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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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[MARK ONE]
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Year Ended December 31, 1999
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to ________
Commission file number 000-30522
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CEREUS TECHNOLOGY PARTNERS, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 13-3773537
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(State of Incorporation) (IRS Employer Identification No.)
1000 Abernathy Road, Suite 1000
Atlanta, GA 30328
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(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 668-0900
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(TITLE OF CLASS)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,695,853.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a date specified within the past 60 days. $124,901,177 based upon the average
bid and asked price as of March 31, 2000.
The number of outstanding shares of the Registrant's Common Stock was
8,921,777 shares as of March 31, 2000.
Transitional Small Business Disclosure Format (check one):
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's definitive proxy statement for its 2000 Annual Meeting
of Stockholders are incorporated into Part III of this Form 10-KSB.
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The statements in this annual report on Form 10-KSB relating to matters that are
not historical facts, including, but not limited to, statements found in Item 1.
"Business" and Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are forward looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from expectations. These include, without limitation, those
set forth under "Item 1. Business". These and other risks are set forth in the
reports filed by the Company with the Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
OVERVIEW
Cereus Technology Partners, Inc. (the "Company" or "Cereus"), known as
AIM Group, Inc. prior to December 1, 1999, adopted a new business strategy in
July 1999 to provide business application software and services through
traditional delivery methods and Web based delivery methods. To facilitate its
new business strategy during 1999 Cereus acquired Client Server Solutions, Inc.
("CSS"), Enterprise Solutions Group, Inc. ("ESG") and Reddy Group, Inc. and
subsidiary, Cereus Bandwidth, LLC (collectively, "Cereus Bandwidth"). On July
30, 1999, the Company acquired ESG and Cereus Bandwidth and on November 15,
1999, the Company acquired CSS. CSS and ESG provide business application
software and services to the middle market through traditional delivery methods.
CSS and ESG are focused on enterprise resource planning ("ERP") applications
that consist of integrated financial, administrative, payroll and human
resource, manufacturing, distribution, point-of-sale and inventory management
software. Those applications are supported by software that includes management
information systems ("MIS") and data base management of sales and marketing
information. Cereus Bandwidth is a provider of Internet-based technology
services to small and middle market companies.
In the first quarter of 2000, the Company recruited a new executive
management team, appointed a new board of directors and changed its strategic
direction. The new management team made the decision to transform the Company
from an ERP implementation and consulting business to a web integration and
application service provider ("ASP") business. This new strategy has the Company
focusing on web integration services for a suite of business software products
as well as hosting that software remotely with access through the Internet.
These services are designed to allow small to medium-sized companies (annual
sales from approximately $25 million to $500 million) to outsource much of their
business software needs and information technology (IT) requirements via
Internet connectivity. The Company also plans to aggressively pursue the
acquisition of other businesses engaged in Internet-related business software
solutions.
The Company has been engaged since its incorporation in 1994 in the
development of specialized minerals and the operation of specialty materials
projects ("Mineral Operations"). The Company operates a surface modification
facility in Arkansas for industrial minerals used as fillers and is endeavoring
to develop a cement additive application for a silica/kaolinite rock mined on
property leased by the Company in Arizona. Although the Company continues to be
engaged in the industrial minerals and specialty materials business and the
operation of its industrial filler surface modification plan, in the fourth
quarter, 1999, the Company made the decision to discontinue its Minerals
Operations and either sell or close the operations. In connection with this
decision the Company recorded an impairment charge of approximately $3 million
to adjust the historical value of the mining assets to their fair value. In
addition, the Company has accrued approximately $.5 million for severance and
transaction costs associated with its disposition of this segment. On March 31,
2000 the Company entered into an agreement to sell its minerals businesses for
approximately $980,000, including approximately $340,000 in working capital
contributions, to the Company's former Chairman of the Board (the "Mineral
Transaction"). The Mineral Transaction is expected to close in the second
quarter of 2000.
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INTERNET AND BUSINESS SOLUTIONS SOFTWARE BUSINESS
As stated above, the Company has, since July 1999, been engaged in,
and, upon the consummation of the Mineral Transaction, will be solely engaged
in, the development and marketing of ASP solutions, web integration and other IT
business application software and consulting services to small and medium-sized
companies. The businesses of Cereus Bandwidth and ESG, which the Company
acquired on July 30, 1999, and the business of CSS, which the Company acquired
on November 15, 1999 are described below.
CEREUS BANDWIDTH. Cereus Bandwidth, which is based in Atlanta,
Georgia and commenced operations in 1996, has been primarily engaged in
providing ISP and related Internet consulting services to small and
medium-sized businesses. Cereus Bandwidth also has marketed its
Internet access services to the "small building," combined office and
hotel and conference room markets. ISP revenues are primarily derived
from monthly subscription fees charged to customers for services
rendered. Agreements entered into by Cereus Bandwidth with its
subscribers are terminable by the subscriber.
ESG. ESG, based in West Palm Beach, Florida, was formed in
March 1996 and is primarily engaged in the marketing and sale of ERP
products, including payroll and human resource software products. ESG's
revenues are primarily derived from the sale of software products, as
well as fees paid by its customers for its consulting services. ESG is
dependent upon its agreements with four software publishers whose
products it sells, and such agreements are terminable by such software
publishers upon 30 days prior notice.
ESG is a certified "value added reseller" (VAR) for a number
of prominent software houses, and has experienced consistent growth in
providing accounting software solutions with consulting implementation
services. Its clients include health care, transportation,
distribution, service, international and charitable organizations.
CSS. CSS, formed in 1996, has offices in Atlanta, Georgia and
Miami and Tampa, Florida, and has been engaged in providing computer
consulting services to small and medium sized businesses in the eastern
U.S. and to a much lesser extent in certain foreign markets. It (i)
develops customized financial, administrative, distribution,
point-of-sale and inventory management software and provides related
data base management and other computer consulting services; and (ii)
resells, as a VAR, packaged accounting and project management software
products. CSS' most significant source of packaged software products in
1999 was Epicor Software Corporation (formerly Platinum Software
Corporation). The Company is dependent upon its agreements with
approximately five publishers of packaged software products, whose
agreements may be terminated upon 30 days prior notice.
CSS specializes in the resale of Epicor (formerly Platinum)
financial management software products, development services and
electronic commerce. CSS provides clients with options for software
implementation, consulting and development services including system
selection and screening, application development, project management
and professional services, business analysis and development of system
requirements, and Web based application development. Included in CSS'
staffing are specialists with the knowledge base to solve growing
business requirements.
CSS emphasizes the furnishing of consulting services to, and
servicing of, small to medium sized organizations as well as reselling
packaged accounting and project management software solutions. CSS is
currently represented with offices and home-based consultants in major
cities across the nation, including Atlanta, Dallas, Fort Lauderdale,
Hartford, Miami, Raleigh and Tampa.
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CONSOLIDATION OF ACQUIRED COMPANIES AND BUSINESS STRATEGY.
The Company's new business strategy is to focus the business
on web integration services and application service provisioning to
small and medium-sized companies (annual sales from approximately $25
million to $500 million), serving as a single-source, Web application
service provider with expertise in ASP, IT strategy, Internet
application and development services, business-to-business e-commerce
and training as well as the legacy ERP software.
The Company's near term goals are to (i) ensure that all
services and programs of the three acquired companies continue on a
scheduled course so the Company continues to meet its contractual
obligations and (ii) integrate the three technology organizations in
order to focus on the new long-term strategy.
The Company believes it is well positioned to participate in
the expanding business of providing ASP services. ASP services make it
possible for clients to access and use leading software packages
without all of the costs of owning and managing the IT infrastructure
that would otherwise be required. American business is undergoing a
major change in how corporate software is purchased and used. Customers
now desire the latest software applications to gain a competitive edge,
but do not have the technical and financial resources to support such
complex expansion. Many companies, particularly in the middle market ,
seek service organizations that will provide a transition path, both
economically and structurally, to achieve these goals. These customers
now find the ASP business solution acceptable due to three converging
trends: (i) the mass adoption of the Internet as a viable and secure
information transmission medium; (ii) increased server processing
power; and (iii) easier access to complex application server software.
Today, high quality software is available via real-time access from
centrally hosted data centers where rentable software is accessed over
high-speed networks for the Internet. As opposed to the old practice in
which corporate software was purchased and managed internally, the new
ASP environment permits outsourcing, via the Internet, of corporate
software that is leased. The Company believes that customers using ASP
services should experience increased efficiencies as well as
significant cost savings due to the reduction of internal IT staffing,
computer hardware capital expenditure and network connections as well
as the ability to lease only those modules that are applicable to the
customer's business operations.
The Company emphasizes customer training in connection with
its marketing of IT Services. The Company's current customer training
curriculum, which focuses primarily on business software applications,
also educates clients on the opportunities available utilizing
Internet-related technology as well as new Internet applications
available to support their software and general business practices.
The Company has introduced an application service provider
program consisting of a wide range of business applications software
and Internet solutions. Under the program, companies will
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be able to lease both business software applications as well as
Internet capabilities. The Company's plan is to create a total solution
which allows customers to rent or lease application services.
The Company currently operates a National Data Center ("NDC")
located in Atlanta, Georgia. This facility supports the ongoing
services for its business applications and Internet business units. The
NDC is operational 7 days a week, 24 hours a day and has the ability to
host database structures of all sizes as well as provide redundancy for
those organizations seeking secure data backup. The Company has
high-speed communications capabilities in place for its customers.
In order for the Company to be able to furnish a broad range
of services and products to its customers, it has initiated new
alliance partnerships with major business application software
publishers. Lawson Software recently selected the Company to represent
its product lines in the southeast as well as selected U.S. cities.
Acuity Financial Software, a business application software of the Sage
Group, provides to the Company an additional offering of financial and
project management software that addresses specific needs of current
and future customers. The Company has entered into a marketing alliance
with Firstwave Technologies, Inc., pursuant to which the Company
markets that company's web-based relationship management applications
and hosting, consulting and integration services. The Company's
distribution agreement with Clarus provides our customers with a Web
based procurement solution.
In addition to the above business application software
alliances, the Company plans to continue to build upon strategic
relationships previously established by the companies that the Company
recently acquired. Included in this group is IBM Corporation. IBM
selected the Company to be a testing partner for a range of hardware
products. The role of the Company has been to test new IBM products for
functional viability and usage by the to-be-targeted end-user group. In
addition, the Company was designated as a Microsoft Solution Provider,
a status achieved through a strict process of technical testing and
resource staffing. It is the goal of the Company to expand these
strategic relationships as well as create new business partnerships
to enhance its service and product capabilities.
COMPETITION.
The Internet-related and IT services market is very
competitive and the number of competitors is rapidly increasing. The
substantial growth and potential size of the Internet market have
attracted many start-ups as well as expansion of existing businesses in
many industries. In the market for Internet-enabled application
software and network solutions, the Company competes on the basis of
performance, price, software functionality and overall network design.
Potential competitors include certain of the "big five" accounting
firms and previously affiliated consulting firms, systems consulting
and implementation firms, service groups of computer equipment
companies, facilities management companies, general management
consulting firms and programming companies.
The Company believes that the breadth of its services and
capabilities and focus on small to medium-sized business customers
results in a favorable competitive position. For example, the Company
is able to perform the complete set of services required for enabling
e-business, which includes strategic management and IT consulting,
enterprise applications, enterprise and network integration,
application hosting and custom business solutions.
EMPLOYEES
At December 31, 1999, the Company had a total of 64 full-time employees
in its Internet and business solutions software business, including 10 sales and
marketing personnel, 25 software consultants representatives, 20 programmers and
developers and 9 general, administrative and financial personnel. In
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addition, as of that date, the Company retained 5 programmers/developers/
consultants under contract. None of the Company's employees are covered
by collective bargaining agreements.
INDUSTRIAL MINERALS AND SPECIALTY MATERIALS BUSINESS
SURFACE MODIFICATION OF INDUSTRIAL FILLERS
GENERAL. The Company's surface modification plant, which commenced
operations in April 1994, is in Malvern, Arkansas. The plant processes mineral
fillers used by the plastics and elastomer industries. The process is surface
modification with silane, resulting in improved mechanical, electrical and
physical properties of the end products. Typical fillers treated include clay,
mica, alumina trihydrate, wollastonite, magnesium hydroxide and microspheres.
The plant's surface modification treatments are marketed under the Uni-Kote(R)
label.
The Company serves the filler surface modification needs of a customer
either by (i) acquiring the appropriate industrial filler itself, modifying the
surface of the filler as called for and then delivering the resulting finished
product to the customer; or (ii) acting as a "toll" processor, in which case the
customer delivers the industrial filler to be surface modified to the Company.
The gross profit margin for the Company's toll processor surface
modification business is approximately 80%, as compared to approximately 25% for
the finished product surface modification business. The percentage of the
Company's total sales represented by toll processor operations (as opposed to
finished product sales) amounted to 4% in 1998 and 4% in 1999.
Composites containing surface modified fillers are used in the
electronics, transportation, construction materials and appliance industries.
Surface modified fillers can decrease the amount of resin used in a composite,
providing cost savings, improved performance and enhanced safety for the end
user.
PLANT CAPACITY. The Malvern surface modification facility has an
estimated capacity of treating approximately 7,200 tons of customer filler per
year on a two-shift, five day per week basis. During 1998 and 1999, the Company
operated on a one-shift per day basis and treated approximately 1,600 tons and
1,500, respectively, of customer fillers.
CUSTOMERS. Approximately 90% of the Company's sales of surface modified
fillers in 1999 were surface modified alumina trihydrate. Other minerals
modified by the Company include magnesium hydroxide, microspheres, talc and
nepheline syenite. During 1998 and 1999, the Company's major customer accounted
for approximately 61% and 52%, respectively, of the Company's sales revenues.
The loss of that customer, to whom the Company sells finished products and does
not act as a toll processor, would have a materially adverse effect on the
Company. The Company has no long-term contractual arrangement with that customer
and no assurance can be given as to the amount of future sales that may be made
by the Company to that customer.
COMPETITION. The Company's surface modification products are sold in
highly competitive markets which are influenced by price, profit performance,
customer location, service and general economic conditions. The Company competes
with other mineral suppliers and toll processors in the filler surface
modification industry. Many of such companies are substantially larger and more
diversified than the Company.
PROCESSING AND MARKETING OF KLANNERITE(R)
OVERVIEW. The Company, through its UMC (Arizona) subsidiary, leases the
Viva Luz Mine in Mojave County in Arizona pursuant to a lease that expires in
March 2004. The lease, however, is subject to a
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further term in perpetuity provided the property is in operation and is
generating minimum royalties. The lease permits the exploration of the property
and removal of the mineral over the remaining term and calls for the payment of
a production royalty of 5% of the total consideration obtained for the mineral
less transportation costs, subject to a minimum royalty of $5,000 per year.
The geology of the Viva Luz Mine is that of a zone system of
hydrothermally altered rocks. The mine is located directly on a natural fault
which acted as the natural plumbing system for hot, corrosive waters which
eliminated a majority of impurities, producing the distinctive and unique white
rock that is a pure, uniform, porous rock that has the trade name Klannerite(R).
In the 1950s, the white sandy mineral was used as roofing granules because of
its insulating capabilities and its proposed use is as an additive to concrete.
ORE RESERVES. The Viva Luz Mine is a cristobalite, quartz and Kaolinite
deposit with proven and probable ore reserves. The deposit is classified into
three different grades, K1, K2 and K3. Based on the independent ore reserve
report of Rio Services, Inc., dated May 1992, the highest grade of K1 has an
estimated mineral deposit of approximately 262,000 short tons (i.e., 2,000 lbs)
of proven reserves and 78,000 short tons of probable reserves, for a total of
approximately 340,000 short tons of proven and probable reserves, and the two
lower grades, K2 and K3, have a total estimated reserve of approximately
1,350,000 short tons of probable reserves.
The term "ore reserve" for the above purposes means that part of a
mineral deposit which could be economically and legally extracted or produced at
the time of the reserve determination. "Proven reserves" means reserves for
which (i) quantity is computed from dimensions revealed in outcrops, trenches,
workings or drill holes, and grade and/or quality are computed from the results
of detailed sampling, and (ii) the sites for inspections, sampling and
measurement are spaced so closely and the geologic character is so well defined
that size, shape, depth and mineral content of the reserves are
well-established. "Probable Reserves" means reserves for which quantity and
grade and/or quality are computed from information similar to that used for
proven reserves, but the sites for inspection, sampling and measurement are
farther apart or are otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to assume
continuity between points of observation.
The mineral deposit outcrops at the surface and most of the overburden
has been removed. Thirteen six-inch dry rotary holes were drilled to block out
an ore reserve and verify the quality of the rock. Hole depths ranged from 100
to 240 feet, and samples were collected using an air cyclone and splitter, every
five feet through the ore zone. Thirteen cross sections were constructed in
AutoCad and used to calculate the above proven ore reserves. An estimated 82% of
the mineral is recoverable in the mining and beneficiation process. The loss in
the recovery process was taken into account in calculating the above ore reserve
data.
MARKETING. Recently, the State of Arizona, Department of Transportation
accepted Klannerite(R) as meeting within their specifications for a type 2
cement application, ASTM C 618 tested and passed. A market study shows that
initial sales for this project should be 25,000 tons/year, and grow to 50,000
tons/year in 4 years.
COMPETITION. The pozzolan market can be divided into three sectors
based on price: a) low cost pozzolan, selling for about $35 per ton delivered,
and dominated by fly ash and blast furnace slag; b) mid priced pozzolan, selling
for about $80 per ton delivered, and dominated by calcined shales and tuffs; and
c) high priced pozzolan, selling for about $160 per ton or more, delivered, and
dominated by silica fume and calcined kaolin. The higher priced pozzolans have
better performance characteristics. Klannerite will compete in the $80 per ton
market.
EMPLOYEES
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At December 31, 1999, the Company employed 9 full-time employees in its
industrial minerals and specialty materials business. Activities at the Viva Luz
Mine are conducted under contract with a third party. None of the Company's
employees are covered by collective bargaining agreements.
FACTORS AFFECTING FUTURE OPERATING RESULTS INVESTOR INTERESTS
This Form 10-KSB contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates" and other similar
expressions or variations of such words are intended to identify these
forward-looking statements. Additionally, statements concerning future matters
such as the development of new products, services, alliances, technologies and
other statements regarding matters that are not historical fact are
forward-looking statements. Forward-looking statements involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements.
Factors that could cause or contribute to such differences include,
but are not limited to: (i) the fact that the Company historically has incurred
net losses, had a deficit in retained earnings of approximately $8,835,000 and
a working capital deficit of approximately $6,250,000 at December 31, 1999, and
may not be able to operate profitably in the future; (ii) the Company's very
limited history in the information technology, Internet-related and business
solutions software business; (iii) the possible unavailability to the Company
of adequate financial resources to fund its operations and planned growth; (iv)
the highly competitive and speculative nature of the IT and Internet-related
industry and the very rapidly changing technology in both computer hardware and
software systems relating to that industry; (v) the fact that the ASP industry
is in its infancy and no assurance can be given that the Company's ASP services
will achieve market acceptance; (vi) the Company's dependence upon third party
suppliers to provide key components for the Company's ASP services as well as
its software vendor relationships which are non-exclusive and subject to
termination; (vii) the security risks associated with the secure transmission
of confidential information in the Company's ISP and ASP activities; (viii) the
creditworthiness of the Company's clients; (ix) the Company's dependence upon
key personnel and its ability to attract and retain key employees; (x) the
risks associated with the Company's planned growth, both internal and through
the acquisition of other companies, and the fact that the Company may not be
able to effect acquisitions of other companies on favorable terms; and (xi) the
fact that no assurance can be given as to whether the Mineral Transaction will
be consummated.
Additional factors that could adversely affect the market for the
Company's common stock include (i) the limited historical public market for the
common stock; (ii) the potential dilutive consequences of there being
outstanding options, warrants and convertible securities entitling their holders
to purchase approximately 9,069,278 shares of common stock at an average
exercise price of $7.34 per share; and (iii) the Company's intention to not
declare any dividends on its common stock in the foreseeable future.
ITEM 2. PROPERTIES
EXECUTIVE OFFICES. In September 1999, the Company relocated its
executive offices to 6,000 square feet of space leased in an office building
located in Atlanta, Georgia at an annual rental of $173,750 under a lease
expiring on December 31, 2004.
INTERNET AND BUSINESS SOLUTIONS SOFTWARE SOLUTIONS BUSINESS. On January
1, 2000, the Company entered into a new lease for 8,000 additional square feet
in the above referenced office building in Atlanta, Georgia for an annual rental
of $220,800 under a lease expiring December 31, 2004. The Company also leases
3,800 square feet of office space in West Palm Beach, Florida at an annual
rental of $72,200 under a lease expiring in April 2004.
INDUSTRIAL MINERALS AND SPECIALTY MATERIALS BUSINESS. UMC (Arkansas)
owns a 9,050 square foot industrial building in Malvern, Arkansas which contains
the Company's surface modification facility. The
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building includes 1,850 square feet of laboratory and office space and is
situated on 3.75 acre site. The Company has a collateral mortgage on the
property that had a principal balance of approximately $187,430 at December 31,
1999.
UMC (Arizona) leases the Viva Luz Mine, which is located on an 80 acre
site located in Mojave County, Arizona, pursuant to a lease that expires in
March 2004. The lease, which calls for the payment of a production royalty of 5%
of the gross consideration obtained for the minerals mined less transportation
costs, subject to a minimum royalty payment of $5,000 per year, provides for a
further term in perpetuity as long as the property is in operation and is
generating minimum royalties.
The Company also leases executive suites in Tampa and Fort Lauderdale
on a month to month basis. The monthly rental rate for each of these leases is
approximately $500.
Additionally, the Company is obligated under the remaining term of the
CSS lease. The lease obligation is approximately $49,000 in 2000 and $12,000 in
2001.
In the opinion of management of the Company, its properties are
adequately covered by insurance and are adequate for its immediate needs and
that additional or substitute space is available to accommodate growth and
expansion.
ITEM 3.LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. Neither the
Company nor any of its subsidiaries is a party to any such legal proceeding, the
outcome of which, individually or in the aggregate, is expected to have a
material adverse affect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on November 30,
1999.
There were five matters voted on at the Annual Meeting. A brief
description of each of these matters, and the results of the votes thereon, are
as follows:
1. Election of Directors
<TABLE>
<CAPTION>
Nominees For Against Abstain
-------- --- ------- -------
<S> <C> <C> <C>
Paul R. Arena 2,294,847 70 2,002
Ernest W. Purcell 2,294,377 540 1,682
K. Pramod Reddy 2,294,378 540 1,682
Ronald Roswell, Jr. 2,294,847 70 1,682
</TABLE>
Each of the foregoing nominees was elected and each of Ernest W.
Purcell, K. Pramod Reddy, Ronald Roswell, Jr. and Paul R. Arena continued to
serve as a director following the Annual Meeting until their resignations in
January 2000, other than Mr. Arena who resigned effective as of March 31, 2000.
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2. To approve a proposed amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of the Company's Common
Stock from 12 million to 50 million, and the results of the votes thereon are as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
2,263,847 31,005 1,733
</TABLE>
3. To approve a proposed amendment to the Company's Certificate of
Incorporate increasing the number of authorized shares of the Company's
preferred stock from 1 million to 10 million shares, and the results of the
votes thereon are as follows
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
1,475,564 85,715 4,174
</TABLE>
4. To approve a proposed amendment to the Company's Certificate of
Incorporation changing the Company's name to Cereus Technology Partners, Inc.,
and the results of the votes thereon are as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
2,235,043 10,871 19,686
</TABLE>
5. To approve a proposed amendment to the Company's 1997 Stock Option
Plan increasing the total number of shares of Common Stock authorized for
issuance under such Plan from 250,000 to 3 million shares, and the results of
the votes thereon are as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
1,477,957 85,815 1,681
</TABLE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock has been quoted in the Over the Counter
Bulletin ("OTC-BB") under the trading symbol "CEUS" since December 1999. Prior
to December 1999, the Company's Common Stock was quoted in the OTC-BB under the
trading symbol "AIMG," and from April 1995 until April 23, 1999, the Company's
Common Stock was listed for trading on the Vancouver Stock Exchange (the "VSE").
As of March 7, 2000, there were approximately 486 holders of record
of the Company's Common Stock.
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<PAGE> 11
The following table sets forth the high and low sales prices per share
of the Company's Common Stock as reported on the VSE for fiscal year 1998 and
1999 through April 23, 1999 and the high and low bid prices per share of the
Company's Common Stock as reported on the OTC-BB from April 23, 1999 to December
31, 1999. The high and low bid prices reflect inter-dealer prices, without
retail mark-up, mark-downs or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
FISCAL YEAR 1998 HIGH LOW
---- ---
<S> <C> <C>
First Quarter.................... $ 2.75 $ .90
Second Quarter................... 3.25 1.95
Third Quarter.................... 4.00 3.00
Fourth Quarter................... 3.50 2.50
FISCAL YEAR 1999
First Quarter.................... $ 4.50 $ 3.00
Second Quarter................... 6.75 3.25
Third Quarter.................... 5.50 4.15
Fourth Quarter................... 5.31 3.38
</TABLE>
The Company has never paid or declared cash dividends and currently
intends to retain any future earnings for the operation and expansion of its
business. Any determination to pay cash dividends in the future will be at the
discretion of the Board of Directors and will be dependent on the Company's
financial condition, results of operations, contractual restrictions, capital
requirements, business prospects, restrictive debt covenants and such other
factors as the Board of Directors deems relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the amount of
certain items included in the Company's Statement of Operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
Net sales $ 1,695,853 --
Cost of sales 1,935,121 --
------------- ------------
Gross loss (239,268) --
------------- ------------
Selling, general, and administrative expenses:
Stock compensation expense 1,063,300 --
Amortization expense 680,833 --
Other selling, general and administrative expenses 960,952 --
------------- ------------
Total selling, general and administrative expenses 2,705,085 --
------------- ------------
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
Operating loss (2,944,353) --
Interest expense, net 513,242 --
------------- ------------
Loss before income taxes and
discontinued operations (3,457,595) --
Income Tax -- --
------------- ------------
Loss before discontinued operations (3,457,595) --
------------- ------------
Discontinued operations:
Loss from discontinued operations (239,957) $ (351,606)
Loss on disposal of discontinued operations (3,486,297) --
------------- ------------
(3,726,254) (351,606)
------------- ------------
Net Loss $ (7,183,849) $ (351,606)
============= ============
Loss per share-basic and diluted $ (1.57) --
Loss before discontinued operations (1.69) (0.27)
------------- ------------
Discontinued net loss (3.26) (0.27)
Imputed noncash preferred stock dividend -- (0.05)
------------- ------------
Loss available to common shares $ (3.26) (0.32)
============= ============
Weighted average common shares outstanding 2,198,690 1,325,016
============= ============
</TABLE>
YEARS ENDED DECEMBER 31, 1999 AND 1998
The results from continuing operations for 1999 were derived from the
operations of the three companies acquired during 1999. On July 30, 1999, the
Company acquired Cereus Bandwith and ESG, and on November 15, 1999, the Company
acquired CSS. CSS and ESG provide business application software and services to
the middle market through traditional delivery methods. Cereus Bandwith is a
provider of Internet-based technology services to small and middle market
companies.
Revenues of approximately $1,696,000 for 1999 were derived principally
from sales of software, consulting and development fees and Internet service
fees.
Cost of sales of approximately $1,935,000 for 1999 primarily reflect
the cost of software products and consulting, development and other direct labor
costs associated with the 1999 revenue.
11
<PAGE> 13
Stock compensation expense of approximately $1,063,000 in 1999
represents non-cash charges related to the granting of stock options and
warrants to employees and others during 1999 and related shares issued to
employees as part of an acquisition.
Amortization of goodwill of approximately $681,000 reflects the
amortization expense for 1999 related to the goodwill associated with the three
acquisitions during 1999.
Other selling, general and administrative fees for 1999 of
approximately $961,000 primarily relate to payroll expenses, professional
services fees, travel expenses, bad debt expenses and other overhead costs,
including depreciation and rent.
Interest expense of approximately $513,000 for 1999 includes
approximately $373,000 of amortization expense related to the discount on
the Subordinate Notes issued in 1999.
Loss from discontinued operations of approximately $240,000 for 1999
and $352,000 for 1998 represent the losses for the mineral operations for those
respective periods.
Loss on disposal of discontinued operations of approximately $3,486,000
in 1999 reflect the write-down of the book value of the mining companies to fair
market value plus an additional accrual for severance and transaction costs
associated with its disposition of these companies.
LIQUIDITY AND SOURCES OF CAPITAL
Cereus has been funded using both equity and debt financing and, most
recently, from the proceeds of a private equity placement of common stock and
warrants completed on February 8, 2000. The net proceeds to the Company from
this private equity placement were approximately $20 million, and upon the
exercise in full of the warrants issued as part of such private equity
placement, the Company will receive additional proceeds of approximately $40
million. As of December 31, 1999, we had a working capital deficit of
approximately $6,250,000. Cash used in continuing operating activities was
approximately $654,000 for the year ended December 31, 1999. Cash used in
operations, including discontinued operations, was approximately $1,006,000 in
1999 compared with cash used in operations of $164,000 in 1998. This reflects
the cash used in continuing operating activities in 1999 as well as the change
in operating assets of both continuing and discontinued operations.
Cash used in investing activities was approximately $2,118,000 in 1999
compared to $85,000 in 1998. This resulted from the acquisition of Cereus
Bandwidth, ESG and CSS during the 1999.
Net cash provided by financing activities was approximately $2,799,000
in 1999 compared with $564,000 in 1998. The increased cash resulted from several
rounds of debt and equity funding in 1999.
Overall the Company used approximately $325,000 in cash in 1999
compared with cash provided of $315,000 in 1998. The cash activity depicted
above is consistent with the new business strategy. We anticipate our
expenditures will be significant as we continue to expand our ASP and web
integration strategy but we believe our liquidity and capital resources will be
sufficient to satisfy our cash requirements for the next 12 to 18 months,
excluding any acquisitions or significant hiring activities. In the event
additional capital resources are required, we will attempt to raise additional
equity and debt capital. There can be no assurance that we will be able to raise
such funds, however, if necessary we can reduce expenses or revaluate our
strategy for further cost reductions.
12
<PAGE> 14
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES:
Independent Auditors'Reports................................................................. 14
Consolidated Balance Sheet, as of December 31, 1999........................................... 16
Consolidated Statements of Operations for Years Ended December 31, 1999 and 1998.............. 18
Consolidated Statements of Stockholders' Equity for Years Ended December 31, 1999 and 1998.... 19
Consolidated Statements of Cash Flows for Years Ended December 31, 1999 and 1998.............. 20
Notes to Consolidated Financial Statements.................................................... 22
</TABLE>
13
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cereus Technology Partners, Inc.:
We have audited the accompanying consolidated balance sheet of Cereus Technology
Partners, Inc. and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cereus Technology
Partners, Inc. and subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG LLP
Atlanta, Georgia
April 3, 2000
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Cereus Technology Partners, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Cereus Technology Partners, Inc. and
subsidiaries for the year ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of Cereus Technology Partners, Inc. and subsidiaries for the year
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Moore Stephens Frost
Little Rock, Arkansas
January 28, 1998 (Except for note 3, for
which the date is March 31, 2000)
15
<PAGE> 17
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1999
ASSETS
<TABLE>
<S> <C>
Current assets:
Accounts receivable, less allowances
of $551,000 $ 814,892
Prepaid expenses and other current assets 145,120
Assets of discontinued operations held for sale 640,000
----------------
Total current assets 1,600,012
----------------
Property and equipment, net 304,166
Goodwill, net of accumulated amortization of $680,833 11,348,425
Other assets 305,976
----------------
$ 13,558,579
================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 18
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Current liabilities:
Bank overdraft $ 107,702
Notes payable and short-term debt 3,351,163
Accounts payable 1,976,411
Accrued expenses and other current liabilities 1,776,783
Accrued stock compensation 638,300
----------------
Total current liabilities 7,850,359
Long-term debt 36,463
----------------
Total liabilities 7,886,822
----------------
Stockholders' equity:
Preferred stock --
Common stock 40,627
Additional paid-in capital 15,481,923
Accumulated deficit (8,835,482)
----------------
Total 6,687,068
Less notes receivable from stockholders (1,015,311)
----------------
Total stockholders' equity 5,671,757
----------------
Commitments and contingencies $ 13,558,579
================
</TABLE>
17
<PAGE> 19
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998
----------- ---------
<S> <C> <C>
Net sales................................................... $ 1,695,853 --
Cost of sales............................................... 1,935,121 --
----------- ---------
Gross loss............................................ (239,268) --
----------- ---------
Selling, general, and administrative expenses:
Stock compensation expense................................ 1,063,300 --
Amortization expense...................................... 680,833 --
Other selling, general, and administrative expenses....... 960,952 --
----------- ---------
Total selling, general, and administrative
expenses............................................ 2,705,085 --
----------- ---------
Operating loss........................................ (2,944,353) --
Interest expense, net....................................... 513,242 --
----------- ---------
Loss before income taxes and discontinued
operations.......................................... (3,457,595) --
Income taxes from continuing operations -- --
----------- ---------
Loss before discontinued operations................... (3,457,595) --
----------- ---------
Discontinued operations:
Loss from discontinued operations......................... (239,957) (351,606)
Loss on disposal of discontinued operations............... (3,486,297) --
----------- ---------
(3,726,254) (351,606)
----------- ---------
Net loss.............................................. $(7,183,849) (351,606)
=========== =========
Loss per share -- basic and diluted:
Loss before discontinued operations....................... $ (1.57) --
Discontinued operations................................... (1.69) (0.27)
=========== =========
Net loss.............................................. (3.26) (0.27)
Imputed noncash preferred stock dividend.................... -- (0.05)
----------- ---------
Loss available to common shares....................... $ (3.26) (0.32)
=========== =========
Weighted average common shares outstanding................ 2,198,690 1,325,016
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 20
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
PREFERRED COMMON
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Balances at December 31, 1997 -- $ -- 1,326,685 $ 13,267
Issuance of 150,000 shares of preferred stock 150,000 150,000 -- --
Cashless exercise of stock options -- -- 2,476 25
Imputed noncash dividend on preferred stock -- -- -- --
Net loss -- -- -- --
-------- ---------- --------- -----------
Balances at December 31, 1998 150,000 150,000 1,329,161 13,292
Issuance of common stock for convertible notes -- -- 214,287 2,143
Issuance of common stock in secondary offering -- -- 624,750 6,248
Issuance of common stock and note receivable to acquire
common stock in connection with acquisitions -- -- 1,749,999 17,500
Conversion of outstanding preferred stock (150,000) (150,000) 75,000 750
Common stock granted for services -- -- 66,666 667
Cashless exercise of stock options -- -- 2,741 27
Discount on subordinated debt -- -- -- --
Net loss -- -- -- --
-------- ---------- --------- -----------
Balances at December 31, 1999 -- $ -- 4,062,604 $ 40,627
======== ========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL NOTES
PAID-IN RETAINED RECEIVABLE FROM TOTAL
CAPITAL EARNINGS SHAREHOLDERS EQUITY
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Balances at December 31, 1997 4,242,467 (1,232,527) -- 3,023,207
Issuance of 150,000 shares of preferred stock 225,000 -- -- 375,000
Cashless exercise of stock options (25) -- -- --
Imputed noncash dividend on preferred stock 67,500 (67,500) -- --
Net loss -- (351,606) -- (351,606)
---------- ---------- ---------- ---------
Balances at December 31, 1998 4,534,942 (1,651,633) -- 3,046,601
Issuance of common stock for convertible notes 447,857 -- -- 450,000
Issuance of common stock in secondary offering 2,492,752 -- -- 2,499,000
Issuance of common stock and note receivable to acquire --
common stock in connection with acquisitions 7,586,500 -- (1,015,311) 6,588,689
Conversion of outstanding preferred stock (225,750) -- -- (375,000)
Common stock granted for services 199,333 -- -- 200,000
Cashless exercise of stock options (27) -- -- --
Discount on subordinated debt 446,316 -- -- 446,316
Net loss -- (7,183,849) -- (7,183,849)
---------- ---------- ---------- ---------
Balances at December 31, 1999 15,481,923 (8,835,482) (1,015,311) 5,671,757
========== ========== ========== =========
</TABLE>
See accompanying notes to combined financial statements.
19
<PAGE> 21
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Operating activities:
Continuing operations:
Loss from continuing operations $ (3,457,595) --
Adjustments to reconcile net loss to net cash
provided by continuing operating activities:
Depreciation and amortization 725,136 --
Noncash stock compensation 1,063,300 --
Accounts receivable allowances 526,000 --
Amortization of debt discount 372,975
Changes in operating assets and liabilities:
Accounts receivable (749,146) --
Prepaid expenses and other current assets (394,883) --
Other assets (305,976) --
Accounts payable 966,770 --
Accrued expenses and other liabilities (39,008)
Accrued stock compensation 638,300 --
-------------- --------------
Net cash used in continuing operating activities (654,127) --
-------------- --------------
Discontinued operations:
Loss from discontinued operations (239,957) (351,606)
Loss on disposal of discontinued operations (3,486,297) --
Adjustments to reconcile loss from discontinued operations
to net cash provided by discontinued operating activities:
Loss on divested operations 3,486,297 --
Changes in operating assets and liabilities for discontinued
operating activities (112,387) 187,270
-------------- --------------
Net cash used in discontinued operating activities (352,344) (164,336)
-------------- --------------
Net cash used in operating activities (1,006,471) (164,336)
-------------- --------------
Investing activities:
Continuing operations:
Additions to property and equipment (167,810) --
Acquisition of businesses, net of cash acquired (1,950,000) --
-------------- --------------
Net cash used in investing activities for
continuing operations (2,117,810) --
-------------- --------------
Discontinued operations:
Additions to property, plant, and equipment -- (91,160)
Proceeds from sale of property, plant and, and equipment -- 11,000
Increase in resource property -- (5,000)
-------------- --------------
Net cash used in investing activities for
discontinued operations -- (85,160)
-------------- --------------
Net cash used in investing activities (2,117,810) (85,160)
Financing activities:
Increase in bank overdraft 107,702 --
Proceeds from borrowings from note payable -- 150,000
Proceeds from issuance of long-term debt 1,259,103 161,489
Repayments of long-term debt (51,054) (122,050)
Issuance of notes receivable (1,015,311) --
Issuance of common stock 2,499,000 --
Issuance of preferred stock -- 375,000
-------------- --------------
Net cash provided by financing activities 2,799,440 564,439
-------------- --------------
Net increase in cash and cash equivalents (324,841) 314,943
Cash and cash equivalents at beginning of period 324,841 9,898
============== ==============
Cash and cash equivalents at end of period $ -- 324,841
============== ==============
</TABLE>
20
<PAGE> 22
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Supplemental disclosures of cash flow information: Cash paid during
the period for continuing operations:
Interest $ 140,267 --
============ ============
Income taxes $ -- --
============ ============
Supplemental disclosures of noncash investing and financing activities:
Issuance of common stock for businesses acquired $ 7,604,000 --
============ ============
Issuance of debt for businesses acquired $ 1,575,000 --
============ ============
Issuance of common stock for convertible notes $ 450,000 --
============ ============
Conversion of outstanding preferred stock $ 375,000 --
============ ============
Common stock granted for services $ 200,000 --
============ ============
Imputed noncash dividend on preferred stock $ -- 67,500
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 23
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) BUSINESS AND BASIS OF PRESENTATION
Cereus Technology Partners, Inc. and subsidiaries (the "Company" or
"Cereus"), was formerly named AIM Group, Inc. prior to December 1,
1999. Prior to July 31, 1999, the Company had been solely engaged
since its incorporation in 1994 in the development of specialized
minerals and operation of specialty materials projects ("Mineral
Operations"). Although the Company continues to be engaged in the
Minerals Operations, in the fourth quarter of 1999 the Company made
the decision to discontinue its Mineral Operations and either sell or
close the operations. On March 31, 2000, the Company entered into an
agreement to sell its mineral businesses for approximately $640,000,
plus approximately $340,000 of working capital contributions, to the
Company's former Chairman of the Board (the "Mineral Transaction").
Accordingly, the surface modification and mining operations have been
reflected as discontinued operations in the accompanying consolidated
financial statements. The Mineral Transaction is expected to be
completed during the quarter ending June 30, 2000 (see note 3).
In 1999, the Company acquired three companies that provided
information technology services and began providing business software
implementation and consulting and Internet services. On July 30, 1999,
the Company acquired The Reddy Group, Inc. and its wholly-owned
subsidiary, Cereus Bandwidth LLC (collectively, "Cereus Bandwidth"),
an Atlanta-based Internet service provider ("ISP") which developed and
currently markets a variety of Internet, intranet and e-commerce
services. On July 30, 1999, the Company acquired Enterprise Solutions
Group, Inc. ("ESG"), a West Palm Beach based business software
applications consulting firm. On November 15, 1999, the Company
acquired Client Server Solutions, Inc. ("CSS"), an Atlanta-based
business software sales and service company. ESG and CSS are focused
on enterprise resource planning ("ERP") applications consisting of
integrated financial, administrative, payroll and human resource,
manufacturing, distribution, point-of-sale and inventory management
software. The applications are supported by software that includes
management information systems and database management of sales and
marketing information.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Cereus Technology Partners, Inc. and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
(c) REVENUE AND COST RECOGNITION
Revenue is derived from the sale of software licenses, hardware, and
software services and is allocated to each element of multi-element
arrangements based in the relative fair values of the elements, which
is established by the price charged when the respective element is
sold separately.
Revenue from license fees and hardware is recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred,
the fee is fixed or determinable and collectibilty is probable.
22
<PAGE> 24
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Software services include installation, training, and maintenance.
Revenue from installation and training are recognized upon performance
of the related services. Installation and training services are
offered and billed as separate elements of contracts and are not
essential to the functionality of the software.
Maintenance is offered as a separate element and includes the right to
unspecified upgrades on a when-and-if available basis. Maintenance
revenue is deferred and recognized ratably over the term of the
related contract, usually one year. Specified upgrades are not
typically offered to customers.
In December 1998, the Accounting Standards Committee of the American
Institute of Certified Public Accountants issued SOP 98-9, Software
Revenue Recognition with Respect to Certain Transactions. SOP 98-9 is
effective for fiscal years beginning after March 15, 1999. The Company
does not expect a material change to its accounting for revenues as a
result of adopting the provisions of SOP 98-9.
Accounts receivable include amounts due from customers for which
revenue has been recognized. Deferred revenue consists of amounts
collected from customers for license and software services that have
not met the criteria for revenue recognition.
(d) CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with
original maturities of three months or less to be cash equivalents.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Amortization of capital
lease assets is included in depreciation expense. Depreciation is
provided on a straight-line basis over the estimated useful lives of
the assets, which is generally 5 years for computer equipment and 10
years for furniture, fixtures and office equipment.
Depreciation expense for continuing operations was $50,088, and $-0-
for the years ended December 31, 1999, and 1998, respectively.
23
<PAGE> 25
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Property and equipment, net, consisted of the following at December
31, 1999:
<TABLE>
<CAPTION>
1999
---------------
<S> <C>
Office equipment $ 58,506
Furniture and fixtures 89,901
Computer equipment 120,225
Computer software 85,622
---------------
354,254
Less accumulated depreciation and amortization 50,088
---------------
Property and equipment, net $ 304,166
===============
</TABLE>
(f) GOODWILL
Goodwill, which represents the excess purchase price over net assets
acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 5 years. The Company evaluates the
recoverability of these intangible assets at each period end using the
undiscounted estimated future net operating cash flows expected to be
derived from such assets. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's anticipated average
cost of funds. The assessment of the recoverability of goodwill will
be impacted if estimated future operating cash flows are not achieved.
(h) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the statement of operations in the
period that includes the enactment date.
(i) STOCK-BASED COMPENSATION
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations, in accounting for its stock-based awards. As such,
compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise
price. Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS No. 123") established accounting
and disclosure requirements using a fair value-based method of
accounting for stock-based employee compensation plans. As allowed by
SFAS No. 123, the Company has elected to continue to apply the
intrinsic value-based method of accounting described above, and has
adopted the disclosure requirements of SFAS No. 123.
24
<PAGE> 26
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(j) EARNINGS PER SHARE
Net loss per share-basic is computed based on net loss divided by the
weighted average common shares outstanding during the year. Earnings
per share is not presented on a diluted basis, as the effect of
potentially dilutive securities was either anti-dilutive due to net
losses or immaterial for the periods presented.
(k) COMPREHENSIVE INCOME
No statements of comprehensive income have been included in the
accompanying consolidated financial statements for the years ended
December 31, 1999 and 1998 since the Company does not have any "other
comprehensive income" to report.
(l) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in
other contracts, and for hedging activities. It requires that, at
adoption, hedging relationships should be designated anew and that
entities recognize all derivatives as either assets or liabilities in
the statement of financial position and to measure those instruments
at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the
resulting designation. Pursuant to Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Instruments and Hedging
Activities, SFAS 133 is effective for all fiscal years beginning after
June 15, 2000. The Company expects that there will be no material
impact as a result of its adoption of SFAS No. 133.
(m) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(n) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future
net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less
costs to sell.
25
<PAGE> 27
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(o) RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 consolidated
financial statements to conform to the presentation adopted in 1999.
(p) COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the
assessment and/or remediation can be reasonably estimated. Recoveries
from third parties, which are probable of realization, are separately
recorded, and are not offset against the related liability, in
accordance with Financial Accounting Standards Board Interpretation
No. 39, "Offsetting of Amounts Related to Certain Contracts."
(2) ACQUISITIONS
On July 30, 1999, Cereus acquired 100% of the outstanding common stock of
ESG pursuant to a Stock Purchase Agreement, dated as of July 31, 1999 (the
"ESG Agreement"), by and between the Company and the shareholders of ESG,
for approximately $3,024,000 including acquisition costs. The total
consideration paid by Cereus in connection with the ESG acquisition
consisted of $550,000 in cash, a $250,000 two-year subordinated note and
383,333 shares of the Company's common stock valued at $5.06 per share
totaling $1,941,000. As a result of the acquisition, ESG became a
wholly-owned subsidiary of the Company. The purchase method of accounting
was used to record the acquisition. Accordingly, the results of operations
of ESG for the period July 31, 1999 through December 31, 1999 are included
in the Company's consolidated financial statements. The excess of the
purchase price over the fair value of the net assets acquired,
approximately $2,754,000, was recorded as goodwill and is being amortized
over five years, the expected benefit period.
On July 30, 1999, the Company acquired 100% of the outstanding common stock
of Cereus Bandwidth ("CB") pursuant to a Stock Purchase Agreement, dated as
of July 31, 1999 (the "CB Agreement"), by and between the Company and the
shareholders of CB, for approximately $2,965,000 including acquisition
costs. The total consideration paid by the Company in connection with the
acquisition consisted of $1 million in cash and 333,333 shares of the
Company's common stock valued at $5.06 per share totaling $1,688,000. As a
result of the acquisition, CB became a wholly-owned subsidiary of the
Company. The purchase method of accounting was used to record the
acquisition. Accordingly, the results of operations for CB for the period
July 31, 1999 through December 31, 1999 are included in the Company's
consolidated financial statements. The excess of the purchase price over
the fair value of the net assets acquired, approximately $2,850,000, was
recorded as goodwill and is being amortized over five years, the expected
benefit period.
On November 15, 1999, the Company acquired 100% of the issued and
outstanding capital stock of each of Client Server Solutions, Inc. ("CSS"),
a Delaware corporation, and CSS Financial Software Sales, Inc. ("CSS
Financial"), a Georgia corporation, pursuant to a Merger Agreement,
dated as of November 15, 1999 (the "CSS Agreement"), by and between the
Company and the shareholders of CSS and CSS Financial, for approximately
$5,134,000 including acquisition costs (net of notes receivable issued to
the selling shareholders). The total consideration paid by Cereus in
connection with the acquisition
26
<PAGE> 28
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
consisted of $400,000 in cash, $1,325,000 in short term notes payable, and
983,333 shares of the Company's common stock, including 150,000 shares held
in escrow, valued at $4.50 per share totaling $4,425,000 subject to a
future earn-out provision. As a result of the acquisition, each of CSS and
CSS Financial were merged with and into a wholly-owned subsidiary of the
Company. The purchase method of accounting was used to record the
acquisition. Accordingly, the results of operations for CSS for the period
November 16, 1999 through December 31, 1999 are included in the Company's
consolidated financial statements. The excess of the purchase price over
the fair value of the net assets acquired, approximately $6,425,000, was
recorded as goodwill and is being amortized over five years, the expected
benefit period.
The following unaudited pro forma financial information presents the
combined results of operations of the Company, ESG, CB, and CSS as if the
acquisitions had occurred on January 1, 1998 after giving effect to certain
adjustments including amortization of goodwill. The pro forma financial
information does not necessarily reflect the results of operations that
would have occurred had the Company, ESG, CB, and CSS constituted a single
entity during such periods.
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1999 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
Pro forma consolidated net sales $ 6,380,684 $ 6,579,595
============== ===============
Pro forma consolidated loss before
discontinued operations $ (4,827,797) $ (101,303)
============== ===============
Pro forma consolidated net loss $ (8,554,051) $ (452,909)
============== ===============
Pro forma loss per share $ (2.46) $ (0.14)
============== ===============
</TABLE>
(3) DISCONTINUED OPERATIONS
The Company, until July 31, 1999, was solely a mining and mined products
company. During 1999, the Company decided to change its business model to
become a technology services company. To accomplish this objective, the
Company acquired three technology consulting companies and changed its
name.
In March 2000, the Company executed a sale agreement with the former
Chairman and President of the Company. This agreement specifies a purchase
price of approximately $640,000 for the stock of all mining subsidiaries
plus approximately $340,000 of working capital contributions to be provided
by the Company. The consideration will be in the form of an
interest-bearing note, due in 180 days, unless called earlier by the
Company based upon certain rights. This note is secured by the pledge of
84,000 shares of the Company's stock.
The Company will retain no subsequent interests in any mining operations or
assets, no liabilities, expressed or contingent with respect to the mining
operations, and the ultimate payment of the note is not tied in any form to
the results of the mining operations.
The sales price approximates the fair market value of the assets, as
determined by an independent appraiser. Therefore, the Company wrote down
the book value of its mining operations to this fair market value and
accrued for transaction costs and severance obligations associated with the
27
<PAGE> 29
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
disposition. Management has estimated that income from operations for the
mining operations would be approximately break-even until the expected
closing date during the second fiscal quarter of fiscal 2000, and
accordingly, did not accrue any amounts for future losses as of December
31, 1999. In accordance with generally accepted accounting principles the
Company's prior period financial statements have been reclassified to
reflect the results of the discontinued operations.
(4) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following at
December 31, 1999:
<TABLE>
<S> <C>
Accrued employee compensation and benefits $ 507,064
Accrued liabilities 986,483
Deferred revenue 26,413
Accrued interest payable 58,824
Taxes accrued and withheld 197,999
----------------
$ 1,776,783
================
</TABLE>
(5) INCOME TAXES
The Company has net operating loss carryforwards available to offset future
taxable income of approximately $5,200,000 expiring through the year 2019.
The net operating loss carryforwards are subject to certain limitations,
computed on an annual basis. Due to the Company's continued losses and the
restricted use of some of the net operating loss carryforwards, a valuation
allowance has been recorded to offset net deferred tax assets.
Deferred tax assets and liabilities at December 31, 1999 are as follows:
<TABLE>
<S> <C>
Gross deferred tax asset $ 3,900,000
Less valuation allowance 2,500,000
----------------
Net deferred tax asset 1,400,000
Gross deferred tax liability 1,400,000
----------------
Net deferred taxes $ --
================
</TABLE>
28
<PAGE> 30
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
The Company's income tax benefit from continuing operations for 1999 and
1998 differed from the amounts computed by applying the Federal income tax
rate of 34% as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Computed expected income tax benefit $ 1,176,000 --
Increase (decrease) in income tax benefit
resulting from:
Increase in valuation allowance (891,000) --
Amortization of goodwill (231,000) --
Other (54,000) --
---------------- ---------------
$ -- --
================ ===============
</TABLE>
(6) DEBT
The Company has a line of credit agreement with a bank which provides for
borrowings of up to $400,000 with interest payable monthly at the prime
rate plus 1.5% (effective rate of 10.46% at December 31, 1999). The line is
collateralized by all business assets of the former CSS company and
personal life insurance contracts. The line expires March 20, 2000 and is
renewable at that time for one year. The Company had borrowings of $399,193
under this line of credit at December 31, 1999, which were paid in full in
April 2000.
During 1999 the Company entered into several loan agreements with the
selling shareholders of CSS and ESG. The balance of the loans payable under
these agreements is $1,565,311 at December 31, 1999. The notes payable for
CSS have a term of four to six months and bear interest at 8% per annum.
The note payable for ESG is a subordinated promissory note with a two-year
term bearing interest at 3% per annum and is payable in two equal
installments of $130,653 on July 30, 2000 and 2001. During the first
quarter of fiscal 2000, the ESG note was cancelled and replaced by the
issuance of 50,000 shares of common stock at $5 per share and 50,000
warrants exercisable at $10 per share and $300,000 of the CSS notes were
canceled and replaced by the issuance of 60,000 shares of common stock at
$5 per share and 60,000 warrants exercisable at $10 per share.
The Company has several non-interest bearing loan agreements to fund the
working capital needs of the Company totaling $35,000 at December 31, 1999.
These loans were paid in full during the first quarter of fiscal 2000.
In 1997 the Company issued $1,050,000 of Series A convertible notes payable
(the "Convertible Notes"). At December 31, 1999 the Company had $600,000 of
the Convertible Notes outstanding with three related parties. Prior to 1999
the Convertible Notes were amended several times. The various amendments
included provisions which: (a) extended the maturity date of the
Convertible Notes to June 30, 1999; (b) increased the annual interest rate
to 10%, effective January 1, 1997; (c) changed the conversion price to
$2.10 per common share; and (d) agreed that the Company will not, without
the prior approval of the holders of at least 80% of the principal amount
of the Convertible Notes outstanding, incur any indebtedness which ranks
senior in priority to payment to the Convertible Notes. In 1999, the
Convertible Notes were amended to extend the maturity date to June 30, 2000
as well as binding the holders of the Convertible Notes to certain
provisions restricting the sale of any shares issued upon conversion. The
Convertible Notes are unsecured. A total of $450,000 of the Convertible
29
<PAGE> 31
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Notes were converted in June 1999, in exchange for 214,286 shares of the
Company's common stock. Subsequent to December 31, 1999, the remaining
Convertible Notes were converted to common stock pursuant to the original
terms.
In 1999, the Company issued $825,000 of subordinated notes ("Subordinated
Notes") which were convertible into common shares at $3.75 per share and
warrants to purchase common shares at $4.00 per share. Upon conversion, the
noteholders will receive warrants to purchase a number of shares equal to:
0.5 times the number of shares into which their Subordinated Notes are
converted if the Subordinated Notes are converted within 30 days of
closing; 1.0 times the number of shares into which their Subordinated Notes
are converted if the Subordinated Notes are repaid or converted up to 90
days of closing; 1.5 times the number of shares into which their
Subordinated Notes are convertible if the Subordinated Notes are repaid or
converted after 90 days of closing. The interest rate on the Subordinated
Notes is 15% per annum payable semi-annually. The Subordinated Notes mature
on October 15, 2000. As of December 31, 1999, the Subordinated Notes and
related debt discount of $73,341 were outstanding. On February 10, 2000,
all of the Subordinated Notes were converted to stock and warrants. (See
note 10.)
(7) SHAREHOLDERS' EQUITY
(a) COMMON AND PREFERRED STOCK
Pursuant to the Company's Restated Certificate of Incorporation, the
Company is authorized to issue 50 million shares of common stock, $.01
par value per share, and 10 million shares of convertible preferred
stock, with $1.00 par value per share.
The preferred shares were convertible into one share of common stock,
as adjusted for any future stock dividends, stock splits or reverse
stock splits. The conversion feature of the preferred stock is $2.50
per share, which was less than the current market price for the common
stock at December 31, 1998. This resulted in a beneficial conversion
amount, which was recorded as an imputed non-cash preferred stock
dividend for the year ended December 31, 1998 in the accompanying
consolidated financial statements. The preferred shares were converted
in 1999, and no shares were outstanding as of December 31, 1999.
(b) STOCK OPTIONS
(i) STOCK OPTION PLANS
In September 1997, the Company's shareholders approved the adoption of
the Company's 1997 Stock Option Plan (the "Plan"), which is
administered by the Company's Board of Directors, and authorized a
total of 250,000 shares of Common Stock for issuance thereunder. The
purpose of the Plan is to enable the Company to attract and retain
competent personnel by offering them the opportunity to acquire a
proprietary interest in the Company. On November 30, 1999,
stockholders of the Company approved an increase in the number of
shares of Common Stock authorized for issuance under the Plan from
250,000 to 3,000,000 shares. Additionally, option grants for outside
directors are covered by two separate plans. The Board has also
approved option grants for non-employee advisors.
30
<PAGE> 32
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(ii) STOCK OPTION ACTIVITY
The following table summarizes activity in the Company's stock option
plans for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Options outstanding at
December 31, 1997 73,333 $0.90
Granted 121,000 2.90
Exercised (3,333) 0.90
Forfeited (8,333) 0.90
-------
Options outstanding at
December 31, 1998 182,669 2.22
Granted 783,333 3.91
Exercised (3,333) 0.90
-------
Options outstanding at
December 31, 1999 962,669 $3.60
=======
</TABLE>
The following table summarizes information about stock options
outstanding and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- -----------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGES OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1999 LIFE(MONTHS) PRICE 1999 PRICE
-------- ------------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 0.90 58,336 93 $ 0.90 25,835 $ 0.90
2.50-3.00 121,000 102 2.90 49,000 2.74
3.00-4.75 783,333 58 3.91 52,500 4.00
------- ------- ---------- ------- ----------
$ 0.90-4.75 962,669 65 $ 3.60 127,335 $ 2.89
======= ======= ========== ======= ==========
</TABLE>
The per share weighted-average fair value of stock options granted
during 1999 and 1998 was $4.41 and $2.90, respectively, on the date of
grant using the Black Scholes option-pricing model. For the year ended
December 31, 1999 the Company used the following weighted-average
assumptions: dividend rate of 0%, expected volatility of 100%,
risk-free interest rate of 6.5% and an expected life of one year. For
the year ended December 31, 1998, the Company used the following
weighted-average assumptions: dividend rate of 0%, expected volatility
of 30%, risk-free interest rate of 4.61% to 6.09% and an expected life
of 5 to 10 years.
31
<PAGE> 33
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Under its adoption of SFAS No. 123, the Company applies the provisions
of APB Opinion No. 25 in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized for stock
options in the accompanying consolidated financial statements. Had the
Company determined compensation cost based on the fair value of the
option at the grant date, the Company's pro forma net loss would have
been as follows:
<TABLE>
<CAPTION>
YEAR END
DECEMBER 31,
--------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
Net loss:
As reported $ (7,183,849) (351,606)
=============== =============
Pro forma $ (9,229,205) (358,600)
=============== =============
Loss per share:
As reported $ (3.26) (0.32)
=============== =============
Pro forma $ (4.20) (0.32)
=============== =============
</TABLE>
(c) OUTSTANDING STOCK PURCHASE WARRANTS AND PUT OBLIGATIONS
In 1999, in connection with the issuance of the Subordinated Notes
described in note 6, the Company issued stock purchase warrants
enabling the holders to purchase 220,000 shares of the Company's Class
A voting common stock at an exercise price of $4.00 per share at any
time through December 2000. The estimated fair value of these warrants
at the date issued was between $1.67 per share and $2.73 per share
using a Black-Scholes option pricing model and assumptions similar to
those used for valuing the Company's stock options as described above.
The terms of the stock purchase warrants include certain registration
rights and grant the holder the right and option to put the warrants
back to the Company for cash for a period of 30 days immediately prior
to the expiration thereof at a price equal to the fair market value of
the shares of Class A voting common stock issuable to the holder upon
exercise, as defined.
In 1999, the Company also issued 168,738 warrants to purchase one
share each of the Company's common stock. The warrants expire at
various points between 2001 and 2004. The warrants have an exercise
prices between $3.75 and $4.15 per share. The estimated fair value of
these warrants at the dates issued was between $1.52 per share and
$2.58 per share using a Black-Scholes option pricing model and
assumptions similar to those used for valuing the Company's stock
options as described above. At December 31, 1999, the warrants were
outstanding.
(8) COMMITMENTS AND CONTINGENCIES
(a) LEASE COMMITMENTS
The Company is obligated under noncancelable operating lease
agreements for office facilities, furniture and fixtures, and computer
equipment for the next five years and thereafter.
Future minimum lease payments under all noncancelable operating lease
agreements with remaining terms in excess of one year in the aggregate
and for the next five years are shown as follows:
32
<PAGE> 34
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000 $ 612,033
2001 589,284
2002 540,391
2003 525,863
2004 512,110
----------------
Total $ 2,779,681
================
</TABLE>
Net rental expense for all cancelable and noncancelable operating
leases was $99,774 for the year ended December 31, 1999. Net rental
expense for all cancelable and noncancelable operating leases was $-0-
for the year ended December 31, 1998.
(b) CONTRACTUAL COMMITMENTS
In an agreement dated December 14, 1999, the Company agreed to issue
approximately 53,000 shares of restricted stock valued at $250,000,
its fair value at that date, in return for user licenses for resale
from a software vendor. The Company committed to purchase a minimum of
$500,000 of user licenses each year for the next three years following
the anniversary date of the agreement. These licenses can be resold at
any time in the future. In return, for the commitment, the Company
will receive from the vendor 50,000 warrants to purchase the common
stock of the vendor which vest when certain purchase levels have been
attained. As of December 31, 1999, the Company had not issued its
restricted stock or received the vendor's warrants.
In a separate agreement with the same vendor dated December 23, 1999,
the Company committed to purchase Application Service Provisioner
user months for a total commitment of $1,115,000. This commitment is
payable quarterly over the twelve month period beginning on the date
of the contract. The user months can be resold anytime in the future.
In return for this commitment, the Company will receive 5,000 warrants
to purchase the common stock of the vendor which vest when certain
purchase levels have been attained.
In an agreement dated December 6, 1999, the Company committed to
purchase software licenses from another vendor requiring payments
totaling $250,000 through June 2000. For these payments, the Company
will receive credits in excess of the $250,000 payment toward
purchases of software licenses to be used anytime in the future.
Additionally, the Company entered into contractual commitments to
deliver products and services in the ordinary course of business. The
Company believes that all such contractual commitments will be met or
renegotiated such that no material adverse financial impact on the
Company's financial position or results of operations will result from
the Company's failure to meet these commitments.
(c) CONTINGENCIES
The Company is subject to lawsuits, claims, and other complaints
arising out of the ordinary conduct of business. While the ultimate
results and outcomes from these matters cannot be
33
<PAGE> 35
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
determined precisely, management, based in part upon the advice of
legal counsel, believes that all matters are adequately covered by
insurance or, if not covered, are without merit or are of such amounts
as would not have a material adverse effect on the Company's financial
position or results of operations.
(9) MAJOR CUSTOMERS
For the year ended December 31, 1999, one customer accounted for 21% of
revenues.
(10) SUBSEQUENT EVENTS
(a) PRIVATE PLACEMENT
On February 8, 2000 the Company completed a private equity placement of its
common stock. The placement consisted of approximately 4 million shares of
common stock at $5 per share and a like number of warrants exercisable at
$10 per share. The gross proceeds were approximately $20 million. All stock
and warrants issued were unregistered.
(b) STOCK COMPENSATION
During the quarter ended March 31, 2000 stock issued to certain employees
pursuant to contingent payments under amended terms of the CSS
acquisition, as well as purchases of stock and warrants by members of
management under terms similar to that of the private equity placement,
resulted in stock compensation expense of approximately $2.2 million
(Unaudited).
(c) DEBT CONVERSION AND EXTINGUISHMENT
During the quarter ended March 31, 2000, the Company retired approximately
$2 million of its notes payable outstanding as of December 31, 1999 through
a conversion of the notes into a combination of stock and warrants. In
addition another $440,000 of notes issued in January of 2000 were converted
into stock and warrants, and the Company settled certain other amounts
payable via issuance of common stock and warrants. Approximately $1 million
of the notes were converted pursuant to their original terms and
accordingly no gain or loss on the extinguishment of debt was recognized.
The remaining notes payable and other payables were extinguished based upon
terms not pursuant to the original obligations. Accordingly, the Company
will recognize a loss on extinguishment of approximately $7.2 million
(Unaudited) based upon the difference between the fair value of the stock
and warrants issued and the debt extinguished as measured at the dates of
the extinguishment.
(d) IMPAIRMENT
During the first quarter of fiscal 2000 the Company hired new management,
appointed a new board of directors and changed its strategic direction from
an ERP implementation and consulting business to a web integration and
application service provider. As a result, management under took a review
of its net investments in the recently acquired companies and based upon
its projections of expected future cash flows over a five year period,
discounted using a 12% interest rate, determined that the investments in
the companies previously engaged in ERP software sales
34
<PAGE> 36
CEREUS TECHNOLOGY PARTNERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
and implementation services was were impaired. Accordingly the Company
expects to recognize an impairment charge of $5.6 million (Unaudited)
during the quarter ended March 31, 2000.
35
<PAGE> 37
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disclosure under this Item 8 is required pursuant to Item 304 of
Regulation S-B.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required under this item with respect to the Company's
directors and executive officers and compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, is incorporated herein by
reference to the Cereus Technology Partners, Inc. definitive proxy
statement to be filed with the Securities and Exchange Commission in
connection with the 2000 Annual Meeting of Stockholders (the "2000 Proxy
Statement").
ITEM 10. EXECUTIVE COMPENSATION
The information required under this item is incorporated by reference to
the 2000 Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated by reference to
the 2000 Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated by reference to
the 2000 Proxy Statement.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The exhibits filed as part of, or incorporated by reference
into this report on Form 10-KSB are set forth on the Exhibit Index
appearing below.
(b) REPORTS ON FORM 8-K. The Registrant filed the following reports with
the Securities and Exchange Commission on Form 8-K during the quarter
ended December 31, 1999:
The Company's Current Report on Form 8-K/A filed with the Securities
and Exchange Commission on October 12, 1999 reported, under Item 7,
the financial statements and pro forma financial information in
connection with the acquisition of (i) Enterprise Solutions Group,
Inc. and (ii) The Reddy Group, Inc.
36
<PAGE> 38
The Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 30, 1999 reported, under Item 2, the
acquisition of 100% of the issued and outstanding capital stock of (i)
Client Server Solutions, Inc. and (ii) CSS Financial Software Sales,
Inc.
The Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 7, 1999 reported, under Item 5, that
the stockholders of the Company approved amendments to the Certificate
of Incorporation, including an amendment to change the Company's name
from AIM Group, Inc. to Cereus Technology Partners, Inc.
The Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 13, 1999 reported, under Item 4, the
resignation of Moore Stephens Frost, PLC as the Company's independent
accounting firm.
37
<PAGE> 39
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
- ----------- --------
3(a) Certificate of Incorporation of the Registrant. (Incorporated
herein by reference to Exhibit 3(a) to the Registrant's
Registration Statement on Form S-4 ( File No. 33-82468 )
3(b) Certificate of Amendment to Certificate of Incorporation of the
Registrant. (Incorporated herein by reference to Exhibit 3(b)
to the Registrant's Registration Statement on Form S-4 (File
No. 33-82468 ).)
3(c) Certificate of Amendment to Certificate of Incorporation of the
Registrant. (Incorporated herein by reference to Exhibit 3(c)
to the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1997.)
3(d) Certificate of Amendment to Certificate of Incorporation of the
Registrant. (Incorporated by reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1998.)
3(e) Certificate of Amendment to Certificate of Incorporation of the
Registrant. (Incorporated herein by reference to Exhibit 3 to
the Registrant's Form 8-K dated November 30, 1999.)
3(f) By-Laws of the Registrant. (Incorporated herein by reference to
Exhibit 3(c) to the Registrant's Registration Statement on Form
S-4 ( File No. 33-82468 ).)
4(a) Form of the Registrant's Warrant Certificate (Incorporated
herein by reference to Exhibit 4(b) to the Registrant's
Registration Statement on Form S-4 (File No.3382468).)
4(b) Form of the Registrant's Option Certificate. (Incorporated
herein by reference to Exhibit 4(c) to the Registrant's
Registration Statement on Form S-4 ( File No. 33-82468 ).)
4(c) Certificate of Designation, Preferences and Rights of Preferred
Stock relating to the Registrant's Series A Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4 to the
Registrant's Current Report on Form 8-K filed on January 5,
1999.)
4(d) Form of Registrant's Warrant Certificate. (Filed herewith.)
4(e) Form of Registration Rights Agreement by and among the
Registrant and the Holders listed therein dated as of February
8, 2000. (Filed herewith.)
10(a) AIM Group, Inc. 1994 Stock Option Plan. (Incorporated herein by
reference to Exhibit 4(a) to the Registrant's Registration
Statement on Form S-4 (File No. 33-82468).)
10(b) Kaolinite Mining Lease and Agreement, dated March 1, 1984,
between Eterna-Tec Corp. as lessee and New Mexico and Arizona
Land Company as Lessor. (Incorporated herein by reference to
Exhibit 10(a) to the Registrant's Registration Statement on
Form S-4 (File No. 33-82468).)
10(c) Assignment Agreement, dated October 26, 1989, by and between
Eterna-Tec Corp. and the Registrant pursuant to which
Eterna-Tec assigned to the Registrant the Kaolinite 33-82468).)
38
<PAGE> 40
EXHIBIT NO. DOCUMENT
- ----------- --------
Lease. (Incorporated herein by reference to Exhibit 10(b) to
the Registrant's Registration Statement on Form S-4 (File No.
10(d) Lease Agreement, dated October 17, 1994, by and between Merrick
Venture Capital, Inc. and AIM Group, Inc. (Incorporated herein
by reference to Exhibit 10(pp) to the Registrant's Registration
Statement on Form S-4. (File No. 33-82468).)
10(e) Form of Series A Convertible Promissory Note, as issued by AIM
Group, Inc. on November 13, 1995, December 20, 1995 and
February 2, 1996. (Incorporated herein by reference to Exhibit
10(e) of the Registrant's Form 10-KSB for the year ended
December 31, 1996.)
10(f) Form of letter agreement amending Series A Convertible
Promissory Note, as entered into by AIM Group, Inc. and each of
the holders of the Series A Convertible Promissory Notes on
April 10,1997. (Incorporated herein by reference to Exhibit
10(f) of the Registrant's Form 10-KSB for the year ended
December 31, 1996.)
10(g) Form of letter agreement amending Series A Convertible
Promissory Note, as entered into by AIM Group, Inc. and each of
the holders of the Series A Convertible Promissory Notes on
April 10,1997. (Incorporated herein by reference to Exhibit
10(g) to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1997.)
10(h) 1997 Stock Option Plan of the Registrant, as amended on
November 30, 1999. (Incorporated herein by reference to Exhibit
10(k) to the Registrant's Form 10-SB filed December 21, 1999.)
10(i) Form of letter agreement amending Series A Convertible
Promissory Note, as entered into by the Registrant with each of
the holders of the Series A Convertible Promissory Notes on
March 24, 1998. (Incorporated herein by reference to Exhibit
10(e) to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1998.)
10(j) Form of letter agreement amending Series A Convertible
Promissory Note, as entered into by the Registrant with each of
the holders of the Series A Convertible Promissory Notes on
November 13, 1998. (Incorporated herein by reference to Exhibit
10(m) to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1998.)
10(k) Promissory Note for $150,000 owed by United Minerals
Corporation to Audrey L. Braswell. (Incorporated herein by
reference to Exhibit 10(n) to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1998.)
10(l) Employment Agreement, effective February 15, 1999, between AIM
Group, Inc. and Theodore L. Lamb. (Incorporated herein by
reference to Exhibit 10(o) to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1998.)
10(m) Stock Option Agreement, dated November 24, 1998, between the
Registrant and R. Jerry Falkner. (Incorporated herein by
reference to Exhibit 10(p) to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1998.)
39
<PAGE> 41
EXHIBIT NO. DOCUMENT
- ----------- --------
10(n) Agreement and Plan of Merger, dated as of May 3, 1999, by and
among the Registrant, AIM Solutions, Inc., Enterprise Solutions
Group, Inc. and Ronald Roswell, Jr. (Incorporated herein by
reference to Exhibit 2A to the Registrant's Current Report on
Form 8-K dated July 30, 1999.)
10(o) Agreement and Plan of Merger, dated as of May 5, 1999, by and
among the Registrant, AIM Solutions, Inc., Client Server
Solutions, Inc., CSS Financial Software Sales, Inc., Michael
Griffith, William Boynes, Jr. and L. Joseph Artime.
(Incorporated herein by reference to Exhibit 2A to the
Registrant's Current Report on Form 8-K dated November 15,
1999.)
10(p) Amended and Restated Agreement and Plan of Merger, dated as of
November 15, 1999, by and among the Registrant, AIM Solutions,
Inc., Client Server Solutions, Inc., CSS Financial Software
Sales, Inc., Todd Melioris, Chris A. Brecher, Joseph Kozak,
Michael Griffith, William Boynes, Jr. and L. Joseph Artime.
(Incorporated herein by reference to Exhibit 2B to the
Registrant's Current Report on Form 8-K dated November 15,
1999.)
10(q) Employment Agreement, effective July 31, 1999, between the
Registrant and Paul R. Arena. (Incorporated herein by reference
to Exhibit 10(u) to the Registrant's Form 10-SB filed December
21, 1999.) Represents an executive compensation plan or
arrangement.
10(r) Employment Agreement, effective November 15, 1999, between the
Registrant and L. Joseph Artime. (Incorporated herein by
reference to Exhibit 10(v) to the Registrant's Form 10-SB filed
December 21, 1999.) Represents an executive compensation plan
or arrangement.
10(s) Employment Agreement, effective November 15, 1999, between the
Registrant and William Boynes, Jr. (Incorporated herein by
reference to Exhibit 10(w) to the Registrant's Form 10-SB filed
December 21, 1999.) Represents an executive compensation plan
or arrangement.
10(t) Employment Agreement, effective November 15, 1999, between the
Registrant and Michael D. Griffith. (Incorporated herein by
reference to Exhibit 10(x) to the Registrant's Form 10-SB filed
December 21, 1999.) Represents an executive compensation plan
or arrangement.
10(u) Employment Agreement, effective July 30, 1999, between the
Registrant and Peyton H. Park. (Incorporated herein by
reference to Exhibit 10(y) to the Registrant's Form 10-SB filed
December 21, 1999.) Represents an executive compensation plan
or arrangement.
10(v) Employment Agreement, effective July 30, 1999, between the
Registrant and K. Pramond Reddy. (Incorporated herein by
reference to Exhibit 10(z) to the Registrant's Form 10-SB filed
December 21, 1999.) Represents an executive compensation plan
or arrangement.
10(w) Employment Agreement, effective July 30, 1999, between the
Registrant and Ronald Roswell, Sr. (Incorporated herein by
reference to Exhibit 10(aa) to the Registrant's Form 10-SB
filed December 21, 1999.) Represents an executive compensation
plan or arrangement.
40
<PAGE> 42
EXHIBIT NO. DOCUMENT
- ----------- --------
10(x) Employment Agreement, effective July 30, 1999, between the
Registrant and Ronald Roswell, Jr. (Incorporated herein by
reference to Exhibit 10(bb) to the Registrant's Form 10-SB
filed December 21, 1999.) Represents an executive compensation
plan or arrangement.
10(y) Form of Note Purchase Agreement relating to 15% Convertible
Subordinated Notes of the Registrant and related forms of 15%
Convertible Subordinated Note and Warrant. (Incorporated herein
by reference to Exhibit 10(cc) to the Registrant's Form 10-SB
filed December 21, 1999.)
10(z) Employment Agreement, effective as of January 10, 2000, between
the Registrant and Steven A. Odom (Filed herewith.) Represents
an executive compensation plan or arrangement.
10(aa) Employment Agreement, effective as of January 10, 2000, between
the Registrant and James M. Logsdon. (Filed herewith.)
Represents an executive compensation plan or arrangement.
10(bb) Employment Agreement, effective as of March 23, 2000, between
the Registrant and Juliet M. Reising (Filed herewith.)
Represents an executive compensation plan or arrangement.
10(cc) Cereus Technology Partners, Inc. Directors' Warrant Incentive
Plan. (Filed herewith.) Represents an executive compensation
plan or arrangement.
10(dd) Cereus Technology Partners, Inc. Outside Directors' Warrant
Plan. (Filed herewith.) Represents an executive compensation
plan or arrangement.
21 Subsidiaries of the Registrant. (Filed herewith.)
27 Financial Data Schedule
41
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on the 14th day of April, 2000.
CEREUS TECHNOLOGY PARTNERS, INC.
By: /s/ STEVE A. ODOM
------------------------------------------
Steven A. Odom, Chief Executive Officer,
Chairman and Director (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of registrant and in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------ ------------------------------- --------------
/s/ STEVEN A. ODOM
- ------------------------
Steven A. Odom Chief Executive Officer, April 14, 2000
Chairman and Director
(Principal Executive Officer)
/s/ JULIET M. REISING
- ------------------------
Juliet M. Reising Executive Vice President, April 14, 2000
Chief Financial Officer and
Director (Principal Financial
and Accounting Officer)
/s/ JAMES M. LOGSDON
- ------------------------
James M. Logsdon Chief Operating Officer and April 14, 2000
Director
/s/ MAX E. BOBBITT
- ------------------------
Max E. Bobbitt Director April 14, 2000
- ------------------------
Gary H. Heck Director
- ------------------------
Amy L. Newmark Director
- ------------------------
Joseph R. Wright, Jr. Director
42
<PAGE> 1
EXHIBIT 4(d)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE ________ SHARES OF COMMON STOCK OF
CEREUS TECHNOLOGY PARTNERS, INC.
No. ______ February 8, 2000
THIS CERTIFIES THAT, for value received, _____________ or
(subject to the restrictions on transfer contained herein and the provisions of
the Registration Rights Agreement (as hereinafter defined)) its registered
assigns (the "Holder") is entitled to purchase from Cereus Technology Partners,
Inc., a Delaware corporation (the "Company"), at any time or from time to time
after 9:00 a.m., Atlanta, Georgia time, on the date hereof and prior to 5:00
p.m., Atlanta, Georgia time, on February 8, 2003 (the "Expiration Date"), at
the place where the Warrant Agency (as hereinafter defined) is located, at the
Exercise Price (as hereinafter defined), the number of shares of common stock,
$.01 par value (the "Common Stock"), of the Company specified above, all
subject to adjustment and upon the terms and conditions as hereinafter
provided.
Capitalized terms used and not otherwise defined in this
Warrant shall have the meanings set forth in Article V hereof.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company at the Warrant Agency: (a)
this Warrant; (b) a written notice, substantially in the form of the
subscription notice attached hereto as Annex 1, of
<PAGE> 2
such Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased, the denominations of the
share certificate or certificates desired and the name or names of the Eligible
Holder(s) in which such certificates are to be registered; and (c) payment of
the Exercise Price with respect to such shares of Common Stock. Such payment
may be made, at the option of the Holder, by cash, money order, certified or
bank cashier's check or wire transfer.
The Company shall, as promptly as practicable and in any
event within five (5) Business Days thereafter, execute and deliver or cause to
be executed and delivered, in accordance with such subscription notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such notice
(or, if such notice shall not specify denominations, one certificate shall be
issued) and shall be issued in the name of the Holder or such other name or
names of Eligible Holder(s) as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued, and such
Holder or any other person so designated to be named therein shall be deemed
for all purposes to have become holders of record of such shares, as of the
date the aforementioned notice is received by the Company. If this Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the Holder a new
Warrant evidencing the right to purchase the remaining shares of Common Stock
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant. The Company shall pay all expenses payable in
connection with the preparation, issuance and delivery of share certificates
and new Warrants as contemplated by Section 2.6 below (other than transfer or
similar taxes in connection with the transfer of securities), except that, if
share certificates or new Warrants shall be registered in a name or names other
than the name of the Holder, funds sufficient to pay all transfer taxes payable
as a result of such transfer shall be paid by the Holder at the time of
delivering the aforementioned notice or promptly upon receipt of a written
request of the Company for payment.
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for shares of the Common Stock of the
Company or other securities purchasable upon the exercise of this Warrant are
closed for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until the date
of the reopening of said transfer books.
1.2. Shares To Be Fully Paid and Nonassessable. All shares of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable.
1.3. No Fractional Shares To Be Issued. The Company shall not
be required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to the
2
<PAGE> 3
same fraction of the Average Closing Price per share of outstanding shares of
Common Stock on the Business Day immediately prior to the date of such
exercise.
1.4. Securities Laws; Share Legend. The Holder, by acceptance
of this Warrant, agrees that this Warrant and all shares of Common Stock
issuable upon exercise of this Warrant will be disposed of only in accordance
with the Securities Act of 1933, as amended (the "Securities Act") and the
rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated thereunder. In addition to any other legend which the
Company may deem advisable under the Securities Act and applicable state
securities laws, all certificates representing shares of Common Stock (as well
as any other securities issued hereunder in respect of any such shares) issued
upon exercise of this Warrant shall be endorsed as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
Any certificate issued at any time in exchange or
substitution for any certificate bearing such legend (except a new certificate
issued upon completion of a public distribution pursuant to a registration
statement under the Securities Act) shall also bear such legend unless, in the
opinion of counsel (in form and substance reasonably satisfactory to the
Company) selected by the Holder of such certificate and reasonably acceptable
to the Company, the securities represented thereby need no longer be subject to
restrictions on resale under the Securities Act.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANT
2.1. Warrant Agency. Until such time, if any, as an
independent agency shall be appointed by the Company to perform services
described herein with respect to this Warrant (the "Warrant Agency"), the
Company shall perform the obligations of the Warrant Agency provided herein at
its principal office address or such other address as the Company shall specify
by prior written notice to the Holder.
2.2. Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
person other than the Company) for
3
<PAGE> 4
all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in this
Article II.
2.3. Transfer of Warrant. This Warrant may only be
transferred to a purchaser subject to and in accordance with this Section 2.3,
and any attempted transfer which is not in accordance with this Section 2.3
shall be null and void and the transferee shall not be entitled to exercise any
of the rights of the holder of this Warrant. The Company agrees to maintain at
the Warrant Agency books for the registration of such transfers of Warrants,
and transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the Warrant
Agency in accordance with this Section 2.3, together with a written assignment
of this Warrant, substantially in the form of the assignment attached hereto as
Annex 2, duly executed by the Holder or its duly authorized agent or
attorney-in-fact, with signatures guaranteed by a bank or trust company or a
broker or dealer registered with the NASD, and funds sufficient to pay any
transfer taxes payable upon such transfer. Upon surrender of this Warrant in
accordance with this Section 2.3, the Company (subject to being satisfied that
such transfer is in compliance with Section 1.4) shall execute and deliver a
new Warrant or Warrants of like tenor and representing in the aggregate the
right to purchase the same number of shares of Common Stock in the name of the
assignee or assignees and in the denominations specified in the instrument of
assignment, and this Warrant shall promptly be canceled. Notwithstanding the
foregoing, a Warrant may be exercised by a new holder without having a new
Warrant issued. The Company shall not be required to pay any Federal or state
transfer tax or charge that may be payable in respect of any transfer of this
Warrant or the issuance or delivery of certificates for Common Stock in a name
other than that of the registered holder of this Warrant.
2.4. Division or Combination of Warrants. This Warrant may be
divided or combined with other Warrants, in connection with the partial
exercise of this Warrant, upon surrender hereof and of any Warrant or Warrants
with which this Warrant is to be combined at the Warrant Agency, together with
a written notice specifying the names and denominations in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys-in-fact. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
2.5. Loss, Theft, Destruction of Warrant Certificates. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of indemnity or security (in
customary form) reasonably satisfactory to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant and upon
reimbursement of the Company's reasonable incidental expenses, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of shares of Common Stock.
4
<PAGE> 5
2.6. Expenses of Delivery of Warrants. Except as otherwise
expressly provided herein, the Company shall pay all expenses (other than
transfer taxes as described in Section 2.3) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder
and shares of Common Stock upon the exercise hereof.
ARTICLE III
ANTIDILUTION PROVISIONS
3.1. Adjustments Generally. The Exercise Price and the number
of shares of Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events, as provided in this Article III.
3.2. Common Share Reorganization. If the Company shall
subdivide its outstanding shares of Common Stock into a greater number of
shares or consolidate its outstanding shares of Common Stock into a smaller
number of shares (any such event being called a "Common Share Reorganization"),
then (a) the Exercise Price shall be adjusted, effective immediately after the
record date at which the holders of shares of Common Stock are determined for
purposes of such Common Share Reorganization, to a price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date before giving effect to such Common Share
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Share
Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be adjusted, effective at such
time, to a number determined by multiplying the number of shares of Common
Stock subject to purchase immediately before such Common Share Reorganization
by a fraction, the numerator of which shall be the number of shares outstanding
after giving effect to such Common Share Reorganization and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
before such Common Share Reorganization.
3.3. Common Share Distribution. (a) If, other than in an
Exempt Distribution, the Company shall issue or otherwise sell any shares of
its Common Stock (any such issuance or sale other than an Exempt Distribution,
including any event described in paragraphs (b) and (c) of this Section 3.3,
hereafter being called a "Common Share Distribution"), the Exercise Price shall
be reduced to the price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior to such Common Share
Distribution by a fraction, the numerator of which shall be the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such Common
Share Distribution multiplied by the Appraised Fair Market Value on the date of
such Common Share Distribution plus (B) the consideration received by the
Company upon such Common Share Distribution, and the denominator of which shall
be the product of (1) the total number of shares of Common Stock outstanding
immediately after such Common Share Distribution,
5
<PAGE> 6
multiplied by (2) the Appraised Fair Market Value on the date of such Common
Share Distribution.
No adjustment of the Exercise Price shall be made in an
amount less than 1% of such Exercise Price, but any such lesser adjustment
shall be carried forward and shall be made at the time of, and together with,
the next subsequent adjustment which together with any adjustments so carried
forward shall aggregate an amount equal to or greater than 1% of such Exercise
Price.
If any Common Share Distribution shall require an adjustment
to the Exercise Price pursuant to the foregoing provisions of this Section 3.3,
then effective at the time such adjustment is made, the number of shares of
Common Stock subject to purchase upon exercise of this Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock subject to purchase immediately before such Common Share Distribution by
a fraction, the numerator of which shall be the number of shares outstanding
immediately after giving effect to such Common Share Distribution and the
denominator shall be the sum of the number of shares outstanding immediately
before giving effect to such Common Share Distribution plus the number of
shares of Common Stock which the aggregate consideration received by the
Company with respect to such Common Share Distribution would purchase at the
Appraised Fair Market Value on the date of such Common Share Distribution
(before giving effect to such Common Share Distribution). The provisions of
this Section 3.3 shall not operate to increase the Exercise Price or reduce the
number of shares of Common Stock subject to purchase upon exercise of this
Warrant.
(b) If, other than in an Exempt Distribution, the Company
shall issue, sell, distribute or otherwise grant in any manner (whether
directly or by assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (such
rights, warrants or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon exercise of such
Options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the aggregate amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Appraised
Fair Market Value on the date of granting such Options (before giving effect to
such grant), then, for purposes of paragraph (a) above, the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of all such Convertible Securities issuable
6
<PAGE> 7
upon the exercise of such Options shall be deemed to have been issued as of the
date of granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration
such price per share, determined as provided above, therefor; provided,
however, upon the expiration or termination of Convertible Securities or
Options, if any thereof shall not have been converted, exchanged or exercised,
the number of shares of Common Stock deemed to be issued and outstanding
pursuant to this subsection (b) shall be reduced by such number of shares as to
which Convertible Securities or Options shall have expired or terminated
unexercised, and such shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall be readjusted and
thereafter be the price which it would have been had adjustment been made on
the basis of the issuance only of shares actually issued pursuant to such
Convertible Securities or Options. Except as otherwise provided in paragraph
(d) below, no additional adjustment of the Exercise Price shall be made upon
the actual exercise of such Options or upon conversion or exchange of such
Convertible Securities.
(c) If, other than in an Exempt Distribution, the Company
shall issue, sell or otherwise distribute (whether directly or by assumption in
a merger or otherwise) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon such conversion or
exchange (determined by dividing (i) the aggregate amount received or
receivable by the Company as consideration for the issue, sale or distribution
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Appraised Fair Market Value on the date of such issue, sale or
distribution (before giving effect to such issue, sale or distribution), then,
for purposes of paragraph (a) above, the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date of the issue,
sale or distribution of such Convertible Securities and thereafter shall be
deemed to be outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above, therefor;
provided, however, upon the expiration or termination of Convertible Securities
or Options, if any thereof shall not have been converted, exchanged or
exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (c) shall be reduced by such number of
shares as to which Convertible Securities or Options shall have expired or
terminated unexercised, and such shares shall no longer be deemed to be issued
and outstanding, and the Exercise Price then in effect shall be readjusted and
thereafter be the price which it would have been had adjustment been made on
the basis of the issuance only of shares actually issued pursuant to such
Convertible Securities or Options. Except as otherwise provided in paragraph
(d) below, no additional adjustment of the Exercise Price shall be made upon
the actual conversion or exchange of such Convertible Securities, and, if any
such issue, sale or distribution of such Convertible Securities is made upon
exercise of any Options to purchase any such Convertible Securities for which
adjustments to the Exercise Price have been or are
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<PAGE> 8
to be made pursuant to other provisions of this Section 3.3, no further
adjustment of the Exercise Price shall be made by reason of such issue, sale or
distribution.
(d) If the purchase price provided for in any Option referred
to in paragraph (b) above, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
paragraph (b) or (c) above, or the rate at which any Convertible Securities
referred to in paragraph (b) or (c) above are convertible into or exchangeable
for Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution upon an event which results in
a related adjustment pursuant to this Article III), the Exercise Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of this Warrant after such readjustment) to the Exercise Price which
would then be in effect had the adjustment made upon the issue, sale,
distribution or grant of such Options or Convertible Securities been made based
upon such changed purchase price, additional consideration or conversion rate,
as the case may be; provided, however, that such readjustment shall give effect
to such change only with respect to such Options and Convertible Securities as
then remain outstanding.
(e) If any shares of Common Stock, Options or Convertible
Securities shall be issued, sold or distributed for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, after deduction therefrom of any expenses incurred and any
underwriting commission or concessions paid or allowed by the Company in
connection therewith. If any shares of Common Stock, Options or Convertible
Securities shall be issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the Fair Market Value of such consideration, after
deduction of any expenses incurred and any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market
Value of such portion of the assets and business of the nonsurviving
corporation as shall be attributable to such shares of Common Stock, Option or
Convertible Securities, as the case may be. If any Options shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued for an amount of consideration equal to the Fair Market
Value thereof.
3.4. Capital Reorganization. If there shall be any
consolidation or merger to which the Company is a party, other than a
consolidation or a merger in which the Company is a continuing corporation and
which does not result in any reclassification of, or change (other than a
Common Share Reorganization or a change in par value) in, outstanding shares of
Common Stock, or any sale or conveyance of the property of the Company as an
entirety or substantially as an entirety (any such event being called a
"Capital Reorganization"), then, effective upon the effective date of such
Capital Reorganization, the Holder shall have the right to purchase, upon
exercise of this Warrant, the kind and amount of shares of stock and
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<PAGE> 9
other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised immediately prior to such Capital
Reorganization. As a condition to effecting any Capital Reorganization, the
Company or the successor or surviving corporation, as the case may be, shall
execute and deliver to the Holder and to the Warrant Agency an agreement as to
the Holder's rights in accordance with this Section 3.4, providing for
subsequent adjustments as nearly equivalent as may be practicable to the
adjustments provided for in this Article III. The provisions of this Section
3.4 shall similarly apply to successive Capital Reorganizations.
3.5. Adjustment Rules. (a) Any adjustments pursuant to this Article
III shall be made successively whenever an event referred to herein shall
occur.
(b) No adjustment shall be made pursuant to this Article III in
respect of the issuance from time to time of shares of Common Stock upon the
exercise of this Warrant.
(c) If the Company shall set a record date to determine the holders of
shares of Common Stock for purposes of a Common Stock Reorganization or Capital
Reorganization and shall legally abandon such action prior to effecting such
action, then no adjustment shall be made pursuant to this Article III in
respect of such action.
3.6. Proceeding Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article III, the Company shall take any action
which may be necessary, including obtaining regulatory approvals or exemptions,
in order that the Company may thereafter validly and legally issue as fully
paid and nonassessable all shares of Common Stock which the Holder is entitled
to receive upon exercise hereof.
3.7. Notice of Dividends, Distributions and Adjustments. The Company
shall give notice to the Holder at least fifteen (15) days prior to any record
date in respect of the payment of dividends or other distributions on the
Common Stock, or in respect of any Common Share Reorganization or Capital
Reorganization describing, in each case, such event in reasonable detail and
specifying such record date. In addition, no later than 15 days after the
effective date or record date, as the case may be, of any Common Share
Reorganization, Common Share Distribution or Capital Reorganization or any
other action that requires an adjustment pursuant to this Article III or any
grant, issuance or sale covered by Section 3.9, the Company shall give notice
to the Holder of such event, describing such event in reasonable detail and
specifying the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the Company
shall give notice to the Holder of such adjustment and computation promptly
after such adjustment becomes determinable.
3.8. Dividends Not Paid Out of Earnings or Earned Surplus. In the
event the Company shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock) payable otherwise than out of earnings or
earned surplus, determined in
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<PAGE> 10
accordance with generally accepted accounting principles, including the making
of appropriate deductions for minority interests, if any, in subsidiaries
(herein referred to as "Liquidating Dividends"), then, as soon as possible
after the exercise of this Warrant, the Company shall pay to the person
exercising such Warrant an amount equal to the aggregate value at the time of
such exercise of all Liquidating Dividends (including but not limited to the
Common Stock which would have been issued at the time of such earlier exercise
and all other securities which would have been issued with respect to such
Common Stock by reason of stock splits, stock dividends, mergers or
reorganizations, or for any other reason). For the purposes of this Paragraph
3.8, a dividend other than in cash shall be considered payable out of earnings
or earned surplus only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as determined in
good faith by the Board of Directors of the Company.
3.9. Grant, Issue or Sale of Options, Convertible Securities,
or Rights. If at any time or from time to time the Company shall grant, issue
or sell any Options, Convertible Securities or rights to purchase property (the
"Purchase Rights") pro rata to the record holders of any class of Common Stock
of the Company and such grants, issuances or sales do not result in an
adjustment of the Purchase Price under Section 3.3 hereof, then the holder of
this Warrant shall be entitled to acquire (within thirty (30) days after the
later to occur of the initial exercise date of such Purchase Rights or receipt
by such holder of the notice concerning Purchase Rights as to which such holder
may be entitled under Paragraph 3.7) and upon the terms applicable to such
Purchase Rights either:
(i) the aggregate Purchase Rights which such holder
could have acquired if it had held the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately before the grant, issuance
or sale of such Purchase Rights, provided that if any Purchase Rights were
distributed to holders of Common Stock without the payment of additional
consideration by such holders, the corresponding Purchase Rights shall be
distributed to the exercising holder of this Warrant as soon as possible after
such exercise and it shall not be necessary for the exercising holder of this
Warrant specifically to request delivery of such rights; or
(ii) in the event that any such Purchase Rights shall
have expired or shall expire prior to the end of said thirty (30) day period,
the number of shares of Common Stock or the amount of property which such
holder could have acquired upon such exercise at the time or times at which the
Company granted, issued or sold such expired Purchase Rights.
3.10. Adjustment by Board of Directors. If any event occurs
as to which, in the opinion of the Board of Directors of the Company, the
provisions of this Article III are not strictly applicable or if strictly
applicable would not fairly protect the rights of the holder of this Warrant in
accordance with the essential intent and principles of such provisions, then
the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights as aforesaid, but in no event shall any adjustment have the
effect of increasing the Exercise Price or
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<PAGE> 11
decreasing the number of shares of Common Stock into which the Warrant is
exercisable as otherwise determined pursuant to any of the provisions of this
Article III except in the case of a combination of shares of a type
contemplated in Section 3.2 and then in no event to an amount larger than the
Exercise Price as adjusted pursuant to Section 3.2.
ARTICLE IV
CALL OPTION
4.1. Company Right to Purchase. The Holder hereby grants to
the Company the right to purchase this Warrant (in whole only and not in part)
for cash (the "Call Option") at a purchase price equal to the product of $0.01
multiplied by the number of shares of Common Stock for which this Warrant is
then exercisable (the "Call Price"); provided, however, that the Call Option
shall only be exercisable (i) if the closing bid price of the Common Stock for
twenty (20) consecutive trading days is at least equal to two (2) times the
Exercise Price then in effect and (ii) if a registration statement under the
Securities Act is effective on the Call Date that registers all the Common
Stock issuable upon the exercise of this Warrant (the "Registrable Stock"). The
Company agrees (i) to prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than one hundred twenty (120) days from the
Call Date (or such lesser time as necessary to permit each seller of
Registrable Stock to complete the distribution described in such registration
statement) and (ii) to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
distribution by the sellers thereof set forth in such registration statement.
In connection therewith, the Company will as expeditiously as possible;
(i) furnish to each seller of Registrable Stock such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Stock owned
by such seller;
(ii) use its reasonable best efforts to register or qualify
such Registrable Stock under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable Stock
owned by such seller, provided that the Company will not be required (A) to
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (B) to subject
itself to taxation in any such jurisdiction or (C) to consent to general
service of process in any such jurisdiction;
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<PAGE> 12
(iii) notify each seller of such Registrable Stock, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Stock, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(iv) cause all such Registrable Stock to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and to be qualified for trading on each system on which similar
securities issued by the Company are from time to time qualified;
(v) provide a transfer agent and registrar for all such
Registrable Stock not later than the effective date of such registration
statement and thereafter maintain such a transfer agent and registrar; and
(vi) use its reasonable best efforts promptly to obtain the
withdrawal of any stop order that is issued suspending the effectiveness of
such registration statement, or of any order suspending or preventing the use
of any related prospectus or suspending the qualification of any Registrable
Stock included in such registration statement for sale in any jurisdiction.
4.2 Notice to Holder. If the Company elects to exercise its Call
Option pursuant to this Article IV, then at least fifteen (15) Business Days
but not more than sixty (60) Business Days before the Call Date, the Company
shall mail or cause to be mailed a redemption notice (the "Notice") by
first-class mail to Holder at Holder's address as it appears on the books
maintained by the Warrant Agency. The Notice shall state: (i) the Call Date;
(ii) the Call Price; (iii) the then current Exercise Price; (iv) that this
Warrant must be presented and surrendered to the Warrant Agency to collect the
Call Price; (v) that this Warrant may be exercised at any time before the close
of business on the fifth (5th) Business Day immediately preceding the Call Date
(the "Exercise Termination Date"); (vi) that, if the Holder wishes to exercise
this Warrant, the Holder must satisfy the requirements of Article I hereof
prior to the Exercise Termination Date; and (vii) that, unless the Company
defaults in making the payment of the Call Price, the only remaining right of
Holder after the Exercise Termination Date shall be to receive payment of the
Call Price upon presentation and surrender of this Warrant to the Warrant
Agency.
4.3 Payment upon Surrender of Warrant. If the Company elects to
exercise its Call Option pursuant to this Article IV, and the Holder does not
exercise this Warrant prior to the Exercise Termination Date, the Company shall
pay the Call Price to the Holder in accordance with the Notice upon
presentation and surrender by the Holder of this Warrant to
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<PAGE> 13
the Warrant Agency.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the
following respective meanings:
"Appraised Fair Market Value" means, as of any date, in
respect of shares of Common Stock, the Average Closing Price, if clauses (i),
(ii) or (iii) of the definition of Average Closing Price applies or, if clause
(iv) of such definition obtains, the Fair Market Value per share of Common
Stock, as determined by a qualified independent appraiser of national standing
having not less than five (5) years' experience in the valuation of securities,
the selection of which is mutually agreed by the Holder and the Company. In all
cases where Appraised Fair Market Value is determined by an independent
appraiser, as aforesaid, one half of such appraiser's fees and expenses shall
be paid by each of the Holder and the Company. For the purposes of this
definition, the agreement of the Holders of a majority in interest of the
Warrants issued as of this date shall be deemed to be approval of all Holders
of Warrants issued pursuant to the Securities Purchase Agreement.
"Average Closing Price" means, as of any date, (i) if shares
of Common Stock are listed on a national securities exchange, the average of
the closing sale prices per share therefor on the largest securities exchange
on which such shares are traded on the last ten (10) trading days before such
date; (ii) if such shares are listed on The Nasdaq National Market but not on
any national securities exchange, the average of the average of the closing bid
and asked prices per share therefor on The Nasdaq National Market on the last
ten (10) trading days before such date; (iii) if such shares are not listed on
either a national securities exchange or The Nasdaq National Market, the
average of the average of the closing bid and asked prices per share therefor
in the over the counter market on the last twenty (20) trading days before such
date; or (iv) if no such sales prices are available, the Fair Market Value of
the Company per share of outstanding Common Stock as of such date.
"Business Days" means each day in which banking institutions
in Atlanta, Georgia are not required or authorized by law or executive order to
close.
"Call Date" means the Business Day fixed by the Company upon
which this Warrant shall be called in accordance with Article IV.
"Call Option" has the meaning set forth in Section 4.1.
"Call Price" has the meaning set forth in Section 4.1.
"Capital Reorganization" has the meaning set forth in Section
3.4.
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"Commission" has the meaning set forth in Section 1.4.
"Common Share Distribution" has the meaning set forth in
Section 3.3(a).
"Common Share Reorganization" has the meaning set forth in
Section 3.2.
"Common Stock" has the meaning set forth in the first
paragraph of this Warrant.
"Company" has the meaning set forth in the first paragraph of
this Warrant.
"Convertible Securities" has the meaning set forth in Section
3.3(b).
"Eligible Holder" means the Holder and any permitted
transferee of the Holder pursuant to and in accordance with this Warrant and
the Registration Rights Agreement.
"Exempt Distribution" means an issuance or other sale by the
Company of any shares of its Common Stock:
(i) pursuant to a Common Share Reorganization;
(ii) (a) to the Company's officers or directors or (b)
to the Company's officers, directors or employees pursuant to employee stock
option, benefit or incentive plans established for their benefit, whether in
existence on the date hereof or approved by the Board of Directors of the
Company after the date hereof;
(iii) at a price per share of more than the greater of
(a) the Exercise Price or (b) eighty percent (80%) of the Appraised Fair Market
Value, which in the case of an issuance in connection with a merger or
acquisition shall be measured on the date of the execution of the definitive
documentation with respect to such merger or acquisition;
(iv) upon the conversion or exercise of any options,
warrants or other convertible securities of the Company outstanding on February
8, 2000; or
(v) to the Holder or any Affiliate thereof.
"Exercise Price" means US $10.00 per share of Common Stock,
subject to adjustment pursuant to Article III.
"Exercise Termination Date" has the meaning set forth in
Section 4.1.
"Expiration Date" has the meaning set forth in the first
paragraph of this Warrant.
"Fair Market Value" means the fair market value of the
business, property or assets in question as determined in good faith by the
Board of Directors of the Company and unless waived by a majority in interest
of the Holders of the Warrants issued as of this date
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confirmed by an independent nationally recognized financial advisor with
expertise in valuing companies of this type, or determined as otherwise
specifically provided herein.
"Holder" has the meaning set forth in the first paragraph of
this Warrant.
"NASD" means The National Association of Securities Dealers,
Inc.
"Notice" has the meaning set forth in Section 4.2.
"Options" has the meaning set forth in Section 3.3(b).
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of February 8, 2000 by and among the Company and the
purchasers of the Warrants.
"Securities Act" means the Securities Act of 1933, as
amended, and any successor Federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect from time to time.
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrants" means this Warrant and the other Warrants issued as
of the date hereof.
ARTICLE VI
MISCELLANEOUS
6.1. Governing Law. This Warrant shall be governed in all
respects by the laws of the State of Delaware, without reference to its
conflicts of law principles.
6.2. Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements contained in this Warrant by or on behalf
of the Company shall bind its successors and assigns, whether or not so
expressed.
6.3. Entire Agreement. This Warrant constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenant except as
specifically set forth herein or therein.
6.4. Waivers and Amendments. No failure or delay of the
Holder in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions
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<PAGE> 16
of this Warrant may be amended, modified or waived with (and only with) the
written consent of the Company and the Holders of a majority in interest of the
Warrants then outstanding; provided, however, that no such amendment,
modification or waiver shall, without the written consent of the Holders of any
Warrant, (a) change the number of shares of Common Stock subject to purchase
upon exercise of such Warrant, the Exercise Price or provisions for payment
thereof or (b) amend, modify or waive the provisions of Section 6.4 or Article
III of such Warrant.
Any such amendment, modification or waiver effected pursuant
to this Section shall be binding upon the Holders of all Warrants and upon the
Company, except as provided in the proviso to the last sentence of the
preceding paragraph. In the event of any such amendment, modification or waiver
the Company shall give prompt notice thereof to all holders of Warrants and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
6.5. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be mailed by express,
registered or certified mail, postage prepaid, return receipt requested, sent
by telecopy (with confirmation of transmission received and followed by the
posting of a "hard copy" of the notice or communication by first-class U.S.
mail), or by courier service guaranteeing overnight delivery with charges
prepaid, or otherwise delivered by hand or by messenger, and shall be
conclusively deemed to have been received by a party hereto and to be effective
on the day on which delivered or telecopied to such party at its address set
forth below (or at such other address as such party shall specify to the other
parties hereto in writing), or, if sent by registered or certified mail, on the
third business day after the day on which mailed, addressed to such party at
such address.
In the case of the Holder, such notices and communications
shall be addressed to its address as shown on the books maintained by the
Warrant Agency, unless the Holder shall notify the Company and the Warrant
Agency in writing that notices and communications should be sent to a different
address, in which case such notices and communications shall be sent to the
address specified by the Holder. In the case of the Company, such notices and
communications shall be addressed as follows: Attention: Chief Financial
Officer, Cereus Technology Partners, Inc., 1000 Abernathy Road, 400 Northpark,
Suite 1000, Atlanta, Georgia 30328.
6.6. Survival of Agreements; Representations and Warranties,
etc. All warranties, representations and covenants made by the Company herein
shall be considered to have been relied upon by the Holder and shall survive
the issuance and delivery of the Warrant, regardless of any investigation made
by the Holder, and shall continue in full force and effect so long as this
Warrant is outstanding.
6.7. Severability. In case any one or more of the provisions
contained in this Warrant shall be held to be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way
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<PAGE> 17
be affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
6.8. Section Headings. The section headings used herein are
for convenience of reference only, do not constitute a part of this Warrant and
shall not affect the construction of or be taken into consideration in
interpreting this Warrant.
6.9. No Rights as Stockholder; No Limitations on Company
Action. This Warrant shall not entitle the Holder to any rights as a
stockholder of the Company. No provision of this Warrant and no right or option
granted or conferred hereunder shall in any way limit, affect or abridge the
exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its certificate of incorporation, reorganize, consolidate
or merge with or into another corporation or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights or
powers.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized representative.
CEREUS TECHNOLOGY PARTNERS, INC.
By:
------------------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive Officer
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Annex 1
SUBSCRIPTION NOTICE
Dated:________________
The undersigned hereby irrevocably elects to exercise the
right of purchase evidenced by the attached Warrant for, and to purchase
thereunder, __________ shares of Common Stock of Cereus Technology Partners,
Inc. as provided for therein. The undersigned tenders herewith payment of the
Exercise Price (as defined in the attached Warrant) for such shares in the form
of cash, money order, certified or bank cashier's check or wire transfer.
Instructions for Registration of Common Stock
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
Name:_________________________________________________
(Please typewrite or print in block letters.)
Address:______________________________________________
Denomination:_________________________________________
Representations and Warranties
In connection with the exercise of the attached Warrant, the
undersigned hereby represents and warrants that:
(i) unless registered pursuant to a Registration Rights
agreement or otherwise, it recognizes that the shares of Common Stock issuable
pursuant to the attached Warrant have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any applicable state
securities laws, and may not transferred, sold, or offered for sale unless
registered pursuant to the Securities Act and all applicable state securities
laws or unless an exemption from such registration in available and the Company
has received an opinion to that effect from counsel reasonably satisfactory to
the Company;
<PAGE> 19
(ii) it recognizes that the shares of Common Stock issuable
pursuant to the attached Warrant are subject to, and are transferable only upon
compliance with, the provisions of the Registration Rights Agreement;
(iii) if the undersigned is an individual, the undersigned is
an "accredited investor" as that term is defined in Rule 501(a)(5) or (6) of
Regulation D promulgated under the Securities Act by reason that the
undersigned is an individual (i) having an individual net worth, or a joint net
worth with the undersigned's spouse, at the time of the purchase that exceeds
$1,000,000, or (ii) who had an individual income in excess of $200,000 in each
of the two most recent years or joint income with the undersigned's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year; or if the undersigned is a
corporation or other entity, the undersigned is an "accredited investor" as
that term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
promulgated under the Securities Act; and
(iv) it is purchasing the shares of Common Stock for
investment and not with a view to resale or distribution or any present
intention to resell or distribute, except in compliance with the Securities Act
and all applicable state securities laws.
Issuance of New Warrant
If said number of shares shall not be all the shares issuable
upon exercise of the attached Warrant, a new Warrant is to be issued in the
name of the undersigned for the balance remaining of such shares less any
fraction of a share paid in cash.
Signature:
----------------------------------------------------------------------
Note: The above signature should correspond exactly with the
name on the face of the attached Warrant or with the name
of the assignee appearing in the assignment form below.
Page 2 of Annex 1
<PAGE> 20
Annex 2
Assignment
For value received, the undersigned hereby sells, assigns and
transfers unto:
Name:________________________________________________
(Please type or print in block letters)
Address:_____________________________________________
the right to purchase Common Stock (as defined in the attached Warrant)
represented by the attached Warrant to the extent of _______________ shares as
to which such right is exercisable and does hereby irrevocably constitute and
appoint ________________________________________________________________
__________________________________________________, attorney-in-fact, to
transfer said Warrant on the books of Cereus Technology Partners, Inc., with
full power of substitution in the premises.
Dated:________________
Signature:
----------------------------------------------------------------------
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant.
<PAGE> 1
EXHIBIT 4(e)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 8th day of February, 2000, by and among CEREUS
TECHNOLOGY PARTNERS, INC., a Delaware corporation (the "Company"), and each of
the stockholders listed on Schedule 1 hereto (each a "Stockholder" and,
collectively, the "Stockholders").
IN CONSIDERATION of the mutual promises and covenants set forth
herein, and intending to be legally bound, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Common Stock" shall mean the Company's common stock,
$.01 par value per share.
(b) "Demand Registration" shall have the meaning given to
it in Section 1.3 hereof.
(c) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(d) "Holder" shall mean any Stockholder who holds
Registrable Securities and any holder of Registrable Securities to whom the
rights conferred by this Agreement have been transferred in compliance with
Section 1.2 hereof.
(e) "Initiating Holders" shall mean any Warrantholder or
Warrantholders who, in the aggregate, have the right to acquire not less than a
majority of the Warrant Shares underlying the then-outstanding Warrants.
(f) "Other Stockholders" shall mean persons who, by
virtue of agreements with the Company other than this Agreement, are entitled
to include their securities in certain registrations hereunder.
(g) "Registrable Securities" shall mean the shares of
Common Stock held by the Stockholders listed on Schedule 1 hereto in the amount
set forth thereon, the Warrants held by the Stockholders listed on Schedule 1
hereto and any shares of Common Stock that such Stockholder has the right to
acquire, or does acquire, upon the exercise of the Warrants
<PAGE> 2
or, in either case, their permitted transferees, provided that a Registrable
Securities ceases to be a Registrable Security when (i) it is registered under
the Securities Act; (ii) it is sold or transferred in accordance with the
requirements of Rule 144 (or similar provisions then in effect) promulgated by
the SEC under the Securities Act ("Rule 144); (iii) it is eligible to be sold
or transferred under Rule 144 without holding period or volume limitations; or
(iv) it is sold in a private transaction in which the transferor's rights under
this Agreement are not assigned.
(h) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and applicable rules and regulations thereunder and the
declaration or ordering of the effectiveness of such registration statement.
(i) "Registration Expenses" shall mean all expenses
incurred in effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and
one counsel selected to represent the Holders, which counsel shall be
reasonably satisfactory to the Company, blue sky fees and expenses, and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include (i) Selling Expenses; (ii) the compensation
of regular employees of the Company, which shall be paid in any event by the
Company; and (iii) blue sky fees and expenses incurred in connection with the
registration or qualification of any Registrable Securities in any state,
province or other jurisdiction in a registration pursuant to Section 1.3 or 1.4
hereof to the extent that the Company shall otherwise be making no offers or
sales in such state, province or other jurisdiction in connection with such
registration.
(j) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(k) "Rule 145" shall mean Rule 145 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(l) "SEC" shall mean the Securities and Exchange
Commission.
(m) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of Registrable Securities.
(n) "Warrantholder" shall mean any holder of a Warrant.
(o) "Warrant Shares" shall mean the shares of Common
Stock issuable by the Company upon exercise of the Warrants.
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<PAGE> 3
(p) "Warrants" shall mean the warrants to purchase shares
of Common Stock at an exercise price of $10.00 per share dated February 8, 2000
issued in connection with the Company's January 2000 private equity financing.
1.2 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all
or any portion of the Registrable Securities unless and until (i) there is then
in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or (ii) (A) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition
and (B) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such shares
under the Securities Act, it being understood that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.
(b) Notwithstanding the provisions of subparagraphs (i)
and (ii) of paragraph (a) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (i) a
partnership to its partners in accordance with their partnership interests;
(ii) a limited liability company to its members in accordance with their member
interests; or (iii) to the Holder's family member or a trust for the benefit of
an individual Holder or one or more of his family members, provided that the
transferee will be subject to the terms of this Section 1.2 to the same extent
as if it were an original Holder hereunder.
(c) Each certificate representing Registrable Securities
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
(d) The Company shall be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the Holder
shall have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so
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<PAGE> 4
disposed of in compliance with the Securities Act without registration,
qualification or legend.
(e) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal or if the
Holder shall request such removal and shall have obtained and delivered to the
Company an opinion of counsel reasonably acceptable to the Company to the
effect that such legend and/or stop-transfer instructions are no longer
required pursuant to applicable state securities laws.
1.3 DEMAND REGISTRATION.
(a) Request for Registration. If the Company shall
receive at any time prior to the third anniversary hereof, a written request
from Initiating Holders that the Company effect the registration under the
Securities Act of their Warrant Shares, then the Company shall, within five
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of this Section 1.3, use its best efforts
to effect such a registration as soon as practicable and in any event to file
within 60 days of the receipt of such request, a registration statement under
the Securities Act covering all the Registrable Securities which the Holders
shall in writing request (given within 10 days of receipt of the notice given
by the Company pursuant to this Section 1.3 (a)) to be included in such
registration and to use its best efforts to have such registration statement
become effective; provided, however, that the Company shall be obligated to
effect such registration on Form S-1 only if (i) Form S-3 (or any successor
form to Form S-3 regardless of its designation) is not available for such
offering by the Holders or (ii) if the offering is underwritten, the
underwriter shall determine that it is in the best interest of the selling
Holders to effect such registration on Form S-1.
(b) Underwriting. The Initiating Holders must, unless
otherwise agreed by the Company and a majority of the Initiating Holders,
distribute the Registrable Securities covered by their request by means of an
underwriting, and the Company shall state that the distribution must be made by
means of an underwriting in the written notice referred to in subsection
1.3(a). The right of any Holder to include its Warrant Shares in such
registration shall be conditioned, if applicable, upon such Holder's
participation in such underwriting and the inclusion of such Holder's Warrant
Shares in the underwriting to the extent provided herein. If applicable, all
Holders proposing to distribute their Warrant Shares through such underwriting
shall, together with the Company, enter into an agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company with the consent of the Holders holding a majority of the Warrant
Shares requested to be included in such registration, which consent shall not
be unreasonably withheld. If applicable, notwithstanding any other provision
of this Section 1.3, if, in the case of a registration request pursuant to
Section 1.3(a), the underwriter advises the Company that marketing factors
require a limitation of the number of Warrant Shares to be underwritten, then
the Company shall so advise all Holders of Warrant Shares which would otherwise
be
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<PAGE> 5
underwritten pursuant hereto, and the number of Warrant Shares that may be
included in the underwriting shall be allocated pro rata based on the number of
Warrant Shares held among all Holders participating in such registration.
(c) Effecting Registration. The Company shall not be
obligated to effect more than one (1) registration pursuant to this Section
1.3. A registration shall not be deemed to have been effected unless such
registration becomes effective pursuant to the 1933 Act; provided that no
registration shall be deemed to have been effected if (i) such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental authority for any reason other than an act or
omission of an Initiating Holder, (ii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied by the Company other than by reason of
an act or omission by an Initiating Holder, or (iii) the Holders shall have
withdrawn such request for registration on the basis that there has been a
material adverse change in the business, condition or prospects of the Company
from that known to the Initiating Holders at the time of their request which
makes the proposed offering unwarranted in the good faith judgment of the
Holders of a majority of the Warrant Shares requested to be included in such
registration.
(d) Exceptions. Notwithstanding the foregoing, (i) the
Company shall not be obligated to effect the filing of a registration statement
pursuant to this Section 1.3 in any particular jurisdiction in which the
Company would be requested to execute a general consent to service of process
in effecting such registration, unless the Company is already subject to
service in such jurisdiction and except as may be required by the Securities
Act, (ii) the Company shall not be obligated to effect the filing of a
registration statement pursuant to this Section 1.3 during the period starting
with the date 45 days prior to the Company's good faith estimate, as certified
in writing by the President of the Company to the Holders requesting a
registration statement pursuant to this Section 1.3, of the date of filing of,
and ending on the date 180 days following the effective date of, a registration
statement pertaining to an underwritten public offering of securities for the
account of the Company, or (iii) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.3 a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would not be in the best interests
of the Company and its stockholders generally for such registration statement
to be filed, the Company shall have a one-time right to defer such filing for a
period of not more than 45 days after receipt of the request of the Initiating
Holders.
1.4 COMPANY REGISTRATION.
(a) Right to Piggyback. If at any time prior to the two
(2) year anniversary of the date hereof the Company shall determine to register
any shares of Common Stock for its own account, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 transaction, or a registration on any registration form that does
not permit secondary sales, the Company will:
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<PAGE> 6
(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holders' rights under this Section
1.4 (including notice deadlines);
(ii) use its best efforts to include in such
registration (and any related filing or qualification under applicable blue sky
laws), except as set forth in Section 1.4(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder and received by the Company within ten (10)
days after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company, provided that such Holders shall have
requested for inclusion in such registration at least fifty-one percent (51%)
of the aggregate number of the Registrable Securities which have been issued to
the Holders prior to the date of such written request. Such written request may
specify all or a part of a Holder's Registrable Securities; and
(iii) keep such registration effective for a
period of one hundred eighty (180) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.4(a)(i). In such event, the right of any
Holder to registration pursuant to this Section 1.4 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of this Section 1.4, if the representative of the underwriters
advises the Company in writing that marketing factors require a limitation on
the number of shares to be underwritten, the representative may (subject to the
limitations set forth below) exclude all Registrable Securities from, or limit
the number of Registrable Securities to be included in, the registration and
underwriting. The Company shall so advise all Holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its own account and thereafter as set
forth in Section 1.11 hereof. If any person does not agree to the terms of any
such underwriting, he shall be excluded therefrom by written notice from the
Company or the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration. If shares are so withdrawn from the registration and if the
number of shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so
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<PAGE> 7
withdrawn, with such shares to be allocated among the persons requesting
additional inclusion in accordance with Section 1.11 hereof.
1.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 1.3 or 1.4 hereof shall be borne by the Company. All Selling Expenses
relating to securities so registered shall be borne by the Holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.6 REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to Section 1.3 or 1.4 hereof, the Company will
keep each Holder advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense, the Company will use its best
efforts to:
(a) 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 Securities Act with respect to the disposition of all
securities covered by such registration statement;
(b) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(c) notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing; provided, however, the Company shall not be obligated to prepare and
furnish any such prospectus supplements or amendments relating to any material
nonpublic information at any such time as the Board of Directors of the Company
has determined that, for good business reasons, the disclosure of such material
nonpublic information at that time is contrary to the best interests of the
Company in the circumstances and is not otherwise required under applicable law
(including applicable securities laws);
(d) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange and/or included in
any national quotation system on which similar securities issued by the Company
are then listed or included;
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<PAGE> 8
(e) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than eighteen months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
1.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, legal counsel and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including
any related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any 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 any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company or relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section 1.7(a) 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 Company (which consent shall
not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by
him are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel and accountants and each
underwriter, if any, of the Company's securities covered by such a
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<PAGE> 9
registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, each other
such Holder and Other Stockholder, and each of their officers, directors, and
partners, and each person controlling such Holder or Other Stockholder, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement, prospectus,
offering circular, or other document, or any 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 the Company and
such Holders, Other Stockholders, directors, officers, partners, legal counsel,
and accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein; provided,
however, (i) that the obligations of such Holder hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld) and
(ii) that in no event shall any indemnity under this Section 1.7(b) exceed the
gross proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this
Section 1.7 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.7, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff of a release to such Indemnified Party from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section
1.7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or
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<PAGE> 10
payable by such Indemnified Party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and of the Indemnified Party on
the other in connection with the conduct, statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.9 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC that may permit the sale
of the Restricted Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) make and keep adequate public information regarding
the Company available as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) so long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing a Holder to sell any such securities without registration.
1.10 NOTICE TO DISCONTINUE; NOTICE BY HOLDERS.
(a) Notice to Discontinue. Each Holder agrees by
acquisition of such securities that, upon receipt of any notice from the
Company of any event of the kind
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described in Section 1.6(d), the Holder will discontinue disposition of
Registrable Securities until the Holder receives copies of the supplemented or
amended prospectus contemplated by Section 1.6(d). In addition, if the Company
requests, the holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in the Holder's possession, of
the prospectus covering the Registrable Securities current at the time of
receipt of such notice. If the Company gives any such notice, the time period
mentioned in Section 1.6(a) shall be extended by the number of days elapsing
between the date of notice and the date that each Holder who has included
Registrable Securities in such registration receives the copies of the
supplemented or amended prospectus contemplated in Section 1.6(d).
(b) Notice by Holders. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to this
Agreement, those Holders shall notify the Company, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event, which as to any Holder is (i) to its
respective knowledge; (ii) solely within its respective knowledge; and (iii)
solely as to matters concerning that Holder, as a result of which the
prospectus included in the registration statement, then in effect, contains an
untrue statement of a material fact or omits to state any material fact
necessary to make the statements therein, in light of the circumstances then
existing, not misleading.
1.11 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance
in which all of the Registrable Securities and other shares of the Company with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and Other Stockholders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable Securities
and Other Shares held by such Holders and Other Stockholders; provided,
however, that such allocation shall not operate to reduce the aggregate number
of Registrable Securities and Other Shares to be included in such registration,
if any Holder or Other Stockholder does not request inclusion of the maximum
number of shares of Registrable Securities and Other Shares allocated to him
pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Holders and Other
Stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and Other Stockholders, assuming conversion, and
this procedure shall be repeated until all of the shares of Registrable
Securities and Other Shares which may be included in the registration on behalf
of the Holders and Other Stockholders have been so allocated.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholders as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation or Bylaws of the
Company, or any provision of any material indenture, agreement or other
instrument to which it or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
2.2 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder (severally and not jointly) represents and warrants to the Company
as follows:
(a) The execution, delivery and performance of this
Agreement by the Stockholder will not violate any provision of law, any order
of any court or any agency or government, or any provision of any material
indenture or agreement or other instrument to which it or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such material
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon
any of the properties or assets of the Stockholder.
(b) This Agreement has been duly executed and delivered
by the Stockholder and constitutes the legal, valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles, the discretion of courts in granting equitable remedies and public
policy considerations.
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3. MISCELLANEOUS
3.1 DELAY OF REGISTRATION. No Holder shall have any 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 Section 1 hereof.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the Holders of at least fifty-one percent
(51%) of the Registrable Securities and any such amendment, waiver, discharge
or termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
3.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated in the
stock records of the Company or at such other address as such Holder shall have
furnished to the Company in writing, or (b) if to the Company, at 1000
Abernathy Road, 400 Northpark, Suite 1000, Atlanta, Georgia 30328, Attn: Chief
Financial Officer, or at such other address as the Company shall have furnished
to each Holder in writing, together with a copy to Rogers & Hardin LLP, 2700
International Tower, 229 Peachtree Street, Atlanta, Georgia 30303, Attn: Steven
E. Fox, Esq. All such notices and other written communications shall be
effective on the date of mailing or delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or default of
the Company under this Agreement shall impair any such right, power or remedy
of such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
3.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided
herein, a Holder's rights hereunder are several rights, not rights jointly held
with any of the other Holders. In
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case any provision of the Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
3.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
3.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.9 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in any number of counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
3.10 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Delaware without reference to Georgia's choice of law rules and each of the
parties hereto hereby consents to personal jurisdiction in any federal or state
court in the State of Delaware.
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement or have caused this Agreement to be duly executed on its behalf by an
officer or representative thereto duly authorized, all as of the date first
above written.
CEREUS TECHNOLOGY PARTNERS, INC.
By:
----------------------------------------
Its:
------------------------------------
STOCKHOLDERS:
----------------------------------------
----------------------------------------
----------------------------------------
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SCHEDULE 1
NAMES OF STOCKHOLDERS
<PAGE> 1
EXHIBIT 10(z)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of January 10, 2000, between CEREUS TECHNOLOGY PARTNERS, INC.,
a Delaware corporation (the "Company"), and STEVEN A. ODOM (the "Employee"), an
individual resident of the State of Georgia.
1. TERM. The term (the "Term") of this Agreement shall begin on
the date hereof (the "Effective Date") and shall continue in effect for a
period of three (3) years from the Effective Date; provided, however, the Term
shall be extended automatically for an additional year on each anniversary of
the Effective Date unless either party hereto gives written notice to the other
party not to so extend at least ninety (90) days prior thereto, in which case
no further extension shall occur; provided further, however, that
notwithstanding any such notice by the Company not to extend, the Term shall
not expire prior to the expiration of twenty-four (24) months after the
occurrence of a Change in Control (as hereinafter defined).
2. EMPLOYMENT AND DUTIES. The Employee shall serve as the
Company's Chief Executive Officer and Chairman of the Company's board of
directors (the "Board") (to which he shall be elected as of the Effective
Date), reporting only to the Board and shall have such powers and duties as may
from time to time be prescribed by the Board, provided that such duties are
consistent with the Employee's position as the senior executive of the Company.
The Company shall provide the Employee with a private office, secretarial and
administrative assistance, office equipment, supplies and other facilities and
services suitable to the Employee's position.
3. COMPENSATION.
3.1 SALARY. For all services to be rendered by the
Employee pursuant to this Agreement, the Company hereby agrees to pay the
Employee a base salary at an annual rate per year of $300,000.00 (the "Base
Salary"), payable in accordance with the Company's payroll practices in effect
from time to time; provided, however, that the Base Salary shall be reduced for
so long as the Employee receives the payments called for under Section 1 of
that certain letter agreement by and between the Employee and World Access,
Inc. dated May 28, 1999 (the "World Access Agreement") with the amount of any
such reduction in Base Salary being equal to the amount the Employee receives
pursuant to Section 1 of such letter agreement in excess of $300,000 per annum.
The Base Salary shall be reviewed at least annually and shall be increased
pursuant to such review by a percentage no less than the percentage increase in
the consumer price index, as published by the Bureau of Labor Statistics of the
U.S. Department of Labor, for the calendar year immediately preceding such
review. Any increase in Base Salary or other compensation granted by the
compensation committee of the Board shall in no way limit or reduce any other
obligation of the Company hereunder. Once established at an increased specified
rate, the Base Salary hereunder shall
<PAGE> 2
not thereafter be reduced, and the term Base Salary used in this Agreement
shall refer to the Base Salary as so increased.
3.2 BONUS. In addition to his Base Salary, in the
discretion of the Board, the Employee may be awarded for each calendar year
during the Term an annual bonus (an "Annual Bonus") either pursuant to a bonus
or incentive plan of the Company or otherwise on terms no less favorable than
those awarded to other executive officers of the Company.
4. WARRANTS.
4.1 GRANT OF WARRANT. Upon the execution hereof, the
Company shall grant to the Employee a warrant pursuant to a warrant certificate
containing customary terms and conditions (the "Warrant") to purchase 1,000,000
shares of the Company's common stock, $.01 par value per share (the "Common
Stock"), exercisable for cash or on a cashless basis as follows:
(i) The Warrant may be exercised for 250,000
shares of Common Stock at an exercise price of $3.75 per share from time to
time commencing on the fifth anniversary of the date hereof and ending on the
tenth anniversary of the date hereof, provided that the Warrant shall be
immediately exercisable for a five (5) year period as to said 250,000 shares if
the Company shall have consummated a private placement of shares of Common
Stock providing gross proceeds to the Company of not less than $5,000,000 on or
before March 10, 2000.
(ii) The Warrant may be exercised for 250,000
shares of Common Stock at an exercise price of $3.75 per share from time to
time commencing on the date that is one month following the date hereof with
the Warrant first then becoming exercisable, during the term of this Agreement,
for one-twelfth (1/12) of such number of shares of Common Stock on such date
and thereafter vesting and becoming exercisable at the rate of one-twelfth
(1/12) for each month thereafter expiring on the fifth anniversary of the date
hereof; provided, however, if the Company is required to make any payment of
Base Salary to the Employee pursuant to Section 3.1 hereof during the first
twelve (12) months of the term hereof, then, notwithstanding the foregoing to
the contrary, that portion of the Warrant that would otherwise vest for the
month for which a payment of Base Salary has been made shall be equal to (i)
one-twelfth (1/12) multiplied by (ii) an amount equal to (A) one (1) minus (B)
a fraction, the numerator of which is the amount of the payment of Base Salary
made for such month and the denominator of which is $25,000, and the amount not
so vested shall lapse.
(iii) The Warrant may be exercised for 250,000
shares of Common Stock at an exercise price of $3.75 per share from time to
time commencing on the fifth anniversary of the date hereof and ending on the
tenth anniversary of the date hereof, provided that the Warrant shall be
immediately exercisable as to said 250,000 shares when and if the average
"market price" (as hereinafter defined) of the Common Stock for twenty
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(20) consecutive trading days at any time during the ten year period commencing
on the date hereof is at least $12.50 per share.
(iv) The Warrant may be exercised for 250,000
shares of Common Stock at an exercise price of $3.75 per share from time to
time commencing on the fifth anniversary of the date hereof and ending on the
tenth anniversary of the date hereof, provided that the Warrant shall be
immediately exercisable as to said 250,000 shares when and if the average
"market price" of the Common Stock for twenty (20) consecutive trading days at
any time during the ten (10) year period commencing on the date hereof is at
least $25.00 per share.
4.2 DEFINITION OF MARKET PRICE. For purposes hereof,
"market price" shall mean the closing price of the Common Stock as of the day
in question as reported with respect to the market (or the composite of
markets, if more than one) in which shares of the Common Stock are then traded
or, if no such closing prices are reported, on the basis of the mean between
the high bid and low asking prices that day on the principal market or
quotation system on which shares of Common Stock are then quoted, or, if not so
quoted, as furnished by a professional securities dealer making a market in
such shares selected by or under authority of the Board.
5. BENEFITS. The Employee shall be entitled to all benefits and
conditions of employment provided by the Company to its executive officers,
including, without limitation, insurance, participation in the Company's
vacation policy, and participation in any stock option or incentive
compensation plans, pension, profit sharing or other retirement plans, subject
(in each case) to the terms of such plans and any provisions, rules,
regulations and laws applicable to such plans.
6. BOARD REPRESENTATION. Upon the request of the Employee, the
Company shall use its best efforts to secure the resignation of each of the
persons then-serving on the Board (other than the Employee), whereupon the
Employee, as the sole member of the Board, shall have the right to appoint
persons to fill the vacancies thereby created in his sole discretion.
7. REIMBURSEMENT FOR BUSINESS EXPENSES. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses incurred by him
in the direct performance of his duties during his employment with the Company
pursuant to the terms of this Agreement and in accordance with the Company's
policies in effect from time to time. All requests for reimbursement shall be
substantiated by invoices and other pertinent data reasonably satisfactory to
the Company.
8. PERFORMANCE. Subject to the performance of his obligations
under the World Access Agreement, the Employee shall devote all of his working
time and efforts to the business and affairs of the Company and to the diligent
performance of the duties and responsibilities assigned to him pursuant to this
Agreement, except for vacations, weekends and holidays. Notwithstanding the
foregoing, the Employee may render charitable, civic and outside board services
so long as such services do not materially interfere with the
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Employee's ability to discharge his duties, including, without limitation, such
outside services as the Employee is currently performing.
9. NON-DISCLOSURE OF PROPRIETARY INFORMATION; NON-COMPETITION;
NON-SOLICITATION.
9.1. CONFIDENTIAL INFORMATION; TRADE SECRETS. As used in
this Agreement, the term "Confidential Information" shall mean valuable,
non-public, competitively sensitive data and information relating to the
Company's business or the business of any entity affiliated with the Company,
other than Trade Secrets (as defined below). "Confidential Information" shall
include, among other things, information specifically designated as a Trade
Secret that is, notwithstanding the designation, determined by a court of
competent jurisdiction not to be a "trade secret" under applicable law. As used
in this Agreement, the term "Trade Secrets" shall mean information or data of
or about the Company or any entity affiliated with the Company, including,
without limitation, technical or non-technical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product plans, or lists of actual or potential
customers or suppliers, that (i) derive 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 their
disclosure or use; and (ii) are subject of efforts that are reasonable under
the circumstances to maintain their secrecy. To the extent that the foregoing
definition is inconsistent with a definition of "trade secret" under applicable
law, the foregoing definition shall be deemed amended to the extent necessary
to render it consistent with applicable law.
9.2. NON-DISCLOSURE. The Employee will be exposed to
Trade Secrets and Confidential Information as a result of his employment by the
Company as provided in this Agreement. The Employee acknowledges and agrees
that any unauthorized disclosure or use of any of the Trade Secrets or
Confidential Information of the Company would be wrongful and would likely
result in immediate and irreparable injury to the Company. In consideration of
the Employee's right to employment (or continued employment) under the terms of
this Agreement, except as appropriate in connection with the performance of his
obligations under this Agreement, the Employee shall not, without the express
prior written consent of an executive officer of the Company other than the
Employee, redistribute, market, publish, disclose or divulge to any other
person or entity, or use or modify for use, directly or indirectly, in any way
for any person or entity (i) any Confidential Information during the Term of
this Agreement and for a period of two (2) years after the final date of the
Term of this Agreement; and (ii) any Trade Secrets at any time (during or after
the Term of this Agreement) during which such information or data shall
continue to constitute a "trade secret" under applicable law. The Employee
agrees to cooperate with any reasonable confidentiality requirements of the
Company. The Employee shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets or Confidential Information of which the
Employee becomes aware.
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9.3. NON-COMPETITION. The Employee shall not, either
directly or indirectly, alone or in partnership, manage, control, operate or
own any business that is substantially similar to the business of the Company
during the term hereof in any geographic area of the United States of America
(a "Competing Business") during the term hereof and, if the Employee's
employment with the Company shall be terminated pursuant to Section 13.1 or
Section 13.3 hereof, during the one (1) year period following the term hereof,
except that the Employee may own up to three percent (3%) of the outstanding
securities of a Competing Business the securities of which are registered with
the Securities and Exchange Commission if such Competing Business is subject to
the periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
9.4. NON-SOLICITATION. For a period of one (1) year
immediately following any termination of the Employee's employment (other than
a termination pursuant to Section 13.2. or Section 13.4 hereof), the Employee
will not solicit, or participate in any solicitation of, the customers,
suppliers, employees or representatives of the Company (or any of its
subsidiaries or affiliated companies) to breach any contract with the Company,
terminate any relationship with the Company or leave the Company. For purposes
of this Agreement, customers shall be limited to actual customers or
actively-sought prospective customers of the Company or any subsidiary or
affiliate of the Company with whom the Employee has had substantial contact
during the Term of this Agreement.
10. CERTAIN DEFINITIONS.
10.1. ACCRUED COMPENSATION. For purposes of this
Agreement, "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the "Termination Date" (as hereinafter
defined) but not paid as of the Termination Date, including, without
limitation, (i) Base Salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Employee on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay, (iv) bonuses, including,
without limitation, any Annual Bonus, and incentive compensation, and (v) all
other amounts to which the Employee is entitled under any compensation plan of
the Company at the times such payments are due.
10.2. BASE AMOUNT. For purposes of this Agreement, "Base
Amount" shall mean the Employee's annual Base Salary at the highest rate in
effect on, or at any time during the ninety (90) day period prior to, the
Termination Date and shall include all amounts of the Employee's Base Salary
that are deferred under any qualified and non-qualified employee benefit plans
of the Company or any other agreement or arrangement.
10.3. CAUSE. For purposes of this Agreement, a termination
of employment is for "Cause" if the Employee has been convicted of a felony or
if the termination is evidenced by a resolution adopted in good faith by
two-thirds (2/3) of the Board that the Employee (i) intentionally and
continually failed substantially to perform his reasonably assigned duties with
the Company (other than a failure resulting from the Employee's incapacity due
to physical or mental illness or from the Employee's assignment of duties that
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<PAGE> 6
would constitute "Good Reason" (as hereinafter defined)) which failure
continued for a period of at least thirty (30) days after a written notice of
demand for substantial performance has been delivered to the Employee
specifying the manner in which the Employee has failed substantially to
perform, or (ii) intentionally engaged in illegal conduct or gross misconduct
which results in material economic harm to the Company; provided, however, that
(A) where the Employee has been terminated for Cause because a felony
prosecution has been brought against him and no conviction or plea of guilty or
plea of nolo contendere or its equivalent results therefrom, then said
termination shall no longer be deemed to have been for Cause and the Employee
shall be entitled to all the benefits provided by Section 11.1(i) hereof from
and after the date on which the prosecution of the Employee has been dismissed
or a judgement of acquittal has been entered, whichever shall first occur; and
(B) no termination of the Employee's employment shall be for Cause as set forth
in clause (ii) above until (x) there shall have been delivered to the Employee
a copy of a written notice setting forth that the Employee was guilty of the
conduct set forth in clause (ii) and specifying the particulars thereof in
detail, and (y) the Employee shall have been provided an opportunity to be
heard in person by the Board (with the assistance of the Employee's counsel if
the Employee so desires). No act, or failure to act, on the Employee's part
shall be considered "intentional" unless the Employee has acted or failed to
act with a lack of good faith and with a lack of reasonable belief that the
Employee's action or failure to act was in the best interests of the Company.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of any senior officer of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company. Any termination of the
Employee's employment by the Company hereunder shall be deemed to be a
termination other than for Cause unless it meets all requirements of this
Section 10.3.
10.4. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall have occurred if:
(i) a majority of the directors of the Company
shall be persons other than persons: (A) for whose election proxies shall have
been solicited by the Board, or (B) who are then serving as directors appointed
by the Board to fill vacancies on the Board caused by death or resignation (but
not by removal) or to fill newly-created directorships;
(ii) a majority of the outstanding voting power
of the Company shall have been acquired or beneficially owned (as defined in
Rule 13d-3 under the 1934 Act or any successor rule thereto) by any person
(other than the Company, a subsidiary of the Company or the Employee) or Group
(as defined below), which Group does not include the Employee; or
(iii) there shall have occurred:
(A) a merger or consolidation of the
Company with or into another corporation (other than (1) a merger or
consolidation with a subsidiary of the
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Company or (2) a merger or consolidation in which (a) the holders of voting
stock of the Company immediately prior to the merger as a class continue to
hold immediately after the merger at least a majority of all outstanding voting
power of the surviving or resulting corporation or its parent and (b) all
holders of each outstanding class or series of voting stock of the Company
immediately prior to the merger or consolidation have the right to receive
substantially the same cash, securities or other property in exchange for their
voting stock of the Company as all other holders of such class or series);
(B) a statutory exchange of shares of
one or more classes or series of outstanding voting stock of the Company for
cash, securities or other property;
(C) the sale or other disposition of
all or substantially all of the assets of the Company (in one transaction or a
series of transactions); or
(D) the liquidation or dissolution of
the Company;
unless more than twenty-five percent (25%) of the voting stock (or the voting
equity interest) of the surviving corporation or the corporation or other
entity acquiring all or substantially all of the assets of the Company (in the
case of a merger, consolidation or disposition of assets) or of the Company or
its resulting parent corporation (in the case of a statutory share exchange) is
beneficially owned by the Employee or a Group that includes the Employee.
10.5. GROUP. For purposes of this Agreement, "Group" shall
mean any two or more persons acting as a partnership, limited partnership,
syndicate, or other group acting in concert for the purpose of acquiring,
holding or disposing of voting stock of the Company.
10.6. DISABILITY. For purposes of this Agreement,
"Disability" shall mean a physical or mental infirmity which impairs the
Employee's ability to substantially perform his duties with the Company for a
period of one hundred eighty (180) consecutive days and the Employee has not
returned to his full time employment prior to the Termination Date as stated in
the "Notice of Termination" (as hereinafter defined).
10.7. GOOD REASON.
10.7.1. For purposes of this Agreement, "Good
Reason" shall mean a good faith determination by the Employee, in the
Employee's sole and absolute judgment, that any one or more of the following
events has occurred, without the Employee's express written consent:
(i) the assignment to the Employee of
any duties inconsistent with the Employee's position (including, without
limitation, status, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the date of such assignment,
or any other action by the Company that results in a material diminution in
such position, authority, duties or responsibilities, excluding for this
purpose
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isolated and inadvertent action not taken in bad faith and remedied by
the Company promptly after receipt of notice thereof given by the Employee;
(ii) a reduction by the Company in the
Employee's Base Salary, as the same may be increased from time to time, or a
change in the eligibility requirements or performance criteria under any bonus,
incentive or compensation plan, program or arrangement under which the Employee
is covered immediately prior to the Termination Date which adversely affects
the Employee;
(iii) any failure to pay the Employee
any compensation or benefits to which he is entitled within five (5) days of
the date due after notice of the failure to so pay is given by the Employee;
(iv) the Company's requiring the
Employee to be based anywhere other than within fifty (50) miles of the
Employee's job location as of the date hereof, except for reasonably required
travel on the Company's business which is not greater than such travel
requirements prior to the date hereof;
(v) the taking of any action by the
Company that would materially adversely affect the physical conditions existing
in or under which the Employee performs his employment duties;
(vi) the insolvency or the filing (by
any party, including the Company) of a petition for bankruptcy by the Company;
(vii) any purported termination of the
Employee's employment for Cause by the Company which does not comply with the
terms of Section 10.3 hereof; or
(viii) any breach by the Company of any
provision of this Agreement.
10.7.2. The Employee's right to terminate his
employment pursuant to this Section 10 shall not be affected by his incapacity
due to physical or mental illness.
10.8. NOTICE OF TERMINATION. For purposes of this
Agreement, "Notice of Termination" shall mean a written notice of termination
from the Company of the Employee's employment which indicates the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
10.9. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean, in the case of the Employee's death, his date of
death, in the case of the Employee's voluntary termination, the last day of
employment, and in all other cases (other
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than in the case of a successor or an assignee, which is provided for in
Section 14.1 hereof), the date specified in the Notice of Termination;
provided, however, that if the Employee's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Employee; and provided further that in the case of
Disability the Employee shall not have returned to the full-time performance of
his duties during such period of at least thirty (30) days.
11. BENEFITS AND PAYMENTS UPON TERMINATION OF EMPLOYMENT.
11.1. COMPENSATION AND BENEFITS. If, during the term of
this Agreement, the Employee's employment with the Company shall be terminated,
the Employee shall be entitled to the following compensation and benefits in
the following circumstances:
(i) If the Employee's employment with the
Company shall be terminated (A) by the Company for Cause or Disability or (B)
by reason of the Employee's death, then the Company shall pay to the Employee
all Accrued Compensation.
(ii) If the Employee's employment with the
Company shall be terminated (A) by the Company pursuant to Section 13.2 hereof
or (B) by the Employee pursuant to section 13.4 hereof, then the Employee shall
be entitled to the following:
(1) the Company shall pay the Employee
all Accrued Compensation;
(2) the Company shall pay the Employee
as severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date an amount in cash equal to two (2) times the Base
Amount;
(3) for twenty-four (24) months or
such longer period as may be provided by the terms of the appropriate program,
practice or policy, the Company shall, at its expense, continue on behalf of
the Employee and his dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization benefits generally made
available to the Company's executive officers at any time during the 90-day
period prior to the Termination Date or at any time thereafter, provided that
(i) the Company's obligation hereunder with respect to the foregoing benefits
shall be limited to the extent that the Employee obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the Company
may reduce the coverage of any benefits it is required to provide the Employee
hereunder as long as the aggregate coverages and benefits of the combined
benefit plans are no less favorable to the Employee than the coverages and
benefits required to be provided hereunder, and (ii) this clause (3) shall not
be interpreted so as to limit any benefits to which the Employee or his
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Employee's termination of
employment, including, without limitation, retiree medical and life insurance
benefits; and
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(4) the restrictions on any
outstanding incentive awards (including, without limitation, restricted stock
and granted performance shares or units) under any incentive plan or
arrangement shall lapse and such incentive award shall become 100% vested, all
stock options, warrants and stock appreciation rights granted to the Employee
on or prior to the date of this Agreement shall become immediately exercisable
and 100% vested and, notwithstanding anything to the contrary contained in the
plan, agreement or other instrument relating to such stock option, warrant or
stock appreciation rights with regard to the period of time within which such
stock option, warrant or stock appreciation rights must be exercised following
the Employee's termination of employment or provision of services to the
Company, all such stock options, warrants and stock appreciation rights may be
exercised at any time and from time to time until the one (1) year anniversary
of the Termination Date, and all performance units granted to the Employee
shall become 100% vested.
(iii) The amounts provided for in subsection
11.1(i) shall be payable to Employee in a lump-sum on the Termination Date, and
the amounts provided for in subsection 11.1(ii) shall be payable to the
Employee in substantially equal bi-weekly installments for a twenty-four (24)
month period commending on the Termination Date and otherwise in accordance
with the Company's payroll practices in effect from time to time.
(iv) The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, and no such payment shall be offset or reduced
by the amount of any compensation or benefits provided to the Employee in any
subsequent employment, except as provided in subsection 11.1(ii)(3).
11.2. NO SEVERANCE. The severance pay and benefits
provided for in this Section 11 shall be in lieu of any other severance or
termination pay to which the Employee may be entitled under any Company
severance or termination plan, program, practice or arrangement.
11.3. OTHER COMPENSATION AND BENEFITS. The Employee's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs, policies and practices then in effect.
12. GROSS-UP PAYMENTS.
12.1. ADDITIONAL PAYMENTS. Anything in this Agreement to
the contrary notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 12) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise
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tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this Section 12.1, if
it shall be determined that the Employee is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the "Reduced
Amount") that could be paid to the Employee such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made
to the Employee and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
12.2 DETERMINATION. Subject to the provisions of Section
12.3, all determinations required to be made under this Section 12, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally-recognized accounting firm selected by the
Company and reasonably acceptable to the Employee (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Employee within fifteen (15) business days of the receipt of notice from the
Employee that there has been a Payment, or such earlier times as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 12, shall be paid by the Company to the Employee within five (5) days
of the receipt of the Accounting Firm's determination. Any determination by the
accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies pursuant to
Section 12.3 and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
12.3 INTERNAL REVENUE SERVICE CLAIM. The Employee shall
notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after the Employee is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Employee shall not pay such claim
prior to the expiration of the 30-day period following the date on which the
Employee gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee
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in writing prior to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, without limitation, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including, without limitation, interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 12.3, the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Employee
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Employee, on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including, without limitation, interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
12.4 REFUNDS. If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 12.3, the Employee becomes
entitled to receive any
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refund with respect to such claim, then the Employee shall (subject to the
Company's complying with the requirements of Section 12.3) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Company pursuant to Section 12.3, a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its
intent to contest such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
13. TERMINATION. The Employee's employment hereunder may be
terminated without any breach of this Agreement only in accordance with this
Section 13.
13.1. TERMINATION BY THE COMPANY FOR CAUSE. The Company
may terminate the Employee's employment at any time for Cause by providing to
the Employee a Notice of Termination, whereupon the Employee shall be entitled
to all of the benefits and payments provided for under Section 11 hereof.
13.2. TERMINATION BY THE COMPANY WITHOUT CAUSE. The
Company may terminate the Employee's employment at any time without Cause by
providing to the Employee a Notice of Termination, whereupon the Employee shall
be entitled to all of the benefits and payments provided for under Section 11
hereof.
13.3. TERMINATION BY THE EMPLOYEE. The Employee's
employment may be terminated by the Employee at any time by providing the
Company with notice of such termination and specifying in the notice the
effective date of such termination, which shall not be less than one hundred
twenty (120) days after giving such notice, whereupon the Employee's employment
shall terminate on the date specified in such notice and the Employee shall be
entitled to all of the benefits and payments provided for under Section 11
hereof; provided, however, that following receipt of such notice, the Company
may specify, in its discretion, the date on which the Employee's employment
shall terminate so long as the date so specified is not more than one hundred
twenty (120) days after the date on which the Employee shall have given notice,
in which case the Employee's employment shall terminate on the date so
specified by the Company.
13.4. TERMINATION BY THE EMPLOYEE FOR GOOD REASON
FOLLOWING A CHANGE OF CONTROL. For a (1) year period following a Change of
Control, the Employee's employment may be terminated by the Employee for Good
Reason at any such time during such one (1) year period by providing the
Company with a notice of such termination and specifying in the notice the
effective date of such termination, whereupon the Employee's employment shall
terminate on the date specified in such notice and the Employee shall be
entitled to all of the benefits and payments provided for under Section 11
hereof.
13.5. TERMINATION UPON DISABILITY. The Company may
terminate the Employee's employment upon the Disability of the Employee by
providing to the Employee
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a Notice of Termination, whereupon the Employee shall be entitled to all of the
benefits and payments provided for under Section 11 hereof.
13.6. DEATH. In the event of the Employee's death during
his employment hereunder, the Employee's employment shall be automatically
terminated, whereupon the Employee shall be entitled to all of the benefits and
payments provided for under Section 11 hereof.
14. SUCCESSORS AND ASSIGNS.
14.1. ASSUMPTION AND AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the Company, its successors and
assigns, and the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) or assign, by
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
or assignment had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession or assignment
shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment had been terminated pursuant
to Section 13.2 hereof, except that for purposes of implementing the foregoing,
the date on which any such succession or assignment becomes effective shall be
deemed the Termination Date hereunder. As used in the Agreement, Company shall
mean the Company as hereinbefore defined and any successor or assign that
executes and delivers the agreement provided for in this Section 14.1 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
14.2. RIGHTS OF EMPLOYEE. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If the Employee should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devise,
legatee or other designee or, if there be no such designee, to the Employee's
estate.
15. INJUNCTIVE RELIEF. The Company and the Employee agree that
damages are an inadequate remedy for, and that the Company or any successor to
the business of the Company would be irreparably harmed by, any breach of
Section 9 of this Agreement, and that the Company, any successor to the
business of the Company or any permitted assignee of the Company shall be
entitled to equitable relief in the form of a preliminary or permanent
injunction upon any breach of Section 9 hereof.
16. NOTICES. For the purpose of this Agreement, notices and all
other communications to either party hereunder provided for in the Agreement
shall be in writing
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and shall be deemed to have been duly given when delivered in person or mailed
by first-class mail or airmail, postage prepaid, addressed:
If to the Employee:
Mr. Steven A. Odom
101 Blackland Road, N.W.
Atlanta, Georgia 30342
If to the Company:
Cereus Technology Partners, Inc.
1000 Abernathy Road, Suite 1000
Atlanta, Georgia 30328
Attention: President
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
17. MISCELLANEOUS. No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver (i) is agreed
to in writing and is signed by the Employee and a representative of the
Company, its successor or permitted assignee and (ii) has been approved by the
Board, its successor or any permitted assignee of the Company. No waiver by
either party to this Agreement at any time of breach by the other party of, or
compliance by the other party with, any condition or provision of this
Agreement to be performed by the other party shall be deemed to be a waiver of
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied, with respect to the subject matter of this Agreement have been made
by either party that are not expressly set forth in this Agreement.
18. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which other
provisions shall remain in full force and effect, nor shall the invalidity or
unenforceability of a portion of any provision of this Agreement affect the
validity or enforceability of the balance of such provision.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
20. HEADINGS. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not, in any way, affect the
meaning or interpretation of any provision of this Agreement.
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21. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws, and not the choice
of law rules, of the State of Georgia.
22. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, other than the provisions of
Section 9 hereof, shall, on the written request of one party served upon the
other, be settled by binding arbitration in Fulton County, Georgia in
accordance with the commercial arbitration rules then recognized by the
American Arbitration Association, and judgment upon the award rendered may be
entered and enforced in any court having jurisdiction thereof.
23. FEES AND EXPENSES. The Company shall pay all legal fees and
related expenses incurred by the Employee as they become due as a result of or
in connection with (i) the Employee's termination of employment (including,
without limitation, all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (ii) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
without limitation, any such fees and expenses incurred in connection
therewith) or by any other plan or arrangement maintained by the Company under
which the Employee is or may be entitled to receive benefits, (iii) the
Employee's hearing before the Board as contemplated in Section 10.3 of this
Agreement, (iv) any tax audit or proceeding to the extent attributable to the
application of any Excise Tax with respect to any Payment or Payments
hereunder, plus in each case interest on any delayed payment at the "Applicable
Federal Rate," as defined in Section 1274(d) of the Code, as then in effect,
and (v) the preparation and execution of this Agreement.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements (if
any), understandings and arrangements (oral or written) between the parties
hereto.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer, and the Employee has
executed and delivered this Agreement, all as of the date first written above.
CEREUS TECHNOLOGY PARTNERS, INC.
By: /s/ Paul Arena
----------------------------------------
Its: Vice Chairman
------------------------------------
/s/ Steven A. Odom
-------------------------------------------
STEVEN A. ODOM
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EXHIBIT 10(aa)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of January 10, 2000, between CEREUS TECHNOLOGY PARTNERS, INC.,
a Delaware corporation (the "Company"), and JAMES M. LOGSDON (the "Employee"),
an individual resident of the State of Texas.
1. TERM. The term (the "Term") of this Agreement shall begin on
the date hereof (the "Effective Date") and shall continue in effect for a
period of three (3) years from the Effective Date; provided, however, the Term
shall be extended automatically for an additional year on each anniversary of
the Effective Date unless either party hereto gives written notice to the other
party not to so extend at least ninety (90) days prior thereto, in which case
no further extension shall occur; provided further, however, that
notwithstanding any such notice by the Company not to extend, the Term shall
not expire prior to the expiration of twenty-four (24) months after the
occurrence of a Change in Control (as hereinafter defined).
2. EMPLOYMENT AND DUTIES. The Employee shall serve as the
Company's President and Chief Operating Officer, reporting to the Company's
Chief Executive Officer, and shall have such powers and duties as may from time
to time be prescribed by the Company's Board of Directors (the "Board"),
provided that such duties are consistent with the Employee's position as the
chief operating officer of the Company. The Company shall provide the Employee
with a private office, secretarial and administrative assistance, office
equipment, supplies and other facilities and services suitable to the
Employee's position.
3. COMPENSATION.
3.1 SALARY. For all services to be rendered by the
Employee pursuant to this Agreement, the Company hereby agrees to pay the
Employee a base salary at an annual rate per year of $125,000 through and
including February 1, 2001 and at an annual rate per year of $225,000
thereafter (the "Base Salary"), payable in accordance with the Company's
payroll practices in effect from time to time; provided, however, that in the
event of the occurrence of a Change in Control prior to February 1, 2001, the
Base Salary hereunder shall be immediately increased to $225,000. The Base
Salary shall be reviewed at least annually and shall be increased pursuant to
such review by a percentage no less than the percentage increase in the
consumer price index, as published by the Bureau of Labor Statistics of the
U.S. Department of Labor, for the calendar year immediately preceding such
review. Any increase in Base Salary or other compensation granted by the
compensation committee of the Board shall in no way limit or reduce any other
obligation of the Company hereunder. Once established at an increased specified
rate, the Base Salary hereunder shall not thereafter be reduced, and the term
Base Salary used in this Agreement shall refer to the Base Salary as so
increased.
<PAGE> 2
3.2 BONUS. In addition to his Base Salary, in the
discretion of the Board, the Employee may be awarded for each calendar year
during the Term an annual bonus (an "Annual Bonus") either pursuant to a bonus
or incentive plan of the Company or otherwise on terms no less favorable than
those awarded to other executive officers of the Company.
4. WARRANTS. Upon the execution hereof, the Company shall grant
to the Employee a warrant pursuant to a warrant certificate containing
customary terms and conditions (the "Warrant") to purchase 500,000 shares of
the Company's common stock, $.01 par value per share (the "Common Stock"),
exercisable for cash or on a cashless basis as follows:
(i) The Warrant may be exercised for 200,000
shares of Common Stock at an exercise price of $3.75 per share from time to
time commencing on the date hereof and ending on the tenth anniversary of the
date hereof.
(ii) The Warrant may be exercised for an
additional 100,000 shares of Common Stock at an exercise price of $3.75 per
share from time to time commencing on the first anniversary of the date hereof
and ending on the tenth anniversary of the date hereof.
(iii) The Warrant may be exercised for an
additional 100,000 shares of Common Stock at an exercise price of $3.75 per
share from time to time commencing on the seventh anniversary of the date
hereof and ending on the tenth anniversary of the date hereof, provided that
the Warrant shall be exercisable commencing on the second anniversary of the
date hereof as to said 100,000 shares if the Company has annual revenue of at
least $30,000,000 during the year ended December 31, 2001.
(iv) The Warrant may be exercised for an
additional 100,000 shares of Common Stock at an exercise price of $3.75 per
share from time to time commencing on the seventh anniversary of the date
hereof and ending on the tenth anniversary of the date hereof, provided that
the Warrant shall be exercisable commencing on the third anniversary of the
date hereof as to said 100,000 shares if the Company has annual revenue of at
least $50,000,000 during the year ended December 31, 2002.
5. BENEFITS. The Employee shall be entitled to all benefits and
conditions of employment provided by the Company to its executive officers,
including, without limitation, insurance, participation in the Company's
vacation policy, and participation in any stock option or incentive
compensation plans, pension, profit sharing or other retirement plans, subject
(in each case) to the terms of such plans and any provisions, rules,
regulations and laws applicable to such plans.
6. REIMBURSEMENT FOR BUSINESS EXPENSES. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses incurred by him
in the direct performance of his duties during his employment with the Company
pursuant to the terms of this Agreement and in accordance with the Company's
policies in effect from time to time. All
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requests for reimbursement shall be substantiated by invoices and other
pertinent data reasonably satisfactory to the Company.
7. PERFORMANCE. The Employee shall devote all of his working
time and efforts to the business and affairs of the Company and to the diligent
performance of the duties and responsibilities assigned to him pursuant to this
Agreement, except for vacations, weekends and holidays. Notwithstanding the
foregoing, the Employee may render charitable, civic and outside board services
so long as such services do not materially interfere with the Employee's
ability to discharge his duties, including, without limitation, such outside
services as the Employee is currently performing.
8. NON-DISCLOSURE OF PROPRIETARY INFORMATION; NON-COMPETITION;
NON-SOLICITATION.
8.1. CONFIDENTIAL INFORMATION; TRADE SECRETS. As used in
this Agreement, the term "Confidential Information" shall mean valuable,
non-public, competitively sensitive data and information relating to the
Company's business or the business of any entity affiliated with the Company,
other than (i) Trade Secrets (as defined below); (ii) information contained in
any publicly available press release, a regulatory filing or other public
communication which is otherwise in the public domain on the date of this
Agreement; (iii) information that hereafter enters the public domain through no
action on the part of the Employee; (iv) information that is known by the
Employee or becomes available to him from a source other than the Company or
any of its affiliates, provided that such information was not obtained as a
result of a breach of any confidentiality obligation by the source of such
information; (v) information that was already in the possession of the Employee
prior to the date hereof and which was not acquired from the Company or any of
its affiliates; or (vi) information obtained from discovery in a legal
proceeding, but only to the extent such information is used in such a
proceeding. "Confidential Information" shall include, among other things,
information specifically designated as a Trade Secret that is, notwithstanding
the designation, determined by a court of competent jurisdiction not to be a
"trade secret" under applicable law. As used in this Agreement, the term "Trade
Secrets" shall mean information or data of or about the Company or any entity
affiliated with the Company, including, without limitation, technical or
non-technical data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial plans,
product plans, or lists of actual or potential customers or suppliers, that (i)
derive 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 their disclosure or use; and (ii) are subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
To the extent that the foregoing definition is inconsistent with a definition
of "trade secret" under applicable law, the foregoing definition shall be
deemed amended to the extent necessary to render it consistent with applicable
law.
8.2. NON-DISCLOSURE. The Employee will be exposed to
Trade Secrets and Confidential Information as a result of his employment by the
Company as provided in this Agreement. The Employee acknowledges and agrees
that any unauthorized disclosure or use
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of any of the Trade Secrets or Confidential Information of the Company would be
wrongful and would likely result in immediate and irreparable injury to the
Company. In consideration of the Employee's right to employment (or continued
employment) under the terms of this Agreement, except as appropriate in
connection with the performance of his obligations under this Agreement, the
Employee shall not, without the express prior written consent of an executive
officer of the Company other than the Employee, redistribute, market, publish,
disclose or divulge to any other person or entity, or use or modify for use,
directly or indirectly, in any way for any person or entity (i) any
Confidential Information during the Term of this Agreement and for a period of
two (2) years after the final date of the Term of this Agreement; and (ii) any
Trade Secrets at any time (during or after the Term of this Agreement) during
which such information or data shall continue to constitute a "trade secret"
under applicable law. The Employee agrees to cooperate with any reasonable
confidentiality requirements of the Company. The Employee shall immediately
notify the Company of any unauthorized disclosure or use of any Trade Secrets
or Confidential Information of which the Employee becomes aware.
8.3. NON-COMPETITION. The Employee shall not, either
directly or indirectly, alone or in partnership, manage, control, operate or
own any business that is substantially similar to the business of the Company
during the term hereof in any geographic area of the United States of America
(a "Competing Business") during the term hereof and, if the Employee's
employment with the Company shall be terminated pursuant to Section 13.1 or
Section 13.3 hereof, during the one (1) year period following the term hereof,
except that the Employee may own up to three percent (3%) of the outstanding
securities of a Competing Business the securities of which are registered with
the Securities and Exchange Commission if such Competing Business is subject to
the periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
8.4. NON-SOLICITATION. For a period of one (1) year
immediately following any termination of the Employee's employment (other than
a termination pursuant to Section 12.2. or Section 12.4 hereof), the Employee
will not solicit, or participate in any solicitation of, the customers,
suppliers, employees or representatives of the Company (or any of its
subsidiaries or affiliated companies) to breach any contract with the Company,
terminate any relationship with the Company or leave the Company. For purposes
of this Agreement, customers shall be limited to actual customers or
actively-sought prospective customers of the Company or any subsidiary or
affiliate of the Company with whom the Employee has had substantial contact
during the Term of this Agreement.
9. CERTAIN DEFINITIONS.
9.1. ACCRUED COMPENSATION. For purposes of this
Agreement, "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the "Termination Date" (as hereinafter
defined) but not paid as of the Termination Date, including, without
limitation, (i) Base Salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Employee on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay, (iv) bonuses, including,
without
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limitation, any Annual Bonus, and incentive compensation, and (v) all other
amounts to which the Employee is entitled under any compensation plan of the
Company at the times such payments are due.
9.2. BASE AMOUNT. For purposes of this Agreement, "Base
Amount" shall mean the Employee's annual Base Salary at the highest rate in
effect on, or at any time during the ninety (90) day period prior to, the
Termination Date and shall include all amounts of the Employee's Base Salary
that are deferred under any qualified and non-qualified employee benefit plans
of the Company or any other agreement or arrangement.
9.3. CAUSE. For purposes of this Agreement, a termination
of employment is for "Cause" if the Employee has been convicted of a felony or
if the termination is evidenced by a resolution adopted in good faith by
two-thirds (2/3) of the Board that the Employee (i) intentionally and
continually failed substantially to perform his reasonably assigned duties with
the Company (other than a failure resulting from the Employee's incapacity due
to physical or mental illness or from the Employee's assignment of duties that
would constitute "Good Reason" (as hereinafter defined)) which failure
continued for a period of at least thirty (30) days after a written notice of
demand for substantial performance has been delivered to the Employee
specifying the manner in which the Employee has failed substantially to
perform, or (ii) intentionally engaged in illegal conduct or gross misconduct
which results in material economic harm to the Company; provided, however, that
(A) where the Employee has been terminated for Cause because a felony
prosecution has been brought against him and no conviction or plea of guilty or
plea of nolo contendere or its equivalent results therefrom, then said
termination shall no longer be deemed to have been for Cause and the Employee
shall be entitled to all the benefits provided by Section 11.1(i) hereof from
and after the date on which the prosecution of the Employee has been dismissed
or a judgement of acquittal has been entered, whichever shall first occur; and
(B) no termination of the Employee's employment shall be for Cause as set forth
in clause (ii) above until (x) there shall have been delivered to the Employee
a copy of a written notice setting forth that the Employee was guilty of the
conduct set forth in clause (ii) and specifying the particulars thereof in
detail, and (y) the Employee shall have been provided an opportunity to be
heard in person by the Board (with the assistance of the Employee's counsel if
the Employee so desires). No act, or failure to act, on the Employee's part
shall be considered "intentional" unless the Employee has acted or failed to
act with a lack of good faith and with a lack of reasonable belief that the
Employee's action or failure to act was in the best interests of the Company.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of any senior officer of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company. Any termination of the
Employee's employment by the Company hereunder shall be deemed to be a
termination other than for Cause unless it meets all requirements of this
Section 9.3.
9.4. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall have occurred if:
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(i) a majority of the directors of the Company
shall be persons other than persons: (A) for whose election proxies shall have
been solicited by the Board, or (B) who are then serving as directors appointed
by the Board to fill vacancies on the Board caused by death or resignation (but
not by removal) or to fill newly-created directorships;
(ii) a majority of the outstanding voting power
of the Company shall have been acquired or beneficially owned (as defined in
Rule 13d-3 under the 1934 Act or any successor rule thereto) by any person
(other than the Company, a subsidiary of the Company or the Employee) or Group
(as defined below), which Group does not include the Employee; or
(iii) there shall have occurred:
(A) a merger or consolidation of the
Company with or into another corporation (other than (1) a merger or
consolidation with a subsidiary of the Company or (2) a merger or consolidation
in which (a) the holders of voting stock of the Company immediately prior to
the merger as a class continue to hold immediately after the merger at least a
majority of all outstanding voting power of the surviving or resulting
corporation or its parent and (b) all holders of each outstanding class or
series of voting stock of the Company immediately prior to the merger or
consolidation have the right to receive substantially the same cash, securities
or other property in exchange for their voting stock of the Company as all
other holders of such class or series);
(B) a statutory exchange of shares of
one or more classes or series of outstanding voting stock of the Company for
cash, securities or other property;
(C) the sale or other disposition of
all or substantially all of the assets of the Company (in one transaction or a
series of transactions); or
(D) the liquidation or dissolution of
the Company;
unless more than twenty-five percent (25%) of the voting stock (or the voting
equity interest) of the surviving corporation or the corporation or other
entity acquiring all or substantially all of the assets of the Company (in the
case of a merger, consolidation or disposition of assets) or of the Company or
its resulting parent corporation (in the case of a statutory share exchange) is
beneficially owned by the Employee or a Group that includes the Employee.
9.5. GROUP. For purposes of this Agreement, "Group" shall
mean any two or more persons acting as a partnership, limited partnership,
syndicate, or other group acting in concert for the purpose of acquiring,
holding or disposing of voting stock of the Company.
9.6. DISABILITY. For purposes of this Agreement,
"Disability" shall mean a physical or mental infirmity which impairs the
Employee's ability to substantially perform his duties with the Company for a
period of one hundred eighty (180) consecutive days and
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the Employee has not returned to his full time employment prior to the
Termination Date as stated in the "Notice of Termination" (as hereinafter
defined).
9.7. GOOD REASON.
9.7.1. For purposes of this Agreement, "Good
Reason" shall mean a good faith determination by the Employee, in the
Employee's sole and absolute judgment, that any one or more of the following
events has occurred, without the Employee's express written consent:
(i) the assignment to the Employee of
any duties inconsistent with the Employee's position (including, without
limitation, status, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the date of such assignment,
or any other action by the Company that results in a material diminution in
such position, authority, duties or responsibilities, excluding for this
purpose isolated and inadvertent action not taken in bad faith and remedied by
the Company promptly after receipt of notice thereof given by the Employee;
(ii) a reduction by the Company in the
Employee's Base Salary, as the same may be increased from time to time, or a
change in the eligibility requirements or performance criteria under any bonus,
incentive or compensation plan, program or arrangement under which the Employee
is covered immediately prior to the Termination Date which adversely affects
the Employee;
(iii) any failure to pay the Employee
any compensation or benefits to which he is entitled within five (5) days of
the date due after notice of the failure to so pay is given by the Employee;
(iv) the Company's requiring the
Employee to be based anywhere other than within fifty (50) miles of the
Employee's job location as of the date hereof, except for reasonably required
travel on the Company's business which is not greater than such travel
requirements prior to the date hereof;
(v) the taking of any action by the
Company that would materially adversely affect the physical conditions existing
in or under which the Employee performs his employment duties;
(vi) the insolvency or the filing (by
any party, including the Company) of a petition for bankruptcy by the Company;
(vii) any purported termination of the
Employee's employment for Cause by the Company which does not comply with the
terms of Section 9.3 hereof; or
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(viii) any breach by the Company of any
provision of this Agreement.
9.7.2. The Employee's right to terminate his
employment pursuant to this Section 9 shall not be affected by his incapacity
due to physical or mental illness.
9.8. NOTICE OF TERMINATION. For purposes of this
Agreement, "Notice of Termination" shall mean a written notice of termination
from the Company of the Employee's employment which indicates the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
9.9. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean, in the case of the Employee's death, his date of
death, in the case of the Employee's voluntary termination, the last day of
employment, and in all other cases (other than in the case of a successor or an
assignee, which is provided for in Section 13.1 hereof), the date specified in
the Notice of Termination; provided, however, that if the Employee's employment
is terminated by the Company for Cause or due to Disability, the date specified
in the Notice of Termination shall be at least thirty (30) days from the date
the Notice of Termination is given to the Employee; and provided further that
in the case of Disability the Employee shall not have returned to the full-time
performance of his duties during such period of at least thirty (30) days.
10. BENEFITS AND PAYMENTS UPON TERMINATION OF EMPLOYMENT.
10.1. COMPENSATION AND BENEFITS. If, during the term of
this Agreement, the Employee's employment with the Company shall be terminated,
the Employee shall be entitled to the following compensation and benefits in
the following circumstances:
(i) If the Employee's employment with the
Company shall be terminated (A) by the Company for Cause or Disability or (B)
by reason of the Employee's death, then the Company shall pay to the Employee
all Accrued Compensation.
(ii) If the Employee's employment with the
Company shall be terminated (A) by the Company pursuant to Section 12.2 hereof
or (B) by the Employee pursuant to Section 12.4 hereof, then the Employee shall
be entitled to the following:
(1) the Company shall pay the Employee
all Accrued Compensation;
(2) the Company shall pay the Employee
as severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date an amount in cash equal to two (2) times the Base
Amount;
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(3) for twenty-four (24) months or
such longer period as may be provided by the terms of the appropriate program,
practice or policy, the Company shall, at its expense, continue on behalf of
the Employee and his dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization benefits generally made
available to the Company's executive officers at any time during the 90-day
period prior to the Termination Date or at any time thereafter, provided that
(i) the Company's obligation hereunder with respect to the foregoing benefits
shall be limited to the extent that the Employee obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the Company
may reduce the coverage of any benefits it is required to provide the Employee
hereunder as long as the aggregate coverages and benefits of the combined
benefit plans are no less favorable to the Employee than the coverages and
benefits required to be provided hereunder, and (ii) this clause (3) shall not
be interpreted so as to limit any benefits to which the Employee or his
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Employee's termination of
employment, including, without limitation, retiree medical and life insurance
benefits; and
(4) the restrictions on any
outstanding incentive awards (including, without limitation, restricted stock
and granted performance shares or units) under any incentive plan or
arrangement shall lapse and such incentive award shall become 100% vested, all
stock options, warrants and stock appreciation rights granted to the Employee
on or prior to the date of this Agreement shall become immediately exercisable
and 100% vested and, notwithstanding anything to the contrary contained in the
plan, agreement or other instrument relating to such stock option, warrant or
stock appreciation rights with regard to the period of time within which such
stock option, warrant or stock appreciation rights must be exercised following
the Employee's termination of employment or provision of services to the
Company, all such stock options, warrants and stock appreciation rights may be
exercised at any time and from time to time until the one (1) year anniversary
of the Termination Date, and all performance units granted to the Employee
shall become 100% vested.
(iii) The amounts provided for in subsection
10.1(i) shall be payable to Employee in a lump-sum on the Termination Date, and
the amounts provided for in subsection 10.1(ii) shall be payable to the
Employee in substantially equal bi-weekly installments for a twenty-four (24)
month period commending on the Termination Date and otherwise in accordance
with the Company's payroll practices in effect from time to time.
(iv) The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, and no such payment shall be offset or reduced
by the amount of any compensation or benefits provided to the Employee in any
subsequent employment, except as provided in subsection 10.1(ii)(3).
10.2. NO SEVERANCE. The severance pay and benefits
provided for in this Section 10 shall be in lieu of any other severance or
termination pay to which the Employee
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may be entitled under any Company severance or termination plan, program,
practice or arrangement.
10.3. OTHER COMPENSATION AND BENEFITS. The Employee's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs, policies and practices then in effect.
11. GROSS-UP PAYMENTS.
11.1. ADDITIONAL PAYMENTS. Anything in this Agreement to
the contrary notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 11) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 11.1, if it shall be determined that the Employee is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
amount (the "Reduced Amount") that could be paid to the Employee such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Employee and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
11.2 DETERMINATION. Subject to the provisions of Section
11.3, all determinations required to be made under this Section 11, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally-recognized accounting firm selected by the
Company and reasonably acceptable to the Employee (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Employee within fifteen (15) business days of the receipt of notice from the
Employee that there has been a Payment, or such earlier times as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 11, shall be paid by the Company to the Employee within five (5) days
of the receipt of the Accounting Firm's determination. Any determination by the
accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company
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should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 11.3 and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee.
11.3 INTERNAL REVENUE SERVICE CLAIM. The Employee shall
notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten (10) business days after the Employee is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Employee shall not pay such claim
prior to the expiration of the 30-day period following the date on which the
Employee gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, without limitation, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including, without limitation, interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 11.3, the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Employee
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one
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or more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee on
an interest-free basis and shall indemnify and hold the Employee harmless, on
an after-tax basis, from any Excise Tax or income tax (including, without
limitation, interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
11.4 REFUNDS. If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 11.3, the Employee becomes
entitled to receive any refund with respect to such claim, then the Employee
shall (subject to the Company's complying with the requirements of Section
11.3) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Employee of an amount advanced by the Company pursuant to
Section 11.3, a determination is made that the Employee shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Employee in writing of its intent to contest such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
12. TERMINATION. The Employee's employment hereunder may be
terminated without any breach of this Agreement only in accordance with this
Section 12.
12.1. TERMINATION BY THE COMPANY FOR CAUSE. The Company
may terminate the Employee's employment at any time for Cause by providing to
the Employee a Notice of Termination, whereupon the Employee shall be entitled
to all of the benefits and payments provided for under Section 10 hereof.
12.2. TERMINATION BY THE COMPANY WITHOUT CAUSE. The
Company may terminate the Employee's employment at any time without Cause by
providing to the Employee a Notice of Termination, whereupon the Employee shall
be entitled to all of the benefits and payments provided for under Section 10
hereof.
12.3. TERMINATION BY THE EMPLOYEE. The Employee's
employment may be terminated by the Employee at any time by providing the
Company with notice of such termination and specifying in the notice the
effective date of such termination, which shall not be less than one hundred
twenty (120) days after giving such notice, whereupon the Employee's employment
shall terminate on the date specified in such notice and the Employee shall be
entitled to all of the benefits and payments provided for under Section 10
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hereof; provided, however, that following receipt of such notice, the Company
may specify, in its discretion, the date on which the Employee's employment
shall terminate so long as the date so specified is not more than one hundred
twenty (120) days after the date on which the Employee shall have given notice,
in which case the Employee's employment shall terminate on the date so
specified by the Company.
12.4. TERMINATION BY THE EMPLOYEE FOR GOOD REASON
FOLLOWING A CHANGE OF CONTROL. For a (1) year period following a Change of
Control, the Employee's employment may be terminated by the Employee for Good
Reason at any such time during such one (1) year period by providing the
Company with a notice of such termination and specifying in the notice the
effective date of such termination, whereupon the Employee's employment shall
terminate on the date specified in such notice and the Employee shall be
entitled to all of the benefits and payments provided for under Section 10
hereof.
12.5. TERMINATION UPON DISABILITY. The Company may
terminate the Employee's employment upon the Disability of the Employee by
providing to the Employee a Notice of Termination, whereupon the Employee shall
be entitled to all of the benefits and payments provided for under Section 10
hereof.
12.6. DEATH. In the event of the Employee's death during
his employment hereunder, the Employee's employment shall be automatically
terminated, whereupon the Employee shall be entitled to all of the benefits and
payments provided for under Section 10 hereof.
13. SUCCESSORS AND ASSIGNS.
13.1. ASSUMPTION AND AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the Company, its successors and
assigns, and the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) or assign, by
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
or assignment had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession or assignment
shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment had been terminated pursuant
to Section 12.2 hereof, except that for purposes of implementing the foregoing,
the date on which any such succession or assignment becomes effective shall be
deemed the Termination Date hereunder. As used in the Agreement, Company shall
mean the Company as hereinbefore defined and any successor or assign that
executes and delivers the agreement provided for in this Section 13.1 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
13.2. RIGHTS OF EMPLOYEE. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of and be enforceable by the
Employee's personal or
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legal representatives, executors, administrators, successors, heirs,
distributees, devises and legatees. If the Employee should die while any
amounts would still be payable to him hereunder if he had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Employee's devise, legatee or other
designee or, if there be no such designee, to the Employee's estate.
14. INJUNCTIVE RELIEF. The Company and the Employee agree that
damages are an inadequate remedy for, and that the Company or any successor to
the business of the Company would be irreparably harmed by, any breach of
Section 8 of this Agreement, and that the Company, any successor to the
business of the Company or any permitted assignee of the Company shall be
entitled to equitable relief in the form of a preliminary or permanent
injunction upon any breach of Section 8 hereof.
15. NOTICES. For the purpose of this Agreement, notices and all
other communications to either party hereunder provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or mailed by first-class mail or airmail, postage prepaid, addressed:
If to the Employee:
Mr. James M. Logsdon
1000 Saddlebrook Drive
Colleyville, Texas 76034
If to the Company:
Cereus Technology Partners, Inc.
1000 Abernathy Road, Suite 1000
Atlanta, Georgia 30328
Attention: President
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
16. MISCELLANEOUS. No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver (i) is agreed
to in writing and is signed by the Employee and a representative of the
Company, its successor or permitted assignee and (ii) has been approved by the
Board, its successor or any permitted assignee of the Company. No waiver by
either party to this Agreement at any time of breach by the other party of, or
compliance by the other party with, any condition or provision of this
Agreement to be performed by the other party shall be deemed to be a waiver of
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied, with respect to the subject matter of this Agreement have been made
by either party that are not expressly set forth in this Agreement.
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17. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which other
provisions shall remain in full force and effect, nor shall the invalidity or
unenforceability of a portion of any provision of this Agreement affect the
validity or enforceability of the balance of such provision.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
19. HEADINGS. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not, in any way, affect the
meaning or interpretation of any provision of this Agreement.
20. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws, and not the choice
of law rules, of the State of Georgia.
21. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, other than the provisions of
Section 8 hereof, shall, on the written request of one party served upon the
other, be settled by binding arbitration in Fulton County, Georgia in
accordance with the commercial arbitration rules then recognized by the
American Arbitration Association, and judgment upon the award rendered may be
entered and enforced in any court having jurisdiction thereof.
22. FEES AND EXPENSES. The Company shall pay all legal fees and
related expenses incurred by the Employee as they become due as a result of or
in connection with (i) the Employee's termination of employment (including,
without limitation, all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (ii) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
without limitation, any such fees and expenses incurred in connection
therewith) or by any other plan or arrangement maintained by the Company under
which the Employee is or may be entitled to receive benefits, (iii) the
Employee's hearing before the Board as contemplated in Section 9.3 of this
Agreement, (iv) any tax audit or proceeding to the extent attributable to the
application of any Excise Tax with respect to any Payment or Payments
hereunder, plus in each case interest on any delayed payment at the "Applicable
Federal Rate," as defined in Section 1274(d) of the Code, as then in effect,
and (v) the preparation and execution of this Agreement.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements (if
any), understandings and arrangements (oral or written) between the parties
hereto.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer, and the Employee has
executed and delivered this Agreement, all as of the date first written above.
CEREUS TECHNOLOGY PARTNERS, INC.
By: /s/ Steven A. Odom
----------------------------------------
Its: Chief Executive Officer
------------------------------------
/s/ James M. Logsdon
-------------------------------------------
JAMES M. LOGSDON
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EXHIBIT 10(bb)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of March 23, 2000, between CEREUS TECHNOLOGY PARTNERS, INC., a
Delaware corporation (the "Company"), and JULIET M. REISING (the "Employee"), an
individual resident of the State of Georgia.
1. TERM. The term (the "Term") of this Agreement shall begin on the
date hereof (the "Effective Date") and shall continue in effect for a period of
three (3) years from the Effective Date; provided, however, the Term shall be
extended automatically for an additional year on each anniversary of the
Effective Date unless either party hereto gives written notice to the other
party not to so extend at least ninety (90) days prior thereto, in which case no
further extension shall occur; provided further, however, that notwithstanding
any such notice by the Company not to extend, the Term shall not expire prior to
the expiration of twenty-four (24) months after the occurrence of a Change in
Control (as hereinafter defined).
2. EMPLOYMENT AND DUTIES. The Employee shall serve as the Company's
Chief Financial Officer, reporting to the Company's Chief Executive Officer, and
shall have such powers and duties as may from time to time be prescribed by the
Company's Board of Directors (the "Board"), provided that such duties are
consistent with the Employee's position as the senior financial officer of the
Company. The Company shall provide the Employee with a private office,
secretarial and administrative assistance, office equipment, supplies and other
facilities and services suitable to the Employee's position.
3. COMPENSATION.
3.1. SALARY. For all services to be rendered by the Employee
pursuant to this Agreement, the Company hereby agrees to pay the Employee a base
salary at an annual rate per year of $175,000 through and including March 23,
2001 and at an annual rate per year of $200,000 thereafter (the "Base Salary"),
payable in accordance with the Company's payroll practices in effect from time
to time; provided, however, that in the event of an occurrence of a Change in
Control (as hereinafter defined) prior to March 23, 2001, the Base Salary
hereunder shall be immediately increased to $200,000. The Base Salary shall be
reviewed at least annually and shall be increased pursuant to such review by a
percentage no less than the percentage increase in the consumer price index, as
published by the Bureau of Labor Statistics of the U.S. Department of Labor, for
the calendar year immediately preceding such review. Any increase in Base Salary
or other compensation granted by the compensation committee of the Board shall
in no way limit or reduce any other obligation of the Company hereunder. Once
established at an increased specified rate, the Base Salary hereunder shall not
thereafter be reduced, and the term Base Salary used in this Agreement shall
refer to the Base Salary as so increased.
<PAGE> 2
3.2. BONUS. In addition to her Base Salary, in the discretion of the
Board, the Employee may be awarded for each calendar year during the Term an
annual bonus (an "Annual Bonus") either pursuant to a bonus or incentive plan of
the Company or otherwise on terms no less favorable than those awarded to other
executive officers of the Company.
4. WARRANTS. Upon the execution hereof, the Company shall grant to the
Employee a warrant pursuant to a warrant certificate containing customary terms
and conditions (the "Warrant") to purchase 380,000 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), exercisable for
cash or on a cashless basis as follows:
(i) The Warrant may be exercised for 126,666 shares of
Common Stock at an exercise price of $17.75 per share from time to time
commencing on the first anniversary of the date hereof and ending on the tenth
anniversary of the date hereof.
(ii) The Warrant may be exercised for an additional 126,667
shares of Common Stock at an exercise price of $17.75 per share from time to
time commencing on the second anniversary of the date hereof and ending on the
tenth anniversary of the date hereof.
(iii) The Warrant may be exercised for an additional 126,667
shares of Common Stock at an exercise price of $17.75 per share from time to
time commencing on the third anniversary of the date hereof and ending on the
tenth anniversary of the date hereof.
5. BENEFITS. The Employee shall be entitled to all benefits and
conditions of employment provided by the Company to its executive officers,
including, without limitation, insurance, participation in the Company's
vacation policy, and participation in any stock option or incentive compensation
plans, pension, profit sharing or other retirement plans, subject (in each case)
to the terms of such plans and any provisions, rules, regulations and laws
applicable to such plans.
6. REIMBURSEMENT FOR BUSINESS EXPENSES. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses incurred by her in
the direct performance of her duties during her employment with the Company
pursuant to the terms of this Agreement and in accordance with the Company's
policies in effect from time to time. All requests for reimbursement shall be
substantiated by invoices and other pertinent data reasonably satisfactory to
the Company.
7. PERFORMANCE. The Employee shall devote all of her working time and
efforts to the business and affairs of the Company and to the diligent
performance of the duties and responsibilities assigned to her pursuant to this
Agreement, except for vacations, weekends and holidays. Notwithstanding the
foregoing, the Employee may render charitable, civic and outside board services
so long as such services do not materially interfere with the
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Employee's ability to discharge her duties, including, without limitation, such
outside services as the Employee is currently performing.
8. NON-DISCLOSURE OF PROPRIETARY INFORMATION; NON-COMPETITION;
NON-SOLICITATION.
8.1. CONFIDENTIAL INFORMATION; TRADE SECRETS. As used in this
Agreement, the term "Confidential Information" shall mean valuable, non-public,
competitively sensitive data and information relating to the Company's business
or the business of any entity affiliated with the Company, other than (i) Trade
Secrets (as defined below); (ii) information contained in any publicly available
press release, a regulatory filing or other public communication which is
otherwise in the public domain on the date of this Agreement; (iii) information
that hereafter enters the public domain through no action on the part of the
Employee; (iv) information that is known by the Employee or becomes available to
her from a source other than the Company or any of its affiliates, provided that
such information was not obtained as a result of a breach of any confidentiality
obligation by the source of such information; (v) information that was already
in the possession of the Employee prior to the date hereof and which was not
acquired from the Company or any of its affiliates; or (vi) information obtained
from discovery in a legal proceeding, but only to the extent such information is
used in such a proceeding. "Confidential Information" shall include, among other
things, information specifically designated as a Trade Secret that is,
notwithstanding the designation, determined by a court of competent jurisdiction
not to be a "trade secret" under applicable law. As used in this Agreement, the
term "Trade Secrets" shall mean information or data of or about the Company or
any entity affiliated with the Company, including, without limitation, technical
or non-technical data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial plans,
product plans, or lists of actual or potential customers or suppliers, that (i)
derive 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 their disclosure or use; and (ii) are subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
To the extent that the foregoing definition is inconsistent with a definition of
"trade secret" under applicable law, the foregoing definition shall be deemed
amended to the extent necessary to render it consistent with applicable law.
8.2. NON-DISCLOSURE. The Employee will be exposed to Trade Secrets
and Confidential Information as a result of her employment by the Company as
provided in this Agreement. The Employee acknowledges and agrees that any
unauthorized disclosure or use of any of the Trade Secrets or Confidential
Information of the Company would be wrongful and would likely result in
immediate and irreparable injury to the Company. In consideration of the
Employee's right to employment (or continued employment) under the terms of this
Agreement, except as appropriate in connection with the performance of her
obligations under this Agreement, the Employee shall not, without the express
prior written consent of an executive officer of the Company other than the
Employee, redistribute, market, publish, disclose or divulge to any other person
or entity, or use or modify for use, directly or indirectly, in any way for any
person or entity (i) any Confidential Information
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during the Term of this Agreement and for a period of two (2) years after the
final date of the Term of this Agreement; and (ii) any Trade Secrets at any time
(during or after the Term of this Agreement) during which such information or
data shall continue to constitute a "trade secret" under applicable law. The
Employee agrees to cooperate with any reasonable confidentiality requirements of
the Company. The Employee shall immediately notify the Company of any
unauthorized disclosure or use of any Trade Secrets or Confidential Information
of which the Employee becomes aware.
8.3. NON-COMPETITION. The Employee shall not, either directly or
indirectly, alone or in partnership, manage, control, operate or own any
business that is substantially similar to the business of the Company during the
term hereof in any geographic area of the United States of America (a "Competing
Business") during the term hereof and, if the Employee's employment with the
Company shall be terminated pursuant to Section 13.1 or Section 13.3 hereof,
during the one (1) year period following the term hereof, except that the
Employee may own up to three percent (3%) of the outstanding securities of a
Competing Business the securities of which are registered with the Securities
and Exchange Commission if such Competing Business is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act").
8.4. NON-SOLICITATION. For a period of one (1) year immediately
following any termination of the Employee's employment (other than a termination
pursuant to Section 12.2. or Section 12.4 hereof), the Employee will not
solicit, or participate in any solicitation of, the customers, suppliers,
employees or representatives of the Company (or any of its subsidiaries or
affiliated companies) to breach any contract with the Company, terminate any
relationship with the Company or leave the Company. For purposes of this
Agreement, customers shall be limited to actual customers or actively-sought
prospective customers of the Company or any subsidiary or affiliate of the
Company with whom the Employee has had substantial contact during the Term of
this Agreement.
9. CERTAIN DEFINITIONS.
9.1. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date, including, without limitation, (i) Base Salary, (ii)
reimbursement for reasonable and necessary expenses incurred by the Employee on
behalf of the Company during the period ending on the Termination Date, (iii)
vacation pay, (iv) bonuses, including, without limitation, any Annual Bonus, and
incentive compensation, and (v) all other amounts to which the Employee is
entitled under any compensation plan of the Company at the times such payments
are due.
9.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount"
shall mean the Employee's annual Base Salary at the highest rate in effect on,
or at any time during the ninety (90) day period prior to, the Termination Date
and shall include all amounts
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of the Employee's Base Salary that are deferred under any qualified and
non-qualified employee benefit plans of the Company or any other agreement or
arrangement.
9.3. CAUSE. For purposes of this Agreement, a termination of
employment is for "Cause" if the Employee has been convicted of a felony or if
the termination is evidenced by a resolution adopted in good faith by two-thirds
(2/3) of the Board that the Employee (i) intentionally and continually failed
substantially to perform her reasonably assigned duties with the Company (other
than a failure resulting from the Employee's incapacity due to physical or
mental illness or from the Employee's assignment of duties that would constitute
"Good Reason" (as hereinafter defined)) which failure continued for a period of
at least thirty (30) days after a written notice of demand for substantial
performance has been delivered to the Employee specifying the manner in which
the Employee has failed substantially to perform, or (ii) intentionally engaged
in illegal conduct or gross misconduct which results in material economic harm
to the Company; provided, however, that (A) where the Employee has been
terminated for Cause because a felony prosecution has been brought against her
and no conviction or plea of guilty or plea of nolo contendere or its equivalent
results therefrom, then said termination shall no longer be deemed to have been
for Cause and the Employee shall be entitled to all the benefits provided by
Section 11.1(i) hereof from and after the date on which the prosecution of the
Employee has been dismissed or a judgement of acquittal has been entered,
whichever shall first occur; and (B) no termination of the Employee's employment
shall be for Cause as set forth in clause (ii) above until (x) there shall have
been delivered to the Employee a copy of a written notice setting forth that the
Employee was guilty of the conduct set forth in clause (ii) and specifying the
particulars thereof in detail, and (y) the Employee shall have been provided an
opportunity to be heard in person by the Board (with the assistance of the
Employee's counsel if the Employee so desires). No act, or failure to act, on
the Employee's part shall be considered "intentional" unless the Employee has
acted or failed to act with a lack of good faith and with a lack of reasonable
belief that the Employee's action or failure to act was in the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of any senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company. Any termination of the
Employee's employment by the Company hereunder shall be deemed to be a
termination other than for Cause unless it meets all requirements of this
Section 9.3.
9.4. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall have occurred if:
(i) a majority of the directors of the Company shall be
persons other than persons: (A) for whose election proxies shall have been
solicited by the Board, or (B) who are then serving as directors appointed by
the Board to fill vacancies on the Board caused by death or resignation (but not
by removal) or to fill newly-created directorships;
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(ii) a majority of the outstanding voting power of the
Company shall have been acquired or beneficially owned (as defined in Rule 13d-3
under the 1934 Act or any successor rule thereto) by any person (other than the
Company, a subsidiary of the Company or the Employee) or Group (as defined
below), which Group does not include the Employee; or
(iii) there shall have occurred:
(A) a merger or consolidation of the Company with or
into another corporation (other than (1) a merger or consolidation with a
subsidiary of the Company, (2) a merger or consolidation in which (a) the
holders of voting stock of the Company immediately prior to the merger as a
class continue to hold immediately after the merger at least a majority of all
outstanding voting power of the surviving or resulting corporation or its parent
and (b) all holders of each outstanding class or series of voting stock of the
Company immediately prior to the merger or consolidation have the right to
receive substantially the same cash, securities or other property in exchange
for their voting stock of the Company as all other holders of such class or
series, or (3) a merger or consolidation in which a majority of the directors of
the surviving corporation after the consummation of such merger or consolidation
are persons (a) who were serving as directors of the Company immediately prior
to such consummation or (b) who are appointed to serve as directors of the
surviving corporation by a majority of the directors of the Company immediately
prior to such consummation or whose appointment has been agreed to by such
majority);
(B) a statutory exchange of shares of one or more
classes or series of outstanding voting stock of the Company for cash,
securities or other property;
(C) the sale or other disposition of all or
substantially all of the assets of the Company (in one transaction or a series
of transactions); or
(D) the liquidation or dissolution of the Company;
unless more than twenty-five percent (25%) of the voting stock (or the voting
equity interest) of the surviving corporation or the corporation or other entity
acquiring all or substantially all of the assets of the Company (in the case of
a merger, consolidation or disposition of assets) or of the Company or its
resulting parent corporation (in the case of a statutory share exchange) is
beneficially owned by the Employee or a Group that includes the Employee.
9.5. GROUP. For purposes of this Agreement, "Group" shall mean any
two or more persons acting as a partnership, limited partnership, syndicate, or
other group acting in concert for the purpose of acquiring, holding or disposing
of voting stock of the Company.
9.6. DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Employee's ability to
substantially perform her duties with the Company for a period of one hundred
eighty (180) consecutive days and
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the Employee has not returned to her full time employment prior to the
Termination Date as stated in the "Notice of Termination" (as hereinafter
defined).
9.7. GOOD REASON.
9.7.1. For purposes of this Agreement, "Good Reason" shall mean
a good faith determination by the Employee, in the Employee's sole and absolute
judgment, that any one or more of the following events has occurred, without the
Employee's express written consent:
(i) the assignment to the Employee of any duties
inconsistent with the Employee's position (including, without limitation,
status, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the date of such assignment,
or any other action by the Company that results in a material diminution in such
position, authority, duties or responsibilities, excluding for this purpose
isolated and inadvertent action not taken in bad faith and remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(ii) a reduction by the Company in the Employee's Base
Salary, as the same may be increased from time to time, or a change in the
eligibility requirements or performance criteria under any bonus, incentive or
compensation plan, program or arrangement under which the Employee is covered
immediately prior to the Termination Date which adversely affects the Employee;
(iii) any failure to pay the Employee any compensation
or benefits to which she is entitled within five (5) days of the date due after
notice of the failure to so pay is given by the Employee;
(iv) the Company's requiring the Employee to be based
anywhere other than within fifty (50) miles of the Employee's job location as of
the date hereof, except for reasonably required travel on the Company's business
which is not greater than such travel requirements prior to the date hereof;
(v) the taking of any action by the Company that would
materially adversely affect the physical conditions existing in or under which
the Employee performs her employment duties;
(vi) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy by the Company;
(vii) any purported termination of the Employee's
employment for Cause by the Company which does not comply with the terms of
Section 9.3 hereof; or
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(viii) any breach by the Company of any provision of
this Agreement.
9.7.2. The Employee's right to terminate her employment
pursuant to this Section 9 shall not be affected by her incapacity due to
physical or mental illness.
9.8. NOTICE OF TERMINATION. For purposes of this Agreement, "Notice
of Termination" shall mean a written notice of termination from the Company of
the Employee's employment which indicates the specific termination provision in
this Agreement relied upon and which sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
9.9. TERMINATION DATE. For purposes of this Agreement, "Termination
Date" shall mean, in the case of the Employee's death, her date of death, in the
case of the Employee's voluntary termination, the last day of employment, and in
all other cases (other than in the case of a successor or an assignee, which is
provided for in Section 13.1 hereof), the date specified in the Notice of
Termination; provided, however, that if the Employee's employment is terminated
by the Company for Cause or due to Disability, the date specified in the Notice
of Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Employee; and provided further that in the case of
Disability the Employee shall not have returned to the full-time performance of
her duties during such period of at least thirty (30) days.
10. CERTAIN BENEFITS AND PAYMENTS.
10.1. COMPENSATION AND BENEFITS UPON TERMINATION OF EMPLOYMENT.
10.1.1. If, during the term of this Agreement, the Employee's
employment with the Company shall be terminated, the Employee shall be entitled
to the following compensation and benefits in the following circumstances:
(i) If the Employee's employment with the Company
shall be terminated (A) by the Company for Cause or Disability or (B) by reason
of the Employee's death, then the Company shall pay to the Employee all Accrued
Compensation.
(ii) If the Employee's employment with the Company
shall be terminated (A) by the Company pursuant to Section 12.2 hereof or (B) by
the Employee pursuant to Section 12.4 hereof, then the Employee shall be
entitled to the following:
(1) the Company shall pay the Employee all
Accrued Compensation;
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(2) the Company shall pay the Employee as
severance pay and in lieu of any further compensation for periods subsequent to
the Termination Date an amount in cash equal to two (2) times the Base Amount;
and
(3) for twenty-four (24) months or such longer
period as may be provided by the terms of the appropriate program, practice or
policy, the Company shall, at its expense, continue on behalf of the Employee
and her dependents and beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits generally made available to the Company's
executive officers at any time during the 90-day period prior to the Termination
Date or at any time thereafter, provided that (i) the Company's obligation
hereunder with respect to the foregoing benefits shall be limited to the extent
that the Employee obtains any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Company may reduce the coverage of any benefits
it is required to provide the Employee hereunder as long as the aggregate
coverages and benefits of the combined benefit plans are no less favorable to
the Employee than the coverages and benefits required to be provided hereunder,
and (ii) this clause (3) shall not be interpreted so as to limit any benefits to
which the Employee or her dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Employee's termination of employment, including, without limitation, retiree
medical and life insurance benefits.
10.1.2. The amounts provided for in subsection 10.1.1(i) shall
be payable to Employee in a lump-sum on the Termination Date, and the amounts
provided for in subsection 10.1.1(ii) shall be payable to the Employee in
substantially equal bi-weekly installments for a twenty-four (24) month period
commending on the Termination Date and otherwise in accordance with the
Company's payroll practices in effect from time to time.
10.1.3. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Employee in any subsequent
employment, except as provided in subsection 10.1.1(ii)(3).
10.1.4. The severance pay and benefits provided for in this
Section 10.1 shall be in lieu of any other severance or termination pay to which
the Employee may be entitled under any Company severance or termination plan,
program, practice or arrangement.
10.1.5. The Employee's entitlement to any other compensation or
benefits upon her termination of employment with the Company shall be determined
in accordance with the Company's employee benefit plans and other applicable
programs, policies and practices then in effect.
10.2. ACCELERATION UPON CHANGE IN CONTROL. Immediately upon the
occurrence of a Change in Control, (i) the restrictions on any outstanding
incentive awards
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(including, without limitation, restricted stock and granted performance shares
or units) under any incentive plan or arrangement shall lapse and such incentive
awards shall become 100% vested, and (ii) all stock options, warrants and stock
appreciation rights granted to the Employee on or prior to the date of this
Agreement shall become immediately exercisable and 100% vested (all incentive
awards, stock options, warrants and stock appreciation rights whose vesting has
been accelerated hereunder are hereinafter referred to as the "Accelerated
Awards"). Notwithstanding anything to the contrary contained in the plan,
agreement or other instrument relating to any Accelerated Award with regard to
the period of time within which such Accelerated Award must be exercised (the
"Normal Exercise Period"), in the event that Employee's employment with the
Company terminates for any reason whatsoever (whether such termination is
voluntary or involuntary) following a Change in Control, all such Accelerated
Awards may be exercised at any time and from time to time (i) until the one (1)
year anniversary of the date of such termination or (ii) the end of the Normal
Exercise Period, whichever is last to occur.
11. GROSS-UP PAYMENTS.
11.1. ADDITIONAL PAYMENTS. Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Employee (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 11) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this Section 11.1, if
it shall be determined that the Employee is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the "Reduced
Amount") that could be paid to the Employee such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Employee and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
11.2. DETERMINATION. Subject to the provisions of Section 11.3, all
determinations required to be made under this Section 11, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a nationally-recognized accounting firm selected by the Company and
reasonably acceptable to the Employee (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Employee
within fifteen (15) business days of the receipt of notice
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from the Employee that there has been a Payment, or such earlier times as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 11, shall be paid by the Company to the Employee within five (5)
days of the receipt of the Accounting Firm's determination. Any determination by
the accounting Firm shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 11.3 and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee.
11.3. INTERNAL REVENUE SERVICE CLAIM. The Employee shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
(10) business days after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not pay such claim prior to
the expiration of the 30-day period following the date on which the Employee
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Employee in writing prior to the expiration of such period that it desires
to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, without limitation, additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including, without limitation, interest and penalties with
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respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section
11.3, the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Employee to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Employee on an
interest-free basis and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income tax (including, without
limitation, interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Employee with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
11.4. REFUNDS. If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 11.3, the Employee becomes entitled
to receive any refund with respect to such claim, then the Employee shall
(subject to the Company's complying with the requirements of Section 11.3)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Company pursuant to Section
11.3, a determination is made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does not notify the Employee
in writing of its intent to contest such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
12. TERMINATION. The Employee's employment hereunder may be terminated
without any breach of this Agreement only in accordance with this Section 12.
12.1. TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate the Employee's employment at any time for Cause by providing to the
Employee a Notice of Termination, whereupon the Employee shall be entitled to
all of the benefits and payments provided for under Section 10.1 hereof.
12.2. TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate the Employee's employment at any time without Cause by providing to
the
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<PAGE> 13
Employee a Notice of Termination, whereupon the Employee shall be entitled
to all of the benefits and payments provided for under Section 10.1 hereof.
12.3. TERMINATION BY THE EMPLOYEE. The Employee's employment may be
terminated by the Employee at any time by providing the Company with notice of
such termination and specifying in the notice the effective date of such
termination, which shall not be less than one hundred twenty (120) days after
giving such notice, whereupon the Employee's employment shall terminate on the
date specified in such notice and the Employee shall be entitled to all of the
benefits and payments provided for under Section 10.1 hereof; provided, however,
that following receipt of such notice, the Company may specify, in its
discretion, the date on which the Employee's employment shall terminate so long
as the date so specified is not more than one hundred twenty (120) days after
the date on which the Employee shall have given notice, in which case the
Employee's employment shall terminate on the date so specified by the Company.
12.4. TERMINATION BY THE EMPLOYEE FOR GOOD REASON FOLLOWING A
CHANGE OF CONTROL. For a (1) year period following a Change of Control, the
Employee's employment may be terminated by the Employee for Good Reason at any
such time during such one (1) year period by providing the Company with a notice
of such termination and specifying in the notice the effective date of such
termination, whereupon the Employee's employment shall terminate on the date
specified in such notice and the Employee shall be entitled to all of the
benefits and payments provided for under Section 10.1 hereof.
12.5. TERMINATION UPON DISABILITY. The Company may terminate the
Employee's employment upon the Disability of the Employee by providing to the
Employee a Notice of Termination, whereupon the Employee shall be entitled to
all of the benefits and payments provided for under Section 10.1 hereof.
12.6. DEATH. In the event of the Employee's death during her
employment hereunder, the Employee's employment shall be automatically
terminated, whereupon the Employee shall be entitled to all of the benefits and
payments provided for under Section 10.1 hereof.
13. SUCCESSORS AND ASSIGNS.
13.1. ASSUMPTION AND AGREEMENT. This Agreement shall be binding
upon and shall inure to the benefit of the Company, its successors and assigns,
and the Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) or assign, by agreement in form
and substance satisfactory to the Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession or assignment shall be a
breach of this Agreement and shall entitle the Employee to compensation from the
Company in the same amount and on the same terms as she would be entitled to
hereunder if her employment had been
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<PAGE> 14
terminated pursuant to Section 12.2 hereof, except that for purposes of
implementing the foregoing, the date on which any such succession or assignment
becomes effective shall be deemed the Termination Date hereunder. As used in the
Agreement, Company shall mean the Company as hereinbefore defined and any
successor or assign that executes and delivers the agreement provided for in
this Section 13.1 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
13.2. RIGHTS OF EMPLOYEE. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If the Employee should
die while any amounts would still be payable to her hereunder if she had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devise,
legatee or other designee or, if there be no such designee, to the Employee's
estate.
14. INJUNCTIVE RELIEF. The Company and the Employee agree that damages
are an inadequate remedy for, and that the Company or any successor to the
business of the Company would be irreparably harmed by, any breach of Section 8
of this Agreement, and that the Company, any successor to the business of the
Company or any permitted assignee of the Company shall be entitled to equitable
relief in the form of a preliminary or permanent injunction upon any breach of
Section 8 hereof.
15. NOTICES. For the purpose of this Agreement, notices and all other
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
or mailed by first-class mail or airmail, postage prepaid, addressed:
If to the Employee:
Ms. Juliet M. Reising
3428 Turtle Cove Ct.
Marietta, Georgia 30067
If to the Company:
Cereus Technology Partners, Inc.
1000 Abernathy Road, Suite 1000
Atlanta, Georgia 30328
Attention: President
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
16. MISCELLANEOUS. No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver (i) is agreed
to in writing and is
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<PAGE> 15
signed by the Employee and a representative of the Company, its successor or
permitted assignee and (ii) has been approved by the Board, its successor or any
permitted assignee of the Company. No waiver by either party to this Agreement
at any time of breach by the other party of, or compliance by the other party
with, any condition or provision of this Agreement to be performed by the other
party shall be deemed to be a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement.
17. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
the other provisions of this Agreement, which other provisions shall remain in
full force and effect, nor shall the invalidity or unenforceability of a portion
of any provision of this Agreement affect the validity or enforceability of the
balance of such provision.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
19. HEADINGS. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not, in any way, affect the
meaning or interpretation of any provision of this Agreement.
20. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws, and not the choice of law
rules, of the State of Georgia.
21. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, other than the provisions of Section 8
hereof, shall, on the written request of one party served upon the other, be
settled by binding arbitration in Fulton County, Georgia in accordance with the
commercial arbitration rules then recognized by the American Arbitration
Association, and judgment upon the award rendered may be entered and enforced in
any court having jurisdiction thereof.
22. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses incurred by the Employee as they become due as a result of or in
connection with (i) the Employee's termination of employment (including, without
limitation, all such fees and expenses, if any, incurred in contesting or
disputing any such termination of employment), (ii) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
without limitation, any such fees and expenses incurred in connection therewith)
or by any other plan or arrangement maintained by the Company under which the
Employee is or may be entitled to receive benefits, (iii) the Employee's hearing
before the Board as contemplated in Section 9.3 of this Agreement, (iv) any tax
audit or proceeding to the extent attributable to the application of any Excise
Tax with respect to
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<PAGE> 16
any Payment or Payments hereunder, plus in each case interest on any delayed
payment at the "Applicable Federal Rate," as defined in Section 1274(d) of the
Code, as then in effect, and (v) the preparation and execution of this
Agreement.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements (if any),
understandings and arrangements (oral or written) between the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer, and the Employee has
executed and delivered this Agreement, all as of the date first written above.
CEREUS TECHNOLOGY PARTNERS, INC.
By: /s/ Steven A. Odom
---------------------------------------
Its: Chief Executive Officer
---------------------------------
/s/ Juliet M. Reising
------------------------------------------
JULIET M. REISING
16
<PAGE> 1
EXHIBIT 10(cc)
CEREUS TECHNOLOGY PARTNERS, INC.
DIRECTORS' WARRANT INCENTIVE PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors'
Incentive Warrant Plan are to attract and retain the best available personnel
for service as Directors of the Company, to provide additional incentive to the
persons serving as Directors of the Company, to align Director and stockholder
long-term incentives and to encourage their continued service on the Board.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD" shall mean the Board of Directors of the
Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "COMMON STOCK" shall mean the common stock, $.01 par
value per share, of the Company.
(d) "COMPANY" shall mean Cereus Technology Partners,
Inc., a Delaware corporation.
(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the
absence of any interruption or termination of service as a Director.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
in and of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "INCENTIVE MEASUREMENT PERIOD" shall mean (1) the two
year period commencing January 2000 and ending January 2002 with respect to
Warrants granted in 2002; (2) the three year period commencing January 2000 and
ending January 2003 with respect to the Warrants granted in 2003; and (3), with
respect to Warrants granted in 2004 and thereafter, the four year period ending
in January of the year of the grant of such Warrant.
<PAGE> 2
(j) "PARENT" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 425(e) of the Code.
(k) "PLAN" shall mean this Directors' Warrant Incentive
Plan.
(l) "SHARE" shall mean a share of Common Stock, as may be
adjusted in accordance with Section 11 of the Plan.
(m) "SUBSIDIARY" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
(n) "WARRANT" shall mean a warrant granted pursuant to
the Plan.
(o) "WARRANT STOCK" shall mean the Common Stock subject
to a Warrant.
(p) "WARRANTHOLDER" shall mean a Director who receives a
Warrant.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares subject to
Warrants which may be awarded and sold under the Plan is 1,000,000 Shares of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock. If a Warrant should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF WARRANTS UNDER THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the
Board in its sole discretion.
(b) PROCEDURE FOR GRANTS. All grants of Warrants
hereunder shall be made by the Board and shall be made strictly in accordance
with the following provisions:
(i) Beginning in January 2002, each Director may
be granted in January of each year, in the discretion of the
Board, Warrants to purchase no more than 50,000 Shares in the
aggregate; provided, however, that no Warrants may be granted
hereunder unless the compound average annual growth rate over
the Incentive Measurement Period with respect to the average
closing price of the Shares as reported in accordance with
Section 8(b) below during the month preceding the date of
grant equals or exceeds 35%.
(ii) The terms and conditions of each Warrant
granted hereunder shall be as follows:
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<PAGE> 3
(A) the term of the Warrant shall be
five (5) years;
(B) the Warrant shall be exercisable
only while the Director remains a Director of the
Company, except as set forth in Section 9 hereof;
(C) the exercise price per Share shall
be equal to 110% of the Fair Market Value (as
hereinafter defined) per Share on the date of grant
of the Warrant, as determined by the Board of
Directors of the Company; and
(D) the Warrant shall become
exercisable in one or more installments as the Board
shall determine in its sole discretion, provided that
if the Director has not attended (in person or by
telephone) at least 75% of the meetings of the Board
while he or she served as a member thereof for the
year prior to which an installment first becomes
exercisable, then such installment may not be
exercised and shall lapse.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of a Warrant previously
granted hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Warrantholders and any other holders of any Warrants granted under the Plan.
(e) SUSPENSION OR TERMINATION OF WARRANT. If the Chief
Executive Officer or his designee reasonably believes that a Warrantholder has
committed an act of misconduct, the Chief Executive Officer may suspend the
Warrantholder's right to exercise any Warrant pending a determination by the
Board (excluding the Director accused of such misconduct). If the Board
(excluding the Director accused of such misconduct) determines a Warrantholder
has committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate disregard
of the Company rules resulting in loss, damage or injury to the Company, or if a
Warrantholder makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Warrantholder nor his estate shall be
3
<PAGE> 4
entitled to exercise any Warrant whatsoever. In making such determination, the
Board (excluding the Director accused of such misconduct) shall act fairly and
shall give the Warrantholder an opportunity to appear and present evidence on
the Warrantholder's behalf at a hearing before the Board or a committee of the
Board.
5. ELIGIBILITY. Warrants may be granted only to Directors of the
Company. All Warrants shall be granted in accordance with the terms set forth in
Section 4(b) hereof. A Director who has been granted a Warrant may, if he or she
is otherwise eligible, be granted an additional Warrant or Warrants in
accordance with such provisions. The Plan shall not confer upon any
Warrantholder any right with respect to continuation of service as a Director or
nomination to serve as a Director, nor shall it interfere in any way with any
rights which the Director or the Company may have to terminate his or her
directorship at any time.
6. TERM OF PLAN. The Plan shall become effective on the date
hereof and shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. TERM OF WARRANT. The term of each Warrant shall be five (5)
years from the date of grant thereof.
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the
Shares to be issued pursuant to exercise of a Warrant shall be equal to 110% of
the Fair Market Value per Share on the date of grant of the Warrant.
(b) FAIR MARKET VALUE. The Fair Market Value shall be
determined by the Board in its discretion; provided, however, that where there
is a public market for the Common Stock, the fair market value per Share shall
be the closing bid price of the Common Stock in the over-the-counter market on
the trading day immediately preceding the date of grant, as reported in The Wall
Street Journal, Eastern Edition (or, if not so reported, as otherwise reported
by The National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the Common Stock is traded on The NASDAQ National
Market or The NASDAQ SmallCap Market or listed on a stock exchange, then the
fair market value per Share shall be the closing price on such system or
exchange on the trading day immediately preceding the date of grant of the
Warrant as reported in The Wall Street Journal, Eastern Edition.
(c) FORM OF CONSIDERATION. The consideration to be paid
for the Shares to be issued upon exercise of a Warrant shall consist entirely of
(i) cash, (ii) check or (iii) any combination of such methods of payment.
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<PAGE> 5
9. EXERCISE OF WARRANT.
(a) TIME FOR EXERCISE. Any Warrant granted hereunder
shall be exercisable at such times as provided herein, provided, however, no
Warrant may be exercised for a fraction of a Share, and no Warrant shall be
exercisable within the first six (6) months of its term, except such latter
limitation shall not apply in the event of the Director's death or disability
prior to the expiration of the six month period. Notwithstanding the foregoing,
no Warrants shall be exercisable until stockholder approval of the Plan has been
obtained.
(b) PROCEDURE FOR EXERCISE. A Warrant shall be deemed to
be exercised when written notice of such exercise has been given to the Company
in accordance with the terms of the Warrant by the person entitled to exercise
the Warrant and full payment for the Shares with respect to which the Warrant is
exercised has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Warrant Stock,
notwithstanding the exercise of the Warrant. A share certificate for the number
of Shares so acquired shall be issued to the Warrantholder as soon as
practicable after exercise of the Warrant. No adjustments will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan. Exercise of
a Warrant in any manner shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under
the Warrant, by the number of Shares as to which the Warrant is exercised.
(c) SECTION 16(B). Warrantholders shall be subject to
Section 16(b) of the Exchange Act and the grant or award of a Warrant hereunder
shall be deemed a purchase thereunder. The Warrants granted shall contain such
additional conditions or restrictions as may be required thereunder as of the
time of grant.
(d) TERMINATION OF STATUS AS A DIRECTOR. Except as
provided in subsection (e) and (f) below, if a Director ceases to serve as a
Director (whether voluntarily or involuntarily), he or she may, but only within
sixty (60) days after the date he or she ceases to be a Director of the Company,
exercise his or her Warrant to the extent that he or she was entitled to
exercise it at the date of such termination. Notwithstanding the foregoing, in
no event may the Warrant be exercised after its five (5) year term has expired.
To the extent that he or she was not entitled to exercise a Warrant at the date
of such termination, or if he or she does not exercise such Warrant (which he or
she was entitled to exercise) within the time specified herein, the Warrant
shall terminate.
(e) DISABILITY OF WARRANTHOLDER. In the event a Director
is unable to continue his or her service as a Director with the Company as a
result of his or her permanent
5
<PAGE> 6
and total disability (as defined in Section 22(e)(3) of the Code), he or she
may, but only within three (3) months from the date of termination, exercise his
or her Warrant to the extent he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Warrant
be exercised after its five (5) year term has expired. To the extent that he or
she was not entitled to exercise the Warrant at the date of termination, or if
he or she does not exercise such Warrant (which he or she was entitled to
exercise) within the time specified herein, the Warrant shall terminate.
(f) DEATH OF WARRANTHOLDER. In the event of the death of
a Warrantholder:
(i) during the term of the Warrant who is, at
the time of his or her death, a Director of the Company and who shall have been
in Continuous Status as a Director since the date of grant of the Warrant, then
the Warrant may be exercised, at any time within six (6) months following the
date of death, by the Warrantholder's estate or by a person who acquired the
right to exercise the Warrant by bequest or inheritance, but only to the extent
of the right to exercise that would have accrued had the Warrantholder continued
living and remained in Continuous Status as a Director for six (6) months after
the date of death. Notwithstanding the foregoing, in no event may the Warrant be
exercised after its five (5) year term has expired; or
(ii) within three (3) months after the
termination of Continuous Status as a Director, the Warrant may be exercised, at
any time within six (6) months following the date of death, by the
Warrantholder's estate or by a person who acquired the right to exercise the
Warrant by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
(g) EXPIRATION OF TERM. Notwithstanding the foregoing, in
no event may the Warrant be exercised after its five (5) year term has expired.
10. NON-TRANSFERABILITY OF WARRANTS. Warrants may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The
designation of a beneficiary by a Warrantholder does not constitute a transfer.
A Warrant may be exercised, during the lifetime of the Warrantholder, only by
the Warrantholder or a transferee permitted by this Section 10.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER;
ACCELERATED EXERCISABILITY. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each outstanding
Warrant, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Warrants have yet been granted or
which have been returned to the Plan upon cancellation or expiration of a
Warrant, as well as the price per share of Common Stock
6
<PAGE> 7
covered by each such outstanding Warrant, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to a Warrant.
Notwithstanding anything herein to the contrary, the Warrants to be
awarded pursuant to this Plan will become immediately exercisable (i) if the
Company is to be consolidated with or acquired by another entity in a merger,
(ii) upon the sale of substantially all of the Company's assets or the sale of
at least 90% of the outstanding Common Stock to a third party, (iii) upon the
merger or consolidation of the Company with or into any other corporation or the
merger or consolidation of any corporation with or into the Company (in which
consolidation or merger the stockholders of the Company receive distributions of
cash or securities as a result thereof), or (iv) upon the liquidation or
dissolution of the Company.
12. TIME OF GRANTING WARRANTS. The date of grant of a Warrant
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the grant shall be given to each Director to whom a Warrant is
so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such
amendment or termination of the Plan shall not affect Warrants already granted
and such Warrants shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Warrantholder and the Company, which agreement must be in writing and signed by
the Warrantholder and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of a Warrant unless the exercise of such Warrant and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
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<PAGE> 8
As a condition to the exercise of a Warrant, the Company may
require the person exercising such Warrant to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
16. FORM OF WARRANT. Warrants shall be evidenced by written
warrants in such form as the Board shall approve.
17. INFORMATION TO WARRANTHOLDERS. The Company shall provide to
each Warrantholder, during the period for which such Warrantholder has one or
more Warrants outstanding, copies of all annual reports to stockholders, proxy
statements and other information provided to all stockholders of the Company.
IN WITNESS WHEREOF, pursuant to the authority granted to the
undersigned by the Board, the Directors' Incentive Warrant Plan is hereby
adopted and effective as of January 10, 2000.
CEREUS TECHNOLOGY PARTNERS, INC.
[SEAL]
Attest:
By: /s/ Steven A. Odom
-----------------------------
Steven A. Odom
/s/ Leigh S. Zoloto Chief Executive Officer
- ---------------------------
Leigh S. Zoloto,
Secretary
8
<PAGE> 1
EXHIBIT 10(dd)
CEREUS TECHNOLOGY PARTNERS, INC.
OUTSIDE DIRECTORS' WARRANT PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Warrant
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the persons serving
as Directors of the Company, to align Director and stockholder long-term
incentives and to encourage their continued service on the Board.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD" shall mean the Board of Directors of the
Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "COMMON STOCK" shall mean the common stock, $.01 par
value per share, of the Company.
(d) "COMPANY" shall mean Cereus Technology Partners,
Inc., a Delaware corporation.
(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the
absence of any interruption or termination of service as a Director.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
in and of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "OUTSIDE DIRECTOR" shall mean a Director who is not
an Employee.
(j) "PARENT" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 425(e) of the Code.
(k) "PLAN" shall mean this Outside Directors' Warrant
Plan.
<PAGE> 2
(l) "SHARE" shall mean a share of Common Stock, as may be
adjusted in accordance with Section 11 of the Plan.
(m) "SUBSIDIARY" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.
(n) "WARRANT" shall mean a warrant granted pursuant to
the Plan.
(o) "WARRANT STOCK" shall mean the Common Stock subject
to a Warrant.
(p) "WARRANTHOLDER" shall mean an Outside Director who
receives a Warrant.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares subject to
Warrants which may be awarded and sold under the Plan is 1,000,000 Shares of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock. If a Warrant should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF WARRANTS UNDER THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the
Board in its sole discretion.
(b) PROCEDURE FOR GRANTS. All grants of Warrants
hereunder shall be made by the Board and shall be made strictly in accordance
with the following provisions:
(i) Each Outside Director elected on or after
January 1, 2000 may be granted, in the discretion of the
Board, Warrants to purchase no more than 250,000 Shares in the
aggregate.
(ii) The terms and conditions of each Warrant
granted hereunder shall be as follows:
(A) the term of the Warrant shall be
five (5) years;
(B) the Warrant shall be exercisable
only while the Director remains a Director of the
Company, except as set forth in Section 9 hereof;
2
<PAGE> 3
(C) the exercise price per Share shall
be determined by the Board, provided that the initial
exercise price shall not be less than the Fair Market
Value (as hereinafter defined) per Share on the date
of grant of the Warrant; and
(D) the Warrant shall become
exercisable in one or more installments as the Board
shall determine in its sole discretion, provided that
if the Director has not attended (in person or by
telephone) at least 75% of the meetings of the Board
while he or she served as a member thereof for the
year prior to which an installment first becomes
exercisable, then such installment may not be
exercised and shall lapse.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of a Warrant previously
granted hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Warrantholders and any other holders of any Warrants granted under the Plan.
(e) SUSPENSION OR TERMINATION OF WARRANT. If the Chief
Executive Officer or his designee reasonably believes that a Warrantholder has
committed an act of misconduct, the Chief Executive Officer may suspend the
Warrantholder's right to exercise any Warrant pending a determination by the
Board (excluding the Director accused of such misconduct). If the Board
(excluding the Director accused of such misconduct) determines a Warrantholder
has committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate disregard
of the Company rules resulting in loss, damage or injury to the Company, or if a
Warrantholder makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Warrantholder nor his estate shall be entitled
to exercise any Warrant whatsoever. In making such determination, the Board
(excluding the Director accused of such misconduct) shall act fairly and shall
give the Warrantholder an opportunity to appear and present evidence on the
Warrantholder's behalf at a hearing before the Board or a committee of the
Board.
5. ELIGIBILITY. Warrants may be granted only to Outside Directors
of the Company. All Warrants shall be granted in accordance with the terms set
forth in Section
3
<PAGE> 4
4(b) hereof. A Director who has been granted a Warrant may, if he or she is
otherwise eligible, be granted an additional Warrant or Warrants in accordance
with such provisions. The Plan shall not confer upon any Warrantholder any right
with respect to continuation of service as a Director or nomination to serve as
a Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN. The Plan shall become effective on the date
hereof and shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. TERM OF WARRANT. The term of each Warrant shall be five (5)
years from the date of grant thereof.
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The initial per Share exercise price
for the Shares to be issued upon exercise of a Warrant shall be no less than the
Fair Market Value per Share on the date of grant of the Warrant.
(b) FAIR MARKET VALUE. The Fair Market Value shall be
determined by the Board in its discretion; provided, however, that where there
is a public market for the Common Stock, the fair market value per Share shall
be the closing bid price of the Common Stock in the over-the-counter market on
the trading day immediately preceding the date of grant, as reported in The Wall
Street Journal, Eastern Edition (or, if not so reported, as otherwise reported
by the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the Common Stock is traded on The NASDAQ National
Market or The NASDAQ SmallCap Market or listed on a stock exchange, then the
fair market value per Share shall be the closing price on such system or
exchange on the trading day immediately preceding the date of grant of the
Warrant as reported in The Wall Street Journal, Eastern Edition.
(c) FORM OF CONSIDERATION. The consideration to be paid
for the Shares to be issued upon exercise of a Warrant shall consist entirely of
(i) cash, (ii) check or (iii) any combination of such methods of payment.
4
<PAGE> 5
9. EXERCISE OF WARRANT.
(a) TIME FOR EXERCISE. Any Warrant granted hereunder
shall be exercisable at such times as determined by the Board; provided,
however, no Warrant may be exercised for a fraction of a share and no Warrant
shall be exercisable within the first six (6) months of its term, except such
latter limitation shall not apply in the event of the Director's death or
disability prior to the expiration of the six month period. Notwithstanding the
foregoing, no Warrants shall be exercisable until stockholder approval of the
Plan has been obtained.
(b) PROCEDURE FOR EXERCISE. A Warrant shall be deemed to
be exercised when written notice of such exercise has been given to the Company
in accordance with the terms of the Warrant by the person entitled to exercise
the Warrant and full payment for the Shares with respect to which the Warrant is
exercised has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Warrant Stock,
notwithstanding the exercise of the Warrant. A share certificate for the number
of Shares so acquired shall be issued to the Warrantholder as soon as
practicable after exercise of the Warrant. No adjustments will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan. Exercise of
a Warrant in any manner shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under
the Warrant, by the number of Shares as to which the Warrant is exercised.
(c) SECTION 16(B). Warrantholders shall be subject to
Section 16(b) of the Exchange Act and the grant or award of a Warrant hereunder
shall be deemed a purchase thereunder. The Warrants granted shall contain such
additional conditions or restrictions as may be required thereunder as of the
time of grant.
(d) TERMINATION OF STATUS AS A DIRECTOR. Except as set
forth in subsection (e) and (f) below, if a Director ceases to serve as a
Director (whether voluntarily or involuntarily), he or she may, but only within
sixty (60) days after the date he or she ceases to be a Director of the Company,
exercise his or her Warrant to the extent that he or she was entitled to
exercise it at the date of such termination. Notwithstanding the foregoing, in
no event may the Warrant be exercised after its five (5) year term has expired.
To the extent that he or she was not entitled to exercise a Warrant at the date
of such termination, or if he or she does not exercise such Warrant (which he or
she was entitled to exercise) within the time specified herein, the Warrant
shall terminate.
(e) DISABILITY OF WARRANTHOLDER. In the event a Director
is unable to continue his or her service as a Director with the Company as a
result of his or her permanent
5
<PAGE> 6
and total disability (as defined in Section 22(e)(3) of the Code), he or she
may, but only within three (3) months from the date of termination, exercise his
or her Warrant to the extent he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Warrant
be exercised after its five (5) year term has expired. To the extent that he or
she was not entitled to exercise the Warrant at the date of termination, or if
he or she does not exercise such Warrant (which he or she was entitled to
exercise) within the time specified herein, the Warrant shall terminate.
(f) DEATH OF WARRANTHOLDER. In the event of the death of
a Warrantholder:
(i) during the term of the Warrant who is, at
the time of his or her death, a Director of the Company and who shall have been
in Continuous Status as a Director since the date of grant of the Warrant, then
the Warrant may be exercised, at any time within six (6) months following the
date of death, by the Warrantholder's estate or by a person who acquired the
right to exercise the Warrant by bequest or inheritance, but only to the extent
of the right to exercise that would have accrued had the Warrantholder continued
living and remained in Continuous Status as a Director for six (6) months after
the date of death. Notwithstanding the foregoing, in no event may the Warrant be
exercised after its five (5) year term has expired; or
(ii) within three (3) months after the
termination of Continuous Status as a Director, the Warrant may be exercised, at
any time within six (6) months following the date of death, by the
Warrantholder's estate or by a person who acquired the right to exercise the
Warrant by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
(g) EXPIRATION OF TERM. Notwithstanding the foregoing, in
no event may the Warrant be exercised after its five (5) year term has expired.
10. NON-TRANSFERABILITY OF WARRANTS. Warrants may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The
designation of a beneficiary by a Warrantholder does not constitute a transfer.
A Warrant may be exercised, during the lifetime of the Warrantholder, only by
the Warrantholder or a transferee permitted by this Section 10.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER;
ACCELERATED EXERCISABILITY. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each outstanding
Warrant, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Warrants have yet been granted or
which have been returned to the Plan upon cancellation or expiration of a
Warrant, as well as the price per share of Common Stock
6
<PAGE> 7
covered by each such outstanding Warrant, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to a Warrant.
Notwithstanding anything herein to the contrary, the Warrants to be
awarded pursuant to this Plan will become immediately exercisable (i) if the
Company is to be consolidated with or acquired by another entity in a merger,
(ii) upon the sale of substantially all of the Company's assets or the sale of
at least 90% of the outstanding Common Stock to a third party, (iii) upon the
merger or consolidation of the Company with or into any other corporation or the
merger or consolidation of any corporation with or into the Company (in which
consolidation or merger the stockholders of the Company receive distributions of
cash or securities as a result thereof), or (iv) upon the liquidation or
dissolution of the Company.
12. TIME OF GRANTING WARRANTS. The date of grant of a Warrant
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the grant shall be given to each Director to whom a Warrant is
so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such
amendment or termination of the Plan shall not affect Warrants already granted
and such Warrants shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Warrantholder and the Company, which agreement must be in writing and signed by
the Warrantholder and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of a Warrant unless the exercise of such Warrant and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
7
<PAGE> 8
As a condition to the exercise of a Warrant, the Company may
require the person exercising such Warrant to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
16. FORM OF WARRANT. Warrants shall be evidenced by written
warrants in such form as the Board shall approve.
17. INFORMATION TO WARRANTHOLDERS. The Company shall provide to
each Warrantholder, during the period for which such Warrantholder has one or
more Warrants outstanding, copies of all annual reports to stockholders, proxy
statements and other information provided to all stockholders of the Company.
IN WITNESS WHEREOF, pursuant to the authority granted to the
undersigned by the Board, the Outside Directors' Warrant Plan is hereby adopted
and effective as of January 10, 2000.
CEREUS TECHNOLOGY PARTNERS, INC.
[SEAL]
Attest:
By: /s/ Steven A. Odom
-----------------------------
Steven A. Odom,
Chief Executive Officer
/s/ Leigh S. Zoloto
Leigh S. Zoloto,
Secretary
8
<PAGE> 1
EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Subsidiary Name State of Incorporation
--------------- ----------------------
<S> <C>
United Minerals Corp. - Arkansas Arkansas
United Minerals Corp. - Arizona Arizona
HeatShield Technologies, Inc. Florida
HST Capital Corp. Florida
Cereus Technology, Inc. Delaware
American Internet Media, Inc. Delaware
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 814,892
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,600,012
<PP&E> 571,702
<DEPRECIATION> 267,536
<TOTAL-ASSETS> 13,558,579
<CURRENT-LIABILITIES> 7,850,359
<BONDS> 36,463
0
0
<COMMON> 40,627
<OTHER-SE> 5,631,130
<TOTAL-LIABILITY-AND-EQUITY> 13,558,579
<SALES> 1,695,853
<TOTAL-REVENUES> 1,695,853
<CGS> 1,935,121
<TOTAL-COSTS> 2,705,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 513,242
<INCOME-PRETAX> (3,457,595)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,457,595)
<DISCONTINUED> (3,726,254)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,183,849)
<EPS-BASIC> (3.26)
<EPS-DILUTED> (3.26)
</TABLE>
