-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PoKj005Zr65g1bqfBudJwMS0YIOc8CwfptflX7ju41EeUOZ5AwhW+oVCkWb0ZXQ8 kNTB2T3Uwp8HOqXmjLXH2A== 0000931763-98-002184.txt : 19980817 0000931763-98-002184.hdr.sgml : 19980817 ACCESSION NUMBER: 0000931763-98-002184 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCEPT GROUP INC CENTRAL INDEX KEY: 0001054930 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] IRS NUMBER: 582237359 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14213 FILM NUMBER: 98689344 BUSINESS ADDRESS: STREET 1: 3150 HOLCOMB BRIDGE ROAD SUITE 200 CITY: NORTCROSS STATE: GA ZIP: 30071 BUSINESS PHONE: 7708402700 MAIL ADDRESS: STREET 1: 3150 HOLCOMB BRIDGE ROAD SUITE 200 CITY: NORTCROSS STATE: GA ZIP: 30071 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998. Or [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______, 19__. Commission file number : 01-14213 ------------ THE INTERCEPT GROUP, INC. (Exact name of registrant as specified in its charter) Georgia 58 - 2237359 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071 (Address of principal executive offices) (770) 248-9600 (Registrant's telephone number including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No ; (2) Yes No X --- --- --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 12, 1998 Common Stock, no par value 9,248,539 --------------- (No. of Shares) ================================================================================ THE INTERCEPT GROUP, INC. INDEX TO FORM 10-Q PAGE ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 4 Consolidated Statements of Operations for the Three Months and Six Months ended June 30, 1998 and 1997 5 Consolidated Statements of Cash Flows for the Six Months ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 17 EXHIBIT INDEX 18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The InterCept Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands)
June 30, December 31, 1998 1997 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 6,943 $ 2,010 Accounts receivable, less allowance for doubtful accounts of $157 both at June 30, 1998 and December 31, 1997 2,592 2,776 Inventory, prepaid expenses and other 494 230 ------------ ------------ Total current assets 10,029 5,016 Property and equipment, net 4,509 2,516 Deferred tax assets 664 668 Intangible assets, net 1,888 1,683 Notes receivable 40 45 Other noncurrent assets 228 228 ------------ ------------ Total assets $ 17,358 $ 10,156 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of notes payable $ 91 $ 581 Line of credit - 200 Accounts payable and accrued liabilities 2,432 2,103 Deferred revenue 1,440 1,140 ------------ ------------ Total current liabilities 3,963 4,024 Notes payable, less current portion 260 4,716 Deferred compensation - 1,800 ------------ ------------ Total liabilities 4,223 10,540 Minority interest 50 - Commitments and contingencies: Series A redeemable preferred stock 8% cumulative, no par value; 30,000 shares authorized; 0 and 4,000 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively - 400 Shareholders' equity: Preferred stock, no par value; 1,000,000 shares authorized; Series A reported above - - Common stock, no par value; 50,000,000 shares authorized; 9,000,114 and 6,750,114 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively 15,780 2,764 Accumulated deficit (2,695) (3,548) ------------ ------------ Total shareholders' equity 13,085 (784) ------------ ------------ Total liabilities and shareholders' equity $ 17,358 $ 10,156 ============ ============
The accompanying notes are an integral part of these condensed consolidated balance sheets. 4 The InterCept Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- 1998 1997 1998 1997 ------------------------ ----------------------- (unaudited) (unaudited) Revenues: Service fee income $ 4,785 $ 3,971 $ 9,358 $ 7,803 Data communications management income 909 761 1,758 1,443 Equipment product sales, services and other 955 690 1,790 1,292 ---------- ---------- --------- ---------- Total revenues 6,649 5,422 12,906 10,538 Costs of services: Cost of service fee income 1,429 1,191 2,721 2,477 Cost of data communications management income 591 600 1,220 1,145 Cost of equipment and product sales 720 588 1,433 1,031 Selling, general and administrative expenses 2,575 2,571 5,107 4,886 Depreciation and amortization 314 330 599 639 ---------- ---------- --------- ---------- Total operating expenses 5,629 5,280 11,080 10,178 Operating income 1,020 142 1,826 360 Other expense, net (132) (165) (292) (328) ---------- ---------- --------- ---------- Income (loss) before provision for income taxes and minority interest 888 (23) 1,534 32 Provision for income taxes 349 77 607 121 Minority interest on (income) loss of consolidated subsidiary (46) 13 (50) 39 ---------- ---------- --------- ---------- Net income (loss) before preferred dividends 493 (87) 877 (50) Preferred dividends (8) (8) (16) (16) ---------- ---------- --------- ---------- Net income (loss) attributable to common shareholders $ 485 $ (95) $ 861 $ (66) ========== ========== ========= ========== Net income (loss) per common share: Basic $ 0.07 $ (0.01) $ 0.12 $ (0.01) ========== ========== ========= ========== Diluted $ 0.07 $ (0.01) $ 0.12 $ (0.01) ========== ========== ========= ========== Weighted average shares outstanding: Basic 7,250 6,750 7,000 6,750 Diluted 7,371 6,750 7,119 6,750
The accompanying notes are an integral part of these condensed consolidated statements of operations. 5 The InterCept Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands)
Six Months Ended June 30, ------------------------------ 1998 1997 ------------------------------ (unaudited) Cash flows from operating activities: Net income (loss) $ 877 $ (50) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 599 639 Minority interest in income (loss) of consolidated subsidiary 50 (39) Deferred income tax provision (benefit) 4 (7) Pro forma tax expense - 37 Changes in operating assets and liabilities: Accounts receivable 183 573 Inventory, prepaid expenses, and other (273) (144) Other assets (308) (117) Accounts payable and accrued expenses 329 (5) Deferred revenue 301 (8) ------------- ------------ Net cash provided by operating activities 1,762 879 ------------- ------------ Cash flows from investing activities: Increase (decrease) in note receivable 14 (611) Purchases of property and equipment, net (2,400) (710) ------------- ------------ Net cash used in investing activities (2,386) (1,321) ------------- ------------ Cash flows from financing activities: Payments on notes payable and line of credit (6,946) (52) Debt issuance costs (88) - Retirement of preferred stock (440) - Distributions for taxes to shareholders of pass through entities (8) (52) Payment of preferred dividends (16) (16) Proceeds from issuance of common stock, net of related issuance costs 13,055 6 ------------- ------------ Net cash provided by (used in) financing activities 5,557 (114) Net increase (decrease) in cash and cash equivalents 4,933 (556) Cash and cash equivalents at beginning of the period 2,010 1,398 ------------- ------------ Cash and cash equivalents at end of the period $ 6,943 $ 842 ============= ============ Supplemental disclosures of cash flow information: Cash paid for interest $ 337 $ 368 ============= ============ Cash paid for income taxes $ 435 $ 132 ============= ============
The accompanying notes are an integral part of these consolidated cash flows. 6 THE INTERCEPT GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Organization The InterCept Group, Inc. ("InterCept" or the "Company") designs, develops, markets and implements a suite of fully integrated electronic commerce products and services primarily for community financial institutions in the United States. The Company's products and services include electronic funds transfer ("EFT"), data communications management, client/server enterprise software and other processing solutions. The Company is a single source provider of a broad range of flexible electronic commerce solutions supporting value-added products and services. The Company provides numerous EFT products and services, including automated teller machine ("ATM"), point-of-sale ("POS") and scrip debit services, debit card transactions, funds transfer services and remote banking services. The Company licenses client/server enterprise software, which operates in a Windows NT(R) environment, to community financial institutions on both a service bureau and an in-house basis. The Company also supplies banking related equipment, provides related maintenance and technical support and offers numerous ancillary products and services to its financial institution customers. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ProVesa, Inc. and InterCept Switch, Inc. Additionally, ProImage, Inc.("ProImage"), a corporation in which ProVesa has a 33.3% ownership interest, has been consolidated in the accompanying financial statements since its inception, due to InterCept's control of ProImage. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, to present fairly the Company's financial position, results of operations, and cash flows at the dates and for the periods presented. Interim results of operations are not necessarily indicative of results to be expected for a 12-month period. The interim financial statements should be read in conjunction with the Company's Registration Statement on Form S-1 (Registration Number 333-47197) as declared effective by the Securities and Exchange Commission on June 9, 1998. 2. NET INCOME PER SHARE Net income per share is calculated and presented in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Basic 7 earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding stock options using the "treasury stock" method based on average stock price for the period. All prior periods are presented under SFAS 128. The following tables set forth a reconciliation of basic earnings per share to diluted earnings per share (in thousands, except earnings per share ("EPS") amounts):
Three Months Ended Three Months Ended June 30, 1998 June 30, 1997 ------------------------------------ ------------------------------------- Income Shares EPS Income Shares EPS ------------------------------------ ------------------------------------- Basic EPS $ 485 7,250 $ 0.07 $ (95) 6,750 $ (0.01) Dilutives: Stock options - 121 - - - - ------------------------------------ ------------------------------------- Diluted EPS $ 485 7,371 $ 0.07 $ (95) 6,750 $ (0.01) ==================================== ===================================== Six Months Ended Six Months Ended June 30, 1998 June 30, 1997 ------------------------------------ ------------------------------------- Income Shares EPS Income Shares EPS ------------------------------------ ------------------------------------- Basic EPS $ 861 7,000 $ 0.12 $ (66) 6,750 $ (0.01) Dilutives: Stock options - 119 - - - - ------------------------------------ ------------------------------------- Diluted EPS $ 861 7,119 $ 0.12 $ (66) 6,750 $ (0.01) ==================================== =====================================
3. INITIAL PUBLIC OFFERING OF 2,387,500 SHARES OF COMMON STOCK On June 9, 1998, the Company completed its initial public offering of 2,387,500 shares (including 137,500 shares sold by a selling shareholder) of common stock at an offering price of $7.00 per share. Net proceeds from the offering were approximately $13.1 million after deducting underwriters discounts and commissions and expenses of the offering. The Company used a portion of the proceeds to (i) pay down significantly all of its long-term debt; (ii) pay amounts owed to an officer of the Company for prior service; (iii) enhance and expand the InterCept Frame Relay Network; and (iv) redeem its outstanding preferred stock. The balance of the proceeds will be used for working capital and general corporate purposes, including possible acquisitions. On July 10, 1998 the underwriters exercised their over- allotment option to purchase an additional 248,425 shares at $7.00 per share. The Company received additional net proceeds of approximately $1.6 million from such sale of shares. 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-term debt and capital lease obligations at June 30, 1998 and December 31, 1997 consisted of the following (in thousands):
June 30, December 31, 1998 1997 ---------------------------------------- Note payable to Georgia State Bank, all outstanding amounts repaid in June, 1998. $ - $ 2,733 Note payable to FNB Commerce, all outstanding amounts repaid in June, 1998. - 1,378 Note payable to Community Bank of Georgia, all outstanding amounts repaid in January, 1998. - 403 Mortgage note payable to Allied Bank, all outstanding amounts repaid in June, 1998. - 389 Note payable to First Macon Bank & Trust interest payable at prime; monthly principal and interest payments, payable in full on September 15, 2001; the note is collaterized by assets of ProImage, and a corporate guarantee by ProVesa of one-third of the balance of the debt. 280 316 Note payable to First Macon Bank & Trust, interest payable at prime, monthly principal and interest payments, the note is collaterized by assets of ProImage, and a corporate guarantee by ProVesa of one-third of the balance of the debt. 71 78 ---------------------------------------- 351 5,297 Less current maturities (91) (581) ---------------------------------------- $ 260 $ 4,716 ========================================
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OVERVIEW The following discussion contains statements which constitute "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements appear in a number of places in this Quarterly Report and include all statements that are not historical statements of fact regarding the intent, anticipation, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the Company's financing plans; (ii) trends affecting the Company's financial condition or results of operations; (iii) the Company's growth strategy and operating strategy and (iv) the declaration and payment of dividends. The words "may," "would," "could," "will," "expect," "estimate," "anticipate," "believe," "intends," "plans," and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the Company's ability to control. Actual results may differ materially from these forward-looking statements as a result of many factors, including: the inability to achieve and maintain profitability; the inability to obtain, continue and manage growth or execute agreements with new customers; the risks related to acquisitions, the inability to attract and retain qualified sales and marketing personnel and enter strategic marketing relationships; market acceptance of new products and enhancements; growth in the Company's customers; rapid changes in technology; increased competition; dependence on new products; and the other factors discussed in the Company's registration statement on Form S-1 (SEC No. 333-47197) as declared effective on June 9, 1998, including the "Risk Factors" section contained therein. The Company derives revenues primarily from the following sources: (i) EFT processing services; (ii) data communications management; (iii) client/server enterprise software support, maintenance and related services; and (iv) maintenance and technical support services, sales of banking related equipment and complementary products and customer services. The Company derives EFT revenues principally from processing ATM, POS and debit card transactions. The Company receives a base fee for providing its ATM processing services and an additional fee for each ATM serviced. Once the number of transactions exceeds established levels, the Company charges additional fees for the extra transactions processed. For its POS services, the Company generally receives a portion of the interchange fees charged by its community financial institution customers that issue debit cards and charges a monthly fee if its customers do not meet a certain minimum dollar amount of transactions for a particular month. Most charges due under the Company's EFT service agreements are paid monthly. The Company's data communications management service revenues are principally derived from network management services, data packet transportation services across The InterCept Frame Relay Network, consulting and equipment configuration, installation and sales. The Company charges a flat monthly fee for providing telecommunications connectivity and network management as well as an installation charge. The Company licenses PC BancPAC, its proprietary Windows NT(R) based client/server software system on both an in-house and service bureau basis. The Company recognizes service revenues as the services are provided. It is the Company's policy to recognize revenues for licensing of PC BancPAC in accordance with Statement of Position 97-2 on "Software Revenue Recognition" issued by the American Institute of Certified Public Accountants. Software license fees are recognized when a noncancellable license agreement 9 has been signed, the product has been shipped, and all significant obligations to the customer have been satisfied. The Company's maintenance, support and equipment revenues consist primarily of revenues from the Company's maintenance and technical support services as well as sales of equipment. Equipment revenues are recognized at the time of shipment while maintenance and technical support service revenues are recognized as the service period elapses. The Company's business and relationships with its customers depend significantly on a number of computer software programs, internal operating systems and connections to other networks. If any of these software programs, systems or networks are not programmed to recognize and properly process dates after December 31, 1999 (the "Year 2000" issue), significant system failures or errors may result which could have a material adverse effect on the business, financial condition, or results of operations of both the effected customers and the Company. The Company has conducted a preliminary review of its internal accounting and operating programs and systems and has been subject to the review of certain federal bank regulatory agencies with respect to some of its operations in light of the Year 2000 issue. No significant Year 2000 problems with the Company's products and services have yet been identified during such reviews and the Company currently believes that its programs and systems and the network connections it maintains are adequately programmed to address the Year 2000 issue or can be modified or replaced to address the Year 2000 issue without incurring costs or delays which would have a material adverse effect on the Company's financial condition. The Company currently provides service bureau processing services to certain customers using a processing solution that is not Year 2000 compliant, and the Company is in the process of converting those customers to its PC BancPAC software, which the Company believes is Year 2000 compliant, before the end of September 1999. The Company currently estimates that the cost of such conversion will total approximately $200,000; however, it is difficult to predict such costs with certainty, and there can be no assurance that the costs necessary to convert its customers to PC BancPAC will not have a material adverse effect on the Company's business, financial condition, or results of operations. Further, any failure by the Company to complete the conversion of any of its service bureau customers or address any problems that may arise during reviews conducted by bank regulatory agencies or otherwise in a timely manner could significantly interrupt the business operations of such customers and the Company, which could have a material adverse effect on the business, financial condition, or results of operations of both the effected customers and the Company. The Company has not completed an assessment of third party products or systems used in its business. Other companies interact electronically with the Company and its customers, and the Company must coordinate its EFT, data communications and enterprise software processing with such other companies and its customers. If these other companies or the Company's customers do not successfully address Year 2000 issues in their operations and if the Company is unable to successfully transfer its business operations to another provider that has Year 2000 compliant systems, the Company's processing operations may be interrupted, hindered or delayed, which would have a material adverse effect on its business, financial condition and results of operations. The Company has had to help some of its customers to implement Year 2000 changes or replace deficient equipment related to the services the Company provides. Furthermore, the Company believes that many financial institutions and third party vendors and network processors (including customers, vendors and processors of the Company) are still in the preliminary stages of analyzing their software and network applications to address Year 2000 issues. It is impossible to estimate the potential expenses involved or delays which may result from the failure of these institutions and third parties to resolve their Year 2000 issues in a timely manner and there can be no assurance that such expenses, failures or delays will not have a material adverse effect on the Company's business, financial condition or results of operations. The Company's quarterly operating results have varied in the past and will likely vary significantly in the future. Factors that may cause the Company's future operating results to vary include, without limitation: the timing of new product and service announcements; changes in pricing policies by the Company and its competitors; market acceptance of new and enhanced versions of the Company's products and services; the lengthening of sales cycles for new or existing products or services; customer attrition; changes in operating expenses; changes in Company strategy; personnel changes; the introduction of alternative technologies; the Company's products becoming obsolete; failure, delay and expenses in 10 making software, systems and networks utilized in the Company's business Year 2000 compliant; the effect of acquisitions; and general economic factors. Product and service revenues are difficult to forecast because the market for electronic commerce products and services is rapidly evolving, and the Company's sales cycle generally covers an extended period but varies substantially from customer to customer. Intercept believes that quarter to quarter comparisons of its results of operations should not be relied upon as indications of future performance. RESULTS OF OPERATIONS The following table sets forth the percentage of revenues represented by certain line items in the Company's condensed consolidated statements of operations for the periods indicated.
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ---------------------------- 1998 1997 1998 1997 ------------------------------ ---------------------------- Revenues 100.0% 100.0% 100.0% 100.0% Costs of services 41.2 43.9 41.6 44.2 Selling, general, and administrative expenses 38.7 47.4 39.6 46.4 Depreciation and amortization 4.7 6.1 4.6 6.1 -------------- ------------ ----------- ------------ Total operating expenses 84.6 97.4 85.8 96.7 -------------- ------------ ----------- ------------ Operating income 15.4 2.6 14.2 3.3 Other expense, net (2.0) (3.0) (2.3) (3.1) -------------- ------------ ----------- ------------ Income (loss) before minority interest and provision for income taxes 13.4 (0.4) 11.9 0.2 Minority interest (income) loss (0.8) 0.2 (0.4) 0.4 Provision for income taxes 5.2 1.4 4.7 1.1 -------------- ------------ ----------- ------------ Net income 7.4% (1.6)% 6.8% (0.5)% ============== ============ =========== ============
11 Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997 Revenues. Revenues increased 22.6%, or $1.2 million, to $6.6 million for the three months ended June 30, 1998 from $5.4 million for the three months ended June 30, 1997. The $1.2 million increase was primarily attributable to (i) $520,000 generated by an increase in EFT processing services, (ii) $150,000 generated by an increase in data communications management services, (iii) $260,000 generated by an increase in equipment sales and (iv) other net increases of $300,000. Costs of Services. Costs of services increased 15.2%, or $360,000, to $2.7 million for the three months ended June 30, 1998 from $2.4 million for the three months ended June 30, 1997. The $360,000 increase was primarily attributable to (i) $130,000 generated by additional equipment sales, (ii) $70,000 generated from additional maintenance services and (iii) other increases of $160,000. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 0.2% to $2.6 million for the three months ended June 30, 1998 from $2.6 million for the three-months ended June 30, 1997. Depreciation and Amortization. Depreciation and amortization decreased 4.8%, or $20,000, to $310,000 for the three months ended June 30, 1998 from $330,000 for the three months ended June 30, 1997. The decrease was primarily attributable to a reduction of amortization for fully amortized intangibles partially offset by additional depreciation expense related to capital expenditures to upgrade and expand the InterCept Frame Relay Network. Other Expense. Other expense decreased 20.1%, or $40,000, to $130,000 for the three months ended June 30, 1998 from $170,000 for the three months ended June 30, 1997. The decrease was primarily due to the reduction of long-term debt. Minority Interest Income (Loss). Minority interest income (loss) decreased $60,000 to a loss of $50,000 for the three months ended June 30, 1998 from $10,000 for the three months ended June 30, 1997. The decrease was attributable to profits in ProImage's operations. Provision for Income Taxes. Provision for income taxes increased $270,000 to $350,000 for the three months ended June 30, 1998 from $80,000 for the three months ended June 30, 1997. The increase was attributable to increased profits partially offset by a reduction in nondeductible amortization. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 Revenues. Revenues increased 22.5%, or $2.4 million, to $12.9 million for the six months ended June 30, 1998 from $10.5 million for the six months ended June 30, 1997. The $2.4 million increase was primarily attributable to (i) $1.1 million generated by an increase in EFT processing services, (ii) $320,000 generated by an increase in data communications management services, (iii) $500,000 generated by an increase in equipment and (iv) other net increases of $440,000. Costs of Services. Costs of services increased 15.5%, or $720,000, to $5.4 million for the six months ended June 30, 1998 from $4.7 million for the six months ended June 30, 1997. The $720,000 increase was primarily attributable to (i) $400,000 generated by an increase in equipment sales, (ii) $80,000 generated by an increase in data communications management, (iii) $70,000 generated from additional maintenance services and (iv) other increases of $170,000. 12 Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 4.5%, or $220,000, to $5.1 million for the six months ended June 30, 1998 from $4.9 million for the six months ended June 30, 1997. The increase was primarily attributable to an increase in additional sales and administrative personnel to support the Company's growth. Depreciation and Amortization. Depreciation and amortization decreased 6.2%, or $40,000, to $600,000 for the six months ended June 30, 1998 from $640,000 for the six months ended June 30, 1997. The decrease was primarily attributable to a reduction of amortization of fully amortized intangibles partially offset by additional depreciation expense related to capital expenditures to upgrade the InterCept Frame Relay Network. Other Expense. Other expense decreased 11.0%, or $40,000, to $290,000 for the six months ended June 30, 1998 from $330,000 for the six months ended June 30, 1997. The decrease was primarily due to the reduction of long term debt. Minority Interest Income (Loss). Minority interest income (loss) decreased $90,000, to a loss of $50,000 for the six months ended June 30, 1998 from $40,000 for the six months ended June 30, 1997. The decrease was attributable to profits in ProImage's operations. Provision for Income Taxes. Provision for income taxes increased $490,000, to $610,000 for the six months ended June 30, 1998 from $120,000 for the six months ended June 30, 1997. The increase was attributable to increased profits partially offset by a reduction in nondeductible amortization. Liquidity and Capital Resources Cash and cash equivalents were $6.9 million at June 30, 1998. Net cash provided by operating activities was $1.8 million and $900,000 for the six months ended June 30, 1998 and 1997, respectively. The increase in the net cash provided by operating activities was primarily attributable to an increase in earnings. Net cash used in investing activities was $2.4 million and $1.3 million for the six months ended June 30, 1998 and 1997, respectively. The increase in net cash used in investing activities was primarily due to capital expenditures of $1.6 million to upgrade and expand the InterCept Frame Relay Network in 1998, partially offset by $600,000 related to the collection of a note receivable in 1997. Net cash provided by (used in) financing activities was $5.6 million and $(100,000) for the six months ended June 30, 1998 and 1997, respectively. The increase in net cash provided by financing activities was primarily due to net proceeds from the completion of the Company's initial public offering. 13 On April 28, 1998, the Company entered into a loan agreement with First Union National Bank (the "First Union Credit Facility"), under which the Company may borrow up to $20.0 million to fund acquisitions and pay expenses related to acquisitions. In addition, at the Company's election, $2.0 million of the First Union Credit Facility may become available for working capital purposes. Before making any borrowings under the loan, InterCept shall have satisfied certain conditions set forth in the loan agreement. The First Union Credit Facility contains provisions which require the Company to maintain certain financial ratios and minimum net worth amounts and which restrict the Company's ability to incur additional debt, make certain capital expenditures, enter into agreements for mergers, acquisitions or the sale of substantial assets and pay dividends. The First Union Credit Facility matures on April 28, 2001. Interest is payable monthly and outstanding principal amounts accrue interest, at the Company's option, at an annual rate equal to either (i) a floating rate equal to the lender's prime rate minus one quarter of one percent or (ii) a fixed rate based upon the 30-day LIBOR rate plus applicable margins. While there can be no assurances, the Company believes that the cash on hand, funds to be provided by operations, and funds which may be available for working capital purposes under the First Union Credit Facility will be sufficient to meet the Company's anticipated capital expenditure and liquidity requirements for its operations through at least June 1999. The Company intends to grow, in part, through strategic acquisitions and will make additional expenditures to negotiate, and consummate acquisition transactions and integrate the acquired companies. While there can be no assurance, management currently believes that cash on hand and funds from the First Union Credit Facility, together with the issuance of Common Stock and other securities, will be sufficient to fund its acquisition needs for the next 12 months. No assurance can be made with respect to the actual timing and the amount of the expenditures or acqusitions. The Company's estimates are forward-looking statements that are subject to risks and uncertainties discussed above. 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to, nor is any of its property subject to, any material legal proceedings, other than routine litigation incidental to its business. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote by the Company's security holders during the second quarter ended June 30, 1998. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit No. Description ------ ----------- 3.1 Amended and Restated Articles of Incorporation, as filed with the Secretary of the State of Georgia on April 29, 1998, (incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (No. 333-47197) as declared effective by the SEC on June 9, 1998 (the "Registration Statement")). 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement). 4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws defining the rights of the holders of Common Stock of the Company. 10.1 Loan and Security Agreement dated April 28, 1998 by and among the Company, its wholly-owned subsidiaries and First Union National Bank (incorporated by reference to Exhibit 10.25 of the Registration Statement). 10.2 Stock Option Agreement dated as of June 24, 1998 by and between the Company and John W. Collins. 10.3 Stock Option Agreement dated as of June 24, 1998 by and between the Company and Donny R. Jackson. 10.4 Stock Option Agreement dated as of June 24, 1998 by and between the Company and Scott R. Meyerhoff. 27.1 Financial Data Schedule for the three and six months ended June 30, 1998. 27.2 Financial Data Schedule for the three and six months ended June 30, 1997. 15 b) Reports on Form 8-K None. ________________ 16 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE INTERCEPT GROUP, INC. August 14, 1998 /s/ John W. Collins - --------------- --------------------------- Date John W. Collins Chairman of the Board and Chief Executive Officer (principal executive officer) August 14, 1998 /s/ Scott R. Meyerhoff - --------------- --------------------------- Date Scott R. Meyerhoff Chief Financial Officer (principal financial and accounting officer) 17 EXHIBIT INDEX Exhibit No. Description --- ----------- 3.1 Amended and Restated Articles of Incorporation, as filed with the Secretary of the State of Georgia on April 29, 1998 (incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (No. 333-47197) as declared effective by the SEC on June 9, 1998 (the "Registration Statement")). 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement) 4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws defining the rights of the holders of Common Stock of the Company. 10.1 Loan and Security Agreement dated April 28, 1998 by and among the Company, its wholly-owned subsidiaries and First Union National Bank (incorporated by reference to Exhibit 10.25 of the Registration Statement). 10.2 Stock Option Agreement dated as of June 24, 1998 by and between the Company and John W. Collins. 10.3 Stock Option Agreement dated as of June 24, 1998 by and between the Company and Donny R. Jackson. 10.4 Stock Option Agreement dated as of June 24, 1998 by and between the Company and Scott R. Meyerhoff. 27.1 Financial Data Schedule for the three and six months ended June 30, 1998. 27.2 Financial Data Schedule for the three and six months ended June 30, 1997. _____________________ 18 EX-10.2 2 STOCK OPTION AGREEMENT EXHIBIT 10.2 THE INTERCEPT GROUP, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this 24th day of June, 1998, by and between The InterCept Group, Inc., a Georgia corporation (the "Company"), and John W. Collins (the "Optionee"). WHEREAS, effective as of November 12, 1996, the Board of Directors of the Company adopted a stock option plan known as the "The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that the Plan be approved by the Company's shareholders; and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows. 1. Incorporation of Plan. This option is granted pursuant to the --------------------- provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations and --------------- conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, no par value (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. 3. Purchase Price. The price per share to be paid by the Optionee for -------------- the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least -------------- the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Option Non-Transferable. No Option shall be transferable by an ----------------------- Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 6. Notice of Exercise of Option. This Option may be exercised by the ---------------------------- Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of shares subject to this Option, -------------------- the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. 2 8. Termination of Employment. ------------------------- (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its subsidiaries, other than a termination that is either (i) for Cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 90 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for Cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement (provided that, on the date which is three months after the date of retirement, the Options will become void and unexercisable unless on the date of retirement the Optionee enters into a noncompete agreement with The Intercept Group, Inc. and continues to comply with such noncompete agreement). This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its subsidiaries. 9. Disabled Optionee. In the event of termination of employment because ----------------- of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal representative) may exercise this Option, within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option, to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 3 10. Death of Optionee. Except as otherwise set forth in Schedule A with ----------------- respect to the rights of the Optionee upon termination of employment under Section 8(a) above, in the event of the Optionee's death while employed by the Company or any of its subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Date of Grant. This Option was granted by the Board of Directors of ------------- the Company on the date set forth in Schedule A (the "Date of Grant"). 12. Compliance with Regulatory Matters. The Optionee acknowledges that ---------------------------------- the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 12. 13. Restriction on Disposition of Shares. The shares purchased pursuant ------------------------------------ to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will, or the laws of descent and distribution, until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 14. Miscellaneous. ------------- (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. 4 (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Georgia. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company's seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written. THE INTERCEPT GROUP, INC. OPTIONEE By: /s/ Donny R. Jackson /s/ John W. Collins -------------------- ------------------- Donny R. Jackson John W. Collins Title: President and Chief Operating Officer ATTEST: /s/ Scott R. Meyerhoff - ----------------------------- Secretary/Assistant Secretary 5 SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN THE INTERCEPT GROUP, INC. AND JOHN W. COLLINS Dated: June 24, 1998 ------------- 1. Number of Shares Subject to Option: 200,000 shares. ---------------------------------- 2. This Option (Check one) [X] is [ ] is not an Incentive Stock Option. ----------- -- -------------------------------- 3. Option Exercise Price: $ 7.70 per share. --------------------- 4. Date of Grant: June 24, 1998 _____________________ ------------- 5. Option Vesting Schedule: ----------------------- Check one: ( ) Options are exercisable with respect to all shares on or after the date hereof (X) Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares: No. of Shares Vesting Date ------------- ------------ 50% Date of Grant 16 2/3% First Anniversary of Date of Grant 16 2/3% Second Anniversary of Date of Grant 16 2/3% Third Anniversary of Date of Grant 6. Option Exercise Period: ---------------------- Check One: (X) All options expire and are void unless exercised on or before June 24, 2003. ( ) Options expire and are void unless exercised on or before the date indicated next to the number of shares: No. of Shares Expiration Date ------------- --------------- 7. Effect of Termination of Employment of Optionee (if different from that set ----------------------------------------------- forth in Sections 8, 9 and 10 of the Stock Option Agreement): SCHEDULE B NOTICE OF EXERCISE The undersigned hereby notifies The InterCept Group, Inc. (the "Company") of this election to exercise the undersigned's stock option to purchase ______________ shares of the Company's common stock, no par value (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated ________________. Accompanying this Notice is (1) a certified or a cashier's check in the amount of $__________ payable to the Company, and/or (2) __________ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof of $____________, such amounts being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 5.2 of the Agreement). IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____ day of ______________, _______. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] Name:_________________________________ Position (if other than Optionee): EX-10.3 3 STOCK OPTION AGREEMENT EXHIBIT 10.3 THE INTERCEPT GROUP, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this 24th day of June, 1998, by and between The InterCept Group, Inc., a Georgia corporation (the "Company"), and Donny R. Jackson (the "Optionee"). WHEREAS, effective as of November 12, 1996, the Board of Directors of the Company adopted a stock option plan known as the "The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that the Plan be approved by the Company's shareholders; and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows. 1. Incorporation of Plan. This option is granted pursuant to the --------------------- provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations and --------------- conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, no par value (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. 3. Purchase Price. The price per share to be paid by the Optionee for -------------- the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least -------------- the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Option Non-Transferable. No Option shall be transferable by an ----------------------- Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 6. Notice of Exercise of Option. This Option may be exercised by the ---------------------------- Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of shares subject to this Option, -------------------- the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. 2 8. Termination of Employment. ------------------------- (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its subsidiaries, other than a termination that is either (i) for Cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 90 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for Cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement (provided that, on the date which is three months after the date of retirement, the Options will become void and unexercisable unless on the date of retirement the Optionee enters into a noncompete agreement with The Intercept Group, Inc. and continues to comply with such noncompete agreement). This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its subsidiaries. 9. Disabled Optionee. In the event of termination of employment because ----------------- of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal representative) may exercise this Option, within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option, to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 3 10. Death of Optionee. Except as otherwise set forth in Schedule A with ----------------- respect to the rights of the Optionee upon termination of employment under Section 8(a) above, in the event of the Optionee's death while employed by the Company or any of its subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Date of Grant. This Option was granted by the Board of Directors of ------------- the Company on the date set forth in Schedule A (the "Date of Grant"). 12. Compliance with Regulatory Matters. The Optionee acknowledges that ---------------------------------- the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 12. 13. Restriction on Disposition of Shares. The shares purchased pursuant ------------------------------------ to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will, or the laws of descent and distribution, until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 14. Miscellaneous. ------------- (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. 4 (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Georgia. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company's seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written. THE INTERCEPT GROUP, INC. OPTIONEE By: /s/ John W. Collins /s/ Donny R. Jackson ------------------------------ ------------------------------ John W. Collins Donny R. Jackson Title: Chief Executive Officer ATTEST: /s/ Scott R. Meyerhoff - ----------------------------------- Secretary/Assistant Secretary 5 SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN THE INTERCEPT GROUP, INC. AND DONNY R. JACKSON Dated: June 24, 1998 ------------- 1. Number of Shares Subject to Option: 100,000 shares. ---------------------------------- 2. This Option (Check one) [X] is [_] is not an Incentive Stock Option. ----------- -- -------------------------------- 3. Option Exercise Price: $ 7.00 per share. --------------------- 4. Date of Grant: June 24, 1998 ___________ ------------- 5. Option Vesting Schedule: ----------------------- Check one: (_) Options are exercisable with respect to all shares on or after the date hereof (X) Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares: No. of Shares Vesting Date ------------- ------------ 50% Date of Grant 16 2/3% First Anniversary of Date of Grant 16 2/3% Second Anniversary of Date of Grant 16 2/3% Third Anniversary of Date of Grant 6. Option Exercise Period: ---------------------- Check One: (X) All options expire and are void unless exercised on or before June 24, 2008. (_) Options expire and are void unless exercised on or before the date indicated next to the number of shares: No. of Shares Expiration Date ------------- --------------- 7. Effect of Termination of Employment of Optionee (if different from that set ----------------------------------------------- forth in Sections 8, 9 and 10 of the Stock Option Agreement): SCHEDULE B NOTICE OF EXERCISE The undersigned hereby notifies The InterCept Group, Inc. (the "Company") of this election to exercise the undersigned's stock option to purchase ______________ shares of the Company's common stock, no par value (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated ________________. Accompanying this Notice is (1) a certified or a cashier's check in the amount of $__________ payable to the Company, and/or (2) __________ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof of $____________, such amounts being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 5.2 of the Agreement). IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____ day of ______________, _______. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] ---------------------------------- Name: Position (if other than Optionee): EX-10.4 4 STOCK OPTION AGREEMENT EXHIBIT 10.4 THE INTERCEPT GROUP, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this 24th day of June, 1998, by and between The InterCept Group, Inc., a Georgia corporation (the "Company"), and Scott R. Meyerhoff (the "Optionee"). WHEREAS, effective as of November 12, 1996, the Board of Directors of the Company adopted a stock option plan known as the "The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that the Plan be approved by the Company's shareholders; and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows. 1. Incorporation of Plan. This option is granted pursuant to the --------------------- provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations and --------------- conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, no par value (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. 3. Purchase Price. The price per share to be paid by the Optionee for -------------- the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least -------------- the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Option Non-Transferable. No Option shall be transferable by an ----------------------- Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 6. Notice of Exercise of Option. This Option may be exercised by the ---------------------------- Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of shares subject to this Option, -------------------- the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. 2 8. Termination of Employment. ------------------------- (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its subsidiaries, other than a termination that is either (i) for Cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 90 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for Cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement (provided that, on the date which is three months after the date of retirement, the Options will become void and unexercisable unless on the date of retirement the Optionee enters into a noncompete agreement with The Intercept Group, Inc. and continues to comply with such noncompete agreement). This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its subsidiaries. 9. Disabled Optionee. In the event of termination of employment because ----------------- of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal representative) may exercise this Option, within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option, to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 3 10. Death of Optionee. Except as otherwise set forth in Schedule A with ----------------- respect to the rights of the Optionee upon termination of employment under Section 8(a) above, in the event of the Optionee's death while employed by the Company or any of its subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Date of Grant. This Option was granted by the Board of Directors of ------------- the Company on the date set forth in Schedule A (the "Date of Grant"). 12. Compliance with Regulatory Matters. The Optionee acknowledges that ---------------------------------- the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 12. 13. Restriction on Disposition of Shares. The shares purchased pursuant ------------------------------------ to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will, or the laws of descent and distribution, until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 14. Miscellaneous. ------------- (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. 4 (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Georgia. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company's seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written. THE INTERCEPT GROUP, INC. OPTIONEE By: /s/ John W. Collins /s/ Scott R. Meyerhoff ---------------------- ---------------------- John W. Collins Scott R. Meyerhoff Title: Chief Executive Officer ATTEST: /s/ Marie Storey - ----------------------------- Secretary/Assistant Secretary 5 SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN THE INTERCEPT GROUP, INC. AND SCOTT R. MEYERHOFF Dated: June 24, 1998 ------------- 1. Number of Shares Subject to Option: 50,000 shares. ---------------------------------- 2. This Option (Check one) [X] is [_] is not an Incentive Stock Option. ----------- -- -------------------------------- 3. Option Exercise Price: $ 7.00 per share. --------------------- 4. Date of Grant: June 24, 1998 _______________ ------------- 5. Option Vesting Schedule: ----------------------- Check one: (_) Options are exercisable with respect to all shares on or after the date hereof (X) Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares: No. of Shares Vesting Date ------------- ------------ 50% Date of Grant 16 2/3% First Anniversary of Date of Grant 16 2/3% Second Anniversary of Date of Grant 16 2/3% Third Anniversary of Date of Grant 6. Option Exercise Period: ---------------------- Check One: (X) All options expire and are void unless exercised on or before June 24, 2008. (_) Options expire and are void unless exercised on or before the date indicated next to the number of shares: No. of Shares Expiration Date ------------- --------------- 7. Effect of Termination of Employment of Optionee (if different from that set ----------------------------------------------- forth in Sections 8, 9 and 10 of the Stock Option Agreement): SCHEDULE B NOTICE OF EXERCISE The undersigned hereby notifies The InterCept Group, Inc. (the "Company") of this election to exercise the undersigned's stock option to purchase _________ shares of the Company's common stock, no par value (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated ________________. Accompanying this Notice is (1) a certified or a cashier's check in the amount of $__________ payable to the Company, and/or (2) __________ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in The Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the date hereof of $____________, such amounts being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 5.2 of the Agreement). IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____ day of ______________, _______. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] ---------------------------------- Name: Position (if other than Optionee): EX-27.1 5 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-1998 DEC-31-1998 APR-01-1998 JAN-01-1998 JUN-30-1998 JUN-30-1998 6,943 6,943 0 0 2,749 2,749 157 157 86 86 10,029 10,029 6,822 6,822 (2,313) (2,313) 17,358 17,358 3,963 3,963 0 0 0 0 0 0 15,780 15,780 (2,695) (2,695) 17,358 17,358 6,649 12,906 6,649 12,906 2,740 5,374 5,629 11,080 132 292 0 0 132 292 842 1,484 349 607 0 0 0 0 0 0 0 0 485 861 0.07 0.12 0.07 0.12
EX-27.2 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 APR-01-1997 JAN-01-1997 JUN-30-1997 JUN-30-1997 842 842 0 0 2,420 2,420 157 157 167 167 4,542 4,542 4,570 4,570 2,009 2,009 10,762 10,762 3,605 3,605 0 0 0 0 400 400 0 0 7 7 10,762 10,762 5,422 10,538 5,422 10,538 2,379 4,653 5,280 10,178 165 328 0 0 165 328 (10) 71 77 121 0 0 0 0 0 0 0 0 (95) (66) (0.01) (0.01) (0.01) (0.01)
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