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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 2001
REGISTRATION NO. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NETZEE, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2488883
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
6190 POWERS FERRY ROAD, SUITE 400
ATLANTA, GEORGIA 30339
(770) 850-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Donny R. Jackson, Chief Executive Officer
Netzee, Inc.
6190 Powers Ferry Road, Suite 400
Atlanta, Georgia 30339
(770) 850-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
Mark D. Kaufman, Esq.
Jeffrey M. Taylor, Esq.
Sutherland Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
(404) 853-8000
(404) 853-8806 (fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable from time to time after the effective
date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box. [X]
If this Form is registering additional securities pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] 33-_________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] 33-_________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO MAXIMUM MAXIMUM AMOUNT OF
TO BE REGISTERED BE OFFERING PRICE AGGREGATE PRICE REGISTRATION
REGISTERED PER UNIT(1) (1) FEE
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Common Stock, no par value per share. 320,000 $0.56 $179,200.00 $44.80
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
on the average of the high and low sales prices as reported on the Nasdaq
National Market on May 1, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED MAY 7, 2001
320,000 SHARES
COMMON STOCK
NETZEE, INC.
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The shareholders of Netzee, Inc. identified in this prospectus may
offer and sell these shares from time to time. See "Selling Shareholders." The
selling shareholders acquired their shares in connection with our acquisition of
Card Plus, Inc. on July 28, 2000.
The selling shareholders will receive all of the net proceeds from the
sale of these shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of these shares. We will not receive
any of the proceeds from the sale of the shares.
Our common stock is quoted on the Nasdaq National Market under the
symbol "NETZ." On May 1, 2001, the last reported sale price of our common stock
was $0.55 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES MANY RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 FOR A DISCUSSION OF THESE RISKS.
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The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
You should rely only on the information contained in this prospectus.
Neither we nor the selling shareholders have authorized anyone to provide you
with information different from that contained in this prospectus. The selling
shareholders are offering to sell, and seeking offers to buy, shares of Netzee
common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of the shares.
The date of this Prospectus is ____________, 2001
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TABLE OF CONTENTS
SUMMARY.......................................................................1
RISK FACTORS..................................................................3
FORWARD-LOOKING STATEMENTS...................................................11
USE OF PROCEEDS..............................................................13
SELLING SHAREHOLDERS.........................................................14
DESCRIPTION OF CAPITAL STOCK.................................................14
PLAN OF DISTRIBUTION.........................................................18
WHERE YOU CAN FIND MORE INFORMATION..........................................21
INFORMATION INCORPORATED BY REFERENCE........................................21
EXPERTS......................................................................22
LEGAL MATTERS................................................................22
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SUMMARY
This summary highlights information contained in documents that we have
incorporated by reference into this prospectus. You should carefully read and
consider all of the information included in this prospectus and in the documents
incorporated by reference in this prospectus before deciding to invest in shares
of our common stock. See "Where You Can Find More Information."
GENERAL
We provide Internet-enabled software products to community financial
institutions in the United States with assets of less than $10 billion. Our
Internet banking product provides a cost-effective, outsourced, secure and
scalable solution that enables community financial institutions to offer their
customers a wide array of financial products and services over the Internet. We
also offer telephone banking products and services to allow community financial
institutions an additional channel for communication with their customers.
Collectively, these services are referred to as our "retail suite" of products.
To compliment our retail suite of products, we also provide a suite of
wholesale support applications that enable community financial institutions to
create internal efficiencies and provide key employees with information to
better manage banking operations. These applications include Internet-based bond
portfolio accounting and analytics and asset/liability management tools as well
as our Bank Mall(TM) product which provides access to key information and
services.
We also provide our financial institution customers with marketing and
training packages individually designed to increase the number of their
customers who use our Internet products and services.
We were incorporated in Georgia in August 1999. Our principal executive
offices are located at 6190 Powers Ferry Road, Suite 400, Atlanta, Georgia
30339, and our telephone number is (770) 850-4000. Our corporate web site
address is http://www.netzee.com. We are not incorporating the information on
our web site into this prospectus, and we do not intend to make any of that
information a part of this prospectus.
THE NETZEE STRATEGY
Our goal is to become the leading provider of Internet banking and
Internet-commerce products and services to community financial institutions. Our
growth will be driven by both the adoption of our products inside community
financial institutions and the use of our retail suite by the customers of our
community financial institution customers. Our strategy includes:
- capitalizing on strategic marketing alliances with bankers'
banks and other partners;
- cross-selling additional products and services to existing
customers;
- increasing community financial institution end user adoption;
and
- expanding and enhancing our products and services.
FORMATION OF NETZEE
Netzee was formed as a Georgia corporation in August 1999 to be merged
with Direct Access Interactive, Inc., a company that was formed in October 1996
to provide Internet and telephone banking products and services. The InterCept
Group, Inc. acquired Direct Access in March 1999 as a wholly owned subsidiary.
InterCept currently owns approximately 28% of our common stock. In 1999 and
2000, we also acquired the following assets or operations:
- the Internet and telephone banking assets of SBS Corporation,
which provided automated technology products and services,
including Internet and telephone banking systems, to community
financial institutions nationwide;
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- the Internet Banking Divisions of each of TIB The Independent
BankersBank and The Bankers Bank, each of which is a "bankers'
bank." A bankers' bank is a bank that exclusively serves and
is owned by financial institutions;
- Call Me Bill, LLC, which provides 24-hour electronic bill
payment services to financial institutions' customers;
- Dyad Corporation, which developed, among other things,
proprietary loan application, approval and fulfillment
software;
- DPSC Software, Inc., which provided regulatory reporting and
support applications for community financial institutions
(these assets were sold to InterCept in February 2001);
- Digital Visions, Inc., which provided Internet-based financial
information tools for community financial institutions;
- Card Plus, Inc., which provided outsourced software and
systems development and related consulting services; and
- the Internet banking and bill payment assets of John H.
Harland Company.
RECENT DEVELOPMENT
On April 9, 2001, Kevin R. Lee was appointed as Senior Vice President
of Operations. Mr. Lee is responsible for implementation, customer service,
technical support, product management, bill payment services, telecommunications
and data center operations. Prior to joining Netzee, from October 1999 until
April 2001, Mr. Lee was Chief Information Officer of MaxRate.com, a business
that developed an Internet-based exchange for certificates of deposit. From June
1993 to September 1999, Mr. Lee worked for Andersen Consulting LLP, providing
consulting services to the financial service industry.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the following risk factors, as well as the other
information presented in or incorporated by reference into this prospectus, in
deciding whether to invest in our common stock. Each of these factors could
adversely effect our operations, the market price of our common stock and our
financial results, and could result in a complete loss of your investment.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY IN A RAPIDLY EVOLVING INDUSTRY, IT
IS DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS
We were incorporated in August 1999 as the successor to a company which
had operated only since October 1996. We have largely grown our operations since
August 1999 through our acquisitions. See "Formation of Netzee." Because key
members of our management team came from different entities, the members of our
senior management team have only worked together for a relatively short time.
Therefore, it is difficult to evaluate us and our prospects. An investor in our
common stock must consider the risks we face as a company operating in the
rapidly evolving Internet banking and Internet-commerce markets. These risks
include our inability to:
- operate profitably;
- integrate successfully the operations we have acquired and the
personnel that have joined us as a result of these
acquisitions;
- develop, test, market and sell our products and services;
- expand successfully our sales and marketing efforts;
- maintain our current, and develop new, strategic marketing
alliances;
- promote acceptance of our Internet based services by our
community financial institution customers and their customers;
- respond effectively to competitive pressures; and
- continue to develop and upgrade our technology.
We may not succeed in achieving any or all of these goals. We may never
achieve or sustain profitability.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE LOSSES IN THE FUTURE, AND WE MAY
NEVER BECOME PROFITABLE
We incurred net losses of approximately $97.2 million for the year
ended December 31, 2000 and $20.4 million for the three months ended March 31,
2001. We may incur significant operating losses in the foreseeable future. We
will need to generate significant revenues to achieve and maintain
profitability, and we cannot give assurances that we will be able to do so. Our
revenues for the year ended December 31, 2000 and the three months ended March
31, 2001 were approximately $19.9 million and $7.5 million, respectively, and
our cash operating expenses, excluding restructuring costs, for the year ended
December 31, 2000 and the three months ended March 31, 2001 were approximately
$34.4 million and $10.1 million, respectively. If our revenues grow more slowly
than we anticipate or if we cannot reduce our operating expenses as expected,
our financial performance will be adversely affected.
WE ARE CURRENTLY EXPERIENCING A PERIOD OF SIGNIFICANT OPERATIONAL REDUCTIONS
THAT MAY PLACE A STRAIN ON OUR ABILITY TO ACHIEVE REVENUE GROWTH AND
PROFITABILITY
We previously experienced significant growth in our operations through
acquisitions in 1999 and 2000. Our recent reorganization and the resulting
reduction in personnel and facilities is placing and will continue to place
additional demands on our management and operational ability. Our current
management, sales, technical and accounting resources may not be adequate to
support our anticipated revenue growth. Our future operating results will
substantially depend on the ability of our management to handle changing
business conditions and to implement and improve our systems. To manage these
changes effectively, we must:
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- predict accurately the growth in the demand for our products
and related services and our capacity to address that demand;
- motivate, manage and retain key employees;
- transfer and install equipment in different facilities as a
result of the consolidation of our facilities;
- continue to integrate our management team;
- integrate the operations and personnel of any other businesses
we acquire; and
- respond effectively to changes in the industry.
OUR RELATIONSHIPS WITH INTERCEPT AND HARLAND MAY PRESENT POTENTIAL CONFLICTS OF
INTEREST, WHICH MAY RESULT IN DECISIONS THAT FAVOR INTERCEPT AND HARLAND OVER
OUR OTHER SHAREHOLDERS
Because Netzee, InterCept and Harland are engaged in the sale of
electronic commerce products and services to community financial institutions,
numerous potential conflicts of interest exist between our companies or their
affiliates. We compete with each other when offering some products and services
to potential customers. Our bylaws contain provisions addressing potential
conflicts of interest between us and InterCept and the allocation of
transactions that, absent such allocation, could constitute corporate
opportunities of both companies. See "Description of Capital Stock -
Relationship with InterCept." Under these provisions, InterCept may take
advantage of a corporate opportunity rather than presenting that opportunity to
us, absent a clear indication that the opportunity was directed to us rather
than to InterCept.
Our existing and future agreements and relationships with InterCept
have not resulted and will not necessarily result from arms-length negotiations.
InterCept currently owns approximately 28% of our common stock. Our Chairman,
our Vice Chairman and two of our other directors are directors and significant
shareholders of InterCept. In addition, John W. Collins, our Chairman, serves as
Chief Executive Officer of InterCept. When the interests of InterCept diverge
from our interests, InterCept's officers and directors may exercise their
influence in InterCept's best interests. Therefore, our agreements and
relationships with InterCept may be less favorable to us than those that we
could obtain from unaffiliated third parties. Moreover, many of the transactions
between us and InterCept do not lend themselves to precise allocations of costs
and benefits. Thus, the value of these transactions will be left to the
discretion of the parties, who are subject to potentially conflicting interests.
Other than the provisions of our bylaws relating to corporate
opportunities with InterCept, there is no mechanism in place to resolve these
conflicts of interest, except that it is our policy that transactions with
affiliated parties be approved by a majority of our disinterested directors.
Nevertheless, due to the extensive relationships between InterCept and us, we
may make decisions that potentially favor InterCept or its affiliates at the
expense of our shareholders. Furthermore, Georgia law may prohibit a shareholder
from successfully challenging these decisions, if the decision received the
affirmative vote of a majority, but not less than two, of our disinterested
directors who received full disclosure of the existence and nature of the
conflict.
There is no mechanism in place to resolve conflicts of interest with
Harland, except as described above. Our existing agreements and relationships
with Harland have resulted, but future agreements will not necessarily result,
from arms-length negotiations. Harland currently owns approximately 16% of our
common stock. Two of our directors were appointed by Harland, and those
appointees are also executive officers of Harland or its subsidiaries. When the
interests of Harland diverge from our interests, these individuals may exercise
their influence in Harland's best interests. Therefore, our agreements and
relationships with Harland may be less favorable to us than those that we could
obtain from unaffiliated third parties.
OUR BUSINESS AND PROSPECTS WILL SUFFER IF END USERS DO NOT ACCEPT AND USE OUR
PRODUCTS AND SERVICES
We derive substantially all of our revenues from products and services
provided to community financial institutions, their customers and other
participants in the financial services industry. Our future success depends
significantly upon the willingness of community financial institutions to offer
technological innovations such as Internet and telephone banking and upon their
customers' demand for and acceptance of these technological innovations and the
willingness of these financial institutions to use our wholesale support
applications. If community
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financial institutions and their customers do not readily accept these
technological innovations as reflected in our products and services, we will
experience reduced demand for our products and services.
We may not be able to be successful in marketing these products and
services or other integrated products and services. In addition, changes in
economic conditions and unforeseen events, including recession, inflation or
other adverse occurrences, may result in a significant decline in the
utilization of community financial institution services or demand for our
products and services. Any event that results in decreased consumer or corporate
use of community financial institution services, or increased pressures on
community financial institutions toward the in-house development of Internet
based systems, could have a material adverse effect on our business, financial
condition and results of operations.
Because we offer Internet-based products and services, our business
would be adversely affected if Internet use does not continue to grow or grows
more slowly than expected. Internet usage may be inhibited for a number of
reasons, including inadequate network infrastructure, security concerns,
inconsistent quality of service and unavailability of cost effective, high-speed
access to the Internet. If the market for Internet-based financial services
fails to grow, grows more slowly than anticipated or becomes saturated with
competitors, our business, financial condition and results of operations likely
would be materially adversely affected.
WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT, AND THESE DELAYS MAY ADVERSELY
AFFECT US
The electronic banking and financial services industry is characterized
by rapidly changing technology, evolving industry standards, emerging
competition and frequent new product and service introductions. Our future
success will depend on our ability to develop, test, sell and support new and
integrated products and services that will keep pace with technological advances
and industry standards and satisfy the evolving needs of both financial
institutions and their customers. Our inability to develop and introduce new and
integrated products and services in a timely manner could limit the
marketability of our products and services and could render them obsolete, which
would adversely affect us. Further, we cannot predict the time required and
costs involved in developing new and integrated products and services. Actual
development costs could substantially exceed budgeted amounts, and estimated
product development schedules could require extensions. In these cases, our
business, financial condition and results of operations may be materially
adversely affected.
IF OUR ACQUISITION STRATEGY IS NOT SUCCESSFUL, WE MAY LOSE OUR COMPETITIVE
POSITION, AND OUR BUSINESS AND FINANCIAL RESULTS MAY SUFFER
We intend to continue to evaluate potential acquisition candidates
within our industry, and we may acquire complementary technologies or businesses
in the future. Due to consolidation trends within the on-line services industry,
failure to adopt and to implement successfully a long-term acquisition strategy
could damage our competitive position. Future acquisitions may involve large,
one-time write-offs and amortization expenses related to goodwill and other
intangible assets. Any of these factors could adversely affect our business,
financial condition or results of operations. An acquisition involves numerous
risks, including:
- assimilating effectively the operations, products and
services, technology, information systems and personnel of the
acquired company into our operations;
- diverting our management's attention from other business
concerns;
- impairing relationships with our employees, affiliates,
strategic marketing alliances and content providers;
- failing to maintain uniform standards, controls, procedures
and policies;
- entering markets in which we have no direct prior experience;
and
- losing key employees of the acquired company.
Some or all of these risks could result in a material adverse effect on
our business, financial condition and results of operations. In addition, we may
not be able to identify suitable acquisition candidates that are available for
sale at reasonable prices. We may also elect to finance future acquisitions with
debt financing, which would increase our debt
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service requirements, or through the issuance of additional common or preferred
stock, which could result in dilution to our shareholders. There can be no
assurance that we will be able to arrange adequate financing for any
acquisitions on acceptable terms or at all.
THE UNPREDICTABILITY OF OUR FUTURE FINANCIAL RESULTS AND EVENTS BEYOND OUR
CONTROL MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON STOCK
The price of our common stock has fluctuated substantially and our
financial results and stock price may fluctuate substantially in the future.
These fluctuations may be caused by numerous factors, including pricing
competition for our products and services and our ability to generate revenues
and operate profitably. Other factors which may cause our common stock to be
adversely affected and which may cause significant fluctuations in our stock
price include:
- our actual or anticipated operating results;
- our actual or anticipated growth rates, as they may change
from time to time;
- changes in analysts' estimates;
- competitors' announcements;
- regulatory actions;
- industry conditions;
- general economic conditions; and
- a variety of other factors that we have discussed elsewhere in
"Risk Factors" and the other information included in or
incorporated by reference into this prospectus.
Further, the market for Internet and technology companies has
experienced extreme price and volume volatility that have often been unrelated
or disproportionate to the operating performance of those companies. These broad
market and industry factors may materially and adversely affect our stock price,
regardless of our operating performance. The trading prices of the stock of many
Internet and technology companies are at or near historical lows and reflect
relative valuation levels substantially lower than historical levels. Because
our stock price is currently very low, small trades and changes in our stock
price can produce significant percentage changes in the value of our common
stock.
OUR CONTINUED INABILITY TO COMPLY WITH THE MAINTENANCE LISTING CRITERIA OF THE
NASDAQ NATIONAL MARKET MAY CAUSE OUR COMMON STOCK TO BE DELISTED
Our common stock is currently listed on the Nasdaq National Market.
Thus, we are subject to financial and market-related tests and other qualitative
standards established by Nasdaq to maintain our listing. On March 13, 2001, we
were notified by Nasdaq that we had failed to meet the continued $1.00 minimum
bid price rule for continued listing. We have been given until June 11, 2001 to
come into compliance with this rule. If we fail to meet this requirement, Nasdaq
could delist our common stock. If this were to happen, it may be more difficult
for a shareholder to buy or sell our stock at competitive market prices, or at
all, and we may lose support from institutional investors, brokerage firms and
market makers that currently buy and sell our stock and provide information to
investors about us. Such an event could also cause the price of our stock to
decrease further.
OUR SALES EFFORTS MAY BE DELAYED BECAUSE COMMUNITY FINANCIAL INSTITUTIONS ARE
GENERALLY SLOW TO ADOPT NEW TECHNOLOGY
Community financial institutions tend to be cautious in making purchase
decisions regarding new technologies. This requires us to provide a significant
level of education to prospective customers regarding the use and benefits of
our products and services prior to the purchase of our products and services.
Further, community financial institutions are frequently slow to approve capital
expenditures and to review new technologies that affect key operations. In
addition, our low stock price, operating losses and financial resources have
made some financial institutions reluctant to purchase our products and
services. All of this could have the affect of significantly lengthening our
sales cycle or
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reducing sales, thereby delaying revenue growth and adversely affecting our
business, operating results and financial condition.
OUR OPERATING RESULTS MAY ADVERSELY BE AFFECTED BECAUSE IMPLEMENTATION OF OUR
INTERNET BANKING PRODUCTS AND SERVICES BY OUR COMMUNITY FINANCIAL INSTITUTION
CUSTOMERS MAY TAKE LONGER THAN WE ANTICIPATE
During the course of an initial implementation of our Internet banking
products and services, we must integrate our Internet banking software with a
community financial institution's core processing systems. This involves the
installation of an interface to permit communication between our Internet
banking products and services and the community financial institution's core
processing systems. We may, from time to time, experience some delays in the
integration process, particularly if we do not already have an established
interface for a particular core processing system. It takes us an average of 60
to 90 days to implement our service bureau Internet banking services. A longer
integration period will increase our costs associated with the implementation
and delay the recognition of revenues. Changes to existing core software systems
by existing customers and custom implementations for future client financial
institutions may also cause integration delays in future implementations that
could have a material adverse effect on our business, operating results and
financial condition for subsequent periods. The implementation of our in-house
Internet banking product depends on the size and complexity of the financial
institution's infrastructure of systems, network structure and software.
DAMAGE TO OUR DATA CENTERS WOULD RESULT IN FAILURES OR INTERRUPTIONS IN
PROVIDING OUR PRODUCTS AND SERVICES TO OUR CUSTOMERS, WHICH COULD JEOPARDIZE OUR
BUSINESS AND CUSTOMER RELATIONSHIPS
Although we have backup facilities to provide Internet services if one
or more of our data centers fail to function, a natural disaster, such as a
fire, tornado or flood, or other unanticipated problem at one or more of our
data centers, including an extended power loss, telecommunications failure,
break-in, computer virus, hacker attack or other events beyond our control,
could nevertheless result in failures or interruptions in providing our products
and services to our customers. The occurrence of any of these events could have
a material adverse effect on our business, financial condition and results of
operations.
OUR BUSINESS COULD SUFFER IF OUR COMMUNITY FINANCIAL INSTITUTION CUSTOMERS
TERMINATE THEIR CONTRACTS WITH US
Significant consolidation is occurring in the financial services
industry, and our community financial institution customers that are involved in
mergers and acquisitions may terminate their agreements with us or fail to renew
them when they expire. An existing community financial institution customer may
be acquired by or merged with another financial institution that utilizes a
different Internet banking system or does not desire to continue the
relationship with us for some other reason. This could result in the new entity
terminating the relationship with us. This risk is particularly relevant to us
because we target small to mid-sized community financial institutions as
customers, which are more likely to be potential acquisition candidates. Our
business, financial condition and results of operations would suffer if
community financial institution customers terminate their relationships with us
as a result of industry consolidation or for any other reason.
IF WE CANNOT HIRE AND RETAIN QUALIFIED PERSONNEL, WE WILL NOT BE ABLE TO CONDUCT
OUR OPERATIONS SUCCESSFULLY OR AT ALL
There is significant competition for qualified employees, and high
employee turnover exists among Internet and other technology companies today. As
a result, we may experience difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. Our operating results may be
adversely affected if we experience increased expenses related to attracting,
training and retaining qualified employees. Our failure to succeed in attracting
new personnel or retaining and motivating our current personnel could adversely
affect our business, financial condition and results of operations.
NETWORK SECURITY PROBLEMS COULD HINDER THE GROWTH OF THE INTERNET AND CAUSE US
TO LOSE CUSTOMERS
To the extent that our activities involve the storage and transmission
of proprietary information, security breaches could expose us to possible
liability and damage our reputation. Any compromise of our security could harm
our business and could deter people from using the Internet to conduct
transactions that involve transmitting confidential information. We rely on
standard Internet security systems, all of which are licensed from third
parties, to provide the
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security and authentication necessary to effect secure transmission of data.
Nevertheless, compromises or breaches of our security measures may occur.
Our networks may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. Someone who is able to circumvent our security
measures could misappropriate our proprietary information or cause interruptions
in our Internet operations. Internet and on-line service providers have in the
past experienced, and we may in the future experience, interruptions in service
as a result of the accidental or intentional actions of Internet users,
including current and former employees or others. Concerns regarding security
risks may deter community financial institutions from purchasing our products
and services and deter their customers from using our products and services. We
may need to expend significant capital or other resources to protect against the
threat of security breaches or to alleviate problems caused by breaches. These
breaches may also require us to pay money damages to others who were harmed by
them. Eliminating computer viruses and alleviating other security problems may
result in interruptions, delays or termination of service to users accessing web
sites that deliver our services, any of which could harm our business, financial
condition and results of operations.
DEFECTS IN SOFTWARE PRODUCTS THAT WE USE IN OUR PRODUCTS AND OUR INABILITY TO
SUSTAIN A HIGH VOLUME OF TRAFFIC MAY MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS
The software used by our systems, products and services may contain
errors, defects or bugs. Although we have not suffered significant harm from any
errors or defects to date, we may discover significant errors or defects in the
future that we may or may not be able to correct. We have recently introduced
and will be continually introducing new products in the market and have not
experienced any product liability claims to date, but the sale and support of
our products and services may entail the risk of these claims. A product
liability claim brought against us could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore, as the volume of traffic and transactions on our system
increases substantially, we could experience periodic temporary capacity
constraints, which may cause unanticipated system disruptions, slower response
times and lower levels of customer service. We may be unable to project
accurately the rate or timing of increases, if any, in the use of our services
or expand and upgrade our systems and infrastructure in a timely manner to
accommodate these increases. Any inability to do so could harm our business.
INCREASED COMPETITION MAY INCREASE PRICING PRESSURES, REDUCE MARGINS AND CREATE
A LOSS OF MARKET SHARE
The market for our products and services is highly competitive. We
compete with a variety of third parties, including other providers of Internet
banking systems, as well as systems developed internally by financial
institutions. We also expect competition in our markets to increase
significantly as new companies enter our market and current competitors expand
their product lines and services. These new competitors may include non-bank
financial institutions, such as brokerage firms, on-line service providers and
data processing vendors, among others. In many instances, these entities are
dominant competitors and may enjoy substantial competitive advantages,
including:
- greater name recognition;
- greater financial, technical and marketing resources to devote
to the development, promotion and sale of their services;
- longer operating histories; and
- a larger base of client financial institutions.
Any pricing pressures, reduced margins or loss of market share
resulting from our failure to compete effectively would materially and adversely
affect our business, financial condition and operating results.
INFRINGEMENT BY OTHERS UPON OUR PROPRIETARY TECHNOLOGY COULD HARM OUR ABILITY TO
ESTABLISH AND PROTECT OUR PROPRIETARY RIGHTS, WHICH COULD ADVERSELY AFFECT OUR
BUSINESS
Our inability to protect our proprietary rights adequately could have a
material adverse effect on the acceptance of our brand names and on our
business, financial condition and operating results. We rely on a combination of
copyright, trademark and trade secret laws and contractual provisions to
establish and protect our proprietary rights. Further, we
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have pending patent applications in the United States and Canada with respect to
our PALMS(TM) asset/liability management software.
There can be no assurance that the steps we have taken, and will take
in the future, to protect our proprietary rights will be adequate or that third
parties will not infringe upon or misappropriate our copyrights, trademarks,
service marks, domain names and similar proprietary rights. In addition,
effective copyright and trademark protection may be unenforceable or limited in
foreign countries, and the global nature of the Internet makes it impossible to
control the ultimate destination of our services. Our competitors or others may
adopt product or service names similar to ours, thereby impeding our ability to
build brand identity and possibly leading to customer confusion. Moreover,
because Internet domain names derive value from the individual's ability to
remember these names, we cannot guarantee that our Internet domain names will
maintain their value if, for example, users begin to rely on mechanisms other
than Internet domain names to access on-line resources.
Furthermore, we may become involved in litigation or other proceedings
regarding our trade secrets, copyrights and other intellectual property rights.
An adverse determination in intellectual property litigation could result in the
loss of proprietary rights, subject us to significant liabilities, require us to
seek licenses from third parties or prevent us from selling our products and
services. There can be no assurance that we would be able to obtain licenses, if
necessary, on commercially reasonable terms, or at all. In addition, litigation
would divert management resources and be expensive. Any of these results could
have a material adverse effect on the acceptance of our brand names and on our
business, financial condition and operating results.
OUR GROWTH MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES THAT COULD ADD ADDITIONAL COSTS TO DOING BUSINESS ON THE INTERNET
Other than the Gramm-Leach-Bliley Act discussed below, there are
currently few laws or regulations that specifically regulate communications or
commerce on the Internet. However, laws and regulations may be adopted in the
future that address issues, including user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting various types of
information and content over the Internet. Several telecommunications companies
have petitioned the Federal Communications Commission to regulate Internet
service providers and on-line service providers in a manner similar to long
distance telephone carriers and to impose access fees on those companies. This
could increase the cost of transmitting data over the Internet. Moreover, it may
take years to determine the extent to which existing laws relating to issues
such as property ownership, libel and personal privacy issues apply to the
Internet. Any new laws or regulations relating to the Internet or the manner in
which existing laws are applied to the Internet could adversely affect our
business.
Our primary customers are community financial institutions, which are
heavily regulated. In addition, financial institution regulators can effectively
control and mandate the standards for the required security systems,
communication technologies and other features of our products and services.
There can be no assurance that federal, state or foreign governmental
authorities will not adopt new regulations addressing electronic financial
institution operations that could require us to modify our current or future
products and services.
For example, the U.S. Congress enacted the Gramm-Leach-Bliley Act in
November 1999. This law restricts or prohibits our ability to offer third
parties access to non-public personal information generated by our Internet
banking products and services. Further, with respect to the information of each
particular individual that does business with a community financial institution,
we will be required to comply with the privacy policies that are adopted by each
financial institution. Pursuant to this law, the federal banking authorities,
the Securities and Exchange Commission and the Federal Trade Commission have
adopted rules and regulations implementing this law. Finally, this law
specifically permits states to adopt financial privacy laws that are more
restrictive than federal law. This law or the adoption of other laws or
regulations affecting our business or our community financial institution
customers' businesses could reduce our growth rate or could otherwise have a
material adverse effect on our business, financial condition and operating
results.
TAXATION OF OUR INTERNET PRODUCTS AND SERVICES COULD AFFECT OUR PRICING POLICIES
AND REDUCE DEMAND FOR OUR PRODUCTS AND SERVICES
Any legislation that substantially impairs the growth of
Internet-commerce could have a material adverse effect on our business,
financial condition and operating results. The tax treatment of the Internet and
Internet-commerce is
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currently unsettled. A number of proposals at the federal, state and local
levels in the United States and before foreign governments would, if enacted,
impose taxes on the sale of goods and services provided over the Internet. A
recently enacted law places a temporary moratorium on some forms of taxation on
Internet commerce. We cannot predict the effect of current attempts to tax or
regulate commerce over the Internet.
TO EXECUTE OUR STRATEGY, WE MAY REQUIRE ADDITIONAL FUNDING THAT MAY NOT BE
AVAILABLE ON FAVORABLE TERMS OR AT ALL, AND A LACK OF FUNDS COULD SUBSTANTIALLY
IMPAIR OUR ABILITY TO OPERATE, GROW AND BE PROFITABLE
We do not have sustained earnings or positive cash flow, and our business
strategy currently requires us to incur significant expenses to operate
competitively and to grow our business. We do not currently have adequate cash
flow from operations to fund these expenses, although we expect to achieve
positive cash flow from operations by the end of 2001. Until that time, we will
be funding our operations from balances available on our credit facility. If we
should need additional financing, it may not be available on favorable terms or
at all. If we cannot raise adequate funds to satisfy our operating and capital
requirements, we may have to limit our operations significantly or cease
operations altogether. Our future operating and capital requirements depend upon
many factors, including:
- our ability to achieve our cost savings measures;
- the response of customers to our product and service
offerings;
- the extent to which we expand our products and services;
- the extent to which we develop and upgrade our technology and
data network infrastructure; and
- the occurrence, timing, size and successful integration of
acquisitions.
OUR STOCK VALUE MAY BE ADVERSELY AFFECTED BECAUSE OUR MANAGEMENT AND AFFILIATES
BENEFICIALLY OWN APPROXIMATELY 60% OF OUR COMMON STOCK, AND THUS NO CORPORATE
ACTIONS REQUIRING SHAREHOLDER APPROVAL CAN BE TAKEN WITHOUT THEIR APPROVAL
Our officers, directors and affiliated persons beneficially own
approximately 60% of our common stock. As a result, our officers, directors and
affiliated persons effectively are able to:
- elect, or defeat the election of, our directors;
- amend or prevent amendment of our articles of incorporation or
bylaws;
- effect or prevent a merger, sale of assets or other corporate
transaction; and
- control the outcome of any other matter submitted to the
shareholders for vote.
Our public shareholders, for so long as they hold less than a majority
of the outstanding shares of our common stock, are unable to control the outcome
of any shareholder vote. Management's stock ownership may discourage a potential
acquiror from offering to purchase or otherwise attempting to obtain control of
Netzee, which in turn could reduce our stock price or prevent our shareholders
from realizing a premium over our stock price.
FUTURE SALES OF OUR COMMON STOCK WILL DILUTE CURRENT SHAREHOLDER OWNERSHIP AND
MAY DEPRESS OUR STOCK PRICE
To carry out our growth strategies, we plan to acquire other businesses
and products using a combination of our stock and cash, and we may also sell
additional shares of our stock to raise money for expanding our operations. We
may issue more shares of stock, both common and preferred, in future
acquisitions or in sales of our stock, which would dilute current shareholder
ownership interest in Netzee.
If our shareholders sell substantial amounts of our common stock,
including shares issuable upon the conversion of shares of preferred stock and
the exercise of outstanding options, the market price of our common stock could
fall. These sales also might make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. As of
April 30, 2001, we had 26,761,218 shares of common stock outstanding, 411,067
shares of common stock reserved for issuance upon the conversion of preferred
stock we issued, and options outstanding to
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acquire 3,840,255 shares of common stock. In connection with our acquisition of
Digital Visions, we also agreed to issue to the former shareholders of Digital
Visions up to 314,136 shares of our common stock upon the attainment by the
Digital Visions operations of revenue goals in fiscal year 2001. Additionally,
in connection with the acquisition of substantially all of the assets of Card
Plus, we granted to Card Plus the right to receive up to 228,570 additional
shares of common stock upon the attainment of certain revenue, EBITDA and
employee retention goals for the period from July 1, 2000 to June 30, 2001.
Additionally, Card Plus has the right to receive all 228,570 additional shares
of common stock if our common stock is priced below $4.50 per share on June 29,
2001, regardless of the attainment of these performance goals.
In addition, we may be required to register up to 7,421,239 shares of
common stock that we issued in connection with some of our acquisitions, subject
to the terms and conditions of applicable registration rights agreements.
Further, we have reserved a total of 6,323,233 shares of our common stock for
issuance under our stock option plan. The plan provides that this amount will be
automatically increased on January 1 of each year to an amount equal to 20% of
the fully diluted shares of our common stock on the preceding December 31,
provided, however, that the number of shares available for issuance shall not be
less than 3,500,000. As of April 30, 2001, we have outstanding options to
purchase a total of 3,840,255 shares of common stock under this plan. We have
registered 6,323,233 of the shares presently issuable under this plan for sale
in the public market.
OUR FUTURE EARNINGS WILL BE REDUCED BECAUSE WE HAVE A SIGNIFICANT AMOUNT OF
INTANGIBLE ASSETS
As of March 31, 2001, approximately $58.1 million, or 82%, of our total
assets were intangible assets. These intangible assets primarily represent
amounts attributable to the issuance of stock in acquisitions accounted for as
purchases. We will likely record additional intangible assets in the future if
we acquire additional businesses. Additionally, we currently amortize intangible
assets over a useful life that management believes is reasonable and is
allowable under generally accepted accounting principles, or GAAP. GAAP can
change in the future and affect the amortization period and therefore our future
results. Additionally, any additional impairment in the value of these
intangible assets could have a material adverse effect on our business,
financial condition and operating results.
OUR ARTICLES OF INCORPORATION AND BYLAWS, AS WELL AS GEORGIA CORPORATE LAW, MAY
PREVENT OR DELAY THIRD PARTIES FROM BUYING YOUR STOCK AND RESULT IN A DECREASE
IN THE STOCK PRICE
Our articles of incorporation, bylaws and Georgia law could make it
more difficult for a third party to acquire us, even if a change in control
would be beneficial to our shareholders. For example, our articles of
incorporation and bylaws provide, among other things, that:
- the board of directors, without shareholder approval, has the
authority to issue preferred stock with rights superior to the
rights of the holders of common stock, and we have already
issued a series of preferred stock in connection with one of
our acquisitions;
- our directors may only be removed for cause, and only upon the
vote of the holders of at least 66 2/3% of our voting stock;
- the board of directors is divided into three classes and
directors have staggered terms; and
- the shareholders may call a special meeting only upon request
of 75% of votes entitled to be cast on an issue.
Georgia law also contains "business combination" and "fair price"
provisions. Our board of directors may adopt these provisions and other
"anti-takeover" measures without shareholder approval, the effect of which may
be to delay, deter or prevent a change in control of Netzee.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in the
information incorporated by reference into this prospectus. These statements
represent our future expectations or projections for Netzee. You can generally
identify forward-looking statements by the use of the words "may," "will,"
"plans," "anticipates," "expects," "intends," "predicts," "estimates,"
"believes," and other similar words. These forward-looking
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statements are made only as of the date of this prospectus, or, if incorporated
by reference into this prospectus from one of our SEC filings, the date on which
the filing is made.
Forward-looking statements include statements regarding:
- our business strategies and goals;
- our future sources of revenues and potential for growth and
profitability;
- our ability to maintain our listing on the Nasdaq National
Market;
- our relationship with InterCept and Harland;
- our ability to develop our existing products and services and
to enhance or expand our product offerings;
- trends and conditions in our industry and the economy
generally;
- development of our sales and marketing efforts;
- our ability to integrate our previous and future acquisitions;
and
- other statements that are not of historical fact.
We believe that it is important to communicate our expectations for the
future to our investors, and we believe that the expectations expressed in our
forward-looking statements are reasonable and accurate based upon information we
currently have or may have at the time the statement is made. However, our
expectations may not prove to be correct due to future events we have not
accurately predicted or over which we have no control. Important factors that
could cause actual results to differ from our expectations are disclosed under
"Risk Factors" in this prospectus and in our SEC filings that we incorporate by
reference into this prospectus. You should also consider the cautionary
statements that may be provided with information contained in filings that are
incorporated by reference into this prospectus. We do not have a duty to update
any of the forward-looking statements after the date of this prospectus to
conform those statements to actual results.
Unaudited pro forma financial information that may be incorporated by
reference into this prospectus does not purport to represent what our results of
operations or financial position would actually have been. You should not rely
on the pro forma financial information as being representative of our future
results of operations or financial position.
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USE OF PROCEEDS
All 320,000 shares of common stock to be offered pursuant to this
prospectus are being offered by the selling shareholders. Except as provided in
the next paragraph, we will not receive any proceeds from the sale of these
shares by the selling shareholders.
All 320,000 shares of common stock to be offered pursuant to this
prospectus were received by the selling shareholders pursuant to our acquisition
of Card Plus on July 28, 2000. At the closing of this acquisition, all of these
shares were placed in escrow until August 20, 2001 to satisfy indemnification
obligations of the selling shareholders to Netzee. Any shares that are sold by
the selling shareholders will be released from the provisions of the escrow,
provided that the selling shareholders will immediately return all proceeds of
the sale to the escrow. Thus, we may indirectly receive some or all of the
proceeds of this offering as a result of the selling shareholders'
indemnification obligations to us. In the event that any of these proceeds are
released to us from the escrow, they will be used by us for working capital
requirements, to pay down our credit facility and for general corporate
purposes. At this time, we cannot determine the amount of proceeds, if any, that
we may be entitled to receive from the escrow. As of the date of this
prospectus, we have not made any claims for indemnification against the escrow.
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SELLING SHAREHOLDERS
On July 28, 2000, we purchased substantially all of the assets of Card
Plus, which provided outsourced software and systems development as well as
related consulting services. In connection with this acquisition, we issued
320,000 shares of our common stock to the three shareholders of Card Plus. All
of these shares were placed in escrow to satisfy indemnification obligations of
the Card Plus shareholders to Netzee. Any shares that are sold by the selling
shareholders will be released from the provisions of the escrow, provided that
the selling shareholders will immediately return all proceeds of the sale to the
escrow. The escrow period ends August 20, 2001. See "Use of Proceeds." The
shareholders of Card Plus also have the right to require us to register up to
228,570 shares of common stock that may be issued upon the attainment of certain
performance-related goals in 2001, or if our common stock price is below $4.50
on June 29, 2001. None of the former shareholders of Card Plus are officers or
directors of Netzee.
The following table sets forth information regarding the beneficial
ownership of our common stock held by each selling shareholder as of May 1,
2001, and as adjusted to reflect the sale of common stock offered by each
selling shareholder. The information in the table is based on information from
the named persons regarding their ownership of our common stock. Except as
otherwise indicated, and subject to applicable community property laws, each of
the selling shareholders has sole voting power and investment power over the
shares beneficially owned. As of April 30, 2001, there were 26,761,218 shares of
common stock outstanding.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO THE OFFERING OWNED AFTER THE OFFERING
------------------------- NUMBER OF ------------------------
NAME OF SELLING SHAREHOLDER NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
-------------------------------- -------- ------- -------------- ------ -------
Kenneth G. Ambellan ......... 160,000 * 160,000 0 0%
Robert W. Boylston, Jr.(1)... 144,000 * 144,000 0 0
Tonya H. Boylston(1)......... 16,000 * 16,000 0 0
---------------------
* Less than 1% of the outstanding common stock.
(1) Each of Robert W. Boylston, Jr. and Tonya H. Boylston, who are husband
and wife, are deemed to beneficially own the shares held by the other.
Therefore, each of them may be deemed to beneficially own and be
offering for sale 160,000 shares of common stock, which is the total
number of shares owned by both of them.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is only a summary and is
subject to the provisions of applicable law and the provisions of our articles
of incorporation and bylaws, as amended, which are incorporated by reference
into the registration statement of which this prospectus forms a part.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our articles of incorporation authorize the board of directors to issue
70,000,000 shares of common stock without par value and 5,000,000 shares of
preferred stock without par value, in one or more classes or series and to
determine the voting rights, preferences as to dividends and in liquidation, and
conversion and other rights of each series. We have authorized 500,000 shares of
Series A 8% Convertible Preferred Stock and 500,000 shares of Series B 8%
Convertible Preferred Stock. As of April 30, 2001, 26,761,218 shares of common
stock were issued and outstanding and held by approximately 245 shareholders of
record, and 500,000 shares of Series B preferred stock were outstanding and held
by one shareholder of record. No shares of Series A preferred stock are
outstanding.
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COMMON STOCK
Under the articles of incorporation, holders of common stock are
entitled to receive dividends as the board of directors may legally declare.
Each shareholder is entitled to one vote per share on all matters to be voted
upon and is not entitled to cumulate votes for the election of directors.
Holders of common stock do not have preemptive, redemption or conversion rights
and, upon liquidation, dissolution or winding up of Netzee, will be entitled to
share ratably in the net assets of Netzee available for distribution to common
shareholders. The rights, preferences and privileges of holders of common stock
are subject to the rights, preferences and privileges of holders of any classes
or series of preferred stock that we have issued or may issue in the future.
PREFERRED STOCK
On December 15, 1999, we issued 500,000 shares of Series A preferred
stock in connection with the acquisition of substantially all the assets and the
assumption of certain of the liabilities of DPSC relating to its business of
developing, marketing and distributing financial institution software and
related products and services. The Series A preferred stock entitled the holder
thereof to receive cumulative cash dividends when, as and if declared by the
board of directors at the rate of 8% per year. Dividends accrued each day and
had to be paid in full before any dividend was paid on any stock ranking junior
to the Series A preferred stock, including the common stock. The Series A
preferred stock was also entitled to receive a preferential liquidation payment
upon the liquidation, dissolution or winding up of Netzee for any reason. This
payment had to be made before the payment or distribution of any assets of
Netzee in liquidation to the holders of any stock ranking junior to the Series A
preferred stock, including the common stock. The shares of Series A preferred
stock were immediately convertible into an aggregate of 411,067 shares of common
stock, subject to certain anti-dilution adjustments. The Series A preferred
stock would also have been redeemable at our option if the average closing price
of the common stock for any four week period had equaled or exceeded $26.00 per
share. This condition to our redemption option with respect to the Series A
preferred stock was never met. Further, on or after June 15, 2002, the holders
of the Series A preferred stock had the right to require us to purchase all
shares of Series A preferred stock owned by such holders at a price equal to
$13.00 per share, plus all accrued and unpaid dividends.
On September 29, 2000, we issued 500,000 shares of Series B preferred
stock in exchange for all 500,000 shares of Series A preferred stock that we had
issued to DPSC in December 1999. No commission or other remuneration was paid or
given in connection with this exchange. The exchange was entered into in order
to reflect the original intent of the parties to the acquisition of the DPSC
assets. The shares of Series B preferred stock have substantially identical
rights, preferences and limitations as the shares of Series A preferred stock,
except as follows:
- Upon conversion of the Series B preferred stock, a holder is
entitled to receive all accrued but unpaid dividends
thereupon. Under the terms of the Series A preferred stock,
Netzee was not obligated to pay such dividends upon
conversion.
- Upon liquidation of Netzee, a holder of the Series B preferred
stock is entitled to receive all accrued but unpaid dividends
thereupon. Under the terms of the Series A preferred stock,
Netzee was only obligated to pay such dividends to the extent
that they were declared but unpaid.
Pursuant to the terms of the Series A preferred stock, these shares
were retired upon our reacquisition of them and may not be reissued.
CLASSIFIED BOARD OF DIRECTORS
The articles of incorporation provide that the board of directors shall
consist of not less than three members, unless the articles of incorporation are
amended to delete the classification of the board of directors. The board of
directors is divided into three classes of directors, as nearly equal in number
as possible, serving staggered three-year terms. As a result, approximately
one-third of the members of the board of directors are elected at each annual
meeting of shareholders. The classification of directors permits the remaining
directors to fill any vacancies on the board of directors and has the effect of
making it more difficult for shareholders to change the composition of the board
of directors. As a result, at least two annual meetings of shareholders may be
required for the shareholders to change a majority of the directors, whether or
not any change in the board of directors would be beneficial to us and our
shareholders and whether or not a majority of our shareholders believes that
such a change would be desirable. We
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believe, however, that the longer time required to elect a majority of a
classified board of directors will help to ensure the continuity and stability
of our management and policies. Currently, the terms of class I directors expire
upon the date of the 2003 annual meeting of shareholders, the terms of class II
directors expire upon the date of the 2004 annual meeting of shareholders, and
the terms of class III directors expire upon the date of the 2002 annual meeting
of shareholders.
REMOVAL OF DIRECTORS AND FILLING VACANCIES
The bylaws provide that, unless the board of directors otherwise
determines, any vacancies, including vacancies resulting from an increase in the
number of directors, will be filled by the affirmative vote of a majority of the
remaining directors, even if less than a quorum. Directors elected to fill a
vacancy shall hold office until the next election of the class for which they
were chosen or if the vacancy occurs from an increase in the size of the Board,
until the next annual meeting of shareholders. Directors may only be removed for
cause, and then only by the affirmative vote of the holders of at least 66 2/3%
of our voting stock.
SPECIAL MEETINGS AND ACTION OF SHAREHOLDERS BY WRITTEN CONSENT
Under the bylaws, the holders of shares representing 75% or more of the
votes entitled to be cast may call a special meeting of shareholders. This
provision makes it more difficult for shareholders to call special meetings of
shareholders. Further, under the articles of incorporation, the shareholders may
act without a meeting and by written consent, if the written consent is signed
by all of the shareholders of Netzee. This provision makes it more difficult for
shareholders to take action outside of a duly called annual or special meeting.
ADVANCE NOTIFICATION OF DIRECTOR NOMINATIONS AND NEW BUSINESS
Our bylaws require shareholders to notify us in advance of their
nominations of candidates for election to the board of directors who are not
nominated by the board of directors. This provision also requires advance
notification of shareholder proposals to be presented at the annual meeting of
shareholders. Without compliance with these provisions, any director nominations
or proposals to be presented by shareholders without the approval of the board
of directors cannot be considered by the shareholders at a meeting.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The articles of incorporation eliminate, subject to certain exceptions,
the personal liability of a director to us or our shareholders for monetary
damage for breaches of such director's duty of care or other duties as a
director. The articles of incorporation do not provide for the elimination of or
any limitation on the personal liability of a director for (1) any
appropriation, in violation of the director's duties, of any business
opportunity of ours, (2) acts or omissions that involve intentional misconduct
or a knowing violation of law, (3) unlawful corporate distributions, or (4) any
transactions from which the director derived an improper personal benefit. The
articles of incorporation further provide that if the Georgia Business
Corporation Code is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
shall be eliminated or limited to the fullest extent permitted by the Georgia
Business Corporation Code, as amended, without further action by the
shareholders. These provisions of the articles of incorporation will limit the
remedies available to a shareholder in the event of breaches of any director's
duties to the shareholder or to us.
Our bylaws require us to indemnify and hold harmless any director who
was or is a party or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative, including any action or suit by or in the right
of Netzee, because he or she is or was a director of Netzee, against expenses
(including, but not limited to, attorney's fees and disbursements, court costs
and expert witness fees), and against judgments, fines, penalties, and amounts
paid in settlement incurred by him or her in connection with the action, suit or
proceeding. Indemnification would be disallowed under any circumstances where
indemnification may not be authorized by action of the board of directors, the
shareholders or otherwise. The board of directors has the power to cause us to
indemnify our (1) officers, employees and agents, and (2) any director, officer,
employee or agent of Netzee who is or was serving at our request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise. In
order to
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provide this indemnification, the board of directors must adopt a resolution
identifying the person or persons to be indemnified and specifying the
particular rights to be provided, which may be different for each person.
We have entered into indemnification agreements with each of our
executive officers and directors that indemnify them to the fullest extent
permitted by the Georgia Business Corporation Code.
To the extent that we have funds reasonably available to be used, we
shall advance to any Netzee director, and may advance to any officer, employee
or agent of Netzee (but only if so provided by a resolution of the board of
directors), expenses incurred in defending any proceeding for which
indemnification is applicable, even before the final disposition of the
proceeding. However, the indemnified party must provide a written affirmation of
his or her good faith belief that he or she has met the standard of conduct
required for indemnification and a written undertaking to repay any advances
made if it is determined that the person is not entitled to indemnification. At
present, the board of directors has not adopted any indemnification resolutions
although it may do so at any time.
Our bylaws also permit us to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of Netzee, or
who, while serving in that capacity, is also or was also serving at our request
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, whether or not we were required to indemnify the person by any bylaw
provision or resolution of the board of directors. We have purchased a policy of
insurance providing reimbursement of liabilities incurred by directors and
officers in their capacities as such.
BUSINESS COMBINATION PROVISIONS OF GEORGIA LAW
The Georgia Business Corporation Code generally restricts a corporation
from entering into certain business combinations with an interested shareholder,
which is defined as any person or entity that is the beneficial owner of at
least 10% of the company's voting stock, or its affiliates, for a period of five
years after the date on which the shareholder became an interest shareholder,
unless:
- the transaction is approved by the board of directors of the
corporation prior to the date such person became an interested
shareholder,
- the interested shareholder acquires 90% of the corporation's
voting stock in the same transaction in which it exceeds 10%,
or
- subsequent to becoming an interested shareholder, the
shareholder acquires 90% of the corporation's voting stock and
the business combination is approved by the holders of a
majority of the voting stock entitled to vote on the
transaction.
The "fair price" provisions of the Georgia Business Corporation Code
further restrict business combination transactions with 10% shareholders. These
provisions require that the consideration paid for stock acquired in the
business combination must meet specified tests, which are designed to ensure
that shareholders receive at least fair market value for their shares in the
business combination.
The interested shareholder and fair price provisions of the Georgia
Business Corporation Code do not apply to a corporation unless the bylaws of the
corporation specifically provide that these provisions are applicable to the
corporation. Netzee has not elected to be covered by these provisions, but it
could do so by action of the board of directors at any time.
RELATIONSHIP WITH INTERCEPT
Our bylaws address potential conflicts of interest between us and
InterCept, which beneficially owns approximately 28% of our common stock. These
bylaw provisions are designed to make clear to all persons who may purchase our
shares from time to time that the undertaking by InterCept of specific corporate
transactions that might otherwise be deemed to be corporate opportunities of
both ours and InterCept will not constitute a usurpation of
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corporate opportunities. These provisions also clarify that a director or
officer has fulfilled his fiduciary and other duties to us and has not derived
an improper benefit if he acts consistently with the following policy:
- A corporate opportunity offered to any person who is an
officer of Netzee, and is also a director but not an officer
of InterCept, shall belong to Netzee, if the opportunity is
expressly offered to that person in working solely in his or
her capacity as an officer of Netzee. Otherwise, the
opportunity shall belong to InterCept.
- A corporate opportunity offered to any person who is a
director but not an officer of Netzee, and who is also a
director or officer of InterCept, shall belong to Netzee, if
the opportunity is expressly offered to that person in working
solely in his or her capacity as a director of Netzee.
Otherwise, the opportunity shall belong to InterCept.
- A corporate opportunity offered to any person who is an
officer of both Netzee and InterCept shall belong to Netzee,
if the opportunity is expressly offered to that person in
working solely in his or her capacity as an officer of Netzee.
Otherwise, the opportunity shall belong to InterCept.
Additionally, these bylaw provisions provide that a corporate
opportunity offered to a person under circumstances where it is unclear whether
it was offered primarily in that person's capacity as an officer or director of
us or of InterCept may be presented to whichever company the director or officer
deems appropriate under the circumstances in his sole discretion exercised in
good faith. These bylaw provisions will expire on the first day on which (1)
InterCept does not own at least 10% of the voting power of Netzee and (2) no
person who is an officer or director of Netzee is also a director or officer of
InterCept.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta.
PLAN OF DISTRIBUTION
We are registering the shares offered under this prospectus on behalf
of the selling shareholders and their pledgees, donees, transferees and
successors in interest. We will not receive any proceeds from the sale of the
shares, except as described in "Use of Proceeds." The selling shareholders and
their pledgees, donees, transferees or successors in interest may sell or
distribute these shares from time to time. These sales may be made by the
selling shareholders directly or through brokers or dealers or underwriters who
may act solely as agents, or who may acquire shares as principals. Sales may be
made at market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices or at fixed prices, which may be
changed. The selling shareholders have the right to accept or reject, in whole
or in part, any proposed purchase of these shares, whether the purchase is to be
made directly or through agents.
The shares may be sold in one or more of the following types of
transactions, or in any combination of the following types of transactions:
(a) a cross or block trade, including a transaction in which the
broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as
principal to facilitate the transaction;
(b) purchases by a broker, dealer or underwriter as principal and
resale by such broker, dealer or underwriter for its account
under this prospectus;
(c) an exchange distribution in accordance with the rules of such
exchange;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
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(e) in transactions "at the market" to or through market makers of
our common stock or into an existing market for the common
stock;
(f) in other ways not involving market makers or established
trading markets, including direct sales of the shares to
purchasers or sales of the shares effected through agents;
(g) through transactions in options, swaps or other derivatives
that may not be listed on an exchange;
(h) in privately negotiated transactions; or
(i) in transactions to cover short sales.
In effecting sales, brokers or dealers engaged by the selling shareholders may
arrange for other brokers or dealers to participate in the resales. In addition,
any securities covered by this prospectus that qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this prospectus. Under
Rule 144, a shareholder may sell shares held more than one year, provided the
shareholder meets various manner of sale, notice and other requirements set
forth in Rule 144.
From time to time after the date of this prospectus, the selling
shareholders may pledge or grant a security interest in some or all of the
shares offered under this prospectus. If a selling shareholder defaults in
performance of the obligations secured by these shares, the pledgees or secured
parties may offer and sell the shares from time to time by this prospectus. The
selling shareholders also may transfer and donate these shares in other
circumstances. The number of shares beneficially owned by the selling
shareholders will decrease as and when the selling shareholders transfer or
donate these shares or default in performing any obligations secured by these
shares. The plan of distribution for shares offered and sold under this
prospectus will otherwise remain unchanged, except that the transferees, donees,
pledgees, secured parties or other successors in interest will be selling
shareholders for purposes of this prospectus. These matters are subject to the
escrow provisions previously described.
In connection with distributions of the shares or otherwise, the
selling shareholders may enter into hedging transactions with brokers or
dealers. In connection with such transactions, brokers or dealers may engage in
short sales of the shares registered hereunder in the course of hedging the
positions they assume, including positions assumed in connection with
distributions of these shares by such brokers or dealers. The selling
shareholders may also sell shares short and redeliver the shares to close out
such short positions. The selling shareholders may also enter into option or
other transactions with brokers or dealers which require the delivery to the
brokers or dealers of the shares registered hereunder, which the brokers or
dealers may resell or otherwise transfer under this prospectus. The selling
shareholders may also loan or pledge the shares to brokers or dealers and the
brokers or dealers may sell the shares so loaned, or, upon a default, the
brokers or dealers may effect sales of the pledged shares under this prospectus.
These matters are subject to the escrow provisions previously described.
The selling shareholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters,
brokers or dealers regarding the sale of these shares, nor is there an
underwriter or coordinating broker or dealer acting in connection with the
proposed sale of these shares. However, the selling shareholders may use
brokers, dealers, underwriters or agents to sell these shares, who may receive
compensation in the form of commissions, discounts or concessions. This
compensation may be paid by the selling shareholders or the purchasers of the
shares for whom such persons may act as agent, or to whom they may sell as
principal, or both. The compensation as to a particular person may be less than
or in excess of customary commissions.
Because the selling shareholders and such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales, they will be
subject to the prospectus delivery requirements of the Securities Act. In
addition, any commission, discount, concession or profit they realize with
respect to the resale of these shares while acting as principals may be deemed
to be underwriting discounts or commissions under the Securities Act. Neither we
nor the selling shareholders can presently estimate the amount of such
compensation. The aggregate proceeds to the selling shareholders from the sale
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of the shares will be the purchase price of the common stock sold less the
aggregate agents' commissions, if any, and other expenses of issuance and
distribution not paid by us.
If the selling shareholders sell these shares in an underwritten
offering, the underwriters may acquire these shares for their own account and
resell the shares from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. In such event, we will set forth in a supplement
to this prospectus the names of the underwriters and the terms of the
transactions, including any underwriting discounts, concessions or commissions
and other items constituting compensation of the underwriters and brokers or
dealers. The underwriters from time to time may change any public offering price
and any discounts, concessions or commissions allowed or reallowed or paid to
brokers or dealers. Unless otherwise set forth in a supplement, the obligations
of the underwriters to purchase the shares will be subject to certain
conditions, and the underwriters will be obligated to purchase all of the shares
specified in the supplement if they purchase any of the shares.
If the selling shareholders notify us that they have entered into any
material arrangement with a broker or dealer for the sale of these shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required, disclosing:
(a) the name of each selling shareholder and of the participating
broker or dealer(s);
(b) the number of shares involved;
(c) the price at which such shares were sold;
(d) the commissions paid or discounts or concessions allowed to
such broker or dealer(s), where applicable; and
(e) other facts material to the transaction.
In addition, we will file a supplement to this prospectus if we are notified
that a donee or pledgee that is not already identified as a selling shareholder
intends to sell more than 500 shares.
We have advised the selling shareholders that during such time as they
may be engaged in a distribution of these shares, they are required to comply
with Regulation M under the Exchange Act. With certain exceptions, Regulation M
prohibits the selling shareholders, any affiliated purchasers and other persons
who participate in such a distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase, any security which is
the subject of the distribution until the entire distribution is complete.
We have agreed to bear certain expenses of registration of the common
stock under the federal and state securities laws and of any offering and sale
hereunder, except for commissions of dealers or agents, fees attributable to the
sale of the shares and some other expenses. We have agreed to indemnify the
selling shareholders, and we may agree to indemnify any agent, dealer or broker
that participates in transactions involving sales of these shares, against
certain liabilities, including potential liabilities under the Securities Act.
The selling shareholders have agreed to indemnify us for certain liabilities,
including potential liabilities arising under the Securities Act. The selling
shareholders may also agree to indemnify any broker or dealer or agent that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
The registration statement for this offering was filed under the terms
of a Registration Rights Agreement dated July 28, 2000 among Netzee, Card Plus
and each of Kenneth G. Ambellan, Robert W. Boylston, Jr. and Tonya H. Boylston,
the former shareholders of Card Plus, and the registration and indemnification
rights of the selling shareholders are subject to the terms of that agreement. A
copy of that agreement has been filed as Exhibit 4.1 to the registration
statement for this offering. This offering will terminate on the earlier of (a)
90 days from the effective date of the registration statement for this offering,
or (b) the date on which the selling shareholders have sold all of the shares
offered hereby.
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There can be no assurance that the selling shareholders will sell any
or all of the shares of common stock offered by them under this prospectus. It
is possible that a significant number of these shares could be sold at the same
time. Such sales, or the perception that such sales could occur, may adversely
affect prevailing market prices for our common stock.
WHERE YOU CAN FIND MORE INFORMATION
We are required by the Securities Exchange Act of 1934, as amended, to
file reports, proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also review any document we have filed with the SEC
at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549
and may obtain copies of such filings from the public reference room at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
INFORMATION INCORPORATED BY REFERENCE
We filed a registration statement on Form S-3 to register with the SEC
the shares of common stock to be offered and sold by this prospectus. This
prospectus forms a part of that registration statement. As allowed by the SEC's
rules, this prospectus does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement. The
SEC allows us to "incorporate by reference" into this prospectus the information
we have filed with the SEC. The information incorporated by reference is an
important part of this prospectus and the information that we file subsequently
with the SEC will automatically update this prospectus. Absent unusual
circumstances, we will have no obligation to amend this prospectus, other than
by filing subsequent information with the SEC. The historical and future
information that is incorporated by reference in this prospectus is considered
to be a part of this prospectus and can be obtained as described above. We also
incorporate by reference any filings we make with the SEC under sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the initial filing of the
registration statement until the earlier of (a) 90 days from the effective date
of the Registration Statement, or (b) the date the selling shareholders sell all
of the shares. We incorporate by reference into this prospectus the following
documents that we have filed with the SEC:
- our annual report on Form 10-K for the fiscal year ended
December 31, 2000 (File No. 0-27925), as filed with the SEC on
April 2, 2001; and
- the description of our capital stock contained in our
Registration Statement on Form 8-A (File No. 0-27925), as
filed with the SEC on September 3, 1999, as amended by the
section "Description of Capital Stock" contained in this
prospectus.
We also incorporate by reference all of our SEC filings pursuant to the
Exchange Act after the date of the initial registration statement and prior to
the effectiveness of the registration statement.
You may request a copy of these filings, at no cost, by visiting our
website at http://www.netzee.com or by writing or telephoning us at Netzee,
Inc., 6190 Powers Ferry Road, Suite 400, Atlanta, Georgia 30339, telephone
number (770) 850-4000, attention Richard S. Eiswirth, Senior Executive Vice
President, Chief Financial Officer and Secretary.
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EXPERTS
The financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of that firm as experts in giving said reports.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP, Atlanta, Georgia, will issue an
opinion regarding the validity of the shares of common stock offered under this
prospectus. Attorneys at Sutherland Asbill & Brennan LLP may own shares of
Netzee common stock.
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================================================================================
320,000 SHARES
NETZEE, INC.
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
__________, 2001
Until _____________, 2001, all dealers that buy, sell or trade the
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the
securities being registered hereby are estimated below, all of which will be
paid by Netzee pursuant to the terms of the Card Plus Registration Rights
Agreement.
SEC registration fee....................................... $ 100.00
Legal fees and expenses.................................... 10,000.00
Printing and engraving..................................... 5,000.00
Accounting fees and expenses............................... 7,500.00
Blue sky fees and expenses................................. 0.00
Transfer agent fees........................................ 0.00
Miscellaneous expenses..................................... 5,000.00
----------
Total............................................. $27,600.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
GEORGIA BUSINESS CORPORATION CODE
Section 14-2-851 of the Georgia Business Corporation Code, or the
"GBCC," empowers a corporation to indemnify a director (including a former
director and including a director who is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) against liability arising from
official acts if the director acted in good faith and reasonably believed that
his or her conduct was in the best interests of the corporation. For all other
acts, the corporation may indemnify a director who acted in good faith and
reasonably believed that the conduct was not opposed to the best interests of
the corporation. The corporation may indemnify a director with respect to
criminal proceedings if the director acted in good faith and had no reasonable
cause to believe the conduct was unlawful. A corporation may not indemnify a
director adjudged liable for conduct involving receipt of an improper personal
benefit.
In addition, section 14-2-856 of the GBCC permits the articles of
incorporation, bylaws, a contract, or resolution approved by the shareholders to
authorize the corporation to indemnify a director against claims to which the
director was a party, including claims by the corporation or in the right of the
corporation (e.g., a shareholder derivative action). However, the corporation
may not indemnify the director for liability to the corporation for any
appropriation of a corporate opportunity, intentional misconduct or knowing
violation of law, unlawful distributions or receipt of an improper benefit.
Section 14-2-852 of the GBCC provides for mandatory indemnification
against reasonable expenses incurred by a director who is wholly successful in
defending an action to which the director was a party due to his or her status
as a director of the corporation on the merits or otherwise. Section 14-2-854
allows a court, upon application by a director, to order indemnification and
advancement of expenses if it determines that the director is entitled to
indemnification under the GBCC or if it determines that indemnification is fair
and reasonable even if the director has failed to meet the statutory standard of
conduct under section 14-2-851. However, the court may not order indemnification
in excess of reasonable expenses for liability to the corporation or for receipt
of an improper benefit.
Section 14-2-857 of the GBCC permits a corporation to indemnify an
officer (including a former officer and including an officer who is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise) to
the same extent as a director. A corporation may indemnify an officer who is not
a director to a further extent by means of an authorization contained in the
articles of incorporation, the bylaws, a board resolution, or
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a contract. However, the corporation may not indemnify an officer for liability
arising from conduct involving appropriation of a corporate opportunity,
intentional misconduct or knowing violation of law, unlawful distributions, or
receipt of an improper personal benefit. An officer who is not a director is
also entitled to mandatory indemnification and may apply for court-ordered
indemnification.
Section 14-2-858 of the GBCC permits a corporation to purchase and
maintain insurance on behalf of directors and officers against liability
incurred by them in their capacities or arising out of their status as directors
and officers of the corporation, regardless of whether the corporation would
have the power to indemnify or advance expenses to the director or officer for
the same liability under the GBCC.
We have entered into indemnification agreements with each of our
executive officers and directors that indemnify them to the fullest extent
permitted by the GBCC.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Netzee
pursuant to the foregoing provisions, we have been informed that in the opinion
of the SEC, this indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ARTICLES OF INCORPORATION
Article VIII of the Articles of Incorporation exculpates the directors
of Netzee from personal liability for money damages to Netzee or its
shareholders to the fullest extent permitted by the GBCC, as it may be amended
from time to time. Currently, under the GBCC, the directors are exculpated from
all liability to Netzee or its shareholders except for liability arising from
conduct involving appropriation of a corporate opportunity, intentional
misconduct or knowing violation of law, unlawful distributions, or receipt of an
improper personal benefit. The Articles of Incorporation also provide that any
repeal or modification of Article VIII of the Articles of Incorporation by the
shareholders of Netzee shall not adversely affect any right or protection of a
director of Netzee existing at the time of such repeal or modification.
BYLAWS
Article VII of Netzee's Bylaws provides that Netzee must indemnify any
person who is or was a director of Netzee who is or was a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, including any action or suit by or in the right of Netzee,
against any judgment, settlement, penalty, fine or reasonable expenses incurred
with any of the foregoing proceedings.
INSURANCE
We have purchased a policy of insurance providing reimbursement to our
officers and directors of indemnification payments and related liabilities
incurred in their capacities as such.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement, dated July 28, 2000, by and among
Netzee, Card Plus and each of the former shareholders of Card Plus (Exhibit
4.1), provides for indemnification of the selling shareholders by Netzee, and
indemnification of Netzee, each of its directors and officers and each
controlling person of Netzee, by each of the selling shareholders, for certain
liabilities, including liabilities arising under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
4.1 Registration Rights Agreement, dated July 28, 2000, by and among Netzee, Inc.,
Card Plus, Inc., Kenneth G. Ambellan, Robert W. Boylston, Jr. and Tonya H.
Boylston(1).
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5.1 Opinion of Sutherland Asbill & Brennan LLP as to the validity of securities
being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Sutherland Asbill & Brennan LLP contained within Opinion of Counsel
filed as Exhibit 5.1.
---------------------
(1) Previously filed as an exhibit to Netzee, Inc.'s Form 10-Q for the
quarter ended September 30, 2000, as filed with the Securities and Exchange
Commission on November 14, 2000, and hereby incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this registration statement (or the
most recent post-effective amendment hereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
change in volume and price represents no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
registration statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange of 1934 (the "Exchange Act") that are incorporated by
reference in this registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration
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statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of such registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, such registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Atlanta, State of Georgia on May 7, 2001.
NETZEE, INC.
By: /s/ Donny R. Jackson
-------------------------------------
Donny R. Jackson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donny R. Jackson, Richard S. Eiswirth and
Jarett J. Janik, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
to this registration statement and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Donny R. Jackson President, Chief Executive Officer and May 7, 2001
------------------------------------------ Director (Principal Executive Officer)
Donny R. Jackson
/s/ Richard S. Eiswirth Senior Executive Vice President, May 7, 2001
------------------------------------------ Chief Financial Officer and
Richard S. Eiswirth Secretary (Principal Financial Officer)
/s/ Jarett J. Janik Vice President and Controller May 7, 2001
------------------------------------------ (Principal Accounting Officer)
Jarett J. Janik
/s/ John W. Collins Chairman of the Board of Directors May 7, 2001
------------------------------------------
John W. Collins
Vice Chairman of the Board of Directors May __, 2001
------------------------------------------
Glenn W. Sturm
/s/ Jon R. Burke Director May 7, 2001
------------------------------------------
Jon R. Burke
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Director May ___, 2001
------------------------------------------
Charles B. Carden
Director May ___, 2001
------------------------------------------
Gayle M. Earls
/s/ Stiles A. Kellett, Jr. Director May 7, 2001
------------------------------------------
Stiles A. Kellett, Jr.
Director May ___, 2001
------------------------------------------
Jefferson B. A. Knox, Sr.
/s/ Bruce P. Leonard Director May 7, 2001
------------------------------------------
Bruce P. Leonard
/s/ John E. O'Malley Director May 7, 2001
------------------------------------------
John E. O'Malley
/s/ A. Jay Waite Director May 7, 2001
------------------------------------------
A. Jay Waite
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