia, as in effect at the time of the subject act or
omission, or by the Articles of Incorporation and Bylaws of the Company, as in
effect at such time or on the Effective Date of this Agreement, whichever
affords or afforded greatest protection to the Executive, and the Executive
shall be entitled to the protection of any insurance policies the Company may
elect to maintain generally for the benefit of its members and officers (and to
the extent the Company maintains such an insurance policy or policies, the
Executive shall be covered by such policy or policies, in accordance with its or
their terms, to the maximum extent of the coverage provided for any Company
officer or director), against all costs, charges and expenses whatsoever
incurred or sustained by him or his legal representatives at the time such
costs, charges and expenses are incurred or sustained, in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being or having been a member, officer, or employee of the Company or any
subsidiary thereof, or his serving or having served any other enterprise as a
member, officer, trustee, or employee at the request of the Company.
11. LIMITATION OF LIABILITY.
The Company hereby represents that, as of the Effective Date, its Articles
of Incorporation and Bylaws provide the Executive with the maximum limitation on
his liability permitted by the laws of the State of Georgia and the Company
agrees that, during the period of Executive's employment, it will provide the
Executive with limitation on his liability equal to or greater than that
provided to any other Employee.
12. GENERAL PROVISIONS.
(a) Notices. Any notice hereunder by either party to the other shall be
-------
given in writing by personal delivery, telex, telecopy or certified mail, return
-13-
<PAGE>
receipt requested, to the applicable address set forth below:
(i) To the Company: Radiant Systems, Inc.
Suite A
1000 Alderman Drive
Alpharetta, Georgia 30202
Attn: John Heyman
Executive Vice President
(ii) To the Executive: H. Martin Rice
608 Old Lathemtown Road
Canton, Georgia 30115
or to such person or other addresses as either party may specify to the
other in writing.
-14-
<PAGE>
(b) Limited Waiver. The waiver by the Company or the Executive of a
--------------
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(c) Assignment. No right, benefit or interest hereunder shall be subject
----------
to assignment, encumbrance, charge, pledge, hypothecation or set off by the
Executive in respect of any claim, debt, obligation or similar process.
(d) Payments Obligations Absolute. The Company's obligation to pay the
-----------------------------
Executive the amounts provided for hereunder shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the Company
may have against him or anyone else or any obligation of Executive to seek other
employment.
-15-
<PAGE>
(e) Amendment. This Agreement may be amended, modified or terminated by
---------
written agreement of the Executive and the Company.
(f) Severability. If any term or provision hereof is determined to be
------------
invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(g) Unsecured Promise. No benefit or promise hereunder shall be secured by
-----------------
any specific assets of the Company. Unless otherwise stated herein, the
Executive shall have only the rights of an unsecured general creditor of the
Company in seeking satisfaction of such benefits or promises.
(h) Governing Law. This Agreement has been made in and shall be governed
-------------
by and construed in accordance with the laws of the State of Georgia.
(i) Entire Agreement. This Agreement sets forth the entire agreement and
----------------
understanding of the parties hereto with respect to the matters covered hereby.
This Agreement supersedes and replaces any prior agreement with respect to
employment, compensation continuation and the matters contained in this
Agreement which the Executive may have had with the Company or any prior or
contemporary affiliate or subsidiary thereof.
(j) Headings. The headings and captions of the Sections of this Agreement
--------
are included solely for convenience of reference and shall not control the
meaning or interpretation of any provisions of this Agreement.
(k) Counterparts. This Agreement may be executed by the parties hereto in
------------
counterparts, each of which shall be deemed an original, but all of such
counterparts shall together constitute one and the same document
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first written above.
-16-
<PAGE>
COMPANY:
RADIANT SYSTEMS, INC.
/S/ John H. Heyman
---------------------------------
By: Its duly authorized officer
EXECUTIVE:
/s/ H. Martin Rice
---------------------------------
H. MARTIN RICE
-17-
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT OF
H. MARTIN RICE
AGREEMENTS WITH RESPECT TO DIVISION OPERATIONS
----------------------------------------------
With respect to the operation of the Division, Executive (and such persons
to whom he may delegate) shall possess, from the date hereof and until all of
the qualified and non-qualified options referenced in Section 3(c) of the
Agreement have fully vested, the authority to:
(i) Hire and fire in accordance with standard Company policy employees
whose salaries or wages are charged to the Division; and
(ii) Make any changes in the hardware and software configuration being sold
currently by the Division; and
(iii) Authorize any changes in the pricing of goods and services sold
currently; provided any decrease in such pricing which is in excess of ten
percent (10%) of then current price charged shall be subject to the prior
approval of the Board of Directors; and
(iv) Outsource any general and administrative services, including legal
services (provided the provider of such legal services does not serve as
corporate counsel to a major competitor or customer of the Company), being
provided by the Company; and
(v) Hire personnel in accordance with standard Company policy and have
their compensation charged against the Division in order to replace services of
an administrative nature being supplied by the Company, which replacement
services shall be of no less quality and timeliness than the services replaced;
and
(vi) Approve all contracts, sales, expenses, and other items of revenue and
expense incurred in the ordinary course of business; provided, any contract
involving total consideration of more than Five Hundred Thousand and No/100
Dollars ($500,000.00) shall be subject to the prior approval of the Board of
Directors.
-18-
<PAGE>
Company and Executive acknowledge that the foregoing responsibilities shall
be conducted in a manner consistent with annual operating and capital budgets
for the Division to be prepared by Executive for each year during the term of
this Agreement and approved by the Board of Directors.
The parties agree that if the Board of Directors or any executive officer
of the Company overrules Executive with respect to any decision he may make
relative to the foregoing items, or the Company takes action relating to the
foregoing items which is opposed in writing by Executive, and the Board fails to
resolve such opposition of Executive to the satisfaction of Executive within
thirty (30) days of taking of such action, then Executive may, at his option,
terminate his employment with the Company, in which case such termination shall
be deemed for all purposes hereunder as a termination by the Company without
cause pursuant to Section 4(b)(iv) of the Agreement.
-19-
<PAGE>
EXHIBIT B
TO
EMPLOYMENT AGREEMENT OF
H. MARTIN RICE
COMPUTATION OF DIVISION INCOME
------------------------------
Division Net Income shall be computed under generally accepted accounting
principles, consistently applied, using the same accounting principles applied
in the same manner as PrysmTech, L.L.C. accounted for its operations, except
that:
(i) No amortization of goodwill or other intangible assets shall be charged
against net income; and
(ii) No expense for interest or depreciation shall be charged against net
income; and
(iii) No income taxes, deferred taxes, tax credits, or tax credit
accounting shall be charged against net income; and
(iv) None of the stock options awarded to Executive pursuant to Section
3(c) above or to William J. Budwitz pursuant to Section 3(c) of his Employment
Agreement with the Company shall be charged against net income; and
(v) All accounting functions, including payables, receivables, general
ledger, and divisional financial reporting shall be provided by Radiant
employees to the Division at cost, but in no event more than 1.5 percent of the
Division's gross revenue; and
(vi) All hardware sold by the Division and furnished by the Company
(following acquisition from third parties) shall be priced to the Division at
the Company's direct cost, without any allowance for general and administrative
expenses, plus an amount equal to ten percent (10%) of direct costs; and
(vii) All hardware components, to the extent available only from the
Company, shall be priced to the Division on a direct material plus allocated
cost basis, provided in no event shall the Division be charged any greater for
such components than any other division of the Company. To the extent hardware
-20-
<PAGE>
components are readily available from parties other than the Company, then such
components shall be priced to the Division at the lesser of (i) the price
available in the marketplace for such component plus ten percent (10%) of such
price or (ii) the lowest price charged by the Company to any of its divisions
for such component.
(viii) Any Company employees performing non-management services for the
Company, but not exclusively for the Division (other than those services set out
in (v) and (vii) above) shall have the direct allocated cost (e.g. items such as
----
direct rent, capital equipment, fringe benefits, direct supervision, long
distance telephone charges, but not items of general overhead such as officer
salaries, accounting department charges, etc.) of their employment pro rated
between them on a fractional full time equivalent basis.
-21-
<PAGE>
EXHIBIT 11.1
RADIANT SYSTEMS, INC.
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
<TABLE>
<CAPTION>
PRO FORMA
FOR THE YEAR
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1996
------------ ------------
PRIMARY AND FULLY DILUTED
<S> <C> <C>
Pro forma net income (loss)........................ $(2,155,564) $ 364,745
=========== ===========
Weighted average Common Stock outstanding during
the period........................................ 8,300,001 8,300,001
Cheap Stock(1)..................................... 2,839,108 2,839,108
Dilutive effect of common stock equivalents........ 0 676,516
----------- -----------
Total............................................. 11,139,109 11,815,625
=========== ===========
Per share amount................................... $ (0.19) $ .03
=========== ===========
</TABLE>
- --------
(1) Pursuant to Securities and Exchange Commission Accounting Bulletin No. 83,
common stock and common stock equivalents issued at prices below the
assumed initial public offering price per share ("cheap stock") during the
twelve months immediately preceding the initial filing date of the
Company's Registration Statement for its public offering have been included
as outstanding for all periods presented, regardless of whether they are
antidilutive.
<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
January 15, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 164,550 2,342,079
<SECURITIES> 0 0
<RECEIVABLES> 665,679 5,005,079
<ALLOWANCES> 41,500 120,000
<INVENTORY> 1,802,716 3,304,933
<CURRENT-ASSETS> 2,708,416 10,949,572
<PP&E> 1,700,935 2,956,583
<DEPRECIATION> 670,266 1,438,681
<TOTAL-ASSETS> 4,234,939 14,615,876
<CURRENT-LIABILITIES> 6,372,469 10,137,847
<BONDS> 0 0
0 0
0 0
<COMMON> 73 76
<OTHER-SE> (3,154,387) (4,500,503)
<TOTAL-LIABILITY-AND-EQUITY> 4,234,939 14,615,876
<SALES> 15,881,995 40,943,321
<TOTAL-REVENUES> 15,881,995 40,943,321
<CGS> 12,162,716 27,734,694
<TOTAL-COSTS> 12,162,716 27,734,694
<OTHER-EXPENSES> 5,819,849 15,357,348
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 166,478 711,848
<INCOME-PRETAX> (1,860,756) (3,488,706)
<INCOME-TAX> (709,165) (1,333,142)
<INCOME-CONTINUING> (1,151,591) (2,155,564)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,151,591) (2,155,564)
<EPS-PRIMARY> (.10) (.20)
<EPS-DILUTED> 0 0
</TABLE>
