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As filed with the Securities and Exchange Commission on April 19, 2002
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARREKER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-1622836
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4055 VALLEY VIEW LANE, SUITE 1000
DALLAS, TEXAS 75244
(972) 458-1981
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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JOHN D. CARREKER, JR.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
4055 VALLEY VIEW LANE, SUITE 1000
DALLAS, TEXAS 75244
(972) 458-1981
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------
COPIES TO:
JOHN B. MCKNIGHT TOD V. MONGAN
LOCKE LIDDELL & SAPP LLP CARREKER CORPORATION
2200 ROSS AVENUE, SUITE 2200 4055 VALLEY VIEW LANE, SUITE 1000
DALLAS, TEXAS 75201-6776 DALLAS, TEXAS 75244
(214) 740-8000 (972) 458-1981
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: 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 interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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- ---------------------------- -------------------------- ------------------------------ -------------------------- -----------------
Title of Class of Amount to be Registered Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Aggregate Price per Share(1) Aggregate Offering Registration Fee (2)
Price (1)
- ---------------------------- -------------------------- ------------------------------ ------------------------ -----------------
Common Stock, par value
$0.01 par share 1,282,214 $9.48 $12,155,388 $1,118.30
- ---------------------------- -------------------------- ------------------------------ ------------------------ -----------------
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(1) ESTIMATED SOLELY FOR PURPOSES OF CALCULATING THE REGISTRATION FEE.
(2) PURSUANT TO RULE 457(c) OF THE RULES AND REGULATIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRATION FEE IS CALCULATED
BASED ON THE AVERAGE OF THE HIGH AND LOW PRICES FOR CARREKER'S COMMON
STOCK ON THE NASDAQ NATIONAL MARKET ON APRIL 16, 2002.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION DATED APRIL 19, 2002
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
1,282,214 SHARES
CARREKER CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-------------------------------
This prospectus relates to the offer and sale from time to time of up to an
aggregate of 1,282,214 shares of our common stock for the account of our
stockholders named in this prospectus. These stockholders acquired the shares
directly from us in a private placement completed on April 5, 2002. We will not
receive any of the proceeds from the sale of these shares, although we have paid
the expenses of preparing this prospectus and the related registration
statement.
The shares are being registered to permit the selling stockholders to sell
the shares from time to time in the public market or through privately
negotiated transactions or otherwise. The selling stockholders may sell this
common stock through ordinary brokerage transactions, directly to market makers
or through any other means described in the section entitled "Plan of
Distribution."
Our common stock is listed for trading on The NASDAQ National Market under
the trading symbol "CANI." On April 16, 2002, the last reported sale price of
our common stock on NASDAQ was $9.49 per share. The shares covered by this
prospectus may be sold at market prices prevailing at the time of sale or at
negotiated prices.
You should read this entire prospectus, including the documents
incorporated by reference, carefully before you invest.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 OF THIS
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
The date of this prospectus is April __, 2002.
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TABLE OF CONTENTS
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PAGE
SUMMARY...........................................................................................................1
CARREKER CORPORATION..............................................................................................1
RISK FACTORS......................................................................................................5
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS......................................................16
WHERE YOU CAN FIND MORE INFORMATION..............................................................................16
INCORPORTION OF INFORMATION WE FILE WITH THE COMMISSION..........................................................16
USE OF PROCEEDS..................................................................................................17
SELLING STOCKHOLDERS.............................................................................................17
PLAN OF DISTRIBUTION.............................................................................................18
LEGAL MATTERS....................................................................................................19
EXPERTS..........................................................................................................19
SEC POSITION ON INDEMNIFICATION................................................................................II-2
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS" AND OUR CONSOLIDATED FINANCIAL
STATEMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE MAKING AN
INVESTMENT DECISION.
CARREKER CORPORATION
GENERAL
We are a leading provider of integrated consulting and software solutions
that enable banks to increase their revenues, reduce their costs and enhance
their delivery of customer services. Our offerings, uniquely tailored to the
needs of the banking industry, fall into three groups:
o REVENUE ENHANCEMENT--increases banks' revenues through market
segmentation and improved customer pricing structures;
o GLOBAL TECHNOLOGY--assists banks in transitioning from paper to
electronic-based payment systems and minimizing payment processing
expenses, and optimizing inventory management of a bank's cash-on-hand,
including management of how much and where cash will be needed; and
o ENTERPRISE SOLUTIONS--integrates systems, combines operations and
improves workflows and internal operational processes.
We have over 20 years of experience in the banking industry. This
experience, combined with our professional staff and managers, many of whom are
former bankers and experts in complex bank operations, and our advanced
technological expertise, positions us to address effectively the challenges and
anticipate opportunities that banks face in today's increasingly competitive
environment. Our customer list includes over 200 financial institutions in the
United States, Canada, the United Kingdom, Ireland and Australia, including 70
of the largest 100 banks in the United States.
OUR INDUSTRY
The banking industry is one of the nation's largest industries, with
aggregate assets of approximately $7.2 trillion as of June 2000, according to
the Federal Deposit Insurance Corporation. While banks historically have focused
on reducing their operating expenses to remain competitive, they are
increasingly focused on developing new sources of revenue growth that capitalize
on their core competencies, automating operations to increase efficiencies and
outsourcing some banking functions to sustain market value growth. To this end,
banks are expending significant resources both internally and on solutions
purchased from external vendors, including outsourcing arrangements. Key
industry trends driving our market opportunity include:
CONSOLIDATION. The banking industry continues to experience substantial
consolidation. As banks grow by acquisition, they require the integration of
operational processes and technological applications that serve to increase
revenues from a larger customer base, achieve efficiencies of scale associated
with increased operating size and enhance customer service through a nationwide
presence and consequent broader geographic reach.
REGULATORY CHANGE. The banking industry is characterized by continuing
regulatory changes. Regulations in certain areas have been relaxed while
regulations in other areas have become more restrictive. Revisions to
regulations also have permitted interstate banking, which allows bank holding
companies to own banks in multiple states under a single charter and,
consequently, to capture the operating and structural efficiencies that such
expanded operations make possible. In addition, deregulation in certain sectors
of the banking industry has led to increased competition for banks from
insurance companies, brokerage houses and other financial institutions in areas
of business which were previously the exclusive domain of banks. These changes
have presented banks with both challenges and opportunities to improve their
operations and achieve competitive advantages.
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EVOLVING TECHNOLOGIES. Rapid technological innovation has increased
customers' expectations and, as a result, has created new means for banks to
gain competitive advantages. Increasingly, customers are requiring that their
banks provide a broader scope of banking services quickly and easily through
automated teller machines, or ATMs, by telephone or over the Internet.
Additionally, technological development has provided banks with the potential
for numerous operational enhancements. For instance, technology currently allows
for the electronic storage of images of documents, including checks, as well as
the ability to recall and use that data quickly and simultaneously at multiple
locations. Technology also currently enables banks to minimize their non-earning
assets by reducing their reserve requirements. Furthermore, technological
developments are fueling industry-wide advancements, such as the conversion from
a paper to an electronic-based check clearing process. The electronic processing
and clearing of checks has been gaining increasing acceptance as an efficient
and viable solution for eliminating the time-consuming and expensive movement of
paper.
EMERGENCE OF THE INTERNET. The Internet increasingly is being used as a
medium for financial transactions and services, including bill payment and
presentment processing, cash management, payroll and other services for
commercial customers. One area of particular interest to banks is the impact
that the rapid growth of business to business, or B2B, e-commerce is having on
their customers. As the trend towards B2B e-commerce accelerates, we believe
that banks, as trusted intermediaries, are well-positioned to electronically
process, transmit, record, archive, provide customer service and mitigate the
risks associated with their customers' B2B transactions.
In order to compete effectively in this dynamic environment, banks often
must identify effective and innovative solutions to address their unique
requirements and re-design, and in some cases completely replace, their
operational systems. Effective development and implementation of these solutions
is technically challenging, time-consuming and expensive, and banks often are
faced with a choice between building internal, custom solutions or purchasing
third party offerings. The development of internal solutions necessarily
involves either re-deploying already stretched resources or acquiring new
resources that increase fixed costs, which typically results in isolated,
departmental solutions. In addition, traditional third party solutions typically
are not designed to the banking industry's unique requirements and are often
inflexible, requiring banks to conform their work processes to available
systems. The situation is exacerbated by the fact that effective solutions
cannot be developed in isolation, given the increasingly interdependent nature
of bank-to-bank operations. Traditional third party solutions are also limited
as some offer analysis and consultation regarding a bank's operations, while
others only provide specific software applications, resulting in a piecemeal
approach to solutions development. By using multiple providers, banks face
increased costs, more complex implementation and delayed realization of
benefits. As a result, banks are in need of a solution provider, specializing in
the banking industry, to provide integrated consulting services and
technological applications.
OUR SOLUTION
Our products and services are designed to address the unique requirements of
the banking industry. These solutions combine consulting services and
technological applications to enable banks to identify and implement e-finance
solutions, increase revenues, reduce costs and enhance delivery of customer
services. The key characteristics of our solutions include:
INTEGRATED AND CONSULTATIVE APPROACH. We combine our consulting expertise
and proprietary technology to serve as a single-source provider of
fully-integrated solutions that address the critical needs of banks. This
approach sets us apart from providers of partial solutions that require banks to
seek costly additional expertise or implementation services to attain a complete
solution. By offering integrated solutions, we achieve more rapid identification
and implementation of solutions than would a piecemeal approach.
COMPREHENSIVE DELIVERY MODEL. We are able to deliver our solutions in a
variety of ways to meet our clients' needs. These delivery methods include
traditional software licensing and associated consulting, third party
Web-hosting and licensing software for use by multiple banks in a shared
operating environment. Our ability to deliver products and services in a variety
of methods allows us to provide solutions to a wider range of clients.
ADVANCED TECHNOLOGY. We incorporate the latest technological developments,
including web-enabled systems and protocols, to produce software applications
that can be expanded with minimal effort, are functional and are able to
interface with a bank's current or legacy systems. In addition, our current and
past participation in inter-bank
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organizations, such as the Electronic Check Clearinghouse Organization, enables
us to stay at the forefront of technological innovations in the industry.
COMPELLING BUSINESS PROPOSITION FOR CLIENTS. Our solutions reduce investment
risk for our clients by increasing revenues or reducing costs in a relatively
short period of time. In addition, in appropriate circumstances, we value-price
certain of our solutions, whereby we receive a percentage of the amount of
additional revenues or reduced costs achieved by the customer. These
arrangements allow banks to fund their investments in our solutions with the
benefits derived from their implementation.
BROAD ARRAY OF SERVICES AND TECHNOLOGY. We believe that our offerings are
the broadest in the banking industry, enabling us to provide a bank with an
expert solution targeted to a narrow area of a bank's operations or to address a
broad range of a bank's operational requirements. We believe that offering a
wide variety of solutions, from revenue enhancement to cost reduction to
improved delivery of customer services, enhances the value we offer to our
customers. In addition, our solutions embrace critical aspects of e-finance,
including mitigation of fraud, electronic processing of paper-based payments,
archiving of historical transactions and research and adjustments relating to
each of these functions. Our complementary groups of products and services, when
offered together, are able to deliver comprehensive solutions to banks. We
believe we are ideally positioned to assist banks in the transformation of their
financial transaction processing expertise into profitable revenue opportunities
with their commercial customers.
OUR STRATEGY
Our objective is to advance our position as a leading provider of integrated
consulting and software solutions to banks. Key elements of our strategy
include:
EXPAND CUSTOMER BASE. We seek to increase our customer base by building on
our strong relationships with larger banks to market our solutions to their
peers, selected smaller banks and other financial institutions. We also have
partnered with several service providers or resellers, including Fiserv, Inc.
and Metavante Corporation, to establish alternate marketing and distribution
channels of certain of our solutions through those companies to smaller banks.
Additionally, we strive to capitalize on our position as a leading provider of
e-finance solutions to the banking industry in the United States to continue to
pursue international customers, particularly banks elsewhere in North America,
Europe, South Africa and Australia. When regulatory change or technological
breakthroughs create a significant economic opportunity, the quality and breadth
of our customer base allows us to rapidly penetrate the industry with valuable
solutions.
CROSS-MARKET OUR PRODUCTS AND SERVICES TO OUR EXISTING CUSTOMER BASE. Once
customers contract for one or more of our products or services, we strive to
develop and expand our relationships by cross-marketing other products and
services to those customers. Over the course of these relationships, we are able
to increase revenues from our existing customer base with minimal additional
sales expense by providing multiple products and services. These relationships
typically do not involve the time and customer acquisition costs associated with
the development of new relationships.
USE OF VALUE-PRICING AND RECURRING REVENUE ARRANGEMENTS. We intend to
continue to share in the value that our solutions create for customers by
expanding the use of pricing methods and negotiated arrangements to generate
high-margin and recurring revenues. We plan to continue to use value-pricing for
solutions in appropriate circumstances where increased revenues or reduced costs
resulting from such solutions can be readily projected and measured. In
addition, we intend to expand our practice of structuring license fees for
software-based solutions according to the usage of the software, which is
intended to transform a one-time license fee into a recurring revenue stream.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. We strive to form alliances
with selected partners whose solutions and expertise, when combined with ours,
provide incremental, value-added benefits to banks and their customers. In
addition to such alliances, we also seek to make selective acquisitions of
complementary businesses that would enable us to expand our line of products and
services, grow our customer base or pursue new business opportunities.
ENHANCE BRAND AWARENESS. We plan to continue to build our brand awareness
and reputation to expand our customer base and attract new strategic alliances,
acquisition candidates and talented consultants, managers and
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employees. We promote the Carreker brand through our Web site, direct mail,
"user" conferences conducted exclusively for our customers, participation in
industry conferences and trade shows, publication of "white papers" related to
specific aspects of our services, customer newsletters and informational
listings in trade journals.
OUR ADDRESS
Our principal executive offices are located at 4055 Valley View Lane, Suite
1000, Dallas, Texas 75244, and our telephone number at that address is (972)
458-1981. Our website is located at www.carreker.com. Information contained on
our website is not part of this prospectus.
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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 AND ALL THE OTHER INFORMATION
CONTAINED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE INVESTING IN
OUR COMMON STOCK. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY
OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
OUR PERFORMANCE DEPENDS ON THE BANKING INDUSTRY, AND ANY CHANGE IN THE BANKING
INDUSTRY'S DEMAND FOR OUR SOLUTIONS COULD REDUCE OUR REVENUES AND HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
We derive substantially all of our revenues from solutions provided to banks
and other participants in the banking industry. Accordingly, our future success
significantly depends upon this industry's continued demand for our solutions.
We believe that an important factor in our growth has been substantial changes
in the banking industry in recent years, as manifested by continuing
consolidation, regulatory change, technological innovation, the emergence of the
Internet and other trends. If this environment of change were to slow, we could
experience reduced demand for our solutions. In addition, the banking industry
is sensitive to changes in economic conditions and is highly susceptible to
unforeseen events, such as domestic or foreign political instability, recession,
inflation or other adverse occurrences that may result in a significant decline
in the utilization of bank services. Furthermore, due to concerns regarding data
security and other factors, banks have been and may in the future be hesitant to
adopt electronic solutions, which can adversely affect the demand for our
solutions. Any event that results in decreased consumer or corporate use of bank
services, or increased pressures on banks towards the in-house development and
implementation of revenue enhancement or cost reduction measures, could have a
material adverse effect on our business, financial condition and results of
operations.
A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR BUSINESS,
AND THE LOSS OF ANY ONE OF THEM COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND
FINANCIAL CONDITION.
Our five largest customers accounted for approximately 30%, 49% and 58% of
total revenues during the fiscal years ended January 31, 2002, 2001 and 2000,
respectively. Wells Fargo & Company and U.S. BANK, N.A. accounted for
approximately 9% and 7% of total revenues, respectively, during the year ended
January 31, 2002, and U.S. BANK, N.A. accounted for approximately 27% of total
revenues during the year ended January 31, 2001. Our significant customers have
changed from period to period. However, a significant portion of our current
revenues is derived from customers who were major customers in prior years, and
we are therefore dependent to a significant degree on our ability to maintain
our existing relationships with these customers. There can be no assurance that
we will be successful in maintaining our existing customer relationships or in
securing additional customers, and there can be no assurance that we can retain
or increase the volume of business that we do with such customers. In
particular, continuing consolidation within the banking industry may result in
the loss of one or more significant customers. Any failure by us to retain one
or more of our large customers, maintain or increase the volume of business done
for such customers or establish profitable relationships with additional
customers could have a material adverse effect on our business, financial
condition and results of operations.
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
In June 2001, we completed a revolving credit facility and borrowed on the
line to facilitate the purchase of Check Solutions Company. Our indebtedness
could have important consequences for our business. For example, it could:
o Increase our vulnerability to general adverse economic and
industry conditions;
o Limit our ability to obtain additional financing;
o Require the dedication of a substantial portion of our cash
flows from operations to the payment of principal of, and
interest on, our indebtedness, thereby reducing the
availability of capital to fund our
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growth strategy, working capital, capital expenditures,
acquisitions and other general corporate purposes; and
o Limit our flexibility in planning for, or reacting to, changes
in our business and the industry.
Further, effective October 2001 we amended the terms of the revolving
credit facility to reflect the impact of a decline in our recent operating
results. The amended terms included adjustments to certain financial covenants
and also a temporary increase in the interest rates applicable to the
indebtedness outstanding under the credit facility. While we believe that we
will meet the amended financial covenant targets, there can be no assurance that
we will be able to do so and, if we are not able to meet these targets, what
actions our lenders might take.
MANY FACTORS, SOME BEYOND OUR CONTROL, COULD CAUSE FLUCTUATIONS IN OUR OPERATING
RESULTS, WHICH COULD RESULT IN A LOWER MARKET PRICE FOR OUR COMMON STOCK.
We have experienced in the past, and expect to experience in the future,
significant fluctuations in quarterly operating results. Such fluctuations may
be caused by many factors, including but not limited to:
o the extent and timing of revenues recognized, particularly in
light of our historical tendency to have a disproportionately
large portion of our contract signings near the end of each
quarter;
o increases in costs beyond anticipated levels, especially in
the context of costs incurred under value-pricing contracts or
fluctuations in software royalty expense due to a change in
future product mix;
o the degree of customer acceptance of new solutions;
o the introduction of new or enhanced solutions by us or our
competitors;
o our mix of revenues derived from consulting and management
service fees on the one hand, and software-related fees on the
other;
o customer budget cycles and priorities and purchasing cycles;
o competitive conditions in the industry;
o seasonal factors;
o timing of consolidation decisions by customers;
o the extent of customers' international expansion; and
o general economic conditions.
Due to the foregoing factors, many of which are beyond our control, our
quarterly revenues and operating results are difficult to forecast. It is
possible that our future quarterly results of operations from time to time will
not meet the expectations of securities analysts or investors, which could have
a material adverse effect on the market price of our common stock.
THE NUMBER OF SHARES OF OUR STOCK ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT
THE PRICE OF OUR COMMON STOCK.
After giving effect to the private placement of shares that we recently
completed, the resale of which shares is covered by this prospectus, as of April
5, 2002 we had outstanding 23,234,742 shares of common stock. We are not certain
whether the private placement investors intend to sell the shares of our common
stock that they purchased, but for so long as the registration statement of
which this prospectus forms a part remains effective, these investors will be
free to resell their shares. In addition, except for approximately 3,300,000
shares of our common stock held by our affiliates as of April 5, 2002, as
defined in Rule 144 under the Securities Act of 1933, all of our remaining
outstanding
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shares of common stock are freely tradable without restriction or registration
under the Securities Act. As of April 5, 2002, we also had outstanding options
entitling their holders to acquire an aggregate of 5,121,072 shares of our
common stock, of which options covering 1,609,089 shares were exercisable. The
shares issued upon the exercise of these options may be resold immediately. The
market price of our common stock could drop due to sales of a large number of
shares of our common stock by our new investors or any other stockholders, or
due to the perception that these sales could occur.
OUR USE OF FIXED-PRICE AND VALUE-PRICED ARRANGEMENTS FOR CUSTOMER PROJECTS COULD
REDUCE OUR REVENUES AND NET INCOME, WHICH COULD RESULT IN DECREASED OPERATING
MARGINS OR LOSSES.
We primarily price our solutions on a time-and-materials, fixed-price or
value-priced basis. In connection with fixed-price projects, we occasionally
incur costs in excess of our projections and as a result achieve lower margins
than expected or may incur losses with respect to projects. In connection with
value-priced projects, we are paid based on an agreed percentage of either
projected or actual increased revenues or decreased costs derived by the bank
generally over a period of up to twelve months following the implementation of
our solutions. We typically must first commit time and resources to develop such
projections before a bank will commit to purchase our solutions and therefore
assume the risk of making these commitments and incurring related expenses with
no assurance that the bank will purchase the solutions. In addition, from time
to time, a customer will not achieve projected revenues or savings because it
belatedly decides not to implement our solutions or the solutions do not produce
the projected results, in which case we may not be able to collect any or all of
the fees provided for in the customer's contract. The nature of our fixed-priced
and value-priced arrangements can result in decreased operating margins or
losses and could materially and adversely affect our business, financial
condition and results of operations.
WE DO NOT TYPICALLY ENTER INTO LONG-TERM AGREEMENTS WITH OUR CUSTOMERS, WHICH
MAKES IT MORE DIFFICULT TO PLAN AND EFFICIENTLY ALLOCATE OUR RESOURCES, AND ANY
DEFERRAL, MODIFICATION OR CANCELLATION OF A CUSTOMER PROJECT CAN ADVERSELY
AFFECT OUR OPERATING RESULTS.
We typically provide services to customers on a project-by-project basis
without long-term agreements. When a customer defers, modifies or cancels a
project, we must be able to rapidly re-deploy our personnel to other projects in
order to minimize the under-utilization of our personnel and the resulting
adverse impact on operating results. In addition, our operating expenses are
relatively fixed and cannot be reduced on short notice to compensate for
unanticipated variations in the number or size of projects in progress. As a
result, any delay, modification or cancellation of a customer project, or any
disruption of our business relationships with any of our significant customers
or with a number of smaller customers could have a material adverse effect on
our business, financial condition and results of operations.
WE HAVE EXPERIENCED RAPID GROWTH IN OUR BUSINESS, AND THERE CAN BE NO ASSURANCE
THAT WE WILL BE ABLE TO MAINTAIN THIS GROWTH RATE. IF WE ARE ABLE TO MAINTAIN
IT, OUR OPERATIONAL AND FINANCIAL RESOURCES COULD BE STRAINED, WHICH COULD CAUSE
US TO LOSE CUSTOMERS, PREVENT US FROM OBTAINING NEW CUSTOMERS AND INCREASE OUR
OPERATING EXPENSES.
We have experienced significant growth in recent years, but there can be no
assurance that we will be able to maintain this growth rate. If we are not
successful in maintaining this growth rate, our business could be negatively
affected. To be successful in maintaining our growth rate, we anticipate that
additional expansion may be required in order to address potential market
opportunities. Any further growth would place further demands on our management,
operational capacity and financial resources. We anticipate that we will need to
recruit large numbers of qualified personnel in all areas of our operations,
including management, sales, marketing, delivery and software development. There
can be no assurance that we will be effective in attracting and retaining
additional qualified personnel, expanding our operational capacity or otherwise
managing growth. In addition, there can be no assurance that our systems,
procedures or controls will be adequate to support any expansion of our
operations. As a result of acquisitions and continued growth, the needs of our
management information systems are expected to expand and change, which could
result in the implementation of new or modified management information systems
and procedures. This may necessitate additional training of existing personnel
or the hiring of additional personnel. If we cannot implement the new, or
modified, management information systems in a timely manner, our ability to
manage growth effectively or generate timely operating and financial reports
could be materially and adversely affected. The failure to manage growth
effectively could have a material adverse effect on our business, financial
condition and results of operations.
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OUR FUTURE SUCCESS SIGNIFICANTLY DEPENDS ON THE EXPERIENCE OF OUR KEY PERSONNEL,
AND THE LOSS OF ANY ONE OF THEM COULD IMPAIR OUR ABILITY TO DO BUSINESS.
Our future success depends, in significant part, upon the continued services
of John D. Carreker, Jr., our Chairman of the Board and Chief Executive Officer,
as well as other executive officers and key personnel. The loss of services of
Mr. Carreker or one or more of our other executive officers or key employees
could have a material adverse effect on our business, financial condition and
results of operations, and there can be no assurance that we will be able to
retain our executive officers or key personnel. We do not maintain key-man life
insurance covering any of our executive officers or other key personnel.
OUR SOFTWARE AND SOLUTIONS MAY CONTAIN DEFECTS OR ERRORS, WHICH COULD ADVERSELY
AFFECT OUR BUSINESS AND SUBJECT US TO LIABILITY CLAIMS.
Our solutions at times in the past have been, and in the future may be,
incompatible with the operating environments of our customers or inappropriate
to address their needs, resulting in additional costs being incurred by us in
rendering services to our customers. Further, like other software products, our
software occasionally has contained undetected errors, or "bugs," which become
apparent through use of the software. Because our new or enhanced software
initially is installed at a limited number of sites and operated by a limited
number of users, such errors and/or incompatibilities may not be detected for a
number of months after delivery of the software. The foregoing errors in the
past have resulted in the deployment of our personnel and funds to cure errors,
occasionally resulting in cost overruns and delays in solutions development and
enhancement. Moreover, solutions with substantial errors could be rejected by or
result in damages to customers, which could have a material adverse effect on
our business, financial condition and results of operations. There can be no
assurance that errors or defects will not be discovered in the future,
potentially causing delays in solution implementation or requiring design
modifications that could adversely affect our business, financial condition and
results of operations. It is also possible that errors or defects in our
solutions could give rise to liability claims against us.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW TECHNOLOGIES AND
SERVICES TO MEET THE CHANGING NEEDS OF OUR CURRENT AND FUTURE CUSTOMERS, AND OUR
INABILITY TO INTRODUCE NEW SOLUTIONS COULD NEGATIVELY IMPACT OUR ABILITY TO DO
BUSINESS AND MAINTAIN OUR FINANCIAL CONDITION.
We regularly undertake new projects and initiatives in order to meet the
changing needs of our customers. In so doing, we invest substantial resources
with no assurance of their ultimate success. We believe our future success will
depend, in part, upon our ability to:
o enhance our existing solutions;
o design and introduce new solutions that address the
increasingly sophisticated and varied needs of our current and
prospective customers;
o develop leading technology; and
o respond to technological advances and emerging industry
standards on a timely and cost-effective basis.
There can be no assurance that future advances in technology will be
beneficial to, or compatible with, our business or that we will be able to
incorporate such advances into our business. In addition, keeping abreast of
technological advances in our business may require substantial expenditures and
lead-time. There can be no assurance that we will be successful in using new
technologies, adapting our solutions to emerging industry standards or
developing, introducing and marketing solution enhancements or new solutions, or
that we will not experience difficulties that could delay or prevent the
successful development, introduction or marketing of these solutions. If we
incur increased costs or are unable, for technical or other reasons, to develop
and introduce new solutions or enhancements of existing solutions in a timely
manner in response to changing market conditions or customer requirements, our
business, financial condition and results of operations could be materially and
adversely affected.
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OUR FOCUS ON PROVIDING AN APPLICATION SERVICE PROVIDER, OR ASP, SOFTWARE HOSTING
MODEL SUBJECTS US TO RISKS ASSOCIATED WITH AN INCREASED DEPENDENCE ON
THIRD-PARTY PROVIDERS AND THE INTERNET.
Our ASP software hosting model gives rise to numerous risks, particularly
risks related to our heightened dependence on third party providers and the
Internet. The success of our ASP software hosting model partially depends on the
performance of the third party application service provider with whom we have
contracted to provide software hosting services. In addition, we are also
dependent on the Internet as a reliable network backbone capable of supporting
our customers' use of our software. There can be no assurance that our solutions
that rely on Internet access will be protected against disruptions, delays or
losses due to technical difficulties, natural causes or security breaches. These
problems may adversely affect the success of our ASP software hosting model and
could negatively impact our operating results. We may also be subject to any
governmental adoption of regulations that charge Internet access fees or impose
taxes on subscriptions. Currently, there are few laws or regulations that
specifically regulate the Internet; however, such laws and regulations, if
adopted, may increase our operating expenses.
THERE IS INTENSE COMPETITION IN OUR INDUSTRY FOR QUALIFIED BANKING PROFESSIONALS
AND TECHNICAL AND MANAGERIAL PERSONNEL, AND OUR FAILURE TO ATTRACT AND RETAIN
THESE PEOPLE COULD AFFECT OUR ABILITY TO RESPOND TO BANKING AND TECHNOLOGICAL
CHANGE AND TO INCREASE OUR REVENUES.
Our future success depends upon our continuing ability to attract and retain
highly qualified banking, technical and managerial personnel. Competition for
such personnel is intense, and we at times have experienced difficulties in
attracting the desired number of such individuals. Further, our employees have
left us to work in-house with our customers and with our competitors. There can
be no assurance that we will be able to attract or retain a sufficient number of
highly qualified employees or independent contractors in the future. If we are
unable to attract personnel in key positions, our business, financial condition
and results of operations could be materially and adversely affected.
WE FACE INCREASED COMPETITION THAT COULD RESULT IN PRICE REDUCTIONS, FEWER
CUSTOMER ORDERS AND LOSS OF MARKET SHARE, ANY OF WHICH COULD MATERIALLY AND
ADVERSELY AFFECT OUR BUSINESS.
We compete with third-party providers of services and software products to
the banking industry that include consulting firms and software companies. Many
of our competitors have significantly greater financial, technical, marketing
and other resources than we do. Our competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products than we can. Also, several of our current and potential competitors
have greater name recognition and larger customer bases that such competitors
could leverage to increase market share at our expense. We expect to face
increased competition as other established and emerging companies enter the
banking services market. Increased competition could result in price reductions,
fewer customer orders and loss of market share, any of which could materially
and adversely affect our business, financial condition and results of
operations. There can be no assurance that we will be able to compete
successfully against current or future competitors, and the failure to do so
would have a material adverse effect upon our business, financial condition and
results of operations.
In addition to competing with a variety of third parties, we experience
competition from our customers and potential customers. From time to time, these
potential customers develop, implement and maintain their own services and
applications for revenue enhancements, cost reductions and/or enhanced customer
services, rather than purchasing services and related products from third
parties. There can be no assurance that these customers or other potential
customers will perceive sufficient value in our solutions to justify investing
in them. In addition, customers or potential customers could enter into
strategic relationships with one or more of our competitors to develop, market
and sell competing services or products.
WE MAY BE UNABLE TO FULLY BENEFIT FROM OUR STRATEGIC ALLIANCES AND ACQUISITIONS,
WHICH COULD NEGATIVELY AFFECT OUR BUSINESS AND HINDER OUR ABILITY TO REALIZE
EXPECTED BENEFITS.
We regularly evaluate opportunities and may enter into strategic alliances,
or make acquisitions of other businesses, products or technologies. Risks
inherent in alliances may include, among others:
o substantial investment of our resources in the alliance;
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o inability to realize the intended benefits of an alliance;
o increased reliance on third parties;
o increased payment of third-party licensing fees or royalties
for the incorporation of third-party technology into our
solutions; and
o inadvertent transfer of our proprietary technology to
strategic "partners."
Acquisitions involve numerous risks, including:
o difficulties in identifying suitable acquisition candidates;
o competition for acquisitions with other companies, many of
which have substantially greater resources than we do;
o failure to close after expending time and resources;
o inability to obtain sufficient financing on acceptable terms
to fund acquisitions;
o requirement that the acquisition may be funded through
additional debt obligations which therefore would increase
interest expense;
o volatility of stock price due to one-time charges to earnings;
o difficulties in assimilating acquired operations and products
into our business;
o maintaining uniform standards, controls, procedures and
policies;
o potential loss of customers and strategic partners of acquired
companies;
o potential loss of key employees of acquired companies;
o diversion of management's attention from other business
concerns;
o amortization of acquired intangible assets; and
o failure of acquired businesses, products or technologies to
perform as expected or to achieve expected levels of revenues,
profitability or productivity.
There can be no assurance that we will be successful in identifying and
entering into strategic alliances or making acquisitions, if at all, and any
inability to do so could have a material adverse effect on our business,
financial condition and results of operations.
We expect that future acquisitions, if any, could provide for consideration
to be paid in cash, shares of our common stock, or a combination of cash and our
common stock. If the consideration for an acquisition transaction is paid in
common stock, this could further dilute existing stockholders. Any impairment
or amortization of a significant amount of goodwill or other assets resulting
from an acquisition transaction could materially impair our operating results
and financial condition.
OUR INABILITY TO PROTECT ADEQUATELY OUR PROPRIETARY TECHNOLOGY OR TO PREVENT ITS
UNAUTHORIZED USE COULD DIVERT OUR FINANCIAL RESOURCES AND CAUSE SIGNIFICANT
EXPENDITURES, WHICH COULD MATERIALLY HARM OUR BUSINESS.
Our success significantly depends upon our proprietary technology and
information. We rely upon a combination of patent, copyright, trademark and
trade secret laws and confidentiality procedures to protect our proprietary
technology and information. We have a number of issued patents and registered
trademarks. There can be no assurance
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that the steps we have taken to protect our services and products are adequate
to prevent misappropriation of our technology or that our competitors
independently will not develop technologies that are substantially equivalent or
superior to our technology. Furthermore, it is very difficult to police
unauthorized use of our software due to the nature of software. Any such
misappropriation of our proprietary technology or information or the development
of competitive technologies could have a material adverse effect on our
business, financial condition and results of operations.
In addition, the laws of some countries in which our software is distributed
do not protect our intellectual property rights to the same extent as the laws
of the United States. For example, the laws of a number of foreign jurisdictions
in which we license our software protect trademarks solely on the basis of the
first to register. We currently do not possess any trademark registrations in
foreign jurisdictions, although we do have copyright protection of our software
under the provisions of various international conventions. Accordingly,
intellectual property protection of our services and products may be ineffective
in many foreign countries. In summary, there can be no assurance that the
protection provided by the laws of the United States or such foreign
jurisdictions will be sufficient to protect our proprietary technology or
information.
INFRINGEMENT CLAIMS BY THIRD PARTIES CAN SUBJECT US TO SUBSTANTIAL LIABILITY AND
EXPENSES AND CAN IMPAIR OUR ABILITY TO SELL OUR SOLUTIONS.
We may need to litigate claims against third parties to enforce our
intellectual property rights, protect our trade secrets, determine the validity
and scope of the proprietary rights of others or defend against claims of
infringement or invalidity. We may be required to incur significant costs in
reaching a resolution to the asserted claims, or any other claims that may be
asserted against us. There can be no assurance that the resolution of a claim
would not require us to pay damages or obtain a license to the third party's
intellectual property rights in order to continue licensing our software as
currently offered or, if such a third-party license is required, that it would
be available on terms acceptable to us. The resolution of claims may also divert
our management resources. If we cannot adequately protect our proprietary
rights, it could have a material adverse effect on our business, operating
results and financial condition.
WE DEPEND ON THIRD PARTIES FOR TECHNOLOGY LICENSES, AND IF WE CANNOT OBTAIN
SATISFACTORY LICENSES OUR BUSINESS COULD SUFFER.
Some technology used in our current software and software in development
includes technology licensed from third parties. These licenses generally
require us to pay royalties and to fulfill confidentiality obligations. The
termination of any such licenses, or the failure of the third party licensors to
adequately maintain or update their products, could result in delays in our
ability to implement solutions or in delays in the introduction of our new or
enhanced solutions while we search for similar technology from alternative
sources, if any, which could prove costly. Any need to implement alternative
technology could prove to be very expensive for us, and any delay in solution
implementation could result in a material adverse effect on the business,
financial condition and results of our operations. It may also be necessary or
desirable in the future to obtain additional licenses for use of third-party
products in our solutions, and there can be no assurance that we will be able to
do so on commercially reasonable terms, if at all.
WE MAY FACE LIABILITY CLAIMS RELATED TO THE USE OF OUR SOLUTIONS, INCLUDING
THOSE WHICH ARISE OUT OF THE USE OF OUR ASP SOFTWARE HOSTING MODEL, AND THE
DEFENSE OF THESE CLAIMS COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS, RESULTS OF
OPERATIONS OR FINANCIAL CONDITION.
As a result of our provision of solutions that address critical functions of
bank operations, we are exposed to possible liability claims from banks and
their customers. Although we have not experienced any material liability claims
to date, there can be no assurance that we will not become subject to such
claims in the future. A liability claim against us could have a material adverse
effect on our business, financial condition and results of operations.
Our ASP software hosting model requires the storage and transmission of
sensitive business information of our customers electronically over the
Internet. The difficulty of securely storing confidential information
electronically has been a significant issue in conducting electronic commerce
and in carrying out banking operations over the Internet. Our ASP software
hosting model requires us to spend significant capital and other resources to
protect against the threat of security breaches or computer viruses, or to
alleviate problems caused by breaches or viruses. To the extent
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that our activities or the activities of our customers require the storage and
transmission of confidential information, such as banking records or credit
information, security breaches and viruses could expose us to claims, litigation
or other possible liabilities. Our inability to prevent security breaches or
computer viruses could also cause our customers to lose confidence in our
solutions and terminate their relationships with us.
WE ARE SUBJECT TO CLAIMS AND LEGAL PROCEEDINGS FROM TIME TO TIME THAT COULD HAVE
A MATERIAL ADVERSE EFFECT ON US.
We are subject to third party claims and are named as a defendant in legal
proceedings from time to time. We may be damaged as a result of an asserted
claim, and we may be required to incur substantial costs in reaching a
resolution of a claim. Any such claim may also divert our management resources.
A significant judgment against us in connection with any legal proceedings could
have a material adverse effect on our business, financial condition and results
of operations. Although we do not believe that the costs or liability that may
result from the resolution of currently pending claims or legal proceedings
against us will be material, there can be no assurance in this regard.
OUR STOCK PRICE HAS FLUCTUATED SIGNIFICANTLY AND, IN THE EVENT OF A DOWNTURN IN
OUR STOCK PRICE, WE COULD FACE SECURITIES CLASS ACTION LITIGATION.
There has been significant volatility in the market price of our common
stock, as well as in the market price of securities of many companies in the
technology and emerging growth sectors. Factors which may have a significant
impact on the market price of our common stock include the following:
o quarterly variations in our results of operations or results
of operations of our competitors;
o changes in earnings estimates or recommendations by securities
analysts;
o developments in our industry and in the banking industry;
o general market and economic conditions; and
o other factors, including factors unrelated to our operating
performance or that of our competitors.
We believe that factors such as quarterly fluctuations in financial results
or announcements by us, our competitors, banks and other bank industry
participants could cause the market price of our common stock to fluctuate
substantially. In addition, the stock market may experience extreme price and
volume fluctuations that often are unrelated to the operating performance of
specific companies. Market fluctuations or perceptions regarding the banking
industry and general economic or political conditions may adversely affect the
market price of the common stock. In the past, following declines in the market
price of a company's securities, securities class-action litigation often has
been instituted against that company. Litigation of this type, if instituted
against us, could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on our
business, financial condition and results of operations.
WE FACE RISKS IN CONNECTION WITH THE EXPANSION OF OUR INTERNATIONAL OPERATIONS,
WHICH COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
We provide solutions to banks outside the United States, and a key component
of our growth strategy is to broaden our international operations. Our
international operations are subject to risks inherent in the conduct of
international business, including:
o unexpected changes in regulatory requirements;
o fluctuations in exchange rates and devaluations of foreign
currencies;
o export license requirements;
o tariffs and other economic barriers to free trade;
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o restrictions on the export of critical technology;
o difficulties in staffing international projects;
o political and economic instability;
o limited intellectual property protection;
o longer accounts receivable cycles and difficulties in
collecting payments; and
o potentially adverse tax and labor consequences.
Some of our international sales are denominated in local currencies, and the
impact of future exchange rate fluctuations on our financial condition and
results of operations cannot be accurately predicted. There can be no assurance
that fluctuations in currency exchange rates in the future will not have a
material adverse effect on revenue from international sales and thus our
business, financial condition and results of operations.
OUR USE OF INDEPENDENT CONTRACTORS EXPOSES US TO LEGAL AND TAX RISKS WHICH, IF
DETERMINED AGAINST US, COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL
CONDITION.
We often provide solutions through independent contractors. As we do not
treat these individuals as our employees, we do not pay federal or state
employment taxes or withhold federal or state employment or income taxes from
compensation paid to such persons. We also do not consider these persons
eligible for coverage or benefits provided under our employee benefit plans or
include these persons when evaluating the compliance of our employee benefit
plans with the requirements of the Internal Revenue Code. Additionally, we do
not treat such persons as employees for purposes of worker's compensation, labor
and employment, or other legal purposes. From time to time, we may face legal
challenges to the appropriateness of the characterization of these individuals
as independent contractors from governmental agencies, the independent
contractors themselves or some other person or entity. The determination of such
a legal challenge generally will be determined on a case-by-case basis in view
of the particular facts of each case. The fact specific nature of this
determination raises the risk that from time to time an individual that we have
characterized as an independent contractor will be reclassified as an employee
for these or other legal purposes.
In the event persons engaged by us as independent contractors are determined
to be employees by the Internal Revenue Service or any applicable taxing
authority, we would be required to pay applicable federal and state employment
taxes and withhold income taxes with respect to these individuals and could
become liable for amounts required to be paid or withheld in prior periods and
for costs, penalties and interest thereon. In addition, we could be required to
include these individuals in our employee benefit plans on a retroactive, as
well as a current, basis. Furthermore, depending on the party that makes the
legal challenge and the remedy sought, we could be subject to other liabilities
sought by governmental authorities or private persons. During the fiscal years
2001 and 2000, we used approximately 38 and 75 independent contractors,
respectively. Any challenge by the IRS, state authorities or private litigants
resulting in a determination that these individuals are employees could have a
material adverse effect on our business, financial condition and results of
operations.
From time to time new legislation may be proposed to establish more
stringent requirements for the engagement of independent contractors. We are
unable to assess the likelihood that any such legislation will be enacted.
Further, our ability to retain independent contractors could in the future
deteriorate, due in part to the lower commitment level that these contractors
have to us.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD FORCE US TO CHANGE OUR
OPERATIONS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO
MAINTAIN OUR CURRENT BUSINESS.
Our primary customers are banks. Although the solutions that we currently
offer have not been subject to any material, specific government regulation, the
banking industry is regulated heavily, and we expect that such regulation will
affect the relative demand for our solutions. While we are not directly subject
to federal or state regulations specifically applicable to financial
institutions, such as banks, thrifts and credit unions, the Federal Deposit
Insurance Corporation, the National Credit Union Administration, the Office of
Thrift Supervision, the Office of the Comptroller
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of the Currency, and various state regulatory authorities typically assert the
right to observe the operations of companies to which certain functions of
financial institutions (such as data processing) are outsourced. These
regulators may from time to time also claim the right to observe the operations
of companies like us that provide software to financial institutions. In
addition, financial institutions with whom we do business may from time to time
require, by contract or otherwise, that evaluations of our internal controls be
performed by independent auditors or by the financial institutions themselves.
There can be no assurance that federal, state or foreign governmental
authorities will not adopt new regulations, and any adoption of new regulations
could require us to modify our current or future solutions. The adoption of laws
or regulations affecting us or our customers' businesses could reduce our growth
rate or could otherwise have a material adverse effect on our business,
financial condition and results of operations.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW COULD
PREVENT OR DELAY POTENTIAL ACQUISITION BIDS, INCLUDING BIDS WHICH MAY BE
BENEFICIAL TO OUR STOCKHOLDERS.
Our certificate of incorporation and bylaws contain provisions that may have
the effect of delaying, deterring or preventing a potential takeover that our
stockholders may consider to be in their best interests. The certificate and
bylaws provide for a classified board of directors serving staggered terms of
three years, prevent stockholders from calling a special meeting of stockholders
and prohibit stockholder action by written consent. The certificate also
authorizes only the board of directors to fill vacancies, including
newly-created directorships, and states that our directors may be removed only
for cause and only by the affirmative vote of holders of at least two-thirds of
the outstanding shares of the voting stock, voting together as a single class.
In addition, our board of directors may issue up to 2,000,000 shares of
preferred stock in one or more series and can fix the rights, preferences,
privileges and restrictions thereof without any further vote or action by our
stockholders. The issuance of shares of preferred stock may prevent or delay a
change of control transaction.
In addition, Section 203 of the Delaware General Corporation Law, which is
applicable to us, restricts certain business combinations with interested
stockholders even if such a combination would be beneficial to stockholders.
These provisions may inhibit a non-negotiated merger or other business
combination. The anti-takeover provisions of the Delaware General Corporation
Law prevent us from engaging in a "business combination" with any "interested
stockholder" for three years following the date that the stockholder became an
interested stockholder. For purposes of Delaware law, a "business combination"
includes a merger or consolidation involving us and the interested stockholder
and the sale of more than 10% of our assets. In general, Delaware law defines an
"interested stockholder" as any entity or person beneficially owning more than
15% of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. Under
Delaware law, a Delaware corporation may opt out of the anti-takeover
provisions. We do not intend to opt out of these anti-takeover provisions.
The foregoing provisions could discourage potential acquisition proposals
and could delay or prevent a change in control transaction. They could also
discourage others from making tender offers for our shares. As a result, these
provisions may prevent the market price of our common stock from reflecting the
effects of actual or rumored takeover attempts. These provisions may also
prevent significant changes in our board of directors and management.
THE ADOPTION OF THE FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT OF FINANCIAL
ACCOUNTING STANDARD NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS AS OF FEBRUARY
1, 2002 COULD ADVERSELY AFFECT OUR FUTURE RESULTS OF OPERATIONS AND FINANCIAL
POSITION.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statement. As of January 31, 2001, we had goodwill and intangible
assets valued at $77.5 million. We will apply the new rules on accounting for
goodwill and other intangible assets beginning with the first quarter of 2002.
Also during 2002, we will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of February 1, 2002 to
determine if a transition impairment charge should be recognized under SFAS 142.
We will thereafter annually test for impairment. There can be no assurance that
such tests will not result in a determination that these assets have been
impaired. If at any time it is determined that an impairment has occurred, we
will be required to reflect the impaired value as a charge resulting in a
reduction in earnings in the quarter such impairment is identified and a
corresponding reduction in the net asset value of the Company.
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WE CANNOT PREDICT EVERY EVENT AND CIRCUMSTANCE WHICH MAY IMPACT OUR BUSINESS
AND, THEREFORE, THE RISKS AND UNCERTAINTIES DISCUSSED ABOVE MAY NOT BE THE ONLY
ONES YOU SHOULD CONSIDER.
The risks and uncertainties discussed above are in addition to those that
apply to most businesses generally. In addition, as we continue to grow our
business, we may encounter other risks of which we are not aware at this time.
These additional risks may cause serious damage to our business in the future,
the impact of which we cannot estimate at this time.
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CAUTIONARY STATEMENTS
CONCERNING FORWARD-LOOKING INFORMATION
This prospectus and the documents incorporated by reference herein
contain 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, that are based on our current expectations, beliefs,
estimates and projections, as well as assumptions made by, and information
currently available to, us. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
Forward-looking statements can generally be identified as such because the
context of the statement may include words such as "expect," "believe,"
"anticipate" or words of similar import. Similarly, statements that describe our
future plans, objectives or goals are also forward-looking statements. These
statements are not guarantees of future performance, events or results and
generally involve known and unknown risks, uncertainties and other facts that
may cause our actual results, performance or achievements to be materially
different from such forward-looking statements. The sections entitled "Risk
Factors" beginning on page 5 of this prospectus, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business" in
our Annual Report and Quarterly Reports contain a discussion of some of the
risks and other factors that could contribute to those differences. We undertake
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Commission. You may inspect and copy such reports,
proxy statements and other information at the public reference facilities
maintained by the Commission at:
Room 1204, Judiciary Plaza Citicorp Center
450 Fifth Street, N.W. 500 West Madison Street
Washington, D.C. 20549 Chicago, IL 60661
Please call the Commission at 1-800-SEC-0330 for further information
about the public reference facilities. This material may also be obtained from
the Commission's worldwide web site at http://www.sec.gov. The address of the
Commission's Internet site is provided solely for the information of prospective
investors and is not intended to be an active link. Our outstanding common stock
is listed on the Nasdaq National Market under the symbol "CANI."
We have filed a registration statement, of which this prospectus is a
part, covering the common stock offered hereby. As allowed by Commission rules,
this prospectus does not contain all the information set forth in the
registration statement and the exhibits, financial statements and schedules
thereto. We refer you to the registration statement, the exhibits, financial
statements and schedules thereto for further information. This prospectus is
qualified in its entirety by such other information.
INCORPORATION OF INFORMATION WE FILE WITH THE COMMISSION
The Commission allows us to "incorporate by reference" certain
information we file with them into this prospectus, which means that we can
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be part of this prospectus, except for any information superseded by
information in this prospectus. We incorporate by reference the documents listed
below and future filings we will make with the Commission under Sections 12(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until the offering of
these shares is terminated:
o our annual report on Form 10-K for the year ended January 31,
2002, filed with the Commission on April 15, 2002;
o our current report on Form 8-K filed with the Commission on
April 18, 2002;
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o our current report on Form 8-K filed with the Commission on
April 9, 2002; and
o the description of our capital stock contained in our
registration statement on Form 8-A filed with the Commission
on May 5, 1998.
Any statement contained in this prospectus or in a document
incorporated by reference shall be deemed to be modified or superseded for all
purposes to the extent that a statement contained in this prospectus or in any
other document which is also incorporated by reference modifies or supersedes
that statement.
You may obtain copies of all documents which are incorporated in this
prospectus by reference (other than the exhibits to such documents which are not
specifically incorporated by reference herein) without charge upon written or
oral request to Tod V. Mongan, Carreker Corporation, 4055 Valley View Lane,
Suite 1000, Dallas, Texas 75244.
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale
of the shares of our common stock and we will not receive any proceeds from the
sale of those shares.
SELLING STOCKHOLDERS
This prospectus relates to the sale of 1,282,214 shares held by the selling
stockholders named in the table below. We issued all of these shares to the
selling stockholders in a private placement transaction that closed on April 5,
2002. We are registering the shares in order to permit the selling stockholders
to offer these shares for resale from time to time.
The information provided in the table below with respect to the selling
stockholders has been obtained from the selling stockholders. The selling
stockholders do not have, nor have they had within the past three years, any
position, office or other material relationship with us. Because the selling
stockholders may sell all or some portion of the shares of common stock
beneficially owned by them, we cannot estimate the number of shares of common
stock that will be beneficially owned by the selling stockholders after this
offering. In addition, the selling stockholders may sell, transfer or otherwise
dispose of at any time or from time to time since the date on which the selling
stockholders provided the information regarding the shares of common stock
beneficially owned by them, all or a portion of the shares of common stock
beneficially owned by them in transactions exempt from the registration
requirements of the Securities Act of 1933, as amended.
<Table>
SHARES OF COMMON STOCK
NAME OF SELLING STOCKHOLDER OWNED BEFORE THE OFFERING SHARES OF COMMON STOCK OFFERED (1)
- ----- ---------------------------- ------------------------- ----------------------------------
NUMBER PERCENT
Barnett & Co. 165,000 * 165,000
Morgan Stanley for the Benefit of The
RS Small Cap Growth Equity Pacific
Master Fund 35,000 * 35,000
Hare & Company 305,000 1.3% 305,000
Net Market Partners, LP 130,000 * 130,000
Permal U.S. Opportunities, Ltd. 189,500 * 189,500
Kinesis Investments Ltd. 150,000 * 150,000
Deephaven Private Placement Trading LTD 127,714 * 127,714
Gryphon Master Fund, LP 100,000 * 100,000
17
<Page>
Quantico Partners, L.P. 50,000 * 50,000
United Capital Management, Inc. 30,000 * 30,000
</Table>
- ----------------
* Less than 1%.
(1) Our registration of the shares of common stock does not necessarily mean
that the selling stockholders will sell all or any of the shares.
PLAN OF DISTRIBUTION
The selling stockholders (or, subject to applicable law, their pledges,
donees, distributes, transferees, or successors-in-interest) are offering shares
of our common stock that they acquired from us in a private placement
transaction. This prospectus covers the selling stockholders' resale of up to
1,282,214 shares of common stock.
This prospectus may be used in connection with resales or
redistributions of common stock by a selling stockholder. Such a resale or
redistribution may be effectuated directly or indirectly through brokers or
dealers or in a distribution by one or more underwriters on a firm commitment or
best efforts basis, on the Nasdaq National Market, in the over-the-counter
market, on any other securities exchange on which shares of common stock are
listed or traded, in privately negotiated transactions or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices. Resale or redistribution also may be
effected through:
o a block trade, which may involve cross trades, in which the
broker or dealer engaged will attempt to sell shares as agent
but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account;
o exchange distributions and/or secondary distributions in
accordance with the rules of the Nasdaq National Market;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o an offering at other than a fixed price on or through the
facilities of the Nasdaq National Market or to or through a
market maker other than on the Nasdaq National Market;
o pledges to lenders as collateral to secure loans, credit or
other financing arrangements and any subsequent foreclosure
thereunder;
o a combination of any such methods of sale; or
o any other legally available means.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. In connection
with resales or redistributions of Carreker common stock or otherwise, a selling
stockholder may enter into hedging transactions with brokers, dealers or other
financial institutions. In connection with these transactions, brokers, dealers
or other financial institutions may engage in short sales of the common stock in
the course of hedging the positions they assume with the selling stockholders. A
selling stockholder may also enter into options or other transactions with
brokers, dealers or other financial institutions which require delivery to that
broker, dealer or financial institution of common stock which common stock may
be resold by such broker, dealer or financial institution pursuant to this
prospectus.
18
<Page>
In effecting sales, brokers, dealers or financial institutions engaged
by a selling stockholder may arrange for other brokers, dealers or financial
institutions to participate. Brokers, dealers or agents may receive commissions,
discounts or concessions from the selling stockholders in amounts to be
negotiated prior to the sale. The broker-dealers participating in these resales
or redistributions may be deemed "underwriters" within the meaning of the
Securities Act, and any profit on the sale of the shares of common stock and any
commissions received by these broker-dealers may be regarded as underwriting
commissions under the Securities Act. We will pay all reasonable expenses
incident to the registration of the shares being offered hereby other than any
commissions and discounts of underwriters, dealers or agents. The shares of
common stock may be sold from time to time at varying prices determined at the
time of sale or at negotiated prices.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934 may apply to
sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus
available to the selling stockholders and have informed them of the need for
delivery of copies of this prospectus to purchasers at or prior to the time of
any sale of the shares offered hereby. The selling stockholders may indemnify a
broker-dealer that participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising under the Securities
of 1933, as amended.
In connection with resales and redistributions, the following
information will, to the extent then required, be provided in the applicable
prospectus supplement:
o the number of shares to be sold;
o the purchase price;
o the public offering price, if applicable;
o the name of any underwriter, agent or broker-dealer; and
o any applicable commissions, discounts or other items
constituting compensation to underwriters, agents or
broker-dealers with respect to the particular sale or
distribution.
LEGAL MATTERS
Locke Liddell & Sapp LLP, Dallas, Texas, has passed upon the validity
of the common stock offered under this prospectus.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended January 31, 2002, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
consolidated financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
19
<Page>
1,282,214 SHARES
CARREKER CORPORATION
------------
COMMON STOCK
------------
PROSPECTUS
------------
APRIL __, 2002
You should rely only on information contained in this prospectus. We
have not authorized anyone to give any information or make any representations
in connection with this offering other than those contained in this prospectus.
If anyone gives you any such information or makes any such representations, you
should not rely on it or them as having been authorized by us. This prospectus
is not an offer to sell common stock and it is not soliciting an offer to buy
common stock in any state where the offer and sale is not 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 our common stock.
20
<Page>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The fees and expenses to be paid by us in connection with the offer of
the securities being registered hereby are estimated as follows:
<Table>
Registration fee.............................................. $1,118.30
Legal fees and expenses....................................... $10,000.00
Accounting fees and expenses.................................. $20,000.00
Printing...................................................... $ 1,411.00
Miscellaneous................................................. $ 4,275.00
Total $ 36,804.30
------------
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, in
effect, that any person made a party to any action by reason of the fact that he
is or was our director, officer, employee or agent may and, in certain cases,
must be indemnified by us against, in the case of a non-derivative action,
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorney's fees) incurred by him as a result of such action, and in the case of
a derivative action, against expense (including attorney's fees), if in either
type of action he acted in good faith and in a manner he reasonably believed to
be in or not opposed to our best interests. This indemnification does not apply,
in a derivative action, to matters as to which it adjudged that the director,
officer, employee or agent is liable to us, unless upon court order it is
determined that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity for
expense and, in a non-derivative action, to any criminal proceeding in which
such person had reasonable cause to believe his conduct was unlawful.
Article Eight of our certificate of incorporation provides that, to the
fullest extent permitted by Delaware law, none of our directors shall be liable
to us or our stockholders for monetary damages for breach of fiduciary duty as a
director.
Article Eight of our certificate of incorporation also provides that we
may indemnify to the fullest extent permitted by Delaware law any and all of our
directors and officers, or former directors and officers, or any person who may
have served at our request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise. In addition, Section 7.07
of our bylaws provides for similar indemnification of officers and directors
within the limits of Delaware law.
We have entered into indemnification agreements with each of our
directors, pursuant to which, we do, to the extent permitted by applicable law,
indemnify such directors against all expenses, judgments, fines and penalties
incurred in connection with the defense or settlement of any actions brought
against them by reason of the fact that they were our directors or assumed
certain responsibilities at our direction. We have purchased directors and
officers liability insurance in order to limit our exposure to liability for
indemnification of directors and officers.
II-1
<Page>
SEC POSITION ON INDEMNIFICATION
As stated above, under our certificate of incorporation, our directors
and officers are indemnified against certain causes of action. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the registrant, the
registrant has been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 16. EXHIBITS.
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-1 (Registration No.
333-48399)).
4.2 Amended and Restated Certificate of Incorporation and Bylaws of the
Company (Incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-48399)).
*5.1 Opinion of Locke Liddell & Sapp LLP.
10.1 Form of Stock Purchase Agreement dated April 2, 2002 (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed April 9, 2002).
*23.1 Consent of Ernst & Young LLP, Independent Auditors.
*23.2 Consent of Arthur Andersen LLP, Independent Auditors.
*24.1 Power of Attorney (included on second signature page).
- -------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) 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.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the
II-2
<Page>
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<Page>
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 Dallas, Texas, on April 19, 2002.
CARREKER CORPORATION
By: /s/ John D. Carreker, Jr.
---------------------------------------
John D. Carreker, Jr.
Chief Executive Officer
<Page>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John D. Carreker, Jr. and Terry L. Gage
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capabilities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, 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 any of them, or their
or his substitute or 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 below by the following persons in the
capacities and on the date indicated.
<Table>
<Caption>
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ John D. Carreker, Jr.
- ------------------------- Chairman of the Board and Chief April 19, 2002
John D. Carreker, Jr. Executive Officer
(Principal Executive Officer)
/s/ Terry L. Gage
- ----------------- Chief Financial Officer April 19, 2002
Terry L. Gage (Principal Financial Officer)
/s/ James D. Carreker Director April 19, 2002
- ---------------------
James D. Carreker
/s/ James R. Erwin Director April 19, 2002
- ------------------
James R. Erwin
/s/ James L. Fischer Director April 19, 2002
- --------------------
James L. Fischer
/s/ Michael D. Hansen President, Chief Operating April 19, 2002
- --------------------- Officer and Director
Michael D. Hansen
/s/ Donald L. House Director April 19, 2002
- -------------------
Donald L. House
/s/ Richard R. Lee Director April 19, 2002
- ------------------
Richard R. Lee
/s/ David K. Sias Director April 19, 2002
- -----------------
David K. Sias
/s/ Ronald G. Steinhart Director April 19, 2002
- -----------------------
Ronald G. Steinhart
</Table>
<Page>
EXHIBIT INDEX
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-1 (Registration No.
333-48399)).
4.2 Amended and Restated Certificate of Incorporation and Bylaws of the
Company (Incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1 (Registration NO. 333-48399)).
*5.1 Opinion of Locke Liddell & Sapp LLP.
10.1 Form of Stock Purchase Agreement dated April 2, 2002 (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed April 9, 2002.
*23.1 Consent of Ernst & Young LLP, Independent Auditors.
*23.2 Consent of Arthur Andersen LLP, Independent Auditors.
*24.1 Power of Attorney (included on second signature page).
- -------------------
* Filed herewith.