<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS OF JULY 23, 1996
REGISTRATION NO. 333- _______
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
INFINITY FINANCIAL TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
<TABLE>
<S> <C> <C>
CALIFORNIA 7372 77-0227321
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</TABLE>
640 CLYDE COURT
MOUNTAIN VIEW, CA 94043
(415) 940-6100
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
----------------------
TERRY H. CARLITZ
CHIEF FINANCIAL OFFICER
640 CLYDE COURT
MOUNTAIN VIEW, CA 94043
(415) 940-6100
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------
Copies to:
<TABLE>
<S> <C>
MICHAEL C. PHILLIPS, ESQ. DONALD M. KELLER, JR., ESQ.
CORI M. ALLEN, ESQ. SONYA F. ERICKSON, ESQ.
HANS J. BRASSELER, ESQ. SANJAY K. KHARE, ESQ.
Morrison & Foerster LLP Venture Law Group
755 Page Mill Road A Professional Corporation
Palo Alto, CA 94304 2800 Sand Hill Road
(415) 813-5600 Menlo Park, CA 94025
(415) 854-4488
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Common Stock, no par value............. 2,702,500 $15.00 $40,537,500 $13,979
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes shares that the U.S. Underwriters and International Underwriters
have the option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
The Prospectus relating to the shares being registered hereby to be used in
connection with a United States offering (the "U.S. Prospectus") is set forth
following this page. The Prospectus to be used in a concurrent international
offering (the "International Prospectus") will consist of alternate pages set
forth following the U.S. Prospectus and the balance of the pages included in the
U.S. Prospectus for which no alternate is provided. The U.S. Prospectus and the
International Prospectus are identical except that they contain different
outside front cover, inside front cover and outside back cover pages and
different descriptions of the plan of distribution (contained under the caption
"Underwriting" in both the U.S. Prospectus and the International Prospectus).
Alternate pages for the International Prospectus are separately designated.
<PAGE> 3
LOGO
SUBJECT TO COMPLETION, DATED JULY 23, 1996
2,350,000 SHARES
INFINITY FINANCIAL TECHNOLOGY, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
----------------------
Of the 2,350,000 shares of Common Stock offered, 1,880,000 shares are being
offered hereby in the United States and 470,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting."
Of the 2,350,000 shares of Common Stock offered, 2,000,000 shares are being
sold by the Company and 350,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares being sold by the Selling Stockholders. See "Principal and Selling
Stockholders."
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price of the shares will be between $13 and $15 per share. For factors to be
considered in determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "INFN."
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
---------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
Total(3).................. $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $900,000 payable by the Company.
(3) Certain Selling Stockholders have granted the U.S. Underwriters an option
for 30 days to purchase up to an additional 282,000 shares at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. Additionally, certain Selling Stockholders have
granted the International Underwriters an option for 30 days to purchase up
to an additional 70,500 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Selling Stockholders will be
$ , $ and $ , respectively. See "Underwriting."
----------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery at the offices of
Goldman, Sachs & Co. in New York, New York, on or about September , 1996.
GOLDMAN, SACHS & CO.
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
----------------------
The date of this Prospectus is September , 1996.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 4
LOGO
SUBJECT TO COMPLETION, DATED JULY 23, 1996
2,350,000 SHARES
INFINITY FINANCIAL TECHNOLOGY, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
----------------------
Of the 2,350,000 shares of Common Stock offered, 470,000 shares are being
offered hereby in an international offering outside the United States and
1,880,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting."
Of the 2,350,000 shares of Common Stock offered, 2,000,000 shares are being
sold by the Company and 350,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares being sold by the Selling Stockholders. See "Principal and Selling
Stockholders."
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price of the shares will be between $13 and $15 per share. For factors to be
considered in determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "INFN."
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
---------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
Total(3).................. $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
International Underwriters and the U.S. Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $900,000 payable by the Company.
(3) Certain Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 70,500 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, certain Selling Stockholders
have granted the U.S. Underwriters an option for 30 days to purchase up to
an additional 282,000 shares at the initial public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Selling Stockholders will be $ ,
$ and $ , respectively. See "Underwriting."
----------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery at the offices of
Goldman, Sachs & Co. in New York, New York, on or about September , 1996.
GOLDMAN SACHS INTERNATIONAL
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
----------------------
The date of this Prospectus is September , 1996.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 5
[INSIDE FRONT COVER]
The Company intends to furnish to its stockholders annual reports
containing audited financial statements and quarterly reports containing
unaudited interim financial information for the first three fiscal quarters of
each fiscal year of the Company.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Infinity(R) and FIN++(R) are registered trademarks of the Company. This
Prospectus contains other product names and trade names and trademarks of the
Company and of other organizations.
2
<PAGE> 6
[ALTERNATE PAGE]
[INSIDE FRONT COVER]
The Company intends to furnish to its stockholders annual reports
containing audited financial statements and quarterly reports containing
unaudited interim financial information for the first three quarters of each
fiscal year of the Company.
In this Prospectus, references to "dollars," "U.S.$" and "$" are to United
States dollars.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Infinity(R) and FIN++(R) are registered trademarks of the Company. This
Prospectus contains other product names and trade names and trademarks of the
Company and of other organizations.
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and the Notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus (i) gives effect to the reincorporation of the
Company in Delaware to be effected prior to the closing of the Offerings, (ii)
reflects the conversion of all outstanding shares of Preferred Stock into shares
of Common Stock effective automatically upon the closing of the Offerings, (iii)
assumes no exercise of the U.S. Underwriters' or International Underwriters'
over-allotment options and (iv) has been adjusted to reflect a 2-for-1 stock
split to be effected prior to the closing of the Offerings.
THE COMPANY
Infinity Financial Technology, Inc. ("Infinity" or the "Company") develops,
markets and supports object-oriented, client/server platform and solutions
software for financial trading and risk management. Founded in 1989, Infinity
currently has more than 35 customers around the world, consisting primarily of
large banks and other financial institutions with sophisticated trading
operations and risk management needs.
Infinity's primary product is the Infinity Platform, which provides
customers with a foundation to rapidly develop, deploy and modify trading and
risk management systems in response to the changing requirements of the
marketplace. The Infinity Platform allows financial institutions and
corporations to build applications to process, store, integrate and analyze
their traded instrument portfolios. Infinity also offers Infinity Derivatives,
solutions software for derivatives trading, which enables the customer to
integrate "front-office" trading activities such as pricing, deal capture and
position-keeping with "back-office" operations such as trade confirmations,
payments processing and general ledger accounting. Infinity has introduced and
plans to release in the second half of 1996 Infinity RiskView, which is designed
to facilitate customers' development of risk management systems. These solutions
are built with the Infinity Platform and are designed to work together with the
Infinity Platform to automate a range of transaction processing and decision
support activities. Infinity's products are characterized by an open systems,
client/server architecture running on the UNIX and Windows NT operating systems
and on leading relational database management systems from Oracle Corporation
("Oracle") and Sybase, Inc. ("Sybase").
The demand for trading and risk management systems has grown significantly
over the past several years. Increases in trading volumes and the complexity of
financial instruments have led to a fundamental shift in how financial assets
are managed: a shift to value management, in which mark-to-market accounting and
value at risk methodologies are used to value traded instrument portfolios and
quantify their associated risks. At the same time, various regulators worldwide
are adopting more stringent reporting requirements. Often, within a single
institution, several different computer systems capture and process trading
portfolios. These systems frequently are located in multiple trading centers,
use different data sets and database technologies and run on a variety of
hardware platforms and operating systems. Integrating these data is a difficult
technological and operational undertaking. A number of high profile financial
crises -- Orange County, California, Baring Brothers and Sumitomo
Corporation -- have highlighted the importance of effective risk management
systems, as well as rigorous management and oversight of trading operations.
These factors, among others, are presenting significant challenges that need to
be met in order to process high volumes of complex financial instruments in a
secure environment and to achieve comprehensive, firmwide risk management.
In response to these challenges, financial institutions worldwide are
investing financial and other resources in the development and acquisition of
trading and risk management technology. The Tower Group, a market research and
consulting firm, estimates that worldwide internal and external expenditures on
hardware, software and services for risk management systems totaled more than
$3.0 billion in 1994 and are expected to grow to $4.3 billion by 2000.
Traditionally, financial
3
<PAGE> 8
institutions have licensed off-the-shelf solutions where they exist and have
internally developed those systems that are not readily available or that
require a unique understanding of the institution's needs. The Company believes
that its strategy and products uniquely position it to take advantage of these
trends.
The Company's objective is to establish itself worldwide as the leading
provider of trading and risk management platform and solutions software. In
order to meet this goal, Infinity's strategy is to establish the Infinity
Platform as an industry standard, expand the Company's product offerings, target
initial sales of new products to sophisticated customers, broaden its customer
base geographically and beyond the banking industry, develop and leverage
strategic business partners and integrate sophisticated financial engineering
with advanced information technology. The Company sells its products through a
direct sales force located in offices in New York, London, Paris and Tokyo as
well as its headquarters in Mountain View, California. The Company also has
full-time support personnel in Frankfurt, Sydney and Toronto. Infinity has
focused on developing strategic third-party relationships with companies that
provide consulting, software development and implementation services. These
relationships enable the Company to leverage the technical expertise of its
strategic partners, access an additional sales and marketing channel and further
enhance its efforts to establish the Infinity Platform as an industry standard.
The Company was incorporated in California in 1989 and will be
reincorporated in Delaware in 1996 prior to the completion of the Offerings. The
Company's headquarters are located at 640 Clyde Court, Mountain View, California
94043, and its telephone number is (415) 940-6100.
RISK FACTORS
For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors."
4
<PAGE> 9
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company.................. 2,000,000 shares
Common Stock offered by the Selling Stockholders..... 350,000 shares
Common Stock to be outstanding after the Offerings... 18,008,608 shares(1)
Proposed Nasdaq National Market symbol............... INFN
Use of proceeds...................................... For general corporate purposes,
including primarily working capital
and possible acquisitions.
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
INCOME DATA:
Revenues...................... $ 1,246 $ 2,597 $ 5,783 $12,595 $24,738 $11,292 $17,947
Income from operations........ 261 43 980 2,124 5,676 2,940 4,061
Net income.................... 207 46 717 1,641 3,449 1,789 2,483
Series B preferred stock
redemption.................. -- -- -- -- (1,276) -- --
Net income attributable to
common stockholders......... 207 46 717 1,641 2,173 1,789 2,483
Net income
per share(2)................ $ 0.01 $ 0.00 $ 0.06 $ 0.10 $ 0.12 $ 0.10 $ 0.13
Net income per share before
Series B preferred stock
redemption.................. $ 0.01 $ 0.00 $ 0.06 $ 0.10 $ 0.19 $ 0.10 $ 0.13
Shares used to compute
net income per share(3)..... 15,852 15,649 13,008 16,354 18,404 17,853 19,565
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
CONSOLIDATED BALANCE SHEET DATA: ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
Cash and cash equivalents........................................ $ 1,905 $ 27,045
Working capital.................................................. 6,053 31,193
Total assets..................................................... 17,999 43,139
Long-term portion of capital lease obligations................... 155 155
Stockholders' equity............................................. 8,387 33,527
</TABLE>
- ---------------
(1) Based on the number of shares of Common Stock outstanding (on a pro forma
basis to give effect to the conversion of all shares of Preferred Stock upon
completion of the offerings) as of June 30, 1996. Excludes (i) 3,467,284
shares issuable upon exercise of options outstanding as of June 30, 1996
having a weighted average exercise price of $1.68 per share under the
Company's 1989 Stock Option Plan and 1993 Stock Incentive Plan, (ii) 106,000
shares issuable upon exercise of options granted from July 1, 1996 to July
22, 1996 and (iii) 1,357,998 additional shares authorized for issuance under
the Company's 1993 Incentive Stock Plan, 1996 Stock Incentive Plan and 1996
Employee Stock Purchase Plan (collectively the "Stock Plans"). See
"Management -- Stock Plans" and Notes 6 and 8 of Notes to Consolidated
Financial Statements.
(2) Net income per share for 1995 reflects a decrease in net income attributable
to common stockholders as a result of the redemption of the Series B
Preferred Stock in November 1995. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in computing net
income per share.
(4) Adjusted to reflect the sale of 2,000,000 shares offered by the Company
hereby, based on an assumed initial public offering price of $14.00 per
share and the application of the estimated net proceeds therefrom.
5
<PAGE> 10
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should carefully consider the following risk factors in evaluating an
investment in the Common Stock offered hereby. This Prospectus contains certain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements as a result of certain of the risk factors set forth
below and elsewhere in this Prospectus.
SIGNIFICANT POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
Although the Company has experienced increased revenues and has been
profitable in each of its last five fiscal years, the Company does not believe
prior growth rates are sustainable or indicative of future operating results,
and there can be no assurance that the Company will be able to sustain revenue
growth or maintain profitability in the future. In addition, the Company intends
to commit substantial financial resources to expanding its business, including
its sales and support operations and product development infrastructure. As a
result, the Company does not expect to sustain the current level of operating
margins in future periods.
Individual licenses of the Company's products typically account for large
dollar amounts relative to quarterly revenues, so that the timing of one license
can cause substantial shifts of revenue and profits between accounting periods.
Because of the large dollar commitment and the mission critical function that
the Company's products address, approval at senior levels within customer
organizations is frequently required for a purchase of the Company's products.
The Company's quarterly revenues are dependent upon a small number of new
individual product sales, and any downturn in a potential customer's business,
or any loss or delay of individual orders for any other reason, would have a
significant impact on the Company's revenues and profitability on a quarterly
and annual basis. For example, in the quarter ended June 30, 1996, revenues
included sales to existing customers and six new customers. The Company
historically has operated with little backlog because its products are generally
shipped as orders are received. As a result, license revenues in any quarter
depend on the volume and timing of, and the Company's ability to fill, orders
received in that quarter. In addition, a relatively high percentage of the
Company's expenses is fixed in the short term because the Company's expense
levels are based, in part, on its expectations as to future revenues. As a
result, if revenues fall below expectations, operating margins will be adversely
affected. In addition, historically the Company has experienced significant
renewal rates of maintenance contracts; however, many customers have licensed
the source code of the Company's products and certain customers have chosen to
terminate the maintenance contracts with the Company due to their ability to
maintain the Company's products. Furthermore, the Company's service revenues
have been dependent upon a relatively small number of new and existing customers
in each quarter. Based on these and other factors, there can be no assurance
that previous renewal rates, and corresponding revenues, will continue in the
future. See "-- Lengthy Sales Cycle."
The Company's revenues and operating results have fluctuated significantly
in the past, and are likely to continue to fluctuate significantly in the
future, on an annual and quarterly basis. Fluctuations in the Company's revenues
and results of operations may result from a number of factors, many of which are
beyond the Company's control, including (i) the relatively long sales cycle of
three months to over one year for the Company's software products, (ii) the
timing and size of the Company's individual license transactions, and, in
particular, the dependence of the Company's revenues in any quarter on the sale
of a limited number of large dollar licenses, (iii) the Company's typical
recognition of a significant portion of its quarterly revenues in the last
month, weeks or days of the quarter, (iv) the relatively high percentage of
total revenues derived from product revenues versus service revenues, (v) the
timing of the introduction of new products or product enhancements by the
Company and its competitors, (vi) the deferral of significant revenues until
completion or acceptance of certain customized portions of software required by
any individual license transaction, (vii) changes in customer budgets, (viii)
seasonality of technology purchases
6
<PAGE> 11
by customers, (ix) the mix of revenues derived from the Company's direct sales
force and various distribution and marketing channels and between domestic and
international customers, (x) currency exchange rate fluctuations, (xi) changes
in applicable government regulations, (xii) the untimely loss of key sales
personnel, (xiii) changes in relationships with strategic partners and (xiv)
general economic conditions, particularly those which affect the Company's
targeted customer base.
The Company's quarterly revenues are also subject to certain seasonal
fluctuations, particularly in the third quarter when reduced economic activity
outside North America during the summer months can negatively affect the
Company's licensing revenues. This and other seasonal factors, which the Company
believes are common to the software industry, could cause the Company's revenues
and profitability to fluctuate between quarters.
Due to the foregoing and other factors, the Company believes that its
quarterly and annual revenues, expenses and operating results could vary
significantly in the future and that period-to-period comparisons should not be
relied upon as indications of future performance. Because of the above factors,
it is possible that the Company's operating results will be below the
expectations of stock market analysts and investors in some future quarter,
which would have a severe adverse effect on the price of the Company's stock.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON EVOLVING MARKET FOR FINANCIAL TRADING AND RISK MANAGEMENT
SOFTWARE; NO ASSURANCE OF MARKET ACCEPTANCE.
To date, the Company has derived substantially all of its revenue from the
sale of software products for financial trading and risk management. The Company
expects that revenues from such sales will account for substantially all of its
revenues for the foreseeable future. The market for financial trading and risk
management software is rapidly evolving, and the Company's operating results and
opportunity for growth in the future are highly dependent on acceptance of its
products in and the continued growth of this market. As is the case in new and
evolving industries, demand and market acceptance for recently introduced
products are subject to a high level of uncertainty and risk. A decline or
slow-down in growth in the market for, or market acceptance of, such products as
a result of increased competition, technological or regulatory change, a banking
and financial services industry downturn or other factors would have a material
adverse effect on the Company's business, financial condition and results of
operations. In particular, because the Company's customer base has historically
been limited to larger commercial banks and financial institutions, the Company
would be particularly vulnerable to a downturn in the banking and financial
services industries.
The Company currently markets and sells its products primarily to large
banks and other financial institutions, many of which rely on internally
developed software to fulfill their financial trading and risk management needs.
Demand for and acceptance of the Company's products by this customer base
depends on a number of factors, which include the products' functionality and
performance characteristics, the ability of these clients to achieve cost
savings by using third-party software, the time and cost required to internally
develop software, the willingness of these institutions to rely on third-party
software to fulfill mission critical financial trading and risk management needs
and their assessment of the Company's ability to support these products. Many of
these banks and financial institutions have made significant investments in
time, capital and human resources in developing and implementing these internal
systems and are highly dependent upon the continued use of internally developed
systems. The legacy nature of many of these internally developed systems
combined with the substantial financial costs to shift to third-party products
for these applications generally constitute the principal factors inhibiting
migration to third-party products in financial trading and risk management, such
as those offered by the Company. No assurance can be made that these factors
will not inhibit growth in the market for third-party financial trading and risk
management software and, as a consequence, materially adversely affect
7
<PAGE> 12
the Company's business, financial condition and results of operations. See
"Business -- Markets and Customers."
The Company is attempting to develop the Infinity Platform as an industry
standard for financial trading and risk management. No assurance can be given
that this attempt to establish an industry standard will be successful, even if
a significant market for third-party financial trading and risk management
software continues to develop. If the Company is unsuccessful in establishing
the Infinity Platform as an industry standard, widespread acceptance of its
products and its ability to market additional application programs for financial
trading and risk management will be adversely affected, and, as a consequence,
the Company's future growth, business, financial condition and results of
operations will be materially adversely affected.
LENGTHY SALES CYCLE
Because of the mission critical functions performed by the Company's
products, the purchase of such products is a strategic decision which generally
requires approval at senior levels of customers' organizations. In addition, the
purchase of the Company's products involves a significant commitment of
customers' financial resources. For these and other reasons, the sales cycle
associated with the purchase of the Company's products is typically complex,
lengthy and subject to a number of significant risks, including changes in
customers' budgetary constraints and approval at senior levels of customers'
organizations, over which the Company has no control. The Company's sales cycle
can range from three months to over one year. Because of the lengthy sales cycle
and the dependence of the Company's quarterly revenues upon a small number of
new individual product sales for large dollar amounts, the loss or delay of a
single sale could have a material adverse effect on the Company's business,
financial condition and results of operations.
RAPID TECHNOLOGICAL CHANGE AND DEPENDENCE ON NEW PRODUCTS
The market for the Company's products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line and to develop and
introduce new products that address technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
In particular, the failure of the Company to develop new products or enhance
existing products to (i) timely adapt to the rapidly developing computer
hardware and software technology upon which its products are based, (ii)
incorporate new functionality reflecting rapidly evolving types of derivative
securities and other financial instruments and risk management methodologies and
(iii) incorporate new functionality to facilitate customers' compliance with
changing applicable governmental regulations could cause customers to delay
their purchase of the Company's products, or to decide not to purchase such
products. In September 1995, the Company introduced its back-office modules for
Infinity Derivatives, which have been implemented on a limited basis to date by
Infinity's customers. The Company further intends to release prior to the end of
1996 a risk management product called Infinity RiskView, designed to extend the
Infinity Platform for certain risk management functions, and a Windows NT
version of its Infinity Derivatives product. No assurance can be given that
development of Infinity RiskView or the Windows NT version of Infinity
Derivatives will be successfully completed or that either of these new products
will be accepted in the marketplace. The anticipated release of these products
also could cause customers to delay purchase decisions for existing products of
the Company. The Company has in the past experienced delays in the introduction
of product enhancements and new products, including a delay in introducing the
back-office modules for Infinity Derivatives. There can be no assurance that the
Company will not experience such delays in the future, or be successful in
developing and marketing, on a timely and cost-effective basis, product
enhancements or new products, including Infinity RiskView and the Windows NT
version of Infinity Derivatives, and the failure to do so could have a material
adverse effect on the Company's
8
<PAGE> 13
business, financial condition and results of operations. See "-- Risks of
Product Defects; Product Liability" and "Business -- Product Development."
SMALL DIRECT SALES FORCE AND RELIANCE ON IBM CORPORATION AND OTHER STRATEGIC
RELATIONSHIPS
The Company has a small direct sales force, which consisted of 16 persons
at June 30, 1996. Historically, most of the Company's sales have been derived
through its direct sales force, and the Company's business strategy depends on
significantly expanding this sales force. The Company has previously experienced
substantial difficulty in hiring sales personnel with expertise in sophisticated
financial instruments and is likely to experience similar difficulty as it
attempts to hire other qualified staff who have the required experience levels.
In the past, the Company has also experienced difficulty in adequately staffing
a sales force for its principal United States sales office located in New York.
There can be no assurance that the Company will be able to recruit, train and
retain additional qualified sales personnel with the requisite experience and
knowledge, particularly those with experience in both finance and software
development. The failure to successfully expand the Company's sale force would
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has established strategic relationships with a number of
organizations that are complementary to its direct sales force and which it
believes are important to its worldwide sales, marketing and support activities
and the implementation of its products. The Company believes that its
relationships with such organizations provide an additional sales and marketing
channel and further promote the Infinity Platform to become an industry
standard. Due in part to the current small size of its direct sales force, the
Company believes such relationships are particularly important to its sales
efforts and efforts to establish an industry standard. In particular, the
Company has developed a non-exclusive strategic relationship with IBM
Corporation ("IBM"). IBM acts as a solution provider and markets the Company's
products on a worldwide basis as part of IBM information management solutions,
although IBM is under no contractual obligation to market the Company's
products. During the quarter ended June 30, 1996, license revenues facilitated
by IBM accounted for 42% of license revenues and 33% of total revenues. Any
deterioration of the Company's relationship with IBM could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company also has relationships with key third-party developers,
including Axime Integration de Systemes ("Axime") and Diagram S.A. ("Diagram"),
and service providers, including Price Waterhouse LLP ("Price Waterhouse").
Third-party developers constitute a key component of Infinity's strategy in
developing products and applications for the Infinity Platform for specific
markets that Infinity does not currently address. In addition, Infinity has
established the Infinity Certified Engineering program which qualifies various
software development firms to work as consultants with Infinity customers in
implementing and customizing the Infinity Platform and other products. The
failure by the Company to maintain its existing relationships, or to establish
new relationships in the future, could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
customers and potential customers frequently rely on these third-party service
providers to extend, deploy and/or manage Infinity's products. If the Company is
unable to train adequately a sufficient number of service providers or, if for
any reason such service providers do not have or choose not to devote the
resources necessary to facilitate implementation of the Company's products or if
such service providers adopt a product or technology other than Infinity's, the
Company's business, financial condition and results of operations could be
materially adversely affected. See "Business -- Sales, Marketing and Support."
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in recent years. This growth has
placed, and may continue to place, a significant strain on the Company's
management and operations. The Company's future operating results will depend on
its ability to continue to broaden the Company's
9
<PAGE> 14
senior management group, and its ability to attract, hire and retain skilled
employees. The Company's success will also depend on the ability of its officers
and key employees to continue to implement and improve its operational and
financial control systems and to expand, train and manage its employee base. The
Company's future operating results will also depend on its ability to expand its
sales and marketing organizations, further implement a reseller and partner
channel to penetrate different and broader markets than those addressed by its
existing direct sales force and expand its support organization commensurate
with growth in its installed base. The Company's inability to effectively manage
growth could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
COMPETITION
The market for transaction processing and risk management systems for
financial institutions is intensely competitive. It is characterized by rapidly
changing technological requirements, as new instruments and new strategies are
developed and implemented, and a high degree of technological progress, as new
software and hardware technologies are applied to the challenge of trading and
risk management. The rapid pace of innovation and change in the market Infinity
serves necessitates an ongoing research and development effort to enhance the
features and functionality of the Infinity Platform and Infinity products.
Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition and a larger installed base of customers than the
Company. The Company's competitors are diverse and offer a variety of solutions
directed at the financial trading and risk management information system
marketplace. These competitors include companies offering and developing
financial trading or risk management software products that compete with
products offered by the Company and the internal development groups within
prospective customers that may develop systems that may substitute for those
offered by the Company. Certain of the Company's competitors provide solutions
for particular elements of the financial trading marketplace, including, for
example, the front-office derivatives trading market, which constitutes a
significant portion of the Company's business. To the extent customers elect to
pursue point solutions targeted at the front-office derivatives market or other
elements of the financial trading marketplace, as opposed to the Company's
integrated solutions, the Company's business, financial condition and results of
operations may be materially adversely affected. The Company may also face
competition from other business application software vendors who may broaden
their product offerings by internally developing or acquiring financial trading
and risk management software products.
In order to be successful in the future, the Company must respond promptly
and effectively to the challenges of technological change and competitors'
innovations. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors or that competition will not have
a material adverse effect on the Company's business, financial condition and
results of operation. See "Business -- Competition."
RISKS ASSOCIATED WITH INTERNATIONAL SALES
In the six months ended June 30, 1996 and for the 1995, 1994 and 1993
fiscal years, the Company derived 70%, 53%, 25% and 27% of its total revenues,
respectively, from sales outside North America and anticipates that a majority
of its revenues for the foreseeable future will be derived from sources outside
North America. The Company sells its products through a direct sales force
located in offices in New York, London, Paris and Tokyo as well as its
headquarters in Mountain View, California. The Company also has full-time
support personnel in Frankfurt, Sydney and Toronto. The Company intends to
continue to expand its sales and support operations outside North America and to
enter additional international markets, which will require significant
management attention and financial resources. International operations are
generally subject to a number of
10
<PAGE> 15
risks, including costs of customizing products for foreign countries, dependence
on local resellers, multiple, conflicting and changing government regulations
regarding financial transactions, longer payment cycles, import and export
restrictions, tariffs, difficulties in staffing and managing foreign operations,
greater difficulty or delay in accounts receivable collection, potentially
adverse tax consequences, the burdens of complying with a variety of foreign
laws, the impact of possible recessionary environments in economies outside
North America and political and economic instability. The Company's total
revenue is also substantially affected by seasonal fluctuations resulting from
lower sales that typically occur during the summer months in Europe and other
parts of the world.
Until 1996, the Company's international sales were generally denominated
and collected in U.S. dollars. In the first half of 1996, international sales
were denominated in both U.S. dollars and foreign currencies. The Company
believes that an increasing portion of the Company's cost of revenues and
operating expenses will be incurred in foreign currencies. Although it is
impossible to predict future exchange rate movements between the U.S. dollar and
other currencies, it can be anticipated that to the extent the U.S. dollar
strengthens or weakens against other currencies, a substantial portion of the
Company's revenues, cost of revenues and operating expenses will be
commensurately lower or higher than would be the case in a more stable foreign
currency environment. Although the Company from time to time undertakes foreign
exchange hedging transactions to cover a portion of its foreign currency
transaction exposure, the Company does not attempt to cover all potential
foreign currency exposure.
In the past, the Company has benefited from increased international demand
for its risk management solutions resulting from the imposition of new capital
adequacy and regulatory reporting requirements. For example, a significant
portion of the Company's 1995 and first quarter 1996 international revenues were
attributable to new European customers who began to respond to the requirements
of the European Capital Adequacy Directive in late 1994 through implementation
of risk management systems. If regulatory requirements remain unchanged or are
eased, the demand for risk management solutions will likely be reduced, which
would materially adversely affect the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Sales, Marketing
and Support."
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends to a significant extent on the performance of
a number of senior management and sales and engineering personnel, including
Roger A. Lang, a founder of the Company and its President and Chief Executive
Officer. The Company's Vice President of Software Engineering is currently on
indefinite leave of absence for medical reasons, and the Company's Vice
President of Client Services will commence a one-year educational leave in
August 1996. The absence of these two key employees place a significant
additional burden on the other members of the Company's management team and
could materially adversely affect the Company's business, financial condition
and results of operations. Should either or both not return to the Company's
employ, the Company expects to experience significant difficulty in replacing
them with equally qualified individuals. Given the critical role of the
Company's limited engineering staff in executing the Company's product
strategies, the loss of any significant part of its engineering staff would also
have a material adverse effect on the Company. The Company generally does not
have long-term employment contracts with Mr. Lang, its engineering staff or any
other employees. The Company believes that its future success also will depend
in part on its ability to attract and retain highly-skilled engineering,
managerial, sales and marketing personnel. Competition for such personnel in the
software industry is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. The Company has
previously experienced substantial difficulty in hiring sales and engineering
personnel with expertise in sophisticated financial instruments and may
experience similar difficulty as it attempts to hire other qualified staff who
have the required experience levels. In particular, the Company has experienced
difficulty competing for such
11
<PAGE> 16
personnel with large financial institutions with substantially greater financial
resources. Failure to attract and retain key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Employees" and "Management -- Executive Officers
and Directors."
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its proprietary technology.
The Company relies primarily on a combination of copyright, trade secret and
trademark laws, nondisclosure and other contractual provisions and technical
measures to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials through trade secret and
copyright laws, which provide only limited protection. As part of its
confidentiality procedures, the Company generally enters into nondisclosure
agreements with its employees, consultants, distributors and corporate partners.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use the Company's products
or technology independently. In particular, the Company customarily provides its
existing and potential distribution partners with access to its product
architecture and other proprietary information underlying the Company's licensed
software, including source code. An unauthorized publication or proliferation of
the Company's source code could materially adversely affect the Company's
business, financial condition and results of operations. Policing unauthorized
use of the Company's products is difficult, and the Company is unable to
determine the extent to which unauthorized use of its software products exists.
In addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries, including countries the Company may
target to expand its sales efforts. Accordingly, there can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology.
RISKS OF PRODUCT DEFECTS; PRODUCT LIABILITY
As a result of their complexity, software products may contain undetected
errors or failures. Despite testing by the Company and testing and use by
current and potential customers, when first introduced or as new versions are
released, there can be no assurance that errors will not be found in new
products after commencement of commercial shipments. Given the critical
functions for which the Company's products are used, the result of any such
error could be significant financial loss to the customer. The occurrence of
such errors could result in loss of or delay in market acceptance of the
Company's products and significantly damage the Company's reputation, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure for potential claims based
on errors or malfunctions of its products. It is possible, however, that the
limitation of liability provisions contained in the Company's license agreements
may not be effective under the laws of certain jurisdictions. Although the
Company has not experienced any product liability claims to date, the sale and
support of the Company's products entails the risk of such claims. The Company
currently does not have insurance against product liability risks, and, if the
Company were to elect to obtain such insurance, there can be no assurance that
such insurance will be available to the Company on commercially reasonable terms
or at all. A product liability claim brought against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Product Development."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
The Company currently has no specific plan for using substantially all of
the proceeds of the Offerings. As a consequence, the Company will have the
discretion to allocate a large percentage of
12
<PAGE> 17
such proceeds to uses which the stockholders may not deem desirable, and there
can be no assurance that the proceeds can or will yield a significant return.
See "Use of Proceeds."
CONTROL BY PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS
Upon completion of the Offerings, the Company's officers, directors and
their affiliates will, in the aggregate, beneficially own approximately 57% of
the Company's outstanding Common Stock, assuming no exercise of options
outstanding (57% if the Underwriters' over-allotment options are exercised in
full). As a result, such persons, acting together, will have the ability to
control the vote on matters submitted to stockholders of the Company for
approval (including election of directors and any merger, consolidation or sale
of all or substantially all of the Company's assets) and to control the
management and affairs of the Company. Accordingly, such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company, impede a merger, consolidation, takeover or other
business combination involving the Company or discourage a potential acquiror
from making a tender offer or otherwise attempting to obtain control of the
Company. See "Management" and "Principal and Selling Stockholders."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to the Offerings, there has been no public market for the Common
Stock of the Company, and there can be no assurance that an active trading
market will develop upon completion of the Offerings or, if it does develop,
that such market will be sustained. The initial public offering price of the
Common Stock will be determined by negotiation among the Company, the Selling
Stockholders and the representatives of the Underwriters, and may not be
representative of the price that will prevail in the open market. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
The market price of the Common Stock after the Offerings may be
significantly affected by factors such as quarterly variations in the Company's
results of operations, the announcement of new products or product enhancements
by the Company or its competitors, technological innovation by the Company or
its competitors and general market conditions specific to particular industries.
In particular, the stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such fluctuations may
adversely affect the market price of the Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, as amended (the "Charter"), and
Bylaws, as amended (the "Bylaws"), contain certain provisions that may have the
effect of discouraging, delaying or preventing a change in control of the
Company or unsolicited acquisition proposals that a stockholder might consider
favorable, including provisions authorizing the issuance of "blank check"
preferred stock, providing for a Board of Directors with staggered, three-year
terms requiring super-majority voting to effect certain amendments to the
Charter and Bylaws, limiting the persons who may call special meetings of
stockholders, prohibiting stockholder action by written consent and establishing
advance notice requirements for nominations for election to the Board of
Directors or for proposing matters that can be acted upon at stockholders
meetings. Certain provisions of Delaware law may also have the effect of
discouraging, delaying or preventing a change in control of the Company or
unsolicited acquisition proposals. See "Description of Capital
Stock -- Anti-Takeover Effects of Provisions of the Company's Charter and
Bylaws" and "Description of Capital Stock -- Section 203 of the Delaware General
Corporation Law."
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<PAGE> 18
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE OF THE
COMMON STOCK
Sales of a substantial number of shares of Common Stock after the Offerings
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. Upon
completion of the Offerings, the Company will have 18,008,608 shares of Common
Stock outstanding based on shares outstanding as of June 30, 1996. Of these
shares, the 2,350,000 shares sold in the Offerings will be freely transferable
without restriction under the Securities Act, unless they are held by
"affiliates" of the Company as that term is used under the Securities Act and
the Regulations promulgated thereunder.
The remaining 15,658,608 outstanding shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are restricted securities within the meaning of Rule 144 under the
Securities Act. Approximately 20,000 of these shares of Common Stock will be
eligible for sale in the public market immediately upon the effective date of
the Registration Statement of which this Prospectus is a part (the "Effective
Date") in reliance on Rule 144(k) under the Securities Act. Beginning 90 days
after the Effective Date, an additional 20,000 of these shares will become
eligible for sale subject to the provisions of Rule 144 and Rule 701. Beginning
180 days after the date of this Prospectus, approximately 13,915,066 additional
shares will become eligible for sale subject to the provisions of Rule 144 or
Rule 701 upon the expiration of agreements not to sell such shares entered into
between the U.S. Underwriters and the International Underwriters and such
stockholders. Beginning 180 days after the date of this Prospectus,
approximately 1,584,236 additional shares subject to vested options as of the
date of this Prospectus will be available for sale subject to compliance with
Rule 701 and upon the expiration of agreements not to sell such shares entered
into between the U.S. Underwriters and the International Underwriters and such
stockholders. In addition, the Commission has proposed revisions to Rule 144 and
Rule 144(k), the effect of which would be to shorten the holding period under
Rule 144 from two years to one year and to shorten the holding period under Rule
144(k) from three years to two years. If enacted, these proposed revisions would
increase, potentially substantially, the number of shares that would be
available for sale in the public market 90 days after the Effective Date and 180
days after the date of this Prospectus. Any shares subject to lock-up agreements
may be released at any time without notice by the U.S. Underwriters and the
International Underwriters.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least two years is entitled to sell, within any
three-month period commencing 90 days after the Effective Date, a number of
shares that does not exceed the greater of (i) 1% of the then outstanding shares
of Common Stock (approximately 180,000 shares immediately after the Offerings)
or (ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale, subject to the filing of a Form 144 with
respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least three years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares prior to the Effective Date or who holds vested
options as of that date pursuant to a written compensatory plan or contract is
entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions, in each case commencing 90
days after the Effective Date. However, the Company and certain officers,
directors and other stockholders of the Company have agreed not to sell or
otherwise dispose of any shares of Common Stock of the Company for the 180-day
period after the date of this Prospectus without
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<PAGE> 19
the prior written consent of the U.S. Underwriters and the International
Underwriters. See "Underwriting."
As soon as practicable after the Effective Date, the Company intends to
file a registration statement on Form S-8 under the Securities Act to register
shares of Common Stock reserved for issuance under the 1989 Stock Option Plan,
the 1993 Stock Incentive Plan, the 1996 Stock Option Plan and the 1996 Employee
Stock Purchase Plan, thus permitting the resale of such shares by non-affiliates
in the public market without restriction under the Securities Act. Such
registration statements will become effective immediately upon filing.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts in the open market may
adversely affect the market price of the Common Stock offered hereby. See
"Shares Eligible for Future Sale."
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<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
being offered by the Company hereby at an assumed initial public offering price
of $14.00 per share are estimated to be approximately $25.1 million. The Company
will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."
The principal purposes of the Offerings are to obtain additional working
capital, to create a public market for the Company's Common Stock and to
facilitate future access by the Company to public equity markets. The net
proceeds to the Company are expected to be used for general corporate purposes,
including primarily working capital. The Company may also use a portion of the
net proceeds to fund acquisitions of complementary businesses, products or
technologies. Although the Company has in the past reviewed potential
acquisition opportunities, there are no current agreements or negotiations with
respect to any such transactions. Pending such uses, the net proceeds of the
Offerings will be invested in investment grade, interest-bearing instruments.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock,
although the Company has in the past repurchased shares of its capital stock
from certain of its stockholders. The Company currently does not intend to pay
dividends in the foreseeable future so that it may reinvest its earnings, if
any, in the development of its business. In addition, the Company's existing
line of credit prohibits the Company from paying cash dividends without the
lender's consent. See Note 4 of Notes to Financial Statements and "Certain
Transactions."
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<PAGE> 21
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1996 and the capitalization of the Company on a pro forma basis to give
effect to the conversion into Common Stock of all outstanding shares of
Preferred Stock and the capitalization of the Company as adjusted to give effect
to the sale by the Company of 2,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price $14.00 per share and
the receipt of estimated net proceeds therefrom. This table should be read in
conjunction with the consolidated financial statements and notes thereto and
"Selected Consolidated Financial Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term portion of capital lease obligations............ $ 155 $ 155 $ 155
Stockholders' equity:
Preferred Stock, $.001 par value; 5,000,000 shares
authorized, 3,083,334 shares issued and outstanding,
actual; no shares issued and outstanding, pro forma
or as adjusted....................................... 1,053 -- --
Common Stock, $.001 par value; 50,000,000 shares
authorized, 12,925,274 shares issued and outstanding,
actual; 16,008,608 shares issued and outstanding pro
forma; 18,008,608 shares issued and outstanding, as
adjusted(1).......................................... 2,340 3,393 28,533
Deferred stock compensation............................. (586) (586) (586)
Notes receivable from stockholders...................... (1,071) (1,071) (1,071)
Retained earnings....................................... 6,651 6,651 6,651
------ --------- -----------
Total stockholders' equity........................... 8,387 8,387 33,527
------ --------- -----------
Total capitalization............................ $8,542 $ 8,542 $33,682
====== ======== ==========
</TABLE>
- ---------------
(1) Excludes (i) 3,467,284 shares issuable upon exercise of options outstanding
as of June 30, 1996 having a weighted average exercise price of $1.68 per
share under the Company's 1989 Stock Option Plan and 1993 Stock Incentive
Plans, (ii) 106,000 shares issuable upon exercise of options granted from
July 1, 1996 to July 22, 1996 and (iii) 1,357,998 additional shares issuable
under the Company's Stock Plans. See "Management -- Stock Plans" and Notes 6
and 8 of Notes to Consolidated Financial Statements.
17
<PAGE> 22
DILUTION
At June 30, 1996, the Company's pro forma net tangible book value was $8.4
million or approximately $0.52 per share. Pro forma net tangible book value per
share represents the amount of the Company's stockholders' equity divided by
16,008,608 shares of Common Stock (on a pro forma basis to give effect to the
conversion of all shares of Preferred Stock upon completion of the Offerings)
outstanding at June 30, 1996. Net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Common Stock in the Offerings made hereby and the pro forma net
tangible book value per share of Common Stock immediately after completion of
the Offerings. After giving effect to the sale by the Company of 2,000,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $14.00 per share, and the application of the estimated
net proceeds therefrom, the pro forma net tangible book value of the Company as
of June 30, 1996 would have been $33.5 million or $1.86 per share. This
represents an immediate increase in net tangible book value of $1.34 per share
to existing stockholders and an immediate dilution in net tangible book value of
$12.14 per share to the purchasers of Common Stock in the Offerings, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................... $14.00
Pro forma net tangible book value per share as of June 30, 1996........ $0.52
Increase attributable to new investors................................. 1.34
Pro forma net tangible book value per share after the Offerings........... 1.86
------
Dilution per share to new investors....................................... $12.14
======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1996,
the differences between the existing stockholders and the purchasers of shares
in the Offerings (at an assumed initial public offering price of $14.00 per
share) with respect to the number and percent of shares purchased from the
Company, the total consideration and percent of total consideration paid and the
average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 16,008,608 89% $ 3,586,000 11% $ 0.22
New investors(1)............ 2,000,000 11 28,000,000 89 14.00
------ ----- ------ ---- -
Total..................... 18,008,608 100% $31,586,000 100%
====== ===== ====== =====
</TABLE>
- ---------------
(1) Sales by Selling Stockholders in the Offerings will reduce the number of
shares held by existing stockholders to 15,658,608 shares, or approximately
87% (15,306,108 shares or approximately 85%, if the U.S. Underwriters' and
International Underwriters' overallotment options are exercised in full) of
the total number of shares of Common Stock to be outstanding after the
Offerings and will increase the number of shares held by new investors to
2,350,000, or approximately 13% (2,702,500 shares, or approximately 15% if
the U.S. Underwriters' and International Underwriters' overallotment options
are exercised in full) of the total shares of Common Stock to be outstanding
after the Offerings. See "Principal and Selling Stockholders."
The foregoing tables and discussion assume no exercise of options after
June 30, 1996. Excludes (i) 3,467,284 shares issuable upon exercise of options
outstanding as of June 30, 1996 having a weighted average exercise price of
$1.68 per share under the Company's 1989 Stock Option Plan and 1993 Stock
Incentive Plan, (ii) 106,000 shares issuable upon exercise of options granted
from July 1, 1996 to July 22, 1996 and (iii) 1,357,998 additional shares
authorized for issuance under the Company's Stock Plans. To the extent that
outstanding options are exercised, there will be further dilution to new
investors. See "Capitalization," "Management -- Executive Compensation,"
"Management -- Stock Plans," and Notes 6 and 8 of Notes to Consolidated
Financial Statements.
18
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company should be
read in conjunction with the consolidated financial statements and the notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere herein. The consolidated statement of
income data for the years ended December 31, 1993, 1994 and 1995 and the
consolidated balance sheet data as of December 31, 1994 and 1995 are derived
from the Company's consolidated financial statements which have been audited by
Ernst & Young LLP, independent auditors, and included elsewhere in this
Prospectus. The consolidated statement of income data for the years ended
December 31, 1991 and 1992 and the consolidated balance sheet data as of
December 31, 1991, 1992 and 1993 are derived from audited consolidated financial
statements not included herein. The Company's consolidated statement of income
data for the six months ended June 30, 1995 and 1996 and the consolidated
balance sheet data as of June 30, 1996 are derived from the Company's unaudited
consolidated financial statements which are included elsewhere herein. The
unaudited financial statements have been prepared by the Company on a basis
consistent with the Company's audited consolidated financial statements, and in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position for such periods. Operating results for the
six-months ended June 30, 1996 are not necessarily indicative of the results of
operations to be expected in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues................................................. $1,246 $ 2,597 $ 5,783 $12,595 $24,738 $11,292 $17,947
Cost of revenues......................................... 241 457 1,507 2,660 2,915 1,125 1,865
Selling, general and administrative...................... 228 898 1,722 4,471 10,049 4,327 7,883
Research and development................................. 516 800 1,574 3,340 6,098 2,900 4,138
Nonrecurring charge...................................... -- 399 -- -- -- --
----- ----- ----- ------ ------ ------ ------
Total costs and expenses........................... 985 2,554 4,803 10,471 19,062 8,352 13,886
----- ----- ----- ------ ------ ------ ------
Income from operations................................... 261 43 980 2,124 5,676 2,940 4,061
Other income (expense), net............................ 40 3 (43) 15 31 21 (57)
----- ----- ----- ------ ------ ------ ------
Income before income taxes............................... 301 46 937 2,139 5,707 2,961 4,004
Provision for income taxes............................... 94 -- 220 498 2,258 1,172 1,521
----- ----- ----- ------ ------ ------ ------
Net income............................................... 207 46 717 1,641 3,449 1,789 2,483
Series B preferred stock redemption...................... -- -- -- -- (1,276) -- --
----- ----- ----- ------ ------ ------ ------
Net income attributable to common stockholders........... $ 207 $ 46 $ 717 $ 1,641 $ 2,173 $ 1,789 $ 2,483
===== ===== ===== ====== ====== ====== ======
Net income per share attributable to common stockholders:
Primary(1)............................................. $ 0.01 $ 0.00 $ 0.06 $ 0.10 $ 0.12 $ 0.10 $ 0.13
===== ===== ===== ====== ====== ====== ======
Fully diluted(1)....................................... $ 0.01 $ 0.00 $ 0.05 $ 0.09 $ 0.12 $ 0.09 $ 0.13
===== ===== ===== ====== ====== ====== ======
Shares used in per share calculations:
Primary(2)............................................. 15,852 15,649 13,008 16,354 18,404 17,853 19,565
===== ===== ===== ====== ====== ====== ======
Fully diluted(2)....................................... 15,852 15,649 14,516 17,866 18,476 19,364 19,586
===== ===== ===== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------- AT JUNE 30,
1991 1992 1993 1994 1995 1996
------ ------- ------- ------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 199 $ 751 $ 800 $ 3,235 $ 3,517 $ 1,905
Working capital (deficiency)............................... (209) 30 199 2,010 4,272 6,053
Total assets............................................... 508 1,719 3,027 8,885 12,848 17,999
Long-term portion of capital lease obligations............. 39 17 6 107 303 155
Stockholders' equity (deficit)............................. (8) (144) 600 3,114 5,766 8,387
</TABLE>
- ---------------
(1) Net income per share attributable to common stockholders for 1995 reflects
the decrease in net income attributable to common stockholders as a result
of the redemption of the Series B Preferred Stock in November 1995. Net
income per share before redemption was $0.19.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in computing net
income per share.
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in the forward-looking statements as a result of certain
factors, including, but not limited to those discussed in "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
The Company was founded in 1989 to develop, market and support
object-oriented, client/server software solutions for financial trading and risk
management. In February 1990, the Company commercially introduced its initial
product, the Infinity Data Model, and in 1992, the Company commenced marketing
the Infinity Fin++ Class Library (collectively, the "Infinity Platform"). In
addition, the Company commenced marketing Infinity Derivatives in 1992. The
Company's revenues have increased each year since inception, and Infinity has
been profitable on an annual basis since the year ended December 31, 1991.
The Company's total revenues consist of license revenues and service
revenues. License revenues are derived primarily from license fees for the
Infinity Platform and Infinity Derivatives and accounted for 79%, 77%, 72% and
71% of total revenues in the first six months of 1996 and for the 1995, 1994 and
1993 fiscal years, respectively. Service revenues are primarily derived from a
full range of services complementing the Company's products, including software
maintenance and support, training, consulting and co-development projects, and
accounted for 21%, 23%, 28% and 29% of total revenues in the first six months of
1996 and for the 1995, 1994 and 1993 fiscal years, respectively. Gross margin on
service revenues has been, and the Company expects that in the future it will
continue to be, significantly lower than gross margin on license revenues.
International revenues, which the Company defines as revenues derived from sales
outside of North America, accounted for 70%, 53%, 25% and 27% of total revenues
in the first six months of 1996 and for the 1995, 1994 and 1993 fiscal years,
respectively.
Although the Company has experienced increased revenue and been profitable
in each of its last five fiscal years, the Company does not believe prior growth
rates are sustainable or indicative of future operating results, and there can
be no assurance that the Company will be able to sustain revenue growth or
maintain profitability in the future. In addition, the Company intends to commit
substantial financial resources to expanding its business, including its sales
and support operations and product development infrastructure. As a result, the
Company does not expect to sustain the current level of operating margins in
future periods.
License revenues in any period are typically dependent upon licensing of
the Company's products for relatively large dollar amounts to a small number of
new or existing customers. The Company expects that licenses of its products to
a limited number of customers will continue to account for a large percentage of
revenues for the foreseeable future. Because of the mission critical role
addressed by the Company's products, the purchase of such products is a
strategic decision that generally requires approval at senior levels of
customers' organizations. In addition, the purchase of the Company's products
involves a significant commitment of customers' financial resources. For these
and other reasons, the sales cycle associated with the purchase of the Company's
products is typically complex, lengthy and subject to a number of significant
risks, including changes in customers' budgeting constraints and approval at
senior levels of customers' organizations, over which the Company has no
control.
Historically, the Company's revenues have been primarily generated through
its direct sales force. However, to provide marketing and sales opportunities
for the Company's direct sales force, and to expand the distribution of its
products, the Company has recently developed strategic
20
<PAGE> 25
relationships with a number of organizations, including systems integrators such
as IBM, third-party developers such as Axime and Diagram and service providers
such as Price Waterhouse. For example, two of the Company's six new customers
signed during the quarter ended June 30, 1996 were facilitated through the
Company's relationship with IBM. For their sales and marketing efforts, these
organizations are typically granted a discount off of the Company's standard
list price of products licensed by such organization or are paid a commission on
sales of licenses by Infinity. Product revenues and operating margins may
fluctuate in any period due to the mix of license revenues derived from sales
for which a discount is granted or for which commissions are paid.
License revenues less deferrals for warranty are recognized upon shipment
only if no significant vendor obligations remain and collection of the resulting
receivable is deemed probable. The license warranty revenues are recognized
ratably over the warranty period, generally 30 to 90 days. Service revenues from
customer maintenance fees for ongoing customer support and product updates are
recognized ratably over the maintenance term, which is typically twelve months.
Payments for maintenance fees are generally received in advance. Service
revenues from training and consulting are recognized when the services are
performed. Revenues from development agreements are recognized upon achievement
of contractual milestones or on a percentage of completion basis.
Until 1996, the Company's international sales were generally denominated
and collected in U.S. dollars. In the first half of 1996, international sales
were denominated in both U.S. dollars and foreign currencies. The Company
believes that an increasing portion of the Company's cost of revenues and
operating expenses will be incurred in foreign currencies. Although it is
impossible to predict future exchange rate movements between the U.S. dollar and
other currencies, it can be anticipated that to the extent the U.S. dollar
strengthens or weakens against other currencies, a substantial portion of the
Company's revenues, cost of revenues and operating expenses will be
commensurately lower or higher than would be the case in a more stable foreign
currency environment. Although the Company from time to time undertakes foreign
exchange hedging transactions to cover a portion of its foreign currency
transaction exposure, the Company does not attempt to cover all potential
foreign currency exposure.
During the first half of 1996, the Company recorded deferred compensation
of $625,000 in connection with certain stock options granted in 1996. Of that
amount, approximately $39,000 was expensed during the six months ended June 30,
1996 and the balance will be expensed ratably over the next four years as the
options vest.
21
<PAGE> 26
CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues,
consolidated statement of income data for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER ENDED
31, JUNE 30,
---------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
License revenues.................................... 71 % 72 % 77 % 78 % 79 %
Service revenues.................................... 29 28 23 22 21
---- ---- ---- ---- ----
Total revenues.............................. 100 100 100 100 100
Costs and expenses:...................................
Cost of revenues.................................... 26 21 12 10 10
Sales and marketing................................. 20 26 31 30 34
Research and development............................ 27 27 25 25 23
General and administrative.......................... 10 9 9 9 10
---- ---- ---- ---- ----
Total costs and expenses.................... 83 83 77 74 77
---- ---- ---- ---- ----
Income from operations................................ 17 17 23 26 23
Other income (expense), net........................... (1 ) -- -- -- (1 )
---- ---- ---- ---- ----
Income before provision for income taxes.............. 16 17 23 26 22
Provision for income taxes............................ 4 4 9 10 8
---- ---- ---- ---- ----
Net income............................................ 12 % 13 % 14 % 16 % 14 %
==== ==== ==== ==== ====
</TABLE>
REVENUES
The Company's revenues are derived from two sources, license revenues and
service revenues, including software maintenance and support, training,
consulting and co-development contracts. Total revenues were $17.9 million and
$11.3 million for the six months ended June 30, 1996 and June 30, 1995,
respectively, representing an increase of 58%. Total revenues increased to $24.7
million in 1995 from $12.6 million in 1994 and from $5.8 million in 1993,
representing increases of 96% and 117% in 1995 and 1994, respectively.
International revenues accounted for 70% and 45% of total revenues for the
six months ended June 30, 1996 and 1995, respectively. International revenue
accounted for 53%, 25% and 27% of total revenues in 1995, 1994 and 1993,
respectively. For fiscal year 1995 and thereafter, the majority of international
sales were made in either Europe or Japan with significant additional sales in
Australia and New Zealand. The more recent increases in international revenues
are primarily attributable to an increase in the Company's international sales
and marketing efforts and opportunities resulting from the imposition of new
regulatory reporting requirements. In particular, a significant portion of the
Company's 1995 and first quarter 1996 international revenues were attributable
to new European customers who began to respond to the requirements of the
European Capital Adequacy Directive in late 1994 through implementation of risk
management systems. In the second quarter of 1996, the Company's international
revenues from licensing were derived primarily from trading systems related
sales. In the future, the Company believes that demand for risk management
solutions will be significantly influenced by changes in capital adequacy and
regulatory reporting requirements. See "Risk Factors -- Risks Associated with
International Sales." The Company currently maintains international sales
offices in London, Paris and Tokyo, and intends to continue to expand its
international operations and enter additional international markets.
LICENSE REVENUES. License revenues were $14.1 million and $8.8 million for
the six months ended June 30, 1996 and 1995, respectively, representing an
increase of 60%. License revenues
22
<PAGE> 27
increased to $19.0 million in 1995 from $9.0 million in 1994 and from $4.1
million in 1993, representing increases of 111% and 120% in 1995 and 1994,
respectively. The increases were primarily due to growing sales to new customers
and increased follow-on sales to existing customers of the Company's new and
existing products.
SERVICE REVENUES. Service revenues were $3.8 million and $2.5 million for
the six months ended June 30, 1996 and 1995, respectively, representing an
increase of 55%. Service revenues increased to $5.7 million in 1995 from $3.6
million in 1994 and from $1.7 million in 1993, representing increases of 60% and
112% in 1995 and 1994, respectively. The increases were primarily attributable
to a larger installed base, partially offset by a decrease in co-development
revenues in 1995. From time to time, the Company has entered into, and may in
the future enter into, co-development contracts whereby the Company collaborates
in the development of a new product and generally owns the technology developed
from these efforts. Co-development revenues were $510,000 and $420,000 in 1994
and 1993, respectively, with no co-development revenues in 1995 or the first
half of 1996. The Company historically has experienced significant renewal rates
of maintenance contracts; however, some customers have licensed the source code
of the Company's products and have, on occasion, chosen to terminate the
maintenance contracts with the Company due to their in-house expertise.
Furthermore, the Company's service revenues have been dependent upon a
relatively small number of new and existing customers in each quarter. Based on
these and other factors, there can be no assurance that previous renewal rates,
and corresponding revenues, will continue in the future.
COST OF REVENUES
Cost of revenues consists primarily of personnel-related costs, including
facility and other overhead allocations incurred in providing on-site and
telephone support, consulting services and training to customers and personnel
costs attributable to co-development contracts in 1994 and 1993. Costs directly
attributable to license revenues are not material. Cost of revenues increased to
$1.9 million compared to $1.1 million, or 10% and 10% of total revenues, for the
six months ended June 30, 1996 and 1995, respectively. In 1995, 1994 and 1993,
cost of revenues were $2.9 million, $2.7 million and $1.5 million, or 12%, 21%
and 26% of total revenues, respectively. The increases in dollar amounts in each
subsequent period were primarily due to the increase in the number of customer
support personnel and related overhead costs necessary to support a larger
installed base. The decreases as a percentage of total revenues relate to the
completion of relatively low margin co-development contracts in 1994, as well as
high margin license revenues comprising a larger portion of total revenues in
each subsequent period. In addition, the Company intends to commit substantial
financial resources to expand its support operations. As a result, the Company
expects its cost of revenues to increase in the future, both in absolute dollar
amounts and possibly as a percentage of total revenues. All development costs
incurred in the research and development of software products and enhancements
to existing software products have been expensed as incurred. See Note 1 of
Notes to Consolidated Financial Statements.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses for sales and marketing personnel, travel and
entertainment, facilities and equipment costs and periodic third-party
commission expenses. Sales and marketing expenses increased to $6.2 million
compared to $3.3 million, or 34% and 30% as a percentage of total revenues, for
the six months ended June 30, 1996 and 1995, respectively. In 1995, 1994 and
1993, sales and marketing expenses were $7.7 million, $3.3 million and $1.1
million, or 31%, 26% and 20% of total revenues, respectively. The increases in
dollar amounts and as a percentage of total revenues in each subsequent period
were primarily attributable to costs associated with additional
23
<PAGE> 28
sales and marketing personnel, facilities expansion, higher sales commissions
associated with increased total revenues and increased marketing activities
domestically and internationally. The Company believes that such expenses will
increase in dollar amounts and possibly as a percentage of total revenues in the
future as the Company expands its sales and marketing staff at its corporate
headquarters and each major location in which the Company chooses to do
business. Commissions paid to third parties have varied significantly in the
past, and the Company believes these expenses will continue to be incurred from
time to time in varying amounts in the future.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of costs associated with development of new products and enhancement
of existing products, particularly salaries and other personnel-related
expenses, as well as facility and equipment costs. Research and development
expenses were $4.1 million and $2.9 million, or 23% and 25% as a percentage of
total revenues, for the six months ended June 30, 1996 and 1995, respectively.
In 1995, 1994, and 1993, research and development expenses were $6.1 million,
$3.3 million and $1.6 million, or 25%, 27% and 27% as a percentage of total
revenues, respectively. The increases in dollar amounts in each subsequent
period were primarily attributable to increases in the number of software
engineers and other personnel-related costs required to expand and enhance the
Company's product offerings. The Company believes that research and development
expenses will increase in dollar amounts and possibly as a percentage of total
revenues in the future.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel costs for finance, human resources and general
management, as well as professional fees and facility and equipment costs.
General and administrative expenses were $1.7 million and $1.0 million, or 10%
and 9% of total revenues, for the six months ended June 30, 1996 and 1995,
respectively. In 1995, 1994 and 1993, general and administrative expenses were
$2.4 million, $1.2 million and $580,000, or 9%, 9% and 10% as a percentage of
total revenues, respectively. The increases in dollar amounts were due to
increased staffing and professional fees necessary to manage and support the
Company's growth. The Company believes general and administrative expenses will
increase in dollar amounts, and possibly as a percentage of total revenues, in
the future as it expands its staffing to support the Company's anticipated
growth.
PROVISION FOR INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
effective tax rates for the years ended December 31, 1995, 1994 and 1993, were
40%, 23% and 24%, respectively. The Company expects its effective tax rate in
1996 to decrease to 38% and has accrued its income tax liability at that rate
through the first six months of 1996. This reduction is primarily attributable
to benefits received after establishing a foreign sales corporation. The 1995
effective tax rate of 40% differs from the federal statutory rate primarily due
to state income taxes, partially offset by certain research and development tax
credits. The lower effective tax rates in 1994 and 1993 are attributable
primarily to the utilization of tax credits and a reduction in the valuation
allowance in 1994.
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth certain unaudited statement of income data
for each of the six quarters in the period beginning January 1, 1995 and ending
June 30, 1996, as well as such data expressed as a percentage of the Company's
total revenues for the periods indicated. This data has been derived from
unaudited financial statements that, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such information. Such data should be read in conjunction
with the Company's annual audited consolidated financial statements and the
notes thereto.
24
<PAGE> 29
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
License revenues.......................... $ 3,984 $ 4,832 $ 4,805 $ 5,412 $ 6,435 $ 7,683
Service revenues.......................... 1,155 1,321 1,682 1,547 1,769 2,060
------ ------ ------ ------ ------ ------
Total revenues..................... 5,139 6,153 6,487 6,959 8,204 9,743
Costs and expenses:.........................
Cost of revenues.......................... 512 613 905 885 791 1,074
Sales and marketing....................... 1,580 1,757 2,156 2,200 2,625 3,549
Research and development.................. 1,456 1,444 1,512 1,686 1,895 2,243
General and administrative................ 448 542 640 726 826 883
------ ------ ------ ------ ------ ------
Total costs and expenses........... 3,996 4,356 5,213 5,497 6,137 7,749
------ ------ ------ ------ ------ ------
Income from operations...................... 1,143 1,797 1,274 1,462 2,067 1,994
Other income (expense), net................. 7 14 (18) 28 (79) 22
------ ------ ------ ------ ------ ------
Income before provision for income taxes.... 1,150 1,811 1,256 1,490 1,988 2,016
Provision for income taxes.................. 455 717 496 590 756 765
------ ------ ------ ------ ------ ------
Net income.................................. 695 1,094 760 900 1,232 1,251
Series B preferred stock redemption......... -- -- -- (1,276) -- --
------ ------ ------ ------ ------ ------
Net income (loss) attributable to common
stockholders.............................. $ 695 $ 1,094 $ 760 $ (376) $ 1,232 $ 1,251
====== ====== ====== ====== ====== ======
Net income (loss) per share attributable to
common stockholders(1).................... $ 0.04 $ 0.06 $ 0.04 $ (0.02) $ 0.06 $ 0.06
Shares used to compute net income (loss) per
share(2).................................. 17,308 18,398 18,715 17,079 19,527 19,602
AS A PERCENTAGE OF REVENUES:
Revenues:
License revenues.......................... 78% 79% 74% 78% 78% 79%
Service revenues.......................... 22 21 26 22 22 21
------ ------ ------ ------ ------ ------
Total revenues..................... 100 100 100 100 100 100
Costs and expenses:
Cost of revenues.......................... 10 10 14 13 10 11
Sales and marketing....................... 31 29 33 32 32 36
Research and development.................. 28 23 23 24 23 23
General and administrative................ 9 9 10 10 10 9
------ ------ ------ ------ ------ ------
Total costs and expenses........... 78 71 80 79 75 79
------ ------ ------ ------ ------ ------
Income from operations...................... 22 29 20 21 25 21
Other income (expense), net................. -- -- -- -- (1) --
------ ------ ------ ------ ------ ------
Income before provision for income taxes.... 22 29 20 21 24 21
Provision for income taxes.................. 8 11 8 8 9 8
------ ------ ------ ------ ------ ------
Net income.................................. 14% 18% 12% 13% 15% 13%
====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) The following table sets forth the net income per share before the Series B
preferred stock redemption:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net income per share before Series B
preferred stock redemption........... $ 0.04 $ 0.06 $ 0.04 $ 0.05 $ 0.06 $ 0.06
Shares used to compute net income per
share before Series B preferred stock
redemption........................... 17,308 18,398 18,715 19,197 19,527 19,602
</TABLE>
(2) For an explanation of the number of shares used to compute net income (loss)
per share. See Note 1 of Notes to Consolidated Financial Statements.
25
<PAGE> 30
REVENUES. Total revenues have increased each consecutive quarter during
the last six quarters to $9.7 million in the second quarter of 1996 from $5.1
million in the first quarter of 1995. The increase was primarily attributable to
increased sales of new and existing products to new customers and increased
follow-on sales to existing customers. License revenues were relatively flat in
the quarter ended September 30, 1995 from the previous quarter due to seasonal
fluctuations the Company has typically experienced and expects it will continue
to experience. During the quarter ended June 30, 1996, license revenues
facilitated by IBM accounted for 42% of license revenues and 33% of total
revenues. Additionally, the Company's growth in its installed base has
contributed to increased maintenance service revenues in each consecutive
quarter. The decrease in service revenues in the quarter ended December 31, 1995
relates to lower revenues recognized on consulting contracts completed during
that period.
COST OF REVENUES. Cost of revenues decreased in the quarter ended March
31, 1996 from the previous two quarters due to the completion of low-margin
consulting contracts in the quarter ended December 31, 1995. The increases in
cost of revenues as a percentage of total revenues in the quarters ended
September 30, 1995 and December 31, 1995 related to increased consulting
activity in such periods.
OPERATING EXPENSES. Operating expenses increased in absolute dollars in
each consecutive quarter over the last six quarters primarily as a result of
increased staffing and other personnel-related expenses to support the Company's
growth. In the quarter ended June 30, 1996, sales and marketing expenses
increased in dollar amount and as a percentage of total revenues due to
additional sales and marketing personnel and increased sales commissions. Sales
and marketing expenses in the last half of 1995 increased as a percentage of
total revenues due to third-party commissions on certain sales and, to a lesser
extent, an increase in sales and marketing personnel and facilities related
expenses. Between the first and second quarter of 1995, research and development
staff levels were unchanged and sales and marketing staff levels declined
slightly, while total revenues grew. This resulted in a decline in these
expenses as a percentage of total revenues. However, the Company expects
operating expenses to increase in total dollar amounts and possibly as a
percentage of total revenues in the future.
OTHER INCOME (EXPENSE), NET. Other income (expense), net consists
primarily of interest income earned on the Company's cash and cash equivalents,
interest expense on capital equipment lease lines and, in the quarter ended
March 31, 1996, a loss on disposal of furniture and equipment under capital
lease obligations related to the Company's headquarters facility relocation.
VARIABILITY OF QUARTERLY RESULTS
The Company's revenues and operating results have fluctuated significantly
in the past, and are likely to continue to fluctuate significantly in the
future, on an annual and quarterly basis. Fluctuations in the Company's revenues
and results of operations may result from a number of factors, many of which are
beyond the Company's control, including (i) the relatively long sales cycle of
three months to over one year for the Company's software products, (ii) the
timing and size of the Company's individual license transactions, and, in
particular, the dependence of the Company's revenues in any quarter on the sale
of a limited number of large dollar licenses, (iii) the Company's typical
recognition of a significant portion of its quarterly revenues in the last
month, weeks or days of the quarter, (iv) the relatively high percentage of
total revenues derived from product revenues versus service revenues, (v) the
timing of the introduction of new products or product enhancements by the
Company and its competitors, (vi) the deferral of significant revenues until
completion or acceptance of certain customized portions of software required by
any individual license transaction, (vii) changes in customer budgets, (viii)
seasonality of technology purchases by customers, (ix) the mix of revenues
derived from the Company's direct sales force and various distribution and
marketing channels and between domestic and international customers, (x)
currency exchange rate fluctuations, (xi) changes in applicable government
regulations, (xii) the untimely loss of key sales personnel, (xiii) changes in
relationships with strategic partners
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and (xiv) general economic conditions, particularly those which affect the
Company's targeted customer base.
The Company historically has operated with little backlog because its
products are generally shipped as orders are received. As a result, license
revenues in any quarter depend on the volume and timing of, and the Company's
ability to fill, orders received in that quarter. In addition, a relatively high
percentage of the Company's expenses is fixed in the short term because the
Company's expense levels are based, in part, on its expectations as to future
revenues. As a result, if revenues fall below expectations, operating margins
are likely to be adversely affected.
Due to the foregoing and other factors, the Company believes that its
quarterly and annual revenues, expenses and operating results could vary
significantly in the future and that period-to-period comparisons should not be
relied upon as indications of future performance. Because of the above factors,
it is possible that the Company's operating results will be below the
expectations of stock market analysts and investors in some future quarter,
which would have a severe adverse effect on the price of the Company's stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily by cash generated
from operations and through private sales of preferred equity securities. For
the six months ended June 30, 1996 approximately $506,000 of cash was used in
operations and in the 1995, 1994 and 1993 fiscal years approximately $2.0
million, $2.9 million, and $604,000, respectively, of cash was generated from
operations. Cash used in operations in the six months ended June 30, 1996 was
primarily due to increases in accounts receivable offset by net income and
increases in deferred revenue and accounts payable. In 1995, cash generated from
operations was primarily attributable to net income, partially offset by an
increase in accounts receivable. In 1994 and 1993, cash generated from
operations was primarily attributable to net income and increases in deferred
revenues, partially offset by increases in accounts receivable.
For the six months ended June 30, 1996 and in the 1995, 1994 and 1993
fiscal years, investing activities consisted primarily of purchases of property
and equipment. In those periods, the Company used approximately $1.0 million,
$650,000, $569,000 and $271,000, respectively, of cash to purchase property and
equipment, primarily consisting of personal computers, furniture and other
office equipment. While the Company has no material capital equipment
commitments, the Company anticipates that its planned purchases of capital
equipment and facilities expansion in the last half of 1996 will require
additional expenditures of approximately $1.3 million. Additionally, the Company
expects that the rate of purchases of property and equipment will increase as
the Company's employee base grows. As of June 30, 1996, the Company's principal
commitments consisted primarily of borrowings under a lease line of credit for
equipment purchases and its obligations under leases for office facilities. See
Note 5 of Notes to Consolidated Financial Statements.
In 1995, financing activities included the repurchase of preferred stock
from a former employee and founder of the Company for $1.3 million. See Note 6
of Notes to Consolidated Financial Statements.
At June 30, 1996, the Company had $1.9 million in cash and cash equivalents
and $6.1 million of working capital. The Company also had available a $3.0
million working capital line of credit agreement, secured by accounts
receivable. The line of credit bears interest at 30-day commercial paper plus
2.9% and drawings are available up to 80% of eligible receivables. There were no
borrowings under the line of credit at June 30, 1996.
Due to the relatively large dollar size of individual sales, the fact that
the Company's accounts receivable from license revenues have been generated
within the last month, weeks and days of the quarter and the significant
international component of sales, the Company has experienced significant
fluctuations in its average days sales outstanding, and Company believes that
such
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<PAGE> 32
fluctuations will continue in the future and will continue to affect its
liquidity, working capital and financial condition. The Company calculates its
quarterly days sales outstanding as the average monthly accounts receivables
divided by total revenue plus the net change in deferred revenue in the period
multiplied by the number of days in the quarter. The Company believes this
method of computing days sales outstanding and the fluctuations experienced
period to period accurately reflects its business operations. Days sales
outstanding according to this method at June 30, 1996 and December 31, 1995 were
81 days and 65 days, respectively. As of July 15, 1996, days sales outstanding
decreased to 58 days due to cash receipts.
The Company believes that the net proceeds from the sale of the Common
Stock offered hereby, together with its current cash balances and cash available
under its lines of credit, will be sufficient to meet its working capital and
capital expenditure requirements for at least the next twelve months. Management
expects that, in the future, cash in excess of current requirements will
continue to be invested in investment grade, interest bearing securities.
However, future operations may require the Company to obtain additional equity
or debt financing. There can be no assurance that additional financing will be
available when needed on terms favorable to the Company, or at all. If adequate
funds are not available or are not available on acceptable terms, the Company
may be unable to fund its anticipated expansion, take advantage of acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
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BUSINESS
Infinity develops, markets and supports object-oriented, client/server
platform and solutions software for financial trading and risk management.
Founded in 1989, Infinity currently has more than 35 customers around the world,
consisting primarily of large banks and other financial institutions with
sophisticated trading operations and risk management needs.
Infinity's primary product is the Infinity Platform, which provides
customers with a foundation to rapidly develop, deploy and modify trading and
risk management systems in response to the changing requirements of the
marketplace. The Infinity Platform allows financial institutions and
corporations to build applications to process, store, integrate and analyze
their traded instrument portfolios. Infinity also offers Infinity Derivatives,
solutions software for derivatives trading, which enables the customer to
integrate "front-office" trading activities such as pricing, deal capture and
position-keeping with "back-office" operations such as trade confirmations,
payments processing and general ledger accounting. Infinity has introduced and
plans to release in the second half of 1996 Infinity RiskView, which is designed
to facilitate customers' development of risk management systems. These solutions
are built with the Infinity Platform and are designed to work together with the
Infinity Platform to automate a range of transaction processing and decision
support activities.
INDUSTRY BACKGROUND
A number of factors have contributed to the increased demand for trading
and risk management systems:
INCREASES IN TRADING VOLUME AND COMPLEXITY
In recent years, global financial markets have been transformed by
significant increases in trading volumes. For example, the Bank for
International Settlements (BIS) estimates that the current daily turnover in the
foreign exchange market is $1.2 trillion, almost double the daily volume in
1989. Moreover, approximately $6.0 trillion in funds pass through the world's
payment and settlement networks each day. In addition to these increasing
volumes, today's global trading environment is characterized by the common use
of derivatives and other complex financial instruments. A survey of the
over-the-counter (OTC) derivatives market published by the BIS estimated the
total value of outstanding OTC contracts at $41.0 trillion as of March 31, 1995.
Financial institutions use derivative instruments in their own businesses to
generate profits and to hedge the risks they incur in connection with their own
trading and asset/liability activities. These institutions also use derivatives
on behalf of clients who face similar risks in the management of their
businesses. This significant increase in trading volume and complexity has led
to a fundamental shift in how financial assets are managed.
FUNDAMENTAL SHIFT IN MANAGEMENT OF FINANCIAL ASSETS
Traditionally, financial assets were held to maturity, but in today's
environment of abundant data flow and low transaction costs, many assets are
actively traded and are thus assigned a market value. By shifting their focus to
market value, leading financial institutions have changed their approach to
understanding and managing risk and return. These firms have adopted a value
management approach using "mark-to-market" accounting to value their traded
instrument portfolios and "value at risk" methodologies to quantify the risks
associated with those portfolios. The value management approach originated in
the sophisticated derivatives trading operations of leading banks and is
increasingly being viewed as critical by institutions seeking to remain
competitive in today's financial markets by effectively balancing risk and
return.
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FINANCIAL CRISES INVOLVING DERIVATIVES AND OTHER COMPLEX FINANCIAL INSTRUMENTS
A number of well-publicized financial crises have illustrated the growing
importance of more rigorous management and oversight of traded instrument
portfolios for both financial and non-financial institutions. The 1994
bankruptcy of Orange County, California resulted from over $1.6 billion in
losses associated with complex financial instruments. The 1995 collapse of the
British merchant bank Baring Brothers resulted from a derivatives and futures
trading strategy which cost the bank $1.2 billion. More recently, the Japanese
trading house Sumitomo Corporation lost a reported $1.8 billion in copper
trades, including options and futures trades. A lack of both operational
controls and risk management oversight are significant contributing factors to
the losses incurred in connection with the use of these complex financial
instruments. These events have caused financial institutions to focus on risk
management and operational controls, and have also resulted in closer regulatory
scrutiny of trading activities.
CHANGING REGULATORY REPORTING REQUIREMENTS
Regulatory bodies worldwide are moving toward more stringent reporting
requirements for traded instrument portfolios. Mark-to-market accounting and
value at risk methodologies are being widely adopted by regulators as a
reporting standard for traded instrument portfolios. The American Banker
Association estimates that the current cost of compliance with regulatory
reporting requirements for member banks is $14.0 billion per year, an amount
which could increase in response to emerging reporting requirements. For
example, commercial banks in the United States are now required to use
mark-to-market accounting, and European banks must use value at risk
methodologies to quantify the risks in their portfolios.
SIGNIFICANT SOFTWARE AND SYSTEMS CHALLENGE
Increases in trading volume and complexity, a shift to value management and
changing regulatory requirements are imposing heavy demands on the systems
infrastructures of many financial institutions. Many existing trading systems
cannot support the higher trading volumes and the constant innovation in the
derivatives markets. Banks are seeking to replace their existing trading systems
with more robust, adaptable technology that can process high volumes of complex
instruments in a secure environment. At the same time, financial institutions
face the need to implement firmwide risk management systems that provide a
comprehensive view of the aggregated positions and risks of trading portfolios.
The software and systems challenges that need to be met in order to achieve
these objectives are significant. To the Company's knowledge, only a few of the
most sophisticated banks and trading houses have successfully implemented fully
operational firmwide risk management systems.
NEED TO INTEGRATE DATA FROM MULTIPLE, DISPARATE SYSTEMS
One of the most significant challenges in building a firmwide risk
management system is to standardize and consolidate the transaction data of
trading activities in order to aggregate exposures and quantify risk. Typically,
different systems have been put in place for managing different trading "books."
Each book can represent a different asset class, currency or trading center.
Risk must be aggregated first for the trading book, which can contain thousands
of positions, and then across all trading books to generate a comprehensive,
easily understandable picture of firmwide risks and exposures. Often, within a
single institution, dozens of different computer systems capture and process
trading books. These systems range from internally developed spreadsheets to
centralized MIS systems to point solutions from third-party vendors. They
frequently are located in multiple trading centers, use different data sets,
database technologies and data dictionaries, and run on a variety of hardware
platforms and operating systems. Integrating these data is a significant
technological and operational challenge that must be met in order to develop
effective risk management and regulatory reporting systems.
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INCREASED INVESTMENT IN TRADING AND RISK MANAGEMENT TECHNOLOGY
In response to these challenges, financial institutions worldwide are
investing financial and other resources in the development and acquisition of
trading and risk management technology. In a Tower Group study, worldwide
internal and external expenditures for hardware, software and services for risk
management systems were estimated at over $3.0 billion in 1994 and are projected
to grow to $4.3 billion by the year 2000. According to the same study, nearly
two thirds of all banks were in the process of implementing an enterprise-wide
risk management system, or considered implementation a high priority. In
addition, a recent Ernst & Young LLP bank survey indicated that a majority of
the top 100 U.S. banks plan to increase their investment in risk management
technology.
INADEQUACY OF MANY IN-HOUSE AND VENDOR SYSTEMS
Traditionally, financial institutions have licensed off-the-shelf solutions
where they exist and have internally developed those systems that are not
readily available or that require a unique understanding of the firm's needs.
Internally-developed systems, while able to accommodate proprietary techniques,
are often costly, time-consuming and difficult to complete. Large-scale in-house
development projects risk not being completed successfully despite years of
effort and millions of dollars of investment. Third-party vendor solutions,
although generally less costly and faster to deploy, often provide only a subset
of required functionality, lacking one or more of front-to-back office
integration, cross-instrument processing or data warehousing capabilities. In
addition, they are typically closed, black box solutions that cannot readily
accommodate changing market requirements or proprietary instruments and pricing
methodologies.
THE FINANCIAL TRADING AND RISK MANAGEMENT SOFTWARE MARKET OPPORTUNITY
These challenges create an opportunity for an open, flexible technology
platform that can support the rapid deployment of trading and risk management
functionality without sacrificing flexibility, customizability or control. To
address fully the requirements of financial institutions and other organizations
with sophisticated trading operations and risk management needs, the Company
believes that this technology platform must:
- provide a framework for integrating data from multiple, disparate trading
systems into a centralized data warehouse for internal risk management
and regulatory reporting requirements;
- accommodate financial innovation on the trading desk while ensuring
proper financial and operational controls;
- support evolving, proprietary approaches to pricing financial instruments
and quantifying the associated risks; and
- accelerate the delivery time for new applications while preserving an
integrated trading, processing and risk management environment.
THE INFINITY SOLUTION
Infinity believes that its product family provides market-proven,
industry-leading platform and solutions software to meet the challenges of
trading and risk management that have not been adequately addressed by either
internally developed or commercially available systems. The Infinity Platform,
consisting of the Infinity Data Model and the Infinity Fin++ Class Library,
provides customers with an object-oriented foundation for developing a wide
variety of client/server financial applications, from front-to-back office
trading systems to global market and credit risk management systems. Infinity
Derivatives is a real-time derivatives trading system that provides support for
the entire life cycle of a trade. Infinity RiskView, expected to be released in
the second half of 1996, in conjunction with the Infinity Platform, is designed
to provide a robust infrastructure that facilitates the construction of firmwide
risk management systems.
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Infinity's product family provides the following benefits:
ROBUST PLATFORM FOR APPLICATION DEVELOPMENT
The Infinity Platform's high degree of flexibility, which results primarily
from its object-oriented design and the ready availability of a large set of
market-tested C++ objects, enables customers to build and modify applications
and systems quickly and efficiently in order to keep pace with financial
innovation while preserving data integrity and compatibility. This robust
platform enables in-house developers to focus on applications, without the
expense and burden of developing and maintaining foundation technology. In
addition, customers may choose to implement a variety of third-party and
custom-built applications with confidence that they will be fully compatible
with the Infinity Platform. The Infinity Platform is also highly extensible,
designed to expand readily to accommodate new financial instruments, new
analytics or new reports with little or no impact on existing processes or
applications.
CONSOLIDATED AND INTEGRATED DATA FOR FIRMWIDE RISK MANAGEMENT
Firmwide risk management requires a comprehensive data source, aggregated
from the many disparate pools of data that a financial institution typically
generates through its trading activities. The Infinity Platform consolidates
trading and market data from a firm's separate, legacy computer systems located
throughout the world and generates an integrated data set that provides the
basis for informed decision-making. The Company intends to enhance these
capabilities with the release of Infinity RiskView, which will include Infinity
RiskView Objects, a C++ class library designed specifically for the development
of risk management applications, and Infinity RiskView Mapper, which will
facilitate transfer and aggregation of data from existing trading and operations
systems.
IMPROVED TIME TO MARKET FOR NEW SYSTEMS AND APPLICATIONS
Customers can use the Infinity Platform and Infinity Derivatives as an
off-the-shelf derivatives trading system that can be quickly implemented from
front-to-back office, while maintaining the flexibility to add new applications
as market requirements change. The Infinity Platform accelerates the development
process and improves developer productivity, largely due to the benefits of the
C++ object-oriented programming language and the large library of market-tested,
ready-to-use C++ objects that can be used to build new customized applications.
By accelerating the pace of application development, customers can reduce the
time to market for new derivative products, new trading processes and new
pricing or risk management methodologies.
REDUCED COSTS THROUGH ENHANCED EFFICIENCY, PRODUCTIVITY AND SECURITY
The Infinity Platform and Infinity Derivatives can enhance the efficiency,
productivity and security of a trading operation. By eliminating duplicative
data entry and paperwork normally associated with such activities as deal entry,
confirmations, settlement, reconciliation and accounting, Infinity's products
improve operational efficiency while reducing costs. In addition, the automation
of many tasks that were previously done by hand increases back-office
productivity and greatly reduces the opportunity for error and its attendant
costs. Finally, a customer's ability to monitor trading activities on a
real-time basis contributes to enhanced security, and the system's ability to
generate an audit trail can help detect and minimize losses associated with
trading positions that exceed authorized limits.
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THE INFINITY STRATEGY
Infinity's objective is to establish itself as the leading worldwide
provider of trading and risk management platform and solutions software.
Infinity's strategy includes the following key elements:
ESTABLISH THE INFINITY PLATFORM AS AN INDUSTRY STANDARD
Infinity seeks to establish the Infinity Platform as a standard for the
development of trading and risk management systems. To achieve this objective,
Infinity licenses its Infinity Data Model and Infinity Fin++ Class Library to
banks and other financial institutions, as well as to independent software
development companies and systems integrators who use it as a foundation for
developing trading and risk management systems and products. Infinity has
established its Business Partners Program to attract and support third-party
development and consulting partners, as well as a network of trained consulting
engineers who provide custom development using the Infinity Platform. The
Infinity Platform was designed to be easily adopted as a standard through its
use of widely accepted technologies including the C++ programming language,
relational database management systems from Oracle and Sybase, and the UNIX and
Windows NT operating systems. This approach typically means the Infinity
Platform is compatible with its customers' internal information technology
standards, and enables customers and partners to leverage a large pool of
engineers trained in these technologies.
EXPAND INFINITY PRODUCT OFFERINGS
Infinity seeks to increase its penetration of the market for trading and
risk management software through selected new product offerings that target
rapidly expanding or technically challenging segments of the market. For
example, through its introduction and scheduled release of Infinity RiskView in
the second half of 1996, Infinity is seeking to respond to the growing demand
from its customer base for scaleable, flexible development platforms designed
specifically for firmwide risk management systems. In addition, the Company
believes that there are significant opportunities for high volume trading
systems in fixed income, equities and foreign exchange.
TARGET INITIAL SALES OF NEW PRODUCTS TO SOPHISTICATED CUSTOMERS
The Company has adopted a strategy of directing initial sales of its new
products at those more demanding and sophisticated customers as a means of
obtaining the most rigorous and challenging evaluation of new product
performance and functionality. These more sophisticated institutions generally
trade and manage the most diverse and complex set of financial instruments and
have very high trading volumes, which provide the greatest opportunity for the
Company to evaluate, obtain feedback and subsequently enhance its products. The
Company also establishes its ability to provide tested solutions by
demonstrating that its products can meet the needs of the most sophisticated and
demanding users in a particular market or for a specific application. Successful
development of the Company's products with selected leaders in particular
markets is intended to better enable the Company to subsequently penetrate such
markets through sales to other customers, who the Company believes often follow
market leaders in selecting systems solutions for their trading and risk
management needs.
BROADEN CUSTOMER BASE
The Company is seeking to broaden its customer and installed product base
by targeting new geographic markets and industries and through the sale of
additional and new products to different groups within existing customer
organizations. The Company intends to leverage its expertise and reputation in
the banking industry into organizations in other industries, such as insurance
companies, investment management companies, treasury departments of large
corporations and domestic and foreign government entities. In addition to
commercial centers located in North
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America, Western Europe, Japan and Australia, where the Company has initially
targeted its sales and marketing efforts, the Company believes that there are a
number of other geographical regions throughout the world that represent
significant opportunities to broaden its customer base. Once Infinity has made
an initial product sale within an organization, Infinity seeks to expand this
initial relationship through licensing of additional seats and sites, as well as
sales of products to other functional groups within the organization.
DEVELOP AND LEVERAGE STRATEGIC BUSINESS RELATIONSHIPS
Infinity has focused on developing strategic third-party relationships with
companies that provide consulting, software development and implementation
services. These relationships enable Infinity to leverage the technical
expertise of its partners, to access an additional sales and marketing channel
and to further enhance its efforts to establish the Infinity Platform as a
standard. Infinity has developed its Business Partner Program to pursue and
coordinate its activities with these strategic partners. Participants in the
Company's Business Partner Program include IBM and Price Waterhouse. For
Infinity customers, these relationships provide a network of consultants,
professional developers, and system integrators who can address specialized
market needs with directly relevant expertise. In addition, Infinity customers
can select from several third-party applications developed using the Infinity
Platform.
INTEGRATE SOPHISTICATED FINANCIAL ENGINEERING WITH ADVANCED INFORMATION
TECHNOLOGIES
By leveraging its core competencies in financial engineering and
information technology, Infinity seeks to provide solutions to its customer base
that embody the most current state of the market for financial instruments and
that utilize the most advanced information technologies. For example, the
Company's products integrate a distributed N-tier client/server architecture and
C++ object-based programming with advanced instrument pricing algorithms and
risk management methodologies. To maintain its leadership position, Infinity has
built a professional development and marketing staff that combines highly
advanced technological skills with experience in complex financial instruments.
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MARKETS AND CUSTOMERS
Infinity currently markets its products primarily to large banks and other
financial institutions located throughout the world. Within each of these
organizations, Infinity seeks to identify and approach several different groups
of potential customers: trading, accounting and operations professionals, risk
managers and information technology professionals.
Infinity has licensed its products to more than 35 financial institutions
and corporations worldwide. Because the Company generally does not have
long-term sales contracts with its customers, there can be no assurance that
relationships with these or other customers will continue. The following is a
list of the Company's customers with active licenses or contracts as of June 30,
1996:
<TABLE>
<S> <C>
ABN-AMRO Bank, N.V. Hitachi Information Systems
Bank Gesellschaft IBM Corporation
Bank of Montreal ING/Barings
Berliner Hannoversche J. Henry Schroders Wagg & Co., Ltd.
Softwareentwicklungsgesellschaft OHG J.P. Morgan & Company Inc.
Canadian Imperial Bank of Mitsubishi Trust & Banking Corp.
Commerce/Wood Gundy F.P. National Australia Bank
Chase Manhattan Bank New Zealand Treasury
Commerzbank AG Norddeutsche Landesbank Girozentrale
Compagnie Parisienne de Reescompte Price Waterhouse LLP
(CPR) Informatique Royal Bank of Canada
Credit Lyonnais Santander Investment SA
DePfa - Bank of Europe Plc Sanwa Financial Products Co., L.P.
Deutsche Bank Smith Barney, Inc.
Deutsche Genossenschaftsbank SunTrust Bank
Diagram SA The Sumitomo Bank, Ltd.
Enron, Corp. The Tokai Bank
Fleet Services Corp. Unibank
Fuji Bank Westdeutsche Landesbank Girozentrale
Greenwich Capital Markets
</TABLE>
During fiscal year 1995, ABN-AMRO Bank accounted for 14% of the Company's
total revenues, and during fiscal year 1994, Canadian Imperial Bank of
Commerce/Wood Gundy F.P., National Australia Bank and Chase Manhattan Bank
accounted for 18%, 15% and 10%, respectively. For the six months ended June 30,
1996, no single customer accounted for greater than 10% of the Company's total
revenues.
The following examples illustrate the use of Infinity's products by its
customers:
INTEGRATED TREASURY SYSTEM IMPROVES RISK MANAGEMENT
A diversified banking group based in the Asia Pacific region standardized
on the Infinity Platform and Infinity Derivatives as the foundation for its
global treasury operation. The system will ultimately support 500 users
worldwide, and will allow the bank to achieve integrated trading and risk
management for both high volume and derivatives instruments. The bank is
currently completing a development of a foreign exchange trading system based on
the Infinity Platform, and has used the Infinity Platform to develop a risk
management data warehouse to be used in conjunction with in-house developed and
third-party analytic packages for risk management. The new integrated system
will help the bank manage market, credit and liquidity risks, and will support
the bank's initiatives to become a leader in derivatives trading.
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EXOTICS PROCESSING SYSTEM FACILITATES INNOVATION WHILE ENABLING FINANCIAL
CONTROL
One of the largest commercial banks in the world licensed the Infinity
Platform to manage processing of exotic transactions, such as ratchet swaps and
cumulative caps, for its global derivatives business. The system developed by
the bank using the Infinity Platform enables it to offer customized derivatives
that respond to its customers' changing risk management requirements. This
system is used to capture the details of these exotic products and allows the
bank to automate its processing requirements in a secure, integrated
environment.
AUTOMATED DERIVATIVES PROCESSING REDUCES COSTS AND IMPROVES EFFICIENCY
A large North American commercial bank used Infinity Derivatives together
with work flow management software from a third party to automate its
derivatives trading operation from front to back office. The bank expects the
system to reduce costs, enhance the bank's flexibility in back office
management, lower operational risks and improve financial control. It will
eliminate paper-based deal entry, confirmation and payments. The bank plans to
extend the new architecture to provide back-office support for its foreign
exchange and money markets treasury groups.
INFINITY PRODUCTS AND TECHNOLOGY
The Company's products currently include the Infinity Platform, comprising
the Infinity Data Model and the Infinity Fin++ Class Library, and Infinity
Derivatives. The Company has also introduced Infinity RiskView, which is
scheduled to be released in the second half of 1996. The following diagram
illustrates the relationship of the Company's products:
Diagram of Relationship of Infinity Products
THE INFINITY PLATFORM
The Infinity Platform is the foundation of the Infinity family of products
and enables users to model new financial products, evaluate market and credit
risk, ensure regulatory compliance, and integrate legacy systems. The Infinity
Platform includes the Infinity Data Model, a relational database schema that
models financial information and allows users to build and maintain a financial
data warehouse, and the Fin++ Class Library, a set of C++ classes that
encapsulate the definitions and behavior of financial instruments. The data
warehousing capabilities of the Infinity Data Model along with the reusable
financial software components provided in the Fin++ Class Library form a robust
infrastructure for developing trading and risk management systems.
INFINITY DATA MODEL. The Infinity Data Model is a technology foundation
supporting the development of data warehouses for firmwide risk management, as
well as front- to back-office trading systems. The product is a relational
database schema that includes over 500 tables describing the securities,
transactions, trades, cash flows, portfolios and organization structures that
represent a firm's trading activities. The product supports derivative products
such as swaps, futures and options, as well as more traditional traded products
such as foreign exchange, money markets, bonds and equities. In addition, it can
easily be extended to incorporate new financial instruments. The Infinity Data
Model is used to build data warehouses that can be accessed by
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<PAGE> 41
multiple users within a financial institution, including trading managers, risk
managers and senior managers for a variety of decision-support activities.
Working in conjunction with relational database management systems offered by
Oracle and Sybase, the Infinity Data Model integrates data from disparate
trading systems into a centralized, cross-instrument repository. By
consolidating transaction data into a consistent, easily accessible data
warehouse, the Infinity Data Model preserves a firm's investment in legacy
systems and technologies.
The Infinity Data Model also supports the development of front- to
back-office trading systems by capturing the events associated with each trade
throughout its life cycle, from initial trade pricing through to general ledger
postings. It models and organizes customer information, including settlement
instructions and legal agreements, and it allows an institution to create a
detailed model of its organizational structure for processing and reporting
purposes.
INFINITY FIN++ CLASS LIBRARY. The Fin++ Class Library is an
object-oriented C++ class library that provides reusable software components for
building trading and risk management applications. The Library consists of over
350 classes that provide the basic building blocks of a trading or risk
management application that can be easily assembled into a complex application.
The library takes advantage of object-oriented design techniques such as
encapsulation, inheritance, aggregation and polymorphism to provide an
easy-to-use tool for in-house and third-party developers. The Fin++ Class
Library works in conjunction with the Infinity Data Model to provide an
infrastructure for automating trading operations, from front to back office, and
for managing firmwide risk.
The building blocks required for financial applications -- securities,
transactions, trades, cash flows, portfolios, and analytics -- are furnished as
Fin++ Class Library objects that are combined into applications. The Fin++ Class
Library also provides a framework for incorporating new financial instruments
and proprietary or third-party analytical models without extensive code changes.
The Fin++ Class Library includes a database layer that provides transparent,
intelligent, fast access to the Infinity Data Model, as well as distribution
classes that provide a simple mechanism for distributing objects across a
network through a publish and subscribe protocol. Fin++ CalcEngines, an add-on
library to the Fin++ Class Library, enables developers to build applications for
real-time pricing and position-keeping in an N-tier client/server architecture.
INFINITY DERIVATIVES
Based on the Infinity Platform, Infinity Derivatives provides real-time
trading for derivatives and handles the entire life cycle of a trade. Trading
desks can quickly implement their front- to back-office functionality without
sacrificing the flexibility to add products, models and processes over time.
Infinity Derivatives offers many potential benefits to its users, including
lower per trade processing costs, improved ability to respond to market
conditions, enhanced client service, better risk management and improved
security. Infinity Derivatives includes a suite of front office applications for
pricing, hedging, position-keeping, portfolio management and risk reporting as
well as back office applications for confirmations and advices, payments, rate
resets and accounting.
Infinity Derivatives handles a wide range of complex financial products,
including swaps, caps, floors and swaptions; it also supports hedging activities
using bonds, futures, foreign exchange and money market instruments. While
Infinity Derivatives incorporates a wide variety of industry standard pricing
models, its open, flexible architecture allows users to incorporate proprietary
and third-party analytical models. Infinity Derivatives also provides
derivatives risk management capabilities, including hedging at a trade and
portfolio level, sensitivity analysis and profit and loss reporting.
In the back-office environment, Infinity Derivatives automates the many
steps required for operations and financial control. Once a trade has been
booked in the system, Infinity Derivatives automatically generates
confirmations, payments and accounting entries, interfacing directly with the
customer's general ledger system.
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Throughout the life of a trade, Infinity Derivatives ensures streamlined
and secure trade processing. It provides a single database for all trade
information, thereby eliminating redundant data entry and costly
reconciliations. It offers a high level of security, with authorizations and
permissions based on trading book, currency, financial instrument type and
function. It provides an audit trail of transactions and operations, and it
enables trade and market data to be secured against unauthorized or accidental
changes.
INFINITY RISKVIEW
Infinity RiskView, which is currently under development and scheduled for
release in the second half of 1996, is based on the Infinity Platform and will
initially focus on management of firmwide trading risk. Together, Infinity
RiskView and the Infinity Platform are designed to provide a robust
infrastructure for constructing firmwide market and credit risk management
systems associated with trading operations.
Infinity RiskView is designed to significantly reduce the cost and
implementation risk associated with data warehousing, which is rapidly emerging
as the preferred approach to a firmwide risk management solution. Infinity
RiskView is designed to address, in conjunction with the Infinity Platform, the
four major challenges of data warehousing: data mapping, data storage, data
access, and analysis and reporting. Infinity RiskView includes RiskView Objects,
a C++ class library for developing risk management applications, and RiskView
Mapper, a graphical application that facilitates transfer and aggregation of
data from existing trading and operations systems. Infinity RiskView is designed
to provide transaction or portfolio level risk analysis, including mark-to-
market, sensitivities, profit and loss reporting and cash flow projections. For
firmwide risk analysis, Infinity RiskView is designed to provide analysis and
reporting capabilities based on value at risk methodologies and historical
simulation. Infinity RiskView also is designed to provide a framework for
integrating proprietary and third-party analytics. There can be no assurance
that the Company will not experience any delay in the timely release of Infinity
RiskView and that it will achieve market acceptance. See "Risk Factors -- Rapid
Technological Change and Dependence on New Products."
TECHNOLOGY
The Infinity Platform, Infinity Derivatives and Infinity RiskView are
client/server software products that operate on the Sun Microsystems,
Hewlett-Packard and IBM versions of the UNIX operating system. In addition, the
Infinity Platform operates on the Windows NT operating system. The Infinity
Platform uses industry-standard relational database management systems from
Oracle and Sybase. Infinity uses the standard TCP/IP protocol for its publish
and subscribe and point-to-point communications infrastructure. This
infrastructure is utilized in the Company's N-tier client/server architecture.
The Company believes that the combination of these open, standards-based
technologies with the extensive financial engineering that is at the core of the
Infinity product family provides customers with significant advantages relative
to both proprietary third-party solutions and comprehensive in-house systems
development.
SALES, MARKETING AND SUPPORT
The Company's sales and marketing efforts are directed at large banks and
other financial institutions through its worldwide direct sales force,
complemented by its network of third-party business partners. The Company
provides product support for customers through its field support offices and its
headquarters-based Client Services Group.
DIRECT SALES
Infinity markets and sells its products through a worldwide direct sales
force located in New York, London, Paris, Tokyo and its Mountain View,
California headquarters. The Company's
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combined sales and support organizations totaled 48 people on June 30, 1996, and
the Company plans to add additional staff to this organization during the
balance of 1996, emphasizing field sales and pre-sales activities. See "Risk
Factors -- Small Direct Sales Force and Reliance on IBM Corporation and Other
Strategic Relationships."
Typically, the Company generates initial leads through inquiries from
prospective customers based on references from existing customers and contacts
made through seminars, conferences, trade shows and an ongoing public relations
program. The sales process then generally involves multiple presentations to
information technology and business professionals within the prospect
institution as well as trial evaluations of the Infinity software. In addition,
Infinity derives a substantial number of follow-on sales from new customers who
purchase licenses for additional users and products to augment their
Infinity-based system.
During the first half of 1996, the contract value of products licensed to
new and existing customers in single significant transactions ranged from
$250,000 to $1.6 million, based on the number and type of products licensed, the
number of seats and sites in the customer's system and other factors. The
Company typically charges customers an annual maintenance fee of 18 percent of
the then current list price or contract value of the product licensed.
The Company's sales backlog is not significant, and the Company believes
backlog is not a meaningful indicator of the Company's future performance. See
"Risk Factors -- Lengthy Sales Cycle."
BUSINESS PARTNER PROGRAM
Infinity has established the Business Partner Program to obtain additional
sales and marketing channels, to further promote the Infinity Platform as an
industry standard and to leverage the marketing organizations, geographical
locations and technical expertise of its partners. Infinity's Business Partner
Program supports three types of partners:
- Licensed Infinity Developer: These developers are authorized to create
and market products and/or services using the Infinity Platform. This
program has fostered the development of third-party applications that are
seamlessly integrated into the Infinity Platform and meet specific market
requirements. These developers are developing and have commenced
marketing applications based on the Infinity Platform for real-time risk
monitoring, Monte Carlo simulation, limits management and data mapping.
- Licensed Infinity Solution Provider: These companies are authorized to
offer a range of services to Infinity clients, including consulting,
planning, installation, implementation support, training, project
management, systems integration, or custom software development. As
licensed Infinity Platform users, these companies may develop and deploy
tools, utilities, and applications used in providing these services to
Infinity clients. Infinity's Licensed Solution Providers include large
global organizations such as IBM and Price Waterhouse.
- Infinity Certified Engineering Partners ("ICEs"): ICEs provide custom
application development and knowledge transfer on the Infinity Platform
to Infinity's customers. A growing number of ICEs are available for
short- or long-term consulting engagements. Infinity provides
certification, education and matching services for ICEs for a nominal
annual fee. By building this third-party engineering capability, Infinity
has been able to maintain its product focus while still meeting customer
needs for specialized development and customization services.
INTERNATIONAL SALES
International revenues outside of North America accounted for 70%, 53%, 25%
and 27% of total revenues for the six-month period ended June 30, 1996, and for
the 1995, 1994 and 1993 fiscal
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years, respectively. The Company has sales personnel located in three financial
centers outside of North America. See "Risk Factors -- Risks Associated with
International Sales."
SUPPORT SERVICES
Support services, covering technical support, implementation and
installation, are a key element of the Company's product offerings. Infinity
customers can access a global field support staff of professionals located in
New York, London, Tokyo, Paris, Frankfurt, Sydney and Toronto. In addition,
Infinity maintains a Client Services Group in its headquarters in Mountain View,
California. The Client Services Group is responsible for supporting the needs of
customers and of the global field support staff and is a gathering point of
valuable customer feedback for the Infinity marketing and product development
teams. The group includes professionals devoted to training, telephone support,
technical publications, production and distribution.
PRODUCT DEVELOPMENT
The market for the Company's products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line and to develop and
introduce new products that address technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
In particular, the failure of the Company to enhance its products to (i) timely
adapt to the rapidly developing computer hardware and software technology upon
which its products are based, (ii) incorporate new functionality reflecting
rapidly evolving types of derivative securities and other financial instruments
and risk management methodologies and (iii) incorporate new functionality to
facilitate customers' compliance with changing regulatory reporting requirements
could cause customers to delay their purchase of the Company's products, or
decide not to purchase such products. In September 1995, the Company introduced
its back-office modules for Infinity Derivatives, which have been implemented on
a limited basis by Infinity customers. The Company further intends to release
prior to the end of 1996 a risk management product called Infinity RiskView,
designed to extend the Infinity Platform for certain risk management functions,
and a Windows NT version of its Infinity Derivatives product. No assurance can
be given that development of Infinity RiskView or the Windows NT version of
Infinity Derivatives will be successfully completed or that either of these new
products will be accepted in the marketplace. The anticipated release of these
products also could cause customers to delay purchase decisions for existing
products of the Company. The Company has in the past experienced delays in the
introduction of product enhancements and new products, including a delay in
introducing the back-office modules for Infinity Derivatives. There can be no
assurance that the Company will not experience such delays in the future, or be
successful in developing and marketing, on a timely and cost-effective basis,
product enhancements or new products, including Infinity RiskView and a Windows
NT version of Infinity Derivatives, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Infinity believes that strong product development capabilities are
essential to its strategy of building a platform that can become an industry
standard, to maintaining the competitiveness of its current product suite, and
to adding new features and functionality to the Infinity Platform and other
products. The Company's product development team comprises professionals with
expertise in software development and professionals with expertise in
derivatives or other financial instruments or risk management methodologies.
From its founding, the Company has believed that this assembly of diverse
technical and financial expertise contributes to the highly integrated
functionality of its software products and thereby provides the Company with a
significant competitive advantage.
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The Company's research and development expenses totaled $4.1 million, $6.1
million, $3.3 million and $1.6 million for the six-month period ended June 30,
1996 and for the 1995, 1994 and 1993 fiscal years, respectively. The Company
expects to continue to allocate significant resources to future product
development. To date, all internally developed software costs have been expensed
as incurred.
The Company's current product development efforts are directed toward
maintaining and enhancing Infinity Derivatives, extending the Infinity Platform
and developing Infinity RiskView. A Windows NT version of the Infinity
Derivatives product is under development for testing and release in the second
half of 1996. Infinity has already delivered a version of the Infinity Platform
that operates on Windows NT. The Windows NT operating system is increasingly
popular with financial institutions, and the Company believes that providing a
version of its product for this environment is strategically important. The
Company's newest product, Infinity RiskView, was announced in June 1996 and is
currently scheduled for field testing and production release in the second half
of 1996.
COMPETITION
The market for transaction processing and risk management systems for
financial institutions is intensely competitive. It is characterized by rapidly
changing technological requirements, as new instruments and new strategies are
developed and implemented, and a high degree of technological progress, as new
software and hardware technologies are applied to the challenge of trading and
risk management. The rapid pace of innovation and change in the market Infinity
serves necessitates an ongoing research and development effort to enhance the
features and functionality of the Infinity Platform and Infinity products.
Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition and a larger installed base of customers than the
Company. The Company's competitors are diverse and offer a variety of solutions
directed at the financial trading and risk management information system
marketplace. These competitors include companies offering and developing
financial trading or risk management software products that compete with
products offered by the Company and the internal development groups within
prospective customers that may develop systems that may substitute for those
offered by the Company. Certain of the Company's competitors provide solutions
for particular elements of the financial trading marketplace, including, for
example, the front-office derivatives trading market, which constitutes a
significant portion of the Company's business. To the extent customers elect to
pursue point solutions targeted at the front-office derivatives market or other
elements of the financial trading marketplace, as opposed to the Company's
integrated solutions, the Company's business, financial condition and results of
operations may be materially adversely affected. The Company may also face
competition from other business application software vendors who may broaden
their product offerings by internally developing or acquiring financial trading
and risk management software products.
The Company believes that the principal competitive factors in the market
for its products are the adaptability of the products to new financial
instruments, the ability of products to be integrated into customers existing
and emerging operations on a firmwide basis, cost, time to implementation,
robustness and support services. Based on these factors, the Company believes
its products compete favorably, although there can be no assurance that the
Company can maintain its competitive position against current and potential
competitors. See "Business -- Industry Background -- Inadequacy of Many In-House
and Vendor Systems."
In order to be successful in the future, the Company must continue to
respond promptly and effectively to the challenges of technological change and
competitors' innovations. There can be no assurance that the Company will be
able to compete successfully with existing or new competitors or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations.
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INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its proprietary technology.
The Company relies primarily on a combination of copyright, trade secret and
trademark laws, nondisclosure and other contractual provisions and technical
measures to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials through trade secret and
copyright laws, which provide only limited protection. As part of its
confidentiality procedures, the Company generally enters into nondisclosure
agreements with its employees, consultants, distributors and corporate partners.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use the Company's products
or technology independently. In particular, the Company customarily provides its
existing and potential distribution partners with access to its product
architecture and other proprietary information underlying the Company's licensed
software, including source code. An unauthorized publication or proliferation of
the Company's source code could materially adversely affect the Company's
business, financial condition and results of operations. Policing unauthorized
use of the Company's products is difficult, and the Company is unable to
determine the extent to which unauthorized use of its software products exists.
In addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries, including countries the Company may
target to expand its sales efforts. Accordingly, there can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology.
EMPLOYEES
At June 30, 1996, Infinity had 133 employees of whom 45 were primarily
engaged in research and development, 70 in sales, support and marketing and 18
in finance and administration. None of the Company's employees is represented by
a collective bargaining agreement and the Company has never experienced any work
stoppage. The Company considers its relations with its employees to be good. The
Company also employs a number of temporary and contract employees, and at June
30, 1996, the Company employed approximately nine temporary and contract
employees.
The Company's success depends to a significant extent on the performance of
a number of senior management and sales and engineering personnel, including
Roger A. Lang, a founder of the Company and its President and Chief Executive
Officer. The Company's Vice President of Software Engineering is currently on
indefinite leave of absence for medical reasons, and the Company's Vice
President of Client Services will commence a one-year educational leave in
August 1996. The absence of these two key employees places a significant
additional burden on the other members of the Company's management team and
could materially adversely affect the Company's business, financial condition
and results of operations. Should either or both not return to the Company's
employ, the Company expects to experience significant difficulty in replacing
them with equally qualified individuals. Given the critical role of the
Company's limited engineering staff in executing the Company's product
strategies, the loss of any significant part of its engineering staff would also
have a material adverse effect on the Company. The Company generally does not
have long-term employment contracts with Mr. Lang, its engineering staff or any
other employees. The Company believes that its future success also will depend
in part on its ability to attract and retain highly-skilled engineering,
managerial, sales and marketing personnel. Competition for such personnel in the
software industry is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. The Company has
previously experienced substantial difficulty in hiring sales and engineering
personnel with expertise in sophisticated financial instruments and may
experience similar difficulty as it attempts to hire other qualified technical
staff who have the required experience. In particular, the Company has
experienced difficulty competing for such personnel with large financial
institutions with substantially greater financial resources. Failure
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<PAGE> 47
to attract and retain key personnel could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Management of Growth."
FACILITIES
The Company's primary offices are located in approximately 40,000 square
feet of space in Mountain View, California under a lease expiring in February
2001. The Company also leases space for its sales and support offices in New
York, Paris, London, Tokyo and Toronto.
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<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company as of July 22, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------- --- -------------
<S> <C> <C>
Roger A. Lang...................... 37 President,
Chief
Executive
Officer and
Director
Till M. Guldimann.................. 47 Executive
Vice
President and
Director
Terry H. Carlitz................... 45 Chief
Financial
Officer and
Vice
President,
Finance
Keith Hospers...................... 50 Vice
President,
Software
Engineering
Michael Laven...................... 48 Vice
President,
Worldwide
Field
Operations
Tejbir S. Sidhu.................... 30 Vice
President,
Client
Services
Charles H. Marston................. 46 Chairman of
the Board
Douglas M. Leone(1)(2)............. 40 Director
John C. Lewis(2)................... 60 Director
James A. Dorrian(1)................ 43 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Lang has been Chief Executive Officer and a Director of the Company
since he co-founded the Company in June 1989. In May 1996, he was named
President of the Company. Prior to founding the Company, Mr. Lang was Vice
President, Global Client Services at C-ATS Software Inc., a provider of software
products for the financial services industry, from September 1986 until June
1989. Mr. Lang holds a B.A. and an M.A. from Stanford University.
Mr. Guldimann has been Executive Vice President and a Director of the
Company since he joined the Company in September 1995. From June 1974 to June
1995, Mr. Guldimann was employed by J.P. Morgan, where he served as Head of
Global Research from March 1990 to June 1995 and as Chairman of J.P. Morgan's
Market Risk Committee from February 1991 to October 1992. Mr. Guldimann holds an
M.S. from the Swiss Federal Institute of Technology and an M.B.A. from Harvard
University.
Ms. Carlitz has been Chief Financial Officer and Vice President, Finance
since she joined the Company in February 1995. From September 1987 to February
1995, she was employed by Apple Computer, Inc. where she held the positions of
Director, Strategic Investments and Business Development, Director and European
Controller and Director, Corporate Planning and Analysis. Ms. Carlitz holds a
B.S. from San Jose State University and an M.B.A. from Stanford University.
Mr. Hospers joined the Company as its Vice President, Software Engineering
in November 1995. From February 1993 to October 1995, Mr. Hospers was employed
by Informix Corporation, a database software company, in a variety of positions
and most recently as Executive Director of Tools Development. From January 1988
to January 1993, Mr. Hospers was employed by Independence Technologies, Inc.
where he was Director of Transaction Processing. Mr. Hospers is currently on an
indefinite leave of absence for medical reasons. Mr. Hospers holds a B.S. degree
from Cornell University and an M.S. degree from the University of Utah.
Mr. Laven is Vice President, Worldwide Field Operations. Prior to joining
the Company in May 1996, he was employed by Scopus Technology, Inc., a customer
information management software company, where he served as Vice President,
International since June 1995. From April 1994 to May 1995, he was Chief
Executive Officer of CoroNet Systems, a network management company. From
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<PAGE> 49
May 1990 to March 1994, Mr. Laven held various positions at Ask Computer, a
relational database management systems and applications company, most recently
serving as Executive Vice President, Worldwide Operations. From June 1982 to
April 1990, Mr. Laven held various positions at Dun and Bradstreet Software, a
software development company, most recently serving as Vice President, Europe.
Mr. Laven holds a B.A. degree from Wesleyan College, an M.A. degree from the
School of International Training and an M.Ed. from Harvard University.
Mr. Sidhu co-founded the Company in June 1989 and is currently Vice
President, Client Services. Prior to founding Infinity, Mr. Sidhu was with
Everex Systems, a manufacturer of PC-based workstations and peripherals from
July 1988 until May 1989. Mr. Sidhu will commence a one-year educational leave
in August 1996. Mr. Sidhu holds a B.A. from the University of Pennsylvania.
Mr. Marston joined Infinity in July 1991, and has previously served as
Director of Financial Engineering, Vice President of Product Development and
President prior to being elected to the position of Chairman of the Board in May
1996. Prior to joining Infinity, Mr. Marston led the design and development
effort for large-scale trading systems from May 1989 until March 1991 at
Berkeley Research and Trading, a financial software company. From February 1985
until April 1989, he served as an analyst in the Public Finance department and a
designer and manager of derivatives product systems in the Capital Markets
Research and Development department at Bank of America. Mr. Marston holds a B.A.
from the University of California at San Diego and a Ph.D. from the University
of California at Berkeley.
Mr. Leone has served as a Director of the Company since January 1994. He is
a partner of Sequoia Capital, which he joined in 1988. Prior to joining Sequoia,
he spent seven years in the electronics industry and held sales and sales
management positions at Sun Microsystems, Hewlett-Packard and Prime Computer.
Mr. Leone is also a director of Arbor Software and International Network
Services, Inc., and is the Chairman of Shomiti Systems. He holds a B.A. from
Cornell University, an M.A. from Columbia University and an M.A. from MIT.
Mr. Lewis has served as a Director of the Company since March 1995. He has
been Chairman of the Board of Amdahl Corporation since May 1987. He also served
as Amdahl's Chief Executive Officer from May 1983 to May 1992. He presently
serves on the Board of Directors of Vitesse Semiconductor Corporation, Cypress
Semiconductor Corporation and Pinnacle Systems, is a member of the Board of
Trustees of Santa Clara University and is a director of the California Chamber
of Commerce. He holds a B.S. from California State University at Fresno.
Mr. Dorrian has served as a Director of the Company since July 1996. In
April 1991, he co-founded Arbor Software and has served as its President and
Chief Executive Officer. Prior to co-founding Arbor Software, Mr. Dorrian was
the President of Solutions Technology, Inc., a software consulting firm
specializing in financial software systems development. Previously, Mr. Dorrian
was Western States Director for Thorn EMI Computer Software, a developer of
Executive Information Systems software. Mr. Dorrian holds a B.A. from Indiana
University.
Currently all directors hold office until the next annual meeting of
stockholders or until their successors have been duly elected and qualified.
However, following the anticipated reincorporation of the Company in Delaware
and commencing at the first annual meeting of stockholders following the annual
meeting of stockholders when the Company shall have had at least 800
stockholders, the Restated Certificate of Incorporation of the Company will
provide for the Board of Directors to be divided into three classes, each with
staggered three-year terms. As a result, only one class of directors will be
elected at each annual meeting of stockholders of the Company, with the other
classes continuing for the remainder of their respective three-year terms. Upon
the division of the Board of Directors into three classes, stockholders shall no
longer have cumulative voting rights and the Company's stockholders representing
a majority of the shares of Common Stock outstanding will be able to elect all
of the directors. See "Description of Capital Stock -- Anti-Takeover Effects of
Provisions of the Company's Charter and Bylaws."
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<PAGE> 50
Officers are elected by and serve at the discretion of the Board of
Directors. There are no family relationships among the directors or officers of
the Company.
BOARD COMMITTEES
Audit Committee. The Audit Committee of the Board of Directors reviews the
results and scope of the annual audit and other services provided by the
Company's independent auditors. The Audit Committee also reviews and evaluates
the Company's system of internal controls as well as monitors transactions
between the Company and its employees, officers and directors. Mr. Dorrian and
Mr. Leone serve as members of the Audit Committee.
Compensation Committee. The Compensation Committee of the Board of
Directors administers the 1996 Stock Incentive Plan, the 1996 Employee Stock
Purchase Plan, the 1993 Stock Incentive Plan and the 1989 Stock Option Plan and
reviews and approves the compensation and benefits for the Company's executive
officers. Mr. Lewis and Mr. Leone serve as members of the Compensation
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in July 1996 to review and
approve the compensation and benefits for the Company's executive officers,
administer the Company's stock option and stock incentive plans and Employee
Stock Purchase Plan and make recommendations to the Board of Directors regarding
such matters. The committee is currently composed of Mr. Lewis and Mr. Leone,
neither of whom is an officer of the Company. No interlocking relationship
exists between any member of the Company's Board of Directors or Compensation
Committee and any member of the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
In February 1995 and September 1995, the Company granted Mr. Lewis
immediately exercisable, non-qualified stock options for 80,000 shares of Common
Stock at an exercise price of $0.35 per share and 20,000 shares of Common Stock
at an exercise price of $1.50 per share, respectively. Mr. Lewis exercised
options to purchase 80,000 shares in March 1995 and options to purchase 20,000
shares in September 1995. In addition, in September 1995 the Company entered
into an agreement with Mr. Lewis whereby Mr. Lewis had the right to purchase
40,000 shares of Common Stock at a purchase price of $1.50 per share, which
right Mr. Lewis exercised concurrently with the execution and delivery of such
agreement. In February 1995, the Company granted Mr. Leone immediately
exercisable, non-qualified stock options for 50,000 shares of Common Stock at an
exercise price of $0.35 per share. Mr. Leone exercised such options to purchase
50,000 shares in March 1995.
DIRECTOR COMPENSATION
The Company's outside directors are reimbursed for expenses incurred in
connection with attending Board and committee meetings but are not compensated
for their services as Board members. The Company may also grant to directors
options to purchase Common Stock of the Company pursuant to the terms of the
1996 Stock Incentive Plan. See "Stock Plans -- 1996 Stock Incentive Plan."
46
<PAGE> 51
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company whose aggregate cash compensation
exceeded $100,000 during the year ended December 31, 1995 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------ -------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS COMPENSATION
- ------------------------------ -------- ----------- --------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Roger A. Lang................. $146,764 $45,000 -- -- --
President, Chief Executive
Officer and Director
Till M. Guldimann............. 66,899(2) -- -- 700,000 --
Executive Vice President
and Director
Keith Hospers................. 25,891(3) 30,000 -- 250,000 --
Vice President, Software
Engineering
Charles H. Marston............ 147,196 30,000 -- -- --
Chairman of the Board
Terry H. Carlitz.............. 126,410 40,000 -- 200,000 --
Chief Financial Officer
and Vice President,
Finance
</TABLE>
- ---------------
(1) Includes bonus amounts earned in 1995 and paid in 1996; excludes bonuses
earned in 1994 and paid in 1995.
(2) Mr. Guldimann joined the Company in September 1995. His base annual salary
for 1995 was $200,000.
(3) Mr. Hospers joined the Company in October 1995. His base annual salary for
1995 was $155,000.
OPTION GRANTS DURING 1995
The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during the year ended
December 31, 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(5)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
GRANTED(1) 1995(2) PER SHARE(3) DATE(4) 5%($) 10%($)
---------- ---------------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Lang........... -- -- -- -- -- --
Till M. Guldimann....... 500,000 27.0% $ 1.50 08/31/05 $471,671 $1,195,307
200,000 10.8 1.50 08/31/05 188,668 478,123
Keith Hospers........... 250,000 13.5 1.50 10/03/05 235,835 597,653
Charles H. Marston...... -- -- -- -- -- --
Terry H. Carlitz........ 200,000 10.8 0.35 02/02/05 44,023 111,562
</TABLE>
- ---------------
(1) Options granted under the Company's 1993 Stock Incentive Plan.
(2) In 1995, the Company granted options to employees to purchase an aggregate
of 1,855,500 shares.
47
<PAGE> 52
(3) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for its Common Stock and the risks normally associated
with high technology companies. The exercise price may be paid in cash,
check, promissory note, shares of the Company's Common Stock, through a
cashless exercise procedure involving same-day sale of the purchased shares
or any combination of such methods.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.
AGGREGATE OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES.
The following table sets forth certain information with respect to stock
options held by the Named Executive Officers during 1995.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS OPTIONS AT DECEMBER 31,
ON EXERCISE (#) REALIZED ($) AT DECEMBER 31, 1995(#) 1995($)(1)
-------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Lang......... -- -- -- --
Till M. Guldimann..... 500,000 -- -- 200,000 -- $ 200,000
Keith Hospers......... -- -- -- 250,000 -- 250,000
Charles H. Marston.... 200,000 $ 45,209 -- -- -- --
Terry H. Carlitz...... 200,000 -- -- -- -- --
</TABLE>
- ---------------
(1) The value of "in-the-money" stock options represents the positive spread
between the exercise price of stock options and the fair market value for
the Company's Common Stock of $2.50 per share as of December 31, 1995, as
determined by the Company's Board of Directors.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement dated September 1,
1995 with
Till M. Guldimann, its Executive Vice President. The agreement provides that Mr.
Guldimann shall receive a yearly salary of $200,000 and reimbursement for
certain expenses. Mr. Guldimann is also entitled to participate in any pension,
bonus, retirement, insurance, medical reimbursement or other employee benefit
plan adopted by the Company. Under an option agreement executed in connection
with his employment agreement, Mr. Guldimann was granted incentive stock options
to purchase 200,000 shares of the Company's Common Stock at an exercise price of
$1.50 per share. Mr. Guldimann was also granted immediately exercisable,
non-qualified options to purchase 500,000 shares of the Company's Common Stock
at an exercise price of $1.50 per share. In addition, on the same date, Mr.
Guldimann purchased 200,000 shares of Common Stock of the Company pursuant to a
Restricted Stock Purchase Agreement. See "Certain Transactions."
The employment agreement continues until Mr. Guldimann's employment is
terminated (i) by the Board of Directors for cause at any time upon ten days
written notice, or without cause upon six months written notice; (ii) by death;
(iii) by Mr. Guldimann for good reason upon 20 days written notice, or at will
upon three months written notice; or (iv) due to disability. Upon termination of
employment without cause by the Company, or for good reason by the employee, the
Company will hire Mr. Guldimann as a consultant for a period of six months
following termination. During the consultancy period, Mr. Guldimann is required
to be available at least ten hours per month in return for which he will be
entitled to receive a monthly salary, bonus and benefits equal to the amount
that he received immediately prior to his termination of employment. During this
period his options will continue to vest.
48
<PAGE> 53
The Company has entered into an employment agreement dated October 24, 1995
with Keith Hospers, its Vice President, Software Engineering. The agreement
provides that Mr. Hospers shall receive a yearly salary of $155,000 and
reimbursement for certain expenses. For the first 12 month period of his
employment, Mr. Hospers is entitled to receive a bonus in the amount of $45,000,
$30,000 of which is payable upon commencement of his employment, and the
remaining $15,000 is payable in three equal installments six, nine and 12 months
after commencement of his employment. After the first 12 months of employment,
Mr. Hospers is eligible to participate in the Company's regular bonus plans. Mr.
Hospers is also entitled to participate in any pension, retirement, insurance,
medical reimbursement or other employee benefit plan adopted by the Company and
was granted in October 1995 incentive stock options to purchase 250,000 shares
of the Company's Common Stock at an exercise price of $1.50 per share. See
"Certain Transactions."
The agreement continues until Mr. Hospers's employment is terminated (i) by
the Board of Directors for cause at any time upon ten days written notice, or
without cause upon one month notice; (ii) by death; (iii) by Mr. Hospers for
good reason upon 20 days written notice, or at will upon six weeks written
notice; or (iv) at the option of the Board of Directors after 120 consecutive
days of disability. If the employment agreement is terminated by Mr. Hospers for
good reason or by either party at will, Mr. Hospers will receive severance
benefits consisting of six months salary, certain benefits, unpaid bonuses and
the vesting and right to exercise any stock options held by Mr. Hospers at the
time of termination. Mr. Hospers is currently on an indefinite leave of absence
for medical reasons.
In May 1996, Michael Laven, the Company's Vice President, Worldwide Field
Operations, entered into a letter agreement with the Company. The letter
agreement provides for an annual salary of $150,000 plus a guaranteed bonus of
$30,000 per annum. Mr. Laven is also eligible for the Company's annual incentive
bonus and executive incentive bonus of up to $120,000, provided certain targets
are met by the Company. Mr. Laven is also eligible to participate in all of the
Company's benefit plans and was granted in May 1996 incentive stock options to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$4.00 per share, and immediately exercisable, nonqualified stock options to
purchase 140,000 shares of the Company's Common Stock at an exercise price of
$4.00 per share. Mr. Laven's employment is at will and may be terminated by
either party with or without cause. See "Certain Transactions."
STOCK PLANS
1989 STOCK OPTION PLAN
The Company's 1989 Stock Option Plan (the "1989 Option Plan") was adopted
by the Board of Directors in December 1989, and approved by the Company's
stockholders in May 1990. The 1989 Option Plan provides for the granting to
employees of the Company and of its subsidiaries or parent corporations of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the granting to employees
and independent contractors of non-qualified stock options. The Board of
Directors and the stockholders have authorized a total of 3,000,000 shares of
Common Stock for issuance pursuant to the 1989 Option Plan, of which options to
purchase 281,018 shares are currently outstanding, options to purchase 2,671,182
shares have been exercised and options to purchase 304,356 shares have been
transferred to the 1993 Stock Incentive Plan. With certain exceptions, the
options terminate upon termination of employment, disability or death of the
employee. There are no further options available for grant under the 1989 Option
Plan.
The 1989 Option Plan may be administered by the Board of Directors or a
committee of the Board (the "Committee"). The Committee has the power to
determine the terms of the options granted, including the exercise price, number
of shares subject to the option and the exercisability thereof, and the form of
consideration payable upon exercise. Options granted under the 1989 Option Plan
are not transferable by the optionee other than by will or the laws of descent
or
49
<PAGE> 54
distribution, and each option is exercisable during the lifetime of the optionee
only by such optionee. The exercise price of all incentive stock options granted
under the 1989 Option Plan must be at least equal to the fair market value, as
determined by the Board of Directors, of the Common Stock on the date of grant.
The exercise price of all non-qualified stock options granted under the 1989
Option Plan must be at least 85% of the fair market value, as determined by the
Board of Directors, of the Common Stock on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting power or
value of all classes of the Company's outstanding capital stock, the exercise
price of any incentive or non-qualified stock option granted must equal at least
110% of the fair market value of the Common Stock on the grant date and the term
of the option must not exceed five years. The term of all other options granted
under the 1989 Option Plan may not exceed ten years. The consideration for
exercising any option may consist of cash, check, shares of Common Stock, a
promissory note, the assignment of part of the proceeds from the sale of shares
acquired upon exercise of the options or any combination thereof.
The 1989 Option Plan provides that in the event of a merger of the Company
with or into another corporation or a consolidation, sale of substantially all
of the Company's assets or like transaction involving the Company in which the
Company's stockholders before the transaction do not retain a majority interest
in the Company, each option may be assumed or an equivalent option may be
substituted by a successor corporation. If the successor corporation chooses not
to assume the options under the 1989 Option Plan, the Optionee may immediately
exercise all options not otherwise exercisable with such exercise conditioned
upon consummation of the transaction.
Unless terminated sooner, the 1989 Option Plan will terminate automatically
in 1999. The Board has the authority to amend, suspend or terminate the 1989
Option Plan, subject to stockholder approval of certain amendments and provided
no such action may affect any share of Common Stock previously issued and sold
or any option previously granted under the 1989 Option Plan.
1993 STOCK INCENTIVE PLAN
The Company's 1993 Stock Incentive Plan (the "1993 Incentive Plan") was
adopted by the Board of Directors in February 1993 and approved by the Company's
stockholders in May 1993. The 1993 Incentive Plan provides for the granting to
employees of the Company and of its subsidiaries or parent corporations of
incentive stock options within the meaning of Section 422 of the Code, and for
the granting to employees and independent contractors of nonstatutory stock
options. The Board of Directors and the stockholders have authorized a total of
6,104,356 shares of Common Stock for issuance pursuant to the 1993 Incentive
Plan, which includes 304,356 shares of Common Stock that were transferred from
the 1989 Stock Option Plan in October 1995, of which options to purchase
3,292,266 shares are currently outstanding and options to purchase 2,804,092
shares have been exercised. Subsequent to June 30, 1996 the Board of Directors
approved a 250,000 share increase of the shares issuable upon exercise of
options granted under the 1993 Stock Incentive Plan. With certain exceptions,
the options terminate upon termination of employment, disability or death of the
optionee.
The 1993 Incentive Plan may be administered by the Board of Directors or a
committee of the Board (the "Committee"). The Committee has the power to
determine the terms of the options granted, including exercise price, transfer
restrictions on shares acquired upon option exercise, repurchase rights of the
Company, number of shares subject to the option and the exercisability thereof,
and the form of consideration payable upon exercise. Options granted under the
1993 Incentive Plan are not transferable by the optionee other than by will or
the laws of descent or distribution, and each option is exercisable during the
lifetime of the optionee only by such optionee. The exercise price of all
incentive stock options granted under the 1993 Incentive Plan must be at least
equal to the fair market value of the Common Stock on the date of grant. The
exercise price of all nonstatutory stock options granted under the 1993
Incentive Plan must be at least 85% of the fair market value of the Common Stock
on the date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of the Company's outstanding
50
<PAGE> 55
capital stock, the exercise price of any incentive stock option granted must
equal at least 110% of the fair market value of the Common Stock on the grant
date and the term of the option must not exceed five years. The term of all
other options granted under the 1993 Incentive Plan may not exceed ten years.
The consideration for exercising any option may consist of cash, check, Company
shares, a promissory note, the assignment of part of the proceeds from the sale
of shares acquired upon exercise of the options, such other consideration as
determined by the Committee, or any combination thereof.
Unless terminated sooner, the 1993 Incentive Plan will terminate
automatically in 2003. The Board has authority to amend, suspend or terminate
the 1993 Incentive Plan subject to stockholder approval of certain amendments
and provided no such action may affect any share of Common Stock previously
issued and sold or any option previously granted under the 1993 Incentive Plan
except in the event an employee is terminated for cause.
1996 STOCK INCENTIVE PLAN
The Company's 1996 Stock Incentive Plan was adopted by the Board of
Directors in July 1996 and is anticipated to be approved by the Company's
stockholders prior to consummation of the Offerings. The purpose of the 1996
Stock Option Plan is to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
employees, directors and consultants of the Company and to promote the success
of the Company's business. The 1996 Stock Incentive Plan provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Code and the granting of nonstatutory stock options, stock
appreciation rights, dividend equivalent rights, restricted stock, performance
units, performance shares, and other equity-based rights ("Awards") to
employees, directors and consultants of the Company. Initially, 800,000 shares
of Common Stock are reserved for issuance under the plan. Commencing with the
later of the consummation of the Offerings and January 2, 1997, the number of
shares of Stock reserved for issuance under the 1996 Stock Incentive Plan will
be increased by a number equal to one and one half percent (1.5%) of the number
of shares of Common Stock outstanding as of December 31 of the immediately
preceding calendar year, provided that the number of shares of Common Stock
available for grant of incentive stock options shall be 800,000 shares, and such
number shall not be subject to adjustment as described above. Where the Award
agreement permits the exercise or purchase of the Award for a certain period of
time following the recipient's termination of service with the Company,
disability, or death, the Award will terminate to the extent not exercised or
purchased on the last day of the specified period or the last day of the
original term of the Award, whichever occurs first. To date, no options have
been granted under the 1996 Stock Incentive Plan.
With respect to Awards granted to directors or officers, the 1996 Stock
Incentive Plan is administered by the Board of Directors or a committee
designated by the Board of Directors constituted to permit such Awards to be
exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended, in
accordance with Rule 16b-3 thereunder. With respect to Awards granted to other
participants, the 1996 Stock Incentive Plan is administered by the Board of
Directors or a committee designated by the Board of Directors. In each case, the
Board of Directors or such committees (the "Plan Administrator") shall determine
the provisions, terms and conditions of each Award, including, but not limited
to, the Award vesting schedule, repurchase provisions, rights of first refusal,
forfeiture provisions, form of payment (cash, shares of Common Stock, or other
consideration) upon settlement of the Award, payment contingencies and
satisfaction of any performance criteria. Incentive stock options are not
transferable by the optionee other than by will or the laws of descent or
distribution, and each incentive stock option is exercisable during the lifetime
of the optionee only by such optionee. Other Awards shall be transferable to the
extent provided in the agreement evidencing the Award. The exercise price of
incentive stock options must be at least equal to the fair market value of the
Common Stock on the date of grant, and the term of
51
<PAGE> 56
the option must not exceed ten years. The term of other Awards will be
determined by the Plan Administrator. With respect to an employee who owns stock
possessing more than 10% of the voting power of all classes of the Company's
outstanding capital stock, the exercise price of any incentive stock option must
equal at least 110% of the fair market value of the Common Stock on the grant
date and the term of the option must not exceed five years. The exercise price
of all nonstatutory stock options granted under the 1996 Stock Incentive Plan
must equal at least 85% of the fair market value of the Common Stock on the date
of grant. The exercise or purchase price of other Awards will be such price as
determined by the Plan Administrator. The consideration to be paid for the
shares of Common Stock upon exercise or purchase of an Award will be determined
by the Plan Administrator and may include cash, check, shares of Common Stock, a
promissory note, or the assignment of part of the proceeds from the sale of
shares acquired upon exercise or purchase of the Award.
In the event of an acquisition of the Company through the sale of all or
substantially all of its assets, a merger or other business combination, the
Plan Administrator has the discretion to accelerate vesting restrictions with
respect to any outstanding Awards under the 1996 Stock Incentive Plan.
Unless terminated sooner, the 1996 Stock Incentive Plan will terminate
automatically in 2006. The Board has the authority to amend, suspend or
terminate the 1996 Stock Incentive Plan subject to stockholder approval of
certain amendments and provided no such action may affect Awards previously
granted under the 1996 Stock Incentive Plan.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), which was approved by the Board of Directors in July 1996 and is
anticipated to be approved by the Company's stockholders prior to the
consummation of the Offerings, is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code and to provide employees of the
Company with an opportunity to purchase Common Stock through payroll deductions.
An aggregate of 300,000 shares of the Company's Common Stock are reserved for
issuance under the Stock Purchase Plan and available for purchase thereunder,
subject to adjustment in the event of a stock split, stock dividend or other
similar change in the Common Stock or the capital structure of the Company. All
employees of the Company and its subsidiaries (including officers) whose
customary employment is for more than five months in any calendar year and more
than 20 hours per week are eligible to participate in the Stock Purchase Plan.
Outside Directors, consultants, and employees subject to the rules or laws of a
foreign jurisdiction that prohibit or make impractical the participation of such
employees in the Stock Purchase Plan are not eligible to participate in the
Stock Purchase Plan. Employees who have completed fewer than three months of
service with the Company also are not eligible to participate.
The Stock Purchase Plan designates Purchase Periods, Accrual Periods and
Exercise Dates. Purchase Periods are generally overlapping periods of 24 months.
A Purchase Period will initiate on the effective date of the Registration
Statement applicable to the Offerings and additional Purchase Periods will
commence each subsequent February 1 and August 1. The initial Purchase Period
will end on July 31, 1998. Accrual Periods are generally six month periods, the
first such commencing on the effective date of the Offerings and ending on July
31, 1998. Thereafter, Accrual Periods will commence each February 1 and August
1. The Exercise Dates are the last days of each Accrual Period.
On the first day of each Purchase Period, a participating employee is
granted a purchase right which is a form of option to be automatically exercised
on the forthcoming Exercise Dates within the Purchase Period during which
deductions are to be made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the Stock Purchase Plan.
When the purchase right is exercised, the participant's withheld salary is used
to purchase shares of
52
<PAGE> 57
Common Stock of the Company. The price per share at which shares of Common Stock
are to be purchased under the Stock Purchase Plan during any Accrual Period is
the lesser of (a) 85% of the fair market value of the Common Stock on the date
of the grant of the option (the commencement of the Purchase Period) or (b) 85%
of the fair market value of the Common Stock on the Exercise Date (the last day
of an Accrual Period). The participant's purchase right is exercised in this
manner on all four Exercise Dates arising in the Purchase Period unless, on the
first day of any Accrual Period, the fair market value of the Common Stock is
lower than the fair market value of the Common Stock on the first day of the
Purchase Period. If so, the participant's participation in the original Purchase
Period is terminated, and the participant is automatically enrolled in the new
Purchase Period effective the same date.
Payroll deductions may range from 1% to 10% (in whole percentage
increments) of a participant's regular base pay, exclusive of overtime, bonuses,
shift-premiums or commissions. Participants may not make direct cash payments to
their accounts. The maximum number of shares of Common Stock which any employee
may purchase under the Stock Purchase Plan during an Accrual Period is 2,000
shares. Certain additional limitations on the amount of Common Stock which may
be purchased during any calendar year are imposed by the Code.
The Stock Purchase Plan will be administered by the Board of Directors or a
committee designated by the Board, which will have the authority to administer
the plan and to resolve all questions relating to the administration of the
plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification agreements with its
directors and officers and to purchase insurance on behalf of any person whom it
is required or permitted to indemnify. The Company has entered into
indemnification agreements with each of its directors and executive officers and
intends to obtain a policy of directors' and officers' liability insurance that
insures such persons against the cost of defense, settlement or payment of a
judgment under certain circumstances.
In addition, the Company's Certificate of Incorporation provides that the
liability of the Company's directors for monetary damages shall be eliminated to
the fullest extent permissible under Delaware law. This provision in the
Certificate of Incorporation does not eliminate a director's duty of care, and
in appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available. Each director will continue
to be subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Company or its
stockholders, for any transaction from which the director derived an improper
personal benefit, for improper transactions between the director and the Company
and for improper distributions to stockholders and loans to directors and
officers. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
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<PAGE> 58
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of June
30, 1996 as adjusted to reflect the sale of shares offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) each Named
Executive Officer (See "Management -- Executive Compensation"), (iv) the Selling
Stockholders and (v) all current executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED AFTER
5% BENEFICIAL OWNERS, DIRECTORS, PRIOR TO OFFERING(1) OFFERING(1)(2)
NAMED EXECUTIVE OFFICERS ---------------------- NUMBER OF ----------------------
AND OTHER SELLING STOCKHOLDERS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- ---------------------------------------- ---------- ------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Roger A. Lang........................... 4,900,000 30.6% 59,000 4,841,000 26.9%
Douglas M. Leone(3)..................... 2,833,334 17.7 2,833,334 15.7
Sequoia Capital(4)...................... 2,783,334 17.4 2,783,334 15.5
Robin Vasan(5).......................... 1,200,000 7.5 1,200,000 6.7
Charles H. Marston...................... 1,000,000 6.3 100,000 900,000 5.0
Till M. Guldimann....................... 800,000 5.0 800,000 4.4
Kishore K. Bopardikar................... 800,000 5.0 80,000 720,000 4.0
Terry H. Carlitz........................ 200,000 1.2 200,000 1.1
John C. Lewis........................... 140,000 * 140,000 *
Keith Hospers(6)........................ 52,400 * 52,400 *
James Dorrian(7)........................ 40,000 * 40,000 *
All executive officers and directors as
a
group (10 persons)(8)................. 10,608,650 65.6 217,000 10,391,650 57.2
Other Selling Stockholders, each
beneficially owning less than 1% of
the outstanding Common Stock prior to
the Offerings(9)...................... 259,157 1.6 53,000 206,157 1.1
</TABLE>
- ---------------
* Less than 1%
(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in the table has sole voting and investment power with respect to the
shares set forth opposite such person's name. The address of each of Roger
A. Lang, Till M. Guldimann and Kishore K. Bopardikar is as follows: c/o
Infinity Financial Technology, Inc., 640 Clyde Court, Mountain View,
California 94043.
(2) Assumes no exercise of the Underwriters' over-allotment options. If the
Underwriters' over-allotment options are exercised in full, certain
stockholders holding an aggregate of 1,393,600 shares, or 8.7% of the
Company's outstanding Common Stock prior to the offerings, will sell an
aggregate of 352,500 shares of Common Stock and will beneficially own
1,041,100 shares, or 5.8% of the Company's outstanding Common Stock.
(3) Includes (a) 2,741,334 shares owned by Sequoia Capital Growth Fund and (b)
42,000 shares owned by Sequoia Technology Partners III. Mr. Leone is a
general partner of both such partnerships. Sequoia Capital Growth Fund and
Sequoia Technology Partners III, c/o Sequoia Capital, 3000 Sand Hill Road,
Bldg. 4, Suite 280, Menlo Park, California 94025. Mr. Leone disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(4) Includes (a) 2,741,334 shares owned by Sequoia Capital Growth Fund and (b)
42,000 shares owned by Sequoia Technology Partners III. Sequoia Capital
Growth Fund, c/o Sequoia Capital, 3000 Sand Hill Road, Bldg. 4, Suite 280,
Menlo Park, California 94025.
(5) Robin Vasan, 150 Almendral Avenue, Atherton, California 94027.
(6) Includes 52,400 shares subject to options exercisable within 60 days of
June 30, 1996.
(7) Includes 40,000 shares subject to options exercisable within 60 days of
June 30, 1996.
(8) Includes 153,214 shares subject to options exercisable within 60 days of
June 30, 1996.
(9) Includes 22,512 shares subject to options exercisable within 60 days of
June 30, 1996.
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<PAGE> 59
CERTAIN TRANSACTIONS
In January 1994, the Company entered into a Series C Preferred Stock
Purchase Agreement with Sequoia Capital Growth Fund and Sequoia Technology
Partners III (collectively "Sequoia") pursuant to which Sequoia agreed to
purchase an aggregate of 2,083,334 shares of Series C Preferred Stock for a
total consideration of $1,756,667. In connection with this agreement, the
Company and Sequoia entered into a stockholders agreement under the terms of
which Sequoia is granted a right of first refusal and a right of participation
in certain secondary sales of stock by the Company and certain members of
management. The shareholders agreement terminates upon the closing of the
Offerings. In addition, in January 1994 the Company entered into an investors'
rights agreement with the Company's founders and the holders of 11,523,334
shares of Common Stock. See "Description of Capital Stock -- Registration
Rights."
In February 1995 and September 1995, the Company granted Mr. Lewis, a
Director of the Company, immediately exercisable, nonqualified stock options for
80,000 shares of Common Stock at an exercise price of $0.35 per share and 20,000
shares of Common Stock at an exercise price of $1.50 per share, respectively.
Mr. Lewis exercised options to purchase 80,000 shares in March 1995 and options
to purchase 20,000 shares in September 1995. In addition, in September 1995 the
Company entered into an agreement with Mr. Lewis whereby Mr. Lewis had the right
to purchase 40,000 shares of Common Stock at a purchase price of $1.50 per
share, which right Mr. Lewis exercised concurrently with the execution and
delivery of such agreement.
In February 1995, the Company granted Mr. Leone, a Director of the Company,
immediately exercisable, non-qualified stock options for 50,000 shares of Common
Stock at an exercise price of $0.35 per share. Mr. Leone exercised options to
purchase all 50,000 shares in March 1995.
In April 1995, the Company granted Ms. Carlitz, the Company's Chief
Financial Officer and Vice President, Finance, immediately exercisable,
incentive stock options for 200,000 shares of Common Stock at an exercise price
of $0.35 per share. Ms. Carlitz paid for the shares with $17,500 in cash and a
promissory note in the original principal amount of $52,500 payable to the
Company. The shares are subject to repurchase by the Company upon termination of
Ms. Carltiz's employment on the terms and conditions set forth in the option
agreement. The promissory note bears interest at 5.88% per annum and is payable
in five equal annual installments. The unpaid balance of the promissory note at
June 30, 1996 was $35,000. The option agreement was amended in May 1996 to
provide for acceleration of Ms. Carlitz's options upon the occurrence by a
change in control and certain other stockholder approved transactions. In June
1996, the Company granted Ms. Carlitz incentive stock options for 40,000 shares
of Common Stock at an exercise price of $6.00 per share.
In September 1995, the Company entered into an employment agreement with
Mr. Guldimann, its Executive Vice President. Under an option agreement executed
in connection with his employment agreement, Mr. Guldimann was granted incentive
stock options to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $1.50 per share. Mr. Guldimann was also granted immediately
exercisable, non-qualified options to purchase 500,000 shares of the Company's
Common Stock at an exercise price of $1.50 per share. Mr. Guldimann exercised
his options for 500,000 shares in September 1995 by delivering a promissory note
in the original principal amount of $750,000 to the Company. Such promissory
note bears interest at 6.04% per annum and is payable as follows: (i) $187,500
on September 1, 1996 and (ii) $15,627 each month thereafter until fully paid.
In addition, in September 1995, Mr. Guldimann purchased 200,000 shares of
the Company's Common Stock pursuant to a Restricted Stock Purchase Agreement. In
payment of such shares, Mr. Guldimann delivered to the Company $100,000 in cash
and a promissory note in the original principal amount of $200,000. Such
promissory note bears interest at 6.04% per annum and is payable in full on
February 1, 1997.
The vesting of Mr. Guldimann's options was amended in December 1995 such
that 25% of such options vest one year from the grant date, and the remainder of
the options vest ratably
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<PAGE> 60
at the end of each month thereafter. The option agreement was again amended in
May 1996 to provide for acceleration of Mr. Guldimann's options upon the
occurrence of a change in control and certain other stockholder approved
transactions.
In July 1996, upon his election to the Board, the Company granted Mr.
Dorrian immediately exercisable non-qualified stock options for 40,000 shares of
the Company's Common Stock at an exercise price of $10.50 per share.
In October 1995, the Company entered into an employment agreement with Mr.
Hospers, Vice President, Software Engineering. Under the agreement, Mr. Hospers
was granted incentive stock options to purchase 250,000 shares of the Company's
Common Stock at an exercise price of $1.50 per share. The agreement was amended
in May 1996 to provide for acceleration of Mr. Hospers's options upon the
occurrence of a change in control and certain other stockholder approved
transactions. See "Management -- Employment Agreements."
In May 1996, the Company entered into a letter agreement with Mr. Laven,
its Vice President, Worldwide Field Operations, under the terms of which he will
receive $180,000 per annum in salary and bonus. See "Management -- Employment
Agreements." In addition, Mr. Laven was granted incentive stock options to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$4.00 per share and a non-qualified stock option to purchase 140,000 shares of
the Company's Common Stock at an exercise price of $4.00 per share. Both option
agreements provide for acceleration of Mr. Laven's options upon the occurrence
of a change in control and certain other stockholder approved transactions.
In April, 1994, Sequoia entered into an option agreement with Mr. Lang and
Mr. Vasan, under the terms of which Sequoia acquired the right to purchase
282,000 shares from Mr. Lang and 376,000 shares from Mr. Vasan. In connection
with this agreement, Mr. Lang and Mr. Vasan executed promissory notes payable to
Sequoia in the original principal amounts of $214,461 and $285,948,
respectively. The promissory notes are repayable in two years and bear interest
at the rate of 6% per annum. The notes are secured with 282,000 and 376,000
shares of Common Stock, respectively. In May 1995, Sequoia exercised its option
to purchase the 282,000 and 376,000 shares from Mr. Lang and Mr. Vasan,
respectively. Sequoia paid $25,293.04 and cancelled the outstanding promissory
note as payment to Mr. Lang for his shares and paid $33,797.61 and cancelled the
outstanding promissory note as payment to Mr. Vasan for his shares.
Effective December 31, 1992, the Company and Mr. Harpal Sandhu, a former
director and founder of the Company, entered into a stock purchase and
settlement agreement in settlement of claims resulting from Mr. Sandhu's
termination of employment with the Company. Under the terms of the agreement,
the Company repurchased 2,608,320 shares of Common Stock from Mr. Sandhu.
Aggregate consideration relating to this agreement was approximately $993,120,
consisting of a cash payment of $75,000 and issuance of a promissory note in the
original principal amount of $918,120. The promissory note bore interest at a
rate between 6% and 12% per annum. In addition, the Company exchanged 1,400,000
shares of Common Stock held by Mr. Sandhu for 1,400,000 shares of Series B
Preferred Stock. The Company was granted an option to repurchase the Series B
Preferred Stock at a later date. In connection with the settlement, the Company
and Mr. Sandhu entered into several ancillary agreements including a co-sale
agreement, a stock pledge agreement, an indemnity agreement and a security
agreement. In January 1994, the Company paid to Mr. Sandhu $1,493,333 as payment
in full for the promissory note and as settlement for all other outstanding
claims, and entered into a release agreement, releasing any and all claims. In
November 1995, the Company exercised its option to repurchase the 1,400,000
shares of Series B Preferred Stock from Mr. Sandhu for a total consideration of
$1,276,297. All amounts due under the agreements between Mr. Sandhu and the
Company have been paid and no amounts are outstanding.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the shares offered hereby, the Company
will be authorized to issue up to 50,000,000 shares of Common Stock, $.001 par
value per share, and 5,000,000 shares of Preferred Stock, $.001 par value per
share.
COMMON STOCK
As of June 30, 1996, there were 16,008,608 shares of Common Stock
outstanding that were held of record by approximately 89 stockholders. There
will be 18,008,608 shares of Common Stock outstanding (assuming no exercise of
the U.S. Underwriters' or International Underwriters' over-allotment options and
no exercise of outstanding options) after giving effect to the sale of Common
Stock offered to the public by the Company hereby.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Commencing at the
first annual meeting of stockholders following the annual meeting of
stockholders when the Company shall have had at least 800 stockholders, the
Company will not have cumulative voting rights in the election of directors, and
accordingly, holders of more than 50% of the shares voting will be able to elect
all of the directors. Subject to preferences that may be granted to any then
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor as well as any distributions to the stockholders. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
of the Company remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive or other subscription or conversion rights. There are no
redemption or sinking fund provisions applicable to the Common Stock.
PREFERRED STOCK
Effective upon the closing of the Offerings and pursuant to the Company's
Certificate of Incorporation, the Board of Directors will have the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, any or all of which may be greater than the rights of Common
Stock, without any further vote or action by stockholders. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock after consummation of the Offerings.
REGISTRATION RIGHTS
Pursuant to an investor rights agreement (the "Rights Agreement") entered
into in January 1994 between the Company and holders (the "Holders") of
approximately 11,523,334 shares of the Company's Common Stock, including Roger
A. Lang, Charles H. Marston, Kishore K. Bopardikar and Tejbir S. Sidhu, the
Holders are entitled to certain rights with respect to the registration of such
shares under the Securities Act of 1933, as amended (the "Securities Act"). If
the Company proposes to register any of its securities under the Securities Act,
either for its own account or the account of other security holders, the Company
is required to notify such Holders and to use its best efforts to effect the
registration, and such Holders are entitled to include at the Company's expense
their Registrable Securities (as such term is defined in the Rights Agreement)
in such registration, subject to certain conditions and limitations. In
addition, at any time Sequoia Capital Growth Fund
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<PAGE> 62
and Sequoia Technology Partners II may require the Company to file a limited
number of registration statements under the Securities Act at the Company's
expense, and the Company is required to use its best efforts to effect such
registration, subject to certain conditions and limitations.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
Commencing at the first annual meeting of stockholders following the annual
meeting of stockholders when the Company shall have had at least 800
stockholders, the Certificate of Incorporation of the Company provides for the
Board of Directors to be divided into three classes, with staggered three-year
terms. As a result, only one class of directors will be elected at each annual
meeting of stockholders of the Company, with the other classes continuing for
the remainder of their respective three-year terms. Thereafter, stockholders
shall no longer have cumulative voting rights and the Company's stockholders
representing a majority of the shares of Common Stock outstanding will be able
to elect all of the directors. The Company's Bylaws also provide that all
stockholder action must be effected at a duly called meeting of stockholders and
not by a consent in writing; the Bylaws provide that only the Company's Chief
Executive Officer, a majority of the members of the Company's Board of Directors
or stockholders holding more than 10% of the outstanding capital stock may call
a special meeting of stockholders.
The Certificate of Incorporation and Bylaws require approval by holders of
66 2/3 percent or more of the outstanding Common Stock to further amend any of
these provisions. The classification of the Board of Directors and elimination
of cumulative voting will make it more difficult for the Company's existing
stockholders to replace the Board of Directors as well as for another party to
obtain control of the Company by replacing the Board of Directors. Since the
Board of Directors has the power to retain and discharge officers of the
Company, these provisions could also make it more difficult for existing
stockholders or another party to effect a change in management.
These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company. These
provisions are intended to enhance the likelihood of continued stability in the
composition of the Board of Directors and in the policies furnished by the Board
of Directors and to discourage certain types of transactions that may involve an
actual or threatened change of control of the Company. These provisions are
designed to reduce the vulnerability of the Company to an unsolicited
acquisition proposal. The provisions also are intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for the Company's
shares and, as a consequence, they also may inhibit fluctuations in the market
price of the Company's shares that could result from actual or rumored takeover
attempts. Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors -- Anti-Takeover Provisions."
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested holder, (ii)
upon consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or
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special meeting of the stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder, (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder, (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder, (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder or (v) the receipt by the
interested stockholder of the benefit of any loss, advances, guarantees, pledges
or other financial benefits by or through the corporation. In general, Section
203 defines an interested stockholder as an entity or person beneficially owning
15% or more of the outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.
See "Risk Factors -- Anti-takeover Provisions."
LISTING
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "INFN."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is
Boston EquiServe. Its address is 150 Royall Street, Canton, Massachusetts 02021,
and its telephone number is (617) 579-2000.
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have 18,008,608 shares
of Common Stock outstanding based on 16,008,608 shares outstanding as of June
30, 1996. Of these shares, the 2,350,000 shares sold in the Offerings will be
freely transferable without restriction under the Securities Act, unless they
are held by "affiliates" of the Company as that term is used under the
Securities Act and the Regulations promulgated thereunder.
The remaining 15,658,608 outstanding shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are restricted securities within the meaning of Rule 144 under the
Securities Act. Approximately 20,000 of these shares of Common Stock will be
eligible for sale in the public market immediately upon the effective date of
the Registration Statement of which this Prospectus is a part (the "Effective
Date") in reliance on Rule 144(k) under the Securities Act. Beginning 90 days
after the Effective Date, an additional 20,000 of these shares will become
eligible for sale subject to the provisions of Rule 144 and Rule 701. Beginning
180 days after the date of this Prospectus, approximately 13,915,066 additional
shares will become eligible for sale subject to the provisions of Rule 144 or
Rule 701 upon the expiration of agreements not to sell such shares entered into
between the U.S. Underwriters and the International Underwriters and such
stockholders. Beginning 180 days after the date of this Prospectus,
approximately 1,584,236 additional shares subject to vested options as of the
Effective Date will be available for sale subject to compliance with Rule 701
and upon the expiration of agreements not to sell such shares entered into
between the U.S. Underwriters and the International Underwriters and such
stockholders. In addition, the Commission has proposed revisions to Rule 144 and
Rule 144(k), the effect of which would be to shorten the holding period under
Rule 144 from two years to one year and to shorten the holding period under Rule
144(k) from three years to two years. If enacted, these proposed revisions would
increase, potentially substantially, the number of shares that would be
available for sale in the public market 90 days after the Effective Date and 180
days after the date of this Prospectus. Any shares subject to lock-up agreements
may be released at any time without notice by the U.S. Underwriters and the
International Underwriters. See "Risk Factors -- Shares Eligible for Future
Sale."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least two years is entitled to sell, within any
three-month period commencing 90 days after the Effective Date, a number of
shares that does not exceed the greater of (i) 1% of the then outstanding shares
of Common Stock (approximately 180,000 shares immediately after the Offerings)
or (ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale, subject to the filing of a Form 144 with
respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least three years would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares prior to the Effective Date or who holds vested
options as of that date pursuant to a written compensatory plan or contract is
entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the Effective Date. However, the Company and certain officers,
directors and other stockholders of the Company have agreed not to sell or
otherwise dispose of any shares of Common Stock of the Company for the 180-day
period after the date of this Prospectus without the prior written consent of
the U.S. Underwriters and the International Underwriters. See "Underwriting."
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As soon as practicable after the Effective Date, the Company intends to
file a registration statement on Form S-8 under the Securities Act to register
shares of Common Stock reserved for issuance under the 1989 Stock Option Plan,
the 1993 Stock Incentive Plan, the 1996 Stock Option Plan and the Stock Purchase
Plan, thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act. Such registration
statements will become effective immediately upon filing.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts in the open market may
adversely affect the market price of the Common Stock offered hereby.
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<PAGE> 66
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below ( the "U.S. Underwriters"), and each of such U.S.
Underwriters, for whom Goldman, Sachs & Co., Deutsche Morgan Grenfell/C. J.
Lawrence Inc. and Robertson, Stephens & Company LLC are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
-------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co.................................................
Deutsche Morgan Grenfell/C. J. Lawrence Inc. .......................
Robertson, Stephens & Company LLC...................................
----------------
Total.....................................................
==============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby
(other than those covered by the U.S. Underwriters' over-allotment option
described below), if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may re-allow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the International
Underwriters of the International Offering (the "International Underwriters")
providing for the concurrent offer and sale of 470,000 shares in an
international offering outside of the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two Offerings
are identical. The closing of the U.S. Offering made hereby is a condition to
the closing of the International Offering, and vice versa. The representatives
of the International Underwriters are Goldman Sachs International, Morgan
Grenfell & Co., Limited and Robertson, Stephens & Company LLC
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Inter-Syndicate Agreement") relating to the Offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions, it
will offer, sell or deliver the shares offered hereby and any other shares of
Common Stock, directly or indirectly, only in the United States of America
(including the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (the "United States") and to U.S. Persons,
which term shall mean, for purposes of this paragraph: (i) any individual who is
a resident of the United States or (ii) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States (including any such entity constituting an
investment advisor acting with discretionary authority for a non-U.S. Person or
Persons). Each of the International Underwriters has agreed or will agree
pursuant to the Inter-Syndicate Agreement that, as part of the distribution of
the shares offered as a part of the International Offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell
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<PAGE> 67
or deliver shares of Common Stock (a) in the United States or to any U.S. person
or (b) to any person whom it believes intends to re-offer, resell or deliver the
shares in the United States or to any U.S. person and (ii) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Inter-Syndicate Agreement, sales may be made between the
U.S. Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
Certain Selling Stockholders have granted to the U.S. Underwriters an
option exercisable for 30 calendar days after the date of this Prospectus to
purchase up to an aggregate of 282,000 additional shares of Common Stock to
cover over-allotments, if any, at the initial public offering price less the
underwriting discount as set forth on the cover of the Prospectus. If the U.S.
Underwriters exercise their over-allotment option, the U.S. Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by them, as
shown in the foregoing table, bears to the 1,880,000 shares of Common Stock
offered hereby. The U.S. Underwriters may exercise such option only to cover
overallotments made in connection with the sale of the shares of Common Stock
offered hereby. Certain Selling Stockholders have granted the International
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 70,500 additional shares of Common Stock,
solely to cover over-allotments, if any, at the initial public offering price
less the underwriting discount, as set forth on the cover page of the
Prospectus.
The Company's officers and directors, and certain other holders of shares
of Common Stock and options therefor, including the Selling Stockholders, have
agreed not to sell, contract to sell, grant any option to sell, transfer or
otherwise dispose of, directly or indirectly shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock or any
substantially similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of a designated representative of
the U.S. and International Underwriters. The Company has agreed, with certain
limited exceptions, not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly shares of Common Stock
or securities exchangeable for or convertible into shares of Common Stock or any
substantially similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of the designated representative
of the U.S. and International Underwriters, except that the Company may issue
securities pursuant to the employee stock plans and currently outstanding
options.
The U.S. Underwriters' representatives have informed the Company that they
do not expect sales to discretionary accounts by the U.S. Underwriters to exceed
five percent of the total number of shares of Common Stock offered by them.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company
and the representatives of the U.S. and International Underwriters. The
principal factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will be
the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to the recently established
market valuations of companies in similar businesses.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "INFN."
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
The Company is a party to a license agreement for certain of its products
with Deutsche Bank, an affiliate of Deutsche Morgan Grenfell/C. J. Lawrence Inc.
and Morgan Grenfell & Co., Limited.
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LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Morrison & Foerster LLP, Palo Alto, California. Michael C. Phillips,
a partner at Morrison & Foerster LLP, is Secretary of the Company and owns
15,000 shares of Common Stock of the Company. Certain U.S. legal matters in
connection with the Offerings will be passed upon for the U.S. Underwriters and
the International Underwriters by Venture Law Group, A Professional Corporation,
Menlo Park, California.
EXPERTS
The consolidated financial statements and schedule of Infinity Financial
Technology, Inc. at December 31, 1994 and 1995 and for each of the three years
in the period ended December 31, 1995 appearing in this prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing herein and elsewhere in
the Registration Statement, and is included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
64
<PAGE> 69
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Certain items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at the North Western Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, NY 10048, and copies of all or any part
thereof may be obtained from such office after payment of fees prescribed by the
Commission.
65
<PAGE> 70
INFINITY FINANCIAL TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Income..................................................... F-4
Consolidated Statement of Stockholders' Equity........................................ F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 71
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Infinity Financial Technology, Inc.
We have audited the accompanying consolidated balance sheets of Infinity
Financial Technology, Inc. as of December 31, 1994 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Infinity
Financial Technology, Inc. at December 31, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
Palo Alto, California
March 7, 1996, except for Note 8 as
to which the date is July , 1996
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
certain events described in Note 8 to the Consolidated Financial Statements.
Palo Alto, California ERNST & YOUNG LLP
July 22, 1996
F-2
<PAGE> 72
INFINITY FINANCIAL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- JUNE 30, STOCKHOLDERS'
1994 1995 1996 EQUITY AT
------- ------- ----------- JUNE 30, 1996
(UNAUDITED) -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 3,235 $ 3,517 $ 1,905
Receivables, less allowance for doubtful
accounts of $195 and $120 at December
31, 1995 and June 30, 1996,
respectively (none at December 31,
1994)................................. 4,068 6,667 12,191
Deferred tax asset....................... 172 569 1,025
Prepaid expenses and other current
assets................................ 199 231 322
------ ------- -------
Total current assets............. 7,674 10,984 15,443
Furniture and equipment, net............... 896 1,449 2,144
Other assets............................... 315 415 412
------ ------- -------
$ 8,885 $12,848 $17,999
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 100 $ 218 $ 1,234
Accrued compensation..................... 906 1,533 1,873
Payable to former stockholder............ -- 1,277 --
Other accrued liabilities................ 846 665 1,165
Deferred revenue......................... 3,703 2,806 4,947
Current portion of capital lease
obligations........................... 109 213 171
------ ------- -------
Total current liabilities........ 5,664 6,712 9,390
Long-term portion of capital lease
obligations.............................. 107 303 155
Other long-term liabilities................ -- 67 67
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value,
issuable in series, 5,000,000 shares
authorized:
4,483,334, 3,083,334 and 3,083,334
shares issued and outstanding at
December 31, 1994 and 1995 and June
30, 1996, respectively (none issued
and outstanding pro forma)
(liquidation preference of $1,960,417
at December 31, 1995 and June 30,
1996)................................. 1,054 1,053 1,053 $ --
Common stock, $0.001 par value,
50,000,000 shares authorized,
9,751,642 and 12,486,200 and
12,925,274 shares issued and
outstanding at December 31, 1994 and
1995 and June 30, 1996, respectively
(16,008,608 shares issued and
outstanding pro forma)................ 96 1,570 2,340 3,393
Deferred stock compensation -- -- (586) (586)
Notes receivable from stockholders....... (31) (1,025) (1,071) (1,071)
Retained earnings........................ 1,995 4,168 6,651 6,651
------ ------- -------
Total stockholders' equity................. 3,114 5,766 8,387 $ 8,387
------ ------- -------
$ 8,885 $12,848 $17,999
====== ======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 73
INFINITY FINANCIAL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License revenues................... $ 4,094 $ 9,021 $19,033 $ 8,816 $14,118
Service revenues................... 1,689 3,574 5,705 2,476 3,829
------ ------- ------- ------- -------
Total revenues............. 5,783 12,595 24,738 11,292 17,947
Costs and expenses:
Cost of revenues................... 1,507 2,660 2,915 1,125 1,865
Sales and marketing................ 1,142 3,296 7,693 3,337 6,174
Research and development........... 1,574 3,340 6,098 2,900 4,138
General and administrative......... 580 1,175 2,356 990 1,709
------ ------- ------- ------- -------
Total costs and expenses... 4,803 10,471 19,062 8,352 13,886
------ ------- ------- ------- -------
Income from operations............... 980 2,124 5,676 2,940 4,061
Interest and other income............ 33 63 191 120 85
Interest and other expense........... (76) (48) (160) (99) (142)
------ ------- ------- ------- -------
Income before provision for income
taxes.............................. 937 2,139 5,707 2,961 4,004
Provision for income taxes........... 220 498 2,258 1,172 1,521
------ ------- ------- ------- -------
Net income........................... $ 717 $ 1,641 $ 3,449 $ 1,789 $ 2,483
Series B preferred stock
redemption......................... -- -- (1,276) -- --
------ ------- ------- ------- -------
Net income attributable to common
stockholders....................... $ 717 $ 1,641 $ 2,173 $ 1,789 $ 2,483
====== ======= ======= ======= =======
Net income per share attributable to
common stockholders:
Primary............................ $ 0.06 $ 0.10 $ 0.12 $ 0.10 $ 0.13
====== ======= ======= ======= =======
Fully diluted...................... $ 0.05 $ 0.09 $ 0.12 $ 0.09 $ 0.13
====== ======= ======= ======= =======
Shares used in per share
calculations:
Primary............................ 13,008 16,354 18,404 17,853 19,565
====== ======= ======= ======= =======
Fully diluted...................... 14,516 17,866 18,476 19,364 19,586
====== ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 74
INFINITY FINANCIAL TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOTES
CONVERTIBLE DEFERRED RECEIVABLE RETAINED TOTAL
PREFERRED COMMON STOCK FROM EARNINGS STOCKHOLDERS'
STOCK STOCK COMPENSATION STOCKHOLDERS (DEFICIT) EQUITY
------------ ------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992........... $ 200 $ 19 $ -- $ -- $ (363) $ (144)
Issuance of 1,450,916 shares of common
stock............................... -- 58 -- (31) -- 27
Issuance of 1,400,000 shares of Series
B preferred stock in exchange for
1,400,000 shares of common stock.... 1 (1 ) -- -- -- --
Net income............................ -- -- -- -- 717 717
---- ------ ---- ----- ------- ------
Balances at December 31, 1993........... 201 76 -- (31) 354 600
Issuance of 679,164 shares of common
stock under stock option plan....... -- 32 -- -- -- 32
Repurchase of 290,000 shares of common
stock............................... -- (12 ) -- -- -- (12)
Issuance of 2,083,334 shares of Series
C preferred stock, net of issuance
costs of $904....................... 853 -- -- -- -- 853
Net income............................ -- -- -- -- 1,641 1,641
---- ------ ---- ----- ------- ------
Balances at December 31, 1994........... 1,054 96 -- (31) 1,995 3,114
Issuance of 2,494,558 shares of common
stock under stock option plan....... -- 1,028 -- (803) -- 225
Issuance of 240,000 shares of common
stock............................... -- 360 -- (200) -- 160
Compensation recorded for accelerated
vesting of options.................. -- 86 -- -- -- 86
Repurchase of 1,400,000 shares of
Series B preferred stock............ (1) -- -- -- (1,276) (1,277)
Repayment of stockholder note......... -- -- -- 9 -- 9
Net income............................ -- -- -- -- 3,449 3,449
---- ------ ---- ----- ------- ------
Balances at December 31, 1995........... 1,053 1,570 -- (1,025) 4,168 5,766
Issuance of 439,074 shares of common
stock under stock option plan
(unaudited)......................... -- 145 -- (60) -- 85
Deferred stock compensation related to
grants of stock options
(unaudited)......................... -- 625 (625) -- -- --
Amortization of deferred stock
compensation (unaudited)............ -- -- 39 -- -- 39
Repayment of stockholder note
(unaudited)......................... -- -- -- 14 -- 14
Net income (unaudited)................ -- -- -- -- 2,483 2,483
---- ------ ---- ----- ------- ------
Balances at June 30, 1996 (unaudited)... $1,053 $2,340 $(586) $(1,071) $ 6,651 $ 8,387
==== ====== ==== ===== ======= ======
</TABLE>
See accompanying notes.
F-5
<PAGE> 75
INFINITY FINANCIAL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 717 $ 1,641 $ 3,449 $ 1,789 $ 2,483
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 287 417 761 129 359
Compensation due to accelerated vesting of
options......................................... -- -- 86 -- --
Changes in assets and liabilities:.................
Accounts receivable............................. (1,239) (2,809) (2,599) (2,876) (5,524)
Deferred income taxes........................... 82 (1) (397) (456)
Prepaid expenses and other assets............... (101) (189) (332) (97) (88)
Accounts payable................................ 56 (16) 118 84 1,016
Accrued compensation............................ 54 634 627 (36) 340
Payable to former stockholder................... -- -- 1,277 -- (1,277)
Other accrued liabilities and long-term
liabilities................................... 335 595 (114) 367 500
Deferred revenue................................ 413 2,578 (897) (1,804) 2,141
------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities......................................... 604 2,850 1,979 (2,444) (506)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures................................. (271) (569) (650) (96) (1,015)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable............................ (283) (635) -- -- --
Payment of stockholder notes payable................. -- -- 9 5 14
Principal payments of capital lease obligations...... (28) (84) (164) (159) (190)
Proceeds from issuance of common stock............... 27 32 385 203 85
Repurchase of preferred stock........................ -- (12) (1,277) -- --
Net proceeds from issuance of Series C
preferred stock.................................... -- 853 -- -- --
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities......................................... (284) 154 (1,047) 49 (91)
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................................ 49 2,435 282 (2,491) (1,612)
Cash and cash equivalents at beginning of the
period............................................. 751 800 3,235 3,235 3,517
------- ------- ------- ------- -------
Cash and cash equivalents at end of the period....... $ 800 $ 3,235 $ 3,517 $ 744 $ 1,905
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid............................... $ 76 $ 223 $ 2,793 $ 847 $ 1,710
======= ======= ======= ======= =======
Interest paid................................... $ 76 $ 48 $ 79 $ 28 $ 33
======= ======= ======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired under capital lease.......... $ 272 $ 272 $ 464 $ 394 $ --
======= ======= ======= ======= =======
Issuance of common stock in exchange for notes
receivable.................................... $ -- $ -- $ 1,003 $ 53 $ 60
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 76
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Infinity Financial Technology, Inc. (the "Company") develops, markets and
supports object-oriented, client/server software solutions for financial trading
and risk management. The Company provides a comprehensive range of customer
support services, including maintenance, training, and consulting. The Company
was incorporated in California in 1989 and has applied for reincorporation in
Delaware in 1996.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany account balances and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates, and such
differences could affect the results of operations reported in future periods.
FOREIGN CURRENCY TRANSLATION
In 1996, the Company established subsidiaries in the United Kingdom and
Japan. The functional currency of the United Kingdom subsidiary is the U.S.
dollar and the functional currency of the Japan subsidiary is the local
currency. Gains and losses on the translation into U.S. dollars of amounts
denominated in foreign currencies are included in net income for those
operations whose functional currency is the U.S. dollar. The cumulative
translation adjustment for those operations whose functional currency is the
local currency was immaterial as of June 30, 1996.
In order to reduce the effect of foreign currency fluctuations on its
results of operations, the Company hedges its exposure on certain intercompany
and customer receivables that are denominated in foreign currencies through the
use of foreign currency forward exchange contracts. The contracts do not subject
the Company to significant market risk from exchange rate movements because the
contracts offset foreign currency balances and transactions being hedged.
Realized and unrealized gains and losses on foreign currency contracts and the
underlying transactions being hedged are included in interest and other income
(expense), net.
INTERIM FINANCIAL INFORMATION
In the opinion of management, the interim financial statements have been
prepared on the same basis as the annual financial statements and include all
adjustments (consisting only of normal recurring adjustments) necessary to state
fairly the financial information set forth therein, in accordance with generally
accepted accounting principles.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of results to be expected for the full fiscal year.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
The Company's revenues consist primarily of license and product revenues
from financial institutions in the United States, Canada, Japan, Australia,
Germany, France and the U.K. The Company sells primarily to large institutions,
and therefore does not obtain collateral against its
F-7
<PAGE> 77
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
outstanding receivables. The Company maintains reserves for potential credit
losses and historically such losses have been immaterial. No customer accounted
for more than 10% of revenues during the six months ended June 30, 1996. Three
customers accounted for 24%, 11% and 10% of revenues during the six months ended
June 30, 1995. During fiscal 1995, one customer accounted for 14% of revenues;
during fiscal 1994, three customers accounted for 18%, 15% and 10% of revenues,
respectively, and during fiscal 1993, four customers accounted for 22%, 18%, 15%
and 12% of revenues, respectively.
Revenues from international customers accounted for 27%, 25% and 53% of
total revenues for the years ended December 31, 1993, 1994 and 1995,
respectively and 45% and 70% of total revenues for the six months ended June 30,
1995 and 1996, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company maintains
deposits with a bank and an investment manager and invests its excess cash in
money market funds which bear minimal risk. Cash equivalents consist of money
market instruments at December 31, 1994 and 1995, and June 30, 1996.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated on a
straight-line basis over estimated useful lives, generally three to five years.
Leasehold improvements are amortized over the lesser of the term of the lease or
the estimated useful life of the asset. Assets under capital lease obligations
are amortized over the shorter of the term of the lease or their useful lives on
a straight-line basis, and such amortization is included with depreciation.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position 91-1 ("SOP 91-1"), "Software
Revenue Recognition." License revenues less deferrals for warranty are
recognized upon shipment only if no significant vendor obligations remain and
collection of the resulting receivable is deemed probable. License warranty
revenues are recognized ratably over the warranty period, generally 30 to 90
days. When the Company receives payment on licenses prior to shipment and
fulfillment of significant vendor obligations, such payments are recorded as
deferred revenue. Service revenues consist primarily of maintenance and support,
training, consulting and co-development projects. Service revenues from customer
maintenance fees for ongoing customer support and product updates are recognized
ratably over the maintenance term, which is typically 12 months. Service
revenues from customer training and consulting services are recognized as the
service is performed. Service revenues from co-development agreements are
recognized upon achievement of contractual milestones or on a
percentage-of-completion basis.
COST OF REVENUES
Cost of revenues, which primarily relate to costs of service revenues,
include materials, sublicense royalties, a portion of development costs
associated with joint product development agreements, and a portion of technical
support costs. Costs of license revenues were immaterial for all periods
presented.
F-8
<PAGE> 78
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as
incurred. Statement of Financial Accounting Standard No. 86 "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant.
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common shares outstanding and common equivalent shares arising from the assumed
exercise of stock options using the treasury stock method and the conversion of
Series A and Series C convertible preferred stock on the as-converted method.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the period commencing 12
months prior to the initial filing of an initial public offering at prices below
the assumed public offering price have been included in the calculation as if
they were outstanding for all periods presented (using the treasury stock
method). Fully diluted net income per share is computed using the weighted
average common and common equivalent shares outstanding plus other dilutive
shares outstanding which are not common equivalent shares. Other dilutive shares
which are not common equivalent shares include Series B convertible preferred
stock during the period such shares were outstanding.
In November 1995, the Company redeemed the Series B Preferred Shares for
$1,277,000. The redemption decreased the income applicable to common
shareholders in the calculation of net income per share in 1995.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued FAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires the Company to review for impairment
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In certain situations, an
impairment loss would be recognized. FAS 121 is effective for the Company's 1996
fiscal year. The impact of the new standard is immaterial.
In October 1995, the FASB issued Statement of Financial Accounting Standard
123 "Accounting for Stock-Based Compensation" ("FAS 123") which also is
effective for the Company's 1996 fiscal year. FAS 123 allows companies which
have stock-based compensation arrangements with employees to adopt a new
fair-value basis of accounting for stock options and other equity instruments,
or to continue to apply the existing accounting rules under APB Opinion 25
"Accounting for Stock Issued to Employees" but with additional financial
statement disclosure. The Company has continued to account for stock-based
compensation arrangements under APB Opinion 25, therefore FAS 123 did not have a
material impact on its financial position, results of operations or cash flows.
F-9
<PAGE> 79
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. OTHER FAIR VALUE DISCLOSURES
At June 30, 1996, the Company had foreign currency forward exchange
contracts, all with maturities of 45 days or less, to exchange Japanese Yen for
U.S. dollars in the amount of $3,456,000. The difference between the fair value
and the carrying amount of these foreign currency forward exchange contracts is
immaterial. One major Japanese multinational bank is counterparty to these
contracts. There were no foreign currency forward exchange contracts outstanding
at December 31, 1994 and 1995.
At December 31, 1995 and 1994, and June 30, 1996, the carrying value of
notes receivable from stockholders approximates their fair value. The fair
values of notes receivable from stockholders are estimated using discounted cash
flow analyses, based on interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
3. FURNITURE AND EQUIPMENT
Furniture and equipment consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and office equipment.............. $ 472 $ 699 $ 1,293
Computer equipment.......................... 1,018 1,672 2,093
------ ------ -------
1,490 2,371 3,386
Accumulated depreciation and amortization... (594) (922) (1,242)
------ ------ -------
Furniture and equipment, net................ $ 896 $1,449 $ 2,144
====== ====== =======
</TABLE>
4. LINE OF CREDIT
The Company has a revolving line of credit which provides for $3,000,000 in
borrowings and expires August 31, 1996. Borrowings under the line are secured
and bear interest at the 30-day commercial paper rate plus 2.9%. The line of
credit agreement requires the Company to maintain certain financial covenants
and prohibits the Company from paying cash dividends without the lender's
consent. For all periods presented, the Company was in compliance with such
covenants. As of December 31, 1994 and 1995 and June 30, 1996, no amounts were
outstanding under the line of credit.
5. LEASE OBLIGATIONS AND OTHER COMMITMENTS
Assets acquired under noncancelable capital leases consist of computer and
office equipment with an aggregate cost basis of approximately $327,000,
$749,000 and $595,000 at December 31, 1994 and 1995, and June 30, 1996,
respectively, and accumulated amortization of approximately $118,000, $257,000
and $292,000 at December 31, 1994 and 1995, and June 30, 1996, respectively.
In February 1996, the Company entered into an equipment financing line,
under which the Company can finance $1,000,000 of capital expenditures. As of
June 30, 1996, the Company had drawn $375,000 under this line. The unused
portion of the line expires on July 31, 1996.
F-10
<PAGE> 80
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The Company leases office space under operating leases which expire
beginning in January 1997 through March 2004. Under one lease, the Company has a
two-year renewal option. The Company also rents certain property and equipment
under operating leases. Rent expense for all operating leases for the years
ended December 31, 1993, 1994 and 1995 and for the six months ended June 30,
1995 and 1996 was approximately $268,000, $544,000, $1,207,000, $630,000, and
$862,000, respectively.
Minimum future lease payments under all operating and capital lease
obligations as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING LEASE CAPITAL LEASE
OBLIGATIONS OBLIGATIONS
--------------- -------------
(IN THOUSANDS)
<S> <C> <C>
1996................................................. $ 1,396 $ 288
1997................................................. 1,306 231
1998................................................. 948 101
1999................................................. 905 --
2000 and thereafter.................................. 1,276 --
------ -----
Total minimum lease payments........................... $ 5,831 620
======
Less amount representing interest...................... (104)
-----
Present value of net minimum lease payments............ 516
Less current portion................................... (213)
-----
Long-term portion...................................... $ 303
=====
</TABLE>
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The board of directors has the authority to issue 5,000,000 shares of
preferred stock, of which 1,000,000 shares have been designated as Series A,
1,400,000 shares have been designated as Series B and 2,083,334 shares have been
designated as Series C. Conversion of all preferred stock is automatic upon the
closing of an underwritten public offering of the Company's common stock if the
aggregate offering proceeds exceed $5,000,000 and the offering price is at least
$2.50 per share.
F-11
<PAGE> 81
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Preferred stock consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Preferred Stock:
Series A convertible, 1,000,000 shares authorized, issued
and outstanding........................................ $ 200 $ 200 $ 200
Series B convertible, 1,400,000 shares authorized,
1,400,000 shares issued and outstanding at December
31,1994 and no shares issued and outstanding at
December 31, 1995 and June 30, 1996.................... 1 -- --
Series C convertible, 2,083,334 shares authorized, issued
and outstanding........................................ 853 853 853
------ ------ ------
$1,054 $1,053 $ 1,053
====== ====== ======
</TABLE>
Series A and C preferred stock are senior to Series B preferred stock and
common stock. Series A and C preferred stock are convertible, at the
stockholders' option, at any time into common stock on a one-for-one basis and
have voting rights equal to the voting rights of the common shares into which
they are convertible.
In the event of a liquidation or winding up of the Company, holders of
Series A and C preferred stock shall have a liquidation preference of $0.20 and
$0.845 per share, respectively. plus accrued and unpaid dividends, if any,
before distributions to the Series B and common stockholders.
The preferred stockholders are entitled to noncumulative dividends in such
amounts and at such time as the board of directors deems appropriate. No
dividend shall be paid on common stock unless an equal dividend has first been
paid on the Series A, B and C preferred stock. The Series C preferred stock has
a dividend preference of $0.0676 over the Series A and B preferred stockholders
and common stockholders, and Series A has a $0.02 dividend preference over the
Series B preferred stockholders and common stockholders. No dividends have been
declared or are payable at June 30, 1996.
On January 31, 1994, the Company completed an offering of Series C
preferred stock for gross proceeds of $1,757,000. As a condition to the stock
purchase, the investors required the Company to terminate certain continuing
covenants including certain cash payments due upon subsequent rounds of
financing imposed on the Company in the 1992 settlement and buy-out of a former
common stockholder. As a result, the Company paid $876,000 to the former common
stockholder as consideration for his agreement to terminate these contractual
covenants and restrictions and for his approval of the Series C preferred stock
financing. These costs have been accounted for as issuance costs associated with
the sale of the Series C preferred stock.
In November 1995, the Company exercised its right to repurchase all of the
outstanding Series B preferred shares for $1,277,000. The excess of the
repurchase cost over the stated value of the shares at the time of issuance to
the stockholder has been recorded as a reduction of retained earnings in the
statement of stockholders' equity.
F-12
<PAGE> 82
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
COMMON STOCK
The Company issues shares of common stock which are subject to the
Company's right to repurchase at the original issuance price upon the occurrence
of certain events as defined in the agreements. This right expires ratably over
48 months. At June 30, 1996, 717,778 shares are subject to repurchase (there
were 700,000 of such shares subject to repurchase at December 31, 1995 and no
shares were subject to repurchase at December 31, 1994).
In 1995, the Company issued 200,000 shares under a stock purchase
agreement. In connection with this agreement, the Company received a secured
promissory note for $200,000. The note bears interest at 6.04% and is due and
payable in March 1997.
At June 30, 1996 and December 31, 1995, the total number of shares of
common stock reserved for future issuances under all option plans and conversion
of Series A and C convertible preferred stock was 6,664,616 and 7,135,776,
respectively.
STOCK OPTIONS
The Company's 1989 Stock Option Plan (the "1989 Plan") authorizes the board
of directors to grant incentive stock options or nonqualified stock options for
up to 3,000,000 common stock shares to employees, consultants, officers and
directors of the Company. The 1989 Plan is administered by the board of
directors with the terms and conditions of options being generally left to the
discretion of the board.
Under the 1989 Plan, options may be granted at a price not less than fair
value at the date of grant as determined by the board of directors or committee
thereof, except for options granted to a person owning greater than 10% of the
total combined voting power of all classes of stock of the Company, for which
the exercise price of the options must not be less than 110% of the fair value
at the time of grant as determined by the board of directors or committee
thereof. Options generally become exercisable over a period of four years with
1/4 of the options vesting on the first anniversary of the option grant, and
the remainder vesting ratably over the following 36 months. Options are
exercisable for a term of five years after the date of grant.
The Company's 1993 Incentive Stock Option Plan (the "1993 Plan") authorizes
the board of directors to grant incentive stock options or nonqualified stock
options for up to 6,104,356 common shares to employees, consultants, officers
and directors of the Company. The terms of the 1993 Plan are generally similar
to the 1989 Plan, except that nonqualified stock options may be granted at a
price not less than 85% of the fair market value at the date of grant and
options are exercisable for a term of ten years after the date of grant.
In the event of termination of employment or consulting services, the
employee or consultant shall have the right to exercise any unexercised vested
options within 30 or 90 days of the date of termination.
Under the 1989 Plan and 1993 Plan, employees may exercise options in
exchange for a secured promissory note. In 1996, the Company received a note for
$60,000 bearing interest at 6.58% and due and payable beginning in June 1997
through June 2000. In 1995, the Company received two notes for $750,000 and
$52,500 bearing interest at 6.04% and 5.88%, respectively, which are due and
payable from September 1996 through September 2000. As of June 30, 1996, $17,500
of principal had been repaid on these notes.
F-13
<PAGE> 83
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Activity under the 1989 Plan and the 1993 Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
OPTIONS --------------------------
AVAILABLE NUMBER OF PRICE PER
FOR GRANT SHARES SHARE
---------- ---------- -----------
<S> <C> <C> <C>
Balance at December 31, 1992...................... 9,646 2,578,792 $0.01-$0.04
Additional authorized........................... 3,000,000 -- --
Granted......................................... (2,307,000) 2,307,000 $0.04-$0.10
Exercised....................................... -- (1,450,916) $0.02-$0.08
Canceled........................................ 308,876 (308,876) $0.02-$0.08
---------- ---------- ------------
Balance at December 31, 1993...................... 1,011,522 3,126,000 $0.02-$0.10
Additional authorized........................... 1,100,000 -- --
Granted......................................... (1,832,000) 1,832,000 $0.10-$0.23
Exercised....................................... -- (679,164) $0.02-$0.18
Repurchased..................................... 290,000 -- --
Canceled........................................ 447,836 (447,836) $0.04-$0.18
---------- ---------- ------------
Balance at December 31, 1994...................... 1,017,358 3,831,000 $0.02-$0.23
Additional authorized........................... 1,700,000 -- --
Granted......................................... (2,020,500) 2,020,500 $0.35-$2.50
Exercised....................................... -- (2,494,558) $0.02-$1.50
Canceled 1989 Plan.............................. -- (1,358) $0.04-$0.08
Canceled........................................ 415,030 (415,030) $0.04-$1.50
---------- ---------- ------------
Balance at December 31, 1995...................... 1,111,888 2,940,554 $0.02-$2.50
Granted......................................... (1,210,000) 1,210,000 $3.00-$6.00
Exercised....................................... -- (439,074) $0.02-$6.00
Canceled 1989 Plan.............................. -- (32,086) $0.04-$0.35
Canceled........................................ 212,110 (212,110) $0.08-$3.00
---------- ---------- ------------
Balance at June 30, 1996.......................... 113,998 3,467,284 $0.04-$6.00
========== ========== ============
</TABLE>
At December 31, 1994 and 1995, and June 30,1996 options to purchase
1,220,598, 745,642 and 835,471 shares, respectively, were exercisable.
The Company has recorded deferred compensation expense of $625,000 to
reflect the difference between the grant price and the deemed fair value of
certain of the Company's common stock options granted in 1996. This amount is
being amortized over a 48-month period consistent with the vesting period of the
individual options. Deferred compensation expense recognized in the six months
ended June 30, 1996 totaled $39,000.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
Unaudited pro forma stockholders' equity at June 30, 1996 gives effect to
the conversion of 3,083,334 shares of preferred stock into common stock upon the
close of the Company's initial public offering of shares of its common stock.
F-14
<PAGE> 84
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. INCOME TAXES
The components of the provisions for income taxes for the years ending
December 31, 1993, 1994 and 1995 and for the six months ended June 30, 1996
consist of the following:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED
------------------------ JUNE 30,
1993 1994 1995 1996
---- ---- ------ ----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal..................................... $ 24 $112 $1,786 $1,127
State....................................... 36 72 515 368
Foreign..................................... 126 330 354 482
---- ---- ------ ------
186 514 2,655 1,977
Deferred (prepaid):
Federal..................................... 30 (31) (328) (26)
State....................................... 4 15 (69) (3)
Foreign..................................... -- -- -- (427)
---- ---- ------ ------
220 $498 $2,258 $1,521
==== ==== ====== ======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The source
and tax effects of the differences are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------- JUNE 30,
1993 1994 1995 1996
----- ------ ------ ----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Income before income taxes................. $ 937 $2,139 $5,707 $4,004
===== ====== ====== ======
Expected tax at 34%........................ $ 318 $ 727 $1,940 $1,361
Foreign provision.......................... 126 330 354 482
State income tax, net of federal benefit... 26 57 294 241
Tax credits................................ (225) (388) (401) (482)
Reduction in valuation allowance........... -- (225) -- --
Foreign sales corporation benefit.......... -- -- (106) (138)
Other...................................... (25) (3) 177 57
----- ------ ------ ------
$ 220 $ 498 $2,258 $1,521
===== ====== ====== ======
</TABLE>
F-15
<PAGE> 85
INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Significant components of the Company's current deferred tax assets and
liabilities for federal and state income taxes are as follows at:
<TABLE>
<CAPTION>
DECEMBER
31,
----------- JUNE 30,
1994 1995 1996
---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Foreign tax credit.......................................... $ -- $ -- $ 203
Foreign net operating loss carryforward..................... -- -- 427
Reserves and accruals....................................... 105 324 343
Other, net.................................................. 67 245 205
---- ----
Total deferred tax asset.......................... 172 569 1,178
---- ----
Unremitted earnings of foreign subsidiary................... -- -- (153)
---- ----
Total deferred tax liability...................... -- -- (153)
---- ----
Net deferred tax asset............................ $172 $569 $1,025
==== ====
</TABLE>
8. SUBSEQUENT EVENTS
In July 1996, the board of directors authorized management of the Company
to file a Registration Statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. In
addition, the Company's board of directors approved a two-for-one stock split.
In conjunction with this split, the Company's board of directors approved an
increase in the number of authorized common shares to 50,000,000. Accordingly,
all the share and per share data has been retroactively adjusted to reflect
these changes.
In July 1996, the Company's board of directors adopted the 1996 Employee
Stock Purchase Plan (the "Purchase Plan") which provides for the issuance of
300,000 shares of common stock and the 1996 Stock Incentive Plan (the "Incentive
Plan"), which provides for the issuance of options to purchase up to 800,000
shares of Common Stock. Shares may be purchased under the Purchase Plan at 85%
of the lesser of the fair market value of the common stock on the grant or
purchase date. In addition, the board of directors also approved an increase of
250,000 in the number of shares authorized for issuance under the 1993 Plan.
In July 1996, the Company applied for reincorporation in the State of
Delaware. In conjunction with the reincorporation in Delaware, the par value of
the Company's preferred and common stock was changed to $0.001. The Company's
financial statements have been retroactively adjusted to reflect this change.
F-16
<PAGE> 86
- -------------------------------------------------------
- -------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 16
Dividend Policy......................... 16
Capitalization.......................... 17
Dilution................................ 18
Selected Consolidated Financial Data.... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 20
Business................................ 29
Management.............................. 44
Principal and Selling Stockholders...... 54
Certain Transactions.................... 55
Description of Capital Stock............ 57
Shares Eligible for Future Sale......... 60
Underwriting............................ 62
Legal Matters........................... 64
Experts................................. 64
Additional Information.................. 65
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
2,350,000 SHARES
INFINITY FINANCIAL
TECHNOLOGY, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------------------
LOGO
------------------------------
GOLDMAN, SACHS & CO.
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 87
[ALTERNATE PAGE]
- -------------------------------------------------------
- -------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 16
Dividend Policy......................... 16
Capitalization.......................... 17
Dilution................................ 18
Selected Consolidated Financial Data.... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 20
Business................................ 29
Management.............................. 44
Principal and Selling Stockholders...... 54
Certain Transactions.................... 55
Description of Capital Stock............ 57
Shares Eligible for Future Sale......... 60
Underwriting............................ 62
Legal Matters........................... 65
Experts................................. 65
Additional Information.................. 65
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
2,350,000 SHARES
INFINITY FINANCIAL
TECHNOLOGY, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------------------
LOGO
------------------------------
GOLDMAN SACHS INTERNATIONAL
DEUTSCHE MORGAN GRENFELL
ROBERTSON, STEPHENS & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 88
APPENDIX -- DESCRIPTION OF GRAPHICS
[INSIDE FRONT COVER]
Infinity's object-oriented, client/server platform and solutions software
automate trading and risk management
INTEGRATED TREASURY SYSTEM IMPROVES RISK MANAGEMENT
<TABLE>
<S> <C>
Graphic: Set forth is one large box labeled "Infinity Fin++ Class Library." Inside this box is a
smaller box labeled "Infinity Data Model." Inside this smaller box is a box split into two
parts, one labeled "Oracle," the other "Sybase." To the left of the large box are four smaller
boxes, with two-way arrows connecting them to the large box. These boxes are labeled
"Derivatives," "Foreign Exchange," "Equities" and "Bonds." To the right of the large box are
four smaller boxes, with two-way arrows connecting them to the large box. These boxes are
labeled "Market Risk," "Credit Risk" and "Liquidity Risk."
Customer: Capital markets operation of diversified banking group based in the Asia-Pacific region
Objective: Become a leader in derivatives trading, and improve management of market, credit and liquidity
risks
Solution: Global system based on Infinity Derivatives and the Infinity Platform to provide integrated
trading and risk management for both high volume and derivative instruments
</TABLE>
BACK OFFICE PROCESSING SYSTEM FACILITATES INNOVATION AND FINANCIAL CONTROL
<TABLE>
<S> <C>
Graphic: Set forth is a photo of a trading floor.
Customer: Derivatives unit of one of world's largest commercial banks
Objective: Respond to customer's changing risk management requirements
Solution: Back office system built using the Infinity Platform processes complex derivative instruments
in a secure, integrated environment
</TABLE>
AUTOMATED DERIVATIVES PROCESSING REDUCES COSTS AND IMPROVES EFFICIENCY
<TABLE>
<S> <C>
Graphic: Set forth are three graphical depictions of a computer screen image for each of Infinity's
front-office, risk management and back-office Infinity Derivatives products.
Customer: Treasury department of large North American commercial bank
Objective: Reduce transaction processing costs, improve financial control, lower operational risks
Solution: Infinity Derivatives together with work flow management software eliminates paper-based
processing
</TABLE>
[PAGE 36]
<TABLE>
<S> <C>
Graphic: Set forth are three stacked rectangular boxes, the bottom box contains the words
"Sybase/Oracle," the middle box contains the words "Infinity Data Model," the top box contains
the words "Infinity Fin++ Class Library." The words "Infinity Platform" appear to the left of
the top and middle boxes. On top of the top box is a row of four smaller boxes. The boxes
contain, from left to right, the following words: the first box, "Infinity Derivatives;" the
second box, "Infinity Data Model;" the third box, "Infinity Fin++ Class Library;" and the
fourth box, "Third Party Applications." The word "solution" appears to the left of the row of
four smaller boxes.
</TABLE>
<PAGE> 89
[INSIDE BACK COVER]
<TABLE>
<S> <C>
Graphic: Set forth are three stacked rectangular boxes, the bottom box contains the words
"Sybase/Oracle," the middle box contains the words "Infinity Data Model," the top box contains
the words "Infinity Fin++ Class Library." The words "Infinity Platform" appear to the left of
the top and middle boxes. On top of the top box is a row of four smaller boxes. The boxes
contain, from left to right, the following words: the first box, "Infinity Derivatives;" the
second box, "Infinity Data Model;" the third box, "Infinity Fin++ Class Library;" and the
fourth box, "Third Party Applications." The word "solution" appears to the left of the row of
four smaller boxes.
</TABLE>
Infinity develops, markets and supports object-oriented, client/server
platform and solutions software for financial trading and risk management.
Infinity's primary product is the Infinity Platform, which provides customers
with a foundation to rapidly develop, deploy and modify trading and risk
management systems in response to the changing requirements of the marketplace.
Infinity also offers Infinity Derivatives, solutions software for derivatives
trading, which enables customers to integrate "front-office" trading activities
such as pricing, deal capture and position-keeping, with "back-office"
operations such as trade confirmations, payments processing and general ledger
accounting. Infinity has introduced and plans to release in the second half of
1996 its Infinity RiskView product, which is designed to facilitate customers'
development of risk management systems. Built with the Infinity Platform, these
solutions, along with third party and internally developed applications,
automate a range of transaction processing and decision support activities.
<PAGE> 90
[ALTERNATE PAGE]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
International Underwriters named below (the "International Underwriters"), and
each of such International Underwriters, for whom Goldman Sachs International,
Morgan Grenfell & Co., Limited and Robertson, Stephens & Company LLC are acting
as representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
-------------------------------------------------------------------- ----------------
<S> <C>
Goldman Sachs International.........................................
Morgan Grenfell & Co., Limited......................................
Robertson, Stephens & Company LLC ..................................
----------------
Total.....................................................
==============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby (other than those covered by the International Underwriters'
over-allotment option described below), if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares
of Common Stock are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S.
Offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 1,880,000 shares of Common Stock in the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two Offerings
are identical. The closing of the International Offering made hereby is a
condition to the closing of the U.S. Offering, and vice versa. The
representatives of the U.S. Underwriters are Goldman, Sachs & Co., Deutsche
Morgan Grenfell/C. J. Lawrence Inc. and Robertson, Stephens & Company LLC.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Inter-Syndicate Agreement") relating to the Offerings, each of
the International Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions, it
will (i) not directly or indirectly offer, sell or deliver shares of Common
Stock (a) in the United States of America (including the States and the District
of Columbia), its territories, its possessions or other areas subject to its
jurisdiction (the "United States") or to any U.S. person (as identified below)
or (b) to any person whom it believes intends to reoffer, resell or redeliver
the shares in the United States or to any U.S. Person, and (ii) cause any dealer
to whom it may sell such shares at any concession to agree to observe a similar
restriction. The term U.S. Person shall mean, for purposes of this paragraph:
(a) any individual who is a resident of the United States or (b) any
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States (including
any such entity constituting an investment
62
<PAGE> 91
[ALTERNATE PAGE]
advisor acting with discretionary authority for a non-U.S. Person or Persons).
Each of the U.S. Underwriters has agreed pursuant to the Inter-Syndicate
Agreement that, as part of the distribution of the shares offered as a part of
the U.S. Offering, and subject to certain exceptions, it will only offer, sell
or deliver Common Shares, directly or indirectly, in the United States and to
U.S. Persons.
Pursuant to the Inter-Syndicate Agreement, sales may be made between the
International Underwriters and the U.S. Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
Certain Selling Stockholders have granted to the International Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 70,500 additional shares of Common Stock to cover
over-allotments, if any, at the initial public offering price less the
underwriting discount as set forth on the cover of the Prospectus. If the
International Underwriters exercise their over-allotment option, the
International Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by them, as shown in the foregoing table, bears to the 470,000
shares of Common Stock offered. The International Underwriters may exercise such
option only to cover over-allotments in connection with the sale of the shares
of Common Stock offered hereby. Certain Selling Stockholders have granted to the
U.S. Underwriters an option exercisable for 30 days after the date of this
Prospectus to purchase up to an aggregate of 282,000 additional shares of Common
Stock, solely to cover over-allotments, at the initial public offering price
less the underwriting discount, as set forth on the cover page of this
Prospectus.
Each International Underwriter has also agreed that (i) it has not offered
or sold and prior to the date six months after the date of issue of the shares
of Common Stock will not offer or sell any shares of Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (ii) it
has complied, and will comply with, all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the shares of Common Stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Purchasers of shares of Common Stock may be required to pay stamp taxes and
other charges in accordance with the laws and practices of the country of
purchase, in addition to the offering price set forth on the cover page hereof.
The Company's officers and directors, and certain other holders of shares
of Common Stock and options therefor, including the Selling Stockholders, have
agreed not to sell, contract to sell, grant any option to sell, transfer or
otherwise dispose of, directly or indirectly shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock or any
substantially similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of a designated representative of
the U.S. and International Underwriters. The Company has agreed, with certain
limited exceptions, not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly shares of Common Stock
or securities exchangeable for or convertible into shares of Common Stock or any
substantially similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of the
63
<PAGE> 92
[ALTERNATE PAGE]
designated representative of the U.S. and International Underwriters, except
that the Company may issue securities pursuant to the employee stock plans and
currently outstanding options.
The International Underwriters' representatives have informed the Company
that they do not expect sales to discretionary accounts by the International
Underwriters to exceed five percent of the total number of shares of Common
Stock offered by them.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company
and the representatives of the U.S. and the International Underwriters. The
principal factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will be
the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to the recently established
market valuations of companies in similar businesses.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "INFN."
The Company and the Selling Stockholders have agreed to indemnify the
several International Underwriters against certain liabilities, including
liabilities under the Securities Act.
The Company is a party to a license agreement for certain of its products
with Deutsche Bank, an affiliate of Deutsche Morgan Grenfell/C. J. Lawrence Inc.
and Morgan Grenfell & Co., Limited.
64
<PAGE> 93
[ALTERNATE PAGE]
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Morrison & Foerster LLP, Palo Alto, California. Michael C. Phillips,
a partner at Morrison & Foerster LLP, is Secretary of the Company and owns
15,000 shares of Common Stock of the Company. Certain U.S. legal matters in
connection with the Offerings will be passed upon for the U.S. Underwriters and
the International Underwriters by Venture Law Group, A Professional Corporation,
Menlo Park, California.
EXPERTS
The consolidated financial statements and schedule of Infinity Financial
Technology, Inc. at December 31, 1994 and 1995 and for each of the three years
in the period ended December 31, 1995 appearing in this Prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing herein and elsewhere in
the Registration Statement, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Certain items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at the North Western Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, NY 10048, and copies of all or any part
thereof may be obtained from such office after payment of fees prescribed by the
Commission.
65
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<CAPTION>
AMOUNT*
----------
<S> <C>
Securities and Exchange Commission Filing Fee................... $ 13,979
NASD Filing Fee................................................. 4,554
Nasdaq National Market Listing Fee.............................. 50,000
Accounting Fees and Expenses.................................... 175,000
Blue Sky Fees and Expenses...................................... 15,000
Legal Fees and Expenses......................................... 250,000
Transfer Agent and Registrar Fees and Expenses.................. 15,000
Printing Expenses............................................... 132,000
Directors and Officers Liability Insurance Premiums............. 175,000
Miscellaneous Expenses.......................................... 69,467
----------
Total................................................. $ 900,000
==========
</TABLE>
- ---------------
* All amounts are estimates except the SEC filing fee, the NASD filing fee and
the Nasdaq National Market listing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws (Exhibit 3.3 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation (Exhibit
3.1 hereto) provides that the liability of its directors for monetary damages
shall be eliminated to the fullest extent permissible under Delaware law.
Pursuant to Delaware law, this includes elimination of liability for monetary
damages for breach of the directors' fiduciary duty of care to the Registrant
and its stockholders. These provisions do not eliminate the directors' duty of
care and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
Prior to the effective date of the Registration Statement, the Registrant
will have entered into agreements with its directors and certain of its
executive officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Registrant and, with respect to
any
II-1
<PAGE> 95
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Registrant intends to obtain in conjunction with the effectiveness of
the Registration Statement a policy of directors' and officers' liability
insurance that insures the Company's directors and officers against the cost of
defense, settlement or payment of a judgment under certain circumstances.
The Underwriting Agreements filed as Exhibit 1.1 and Exhibit 1.2 to this
Registration Statement provides for indemnification by the U.S. Underwriters and
the International Underwriters of the Registrant and its officers and directors
for certain liabilities arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
For the three year period from June 30, 1993 to June 30, 1996, the
Registrant has issued and sold the following unregistered securities:
1. During the period, the Registrant granted stock options to
employees, directors and consultants under its Stock Option Plans covering
an aggregate of 5,482,500 shares of the Registrant's Common Stock, at
exercise prices ranging from $0.75 to $6.00 with a weighted average
exercise price of $1.31 per share.
2. During the period, the Registrant issued and sold an aggregate of
4,002,796 shares of its Common Stock to 60 employees for cash and
promissory notes in the aggregate amount of $1,226,603.98 upon exercise of
stock options granted pursuant to the Registrant's Stock Option Plans.
3. During the period, the Registrant issued and sold an aggregate of
240,000 shares of its Common Stock for an aggregate purchase price of
$360,000.
4. During the period, the Registrant issued and sold an aggregate of
2,083,334 shares of its Series C Preferred Stock for an aggregate purchase
price of $1,756,667.
The sale and issuance of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue of
either Rule 701 or Regulation D promulgated thereunder in that they were offered
and sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701 or offered to
investors in accordance with Regulation D.
Appropriate legends were affixed to the stock certificates issued in the
above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. No Underwriters were employed in any of
the above transactions.
II-2
<PAGE> 96
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------ ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in
effect.
3.2 Registrant's Amended and Restated Bylaws, as currently in effect.
3.3* Registrant's Agreement and Plan of Reorganization.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Morrison & Foerster LLP as to the legality of the Common Stock.
10.1 Investors' Rights Agreement, dated January 1994.
10.2 Form of Indemnification Agreement between the Registrant and each of its executive
officers and directors.
10.3 Employment Agreement between the Registrant and Mr. Guldimann dated as of September
1, 1995.
10.4 Employment Agreement between the Registrant and Mr. Hospers dated as of October 24,
1995.
10.5 Letter Agreement between the Registrant and Mr. Laven dated as of May 1996.
10.8* Form of Promissory Notes entered into between the Registrant and each of Ms.
Carlitz, Mr. Guldimann, Mr. Paul and Mr. Sandhu.
10.11 Lease Agreement between the Registrant and the Arrillaga Family Trust and the
Richard T. Peery Separate Property Trust, dated November 8, 1995.
10.13 Registrant's 1989 Stock Option Plan, including forms of agreements thereunder.
10.14 Registrant's 1993 Stock Incentive Plan, including forms of agreements thereunder.
10.15 Registrant's 1996 Stock Incentive Plan, including forms of agreements thereunder.
10.16 Registrant's 1996 Employee Stock Purchase Plan, including forms of agreements
thereunder.
10.17 Series C Preferred Stock Purchase Agreement between the Company and the investors
listed therein dated as of January 31, 1994.
11.1 Statement regarding calculation of net income per share.
21.1 Registrant's Significant Subsidiaries.
23.1 Consent of Morrison & Foerster LLP. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors. Reference is made to Page II-5.
24.1 Powers of Attorney. Reference is made to Page II-4.
</TABLE>
- ---------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed have
been omitted since the information is not applicable.
II-3
<PAGE> 97
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the U.S. Underwriters and the
International Underwriters at the closing specified in the Underwriting
Agreements certificates in such denominations and registered in such names as
required by the U.S. Underwriters and the International Underwriters to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the issuer pursuant to the foregoing provisions, or
otherwise, the issuer 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 issuer 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 issuer 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.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the issuer pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time the Commission declared it effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of those securities.
II-4
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Mountain
View, State of California on the 23rd day of July, 1996.
INFINITY FINANCIAL TECHNOLOGY, INC.
By: /S/ ROGER A. LANG
-------------------------------------
Roger A. Lang
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Roger A. Lang and Terry H. Carlitz, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments to this Registration Statement and sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1993, 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, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith
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 by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- --------------
<C> <S> <C>
/S/ ROGER A. LANG President, Chief Executive Officer July 23, 1996
- ------------------------------------------ and Director (Principal Executive
Roger A. Lang Officer)
/S/ TERRY H. CARLITZ Chief Financial Officer and Vice July 23, 1996
- ------------------------------------------ President, Finance (Principal
Terry H. Carlitz Financial and Accounting Officer)
/S/ CHARLES H. MARSTON Director July 23, 1996
- ------------------------------------------
Charles H. Marston
/S/ TILL M. GULDIMANN Director July 23, 1996
- ------------------------------------------
Till M. Guldimann
/S/ JOHN C. LEWIS Director July 23, 1996
- ------------------------------------------
John C. Lewis
/S/ DOUGLAS M. LEONE Director July 23, 1996
- ------------------------------------------
Douglas M. Leone
/S/ JAMES A. DORRIAN Director July 23, 1996
- ------------------------------------------
James A. Dorrian
</TABLE>
II-5
<PAGE> 99
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated March 7, 1996
(except for Note 8, as to which the date is July , 1996), in the Registration
Statement (Form S-1) and related Prospectus of Infinity Financial Technology,
Inc. for the registration of 2,350,000 shares of Common Stock.
Our audit also included the financial statement schedule of Infinity
Financial Technology, Inc. listed in Item 16(b). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
Palo Alto, California
July , 1996
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon completion of
certain events described in Note 8 to the Consolidated Financial Statements.
ERNST & YOUNG LLP
Palo Alto, California
July 22, 1996
II-6
<PAGE> 100
SCHEDULE XIII
INFINITY FINANCIAL TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
- ------------------------------------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Allowances for doubtful accounts:
Year ended December 31, 1993............ -- -- -- --
Year ended December 31, 1994............ -- -- -- --
Year ended December 31, 1995............ -- $195 -- 195
</TABLE>
- ---------------
(1) Deductions represent write-offs of uncollectible accounts receivable
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DOCUMENT NUMBERED PAGE
- ------ --------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as currently in effect.
3.2 Registrant's Amended and Restated Bylaws, as currently in effect.
3.3* Registrant's Agreement and Plan of Reorganization.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Morrison & Foerster LLP as to the legality of the Common
Stock.
10.1 Investors' Rights Agreement, dated January 1994.
10.2 Form of Indemnification Agreement between the Registrant and each of
its executive officers and directors.
10.3 Employment Agreement between the Registrant and Mr. Guldimann dated
as of September 1, 1995.
10.4 Employment Agreement between the Registrant and Mr. Hospers dated as
of October 24, 1995.
10.5 Letter Agreement between the Registrant and Mr. Laven dated as of May
1996.
10.8* Form of Promissory Notes entered into between the Registrant and each
of Ms. Carlitz, Mr. Guldimann, Mr. Paul and Mr. Sandhu.
10.11 Lease Agreement between the Registrant and the Arrillaga Family Trust
and the Richard T. Peery Separate Property Trust, dated November 8,
1995.
10.13 Registrant's 1989 Stock Option Plan, including forms of agreements
thereunder.
10.14 Registrant's 1993 Stock Incentive Plan, including forms of agreements
thereunder.
10.15 Registrant's 1996 Stock Incentive Plan, including forms of agreements
thereunder.
10.16 Registrant's 1996 Employee Stock Purchase Plan, including forms of
agreements thereunder.
10.17 Series C Preferred Stock Purchase Agreement between the Company and
the investors listed therein dated as of January 31, 1994.
11.1 Statement regarding calculation of net income per share.
21.1 Registrant's Significant Subsidiaries.
23.1 Consent of Morrison & Foerster LLP. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors. Reference is made
to Page II-5.
24.1 Powers of Attorney. Reference is made to Page II-4.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
INFINITY FINANCIAL TECHNOLOGY, INC.
COMMON STOCK,
$0.001 PAR VALUE PER SHARE
--------------------------------
UNDERWRITING AGREEMENT
--------------------------------
Goldman, Sachs & Co., September ___, 1996
Deutsche Morgan Grenfell/C.J. Lawrence Inc.
Robertson, Stephens & Company
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Infinity Financial Technology, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of ________ shares and, at the election of the
Underwriters, up to ________ additional shares of Common Stock, $0.001 par
value, ("Stock") of the Company and the stockholders of the Company named in
Schedule II hereto (the "Selling Stockholders") propose, subject to the terms
and conditions stated herein, to sell to the Underwriters an aggregate of
________ shares and, at the election of the Underwriters, up to ________
additional shares of Stock. The aggregate of ________ shares to be sold by the
Company and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of ________ additional shares to be sold by the Company and the
Selling Stockholders is herein called the "Optional Shares". The Firm Shares and
the Optional Shares that the Underwriters elect to purchase pursuant to Section
2 hereof are herein collectively called the "Shares."
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of ________ shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Deutsche
Morgan Grenfell and Robertson, Stephens & Company are acting as lead managers.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the International Underwriting Agreement are
hereby expressly made conditional on one another. The Underwriters hereunder and
the International Underwriters are simultaneously entering into an Agreement
between U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares
<PAGE> 2
hereunder and the other relating to the International Shares. The latter form of
prospectus will be identical to the former except for certain substitute pages
as included in the registration statement and amendments thereto as mentioned
below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the
context may otherwise require, references hereinafter to the Shares shall
include all the shares of Stock which may be sold pursuant to either this
Agreement or the International Underwriting Agreement, and references herein to
any prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
1. (a) The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-___) (the
"Initial Registration Statement") in respect of the Shares has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you and, excluding exhibits thereto, and to you for
each of the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and no
stop order suspending the effectiveness of the Initial Registration Statement
has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act, is
hereinafter called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, including all
exhibits thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the
Act to be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial Registration
Statement became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are hereinafter
collectively called the "Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus").
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
-2-
<PAGE> 3
(iii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(iv) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or long-term debt
of the Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vi) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(vii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the
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<PAGE> 4
description of the Stock contained in the Prospectus; and all of the issued
shares of capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims; the holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to acquire the Shares which have not be complied
with; there are no outstanding securities convertible into or exchangeable for,
or warrants, rights or options to purchase from the Company, or obligations of
the Company to issue, shares of Common Stock or any other class of capital stock
of the Company (except as set forth in the Prospectus under "Description of
Capital Stock"); and there are no restrictions on subsequent transfers of the
Shares;
(viii) The unissued Shares to be issued and sold by the
Company to the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued and
fully paid and non-assessable and will conform to the description of the Stock
contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting Agreement,
except the registration under the Act of the Shares and such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
(x) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
lease or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock and under the caption "Underwriting", insofar
as they purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
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<PAGE> 5
(xii) Other than as set forth in the Prospectus, there are
no legal or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others;
(xiii) Neither the Company nor any of its subsidiaries has
taken, directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares;
(xiv) Except as disclosed in the Prospectus, the Company is
not subject to any agreements or arrangements which restrict the Company's
ability to engage in business with or to compete with any entity or any type of
business;
(xv) The Company has complied with all agreements or
arrangements which grant preemptive or registration rights to holders of the
Company's securities;
(xvi) Except as disclosed in the Prospectus, each of the
Company and its subsidiaries owns or possesses adequate licenses or other rights
to use all patents, patent licenses, trademarks, trade names, service marks,
service names, copyrights and other intellectual property rights ("Intellectual
Property") necessary to carry on its business as presently conducted and neither
the Company nor any of its subsidiaries has received any notice of infringement
or conflict with asserted rights of others with respect to the Intellectual
Property which, singly or in the aggregate, if the subject of any unfavorable
decision, ruling or finding, would result in a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(xvii) The Company and each of its subsidiaries have all
licenses, franchises, permits, authorizations, approvals and orders and other
concessions of and from all governmental authorities that are necessary to own
or lease their other properties and conduct their businesses as described in the
Prospectus;
(xviii) The Stock, including the Shares, is listed for
quotation on the Nasdaq National Market ("NASDAQ");
(xix) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(xx) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(xxi) Ernst & Young LLP, who have certified certain
financial statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
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<PAGE> 6
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of this
Agreement, the International Underwriting Agreement, the Power of Attorney and
the Custody Agreement hereinafter referred to, and for the sale and delivery of
the Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement, have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this Agreement,
the International Underwriting Agreement, the Power of Attorney and the Custody
Agreement and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder hereunder and under the International Underwriting
Agreement;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting Agreement and the
compliance by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound, or to which any of the property or assets of such
Selling Stockholder is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws of such Selling
Stockholder if such Selling Stockholder is a corporation, the Partnership
Agreement of such Selling Stockholder if such Selling Stockholder is a
partnership or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling Stockholder or
the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior
to each Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by such
Selling Stockholder hereunder and under the International Underwriting
Agreement, free and clear of all liens, encumbrances, equities or claims; and,
upon delivery of such Shares and payment therefor pursuant hereto and thereto,
good and valid title to such Shares, free and clear of all liens, encumbrances,
equities or claims, will pass to the several Underwriters or the International
Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities of
the Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities, without your prior written consent;
(v) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares;
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<PAGE> 7
(vi) To the extent that any statements or omissions made
in the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements to
the Registration Statement and the Prospectus, when they become effective or are
filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vii) In order to document the Underwriters' compliance
with the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein contemplated,
such Selling Stockholder will deliver to you prior to or at the First Time of
Delivery (as hereinafter defined) a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of
the Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement have been placed in custody under a Custody
Agreement, in the form heretofore furnished to you (the "Custody Agreement"),
duly executed and delivered by such Selling Stockholder to Boston Equiserve, as
custodian (the "Custodian"), and such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you (the
"Power of Attorney"), appointing the persons indicated in Schedule II hereto,
and each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement and
the International Underwriting Agreement on behalf of such Selling Stockholder,
to determine the purchase price to be paid by the Underwriters and the
International Underwriters to the Selling Stockholders as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement, the
International Underwriting Agreement and the Custody Agreement;
(ix) The Shares represented by the certificates held in
custody for such Selling Stockholder under the Custody Agreement are subject to
the interests of the Underwriters hereunder and the International Underwriters
under the International Underwriting Agreement; the arrangements made by such
Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that
extent irrevocable; the obligations of the Selling Stockholders hereunder shall
not be terminated by operation of law, whether by the death or incapacity of any
individual Selling Stockholder or, in the case of an estate or trust, by the
death or incapacity of any executor or trustee or the termination of such estate
or trust, or in the case of a partnership or corporation, by the dissolution of
such partnership or corporation, or by the occurrence of any other event; if any
individual Selling Stockholder or any such executor or trustee should die or
become incapacitated, or if any such estate or trust should be terminated, or if
any such partnership or
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<PAGE> 8
corporation should be dissolved, or if any other such event should occur, before
the delivery of the Shares hereunder, certificates representing the Shares shall
be delivered by or on behalf of the Selling Stockholders in accordance with the
terms and conditions of this Agreement, of the International Underwriting
Agreement and of the Custody Agreements; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if
such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or
any of them, shall have received notice of such death, incapacity, termination,
dissolution or other event; and
(x) Certificates in negotiable form representing all of
the Shares to be sold by such Selling Stockholder shall be delivered to the
Custodian on or before the business day preceding the date of this Agreement,
duly endorsed for transfer in accordance with the terms of this Agreement and
accompanied by such other documents as may be necessary to effect such transfer,
in form and substance satisfactory to you.
2. Subject to the terms and conditions herein set forth, the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $_____, the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and all of the Selling Stockholders hereunder and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company and each of the Selling
Stockholders agree, severally and not jointly to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company and each of the Selling Stockholders, at the purchase
price per share set forth in this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company and the Selling Stockholders, as and to the extent
indicated in Schedule II hereto, hereby grant, severally and not jointly, to the
Underwriters the right to purchase at their election up to ________ Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares shall be made in proportion to the
maximum number of Optional Shares to be sold by the Company and each Selling
Stockholder as set forth in Schedule II hereto. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company
and the Attorneys-in-Fact, given within a period of 30 calendar days after the
date of this Agreement and setting forth the aggregate number of Optional Shares
to be purchased and the date on which such Optional
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<PAGE> 9
Shares are to be delivered, as determined by you but in no event earlier than
the First Time of Delivery (as defined in Section 4 hereof) or, unless you and
the Company and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder,
in definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC") for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer to the order of the Company and the
Custodian, as their interests may appear, in federal (same day) funds. The
Company will cause the certificates representing the Shares to be made available
for checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of Goldman, Sachs
& Co., 85 Broad Street, New York, New York 10004 (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to the Firm
Shares, 10:00 a.m., New York City time, on September ___, 1996 or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in writing,
and, with respect to the Optional Shares, 10:00 a.m., New York City time, on the
date specified by Goldman, Sachs & Co. in the written notice given by Goldman,
Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or
such other time and date as Goldman, Sachs & Co., the Company and the Selling
Stockholders may agree upon in writing. Such time and date for delivery of the
Firm Shares is herein called the "First Time of Delivery", such time and date
for delivery of the Firm Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof, will be delivered at the offices
of Morrison & Foerster, 755 Page Mill Road, Palo Alto, California 94304 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at each Time of Delivery. A meeting will be held at the Closing Location at
7:00 p.m., New York City time, on the New York Business Day next preceding each
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to
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<PAGE> 10
make no further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to time,
to furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the offering or sale of
the Shares and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as you
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or
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otherwise dispose of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are substantially
similar to the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
Stock or any such substantially similar securities, without your prior written
consent;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use of
Proceeds";
(i) To use its best efforts to list for quotation the Shares on
the National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ"); and
(j) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 p.m., Washington, D. C. time, on the date
of this Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act.
6. The Company and each of the Selling Stockholders covenant and
agree with one another and the several Underwriters that (a) the Company will
pay or cause to be paid the following: (i) the fees, disbursements and expenses
of the Company's counsel and accountants in connection with the registration of
the Shares under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, the International Underwriting Agreement, the Agreement between
Syndicates, the Selling Agreements, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of
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<PAGE> 12
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey; (iv) all fees and expenses in connection
with listing the Shares on NASDAQ; (v) the filing fees incident to, and the fees
and disbursements of counsel for the Underwriters in connection with, securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Shares (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar; and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section; and (b) such Selling Stockholder will pay or cause to be paid all costs
and expenses incident to the performance of such Selling Stockholder's
obligations hereunder which are not otherwise specifically provided for in this
Section, including (i) any fees and expenses of counsel for such Selling
Stockholder, (ii) such Selling Stockholder's pro rata share of the fees and
expenses of the Attorneys-in-Fact and the Custodian and (iii) all expenses and
taxes incident to the sale and delivery of the Shares to be sold by such Selling
Stockholder to the Underwriters hereunder. In connection with clause (b) (iii)
of the preceding sentence, Goldman, Sachs & Co. agrees to pay New York State
stock transfer tax, and the Selling Stockholder agrees to reimburse Goldman,
Sachs & Co. for associated carrying costs if such tax payment is not rebated on
the day of payment and for any portion of such tax payment not rebated. It is
understood, however, that [the Company shall bear, and the Selling Stockholders
shall not be required to pay or to reimburse the Company for, the cost of any
other matters not directly relating to the sale and purchase of the Shares
pursuant to this Agreement, and that except as provided in this Section, and
Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes on resale of
any of the Shares by them, and any advertising expenses connected with any
offers they may make.
7. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of the Selling Stockholders herein are, at and as
of such Time of Delivery, true and correct, the condition that the Company and
the Selling Stockholders shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington D.C. time, on the date of this Agreement; no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Venture Law Group, A Professional Corporation, counsel for
the Underwriters, shall have furnished to you such opinion or opinions (a draft
of each such opinion is attached as Annex II(a) hereto), dated such Time of
Delivery (provided that such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters) to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power
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<PAGE> 13
and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and the Shares being delivered at such Time of
Delivery have been duly authorized and, upon delivery to you against
payment therefor in accordance with the terms of this Agreement, will
be validly issued, fully paid and non-assessable; the Shares conform to
the description of the Stock contained in the Prospectus; and the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights pursuant to the Company's
Certificate of Incorporation to acquire the Shares to be purchased from
the Company hereunder;
(iii) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(iv) The statements set forth in the Prospectus under the
caption "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the Stock and under the caption
"Underwriting," insofar as they purport to describe the provisions of
the laws and documents referred to therein, describe such provisions
fairly; and
(v) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules and the financial data therein, as to which such counsel need
express no opinion), comply as to form in all material respects with
the requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (iv) of this Section 7(b), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required.
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<PAGE> 14
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(c) Morrison & Foerster, counsel for the Company, shall
have furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that (a draft of each such
opinion is attached as Annex II(b) hereto):
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; the Shares conform to the description of
the Stock contained in the Prospectus; and the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive
or other rights to acquire the Shares to be purchased from the Company
hereunder pursuant to the Company's certificate of incorporation or
bylaws or, to such counsel's knowledge after reasonable investigation,
otherwise;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates, and that copies of such
opinions and certificates be provided to counsel for the Underwriters);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the
issued shares of capital stock of each such subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company
or its subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates, and that copies of such opinions and
certificates be provided to counsel for the Underwriters);
(v) The Company and its subsidiaries do not own any real
property. Any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries;
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<PAGE> 15
(vi) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vii) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(viii) The issue and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
after reasonable investigation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters and the
International Underwriters;
(x) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and under the caption
"Underwriting," insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xii) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
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<PAGE> 16
(xiii) The Company has complied with all agreements or
arrangements known to such counsel after reasonable investigation which
grant registration rights to holders of the Company's securities; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules and the financial data therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xi) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(d) The respective counsel for each of the Selling
Stockholders, as indicated in Schedule II hereto, each shall have furnished to
you their written opinion with respect to each of the Selling Stockholders for
whom they are acting as counsel (a draft of each such opinion is attached as
Annex II(c) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been
duly authorized, executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling Stockholder in
accordance with their terms and, such Selling Stockholder has full
right, power and authority to sell, assign, transfer and deliver the
Shares to be sold by such Selling Stockholder hereunder;
(ii) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by or on behalf of such
Selling Stockholder; and
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<PAGE> 17
the sale of the Shares to be sold by such Selling Stockholder hereunder
and thereunder and the compliance by such Selling Stockholder with all
of the provisions of this Agreement and the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any terms or
provisions of, or constitute a default under, any statute, indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound, or to which any of
the property or assets of such Selling Stockholder is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if
such Selling Stockholder is a corporation, the Partnership Agreement of
such Selling Stockholder if such Selling Stockholder is a partnership
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement and the
International Underwriting Agreement in connection with the Shares to
be sold by such Selling Stockholder hereunder or thereunder, except
such as have been obtained under the Act and such as may be required
under state or securities or Blue Sky laws in connection with the
purchase and distribution of such Shares by the Underwriters or the
International Underwriters;
(iv) Immediately prior to such Time of Delivery such
Selling Stockholder had good and valid title to the Shares to be sold
at such Time of Delivery by such Selling Stockholder under this
Agreement and the International Underwriting Agreement, free and clear
of all liens, encumbrances, equities or claims, and full right, power
and authority to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder and thereunder; and
(v) Good and valid title to such Shares, free and clear
of all liens, encumbrances, equities or claims, has been transferred to
each of the several Underwriters or International Underwriters, as the
case may be, who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any other
adverse claim within the meaning of the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate,
and that a copy of such certificate be provided to counsel for the Underwriters;
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 10:00 a.m., New York City time, on the effective
date of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Ernst & Young shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to you,
to the effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution
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<PAGE> 18
of this Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective amendment to
the Registration Statement and as of each Time of Delivery is attached as Annex
I(b) hereto);
(f)(i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus there shall
not have been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(h) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, American Stock
Exchange or NASDAQ; (ii) a suspension or material limitation in trading in the
Company's securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal, New York or California State authorities;
(iv) the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(i) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed, subject to
notice of issuance, for quotation on NASDAQ;
(j) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each holder of shares of Stock
of the Company and each holder of options to purchase shares of Stock of the
Company to the effect set forth in Subsection 1(b)(iv) hereof in form and
substance satisfactory to you;
(k) The Company shall have complied with the provisions
of Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
(l) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company
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<PAGE> 19
and of the Selling Stockholders, respectively, satisfactory to you as to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders, respectively, herein at and as of such Time of Delivery, as to the
performance by the Company and the Selling Stockholders of all of their
respective obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (f) of this Section, and as to such
other matters as you may reasonably request.
8. (a) The Company and each of the Selling Stockholders listed
under Part A of Schedule ll hereto, jointly and severally, will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and such Selling Stockholders shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein and provided further that
the liability of a Selling Stockholder pursuant to this subsection (a) shall not
exceed the product of the number of Shares sold by such Selling Stockholder and
the initial public offering price of the Shares as set forth in the Prospectus.
(b) Each of the Selling Stockholders listed under Part B
of Schedule ll hereto will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Selling
Stockholder expressly for use therein; and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that such Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
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<PAGE> 20
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein and provided further that the liability of a Selling
Stockholder pursuant to this Subsection (b) shall not exceed the product of the
number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus.
(c) Each Underwriter will indemnify and hold harmless the
Company and each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company or such Selling Stockholder may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to
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<PAGE> 21
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the respective Selling Stockholders may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company or any Selling Stockholder within the
meaning of the Act.
-21-
<PAGE> 22
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company and the Selling Stockholders shall
be entitled to a further period of thirty-six hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company and the Selling Stockholders that you have so arranged for
the purchase of such Shares, or the Company and the Selling Stockholders notify
you that they have so arranged for the purchase of such Shares, you or the
Company and the Selling Stockholders shall have the right to postpone such Time
of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all of the Shares to be purchased at
such Time of Delivery, then the Company and the Selling Stockholders shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased exceeds
one-eleventh of the aggregate number of all of the Shares to be purchased at
such Time of Delivery, or if the Company and the Selling Stockholders shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company and the Selling
Stockholders to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company or the
Selling Stockholders, except for the expenses to be borne by the Company and the
Selling Stockholders and the Underwriters as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement,
-22-
<PAGE> 23
shall remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any Underwriter or
any controlling person of any Underwriter, or the Company, or any of the Selling
Stockholders, or any officer or director or controlling person of the Company,
or any controlling person of any Selling Stockholder, and shall survive delivery
of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to such Selling Stockholder at its address set
forth in Schedule II hereto; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth in
the Registration Statement, Attention: Secretary; provided, however, that any
notice to an Underwriter pursuant to Section 8 (d) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its address
set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholders by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
-23-
<PAGE> 24
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us seven (7) counterparts hereof, and upon the acceptance hereof
by you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters (U.S.
Version), the form of which shall be submitted to the Company and the Selling
Stockholders for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
-24-
<PAGE> 25
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Infinity Financial Technology, Inc.
By:
-----------------------------------
Name:
Title:
Selling Stockholders
By:
-----------------------------------
Name:
Title:
*As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Schedule II to this Agreement.
Accepted as of the date hereof:
Goldman, Sachs & Co.
Deutsche Morgan Grenfell/C.J. Lawrence Inc.
Robertson, Stephens & Company
By:
-----------------------------------
(Goldman, Sachs & Co.)
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co............................
Deutsche Morgan Grenfell/C.J. Lawrence Inc.....
Robertson, Stephens & Company..................
--------------- ------------------
Total........................
=============== ==================
</TABLE>
<PAGE> 27
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
--------------- ------------------
<S> <C> <C>
The Company........................................................
The Selling Stockholder(s):
PART A:
[NAME OF SELLING STOCKHOLDER](a)..........................
[NAME OF SELLING STOCKHOLDER](b)..........................
[NAME OF SELLING STOCKHOLDER](c)..........................
PART B:
[NAME OF SELLING STOCKHOLDER](d)..........................
[NAME OF SELLING STOCKHOLDER](e)..........................
--------------- ------------------
Total......................................................
=============== ==================
</TABLE>
(a) This Selling Stockholder is represented by [NAME AND ADDRESS OF
COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder. The address
for such Selling Stockholder is _______.
(b) This Selling Stockholder is represented by [NAME AND ADDRESS OF
COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder. The address
for such Selling Stockholder is _______.
(c) This Selling Stockholder is represented by [NAME AND ADDRESS OF
COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the
<PAGE> 28
Attorneys-in-Fact for such Selling Stockholder. The address for such Selling
Stockholder is _______.
(d) This Selling Stockholder is represented by [NAME AND ADDRESS OF
COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder. The address
for such Selling Stockholder is _______.
(e) This Selling Stockholder is represented by [NAME AND ADDRESS OF
COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder. The address
for such Selling Stockholder is _______.
<PAGE> 29
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of
the Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information, schedules, financial forecasts
and/or pro forma financial information required to be included in the
Prospectus or the Registration Statement pursuant to the requirements
of the Act are so included; the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives; and on
the basis of specified procedures including inquiries of officials of
the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such five fiscal years, copies of which have been
separately furnished to the Representatives;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing procedures
that caused them to believe that this information does not conform in
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
F-1
<PAGE> 30
ANNEX I
(vi) On the basis of limited procedures, not constituting
an examination in accordance with generally accepted auditing
standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading of the
latest available interim financial statements of the Company and its
subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (I) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications
should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus,
except in each case for
F-2
<PAGE> 31
ANNEX I
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
F-3
<PAGE> 1
INFINITY FINANCIAL TECHNOLOGY, INC.
COMMON STOCK,
$0.001 PAR VALUE PER SHARE
-----------------------------
INTERNATIONAL UNDERWRITING AGREEMENT
September ___, 1996
Goldman Sachs International,
Deutsche Morgan Grenfell/C.J. Lawrence Inc.
Robertson, Stephens & Company
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Infinity Financial Technology, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of ............. shares and, at the election of the
Underwriters, up to .............. additional shares of Common Stock $0.001 par
value, ("Stock") of the Company and the stockholders of the Company named in
Schedule II hereto (the "Selling Stockholders") propose, subject to the terms
and conditions stated herein, to sell to the Underwriters an aggregate of .....
shares and, at the election of the Underwriters, up to ............ additional
shares of Stock. The aggregate of ................ shares to be sold by the
Company and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of ................ additional shares to be sold by the Company and
the Selling Stockholders is herein called the "Optional Shares". The Firm Shares
and the Optional Shares which the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called, the "Shares."
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
sale by the Company and the Selling Stockholders of up to a total of ....shares
of Stock (the "U.S. Shares"), including the overallotment option thereunder,
through arrangements with certain underwriters in the United States (the "U.S.
Underwriters"), for whom Goldman, Sachs &
<PAGE> 2
Co., Deutsche Morgan Grenfell/C.J. Lawrence Inc. and Robertson, Stephens &
Company are acting as representatives. Anything herein or therein to the
contrary notwithstanding, the respective closings under this Agreement and the
U.S. Underwriting Agreement are hereby expressly made conditional on one
another. The Underwriters hereunder and the U.S. Underwriters are simultaneously
entering into an Agreement between U.S. and International Underwriting
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates and for
consultation by the Lead Managers hereunder with Goldman, Sachs & Co. prior to
exercising the rights of the Underwriters under Section 7 hereof. Two forms of
prospectus are to be used in connection with the offering and sale of shares of
Stock contemplated by the foregoing, one relating to the Shares hereunder and
the other relating to the U.S. Shares. The latter form of prospectus will be
identical to the former except for certain substitute pages as included in the
registration statement and amendments thereto as mentioned below. Except as used
in Sections 2, 3, 4, 9 and 11 herein, and except as context may otherwise
require, references hereinafter to the Shares shall include all of the shares of
Stock which may be sold pursuant to either this Agreement or the U.S.
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof.
In addition, this Agreement incorporates by reference certain
provisions from the U.S. Underwriting Agreement (including the related
definitions of terms, which are also used elsewhere herein) and, for purposes of
applying the same, references (whether in these precise words or their
equivalent) in the incorporated provisions to the "Underwriters" shall be to the
Underwriters hereunder, to the "Shares" shall be to the Shares hereunder as just
defined, to "this Agreement" (meaning therein the U.S. Underwriting Agreement)
shall be to this Agreement (except where this Agreement is already referred to
or as the context may otherwise require) and to the representatives of the
Underwriters or to Goldman, Sachs & Co. shall be to the addressees of this
Agreement and to Goldman Sachs International ("GSI"), and, in general, all such
provisions and defined terms shall be applied mutatis mutandis as if the
incorporated provisions were set forth in full herein having regard to their
context in this Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Stockholders
hereby make to the Underwriters the same respective representations, warranties
and agreements as are set forth in Section 1 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $............, the number of Firm
Shares (to be adjusted by you so as to eliminate fractional shares) determined
by multiplying the aggregate number of Firm Shares to be sold by the Company and
each of the Selling Stockholders as set forth opposite their respective names in
Schedule II hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by such Underwriter as set forth opposite the
name of such Underwriter in Schedule I hereto and the
-2-
<PAGE> 3
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from the Company and all the Selling Stockholders hereunder
and (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company and each of
the Selling Stockholders agree, severally and not jointly, to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and each of the Selling Stockholders, at
the purchase price per share set forth in this Section 2, that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction the numerator of which
is the maximum number of Optional Shares which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I hereto
and the denominator of which is the maximum number of Optional Shares that all
of the Underwriters are entitled to purchase hereunder.
The Company and the Selling Stockholders, as and to the extent
indicated in Schedule II hereto, hereby grant, severally and not jointly, to the
Underwriters the right to purchase at their election up to ...................
Optional Shares, at the purchase price per share set forth in the paragraph
above, for the sole purpose of covering overallotments in the sale of the Firm
Shares. Any such election to purchase Optional Shares shall be made in
proportion to the maximum number of Optional Shares to be sold by the Company
and each Selling Stockholder as set forth in Schedule II hereto initially with
respect to the Optional Shares to be sold by the Company and then among the
Selling Stockholders in proportion to the maximum number of Optional Shares to
be sold by each Selling Stockholder as set forth in Schedule II hereto. Any such
election to purchase Optional Shares may be exercised only by written notice
from you to the Company and the Attorneys-in-Fact, given within a period of 30
calendar days after the date of this Agreement and setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by you but in no event earlier than
the First Time of Delivery (as defined in Section 4 hereof) or, unless you, the
Company and the Attorneys-in-Fact otherwise agree in writing, earlier than two
or later than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to and
with the Company and the Selling Stockholders the representations and agreements
of such Underwriter as a member of the selling group contained in Sections 3(d)
and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company and the Selling
Stockholders shall be delivered by or on behalf of the Company and the
Selling Stockholders to Goldman, Sachs & Co., through the facilities of
The Depository Trust Company ("DTC"), for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the
-3-
<PAGE> 4
purchase price therefor by certified or official bank check or checks,
payable to the order of the Company and the Custodian each, as their
interests may appear, in federal (same day) funds. The Company will
cause the certificates representing the Shares to be made available for
checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the
"Designated Office"). The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 10:00 a.m., New York City
time, on September ___, 1996 on such other time and date as Goldman,
Sachs & Co., the Company and the Selling Stockholders may agree upon in
writing, and, with respect to the Optional Shares, 10:00 a.m., New York
time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters' election to
purchase such Optional Shares, or such other time and date as Goldman,
Sachs & Co., the Company and the Selling Stockholders may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery", such time and date for delivery of
the Firm Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 of the U.S.
Underwriting Agreement, including the cross-receipt for the Shares and
any additional documents requested by the Underwriters pursuant to
Section 7(l) of the U.S. Underwriting Agreement will be delivered at
the offices of Morrisson & Foerster, 755 Page Mill Road, Palo Alto,
California 94304 (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at each Time of Delivery. A
meeting will be held at the Closing Location at 7:00 p.m., New York
City time, on the New York Business Day next preceding each Time of
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. The Company hereby makes with the Underwriters the same agreements
as are set forth in Section 5 of the U.S. Underwriting Agreement, which Section
is incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company, and the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of their
respective obligations hereunder
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<PAGE> 5
theretofore to be performed, and additional conditions identical to those set
forth in Section 7 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
8. (a) The Company and each of the Selling Stockholders listed under
Part A of Schedule ll hereto, jointly and severally, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company and such Selling
Stockholders shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein and provided further that the liability of a
Selling Stockholder pursuant to this subsection (a) shall not exceed the product
of the number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus.
(b) Each of the Selling Stockholders listed under Part B of
Schedule ll hereto will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Selling
Stockholder expressly for use therein; and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that such Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein and provided further that the
-5-
<PAGE> 6
liability of a Selling Stockholder pursuant to this Subsection (b) shall not
exceed the product of the number of Shares sold by such Selling Stockholder and
the initial public offering price of the Shares as set forth in the Prospectus.
(c) Each Underwriter will indemnify and hold harmless the Company
and each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such Selling Stockholder may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c)
-6-
<PAGE> 7
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (d) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, each
of the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (e) were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders
under this Section 8 shall be in addition to any liability which the Company and
the respective Selling Stockholders may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls any
Underwriter within the
-7-
<PAGE> 8
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Deliver,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholders to sell
the Optional Shares) shall thereupon terminate, without liability on
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<PAGE> 9
the part of any non-defaulting Underwriter or the Company or the Selling
Stockholders, except for the expenses to be borne by the Company and the Selling
Stockholders and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any of the Selling Stockholders, or any officer
or director or controlling person of the Company or any controlling person of
any Selling Stockholders, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number of
Shares to be sold by the Company and such Selling Stockholder hereunder) will
reimburse the Underwriters through GSI for all out-of-pocket expenses approved
in writing by GSI, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter [in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on on behalf of you as the representatives of the
Underwriters; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will
-9-
<PAGE> 10
be supplied to the Company or the Selling Stockholders by GSI upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, United States of America.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us seven (7) counterparts hereof, and upon the acceptance hereof
by you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters (International
Version), the form of which shall be furnished to the Company and the Selling
Stockholders for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
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<PAGE> 11
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Infinity Financial Technology, Inc.
By:
----------------------------------
Name:
Title:
Selling Stockholders
By: *
----------------------------------
Name:
Title:
* As Attorney-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule II
to this Agreement.
Accepted as of the date hereof:
Goldman Sachs International
Deutsche Morgan Grenfell/C.J. Lawrence Inc.
Robertson, Stephens & Company
By:
----------------------------------
(Goldman, Sachs International)
On behalf of each of the Underwriters
-11-
<PAGE> 12
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co................................................
Deutsche Morgan Grenfell/C.J. Lawrence Inc.........................
Robertson, Stephens & Company......................................
--------------- ------------------
Total.............................................
=============== ==================
</TABLE>
-12-
<PAGE> 13
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Company........................................................
The Selling Stockholder(s):
PART A:
-------
Name of Selling Stockholder(a)............................
Name of Selling Stockholder(b)............................
Name of Selling Stockholder(c)............................
PART B:
-------
Name of Selling Stockholder(d)............................
Name of Selling Stockholder(e)............................
--------------- ------------------
Total......................................................
=============== ==================
</TABLE>
(a) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
-13-
<PAGE> 14
(c) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
-14-
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
INFINITY FINANCIAL TECHNOLOGY-DELAWARE, INC.
The undersigned, a natural person, for the purpose of organizing a corporation
for conducting the business and promoting the purposes hereinafter stated, under
the provisions and subject to the requirements of the laws of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and know, identified, and referred
to as the "General Corporation Law of the State of Delaware"), hereby certifies
that:
ARTICLE I
The name of the Corporation is Infinity Financial
Technology-Delaware, Inc. (hereinafter called the "Corporation").
ARTICLE II
The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington 19805, County of New Castle. The name of its registered
agent at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE III
The nature of the business and the purposes to be conducted
and promoted by the Corporation shall be: To conduct any lawful business, to
promote any lawful purpose, and to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of shares
to be designated respectively "Preferred" with a par value of $0.001 per share
("Preferred Stock") and "Common" with a par value of $0.001 per share ("Common
Stock"). The total number of Preferred shares authorized is 6,541,667 and the
total number of Common shares authorized is 25,000,000.
The Preferred Stock authorized by this Certificate of Incorporation may be
issued from time to time in one or more series. Subject to applicable protective
voting rights which have been or may be granted to the Preferred Stock, the
Board of Directors is authorized to determine or alter any
1
<PAGE> 2
or all of the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, and to fix, alter or
reduce the number of shares comprising any such series (but not below the number
of such shares outstanding for any such series) and the designation thereof, or
any of them, and to provide for rights and terms of redemption or conversion of
the shares of any such series.
A description of the respective classes and series of stock and a statement of
the designations, preferences, voting powers, relative, participating, optional
or other special rights and privileges, and the qualifications, limitations and
restrictions of the Preferred and Common Stock are as follows:
1. Designation and Amount. There shall be designated a Series A
Preferred Stock (the "Series A Preferred"), and the number of shares
constituting such series shall be 500,000, and there shall be designated a
Series C Preferred Stock (the "Series C Preferred"), and the number of shares
constituting such series shall be 1,041,667.
2. Dividends and Distributions.
(a) Subject to the provisions for adjustment hereinafter
set forth, the holders of shares of Series C Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors (the "Board") out of
funds legally available for the purpose, an annual cash dividend in the amount
of $0.1352 per share (as adjusted to reflect any stock split, stock dividend,
combination, recapitalization and the like (collectively, a "Recapitalization")
with respect to the Series C Preferred), prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock) on
the Series A Preferred or Common Stock of the Corporation. Such dividends shall
not be cumulative, and no right shall accrue to holders of Series C Preferred by
reason of the fact that dividends on such shares are not declared or paid in any
year.
(b) After full payment of any preferential dividends with
respect to the Series C Preferred pursuant to Section 2(a) above and subject to
the provisions for adjustment hereinafter set forth, the holders of shares of
Series A Preferred shall be entitled to receive, when, as and if declared by the
Board out of funds legally available for the purpose, an annual cash dividend in
the amount of $0.04 per share of Series A Preferred (as adjusted to reflect a
Recapitalization with respect to the Series A Preferred), prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock) on the Common Stock of the Corporation. Such dividends shall not
be cumulative, and no right shall accrue to holders of Series A Preferred by
reason of the fact that dividends on such shares are not declared or paid in any
year.
(c) Notwithstanding Sections 2(a) and 2(b) hereof, the
Corporation may at any time, out of funds legally available therefor, repurchase
shares of Common Stock of the Corporation (i) issued to or held by employees,
directors or consultants of the Corporation or its subsidiaries upon termination
of their employment or services, pursuant to any agreement providing for such
right of repurchase, or (ii) issued to or held by any person subject to the
Corporation's right of first refusal to purchase such shares where the purchase
is pursuant to the
2
<PAGE> 3
exercise of such right of first refusal, in either case whether or not dividends
on the Preferred Stock shall have been declared and paid or funds set aside
therefor.
3. Liquidation Rights. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
distributions shall be made to the holders of Series A Preferred, and Series C
Preferred in respect of such Series A Preferred and Series C Preferred before
any amount shall be paid to the holders of Common Stock in respect of such
Common Stock, in the following manner:
(a) Series A Preferred and Series C Preferred. The
holders of the Series A Preferred and Series C Preferred shall be entitled to be
paid first out of the assets of the Corporation available for distribution to
holders of its capital stock an amount per share equal to $.40 per share of
Series A Preferred and $1.69 per share of Series C Preferred, as adjusted to
reflect any Recapitalization of the Series A Preferred and Series C Preferred,
plus all declared and unpaid dividends, if any. If, upon the occurrence of a
liquidation, dissolution or winding up, the assets and funds thus distributed
among the holders of the Series A Preferred and Series C Preferred shall be
insufficient to permit the payment to such holders of their full liquidation
preferences, then the entire assets and funds of the Corporation legally
available for distribution to the holders of capital stock shall be distributed
ratably among the holders of the Series A Preferred and Series C Preferred in
proportion to the aggregate preferential amounts owed to each such holder.
(b) Series C Preferred and Common Stock. After full
payment of the liquidation preference with respect to all shares of (i) Series A
Preferred and Series C Preferred pursuant to Section 3(a) above, and (ii) stock
designated to or authorized after the date hereof that has rights, preferences
and privileges senior to the Series C Preferred, the holders of Series C
Preferred Stock and Common Stock shall be entitled to share ratably based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series C Preferred) until the holders of Series C Preferred shall have received
pursuant to this Section 3(b) an aggregate amount equal to the lesser of (x)
$1.69 and (y) an amount equal to accrued interest on $1.69 at the simple rate of
fifteen percent (15%) per annum, based on a 365 day year, commencing on the date
that a share of Series C Preferred is first issued and sold by the Corporation.
(c) Common Stock. If assets are remaining after payment
of the full preferential amount with respect to the Preferred Stock, then the
holders of the Common Stock shall be entitled to share ratably based upon their
ownership of Common Stock in all such remaining assets and surplus funds.
(d) Events Deemed a Liquidation. For purposes of this
Section 3, a liquidation, dissolution or winding up of the Corporation shall be
deemed to be occasioned by and to include a Corporate Sale (as defined below).
For purposes of this Article IV, a "Corporate Sale" shall mean (i) any
acquisition of the Corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of the
Corporation for securities or consideration issued, or caused to be issued, by
the acquiring corporation or its subsidiary that results in the Corporation's
stockholders immediately prior to such merger or consolidation not holding at
least 50% of the voting stock of the surviving corporation, or (ii) any other
transaction
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or series of related transactions that will result in the Corporation's
stockholders immediately prior to such transaction, or series of related
transactions, not holding at least 50% of the voting stock of the Corporation,
(other than a transaction or series of transactions involving the original issue
of shares of capital stock by the Corporation for cash or cancellation of
indebtedness) or (iii) a sale or other transfer of all or substantially all of
the assets of the Corporation, or (iv) any transfer (including transfer by
exclusive license) of all or substantially all of the Corporation's rights to
its technology (other than any exclusive license of such technology for limited
geographic territories which does not result in the transfer of more than fifty
percent (50%) of the Corporation's business operations as determined on the
basis of revenue accrued by the Corporation during the preceding twelve (12)
month period); for purposes of clauses (iii) and (iv) above, both the quantum of
assets or rights to technology involved in a sale or other transfer and the
effect of such transfer upon the nature of the business of the Corporation shall
be taken into account in determining whether such transfer involves all or
substantially all of the Corporation's assets or technology.
(e) Valuation of Securities and Property. In the event
the Corporation proposes to distribute assets other than cash in connection with
any liquidation, dissolution or winding up of the Corporation, the value of the
assets to be distributed to the holders of shares of Preferred Stock shall be
determined in good faith by the Board. Any securities not subject to investment
letter or similar restrictions on free marketability shall be valued as follows:
(i) If traded on a securities exchange, the
value shall be deemed to be the average of the security's closing prices on such
exchange over the thirty (30) day period ending three (3) days prior to the
distribution;
(ii) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
thirty (30) day period ending three (3) days prior to the distribution; and
(iii) If there is no active public market, the
value shall be the fair market value thereof as determined in good faith by the
Board.
The method of valuation of securities subject to investment letter or other
restrictions on free marketability shall be adjusted to make an appropriate
discount from the market value determined as above in clauses (i), (ii) or (iii)
to reflect the fair market value thereof as determined in good faith by the
Board. The holders of at least 50% of the outstanding Series A Preferred and
Series C Preferred, voting together as a single class, shall have the right to
challenge any determination by the Board of fair market value pursuant to this
Section 3(e), in which case the determination of fair market value shall be made
by an independent appraiser selected jointly by the Board and the challenging
parties, the cost of such appraisal to be borne equally by the Corporation and
the challenging parties.
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4. Conversion. The holders of the Series A Preferred and Series C
Preferred have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert Series A Preferred and Series C
Preferred. Each share of Series A Preferred and Series C Preferred shall
initially be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share into the number of fully paid and
nonassessable shares of Common Stock which results from dividing the Conversion
Price (as defined below) per share in effect for such series at the time of
conversion into the per share Conversion Value (as hereinafter defined) of such
series. The initial Conversion Price per share of the Series A Preferred shall
be $.40, and the Conversion Value per share of the Series A Preferred shall be
$.40. The initial Conversion Price per share of the Series C Preferred shall be
$1.69, and the Conversion Value per share of the Series C Preferred shall be
$1.69. The initial Conversion Price per share of the Series A Preferred and the
Series C Preferred shall be subject to adjustment from time to time as provided
in Section 4(d) hereof, except that no adjustments shall be made to the
Conversion Price for the Series A Preferred pursuant to Section 4(d)(iv) below.
Upon conversion, all declared and unpaid dividends on the Series A Preferred and
the Series C Preferred shall be paid in cash, to the extent legally permitted.
(b) Automatic Conversion of Series A Preferred and Series
C Preferred. Each share of Series A Preferred and Series C Preferred, shall
automatically be converted into shares of Common Stock upon (i) the closing of a
sale of the Corporation's Common Stock in an underwritten registered public
offering with an aggregate offering price to the public of at least $5,000,000
and an offering price per share to the public equal to or greater than $5.00 (as
adjusted to reflect Recapitalizations of the Common Stock), or (ii) the written
consent of holders of not less than two-thirds (2/3) of the then-outstanding
shares of Series A Preferred and Series C Preferred, voting together as a single
class.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock and to receive certificates therefor, he or she shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Corporation and shall give written
notice to the Corporation at such office that he or she elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
to Section 4(b) hereof, the outstanding shares of Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Preferred Stock are either delivered to the
Corporation or its transfer agent as provided above, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such delivery,
or after such agreement and indemnification, issue and deliver at such office to
such holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he or she shall be entitled as aforesaid and a
check payable to the holder in the
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amount of any declared and unpaid dividends payable pursuant to Section 4(a)
hereof, if any. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred or Series C Preferred to be converted, or, in the case of
automatic conversion, immediately prior to the occurrence of the event leading
to such automatic conversion, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(d) Adjustments to Conversion Price.
(i) Special Definitions. For purposes of this
Section 4(d), the following definitions shall apply:
(1) `Options' shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(2) `Convertible Securities' shall mean
any evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common Stock.
(3) `Additional Shares of Common' shall
mean all shares of Common Stock issued (or, pursuant to Section 4(d)(iii),
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(A) upon conversion of shares of
Series A Preferred or Series C Preferred;
(B) to officers, directors or
employees of, or consultants to, the Corporation pursuant to a stock grant,
option plan or purchase plan or other employee stock incentive program or
agreement approved by the Board, not to exceed 7,300,000 shares (including
4,753,239 shares outstanding as of the Original Issue Date and 1,406,542 shares
issuable pursuant to Options outstanding as of the Original Issue Date), net of
repurchases and cancellations and expirations (without exercise) of options,
since the Original Issue Date;
(C) as a dividend or distribution on
Series A Preferred or Series C Preferred;
(D) in a transaction described
in Section 4(d)(vi); or
(E) by way of dividend or other
distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common by the foregoing clauses (A), (B), (C), (D) or this
clause (E).
(4) `Original Issue Date' shall mean
January 15, 1994.
(ii) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of the Series A Preferred or the Series C
Preferred shall be made in respect of the issuance of Additional Shares of
Common unless the consideration per share for an Additional
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Share of Common issued or deemed to be issued by the Corporation is less than
the Conversion Price for the Series A Preferred or the Series C Preferred, as
applicable, in effect on the date of, and immediately prior to, such issue.
(iii) Deemed Issue of Additional Shares of Common.
(1) Options and Convertible Securities.
In the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the exercise of such Options and
conversion or exchange of such Convertible Securities shall be deemed to be
Additional Shares of Common issued as of the time of such issue or, in case such
a record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Section
4(d)(v) hereof) of such Additional Shares of Common would be less than the
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common are deemed to be issued:
(A) except as provided in
Section 4(d)(iii)(B), no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or
Convertible Securities by their terms provide, with the passage of time or
otherwise, for any change in the consideration payable to the Corporation, or
change in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (other than under or by reason of provisions
designed to protect against dilution), the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto) and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; and
(C) no readjustment pursuant to
clause (B) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (1) the Conversion Price on the original
adjustment date or (2) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common between the original adjustment date and
such readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance
of Additional Shares of Common. In the event this Corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to Section 4(d)(iii))
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without consideration or for a consideration per share less than the Conversion
Price of the Series C Preferred in effect on the date of and immediately prior
to such issue (such issuance price being referred to herein as the "Dilution
Price"), then and in each such event the Conversion Price of the Series C
Preferred, as applicable, shall be reduced to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common so issued would purchase at such Conversion Price;
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common so issued; provided that, for the purposes of this Section
4(d)(iv), all shares of Common Stock issuable upon conversion of all outstanding
Preferred Stock and all outstanding Options (provided such Options have an
exercise price below the Conversion Price of the Series A Preferred immediately
prior to such issue) and Convertible Securities shall be deemed to be
outstanding, and, immediately after any Additional Shares of Common are deemed
issued pursuant to Section 4(d)(iii), such Additional Shares of Common shall be
deemed to be outstanding.
(v) Determination of Consideration. For purposes
of this Section 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common shall be computed as follows:
(1) Cash and Property: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined by the Board in the good faith exercise of its
reasonable business judgment; and
(C) in the event Additional
Shares of Common are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing.
(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or
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exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares
of Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(vi) Other Adjustments to Conversion Price.
(1) Subdivisions, Combinations, or
Consolidations of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided, combined or consolidated, by stock split, stock
dividend, combination or like event, into a greater or lesser number of shares
of Common Stock, the Conversion Price of the Series A Preferred and the Series C
Preferred in effect immediately prior to such subdivision, combination,
consolidation or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination or consolidation, be proportionately adjusted.
(2) Distributions Other Than Cash
Dividends Out of Retained Earnings. In case the Corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred and Series C Preferred shall, concurrently with the
distribution to holders of Common Stock, receive a like distribution based upon
the number of shares of Common Stock into which such series of Preferred Stock
is then convertible.
(3) Reclassifications. In the case, at
any time after the date hereof, of any capital reorganization or any
reclassification of the stock of the Corporation (other than as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another person (other
than a consolidation or merger in which the Corporation is the continuing entity
and which does not result in any change in the Common Stock or which is treated
as a liquidation pursuant to Section 3(d)), or of the sale or other disposition
of all or substantially all the properties and assets of the Corporation, the
shares of the Series A Preferred and Series C Preferred shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of the Series A Preferred or Series C Preferred into Common
Stock. The provisions of this clause 4(d)(vi)(3) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
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(e) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price of the Series A
Preferred or Series C Preferred pursuant to this Section 4, the Corporation at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of Series A Preferred or Series
C Preferred a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred or Series C Preferred, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price of the Series A Preferred and Series C
Preferred at the time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon the conversion of the Series A Preferred or Series C Preferred.
(f) Status of Converted Stock. In case any shares of
Series A Preferred or Series C Preferred shall be converted pursuant to Section
4 hereof, the shares so converted shall be cancelled, shall not be reissuable
and shall cease to be a part of the authorized capital stock of the Corporation.
(g) Fractional Shares. In lieu of any fractional shares
to which the holder of Series A Preferred or Series C Preferred would otherwise
be entitled upon conversion, the Corporation shall pay cash equal to such
fraction multiplied by the fair market value of one share of Common Stock as
determined by the Board. The number of whole shares issuable to each holder upon
such conversion shall be determined on the basis of the number of shares of
Common Stock issuable upon conversion of the total number of shares of Series A
Preferred and Series C Preferred held by such holder at the time of converting
into Common Stock.
(h) Miscellaneous.
(i) All calculations under this Section 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
(ii) The holders of at least 50% of the
outstanding Series A Preferred or Series C Preferred shall have the right to
challenge any determination by the Board of fair value pursuant to this Section
4, in which case such determination of fair value shall be made by an
independent appraiser selected jointly by the Board and the challenging parties,
the cost of such appraisal to be borne equally by the Corporation and the
challenging parties.
(iii) No adjustment in the Conversion Price of the
Series A Preferred or Series C Preferred need be made if such adjustment would
result in a change in such Conversion Price of less than $0.01. Any adjustment
of less than $0.01 which is not made shall be carried forward and shall be made
at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in such Conversion
Price.
(i) No Impairment. The Corporation will not by amendment
of its Certificate of Incorporation, or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to
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avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Series A Preferred or Series C Preferred
against impairment.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred and Series C Preferred, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred and Series
C Preferred. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
then-outstanding shares of Preferred stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
5. Voting Rights of Common Stock, Series A Preferred and Series C
Preferred. Except as otherwise required by law or by Section 8 hereof, the
holder of each share of Common Stock issued and outstanding shall have one vote,
and the holder of each share of Series A Preferred and Series C Preferred issued
and outstanding shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such share of Series A Preferred or Series C
Preferred, as applicable, could be converted at the record date for
determination of the stockholders entitled to vote on such matters, or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited, such votes to be counted together with all
other shares of stock of the Corporation having general voting power and not
separately as a class. Fractional votes by the holders of Series A Preferred and
Series C Preferred shall not, however, be permitted, and any fractional voting
rights shall (after aggregating all shares into which shares of Series A
Preferred or Series C Preferred held by each holder could be converted) be
rounded to the nearest whole number.
6. Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred or Series C Preferred, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
7. Notices. Any notice required by the provisions hereof to be
given to the holders of Series A Preferred and Series C Preferred shall be
deemed given when deposited in the United States mail, postage prepaid, or
delivered to an overnight delivery service, and addressed to each holder of
record at his or her address appearing on the books of this Corporation.
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8. Protective Provisions of Series C Preferred. So long as any
shares of Series C Preferred are outstanding, the Corporation shall not, without
first obtaining the approval of the holders of at least a majority of the
then-outstanding shares of such series, voting as a separate class, take any
action that:
(a) alters the rights, preferences or privileges of such
series;
(b) creates any new class or series of shares that has a
preference over or is on a parity with such series with respect to voting,
dividends or liquidation preferences;
(c) reclassifies stock into shares having a preference
over or on a parity with such series with respect to voting, dividends or
liquidation preferences;
(d) authorizes any dividend or other distribution with
respect to Common Stock (other than a dividend payable in Common Stock or as
authorized by Section 2(a) or Section 2(b) with respect to the Series A
Preferred);
(e) repurchases, redeems or retires any shares of capital
stock of the Corporation except as provided in Sections 2(c); or
(f) consummates a Corporate Sale.
ARTICLE V
The name and mailing address of the sole incorporator is as follows:
Name Mailing Address
---- ---------------
Janet S. Herman c/o Morrison & Foerster, LLP
755 Page Mill Road
Palo Alto, CA 94304
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
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Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE VIII
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation, and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
The management of the business and the conduct of the affairs of the Corporation
shall be vested in its Board of Directors. The number of directors which shall
constitute the whole Board of Directors shall be fixed by, or in the manner
provided in, the Bylaws. The phrase "whole Board" and the phrase "total number
of directors" shall be deemed to have the same meaning, to wit, the total number
of directors which the Corporation would have if there were no vacancies. No
election of directors need be by written ballot.
After the original or other Bylaws of the Corporation have been adopted,
amended, or repealed, as the case may be, in accordance with the provisions of
Section 109 of the General Corporation Law of the State of Delaware, and, after
the Corporation has received nay payment for nay of its stock, the power to
adopt, amend, or repeal the Bylaws of the Corporation may be exercised by the
Board of directors of the Corporation; provided, however, that any provision for
the classification of directors of the Corporation for staggered terms pursuant
to the provisions of subsection (d) of Section 141 of the General Corporation
Law of the State of Delaware shall be set forth in an initial Bylaw adopted by
the stockholders entitled to vote of the Corporation unless provisions for such
classification shall be set forth in this Certificate of Incorporation.
Whenever the Corporation shall be authorized to issue only one class of stock,
each outstanding share shall entitle the holder thereof to notice of, and the
right to vote at, any meeting of stockholders. Whenever the Corporation shall be
authorized to issue more than one class of stock, no outstanding share of any
class of stock which is denied voting power under the provisions of the
Certificate of Incorporation shall entitle the holder thereto to the right to
vote any meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of Section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such class
which is otherwise denied voting power shall entitle the holder thereof to vote
upon the increase or decrease in the number of authorized shares of said class.
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ARTICLE IX
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of Paragraph (7) of
subsection (b) of Section 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
ARTICLE X
The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
ARTICLE XI
From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article XI.
The undersigned, as the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Law of the State of
Delaware, makes this certificate, hereby declaring and certifying that this act
and deed and the facts herein stated are true, and accordingly, have hereunto
set may hand this 1st day of July, 1996.
----------------------------------
Janet S. Herman,
Sole Incorporator
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Exhibit 3.2
BYLAWS OF
INFINITY FINANCIAL TECHNOLOGY-DELAWARE, INC.,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1 REGISTERED OFFICE.
The registered office of Infinity Financial Technology-Delaware, Inc.,
(the "Corporation") in the State of Delaware shall be in the City of Wilmington,
County of New Castle.
SECTION 2 OTHER OFFICES.
The Corporation shall also have and maintain an office or principal
place of business at 640 Clyde Court, Mountain View, California 94043, and may
also have offices at such other places, both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 1 PLACE OF MEETINGS.
Meetings of the stockholders of the Corporation shall be held at such
place, either within or without the State of Delaware, as may be designated from
time to time by the Board of Directors, or, if not so designated, then at the
office of the Corporation required to be maintained pursuant to Section 2 of
Article I hereof.
SECTION 2 ANNUAL MEETINGS.
The annual meetings of the stockholders of the Corporation, commencing
with the year 1996, for the purpose of election of directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
SECTION 3 SPECIAL MEETINGS.
Special Meetings of the stockholders of the Corporation may be called,
for any purpose or purposes, by the Chairman of the Board or the President or
the Board of Directors at any time. Upon written request of any stockholder or
stockholders holding in the aggregate one-tenth of the voting power of all
stockholders delivered in person or sent by registered mail to the Chairman of
the Board, President or Secretary of the Corporation, the Secretary shall call a
special meeting of
<PAGE> 2
stockholders to be held at the office of the Corporation required to be
maintained pursuant to Section 2 of Article I hereof at such time as the
Secretary may fix, such meeting to be held not less than ten (10) nor more than
sixty (60) days after the receipt of such request, and if the Secretary shall
neglect or refuse to call such meeting, within seven (7) days after the receipt
of such request, the stockholder making such request may do so.
SECTION 4 NOTICE OF MEETINGS.
(a) Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders,
specifying the place, date and hour and purpose or purposes of the meeting,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote thereat, directed to
his address as it appears upon the books of the Corporation; except that where
the matter to be acted on is a merger or consolidation of the Corporation or a
sale, lease or exchange of all or substantially all of its assets, such notice
shall be given not less than twenty (20) nor more than sixty (60) days prior to
such meeting.
(b) If at any meeting action is proposed to be taken
which, if taken, would entitle shareholders fulfilling the requirements of
section 262(d) of the Delaware General Corporation Law to an appraisal of the
fair value of their shares, the notice of such meeting shall contain a statement
of that purpose and to that effect and shall be accompanied by a copy of that
statutory section.
(c) When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken unless the
adjournment is for more than thirty (30) days, or unless after the adjournment a
new record date is fixed for the adjourned meeting, in which event a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(d) Notice of the time, place and purpose of any meeting
of stockholders may be waived in writing, either before or after such meeting,
and to the extent permitted by law, will be waived by any stockholder by his
attendance thereat, in person or by proxy. Any stockholder so waiving notice of
such meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.
(e) Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it or of his legal
representatives or assigns, except in those cases where an irrevocable proxy
permitted by statute has been given.
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SECTION 5 QUORUM AND VOTING.
(a) At all meetings of stockholders, except where
otherwise provided by law, the Certificate of Incorporation, or these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. Shares, the voting of which at said
meeting have been enjoined, or which for any reason cannot be lawfully voted at
such meeting, shall not be counted to determine a quorum at said meeting. In the
absence of a quorum, any meeting of stockholders may be adjourned, from time to
time, by vote of the holders of a majority of the shares represented thereat,
but no other business shall be transacted at such meeting. At such adjourned
meeting at which a quorum is present or represented any business may be
transacted which might have been transacted at the original meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum.
(b) Except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws, all action taken by the holders of a majority
of the voting power represented at any meeting at which a quorum is present
shall be valid and binding upon the Corporation.
(c) Where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes, present
in person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter and the affirmative vote of the
majority of shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class.
SECTION 6 VOTING RIGHTS.
(a) Except as otherwise provided by law, only persons in
whose names shares entitled to vote stand on the stock records of the
Corporation on the record date for determining the stockholders entitled to vote
at said meeting shall be entitled to vote at such meeting. Shares standing in
the names of two or more persons shall be voted or represented in accordance
with the determination of the majority of such persons, or, if only one of such
persons is present in person or represented by proxy, such person shall have the
right to vote such shares and such shares shall be deemed to be represented for
the purpose of determining a quorum.
(b) Every person entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent, which proxy shall be filed with the Secretary of the Corporation at or
before the meeting at which it is to be used. Said proxy so appointed need not
be a stockholder. No proxy shall be voted on after three (3) years from its date
unless the proxy provides for a longer period.
(c) Without limiting the manner in which a stockholder
may authorize another person or persons to act for him as proxy pursuant to
subsection (b) of this section, the following shall constitute a valid means by
which a stockholder may grant such authority:
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(1) A stockholder may execute a writing
authorizing another person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer, director, employee or
agent signing such writing or causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature.
(2) A stockholder may authorize another person
or persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic transmission
to the person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized by the
person who will be the holder of the proxy to receive such transmission,
provided that any such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied.
(d) Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to
subsection (c) of this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
SECTION 7 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS.
(a) The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting and make a
written report thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of
shares outstanding and the voting power of each, (ii) determine the shares
represented at a meeting and the validity of proxies and ballots, (iii) count
all votes and ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the
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inspectors after the closing of the polls unless the Court of Chancery upon
application by a stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
accordance with Section 212(c)(2) of the Delaware General Corporation Law,
ballots and the regular books and records of the Corporation, except that the
inspectors may consider other reliable information for the limited purpose of
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the holder of
a proxy is authorized by the record owner to cast or more votes than the
stockholder holds of record. If the inspectors consider other reliable
information for the limited purpose permitted herein, the inspectors at the time
they make their certification pursuant to subsection (b)(v) of this section
shall specify the precise information considered by them including the person or
persons from whom they obtained the information, when the information was
obtained, the means by which the information was obtained and the basis for the
inspectors' belief that such information is accurate and reliable.
SECTION 8 LIST OF STOCKHOLDERS.
The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held and which place shall
be specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at the
time and place of meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
SECTION 9 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at the direction
of the Board of Directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation, not less
than thirty (30) days nor more than sixty (60) days prior to the meeting;
provided, however, that in the event that less than forty (40) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which
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<PAGE> 6
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting, (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class and number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 9, provided, however, that nothing in this
Section 9 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting in accordance with said
procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 9, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
SECTION 10 NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS.
In addition to any other applicable requirements, only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors, by any nominating committee or person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 10. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than thirty (30)
days nor more than sixty (60) days prior to the meeting; provided, however, that
in the event that less than forty (40) days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, (i) the name,
age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
the Corporation which are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Rule 14a under
the Securities Exchange Act of 1934; and (b) as to the stockholder giving the
notice, (i) the name and record address of the stockholder, and (ii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be
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eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. These provisions shall not
apply to nomination of any persons entitled to be separately elected by holders
of preferred stock.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 11 ACTION WITHOUT MEETING.
Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, are signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. To be effective, a written consent must be delivered to
the Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered in the manner
required by this Section to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation in
accordance with this Section. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
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ARTICLE III
DIRECTORS
SECTION 1 NUMBER AND TERM OF OFFICE.
The number of directors which shall constitute the whole of the Board
of Directors shall be one (1). With the exception of the first Board of
Directors, which shall be elected by the incorporator, and except as provided in
Section 3 of this Article III, the directors shall be elected by a plurality
vote of the shares represented in person or by proxy, at the stockholders annual
meeting in each year and entitled to vote on the election of directors. Elected
directors shall hold office until the next annual meeting and until their
successors shall be duly elected and qualified. Directors need not be
stockholders. If, for any cause, the Board of Directors shall not have been
elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
If provided in the Certificate of Incorporation, at all elections of
directors each shareholder having the right to vote shall be entitled to as many
votes as the number of shares so held by him of record multiplied by the number
of directors to be elected, and he may cast all of such votes for a single
director, or he may distribute them among any two or more of the directors to be
voted for, as he may see fit.
SECTION 2 POWERS.
The powers of the Corporation shall be exercised, its business
conducted and its property controlled by or under the direction of the Board of
Directors.
SECTION 3 VACANCIES.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director, and each director so elected shall hold office for the unexpired
portion of the term of the director whose place shall be vacant, and until his
successor shall have been duly elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this section in the case of the death,
removal or resignation of any director, or if the stockholders fail at any
meeting of stockholders at which directors are to be elected (including any
meeting referred to in Section 4 below) to elect the number of directors then
constituting the whole Board.
SECTION 4 RESIGNATIONS AND REMOVALS.
(a) Any director may resign at any time by delivering his
written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made it shall be
deemed effective at the pleasure of the Board of Directors. When one or more
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directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office for the unexpired portion of the term of the director
whose place shall be vacated and until his successor shall have been duly
elected and qualified.
(b) At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, the Board of Directors, or any
individual director, may be removed from office, with or without cause, and a
new director or directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of directors.
SECTION 5 MEETINGS.
(a) The annual meeting of the Board of Directors shall be
held immediately after the annual stockholders' meeting and at the place where
such meeting is held or at the place announced by the Chairman at such meeting.
No notice of an annual meeting of the Board of Directors shall be necessary and
such meeting shall be held for the purpose of electing officers and transacting
such other business as may lawfully come before it.
(b) Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
Corporation required to be maintained pursuant to Section 2 of Article I hereof.
Regular meetings of the Board of Directors may also be held at any place within
or without the State of Delaware which has been designated by resolutions of the
Board of Directors or the written consent of all directors.
(c) Special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board or, if there is no Chairman of the Board, by
the President, or by the Secretary or by any of two directors of the
Corporation.
(d) Written notice of the time and place of all regular
and special meetings of the Board of Directors shall be delivered personally to
each director or sent by telegram or facsimile transmission at least forty-eight
(48) hours before the start of the meeting, or sent by first class mail at least
one hundred and twenty (120) hours before the start of the meeting. Notice of
any meeting may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat.
SECTION 6 QUORUM AND VOTING.
(a) A quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time in accordance
with Section I of Article III of these Bylaws, but not less than one; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
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(b) At each meeting of the Board at which a quorum is
present all questions and business shall be determined by a vote of a majority
of the directors present, unless a different vote be required by law, the
Certificate of Incorporation, or these Bylaws.
(c) Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communication equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(d) The transactions of any meeting of the Board of
Directors, or any committee thereof, however called or noticed, or wherever
held, shall be as valid as though had at a meeting duly held after regular call
and notice, if a quorum be present and if, either before or after the meeting,
each of the directors not present shall sign a written waiver of notice, or a
consent to holding such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
SECTION 7 ACTION WITHOUT MEETING.
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting,
if all members of the Board or of such committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the minutes of
proceedings of the Board or committee.
SECTION 8 FEES AND COMPENSATION.
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the Board of Directors.
SECTION 9 COMMITTEES.
(a) Executive Committee: The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint an Executive
Committee of not less than one member, each of whom shall be a director. The
Executive Committee, to the extent permitted by law, shall have and may exercise
when the Board of Directors is not in session all powers of the Board in the
management of the business and affairs of the Corporation, including, without
limitation, the power and authority to declare a dividend or to authorize the
issuance of stock, except such committee shall not have the power or authority
to amend the Certificate of Incorporation, to adopt an agreement or merger or
consolidation, to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, to recommend
to the stockholders of the Corporation a dissolution of the Corporation or a
revocation of a dissolution, or to amend these Bylaws.
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(b) Other Committees: The Board of Directors may, by
resolution passed by a majority of the whole Board, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committee, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) Term: The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board, subject to the provisions
of subsections (a) or (b) of this Section 9, may at any time increase or
decrease the number of members of a committee or terminate the existence of a
committee; provided, that no committee shall consist of less than one member.
The membership of a committee member shall terminate on the date of his death or
voluntary resignation, but the Board may at any time for any reason remove any
individual committee member and the Board may fill any committee vacancy created
by death, resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) Meetings: Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any other
committee appointed pursuant to this Section 9 shall be held at such times and
places as are determined by the Board of Directors, or by any such committee,
and when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter; special
meetings of any such committee may be held at the principal office of the
Corporation required to be maintained pursuant to Section 2 of Article I hereof;
or at any place which has been designated from time to time by resolution of
such committee or by written consent of all members thereof, and may be called
by any director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given in
the manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time after the meeting and will be waived by any director by attendance thereat.
A majority of the authorized number of members of any such committee shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act of
such committee.
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ARTICLE IV
OFFICERS
SECTION 1 OFFICERS DESIGNATED.
The officers of the Corporation shall be a Chairman of the Board of
Directors and a President, and one or more Vice-Presidents, a Secretary, and a
Treasurer. The order of the seniority of the Vice Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors or the Chairman of the Board or the President
may also appoint one or more assistant secretaries, assistant treasurers, and
such other officers and agents with such powers and duties as it or he shall
deem necessary. The Board of Directors may assign such additional titles to one
or more of the officers as they shall deem appropriate. Any one person may hold
any number of offices of the Corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the Corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 2 TENURE AND DUTIES OF OFFICERS.
(a) General: All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall have been
duly elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors. Nothing in these Bylaws shall
be construed as creating any kind of contractual right to employment with the
Corporation.
(b) Duties of the Chairman of the Board of Directors: The
Chairman of the Board of Directors (if there be such an officer appointed) shall
be the chief executive officer of the Corporation and, when present, shall
preside at all meetings of the shareholders and the Board of Directors. The
Chairman of the Board of Directors shall perform such other duties and have such
other powers as the Board of Directors shall designate from time to time.
(c) Duties of President: The President shall be the chief
executive officer of the Corporation in the absence of the Chairman of the Board
and shall preside at all meetings of the shareholders and at all meetings of the
Board of Directors, unless the Chairman of the Board of Directors has been
appointed and is present. The President shall perform such other duties and have
such other powers as the Board of Directors shall designate from time to time.
(d) Duties of Vice-Presidents: The Vice-Presidents, in
the order of their seniority, may assume and perform the duties of the President
in the absence or disability of the President or whenever the office of the
President is vacant. The Vice-President shall perform such other duties and have
such other powers as the Board of Directors or the President shall designate
from time to time.
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<PAGE> 13
(e) Duties of Secretary: The Secretary shall attend all
meetings of the shareholders and of the Board of Directors and any committee
thereof, and shall record all acts and proceedings thereof in the minute book of
the Corporation. The Secretary shall give notice, in conformity with these
Bylaws, of all meetings of the shareholders, and of all meetings of the Board of
Directors and any Committee thereof requiring notice. The Secretary shall
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
(f) Duties of Treasurer: The Treasurer shall keep or
cause to be kept the books of account of the Corporation in a thorough and
proper manner, and shall render statements of the financial affairs of the
Corporation in such form and as often as required by the Board of Directors or
the President. The Treasurer, subject to the order of the Board of Directors,
shall have the custody of all funds and securities of the Corporation. The
Treasurer shall perform all other duties commonly incident to his office and
shall perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time. The President may
direct any Assistant Treasurer to assume and perform the duties of the Treasurer
in the absence or disability of the Treasurer, and each Assistant Treasurer
shall perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS, AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 1 EXECUTION OF CORPORATE INSTRUMENTS.
(a) The Board of Directors may, in its discretion,
determine the method and designate the signatory officer or officers, or other
person or persons, to execute any corporate instrument or document, or to sign
the corporate name without limitation, except where otherwise provided by law,
and such execution or signature shall be binding upon the Corporation.
(b) Unless otherwise specifically determined by the Board
of Directors or otherwise required by law, formal contracts of the Corporation,
promissory notes, deeds of trust, mortgages and other evidences of indebtedness
of the Corporation, and other corporate instruments or documents requiring the
corporate seal, and certificates of shares of stock owned by the Corporation,
shall be executed, signed or endorsed by the Chairman of the Board (if there be
such an officer appointed) or by the President; such documents may also be
executed by any Vice-President and by the Secretary or Treasurer or any
Assistant Secretary or Assistant Treasurer. All other instruments and documents
requiring the corporate signature, but not requiring the corporate seal, may be
executed as aforesaid or in such other manner as may be directed by the Board of
Directors.
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<PAGE> 14
(c) All checks and drafts drawn on banks or other
depositories on funds to the credit of the Corporation, or in special accounts
of the Corporation, shall be signed by such person or persons as the Board of
Directors shall authorize so to do.
SECTION 2 VOTING OF SECURITIES OWNED BY CORPORATION.
All stock and other securities of other corporations owned or held by
the Corporation for itself, or for other parties in any capacity, shall be
voted, and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board of Directors or, in the absence
of such authorization, by the Chairman of the Board (if there be such an officer
appointed), or by the President, or by any Vice-President.
ARTICLE VI
SHARES OF STOCK
SECTION 1 FORM AND EXECUTION OF CERTIFICATES.
Certificates for the shares of stock of the Corporation shall be in
such form as is consistent with the Certificate of Incorporation and applicable
law. Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of the Corporation by, the Chairman of the
Board (if there be such an officer appointed), or by the President or any
Vice-President and by the Treasurer or Assistant Treasurer or the Secretary or
Assistant Secretary, certifying the number of shares owned by him in the
Corporation. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. If the Corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the Delaware General
Corporation Law, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
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SECTION 2 LOST CERTIFICATES.
The Board of Directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to indemnify the
Corporation in such manner as it shall require and/or to give the Corporation a
surety bond in such form and amount as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.
SECTION 3 TRANSFERS.
Transfers of record of shares of stock of the Corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a certificate or certificates for a like
number of shares, properly endorsed.
SECTION 4 FIXING RECORD DATES.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the date on which the meeting is held. A determination of
stockholders of record entitled notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by the Delaware General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody
15
<PAGE> 16
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 5 REGISTERED STOCKHOLDERS.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities of the
Corporation, other than stock certificates, may be signed by the Chairman of the
Board (if there be such an officer appointed), or the President or any
Vice-President or such other person as may be authorized by the Board of
Directors and the corporate seal impressed thereon or a facsimile of such seal
imprinted thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that
where any such bond, debenture or other corporate security shall be
authenticated by the manual signature of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signature of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the Corporation,
or such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or before the bond,
debenture or other corporate security so signed or attested shall have been
delivered,
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<PAGE> 17
such bond, debenture or other corporate security nevertheless may be adopted by
the Corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the Corporation.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall consist of a die bearing the name of the
Corporation and the state and date of its incorporation. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE IX
INDEMNIFICATION OF
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1 RIGHT TO INDEMNIFICATION.
Each person who was or is a party or is threatened to be made a party
to or is involved (as a party, witness, or otherwise), in any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a "Proceeding"), by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director, officer, employee, or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee benefit plans, whether
the basis of the Proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent (hereafter an "Agent"), shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended or interpreted (but, in the case of any such amendment or
interpretation, only to the extent that such amendment or interpretation permits
the Corporation to provide broader indemnification rights than were permitted
prior thereto) against all expenses, liability, and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to
be paid in settlement, and any interest, assessments, or other charges imposed
thereon, and any federal, state, local, or foreign taxes imposed on any Agent as
a result of the actual or deemed receipt of any payments under this Article)
reasonably incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing in, any Proceeding (hereinafter "Expenses");
provided, however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the Corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the Corporation. The right to indemnification
conferred in this Article shall be a contract right.
SECTION 2 AUTHORITY TO ADVANCE EXPENSES.
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<PAGE> 18
Expenses incurred by an officer or director (acting in his capacity as
such) in defending a Proceeding shall be paid by the Corporation in advance of
the final disposition of such Proceeding, provided, however, that if required by
the Delaware General Corporation Law, as amended, such Expenses shall be
advanced only upon delivery to the Corporation of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article or otherwise. Expenses incurred by other Agents of
the Corporation (or by the directors or officers not acting in their capacity as
such, including service with respect to employee benefit plans) may be advanced
upon such terms and conditions as the Board of Directors deems appropriate. Any
obligation to reimburse the Corporation for Expense advances shall be unsecured
and no interest shall be charged thereon.
SECTION 3 RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under Section 1 or 2 of this Article is not paid in full by
the Corporation within ninety (90) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the Corporation) that the claimant has
not met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed. The burden of proving such a defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
SECTION 4 PROVISIONS NONEXCLUSIVE.
The rights conferred on any person by this Article shall not be
exclusive of any other rights that such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, agreement,
vote of stockholders or disinterested directors, or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Certificate, agreement, or vote
of the stockholders or disinterested directors is inconsistent with these
bylaws, the provision, agreement, or vote shall take precedence.
SECTION 5 AUTHORITY TO INSURE.
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The Corporation may purchase and maintain insurance to protect itself
and any Agent against any Expense, whether or not the Corporation would have the
power to indemnify the Agent against such Expense under applicable law or the
provisions of this Article.
SECTION 6 SURVIVAL OF RIGHTS.
The rights provided by this Article shall continue as to a person who
has ceased to be an Agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
SECTION 7 SETTLEMENT OF CLAIMS.
The Corporation shall not be liable to indemnify any Agent under this
Article (a) for any amounts paid in settlement of any action or claim effected
without the corporation's written consent, which consent shall not be
unreasonably withheld; or (b) for any judicial award if the Corporation was not
given a reasonable and timely opportunity, at its expense, to participate in the
defense of such action.
SECTION 8 EFFECT OF AMENDMENT.
Any amendment, repeal, or modification of this Article shall not
adversely affect any right or protection of any Agent existing at the time of
such amendment, repeal, or modification.
SECTION 9 SUBROGATION.
In the event of payment under this Article, the Corporation shall be
surrogated to the extent of such payment to all of the rights of recovery of the
Agent, who shall execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such documents
necessary to enable the Corporation effectively to bring suit to enforce such
rights.
SECTION 10 NO DUPLICATION OF PAYMENTS.
The Corporation shall not be liable under this Article to make any
payment in connection with any claim made against the Agent to the extent the
Agent has otherwise actually received payment (under any insurance policy,
agreement, vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
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ARTICLE X
NOTICES
Whenever, under any provisions of these Bylaws, notice is required to
be given to any stockholder, the same shall be given in writing, timely and duly
deposited in the United States Mail, postage prepaid, and addressed to his last
known post office address as shown by the stock record of the Corporation or its
transfer agent. Any notice required to be given to any director may be given by
the method hereinabove stated, or by telegram or other means of electronic
transmission, except that such notice other than one which is delivered
personally, shall be sent to such address or (in the case of facsimile
telecommunication) facsimile telephone number as such director shall have filed
in writing with the Secretary of the Corporation, or, in the absence of such
filing, to the last known post office address of such director. If no address of
a stockholder or director be known, such notice may be sent to the office of the
Corporation required to be maintained pursuant to Section 2 of Article I hereof.
An affidavit of mailing, executed by a duly authorized and competent employee of
the Corporation or its transfer agent appointed with respect to the class of
stock affected, specifying the name and address or the names and addresses of
the stockholder or stockholders, director or directors, to whom any such notice
or notices was or were given, and the time and method of giving the same, shall
be conclusive evidence of the statements therein contained. All notices given by
mail, as above provided, shall be deemed to have been given as at the time of
mailing and all notices given by telegram or other means of electronic
transmission shall be deemed to have been given as at the sending time recorded
by the telegraph company or other electronic transmission equipment operator
transmitting the same. It shall not be necessary that the same method of giving
be employed in respect of all directors, but one permissible method may be
employed in respect of any one or more, and any other permissible method or
methods may be employed in respect of any other or others. The period or
limitation of time within which any stockholder may exercise any option or
right, or enjoy any privilege or benefit, or be required to act, or within which
any director may exercise any power or right, or enjoy any privilege, pursuant
to any notice sent him in the manner above provided, shall not be affected or
extended in any manner by the failure of such a stockholder or such director to
receive such notice. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation, or of these
Bylaws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Whenever notice is required to be given, under any provision
of law or of the Certificate of Incorporation or Bylaws of the Corporation, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the Corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate shall
state, if such is the fact and if notice is required, that notice was given to
all persons entitled to receive notice except such persons with whom
communication is unlawful.
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ARTICLE XI
AMENDMENTS
These Bylaws may be repealed, altered or amended or new Bylaws adopted
by written consent of stockholders in the manner authorized by Section 8 of
Article II, or at any meeting of the stockholders, either annual or special, by
the affirmative vote of a majority of the stock entitled to vote at such
meeting. The Board of Directors shall also have the authority to repeal, alter
or amend these Bylaws or adopt new Bylaws (including, without limitation, the
amendment of any Bylaws setting forth the number of directors who shall
constitute the whole Board of Directors) by unanimous written consent or at any
annual, regular, or special meeting by the affirmative vote of a majority of the
whole number of directors, subject to the power of the stockholders to change or
repeal such Bylaws and provided that the Board of Directors shall not make or
alter any Bylaws fixing the qualifications, classifications, or term of office
of directors.
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of Infinity Financial Technology-Delaware,
Inc., a Delaware corporation, hereby certifies that the foregoing is a full,
true and correct copy of the Bylaws of said Corporation, with all amendments to
date of this Certificate.
WITNESS the signature of the undersigned this 2nd day of July, 1996.
----------------------------------
Terry H. Carlitz, Secretary
<PAGE> 23
BYLAWS
OF
INFINITY FINANCIAL TECHNOLOGY-DELAWARE, INC.,
A DELAWARE CORPORATION
<PAGE> 24
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE/SECTION DESCRIPTION PAGE
<S> <C> <C>
ARTICLE I Offices ............................................................. 1
Section
1 Registered Office ................................................... 1
2 Other Offices ....................................................... 1
ARTICLE II Stockholders' Meetings .............................................. 1
Section
1 Place of Meetings ................................................... 1
2 Annual Meetings ..................................................... 1
3 Special Meetings .................................................... 1
4 Notice of Meetings .................................................. 2
5 Quorum and Voting ................................................... 2
6 Voting Rights ....................................................... 3
7 Voting Procedures and Inspectors of Elections ....................... 4
8 List of Stockholders ................................................ 5
9 Stockholder Proposals at Annual Meetings ............................ 5
10 Nominations of Persons for Election to the Board of Directors ....... 6
11 Action Without Meeting .............................................. 7
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
ARTICLE/SECTION DESCRIPTION PAGE
<S> <C> <C>
ARTICLE III Directors .......................................................... 8
Section
1 Number and Term of Office .......................................... 8
2 Powers ............................................................. 8
3 Vacancies .......................................................... 8
4 Resignations and Removals .......................................... 8
5 Meetings ........................................................... 9
6 Quorum and Voting .................................................. 9
7 Action Without Meeting ............................................. 10
8 Fees and Compensation .............................................. 10
9 Committees ......................................................... 10
ARTICLE IV Officers ........................................................... 12
Section
1 Officers Designated ................................................ 12
2 Tenure and Duties of Officers ...................................... 12
ARTICLE V Execution of Corporate Instruments,
and Voting of Securities Owned by
the Corporation .................................................... 13
Section
1 Execution of Corporate Instruments ................................. 13
2 Voting of Securities Owned by Corporation .......................... 14
</TABLE>
ii
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<TABLE>
<CAPTION>
ARTICLE/SECTION DESCRIPTION PAGE
<S> <C> <C>
ARTICLE VI Shares of Stock .................................................... 14
Section
1 Form and Execution of Certificates ................................. 14
2 Lost Certificates .................................................. 14
3 Transfers .......................................................... 15
4 Fixing Record Dates ................................................ 15
5 Registered Stockholders ............................................ 16
ARTICLE VII Other Securities of the Corporation ................................ 16
ARTICLE VIII Corporate Seal ..................................................... 17
ARTICLE IX Indemnification of Officers,
Directors, Employees and Agents .................................... 17
Section
1 Right to Indemnification ........................................... 17
2 Authority to Advance Expenses ...................................... 17
3 Right of Claimant to Bring Suit .................................... 18
4 Provisions Nonexclusive ............................................ 18
5 Authority to Insure ................................................ 18
6 Survival of Rights ................................................. 19
7 Settlement of Claims ............................................... 19
8 Effect of Amendment ................................................ 19
</TABLE>
iii
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<TABLE>
<CAPTION>
ARTICLE/SECTION DESCRIPTION PAGE
<S> <C> <C>
9 Subrogation ........................................................ 19
10 No Duplication of Payments ......................................... 19
ARTICLE X Notices ............................................................ 20
ARTICLE XI Amendments ......................................................... 21
</TABLE>
iv
<PAGE> 1
Exhibit 5.1
Infinity Financial Technology
July 23, 1996
Page 1
July 23, 1996
Infinity Financial Technology, Inc.
640 Clyde Court
Mountain View, CA 94043
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-1 filed by Infinity Financial Technology, Inc., a California
corporation (the "Company"), with the Securities and Exchange Commission on July
23, 1996 (the "Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended, of up to 2,702,500 shares of the Company's
common stock, no par value (the "Stock"), of which 2,000,000 shares of
authorized but unissued stock are to be offered and sold by the Company and up
to 702,500 shares of stock (including 352,500 shares subject to the
underwriters' over-allotment option) are to be offered and sold by certain
selling shareholders (the "Selling Shareholders"). The Stock is to be sold to
the underwriters named in the Registration Statement for resale to the public.
As counsel to the Company, we have examined the proceedings
taken by the Company in connection with the issuance and sale by the Company of
up to 2,702,500 shares of Stock.
We are of the opinion that (i) the shares of Stock to be
offered and sold by the Company have been duly authorized and, when issued and
sold by the Company in the manner described in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be legally issued, fully paid and nonassessable, and (ii) the
shares of Stock to be offered and sold by the Selling Shareholders have been
duly authorized and legally issued and are fully paid and nonassessable.
<PAGE> 2
Infinity Financial Technology
July 23, 1996
Page 2
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in the
Registration Statement, the prospectus constituting a part thereof and any
amendments thereto.
Very truly yours,
MORRISON & FOERSTER LLP
<PAGE> 1
Exhibit 10.1
INFINITY FINANCIAL TECHNOLOGY, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is made as of January
__, 1994 by and among Infinity Financial Technology, Inc., a California
corporation (the "Company"), the entities listed on the Schedule of Investors
attached hereto (the "Investors") and Roger A. Lang, Denny K. Paul, Robin Vasan,
Charles Marston, Kishore Bopardikar and Tejbir Sidhu ("Management").
RECITALS
A. Certain of the Investors (the "Series A Investors") have
acquired an aggregate of 500,000 shares of Series A Preferred Stock of the
Company.
B. Certain of the Investors and the Company are parties to the
Series C Preferred Stock Purchase Agreement dated as of January __, 1994 (the
"Purchase Agreement").
C. The obligations of the Company and the Investors (other than
the Series A Investors) under the Purchase Agreement are conditioned, among
other things, upon the execution and delivery of this Agreement by the Investors
and the Company.
D. The Company desires to grant, and the Investors desire to be
granted, the rights created herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used and not
otherwise defined herein shall have the meanings given them in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Conversion Stock" means the Common Stock issued or issuable
upon conversion of the Preferred Stock.
"Holder" shall mean (i) any person or entity holding or
having the right to acquire Registrable Securities, and (ii) any person holding
Registrable Securities to whom the rights under this Agreement have been
transferred in accordance with Section 5.10 hereof.
"Initiating Holders" shall mean any Holders who in the
aggregate hold not less than 50% of the Registrable Securities.
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"Management Stock" means all Common Stock now or hereafter
held by Management.
"Preferred Stock" shall mean (i) the Series C Preferred Stock
of the Company issued pursuant to the Purchase Agreement and (ii) the Price
Waterhouse Preferred Stock.
"Price Waterhouse Preferred Stock" shall mean up to 500,000
shares of Series D Preferred Stock of the Company, or any other series of
preferred stock of the Company, sold by the Company to Price Waterhouse or any
affiliate or affiliates thereof.
"Registrable Securities" shall mean (i) the Conversion Stock,
(ii) the Management Stock and the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock; provided, that the Management Stock
and the Common Stock issued or issuable upon conversion of the Series A
Preferred Stock shall not be deemed Registrable Securities for the purpose of
Sections 5.1, 5.3, 5.4 and 5.10 hereof; and (iii) any Common Stock of the
Company issued or issuable in respect of the shares referenced in (i) or (ii)
above, subject to the limitations in (ii) above, upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issuable with respect to the shares referenced in (i) or (ii) above; provided,
however, that such shares or other securities shall only be treated as
Registrable Securities if and so long as they have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction.
The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 5.1,
5.2 and 5.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company) and the reasonable fees and disbursements
of one counsel for all Holders.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth under "Registration
Expenses," all fees and disbursements of counsel for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the
Conversion Stock and any other securities issued in respect of the Preferred
Stock or the Conversion Stock upon any
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<PAGE> 3
stock split, stock dividend, recapitalization, merger, consolidation or similar
event shall not be sold, assigned, transferred or pledged except upon the
conditions specified in this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act. The Investors will cause
any proposed purchaser, assignee, transferee, or pledgee of any such shares held
by the Investors to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Stock, (ii) the Conversion Stock, and (iii) any other securities
issued in respect of the Preferred Stock or the Conversion Stock upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 4 below) be
stamped or otherwise imprinted with a legend in substantially the following form
(in addition to any legends required by the Bylaws of the Company or under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Investor and/or Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock or
the Common Stock in order to implement the restrictions on transfer established
in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by the
Investor to any of its partners, or retired partners, or to the estate of any of
its partners or retired partners, (iii) in transactions involving the transfer
without consideration of Restricted Securities by the Investor during his
lifetime by way of gift or on death by will or intestacy, (iv) in transactions
involving the transfer or distribution of Restricted Securities by a corporation
to any subsidiary, parent or affiliated corporation of such corporation, or (v)
in transactions in compliance with Rule 144), unless there is in effect a
registration statement under the Securities
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<PAGE> 4
Act covering the proposed transfer, the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer, sale,
assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed transfer, sale, assignment or pledge in sufficient
detail, and shall be accompanied, at such holder's expense by either (A) an
unqualified written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (B) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legends set forth in Section 3
above, except that such certificate shall not bear such restrictive legend if,
in the opinion of counsel for such holder and the Company, such legends are not
required in order to establish compliance with any provision of the Securities
Act.
5. REGISTRATION.
5.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the
Company shall receive from Initiating Holders a written request that the Company
effect any registration, qualification or compliance with respect to not less
than one-half of their shares of Registrable Securities, or any lesser number of
shares if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed ten million dollars ($10,000,000), the
Company will:
(i) promptly give written notice of
the proposed registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its
best efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 5.1:
(A) In any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act;
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<PAGE> 5
(B) Prior to the earlier of
January 31, 1999 or six (6) months after the effective date of the Company's
first registered public offering of its stock;
(C) If the Company, within
ten (10) days of the receipt of the request of the Initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan);
(D) During the period
starting with the date of filing of, and ending on the date 180 days immediately
following the effective date of, any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(E) After the Company has
effected two such registrations pursuant to this Section 5.1(a), and such
registrations have been declared or ordered effective;
(F) Within twelve (12)
months after the Company has effected such a registration pursuant to this
Section 5.1(a), and such registration has been declared or ordered effective; or
(G) If the Company shall
furnish to such Initiating Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, in which case the
Company's obligation to use its best efforts to register, qualify or comply
under this Section 5.1 shall be deferred for a period not to exceed 180 days
from the date of receipt of written request from the Initiating Holders,
provided that the Company may not exercise this deferral right more than once
per twelve-month period.
Subject to the foregoing clauses (A) through (G), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. In the event that a registration
pursuant to Section 5.1 is for a public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 5.1(a)(i), and the right of any Holder to registration pursuant to
Section 5.1 shall be conditioned upon such Holder's participation in such
underwriting arrangements, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be limited to the
extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the
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<PAGE> 6
managing underwriter selected for such underwriting by a majority in interest of
the Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 5.1, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 180 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
5.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from
time to time the Company shall determine to register any of its equity
securities, either for its own account or for the account of a security holder
or holders, other than (A) a registration relating solely to employee benefit
plans, or (B) a registration relating solely to a Rule 145 transaction, the
Company will:
(i) promptly give to each Holder written
notice thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 30 days after receipt of such written
notice from the Company, by any Holder.
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 5.2(a)(i). In such event the right of any
Holder to registration pursuant to Section 5.2 shall be conditioned upon such
Holder's participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a
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<PAGE> 7
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities to be included in such registration (i) in
the case of the Company's initial public offering, to zero, and (ii) in the case
of any other offering, to an amount no less than 25% of all shares to be
included in such offering; provided however, that (x) any such limitation or
"cut-back" shall be first applied to all shares proposed to be sold in such
offering other than for the account of the Company which are not Registrable
Securities, (y) notwithstanding clause (x), in no event shall any shares being
sold by a shareholder exercising a demand registration right similar to that
granted in Section 5.1 be included in such offering and (z) the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless the Management Stock and the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock are first entirely excluded from the
underwriting. The Company shall so advise all Holders and other holders
distributing their securities through such underwriting, and the number of
shares of Registrable Securities or other securities that may be included in the
registration and underwriting shall be first allocated among all the Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holder at the time of filing the Registration Statement.
To facilitate the allocation of shares in accordance with the above provisions,
the Company may round the number of shares allocated to any Holder or holder to
the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 120 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 5.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
5.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would equal or exceed
$1,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as such Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than one
registration pursuant to this Section 5.3 in any six (6) month period. The
Company shall inform other Holders of the proposed registration and offer them
the opportunity to participate. In the event the registration is proposed to be
part of a firm commitment underwritten public offering, the substantive
provisions of Section 5.1(b) shall be applicable to each such registration
initiated under this Section 5.3.
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<PAGE> 8
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 5.3:
(i) in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(ii) if the Company, within ten (10)
days of the receipt of the request of the initiating Holders, gives notice of
its bona fide intention to effect the filing of a registration statement with
the Commission within ninety (90) days of receipt of such request (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(iii) after the Company has effected
two such registrations pursuant to Section 5.3(a), and such registrations have
been declared or ordered effective;
(iv) during the period starting with
the date of filing of, and ending on the date 180 days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or
(v) if the Company shall furnish to
such Holder or Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for registration
statements to be filed in the near future, in which case the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 180 days from the receipt of the request to
file such registration by such Holder or Holders, provided that the Company may
not exercise this deferral right more than once per twelve-month period.
5.4. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.
From and after the Closing Date, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities without the written consent
of the holders of a majority of the Registrable Securities then outstanding,
unless (i) such other registration rights are subordinate to the registration
rights granted to the Holders hereunder, and (ii) the holders of such rights are
subject to market standoff obligations no more favorable to such persons than
those contained herein. The Investors acquiring Registrable Securities on the
Closing Date hereby consent to the execution of this Agreement after the date
hereof by the purchaser or purchasers of the Price Waterhouse Preferred Stock.
Upon execution, such purchaser or purchasers shall be deemed Investors hereunder
as if set forth on the Schedule of Investors attached hereto.
5.5. EXPENSES OF REGISTRATION. All Registration
Expenses incurred in connection with (i) two registrations pursuant to
Section 5.1, (ii) all registrations pursuant to
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<PAGE> 9
Section 5.2, and (iii) two registrations pursuant to Section 5.3, shall be borne
by the Company; provided, however, that the Company shall not be required to pay
for any Registration Expenses incurred in connection with a registration
pursuant to Section 5.1 or 5.3 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all Holders initially participating
in such registration shall bear such expenses), unless the Holders of a majority
of the Registrable Securities agree to forfeit their right to one registration
pursuant to Section 5.1 or 5.3, respectively. Unless otherwise stated, all
Selling Expenses relating to securities registered on behalf of the Holders and
all other registration expenses shall be borne by the Holders of such securities
pro rata on the basis of the number of shares so registered.
5.6. REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for at least
one hundred twenty (120) days or until the distribution described in the
registration statement has been completed, whichever first occurs; and
(b) Furnish to the Holders participating in
such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such Holders and
underwriters may reasonably request in order to facilitate the public offering
of such securities.
5.7. INDEMNIFICATION.
(a) The Company will indemnify each Holder of
Registrable Securities included in a registration pursuant to this Agreement,
each of its officers and directors and partners, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, state securities law or any
rule or regulation promulgated under such laws applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, each such underwriter
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and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by any Holder, controlling person or underwriter and
stated to be specifically for use therein; provided, however, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus on file with the Commission at the
time the registration statement becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter, or any
Holder, if there is no underwriter, if a copy of the Final Prospectus was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act, and if the
Final Prospectus would have cured the defect giving rise to the loss, liability,
claim or damage.
(b) Each Holder will, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers, directors and
partners and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by such Holder of the Securities Act, the
Securities Exchange Act of 1934, state securities laws or any rule or regulation
promulgated under such laws applicable to such Holder in connection with any
such registration, qualification or compliance, and will reimburse the Company,
such other Holders, such directors, officers, partners, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this Section 5.7(b) shall be limited in an amount
equal to the net proceeds of the shares sold by such Holder, unless such
liability arises out of or is based on willful misconduct by such Holder.
(c) Each party entitled to indemnification under this
Section 5.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as
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to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action, and provided further that the
Indemnifying Party shall not assume the defense for matters as to which
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would be inappropriate due to actual or potential differing
interests between them, but shall instead in such event pay the fees and costs
of separate counsel for the Indemnified Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
5.8. INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
5.9. RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Securities Exchange Act of
1934, as amended;
(b) File with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (at any time after it has
become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted
Securities to furnish to such Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public) and of the Securities Act and the Securities Exchange Act of
1934 (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as the Holder may
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<PAGE> 12
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
5.10. TRANSFER OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted Investors under Sections 5.1,
5.2 and 5.3 may be assigned to a transferee or assignee in connection with any
transfer or assignment of Registrable Securities by the Investor provided that:
(i) such transfer may otherwise be effected in accordance with applicable
securities laws, (ii) such assignee or transferee acquires at least 100,000
shares of Preferred Stock and/or Conversion Stock held by the assignor or
transferor (appropriately adjusted for recapitalizations, stock splits and the
like), (iii) written notice is promptly given to the Company and (iv) such
transferee agrees to be bound by the provisions of this Agreement.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to (A) any affiliated partnership or constituent
partner or retired partner of an Investor which is a partnership, or (B) an
officer, director or shareholder or a subsidiary, parent or affiliated
corporation of an Investor which is a corporation, or (C) a family member or
trust for the benefit of an Investor who is an individual, without compliance
with item (ii) above, provided written notice thereof is promptly given to the
Company and the transferee agrees to be bound by the provisions of this
Agreement.
5.11. TERMINATION OF REGISTRATION RIGHTS. The rights
granted pursuant to Sections 5.2 and 5.3 of this Agreement shall terminate as to
any Holder at such time as such Holder (i) can sell all of his Registrable
Securities pursuant to Rule 144(k) promulgated under the Securities Act or (ii)
can sell all of his Registrable Securities pursuant to Rule 144 promulgated
under the Securities Act in any ninety (90) day period.
6. FINANCIAL INFORMATION.
(a) The Company will provide the following
reports to each Investor (other than the Series A Investors):
(i) As soon as practicable after the
end of each fiscal year, and in any event within 90 days thereafter,
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year, and consolidated statements of operations and of
cash flows and shareholders' equity of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and audited by independent
public accountants of national standing selected by the Company;
(ii) As soon as practicable after the
end of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within 45 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such quarterly period, and consolidated statements of operations and of cash
flows of the Company and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes), subject to changes resulting
from year-end audit adjustments, in reasonable detail and signed by the
principal financial or accounting officer of the Company;
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<PAGE> 13
(iii) Within 30 days after the end of
each monthly accounting period, a consolidated condensed balance sheet of the
Company and its subsidiaries, if any, as of the end of each such monthly period,
and consolidated condensed statement of operations of the Company and its
subsidiaries for such period and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, signed by the principal financial or accounting officer of the
Company; and
(iv) At least 30 days prior to the
beginning of each fiscal year, a budget adopted by the Company's Board of
Directors for the fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months, and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
7. INSPECTION. The Company shall permit each Investor (other
than the Series A Investors), at such Investor's expense, to visit and inspect
the Company's properties, to examine its books of account and records and to
discuss the Company's affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by such Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 7 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
8. CONFIDENTIALITY. Each Investor (other than the Series A
Investors) and transferee acknowledges and agrees that any information obtained
pursuant to Section 6 or 7 which may be considered "inside" non-public
information will not be utilized by such Investor or transferee in connection
with purchases or sales of the Company's securities and will not be disclosed by
any such Investor or transferee.
9. RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each Qualified
Investor (as defined in this Section 9) a right of first offer with respect to
future sales of New Securities (as defined in this Section 9) by the Company.
For purposes of this Section 9, a Qualified Investor shall mean any Investor
(other than a Series A Investor) who holds at least 100,000 shares of Preferred
Stock and/or Conversion Stock (appropriately adjusted for recapitalizations,
stock splits and the like).
(b) Except as set forth below, "New Securities" shall
mean any shares of capital stock of the Company, including Common Stock and any
series of preferred stock, whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Stock or preferred stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Conversion Stock, (ii)
the Price Waterhouse Preferred Stock, (iii) Common Stock offered to the public
generally pursuant to a registration statement under the Securities Act in
connection with the Company's initial public offering, (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of all or substantially all of the assets or other reorganization
whereby the Company or its shareholders own more than fifty percent (50%) of the
voting power
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of the surviving or successor corporation, (v) up to 7,300,000 shares (net of
any repurchases) of the Company's Common Stock or related options, warrants or
other rights to purchase such Common Stock issued on or after the inception of
the Company to employees, officers and directors of, and consultants to, the
Company, pursuant to arrangements approved by the Board of Directors of the
Company, (vi) stock issued pursuant to any rights, agreements or convertible
securities, including without limitation options and warrants, provided that (x)
such rights, agreements or convertible securities were outstanding prior to the
date of this Agreement, or (y) the rights of first refusal established by this
Section 9 applied with respect to the initial sale or grant by the Company of
such rights, agreements or convertible securities, or (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(c) In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Qualified Investor
written notice of its intention, describing the amount and type of New
Securities, and the price and terms upon which the Company proposes to issue the
same. Each Qualified Investor shall have fifteen (15) days from the date of
receipt of any such notice to agree to purchase up to its respective Pro Rata
Share (as defined below) of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. A Qualified Investor's
"Pro Rata Share" of New Securities, for purposes of this right of first offer,
is the ratio that (i) the sum of the number of shares of Common Stock then held
by such Qualified Investor and the number of shares of Common Stock issuable
upon conversion of the Preferred Stock then held by such Qualified Investor
bears to (ii) the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon exercise or
conversion of all then outstanding securities exercisable for or convertible
into, directly or indirectly, Common Stock.
(d) In the event all of the New Securities are
not elected to be purchased by Qualified Investors within fifteen (15) days
after the notice pursuant to Section 9(c) above, the Company shall have ninety
(90) days thereafter to sell the New Securities not elected to be purchased by
Qualified Investors at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities within said ninety (90) day
period, the Company shall not thereafter issue or sell any New Securities
without first offering such securities in the manner provided above.
(e) The right of first refusal hereunder is not
assignable except by each of such Qualified Investors to any party who acquires
at least 100,000 shares of the Preferred Stock and/or Conversion Stock
(appropriately adjusted for recapitalizations, stock splits and the like).
10. TERMINATION OF COVENANTS. The covenants set forth in Sections
6, 7 and 9 shall terminate and be of no further force or effect upon the
consummation of a firm commitment underwritten public offering or at such time
as the Company is required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, whichever shall occur first.
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<PAGE> 15
11. STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities, each Investor and Holder agrees, upon
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180 days) from the
effective date of such registration as may be requested by the underwriters,
provided that all officers and directors of the Company who own stock of, or
hold options to purchase stock of, the Company and all other persons who hold 5%
or more of the then outstanding capital stock of the Company also agree to such
restrictions. The Investors and Holders agree that the Company may instruct its
transfer agent to place stop-transfer notations in its records to enforce the
provisions of this Section 11.
12. DETERMINATION OF SHARE AMOUNTS AND PERCENTAGES. For the
purposes of determining the minimum holdings set forth in this Agreement,
including without limitation the minimum holdings pursuant to Sections 5.10,
9(a), 9(e) and 13(b), the following rules shall govern:
(a) All shares held by entities affiliated with
the Holder shall be deemed held by such Holder, and any Holder which is a
partnership shall be deemed to hold any shares of Preferred Stock and/or
Conversion Stock originally purchased by such Holder and subsequently
distributed to partners of such Holder, but which have not been resold by such
partners.
(b) When shares of Preferred Stock are counted
together with shares of Conversion Stock or shares of Common Stock, shares of
Preferred Stock shall be counted on an as-converted into Common Stock basis, and
the term "Conversion Stock" shall mean only the shares of Common Stock which
have been issued pursuant to conversion of Preferred Stock.
13. AMENDMENT.
(a) Any provision of Section 5 of this Agreement
may be amended or the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding or deemed to be outstanding. Any amendment or waiver
effected in accordance with this Section 13(a) shall be binding upon each
Investor and each Holder of Registrable Securities at the time outstanding or
deemed to be outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
(b) Except as expressly provided herein, no
other Section of this Agreement may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that holders of a majority of the Preferred Stock and Conversion Stock
may, with the Company's prior written consent, waive, modify or amend on behalf
of all Holders any provisions hereof so long as the effect thereof will be that
all such persons will be treated in the same manner.
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<PAGE> 16
14. GOVERNING LAW. This Agreement and the legal relations between
the parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California. The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the breach
or interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers, and other relations between the
parties arising under this Agreement.
15. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties regarding the matters set
forth herein. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
16. NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, addressed (a) if to an Investor, at such Investor's address as set
forth on the Schedule of Investors attached hereto, or at such other address as
such Investor shall have furnished to the Company in writing in accordance with
this Section 16, (b) if to any other holder of Preferred Stock or Conversion
Stock, at such address as such holder shall have furnished the Company in
writing in accordance with this Section 16, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder thereof who has so furnished an address to the Company, or (c) if to the
Company, at its principal office.
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<PAGE> 17
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
INFINITY FINANCIAL TECHNOLOGY, INC.,
a California corporation
By:______________________________________________
Title:___________________________________________
"INVESTOR"
SEQUOIA CAPITAL GROWTH FUND
SEQUOIA TECHNOLOGY PARTNERS III
By:______________________________________________
Title:___________________________________________
"MANAGEMENT"
- ---------------------------------------
Name
- ---------------------------------------
Signature
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<PAGE> 18
SCHEDULE OF INVESTORS
Sequoia Capital Growth Fund
Sequoia Technology Partners III
Series A Investors
Roger A. Lang and Sue Jane Lang
Craig P. Duling
Jagtar and Shivtej Sandhu
<PAGE> 1
Exhibit 10.2
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is entered into, effective as of _______________, 1996,
by and between Infinity Financial Technology, Inc., a Delaware corporation (the
"Company"), and __________________________________________ ("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims currently being asserted against directors and
officers of corporations;
WHEREAS, the Certificate of Incorporation and Bylaws of the Company
require the Company to indemnify and advance expenses to its directors and
officers to the fullest extent permitted under Delaware law, and the Indemnitee
has been serving and continues to serve as a director and/or officer of the
Company in part in reliance on the Company's Certificate of Incorporation and
Bylaws; and
WHEREAS, in recognition of Indemnitee's need for (i) substantial
protection against personal liability based on Indemnitee's reliance on the
aforesaid Certificate of Incorporation and Bylaws, (ii) specific contractual
assurance that the protection promised by the Certificate of Incorporation and
Bylaws will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation and Bylaws or any
change in the composition of the Company's Board of Directors or acquisition
transaction relating to the Company), and (iii) an inducement to provide
effective services to the Company as a director and/or officer, the Company
wishes to provide in this Agreement for the indemnification of and the advancing
of expenses to Indemnitee to the fullest extent (whether partial or complete)
permitted under Delaware law and as set forth in this Agreement, and, to the
extent insurance is maintained, to provide for the continued coverage of
Indemnitee under the Company's directors' and officers' liability insurance
policies.
NOW, THEREFORE, in consideration of the above premises and of
Indemnitee continuing to serve the Company directly or, at its request, with
another enterprise, and intending to be legally bound hereby, the parties agree
as follows:
<PAGE> 2
1. Certain Definitions:
(a) Board: the Board of Directors of the Company.
(b) Affiliate: any corporation or other person or entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
(c) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"))(other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, and other than any person holding shares of the Company on the date
that the Company first registers under the Act or any transferee of such
individual if such transferee is a spouse or lineal descendant of the transferee
or a trust for the benefit of the individual, his spouse or lineal descendants),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
30% or more of the total voting power represented by the Company's then
outstanding Voting Securities, or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board and
any new director whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board, or (iii)
the stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation that would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
Company's assets.
(d) Expenses: any expense, liability, or loss, including attorneys'
fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be
paid in settlement, any interest, assessments, or other charges imposed thereon,
any federal, state, local, or foreign taxes imposed as a result of the actual or
deemed receipt of any payments under this Agreement, and all other costs and
obligations, paid or incurred in connection with investigating, defending, being
a witness in, participating in (including on appeal), or preparing for any of
the foregoing in, any Proceeding relating to any Indemnifiable Event.
(e) Indemnifiable Event: any event or occurrence that takes place
either prior to or after the execution of this Agreement, related to the fact
that Indemnitee is or
2
<PAGE> 3
was a director or officer of the Company, or while a director or officer is or
was serving at the request of the Company as a director, officer, employee,
trustee, agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, employee benefit plan, trust, or other enterprise,
or was a director, officer, employee, or agent of a foreign or domestic
corporation that was a predecessor corporation of the Company or of another
enterprise at the request of such predecessor corporation, or related to
anything done or not done by Indemnitee in any such capacity, whether or not the
basis of the Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as a
director, officer, employee, or agent of the Company, as described above.
(f) Independent Counsel: the person or body appointed in connection
with Section 3.
(g) Proceeding: any threatened, pending, or completed action, suit,
or proceeding (including an action by or in the right of the Company), or any
inquiry, hearing, or investigation, whether conducted by the Company or any
other party, that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding, whether civil, criminal,
administrative, investigative, or other.
(h) Reviewing Party: the person or body appointed in accordance with
Section 3.
(i) Voting Securities: any securities of the Company that vote
generally in the election of directors.
2. Agreement to Indemnify.
(a) General Agreement. In the event Indemnitee was, is, or becomes a
party to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, a Proceeding by reason of (or arising in
part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee from
and against any and all Expenses to the fullest extent permitted by law, as the
same exists or may hereafter be amended or interpreted (but in the case of any
such amendment or interpretation, only to the extent that such amendment or
interpretation permits the Company to provide broader indemnification rights
than were permitted prior thereto). The parties hereto intend that this
Agreement shall provide for indemnification in excess of that expressly
permitted by statute, including, without limitation, any indemnification
provided by the Company's Certificate of Incorporation, its Bylaws, vote of its
shareholders or disinterested directors, or applicable law.
(b) Initiation of Proceeding. Notwithstanding anything in this
Agreement to the contrary, Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Proceeding initiated by
Indemnitee against the Company or any director or officer of the Company unless
(i) the Company has joined in or the Board has consented to the initiation of
such Proceeding; (ii) the Proceeding is one to enforce
3
<PAGE> 4
indemnification rights under Section 5; or (iii) the Proceeding is instituted
after a Change in Control (other than a Change in Control approved by a majority
of the directors on the Board who were directors immediately prior to such
Change in Control) and Independent Counsel has approved its initiation.
(c) Expense Advances. If so requested by Indemnitee, the Company
shall advance (within ten business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance"); provided that, (i) such an Expense Advance
shall be made only upon delivery to the Company of an undertaking by or on
behalf of the Indemnitee to repay the amount thereof if it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company, and
(ii) if and to the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be so indemnified under applicable law, the Company
shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse
the Company) for all such amounts theretofore paid. If Indemnitee has commenced
or commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, as
provided in Section 4, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding, and Indemnitee shall not be required to reimburse the Company
for any Expense Advance until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been exhausted
or have lapsed). Indemnitee's obligation to reimburse the Company for Expense
Advances shall be unsecured and no interest shall be charged thereon.
(d) Mandatory Indemnification. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any Proceeding relating in whole or in part to
an Indemnifiable Event or in defense of any issue or matter therein, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
(e) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
(f) Prohibited Indemnification. No indemnification pursuant to this
Agreement shall be paid by the Company on account of any Proceeding in which
judgment is rendered against Indemnitee for an accounting of profits made from
the purchase or sale by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
or similar provisions of any federal, state, or local laws.
3. Reviewing Party. Prior to any Change in Control, the Reviewing Party
shall be any appropriate person or body consisting of a member or members of the
Board or any other person or body appointed by the Board who is not a party to
the particular Proceeding with respect to which Indemnitee is seeking
indemnification; after a Change in Control, the
4
<PAGE> 5
Independent Counsel referred to below shall become the Reviewing Party. With
respect to all matters arising after a Change in Control (other than a Change in
Control approved by a majority of the directors on the Board who were directors
immediately prior to such Change in Control) concerning the rights of Indemnitee
to indemnity payments and Expense Advances under this Agreement or any other
agreement or under applicable law or the Company's Certificate of Incorporation
or Bylaws now or hereafter in effect relating to indemnification for
Indemnifiable Events, the Company shall seek legal advice only from Independent
Counsel selected by Indemnitee and approved by the Company (which approval shall
not be unreasonably withheld), and who has not otherwise performed services for
the Company or the Indemnitee (other than in connection with indemnification
matters) within the last five years. The Independent Counsel shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. Such counsel, among other things, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent the Indemnitee
should be permitted to be indemnified under applicable law. The Company agrees
to pay the reasonable fees of the Independent Counsel and to indemnify fully
such counsel against any and all expenses (including attorneys' fees), claims,
liabilities, loss, and damages arising out of or relating to this Agreement or
the engagement of Independent Counsel pursuant hereto.
4. Indemnification Process and Appeal.
(a) Indemnification Payment. Indemnitee shall be entitled to
indemnification of Expenses, and shall receive payment thereof, from the Company
in accordance with this Agreement as soon as practicable after Indemnitee has
made written demand on the Company for indemnification, unless the Reviewing
Party has given a written opinion to the Company that Indemnitee is not entitled
to indemnification under applicable law.
(b) Suit to Enforce Rights. Regardless of any action by the
Reviewing Party, if Indemnitee has not received full indemnification within
thirty days after making a demand in accordance with Section 4(a), Indemnitee
shall have the right to enforce its indemnification rights under this Agreement
by commencing litigation in any court in the State of California or the State of
Delaware having subject matter jurisdiction thereof seeking an initial
determination by the court or challenging any determination by the Reviewing
Party or any aspect thereof. The Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
not challenged by the Indemnitee shall be binding on the Company and Indemnitee.
The remedy provided for in this Section 4 shall be in addition to any other
remedies available to Indemnitee at law or in equity.
(c) Defense to Indemnification, Burden of Proof, and Presumptions.
It shall be a defense to any action brought by Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the Company) that it is not
permissible under applicable law for the Company to indemnify
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Indemnitee for the amount claimed. In connection with any such action or any
determination by the Reviewing Party or otherwise as to whether Indemnitee is
entitled to be indemnified hereunder, the burden of proving such a defense or
determination shall be on the Company. Neither the failure of the Reviewing
Party or the Company (including its Board, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action by Indemnitee that indemnification of the claimant is proper under the
circumstances because Indemnitee has met the standard of conduct set forth in
applicable law, nor an actual determination by the Reviewing Party or Company
(including its Board, independent legal counsel, or its stockholders) that the
Indemnitee had not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination
of any claim, action, suit, or proceeding, by judgment, order, settlement
(whether with or without court approval), conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
5. Indemnification for Expenses Incurred in Enforcing Rights. The
Company shall indemnify Indemnitee against any and all Expenses that are
incurred by Indemnitee in connection with any action brought by Indemnitee for
(i) indemnification or advance payment of Expenses by the Company under
this Agreement or any other agreement or under applicable law or the
Company's Certificate of Incorporation or Bylaws now or hereafter in
effect relating to indemnification for Indemnifiable Events, and/or
(ii) recovery under directors' and officers' liability insurance policies
maintained by the Company, but only in the event that Indemnitee
ultimately is determined to be entitled to such indemnification or
insurance recovery, as the case may be. In addition, the Company shall,
if so requested by Indemnitee, advance the foregoing Expenses to
Indemnitee, subject to and in accordance with Section 2(c).
6. Notification and Defense of Proceeding.
(a) Notice. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof
is to be made against the Company under this Agreement, notify the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve the Company from any liability that it may have to Indemnitee, except as
provided in Section 6(c).
(b) Defense. With respect to any Proceeding as to which Indemnitee
notifies the Company of the commencement thereof, the Company will be entitled
to participate in the Proceeding at its own expense and except as otherwise
provided below, to the extent the Company so wishes, it may assume the defense
thereof with counsel reasonably satisfactory to
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Indemnitee. After notice from the Company to Indemnitee of its election to
assume the defense of any Proceeding, the Company shall not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided below.
Indemnitee shall have the right to employ legal counsel in such Proceeding, but
all Expenses related thereto incurred after notice from the Company of its
assumption of the defense shall be at Indemnitee's expense unless: (i) the
employment of legal counsel by Indemnitee has been authorized by the Company,
(ii) Indemnitee has reasonably determined that there may be a conflict of
interest between Indemnitee and the Company in the defense of the Proceeding,
(iii) after a Change in Control (other than a Change in Control approved by a
majority of the directors on the Board who were directors immediately prior to
such Change in Control), the employment of counsel by Indemnitee has been
approved by the Independent Counsel, or (iv) the Company shall not in fact have
employed counsel to assume the defense of such Proceeding, in each of which
cases all Expenses of the Proceeding shall be borne by the Company. The Company
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of the Company or as to which Indemnitee shall have made the
determination provided for in (ii), (iii) and (iv) above.
(c) Settlement of Claims. The Company shall not be liable to
indemnify Indemnitee under this Agreement or otherwise for any amounts paid in
settlement of any Proceeding effected without the Company's written consent,
such consent not to be unreasonably withheld; provided, however, that if a
Change in Control has occurred (other than a Change in Control approved by a
majority of the directors on the Board who were directors immediately prior to
such Change in Control), the Company shall be liable for indemnification of
Indemnitee for amounts paid in settlement if the Independent Counsel has
approved the settlement. The Company shall not settle any Proceeding in any
manner that would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent. The Company shall not be liable to indemnify the
Indemnitee under this Agreement with regard to any judicial award if the Company
was not given a reasonable and timely opportunity, at its expense, to
participate in the defense of such action; the Company's liability hereunder
shall not be excused if participation in the Proceeding by the Company was
barred by this Agreement.
7. Establishment of Trust. In the event of a Change in Control (other
than a Change in Control approved by a majority of the directors on the Board
who were directors immediately prior to such Change in Control) the Company
shall, upon written request by Indemnitee, create a Trust for the benefit of the
Indemnitee and from time to time upon written request of Indemnitee shall fund
the Trust in an amount sufficient to satisfy any and all Expenses reasonably
anticipated at the time of each such request to be incurred in connection with
investigating, preparing for, participating in, and/or defending any Proceeding
relating to an Indemnifiable Event. The amount or amounts to be deposited in the
Trust pursuant to the foregoing funding obligation shall be determined by the
Independent Counsel. The terms of the Trust shall provide that (i) the Trust
shall not be revoked or the principal thereof invaded without the written
consent of the Indemnitee, (ii) the Trustee shall advance, within ten business
days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and
the Indemnitee hereby
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agrees to reimburse the Trust under the same circumstances for which the
Indemnitee would be required to reimburse the Company under Section 2(c) of this
Agreement), (iii) the Trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the Trustee shall
promptly pay to the Indemnitee all amounts for which the Indemnitee shall be
entitled to indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in the Trust shall revert to the Company upon a final
determination by the Independent Counsel or a court of competent jurisdiction,
as the case may be, that the Indemnitee has been fully indemnified under the
terms of this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing
in this Section 7 shall relieve the Company of any of its obligations under this
Agreement. All income earned on the assets held in the Trust shall be reported
as income by the Company for federal, state, local, and foreign tax purposes.
The Company shall pay all costs of establishing and maintaining the Trust and
shall indemnify the Trustee against any and all expenses (including attorneys'
fees), claims, liabilities, loss, and damages arising out of or relating to this
Agreement or the establishment and maintenance of the Trust.
8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Certificate
of Incorporation, Bylaws, applicable law, or otherwise; provided, however, that
this Agreement shall supersede any prior indemnification agreement between the
Company and the Indemnitee. To the extent that a change in applicable law
(whether by statute or judicial decision) permits greater indemnification than
would be afforded currently under the Company's Certificate of Incorporation,
Bylaws, applicable law, or this Agreement, it is the intent of the parties that
Indemnitee enjoy by this Agreement the greater benefits so afforded by such
change.
9. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing general and/or directors' and officers'
liability insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
10. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
Affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors, or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, or such longer period as
may be required by state law under the circumstances. Any claim or cause of
action of the Company or its Affiliate shall be extinguished and deemed released
unless asserted by the timely filing and notice of a legal action within such
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, the shorter period shall
govern.
11. Amendment of this Agreement. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be binding unless in the form of a writing signed by the party against
whom enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver. Except as specifically provided herein,
no failure to
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exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
12. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation, or otherwise to all or substantially all of the business and/or
assets of the Company), assigns, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation, or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity pertaining to an Indemnifiable Event even though he
may have ceased to serve in such capacity at the time of any Proceeding.
15. Severability. If any provision (or portion thereof) of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, or otherwise unenforceable, the remaining provisions shall remain
enforceable to the fullest extent permitted by law. Furthermore, to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void, or otherwise unenforceable, that is not itself invalid, void, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, void, or unenforceable.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such State without giving effect to its
principles of conflicts of laws.
17. Notices. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed to the
Company at:
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Infinity Financial Technology, Inc.
640 Cylde Court
Mountain View, California 94043
Attention: President
and to Indemnitee at:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Notice of change of address shall be effective only when given in accordance
with this Section. All notices complying with this Section shall be deemed to
have been received on the date of hand delivery or on the third business day
after mailing.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.
INFINITY FINANCIAL TECHNOLOGY, INC.
By: _______________________________
Roger Lang
Title: President and Chief
Executive Officer
INDEMNITEE
___________________________________
[Signature]
___________________________________
[Print Name]
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into as of September 1, 1995,
between Infinity Financial Technology, Inc., a California corporation (the
"Company"), and Till Guldimann ("Employee").
R E C I T A L S
Company desires to obtain the services of Employee, on its own
behalf and on behalf of all existing and future Affiliated Companies (defined to
mean any corporation or other business entity or entities that directly or
indirectly controls, is controlled by, or is under common control with the
Company), and Employee desires to secure employment from the Company upon the
following terms and conditions.
A G R E E M E N T
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Position, Period of Employment.
(a) Period of Employment. The Company hereby
employs Employee to render services to the Company in the position and with the
duties and responsibilities described in Section 1(b) for the period (the
"Period of Employment") commencing on the date of this Agreement and ending upon
the date this Agreement is terminated in accordance with Section 3 below. Except
as provided in Section 3 below, the Company shall pay Employee the compensation
to which he is entitled under Section 2(a) through the end of the Period of
Employment, and thereafter Company's obligations hereunder to pay or otherwise
provide compensation and benefits to Employee shall end.
(b) Position. Employee hereby accepts employment
with the Company as Executive Vice President. Employee shall devote his best
efforts and his full time and attention to the performance of the services
customarily incident to such office and to such other services as may be
reasonably requested by the Board of Directors of the Company (the "Board"). The
Company shall retain full direction and control of the means and methods by
which Employee performs the above services and, subject to the terms of this
Section 1(b), of the place(s) at which such services are to be rendered.
Commencing as of the date and continuing until not later than September 1, 1996,
Employee's place of employment shall be the Company's New York offices,
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and Employee acknowledges that he will be required to travel frequently in
accordance with the Company's travel policies to its principal place of business
in Mountain View, California and to destinations outside the United States. By
September 1, 1996, Employee shall have relocated to the Company's principal
offices in Mountain View, California.
(c) Service on Board and Management Committee.
During the Period of Employment and subject to this Section 1(c), Employee shall
further serve as a member of the Company's Management Committee and as a member
of the Board, provided that (i) the Company shall have the right to require
Employee to resign or otherwise be removed from the Board if a majority of the
Board shall reasonably determine that it is in the best interest of the Company
that Employee cease to serve on the Board; (ii) Employee shall in his sole
discretion have the right at any time during the Period of Employment to resign
from the Board; and (iii) any right of Employee to continue to serve on the
Board shall be subject to the rights of the shareholders of the Company to vote
their shares of the Company to remove or not re-elect him to the Board.
(d) Other Activities. Except upon the prior
written consent of the Board, Employee, during the Period of Employment, will
not (i) accept any other employment, or (ii) engage, directly or indirectly, in
any other business activity (whether or not pursued for pecuniary advantage)
that is or may be competitive with, or that might place him in a competing
position to that of the Company or any Affiliated Company. The Company
acknowledges that Employee shall be receiving continued salary payments through
February of 1996 from his prior employer, J. P. Morgan, and agrees that receipt
of such salary payments shall not be deemed a breach of or inconsistent with
this Agreement provided that Employee agrees that he shall not: (x) take any
action or omit to take action as a condition to receipt of such salary payments
that would constitute a breach of this Agreement or the Employee Proprietary
Information and Inventions Agreement described in Section 4 below; or (y) engage
in any conduct in connection with his continued affiliation with J. P. Morgan
that would constitute a conflict of interest with his employment relationship at
the Company or a breach of this Section 1(d).
2. Compensation, Benefits, Expenses.
(a) Compensation. In consideration of the
services to be rendered hereunder, including, without limitation, services to
any Affiliated Company, Employee shall be paid an annual salary of Two Hundred
Thousand Dollars ($200,000), payable at the times and pursuant to the procedures
regularly established, and as they may be amended, by the Company during the
course of this Agreement. This rate shall be reviewed annually, in accordance
with the Company's salary review practices, and increased to reflect increases
in the cost of living and such other increases as are awarded in accordance with
the Company's regular salary review practices for giving salary increases to
similarly situated employees.
(b) Stock Options. Employee shall be granted an
incentive stock option pursuant to the Company's 1993 Stock Option Plan for
100,000 shares of the Company's Common Stock upon the terms and conditions set
forth in that certain Incentive Stock Option
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Agreement in the form attached hereto as Exhibit A (the "ISO Agreement"), which
the Company shall execute and deliver to Employee concurrently with the signing
by both parties of this Agreement.
(c) Bonus. Employee shall be eligible to
participate in such bonus plans as the Company may from time to time adopt for
the benefit of similarly situated employees of the Company. Employee's right to
receive any such bonus shall be subject to the terms of any Company bonus plan
for which he may become a participant and the terms determined by the Board or a
Committee thereof designating him as a participant or granting him an award
thereunder.
(d) Vacation. Employee shall be entitled to
vacation in accordance with the Company's vacation policies for similarly
situated employees, as such policies may be amended from time to time.
(e) Moving Expenses. The Company agrees to
reimburse Employee for his reasonable expenses in accordance with Company
policies for his move from the New York area to the Mountain View, California
area as contemplated by Section 1(a) above.
(f) Benefits. As he becomes eligible therefor,
the Company shall provide Employee with the right to participate in and to
receive benefits from all present and future life, accident, disability,
medical, pension, and savings plans and all similar benefits made available
generally to executives similarly situated employees of the Company. The amount
and extent of benefits to which Employee is entitled shall be governed by the
specific benefit plan, as it may be amended from time to time.
(g) Expenses. The Company shall reimburse
Employee for reasonable travel and other business expenses incurred by Employee
in the performance of his duties hereunder in accordance with the Company's
general policies, as they may be amended from time to time during the course of
this Agreement.
3. Termination of Employment.
(a) By Death. The Period of Employment shall
terminate automatically upon the death of the Employee. The Company shall pay to
the Employee's beneficiaries or estate, as appropriate, the compensation to
which he is entitled pursuant to Section 2(a) through the end of the month in
which death occurs. Thereafter, the Company's obligations hereunder shall
terminate. Nothing in this Section shall affect any entitlement of the
Employee's heirs to the benefits of any life insurance plan.
(b) By Disability. If, in the sole opinion of
the Board, the Employee shall be prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity for a period of more
than one hundred and twenty (120) consecutive days in any twelve-month period,
then, to the extent permitted by law, the Period of Employment shall
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terminate on and the compensation to which Employee is entitled pursuant to
Section 2(a) shallbe paid up through the last day of the month in which the one
hundred and twentieth day of incapacity occurs, and thereafter the Company's
obligations hereunder shall terminate. Nothing in this Section shall affect
Employee's rights under any disability plan in which he is a participant.
(c) By Company For Cause. The Company may
terminate, without liability, the Period of Employment for Cause (as defined
below) at any time and upon ten (10) days' advance written notice to Employee.
The Company shall pay Employee the compensation to which he is entitled pursuant
to Section 2(a) through the end of the notice period and thereafter the
Company's obligations hereunder shall terminate. Termination shall be for Cause
if: (i) because of any intentional act or failure to act by Employee which, in
the reasonable opinion of the Board, is in bad faith and to the detriment of the
Company or any Affiliated Company; (ii) in the reasonable opinion of the Board,
Employee refuses or fails to act in accordance with any direction or order of
the Board; (iii) in the reasonable opinion of the Board, Employee shall fail in
any material respect and on a continuing basis to perform his duties pursuant to
Section 1 hereof (other than as a result of disability as provided for in
Section 3(b)) and shall not have cured such failure following thirty (30) days
notice from a majority of the members of the Board; (iv) Employee is convicted
of a crime relating to his character or employment by the Company; or (v)
because Employee, in the reasonable opinion of the Board, breaches any material
term of this Agreement, provided the breach continues for a period of five (5)
days after Employee receives written notice of that breach from the Board.
(d) By Employee For Good Reason. Employee may
terminate, without liability, the Period of Employment for Good Reason (as
defined below) upon twenty (20) days' advance written notice to the Company. The
Company shall pay Employee the compensation to which he is entitled pursuant to
Section 2(a) through the end of the notice period plus the Severance Benefits
(as defined in Section 3(f) below) and thereafter all obligations of the Company
hereunder shall terminate. Good Reason shall exist if: (i) there is an
assignment to the Employee of any duties materially inconsistent with or which
constitute a material change in the Employee's position, duties,
responsibilities, or status with the Company, or a material change in the
Employee's reporting responsibilities, title, or offices; or removal of the
Employee from or failure to re-elect the Employee to any of such positions
(including without limitation Employee's position on the Management Committee or
any successor committee, unless such committee is otherwise terminated by the
Company), except in connection with the termination of the Period of Employment
for Cause, or due to disability, early or normal retirement as defined by the
Company's pension plan, death, or termination of the Period of Employment by the
Employee other than for Good Reason (provided that removal and/or failure to
re-elect Employee to the Board in accordance with Section 1(c) shall not be
deemed Good Reason for purposes of this Section 3(d)); (ii) there is a reduction
by the Company in the Employee's annual salary then in effect other than a
reduction similar in percentage to a reduction generally applicable to similarly
situated employees of the Company; or (iii) the Company acts in any way that
would adversely affect the Employee's participation in or materially reduce the
Employee's benefit under any benefit plan of the Company in which the Employee
is participating or deprive the Employee of
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any material fringe benefit enjoyed by the Employee except those changes
generally affecting similarly situated employees of the Company.
(e) At Will. At any time, either the Company or
the Employee may terminate, without liability, the Period of Employment for any
reason, with or without cause, on written notice to the other party. In the
event Employee elects to terminate the Period of Employment pursuant to this
Section 3(e), Employee shall give the Company not less than three (3) months'
notice of such termination. If the Employee terminates his employment pursuant
to this Section 3(e), the Company shall have the option, in its sole discretion,
to terminate Employee immediately without the running of the notice period. If
the Employee terminates his employment pursuant to this, the Company shall pay
Employee the compensation to which he is entitled pursuant to Section 2(a)
through the end of the notice period or, if elected through the day upon which
early termination is elected pursuant to the foregoing sentence, and thereafter
all obligations of the Company shall terminate. In the event the Company elects
to terminate the Period of Employment pursuant to this Section 3(e), the Company
shall give Employee not less than six (6) months notice of such termination. If
the Company terminates Employee's employment pursuant to this Section 3(e), the
Company shall have the option, in its sole discretion, to terminate Employee at
any time during such six (6) month period and to immediately commence the
Severance Period as of the date of such termination. Employee hereby agrees that
the Company may dismiss him under this Section 3(e) without regard (i) to any
general or specific policies (whether written or oral) of the Company relating
to the employment or termination of its employees, or (ii) to any statements
made to Employee, whether made orally or contained in any document, pertaining
to Employee's relationship with the Company.
(f) Severance Benefits.
(1) Employee shall only be entitled to
Severance Benefits hereunder in the event that the Period of Employment shall
terminate in accordance with Section 3(d) and 3(e) hereof and in each case
subject to the terms of said Sections 3(d) and 3(e). Upon full payment of and
upon providing of such Severance Benefits, Employee shall be deemed to have
released the Company and each of its officers, directors and agents from any and
all claims, liabilities or causes of action in favor of the Employee arising in
connection with his prior employment by the Company.
(2) For purposes of this Agreement,
"Severance Benefits" shall mean a continuation by the Company for a period of
six (6) months of: (i) Employee's salary payable in accordance with the
Company's payroll procedures pursuant to Section 2(a) following termination:
(ii) those benefits to which Employee is entitled pursuant to Section 2(f)
hereof; and (iii) the vesting and right to exercise any stock options held by
Employee at the time of termination. As a condition precedent to the continued
vesting and exercisability of Employee's stock options during said six (6) month
period, Employee agrees to perform, on request from the Company, up to ten (10)
hours of consulting service per month during said six (6) month period. Subject
to Employee fulfilling his consulting obligations to the Company as provided in
this Section 3(f)(2) during the Severance Period (as defined below), Employee
shall be deemed to
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continue as employee of the Company during the Severance Period for the purpose
of such stock options, and such stock options shall thereafter terminate in
accordance with their terms following expiration of the Severance Period. No
additional compensation shall be payable by the Company for such consulting
services beyond the Severance Benefits. The period in which Employee shall be
entitled to Severance Benefits shall hereinafter be referred to as the
"Severance Period".
(g) Termination Obligations.
(1) Employee hereby acknowledges and
agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, blueprints, and other
documents, or materials, or copies thereof, and equipment furnished to or
prepared by Employee in the course of or incident to his employment, belong to
the Company and shall be promptly returned to the Company upon termination of
the Period of Employment. Following termination, the Employee will not retain
any written or other tangible material containing any proprietary information of
the Company.
(2) Upon termination of the Period of
Employment, the Employee shall be deemed to have resigned from all offices and
directorships then held with the Company or any Affiliated Company.
4. Proprietary Information Agreement. As a condition to
his employment with the Company, Employee shall execute and deliver a copy of
the Company's standard form Employee Proprietary Information and Inventions
Agreement. Any breach by Employee of such agreement shall be deemed a breach of
this Agreement for purposes of Section 3(c) hereof. Employee's obligations under
such Employee Proprietary Information and Inventions Agreement shall survive any
termination of the Period of Employment.
5. Assignment; Successors and Assigns. Employee agrees
that he will not assign, sell, transfer, delegate or otherwise dispose of,
whether voluntarily or involuntarily, or by operation of law, any rights or
obligations under this Agreement, nor shall Employee's rights be subject to
encumbrance or the claims of creditors. Any purported assignment, transfer, or
delegation shall be null and void. Nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any other corporation, or
the sale by the Company of all or substantially all of its properties or assets,
or the assignment by the Company of this Agreement and the performance of its
obligations hereunder to any successor in interest or any Affiliated Company.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, legal representatives,
successors, and permitted assigns, and shall not benefit any person or entity
other than those enumerated above.
6. Notices. All notices or other communications required
or permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by
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hand or mailed, postage prepaid, by certified or registered mail, return receipt
requested, and addressed to the Company at:
2001 Landings Drive
Mt. View, CA 94034
Attn: Vice President, Finance
or to the Employee at: 34 Roosevelt Road
Maplewood, NJ 07040
Notice of change of address shall be effective only when done in accordance with
this Section.
7. Entire Agreement. The terms of this Agreement are
intended by the parties to be the final expression of their agreement with
respect to the employment of Employee by the Company and may not be contradicted
by evidence of any prior or contemporaneous agreement. The parties further
intend that this Agreement shall constitute the complete and exclusive statement
of its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
8. Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Employee and by a duly authorized representative of the Company other than
Employee. By an instrument in writing similarly executed, either party may waive
compliance by the other party with any provision of this Agreement that such
other party was or is obligated to comply with or perform, provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.
9. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such provisions as applied to other
persons, places, and circumstances shall remain in full force and effect.
10. Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed by and
construed in accordance with the law of the State of California.
11. Employee Acknowledgment. Employee acknowledges (i)
that he has consulted with or has had the opportunity to consult with
independent counsel of his own choice concerning this Agreement and has been
advised to do so by the Company, and (ii) that he has
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<PAGE> 8
read and understands the Agreement, is fully aware of its legal effect, and has
entered into it freely based on his own judgment.
12. Exclusive. Both parties agree that this Agreement
shall provide the exclusive remedies for any breach by the Company of its terms.
The parties have duly executed this Agreement as of the date
first written above.
COMPANY: EMPLOYEE:
INFINITY FINANCIAL TECHNOLOGY, INC.
By: _________________________________ _______________________________
Title: ______________________________ Till Guldimann
8
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into as of October 24, 1995,
between Infinity Financial Technology, Inc., a California corporation (the
"Company"), and Keith Hospers ("Employee").
R E C I T A L S
Company desires to obtain the services of Employee, on its own
behalf and on behalf of all existing and future Affiliated Companies (defined to
mean any corporation or other business entity or entities that directly or
indirectly controls, is controlled by, or is under common control with the
Company), and Employee desires to secure employment from the Company upon the
following terms and conditions.
A G R E E M E N T
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Position, Period of Employment.
(a) Period of Employment. The Company hereby employs
Employee to render services to the Company in the position and with the duties
and responsibilities described in Section 1(b) for the period (the "Period of
Employment") commencing November 1, 1995 and ending upon the date this Agreement
is terminated in accordance with Section 3 below. Except as provided in Section
3 below, the Company shall pay Employee the compensation to which he is entitled
under Section 2(a) through the end of the Period of Employment, and thereafter
Company's obligations hereunder to pay or otherwise provide compensation and
benefits to Employee shall end.
(b) Position. Employee hereby accepts employment with
the Company as Vice President for Software Engineering. Employee shall devote
his best efforts and his full time and attention to the performance of the
services customarily incident to such office and to such other services as may
be reasonably requested by the Board of Directors of the Company (the "Board").
The Company shall retain full direction and control of the means and methods by
which Employee performs the above services and, subject to the terms of this
Section 1(b), of the place(s) at which such services are to be rendered.
Employee's place of employment shall be the Company's Mountain View, California
offices. Employee acknowledges that he will be required to travel frequently in
accordance with the Company's travel policies to destinations within and outside
the United States.
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<PAGE> 2
(c) Other Activities. Except upon the prior written
consent of the Board, Employee, during the Period of Employment, will not (i)
accept any other employment, or (ii) engage, directly or indirectly, in any
other business activity (whether or not pursued for pecuniary advantage) that is
or may be competitive with, or that might place him in a competing position to
that of the Company or any Affiliated Company.
2. Compensation, Benefits, Expenses.
(a) Compensation. In consideration of the services to
be rendered hereunder, including, without limitation, services to any Affiliated
Company, Employee shall be paid an annual salary of One Hundred Fifty-Five
Thousand Dollars ($155,000), payable at the times and pursuant to the procedures
regularly established, and as they may be amended, by the Company during the
course of this Agreement. This rate shall be reviewed annually, in accordance
with the Company's salary review practices, and increased to reflect increases
in the cost of living and such other increases as are awarded in accordance with
the Company's regular salary review practices for giving salary increases to
similarly situated employees.
(b) Stock Options. Employee shall be granted an
incentive stock option pursuant to the Company's 1993 Stock Option Plan for
125,000 shares of the Company's Common Stock upon the terms and conditions set
forth in that certain Incentive Stock Option Agreement in the form attached
hereto as Exhibit A (the "ISO Agreement"), which the Company shall execute and
deliver to Employee concurrently with the signing by both parties of this
Agreement.
(c) Bonus. (i) Employee shall receive from the
Company a bonus of Forty-Five Thousand Dollars ($45,000) for the first
twelve-month term of the Period of Employment. Thirty Thousand Dollars ($30,000)
of such bonus shall be payable upon the commencement of the Employment Period,
Five Thousand Dollars ($5,000) thereof after the first six (6) months of the
Employment Period, Five Thousand Dollars ($5,000) thereof after the first nine
(9) months of the Employment Period, and the remaining Five Thousand Dollars
($5,000) thereof after the first twelve (12) months of the Employment Period.
(ii) After the first twelve months of the Employment Period, Employee shall be
eligible to participate in such bonus plans as the Company may from time to time
adopt for the benefit of similarly situated employees of the Company. Employee's
right to receive any such bonus shall be subject to the terms of any Company
bonus plan for which he may become a participant and the terms determined by the
Board or a Committee thereof designating him as a participant or granting him an
award thereunder.
(d) Vacation. Employee shall be entitled to vacation
in accordance with the Company's vacation policies for similarly situated
employees, as such policies may be amended from time to time.
(e) Benefits. As he becomes eligible therefor, the
Company shall provide Employee with the right to participate in and to receive
benefits from all present and
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<PAGE> 3
future life, accident, disability, medical, pension, and savings plans and all
similar benefits made available generally to similarly situated employees of the
Company. The amount and extent of benefits to which Employee is entitled shall
be governed by the specific benefit plan, as it may be amended from time to
time.
(f) Expenses. The Company shall reimburse Employee
for reasonable travel and other business expenses incurred by Employee in the
performance of his duties hereunder in accordance with the Company's general
policies, as they may be amended from time to time during the course of this
Agreement.
3. Termination of Employment.
(a) By Death. The Period of Employment shall
terminate automatically upon the death of the Employee. The Company shall pay to
the Employee's beneficiaries or estate, as appropriate, (i) the compensation to
which he is entitled pursuant to Section 2(a) through the end of the month in
which death occurs, and (ii) any part of the bonus pursuant to Section 2(c)(i)
that has not been paid. Thereafter, the Company's obligations hereunder shall
terminate. Nothing in this Section shall affect any entitlement of the
Employee's heirs to the benefits of any life insurance plan.
(b) By Disability. If, in the sole opinion of the
Board, the Employee shall be prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity for a period of more
than one hundred and twenty (120) consecutive days in any twelve-month period,
then, to the extent permitted by law, the Period of Employment shall terminate
on the last day of the month in which the one hundred and twentieth day of
incapacity occurs, and (i) the compensation to which Employee is entitled
pursuant to Section 2(a) through such date, and (ii) any part of the bonus
pursuant to Section 2(c)(i) that has not been paid shall be paid, and thereafter
the Company's obligations hereunder shall terminate. Nothing in this Section
shall affect Employee's rights under any disability plan in which he is a
participant.
(c) By Company For Cause. The Company may terminate,
without liability, the Period of Employment for Cause (as defined below) at any
time and upon ten (10) days' advance written notice to Employee. The Company
shall pay Employee the compensation to which he is entitled pursuant to Section
2(a) through the end of the notice period and thereafter the Company's
obligations hereunder shall terminate. Termination shall be for Cause if: (i)
because of any intentional act or failure to act by Employee which, in the
reasonable opinion of the Board, is in bad faith and to the detriment of the
Company or any Affiliated Company; (ii) in the reasonable opinion of the Board,
Employee refuses or fails to act in accordance with any direction or order of
the Board; (iii) in the reasonable opinion of the Board, Employee shall fail in
any material respect and on a continuing basis to perform his duties pursuant to
Section 1 hereof (other than as a result of disability as provided for in
Section 3(b)) and shall not have cured such failure following thirty (30) days
notice from a majority of the members of the Board; (iv) Employee is convicted
of a crime relating to his character or employment by the Company; or (v)
because Employee, in the reasonable opinion of the Board, breaches any material
term of this
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<PAGE> 4
Agreement, provided the breach continues for a period of five (5) days after
Employee receives written notice of that breach from the Board.
(d) By Employee For Good Reason. Employee may
terminate, without liability, the Period of Employment for Good Reason (as
defined below) upon twenty (20) days' advance written notice to the Company. The
Company shall pay Employee the compensation to which he is entitled pursuant to
Section 2(a) through the end of the notice period plus the Severance Benefits
(as defined in Section 3(f) below), and thereafter all obligations of the
Company hereunder shall terminate. Good Reason shall exist if: (i) there is an
assignment to the Employee of any duties materially inconsistent with or which
constitute a material change in the Employee's position, duties,
responsibilities, or status with the Company, or a material change in the
Employee's reporting responsibilities, title, or offices; or removal of the
Employee from or failure to re-elect the Employee to any of such positions,
except in connection with the termination of the Period of Employment for Cause,
or due to disability, early or normal retirement as defined by the Company's
pension plan, death, or termination of the Period of Employment by the Employee
other than for Good Reason; (ii) there is a reduction by the Company in the
Employee's annual salary then in effect other than a reduction similar in
percentage to a reduction generally applicable to similarly situated employees
of the Company; or (iii) the Company acts in any way that would adversely affect
the Employee's participation in or materially reduce the Employee's benefits
under any benefit plan of the Company in which the Employee is participating or
deprive the Employee of any material fringe benefit enjoyed by the Employee
except those changes generally affecting similarly situated employees of the
Company.
(e) At Will. At any time, either the Company or the
Employee may terminate, without liability, the Period of Employment for any
reason, with or without cause, on written notice to the other party. In the
event Employee elects to terminate the Period of Employment pursuant to this
Section 3(e), Employee shall give the Company not less than six (6) weeks'
notice of such termination. If the Employee terminates his employment pursuant
to this Section 3(e), the Company shall have the option, in its sole discretion,
to terminate Employee immediately without the running of the notice period. If
the Employee terminates his employment pursuant to this, the Company shall pay
Employee the compensation to which he is entitled pursuant to Section 2(a)
through the end of the notice period or, if elected through the day upon which
early termination is elected pursuant to the foregoing sentence, and thereafter
all obligations of the Company shall terminate; Employee shall not be entitled
to Severance Benefits. In the event the Company elects to terminate the Period
of Employment pursuant to this Section 3(e), the Company shall give Employee not
less than one (1) month notice of such termination. If the Company terminates
Employee's employment pursuant to this Section 3(e), the Company shall have the
option, in its sole discretion, to terminate Employee at any time during such
one (1) month period and to immediately commence the Severance Period as of the
date of such termination. Employee hereby agrees that the Company may dismiss
him under this Section 3(e) without regard (i) to any general or specific
policies (whether written or oral) of the Company relating to the employment or
termination of its employees, or (ii) to any statements made to Employee,
whether made orally or contained in any document, pertaining to Employee's
relationship with the Company.
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<PAGE> 5
(f) Severance Benefits.
(1) Employee shall only be entitled to
Severance Benefits hereunder in the event that the Period of Employment shall
terminate in accordance with Section 3(d) and 3(e) hereof and in each case
subject to the terms of said Sections 3(d) and 3(e). Upon full payment of and
upon providing of such Severance Benefits, Employee shall be deemed to have
released the Company and each of its officers, directors and agents from any and
all claims, liabilities or causes of action in favor of the Employee arising in
connection with his prior employment by the Company.
(2) For purposes of this Agreement,
"Severance Benefits" shall mean a continuation by the Company for a period of
six (6) months of: (i) Employee's salary payable in accordance with the
Company's payroll procedures pursuant to Section 2(a) following termination;
(ii) those benefits to which Employee is entitled pursuant to Section 2(f)
hereof; (iii) the payment of any part of the bonus pursuant to Section 2(c)(i)
that has not been paid; and (iv) the vesting and right to exercise any stock
options held by Employee at the time of termination. The period in which
Employee shall be entitled to Severance Benefits shall be referred to as the
"Severance Period".
(g) Termination Obligations.
(1) Employee hereby acknowledges and agrees
that all personal property, including, without limitation, all books, manuals,
records, reports, notes, contracts, lists, blueprints, and other documents, or
materials, or copies thereof, and equipment furnished to or prepared by Employee
in the course of or incident to his employment, belong to the Company and shall
be promptly returned to the Company upon termination of the Period of
Employment. Following termination, the Employee will not retain any written or
other tangible material containing any proprietary information of the Company.
(2) Upon termination of the Period of
Employment, the Employee shall be deemed to have resigned from all offices and
directorships then held with the Company or any Affiliated Company.
4. Proprietary Information Agreement. As a condition to his
employment with the Company, Employee shall execute and deliver a copy of the
Company's standard form Employee Proprietary Information and Inventions
Agreement. Any breach by Employee of such agreement shall be deemed a breach of
this Agreement for purposes of Section 3(c) hereof. Employee's obligations under
such Employee Proprietary Information and Inventions Agreement shall survive any
termination of the Period of Employment.
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5. Assignment; Successors and Assigns. Employee agrees that he
will not assign, sell, transfer, delegate or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or obligations
under this Agreement, nor shall Employee's rights be subject to encumbrance or
the claims of creditors. Any purported assignment, transfer, or delegation shall
be null and void. Nothing in this Agreement shall prevent the consolidation of
the Company with, or its merger into, any other corporation, or the sale by the
Company of all or substantially all of its properties or assets, or the
assignment by the Company of this Agreement and the performance of its
obligations hereunder to any successor in interest or any Affiliated Company.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, legal representatives,
successors, and permitted assigns, and shall not benefit any person or entity
other than those enumerated above.
6. Notices. All notices or other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand or mailed, postage prepaid, by certified or
registered mail, return receipt requested, and addressed to the Company at:
2001 Landings Drive
Mountain View, CA 94034
Attn: Vice President, Finance
or to the Employee at: 216 Greg Drive
Los Gatos, CA 95032
Notice of change of address shall be effective only when done in accordance with
this Section.
7. Entire Agreement. The terms of this Agreement are intended
by the parties to be the final expression of their agreement with respect to the
employment of Employee by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
8. Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Employee and by a duly authorized representative of the Company other than
Employee. By an instrument in writing similarly executed, either party may waive
compliance by the other party with any provision of this Agreement that such
other party was or is obligated to comply with or perform, provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity.
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<PAGE> 7
9. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such provisions as applied to other
persons, places, and circumstances shall remain in full force and effect.
10. Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed by and
construed in accordance with the law of the State of California.
11. Employee Acknowledgment. Employee acknowledges (i) that he
has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (ii) that he has read and understands the Agreement, is
fully aware of its legal effect, and has entered into it freely based on his own
judgment.
12. Exclusive. Both parties agree that this Agreement shall
provide the exclusive remedies for any breach by the Company of its terms.
The parties have duly executed this Agreement as of the date
first written above.
COMPANY: EMPLOYEE:
INFINITY FINANCIAL TECHNOLOGY, INC.
By:
------------------------------------ -----------------------------------
Title: Keith Hospers
---------------------------------
7
<PAGE> 1
Exhibit 10.5
May 13, 1996
Mr. Michael Laven
2234 Vallejo Street
San Francisco, CA 94123
Dear Michael:
I am very pleased to offer you the position of Vice President, Worldwide Field
Operations at Infinity. In this position, your primary responsibility will be
management of Infinity's world-wide sales and support activities.
Below please find the terms of Infinity's offer:
Status: Full-time exempt, reporting directly to Roger Lang, Chief Executive
Officer
Title: Vice president, Worldwide Field Operations
RESPONSIBILITIES: In the capacity of Vice President, Worldwide Field Operations
you will have the following initial responsibilities:
- structuring a sales and support commission plan
- managing all field operations, including sales, support and
consulting
- developing a sales and support training plan
- working with the CEO and Director of Marketing to develop overall
business plan
- upholding Infinity's reputation for integrity as an officer of the
company
SALARY AND BONUS: You shall receive a base salary of $12,500 per month ($150,00
per annum). You will further receive a Guaranteed Bonus of $7,500 per quarter
payable in arrears. In addition you will be eligible for an Annual Incentive
Bonus of $120,000 based on Infinity's achievement of it's annual financial
goals. For FY1996 you will receive a bonus payable under Infinity's 1996
Executive Incentive Plan based on Infinity's performance as to revenue and
pre-tax profit margins relative to its existing financial annual plan. Your
target and maximum bonus for 1996 under that plan will be $120,000. If Infinity
achieves but does not exceed its annual financial plan in 1996 as to pre-tax
profit margin and revenue, you would receive 70% of your target bonus or a bonus
or $84,000. For FY 1997 and all subsequent years the Annual Incentive Bonus plan
will be determined in advance by the CEO. The Annual Incentive Bonus will be
paid at such times determined by the Infinity Board of Directors for each of the
participating members of Infinity's management.
OTHER BENEFITS: As a full-time employee, you will be eligible for all benefits
as described in the Infinity Employee Benefits Summary. Please feel free to
contact Susan Coleman at 415/940-6107 if you have further questions about any of
these benefits.
<PAGE> 2
Mr. Michael Laven
May 13, 1996
Page 2
VACATION: Infinity offers 15 days per annum of years one through five of
employment and 20 days per annum for years six and beyond. Further information
and a complete list of observed US holidays can be found in the Employee
Handbook.
EQUITY: A stock option grant of 120,000 shares has been approved by the Infinity
Board at an exercise price of $8.00 per share. These options will vest in
accordance with Infinity's standard vesting policy whereby 25% of the options
become exercisable after one (1) year of employment and the balance of the
option shares vest in equal monthly installments over the next three (3) years
so that the option is fully exercisable after four (4) years from the date of
grant. If Infinity is acquired within two (2) years of the date of original
option grant, the vesting on your options (both ISO and non-qualified) will be
accelerated so that the options will be exercisable as to 50% of the underlying
shares at the closing of such acquisition. Based on Internal Revenue Code
limitations, this grant will be an incentive stock option as to 50,000 of the
shares subject to this option (12,500 of the shares that vest each year) and a
non-qualified stock option for the balance of the shares subject to this option.
Please contact Susan Coleman at 415/940-6107 for further details about the stock
option program and vesting provisions.
In accepting this offer letter by signature below, you also confirm that you are
not subject to any agreement with your present or former employers (e.g.
non-compete agreements) that would prohibit your acceptance of this offer or
your performance of any of the responsibilities defined in this offer or
contemplated in the future during your employment with Infinity.
SEVERANCE: Employment with Infinity is at-will and may be terminated by either
party at any time, with or without cause. This offer letter is not a contract,
and the above outlined terms may be reviewed and modified by Infinity at any
time. This offer will remain valid until May 14, 1996. As evidence of your
acceptance, please sign below and return this letter to Susan Coleman in Human
Resources. The enclosed copy is for your records.
We are anxious to have you as a full-time member of the Infinity team, and are
eager to receive a positive response as soon as possible.
Best regards,
Susan Coleman
Human Resources, Manager
Enclosures
- as above
Agreed and Accepted: Date:
------------------------------- --------------
Anticipated Start Date:
----------------------------
<PAGE> 1
EXHIBIT 10.11
BLDG: Clyde Ct. #3
OWNER: 500
PROP: 20
UNIT: 2
TENANT: 2005
LEASE AGREEMENT
THIS LEASE, made this 8th day of November, 1995 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (ARRILLAGA FAMILY TRUST) as
amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
called Landlord, and INFINITY FINANCIAL TECHNOLOGY, INC., a California
corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:
All of that certain 39,703+ square foot, one-story building and parking
appurtenant thereto located at 740 Clyde Court, Mountain View,
California 94043. Said Premises leased hereunder, is more particularly
shown within the area outlined in Red on Exhibit A attached hereto. The
Premises is leased, pursuant to the terms and conditions contained
herein, on an "as-is" basis, in its present condition, and in the
configuration as shown in Red on Exhibit B to be attached hereto.
The interior of the building leased hereunder shall be improved by
Landlord and leased by Tenant in the configuration as shown in Red on
Exhibit B to be attached hereto.
The word "Premises" as used throughout this lease is hereby defined to
include the nonexclusive use of landscaped areas, sidewalks and driveways in
front of or adjacent to the Premises, and the nonexclusive use of the area
directly underneath or over such sidewalks and driveways. The gross leasable
area of the building shall be measured from outside of exterior walls to outside
of exterior walls, and shall include any atriums, covered entrances or egresses
and covered loading areas.
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
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<PAGE> 2
1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, and storage and other
uses necessary for Tenant to conduct Tenant's business, provided that such uses
shall be in accordance with all applicable governmental laws and ordinances, and
for no other purpose. Tenant shall not do or permit to be done in or about the
Premises nor bring or keep or permit to be brought or kept in or about the
Premises anything which is prohibited by or will in any way increase the
existing rate of (or otherwise affect) fire or any insurance covering the
Premises or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
walls, or ceiling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door partition or wall which may appear unsightly from
outside the Premises. No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability to the extent arising out of failure of Tenant to comply with
any applicable law as related to the Tenant's use of the Premises. Tenant shall
comply with any covenant, condition, or restriction ("CC&R's") affecting the
Premises. The provisions of this paragraph are for the benefit of Landlord only
and shall not be construed to be for the benefit of any tenant or occupant of
the Premises. There are no CC&R's affecting the Premises at the time of Lease
execution. In the event CC&R's are subsequently implemented, Landlord shall
provide a copy of said CC&R's to Tenant.
2. TERM*
- --------------------
* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting
partial month will be pro-rated (for the number of days in the partial month)
at the Basic Rent rate scheduled for the projected commencement date as shown
in Paragraph 39.
2
<PAGE> 3
A. The term of this Lease shall be for a period of FIVE (5) years
(unless sooner terminated as hereinafter provided) and, subject to Paragraphs 2B
and 3, shall commence on the 1st day of March, 1996 and end on the 28th day of
February, 2001.
B. Possession of the Premises shall be deemed tendered and the term
of the Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the
proper governmental agency, or, if the governmental agency having jurisdiction
over the area in which the Premises are situated does not issue certified of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed in
compliance with Exhibit B attached hereto; or
(b) Upon the occupancy of the Premises by any of Tenant's
operating personnel; or
(c) When the Tenant Improvement have been substantially
completed for Tenant's use and occupancy, in accordance and compliance with
Exhibit B of this Lease Agreement; or
(d) As otherwise agreed in writing. Upon determination of such
date, Landlord and Tenant shall execute a letter of acknowledgment establishing
the Commencement Date.
3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver
possession of said premises to Tenant at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable; no obligation
of Tenant shall be affected thereby; nor shall Landlord or Landlord's agents be
liable to Tenant for any loss or damage resulting therefrom; but in that event
the commencement and termination dates of the Lease, and all other dates
affected thereby shall be revised to conform to the date of Landlord's delivery
of possession, as specified in Paragraph 2B, above. The above is, however,
subject to the provision that the period of delay of delivery of the Premises
shall not exceed 60 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.
4. RENT
A. Basic Rent. Tenant agrees to pay to Landlord at such place as
Landlord may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased premises the total sum of
THREE MILLION EIGHT HUNDRED ELEVEN THOUSAND FOUR HUNDRED EIGHTY EIGHT AND NO/100
Dollars ($3,811,488.00) in lawful money of the United States of America, payable
as follows:
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See Paragraph 39 for Basic Rent Schedule.
B. Time for Payment. Full monthly rent is due in advance on the first
day of each calendar month. In the event that the term of this Lease commences
on a date other than the first day of a calendar month, on the date of
commencement of the term hereof Tenant shall pay to Landlord as rent for the
period from such date of commencement and the first day of the next succeeding
calendar month bears to thirty (30). In the event that the term of this Lease
for any reason ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof Tenant shall pay to
Landlord as rent for the period from said first day of said last calendar month
to and including the last day of the term hereof that proportion of the monthly
rent hereunder which the number of days between said first day of said last
calendar month and the last day of the term hereof bears to thirty (30).
C. Late Charge. Notwithstanding any other provision of this lease, if
Tenant is in default in the payment of rental as set forth in this Paragraph 4
when due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rent due, a late charge for each rental payment in default ten (10)
days. Said late charge shall equal ten percent (10%) of each rental payment so
in default.
D. Additional Rent. Beginning with the commencement date of the term
of this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:
(a) All Taxes relating to the Premises as set forth in
Paragraph 9, and
(b) All insurance premiums relating to the Premises, as set
forth in Paragraph 12, and
(c) All charges, costs and expenses, which Tenant is
required to pay hereunder, together with all interest and penalties, costs and
expenses including reasonable attorneys' fees and legal expenses, that may
accrue thereto in the event of Tenant's failure to pay such amounts, and all
damages, reasonable costs and expenses which Landlord may incur by reason of
default of Tenant or failure on Tenant's part to comply with the terms of this
Lease within ten (10) days of written demand in the event of nonpayment by
Tenant of Additional Rent, Landlord shall have all rights and remedies with
respect thereto as Landlord has for nonpayment of rent.
The Additional Rent due hereunder shall be paid to Landlord or
Landlord's agent (i) within five business days for taxes and insurance and
within thirty (30) days for all other Additional Rent items after presentation
of invoice from Landlord or Landlord's agent setting forth such Additional Rent
and/or (ii) at the option of Landlord, Tenant shall pay to Landlord monthly, in
advance, Tenant's pro rata share of an amount estimated by Landlord to be
Landlord's approximate average monthly expenditure for such Additional Rent
items, which estimated amount shall be reconciled within 120 days of the end of
each calendar year or more frequently if Landlord elects to do so at Landlord's
sole and
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absolute discretion as compared to Landlord's actual expenditure for said
Additional Rent items, with Tenant paying to Landlord within ten (10) days of
written demand upon demand, any amount of actual expenses expended by Landlord
in excess of said estimated amount, or Landlord refunding to Tenant (providing
Tenant is not in default in the performance of any of the terms, covenants and
conditions of this Lease) any amount of estimated payments made by Tenant in
excess of Landlord's actual expenditures for said Additional Rent items. Within
thirty (30) days after receipt of Landlord's reconciliation, Tenant shall have
the right, at Tenant's sole expense, to audit, at a mutually convenient time at
Landlord's office, Landlord's records relating to the foregoing expenses. Such
audit must be conducted by Tenant or an independent nationally recognized
accounting firm that is not being compensated by Tenant or other third party on
a contingency fee basis. If such audit reveals that Landlord has overcharged
Tenant, the amount overcharged shall be credited to Tenant's account within
thirty (30) days after the audit is concluded.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this Lease, and
if the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.
E. Place of Payment of Rent and Additional Rent. All Basic Rent
hereunder and all payments hereunder for Additional Rent shall be paid to
Landlord at the office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San
Francisco, CA 94160 or to such other person or to such other place as Landlord
may from time to time designate in writing.
F. Security Deposit.* Concurrently with Tenant's execution of this
Lease, Tenant shall deposit with Landlord the sum of ONE HUNDRED THIRTY FOUR
THOUSAND NINE HUNDRED NINETY AND 20/100 Dollars ($134,990.20). Said sum shall be
held by Landlord as a Security Deposit for the faithful performance by Tenant of
all the terms, covenants, and conditions of this Lease to be kept and performed
by Tenant during the term hereof. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions relating
to the payment of rent and any of the monetary sums due herewith, Landlord may
(but shall not be required to) use, apply or retain all or any part of this
Security Deposit for the payment of any other amount which Landlord may spend by
reason of Tenant's default or to compensate Landlord or any other loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of said
Deposit is so used or applied, Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in the amount sufficient to restore
- --------------------
* $67,495.10 due upon Lease execution.
$67,495.10 Promissory Note due March 1, 1997.
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the Security Deposit to its original amount. Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and faithfully performs
every provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of such Deposit or the accounting therefor.
5. ACCEPTANCE AND SURRENDER OF PREMISES Except as otherwise set forth in
this Lease, by entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair and accepts the building and improvements
included in the Premises in their present condition and without representation
or warranty by Landlord as to the condition of such building or as to the use or
occupancy which may be made thereof. Any exceptions to the foregoing must be by
written agreement executed by Landlord and Tenant. Tenant agrees on the last day
of the Lease term, or on the sooner termination of this Lease, to surrender the
Premises promptly and peaceably to Landlord in good condition and repair (damage
by Acts of God, fire, normal wear and tear excepted), with all interior walls
painted, or cleaned so that they appear freshly painted, and repaired and
replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and
shampooed; all broken, marred or nonconforming acoustical ceiling tiles
replaced; all windows washed; the airconditioning and heating systems serviced
by a reputable and licensed service firm and in good operating condition and
repair; the plumbing and electrical systems and lighting in good order and
repair, including replacement of any burned out or broken light bulbs or
ballasts; the lawn and shrubs in good condition including the replacement of any
dead or damaged plantings; the sidewalk, driveways and parking areas in good
order, condition and repair; together with all alterations, additions, and
improvements which may have been made in, to, or on the Premises (except
moveable trade fixtures installed at the expense of Tenant) except that Tenant
shall ascertain from Landlord within thirty (30) days before the end of the term
of this Lease whether Landlord desires to have the Premises or any part or parts
thereof restored to their condition and configuration as (subject to Paragraph 6
below) when the Premises were delivered to Tenant and if Landlord shall so
desire, then Tenant shall restore said Premises or such part or parts thereof
before the end of this Lease at Tenant's sole cost and expense. Tenant, on or
before the end of the term or sooner termination of this Lease, shall remove all
of Tenant's personal property and trade fixtures from the Premises, and all
property not so removed on or before the end of the term or sooner termination
of this Lease shall be deemed abandoned by Tenant and title to same shall
thereupon pass to Landlord without compensation to Tenant. Landlord may, upon
termination of this Lease, remove all moveable furniture and equipment so
abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by such
removal at Tenant's sole cost. If the Premises be not surrendered at the end of
the term or sooner termination of this Lease, Tenant shall indemnify Landlord
against loss or liability resulting from the delay by Tenant in so
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surrendering the Premises including, without limitation, any claims made by any
succeeding tenant founded on such delay. Nothing contained herein shall be
construed as an extension of the term hereof or as a consent of Landlord to any
holding over by Tenant. The voluntary or other surrender of this Lease or the
Premises by Tenant or a mutual cancellation of this Lease shall not work as a
merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies.
6. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made,
any alteration or addition to the Premises, or any part thereof, without the
written consent of Landlord (which written consent will specify whether Landlord
shall require removal of said alterations and/or additions), first had and
obtained by Tenant (such consent not to be unreasonably withheld), but at the
cost of Tenant, and any addition to, or alteration of, the Premises, except
moveable furniture and trade fixtures, shall at once become a part of the
Premises and belong to Landlord. Landlord reserves the right to approve all
contractors and mechanics proposed by Tenant to make such alterations and
additions. Tenant shall retain title to all moveable furniture and trade
fixtures placed in the Premises. All heating, lighting, electrical, air
conditioning, floor to ceiling partitioning, drapery, carpeting, and floor
installations made by Tenant, together with all property that has become an
integral part of the Premises, shall not be deemed trade fixtures. Tenant agrees
that it will not proceed to make such alteration or additions, without having
obtained consent from Landlord to do so, and until five (5) days from the
receipt of such consent, in order that Landlord may post appropriate notices to
avoid any liability to contractors or material suppliers for payment for
Tenant's improvements. Tenant will at all times permit such notices to be posted
and to remain posted until the completion of work. Tenant shall, if required by
Landlord, secure at Tenant's own cost and expense, a completion and lien
indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10)
days after Tenant receives notice of the filing thereof, at the cost and expense
of Tenant. Any exceptions to the foregoing must be made in writing and executed
by both Landlord and Tenant.
7. TENANT MAINTENANCE Except as otherwise set forth in this Lease, Tenant
shall, at its sole cost and expense, keep and maintain the Premises (including
appurtenances) and every part thereof in a high standard of maintenance and
repair, or replacement, and in good and sanitary condition. Tenant's maintenance
and repair responsibilities herein referred to include, but are not limited to,
janitorization, all windows (interior and exterior), window frames, plate glass
and glazing (destroyed by accident or act or third parties), truck doors,
plumbing systems (such as water and drain lines, sinks, toilets, faucets,
drains, showers and water fountains), electrical systems (such as panels,
conduits, outlets, lighting fixtures, lamps, bulbs, tubes and ballasts), heating
and airconditioning systems (such as compressors, fans, air handlers, ducts,
mixing boxes, thermostats, time clocks, boilers, heaters, supply and return
grills), structural elements and exterior surfaces of the building, store
fronts, roofs, downspouts, all interior improvements within the premises
including but not limited to wall coverings, window
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coverings, carpet, floor coverings, partitioning, ceilings, doors (both interior
and exterior), including closing mechanisms, latches, locks, skylights (if any),
automatic fire extinguishing systems, and elevators and all other interior
improvements of any nature whatsoever, and all exterior improvements including
but not limited to landscaping, sidewalks, driveways, parking lots including
striping and sealing, sprinkler systems, lighting, ponds, fountains, waterways,
and drains. Tenant agrees to provide carpet shields under all rolling chairs or
to otherwise be responsible for wear and tear of the carpet caused by such
rolling chairs if such wear and tear exceeds that caused by normal foot traffic
in surrounding areas. Areas of excessive wear shall be replaced at Tenant's sole
expense upon Lease termination. Tenant hereby waives all rights under, and
benefits of, Subsection 1 of Section 1932 and Section 1941 and 1942 of the
California Civil Code and under any similar law, statute or ordinance now or
hereafter in effect. In the event of the above maintenance responsibilities
apply to any other tenant(s) of Landlord where there is common usage with other
tenant(s), such maintenance responsibilities and charges shall be allocated to
the leased Premises by square footage or other equitable basis as calculated and
determined by Landlord.
8. UTILITIES Tenant shall pay promptly, as the same become due, all charges
for water, gas, electricity, telephone, telex and other electronic communication
service, sewer service, waste pick-up and any other utilities, materials or
services furnished directly to or used by Tenant on or about the Premises during
the term of this Lease, including, without limitation, any temporary or
permanent utility surcharge or other exactions whether or not hereinafter
imposed. In the event the above charges apply to any other tenant(s) of Landlord
where there is common usage with other tenant(s), such charges shall be
allocated to the leased Premises by square footage or other equitable basis as
calculated and determined by Landlord.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
9. TAXES
A. As Additional Rent and in accordance with Paragraph 4D of this
Lease, Tenant shall pay to Landlord, or if Landlord so directs, directly to the
Tax Collector, all Real Property Taxes relating to the Premises as evidenced by
the related real property tax bill(s). In the event the Premises leased
hereunder consist of only a portion of the entire tax parcel, Tenant shall pay
to Landlord Tenant's proportionate share of such real estate taxes allocated to
the leased Premises by square footage or other reasonable basis as calculated
and determined by Landlord. If the tax billing pertains 100% to the leased
Premises, and Landlord chooses to have Tenant pay said real estate taxes
directly to the Tax Collector, then in such event it shall be the responsibility
of Tenant to obtain the tax and assessment bills and pay, prior to delinquency,
the applicable real property taxes and assessments pertaining to the leased
Premises, and failure to receive a bill for taxes and/or
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assessments shall not provide a basis for cancellation of or nonresponsibility
for payment of penalties for nonpayment or late payment by Tenant. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership of
the Premises) now or hereafter imposed by any governmental or quasi-governmental
authority or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the value,
occupancy or use of, all or any portion of the Premises (as now constructed or
as may at any time hereafter be constructed, altered, or otherwise changed) or
Landlord's interest therein; any improvements located within the Premises
(regardless of ownership); the fixtures, equipment and other property of
Landlord, real or personal, that are an integral part of and located in the
Premises; or parking areas, public utilities, or energy within the Premises;
(ii) all charges, levies or fees imposed by reason of environmental regulation
or other governmental control of the Premises; and (iii) all costs and fees
(including reasonable attorneys' fees) incurred by Landlord in reasonably
contesting any Real Property Tax and in negotiating with public authorities as
to any Real Property Tax. If at any time during the term of this Lease the
taxation or assessment of the Premises prevailing as of the commencement date of
this Lease shall be altered so that in lieu of or in addition to any Real
Property Tax described above there shall be levied, assessed or imposed (whether
by reason of a change in the method of taxation or assessment, creation of a new
tax or charge, or any other cause) an alternate or additional tax or charge (i)
on the value, use or occupancy of the Premises or Landlord's interest therein or
(ii) on or measured by the gross receipts, income or rentals from the Premises,
on Landlord's business of leasing the Premises, or computed in any manner with
respect to the operation of the Premises, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources or any penalties, fines, interest or charge
attributable to the late payment of any real property taxes by Landlord,
provided Tenant has paid said taxes by the due date as specified in Landlord's
statement to Tenant. See Paragraph 44.
B. Taxes on Tenant's Property. Tenant shall be liable for and shall
pay ten days before delinquency, taxes levied against any personal property or
trade fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures are levied against Landlord or Landlord's property or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant and if Landlord, after
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written notice to Tenant, pays the taxes based on such increased assessment,
which Landlord shall have the right to do regardless of the validity thereof,
but only under proper protest if requested by Tenant, Tenant shall upon demand,
as the case may be, repay to Landlord the taxes so levied against Landlord, or
the proportion of such taxes resulting from such increase in the assessment;
provided that in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation, to bring suit in any court of
competent jurisdiction to recover the amount of such taxes so paid under
protest, and any amount so recovered shall belong to Tenant.
10. LIABILITY INSURANCE Tenant, at Tenant's expense, agreed to keep in force
during the term of this Lease a policy of commercial general insurance with
combined single limit coverage of not less than Two Million Dollars ($2,000,000)
for bodily injury and property damage occurring in, on or about the Premises,
including parking and landscaped areas. Such insurance shall be primary and
noncontributory as respects any insurance carried by Landlord. The policy or
policies effecting such insurance shall name Landlord as additional insureds,
and shall insure any liability of Landlord, contingent or otherwise, as respects
acts or omissions of Tenant, its agents, employees or invitees or otherwise by
any conduct or transactions of any of said persons in or about or concerning the
Premises, including any failure of Tenant to observe or perform any of its
obligations hereunder; shall be issued by an insurance company admitted to
transact business in the State of California; and shall provide that the
insurance effected thereby shall not be canceled, except upon thirty (30) days'
prior written notice to Landlord. A certificate of insurance of said policy
shall be delivered to Landlord. If, during the term of this Lease, in the
considered opinion of Landlord's Lender, insurance advisor, or counsel, the
amount of insurance described in this Paragraph 10 is not adequate, Tenant
agrees to increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.
11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION
INSURANCE Tenant shall maintain a policy or policies of fire and property damage
insurance in "all risk" form with a sprinkler leakage endorsement insuring the
personal property, inventory, trade fixtures, and leasehold improvements within
the leased Premises for the full replacement value thereof. The proceeds from
any of such policies shall be used for the repair or replacement of such items
so insured.
Tenant shall also maintain a policy or policies of workman's
compensation insurance and any other employee benefit insurance sufficient to
comply with all laws.
12. PROPERTY INSURANCE Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (allocated to the leased Premises by square footage or other
equitable basis as calculated and determined by Landlord) of the deductibles on
insurance claims and the cost of, policy or policies or insurance covering loss
or damage to the Premises (excluding routine maintenance and repairs and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full
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replacement value thereof, providing protection against those perils included
within the classification of "all risks" insurance and flood and/or earthquake
insurance, if available, plus a policy of rental income insurance in the amount
of one hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid
as Additional Rent. If such insurance cost is increased due to Tenant's use of
the Premises, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for the Premises.
Landlord and Tenant do each hereby respectively release the other, to
the extent of insurance coverage of the releasing party, from any liability for
loss or damage caused by fire or any of the extended coverage casualties
included in the releasing party's insurance policies, irrespective of the cause
of such fire or casualty; provided, however, that if the insurance policy of
either releasing party prohibits such waiver, then this waiver shall not take
effect until consent to such waiver is obtained. If such waiver is so
prohibited, the insured party affected shall promptly notify the other party
thereof.
13. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord, its agents, servants, employees,
invitees, or contractors, Tenant shall hold Landlord harmless from and defend
Landlord against any and all expenses, including reasonable attorneys' fees, in
connection therewith to the extent arising out of any injury to or death of any
person or damage to or destruction of property occurring in, on or about the
Premises, or any part thereof, from any cause whatsoever.
14. COMPLIANCE Subject to Paragraph 49, Tenant, at its sole cost and
expense, shall promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now or hereafter in effect, with
the requirement of any board of, fire underwriters or other similar body now or
hereafter constituted; and with any direction or occupancy certificate issued
pursuant to law by any public officer; provided, however, that no such failure
shall be deemed a breach of the provisions if Tenant, immediately upon
notification, commences to remedy or rectify said failure. The judgment of any
court of competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
such law, statute, ordinance or governmental rule, regulation, requirement,
direction or provision, shall be conclusive of that fact as between Landlord and
Tenant. Tenant shall, at its sole cost and expense, comply with any and all
requirements pertaining to said Premises, of any insurance organization or
company, necessary for the maintenance of reasonable fire and public liability
insurance covering requirements pertaining to said Premises, of any
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insurance organization or company, necessary for the maintenance of reasonable
fire and public liability insurance covering the Premises. See Paragraph 49.
15. LIENS Tenant shall keep the Premises free of any liens arising out of
any work performed, materials furnished or obligation incurred by Tenant in the
event that Tenant shall not, within ten (10) days following notice to Tenant of
the imposition of such lien, cause the same to be released of record, Landlord
shall have in addition to all other remedies provided herein and by law, the
right, but no obligation, to cause the same to be released by such means as it
shall deem proper, including payment of the claim giving rise to such lien. All
sums paid by Landlord for such purpose, and all expenses incurred by it in
connection therewith, shall be payable to Landlord by Tenant on demand with
interest at the prime rate of interest as quoted by the Bank of America.
16. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or
hypothecate the leasehold estate under this Lease, or any interest therein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without, in each case, the prior written
consent of Landlord which consent will not be unreasonably withheld. As a
condition for granting this consent to any assignment, transfer, or subletting,
Landlord may require that Tenant agrees to pay to Landlord, as additional rent,
fifty percent (50%) of all rents or additional consideration received by Tenant
from its assignees, transferees, or subtenants in excess of the rent payable by
Tenant to Landlord hereunder, provided, however that for sharing such excess
rent, Tenant shall first be entitled to recover from such excess rent the amount
of any reasonable leasing commissions paid by Tenant to third parties not
affiliated with Tenant. Tenant shall, by fifteen (15) days written notice,
advise Landlord of its intent to assign or transfer Tenant's interest in the
Lease or sublet the Premises or any portion thereof for any part of the term
hereof. Within ten (10) days after receipt of said written notice, if Tenant
intends to transfer its entire interest in the lease, Landlord may, in its sole
discretion, elect to terminate this Lease as to the portion of the Premises
described in Tenant's notice on the date specified in Tenant's notice by giving
written notice of such election to terminate. If no such notice to terminate is
given to Tenant within said ten (10) day period, Tenant may proceed to locate an
acceptable sublessee, assignee, or other transferee for presentment to Landlord
for Landlord's approval, all in accordance with the terms, covenants, and
conditions of this paragraph 16. If Tenant intends to sublet the entire Premises
and Landlord elects to terminate this Lease, this Lease shall be terminated on
the date specified in Tenant's notice. If, however, this Lease shall terminate
pursuant to the foregoing with respect to less than all the premises, the rent,
as defined and reserved hereinabove shall be adjusted on a pro rata basis to the
number of square feet retained by Tenant, and this Lease as so amended shall
continue in full force and effect. In the event Tenant is allowed to assign,
transfer or sublet the whole or any part of the Premises, with the prior written
consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premises, without also having obtained the prior written consent of
Landlord, which consent shall not be unreasonably withheld. A consent of
Landlord to one assignment, transfer, hypothecation, subletting, occupation or
use by any other person shall not release
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Tenant from any of Tenant's obligations hereunder or be deemed to be a consent
to any subsequent similar or dissimilar assignment, transfer, hypothecation,
subletting, occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without such consent
shall be void and shall constitute a breach of this Lease by Tenant and shall,
at the option of Landlord exercised by written notice to Tenant, terminate this
Lease. The leasehold estate under this Lease shall not, nor shall any interest
therein, be assignable for any purpose by operation of law without the written
consent of Landlord, which consent shall not be unreasonably withheld. As a
condition to its consent, Landlord may require Tenant to pay all reasonable
expenses in connection with the assignment, and Landlord may require Tenant's
assignee or transferee (or other assignees or transferees) to assume in writing
all of the obligations under this Lease and for Tenant to remain liable to
Landlord under the Lease.
17. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease. See Paragraph 46.
18. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
after at least 24 hours notice (except in emergencies) have, the right to enter
the Premises to inspect them; to perform any services to be provided by Landlord
hereunder; to make repairs or provide any services to a contiguous tenant(s); to
submit the Premises to prospective purchasers, mortgagors or tenants; to post
notices of nonresponsibility; and to alter, improve or repair the Premises or
other parts of the building, all without abatement of rent, and may erect
scaffolding and other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed; provided,
however that the business of Tenant shall be interfered with to the last extent
that is reasonably practical. Any entry to the Premises by Landlord for the
purposes provided for herein shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof. See Paragraph 47
19. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days
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after an order for relief in a liquidation action or within thirty (30) days
after the commencement of any action.
Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (iii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained in this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a default hereunder by
Tenant upon expiration of the appropriate grace period hereinafter provided.
Tenant shall have a period of five (5) days from the date of written notice from
Landlord within which to cure any default in the payment of rental or adjustment
thereto. Tenant shall have a period of thirty (30) days from the date of written
notice from Landlord within which to cure any other default under this Lease;
provided, however, that if the nature of Tenant's failure is such that more than
thirty (30) days is reasonably required to cure the same, Tenant shall not be in
default so long as Tenant commences performance within such thirty (30) day
period and thereafter prosecutes the same to completion. Upon an uncured default
of this Lease by Tenant, Landlord shall have the following rights and remedies
in addition to any other rights or remedies available to Landlord at law or in
equity:
(a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but not limited to, recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of rental loss for the same period
that Tenant proves could be reasonably avoided, as computed pursuant to
subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs
(2) and (3) of Section 1951.2 of the California Civil Code of the amount of
rental loss that could be reasonably avoided shall be made in the following
manner: Landlord and Tenant shall each select a licensed real estate broker in
the business of renting property of the same type and use as the Premises and in
the same
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geographic vicinity. Such two real estate brokers all select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
(b) The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d) To the extent permitted by law the right and power, to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its reasonable
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately
liable to pay Landlord, in addition to indebtedness other than rent due
hereunder, the reasonable cost of such subletting, including, but not limited
to, reasonable attorneys' fees, and any real estate commissions actually paid,
and the cost of such reasonable alterations and repairs incurred by Landlord and
the amount, if any, by which the rent hereunder for the period of such
subletting (to the extent such period does not exceed the term hereof) exceeds
the amount to be paid as rent for the Premises for such period or (iii) at the
option of Landlord, rents received from such subletting shall be applied first
to payment of indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs of such subletting and of such
alterations and repairs; third to payment of rent due and unpaid hereunder; and
the residue, if any, shall be held by Landlord and applied in payment of future
rent as the same becomes due hereunder. If Tenant has been credited with any
rent to be received by such subletting under option (i) and such rent shall not
be promptly paid to Landlord by the subtenant(s), or if such rentals received
from such subletting under option (ii) during any month be less than that to be
paid during that month by Tenant hereunder, Tenant shall pay any such deficiency
to Landlord. Such deficiency shall be calculated and paid monthly. No taking
possession of the Premises by Landlord, shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Tenant. Notwithstanding any such subletting without termination, Landlord may
at any time hereafter elect to terminate this Lease for such previous breach.
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(e) The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises and to apply any
rental collected from the Premises and to exercise all other rights and remedies
granted to Landlord pursuant to subparagraph d above.
20. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease (except that Tenant may vacate so long as it pays
rent, provides an on-site security guard during normal business hours from
Monday through Friday, and otherwise performs its obligations hereunder) and if
Tenant shall abandon, vacate or surrender said Premises, or be dispossessed by
the process of law, or otherwise, any personal property belonging to Tenant and
left on the Premises shall be deemed to be abandoned, at the option of Landlord,
except such property as may be mortgaged to Landlord.
21. DESTRUCTION In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental damage
and destruction from vandalism and accidents to which Tenant is responsible
under paragraph 7, Landlord may, at his option:
(a) Rebuild or restore the Premises to their condition prior to
the damage or destruction, or
(b) Terminate this Lease. (providing that the Premises is
damaged to the extent of at least 33 1/3% of the replacement cost)
If Landlord does not give Tenant notice in writing within thirty (30)
days from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in the proportion that the area of the Premises
rendered unrentable by such damage bears to the total area of the Premises. If
Landlord initially estimates that the rebuilding or restoration will exceed 120
days or if Landlord does not complete the rebuilding or restoration within one
hundred twenty (120) days following the date of destruction (such period of time
to be extended for delays caused by the fault or neglect of Tenant or not more
than forty five (45) days because of Acts of God, acts of public agencies, labor
disputes, strikes, fires, freight embargos, rainy or stormy weather, inability
to obtain materials, supplies or fuels, acts or contractors or subcontractors,
or delay of the contractors or subcontractors due to such caused or other
contingencies beyond the control of Landlord), then Tenant shall have the right
to terminate this Lease by giving fifteen (15) days prior written notice to
Landlord. Notwithstanding anything herein to the contrary, Landlord's obligation
to rebuild or restore shall be limited to the building and interior improvements
constructed by Landlord as they existed as of the commencement date of the Lease
and shall not include restoration of Tenant's trade fixtures, equipment,
merchandise, or any improvements, alterations or additions made by Tenant to the
Premises, which Tenant shall forthwith replace or fully
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repair at Tenant's sole cost and expense provided this Lease is not cancelled
according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect. Tenant hereby expressly waives
the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of
the California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33 1/3% of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not.
22. EMINENT DOMAIN. If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill, shall be and remain
the property of Tenant.
If any actions or proceedings is commenced for such taking of the
Premises or any part thereof, or if Landlord is advised in writing by any entity
or body having the right or power of condemnation of its intention to condemn
the premises or any portion thereof, then Landlord shall have the right to
terminate this Lease by giving Tenant written notice thereof within sixty (60)
days of the date of receipt of said written advice, or commencement of said
actin or proceeding, or taking conveyance, which termination shall take place as
of the first to occur of the last day of the calendar month next following the
month in which such notice is given or the date on which title to the Premises
shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if
the portion of the Premises taken or conveyed is so substantial that the Tenant
can no longer reasonably conduct its business, Tenant shall have the privilege
of terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.
If a portion of the Premises be taken by condemnation or conveyance in
lieu thereof and neither Landlord nor Tenant shall terminate this Lease as
provided herein, this Lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed, and the rent herein shall be
apportioned as of the date of such taking or conveyance so that thereafter the
rent to be paid by Tenant shall be in the ration that the
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area of the portion of the Premises not so taken or conveyed bears to the total
area of the Premises prior to such taking.
23. SALE OR CONVEYANCE BY LANDLORD. In the event of a sale or conveyance of
the Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any
liability accruing after the date of transfer upon any of the items, covenants
or conditions (express or implied) herein contained in favor of Tenant, and in
such event, insofar as such transfer is concerned, Tenant agrees to look solely
to the responsibility of the successor in interest of such transferor in and to
the Premises and this Lease from and after the date of such transfer, provided
that the successor in interest of such transferor expressly assumes the
transferor's obligations under this Lease in writing, from and after the date of
transfer. This Lease shall not be affected by any such sale or conveyance, and
Tenant agrees to attorn to the successor in interest of such transferor.
24. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the interest of
Landlord in the land and buildings in which the leased Premises are located
(whether such interest of Landlord is a fee title interest or a leasehold
interest) is encumbered by deed of trust, and such interest is acquired by the
lender or any third party through judicial foreclosure or by exercise of a power
of sale at private trustee's foreclosure sale. Tenant hereby agrees to attorn to
the purchaser at any such foreclosure sale and to recognize such purchaser as
the Landlord under this Lease. In the event the lien of the deed of trust
securing the loan from a Lender to Landlord is prior and paramount to the Lease,
this Lease shall nonetheless continue in full force and effect for the remainder
of the unexpired term hereof, at the same rental herein reserved and upon all
the other terms, conditions and covenants herein contained.
25. HOLDING OVER. Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred twenty five (125%) percent of the monthly Basic
Rent required during the last month of the Lease term.
26. CERTIFICATE OF ESTOPPEL. Tenant shall at any time upon not less than ten
(10) days prior written notice to Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement
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within such time shall be conclusive upon Tenant that this Lease is in full
force and effect, without modification except as may be represented by Landlord;
that there are no uncured defaults in Landlord's performance, and that not more
than one month's rent has been paid in advance.
27. CONSTRUCTION CHANGES. It is understood that the description of the
Premises and the location of ductwork, plumbing and other facilities therein are
subject to such minor changes as Landlord or Landlord's architect determines to
be desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guaranteed the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.
28. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and conditions of
this Lease to be performed or observed by Tenant shall be performed or observed
by Tenant at Tenant's sole cost and expense and without any reduction of rent.
If Tenant shall fail to pay any sum of money, or other rent, required to be paid
by it hereunder or shall fail to perform any other term or covenant hereunder o
its part to be performed, and such failure to pay money shall continue for five
(5) days after written notice thereof by Landlord or such other failure to
perform shall continue for ten (10) days after written notice thereof by
Landlord or such longer period as is reasonably required to cure such
nonmonetary failure to perform if Tenant is diligently proceedings to cure same.
Landlord, without waiving or releasing Tenant from any obligation of Tenant
hereunder, may, but shall not be obliged to, make any such payment or perform
any such other term or covenant on Tenant's part to be performed. All sums so
paid by Landlord and all necessary costs of such payment on performance by
Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord
on demand by Landlord, and Landlord shall have (in addition to any other right
or remedy of Landlord) the same rights and remedies in the event of nonpayment
by Tenant as in the case of failure by Tenant in the payment of rent hereunder.
29. ATTORNEY'S FEES.
A. In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.
B. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.
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30. WAIVER. The waiver by either party of the other party's failure to
perform or observe any term, covenant or condition herein contained to be
performed or observed by such waiving party shall not be deemed to be a waiver
of such term, covenant or condition or of any subsequent failure of the party
failing to perform or observe the same or any other such term, covenant or
condition therein contained, and no custom or practice which may develop between
the parties hereto during the term hereof shall be deemed a waiver of, or in any
way affect, the right of either party to insist upon performance and observance
by the other party in strict accordance with the terms hereof.
31. NOTICES. All notices, demands, requests, advices or designations which
may be or are required to be given by either party to the other hereunder shall
be in writing. All notices, demands, requests, advices or designations by
Landlord to Tenant shall be sufficiently given, made or delivered if personally
served on Tenant by leaving the same at the Premises of if sent by United States
certified or registered mail, postage prepaid, or by a reputable overnight
courier service addressed to Tenant at the Premises. All notices, demands,
requests, advices or designations by Tenant to landlord shall be sent by United
States certified or registered mail, postage prepaid, or by a reputable
overnight courier service addressed to Landlord at its offices at
Peer/Arrillaga, 2560 Mission College Blvd., Suite 101, Santa Clara, CA 95054.
Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed received on the date of the personal service or
receipt or refusal to accept receipt of the mailing thereof in the manner herein
provided, as the case may be.
32. EXAMINATION OF LEASE. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.
33. DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event earlier than (30) days after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than thirty (30) days are required for performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.
34. CORPORATE AUTHORITY. If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to
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Landlord a certified copy of the resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.
35. LIMITATION OF LIABILITY. In consideration of the benefits accruing
hereunder. Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:
(a) the sole and exclusive remedy shall be against Landlord and
Landlord's assets;
(b) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);
(e) no judgment will be taken against any partner of Landlord;
(f) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(g) no writ of execution will ever be levied against the assets of any
partner of Landlord;
(h) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
36. SIGNS. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall which may appear unsightly from
outside the Premises. Notwithstanding anything to the contrary in this Paragraph
36, Landlord shall provide and
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install, at Landlord's expense, an exterior monument; Tenant shall install its
signage on said monument at Tenant's expense.
37. MISCELLANEOUS AND GENERAL PROVISIONS.
A. Use of Building Name. Tenant shall not, without the written
consent of Landlord, use the name of the building for any purpose other than as
the address of the business conducted by Tenant in the Premises.
Initials:
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Initials:
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Exhibit 10.13
INFINITY INTERNATIONAL FINANCIAL TECHNOLOGY INC.
1989 STOCK OPTION PLAN
1. Purpose. The INFINITY International Financial Technology Inc.
1989 Stock Option Plan (the "Plan") is established to create additional
incentive for key employees, directors and consultants of INFINITY International
Financial Technology Inc. and any successor corporation thereto (collectively
referred to as the "Company"), and any present or future parent and/or
subsidiary corporations of such corporation (all of whom along with the Company
being individually referred to as a "Participating Company" and collectively
referred to as the "Participating Company Group"), to promote the financial
success and progress of the Participating Company Group. For purposes of the
Plan, a parent corporation and a subsidiary corporation shall be as defined in
sections 425(e) and 425(f) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of the Plan or of
any options granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan and/or any Option. Options may be either
incentive stock options as defined in section 422A of the Code ("Incentive Stock
Options") or nonqualified stock options. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right obligation, or election.
3. Eligibility. The Options may be granted only to employees
(including officers) and directors of the Participating Company Group or to
individuals who are rendering services as consultants, advisors, or other
independent contractors to the Participating Company Group. The Board shall, in
the Board's sole discretion, determine which persons shall be granted Options
(an "Optionee"). A director of the Company shall be eligible to be granted only
a nonqualified stock option unless the director is also an employee of the
Company. An individual who is rendering services as a consultant, advisor, or
other independent contractor shall be eligible to be granted only a nonqualified
stock option. An Optionee may, if otherwise eligible, be granted additional
Options.
4. Shares Subject to Option. Options shall be options for the
purchase of the authorized but unissued common stock of the Company (the
"Stock"), subject to adjustment as provided in paragraph 9 below. The maximum
number of shares of Stock which may be issued under the Plan shall be
one million five hundred thousand (1,500,000) shares. In the
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event that any outstanding Option for any reason expires or is terminated or
canceled and/or shares of Stock subject to repurchase are repurchased by the
Company, the shares allocable to the unexercised portion of such Option, or such
repurchased shares, may again be subjected to an Option.
5. Time for Granting Options. All Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by
the Board or the date the Plan is duly approved by the shareholders of the
Company.
6. Terms, Conditions and Form of Options. Subject to the provisions
of the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option price of the Option, the exercisability of the Option, whether the
Option is to be treated as an Incentive Stock Option or as a nonqualified stock
option and all other terms and conditions of the Option not inconsistent with
the Plan. Options granted pursuant to the Plan shall be evidenced by written
agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish, and shall comply with and
be subject to the following terms and conditions:
(a) Option Price. The option price for each Option shall be
established in the sole discretion of the Board; provided, however that (i) the
option price per share for an Incentive Stock Option shall be not less than the
fair market value, as determined by the Board, of a share of Stock on the date
of the granting of the Option, (ii) the option price per share for a
nonqualified stock option shall not be less than eighty-five percent (85%) of
the fair market value, as determined by the Board, of a share of Stock on the
date of the granting of the Option and (iii) no Option granted to an Optionee
who at the time the Option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of section 422A(b)(6) of the Code
and/or ten percent (10%) of the total combined value of all classes of stock of
a Participating Company (a "Ten Percent Owner Optionee") shall have an option
price per share less than one hundred ten percent (110%) of the fair market
value of a share of Stock on the date the Option is granted. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a nonqualified stock
option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying with the provisions of
section 425(a) of the Code.
(b) Exercise Period of Options. The Board shall have the power
to set the time or times which each Option shall be exercisable or the event or
events upon the occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that (i) no Option
shall be exercisable after the expiration of ten (10) years after the date such
Option is granted and (ii) no Option granted to a Ten Percent Owner Optionee
shall be exercisable after the expiration of five (5) years after the date such
Option is granted.
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(c) Payment of Option Price. Payment of the option price for the
number of shares of Stock being purchased pursuant to any Option shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's stock owned by the Optionee having a value, as
determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriters of the Company), not less
than the option price, (iii) by the Optionee's recourse promissory note, (iv) by
the assignment of the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System), or (v) by
any combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the form of Standard Option Agreement described
in paragraph 7 below, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the option
price and/or which otherwise restrict one (1) or more forms of consideration.
Notwithstanding the foregoing, an Option may not be exercised by tender to the
Company of shares of the Company's stock to the extent such tender of stock
would constitute a violation of the provisions of any law, regulation and/or
agreement restricting the redemption of the Company's stock. Furthermore, no
promissory note shall be permitted if an exercise using a promissory note would
be a violation of any law. Any permitted promissory note shall be due and
payable not more than five (5) years after the Option is exercised, and interest
shall be payable at least annually and be at least equal to the minimum interest
rate necessary to avoid imputed interest pursuant to all applicable sections of
the Code. The Board shall have the authority to permit or require the Optionee
to secure any promissory note used to exercise an Option with the shares of
Stock acquired on exercise of the Option and/or with other collateral acceptable
to the Company.
(x) Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless such
shares of the Company's stock either have been owned by the Optionee for more
than six (6) months or were not acquired, directly or indirectly, from the
Company.
(y) Unless otherwise provided by the Board, in the event the
Company at any time becomes subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(z) The Company reserves, at any and all times, the right, in the
Company's sole and absolute discretion, to establish, decline to approve and/or
terminate any program and/or procedures for the exercise of Options by means of
an assignment of the proceeds of a sale of some or all of the shares of Stock to
be acquired upon such exercise.
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7. Standard Form of Stock Option Agreement. Unless otherwise
provided for by the Board at the time an Option is granted or as otherwise
provided for by this paragraph 7, all Options shall comply with and be subject
to the terms and conditions set forth in the stock option agreement attached
hereto as Exhibit A and incorporated herein by reference (the "Standard Option
Agreement").
(a) Modifications for Nonqualified Stock Options. In the event
the Option is designated as a nonqualified stock option, the Standard Option
Agreement for such Option shall be the Standard Option Agreement as modified as
set forth below unless otherwise specified by the Board:
(i) The title and paragraph 2 of the Standard Option
Agreement shall reflect the Option's status as a nonqualified stock option.
(ii) Paragraph 4(a) of the Standard Option Agreement shall
be modified to delete therefrom the second and third sentences referring to the
"$100,000 Exercise Limitation" applicable to Incentive Stock Options.
(iii) A new paragraph 7(f) shall be added to the Standard
Option Agreement providing that, in the event an Optionee is a director,
consultant, or advisor but not an employee of a Participating Company at the
time the Option is granted, termination of the Optionee's status as a director,
consultant or advisor of the Participating Company shall be deemed to be
termination of the Optionee's employment for purposes of the Standard Option
Agreement.
(iv) Paragraph 15 of the Standard Option Agreement
providing, among other things, that the Optionee give the Company notice of
sales upon disqualifying dispositions of Incentive Stock Options shall be
deleted and shall not apply to the Option.
(v) Paragraph 16 of the Standard Option Agreement
regarding the "$100,000 Exercise Limitation" applicable to Incentive Stock
Options shall be deleted and shall not apply to the Option.
(vi) Paragraph 18(e) of the Standard Option Agreement
regarding the stock certificate legend applicable to Incentive Stock Options
shall be deleted and shall not apply to the Option.
(vii) Paragraph 21 of the Standard Option Agreement shall
be modified to delete the provision that amendments to the Standard Option
Agreement may be made without the Optionee's consent if such amendments are
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option.
(viii) The remaining paragraphs of such modified Standard
Option Agreement for nonqualified stock options shall be renumbered accordingly.
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(b) Standard Term for Options. Unless otherwise provided for by
the Board in grant of an Option, any Option granted hereunder shall be
exercisable for a term of five (5) years.
8. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the Standard Option Agreement either in
connection with the grant of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the terms
and conditions of such revised or amended standard form or forms of stock option
agreement shall be in accordance with the terms of the Plan. Such authority
shall include, but not by way of limitation, the authority to grant Options
which are not immediately exercisable.
9. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the option price of any outstanding options in
the event of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company.
10. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Control Company. For purposes of applying this paragraph 10, the "Control
Company" shall mean the Participating Company whose stock is subject to the
Option.
(a) the direct or indirect sale or exchange by the shareholders
of the Control Company of all or substantially all of the stock of the Control
Company where the shareholders of the Control Company where the shareholders of
the Control Company before such sale or exchange do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of the Control Company;
(b) a merger in which the shareholders of the Control Company
before such merger do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Control Company; or
(c) the sale, exchange, or transfer (including, without
limitation, pursuant to a liquidation or dissolution) of all or substantially
all of the Control Company's assets (other than a sale, exchange, or transfer to
one (1) or more corporations where the shareholders of the Control Company
before such sale, exchange, or transfer retain, directly or indirectly, at least
a majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall either assume the Company's rights and obligations under
outstanding stock option agreements or substitute options for the Acquiring
Corporation's stock for such outstanding Options. In the event the Acquiring
Corporation elects not to assume or substitute for such outstanding Options in
connection with a merger described in (b) above or a sale or assets
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described in (c) above, the Board shall provide than any unexercisable and/or
unvested portion of the outstanding Options shall be immediately exercisable and
vested as of a date prior to the Transfer of Control, as the Board so
determines. The exercise and/or vesting of any Option that was permissible
solely by reason of this paragraph 10 shall be conditioned upon the consummation
of the Transfer of Control. Any Options which are neither assumed by the
Acquiring Corporation nor exercised as of the date of the Transfer of Control
shall terminate effective as of the date of the Transfer of Control.
11. Provision of Information. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common shareholders.
12. Options Non-Transferable. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
13. Transfer of Company's Rights. In the event any Participating
Company assigns, other than by operation of law, to a third person, other than
another Participating Company, any of the Participating Company's rights to
repurchase any shares of Stock acquired on the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be not
less than the fair market value of the shares of Stock which may be repurchased
under such right (as determined by the Company) minus the repurchase price of
such shares. The requirements of this paragraph 13 regarding the minimum
consideration to be received by the assigning Participating Company shall not
inure to the benefit of the Optionee whose shares of Stock are being
repurchased. Failure of a Participating Company to comply with the provisions of
this paragraph 13 shall not constitute a defense or otherwise prevent the
exercise of the repurchase right by the assignee of such right.
14. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's shareholders,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 9 above), (b) no
change in the class of persons eligible to receive Incentive Stock Options and
(c) no expansion in the class of persons eligible to receive nonqualified stock
options. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing INFINITY International Financial Technology Inc. 1989 Stock
Option Plan was duly adopted by the Board of Directors of the Company on the ___
day of December, 1989.
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___________________________________
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Exhibit 10.14
INFINITY FINANCIAL TECHNOLOGY, INC
1993 STOCK INCENTIVE PLAN
1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.
(a) The 1993 Stock Incentive Plan (the "Plan") of INFINITY
Financial Technology, Inc., a California corporation (the "Company"), is hereby
adopted.
(b) The purpose of this Plan is to provide incentives to
employees, directors, advisors and consultants of the Company and its affiliates
(collectively, the "Participants") for increased efforts and successful
achievements on behalf of or in the interests of the Company and its affiliates
and to maximize the rewards due them for such increased efforts and successful
achievements.
(c) The Plan is intended to provide a means whereby Participants
may be given an opportunity to purchase shares of Stock (as defined in Section 3
of the Plan) of the Company pursuant to (i) options which may qualify as
incentive stock options (the "incentive stock options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) options which do
not qualify as incentive stock options (the "nonqualified stock options").
(d) The term "affiliates" as used in this Plan means parent or
subsidiary corporations, as defined in Section 424(e) and (f) of the Code (but
substituting "the Company" for "employer corporation"), including parents or
subsidiaries which become such after adoption of the Plan.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board of Directors of
the Company(the "Board"). The Board may delegate the responsibility for
administering the Plan to a committee (the "Committee"), under such terms and
conditions as the Board shall determine. If the Board does not delegate
administration of the Plan to the Committee, then each reference in this Plan to
"the Committee" shall be construed to refer solely to the Board. The Committee
shall consist of two or more members of the Board or such lesser number of
members of the Board as permitted by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"). From and after the date on
which the Stock is registered under Section 12(g) of the Securities Exchange Act
of 1934 (the "1934 Act Effective Date"), none of the members of the Committee
shall receive, while serving on the Committee, or with respect to any member of
the Committee appointed after the 1934 Act Effective Date, during the lesser of
(x) the one year period preceding appointment to the Committee and (y) the
period commencing on the 1934 Act Effective Date and terminating on the date of
appointment to the Committee, a grant or award of equity securities under (i)
the Plan or (ii) any other plan of the Company or its affiliates under which the
participants are entitled to acquire Stock (including restricted Stock), stock
options, stock bonuses, related rights or stock appreciation rights of the
Company or any of its affiliates, other than pursuant to transactions in any
such other plan which do not disqualify a director from being a disinterested
person under Rule 16b-3. The limitations set forth in this Section 2(a) shall
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automatically incorporate any additional requirements that may in the future be
necessary for the Plan to comply with Rule 16b-3. Members of the Committee shall
serve at the pleasure of the Board.
(b) The Committee may from time to time determine which
employees, directors, advisors or consultants of the Company or its affiliates
shall be granted options under the Plan, the terms thereof (including without
limitation determining whether the options are incentive stock options, the
times at which the options shall become exercisable, restrictions on transfer of
Stock acquired upon exercise of the options, and whether the Company shall have
rights to repurchase such Stock), and the number of shares for which an option
or options, may be granted; provided, however, that only nonqualified stock
options shall be granted to persons who are not employees of the Company or its
affiliates.
(c) If rights of the Company to repurchase Stock are imposed, (i)
the Committee may, in its sole discretion, accelerate, in whole or in part, the
time for lapsing of any such rights of the Company to repurchase of shares of
such Stock, and (ii) the certificates evidencing such shares of Stock, although
issued in the name of the Participant concerned, shall be held by the Company or
a third party designated by the Committee in escrow subject to delivery to the
Participant or to the Company at such times and in such amounts as shall be
directed by the Committee under the terms of this Plan and the Participant's
option agreement.
(d) The Committee shall have the sole authority, in its absolute
discretion, to (i) adopt, amend and rescind such rules and regulations
consistent with the provisions of the Plan as, in its opinion, may be advisable
in the administration of the Plan, (ii) construe and interpret the Plan, the
rules and regulations, and the instruments evidencing options granted under the
Plan and (iii) make all other determinations deemed necessary or advisable for
the administration of the Plan. All decisions, determinations and
interpretations of the Committee shall be binding on all Participants in the
Plan.
3. STOCK SUBJECT TO THE PLAN.
(a) Stock shall mean Common Stock of the Company reserved for
issuance under this Plan or such stock as may be changed as contemplated by
Section 3(c) below. Stock shall include shares drawn and reserved from either
the Company's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including without limitation shares repurchased by the
Company in the open market.
(b) Options may be granted under the Plan from time to time to
Participants to purchase an aggregate of 3,186,266 shares of Stock.
Notwithstanding the foregoing, no option shall be granted under the Plan if, at
the time of any such grant, the aggregate number of shares subject to
outstanding options and rights to purchase Stock would exceed 30% of the then
outstanding shares of the Company. Should one or more outstanding options under
this Plan expire or terminate for any reason prior to exercise in full
(including any option canceled in accordance with the cancellation-regrant
provisions of Section 6(f) of this Plan), then the shares of Stock subject to
the portion of each option not so exercised shall be available for subsequent
option grants under the Plan. Shares of Stock repurchased by the Company
pursuant to any
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repurchase right shall be available for subsequent option grants
(other than incentive stock options) under the Plan. Shares of Stock subject to
any option or portion thereof surrendered or canceled in accordance with Section
11 or 12 shall not be available for subsequent option grant under the Plan.
(c) If there shall be any change in the Stock subject to the
Plan, including Stock subject to any option granted hereunder, through merger,
consolidation, reorganization, reincorporation stock split, stock dividend or
other similar change in the corporate structure of the Company, appropriate
adjustments shall be made by the Committee in order to preserve but not to
increase the benefits to each Participant, including adjustments in the
aggregate number of shares of Stock subject to the Plan and the number of shares
of Stock and the price per share subject to outstanding options granted
hereunder. Consistent with the foregoing, in the event that the outstanding
Stock is changed into another class or series of capital stock of the Company,
outstanding options to purchase Stock granted under the Plan shall become
options to purchase such other class or series and the provisions of this
Section 3(c) shall apply to such new class or series.
4. ELIGIBILITY.
Persons who shall be eligible to have granted to them options
provided for by the Plan shall be such employees, directors, advisors or
consultants of the Company and its affiliates as the Committee, in its absolute
discretion, determines should be awarded such incentives given the best
interests of the Company; provided, however that (i) incentive stock options may
only be granted to employees of the Company or its affiliates and (ii) any
person holding capital stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation (a "10% shareholder") shall not be eligible to receive incentive
stock options unless the exercise price per share of the Stock subject thereto
is at least 110% of the fair market value of such Stock on the date the option
is granted.
As used herein, "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of the employment relationship by the
Company or its affiliates. Continuous Status as an Employee shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Committee, provided that such
leave is for a period of not more than ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted from time to time;
or (iv) transfers between locations of the Company or between the Company, its
affiliates or successor.
5. TERMINATION OF OPTION.
(a) Termination of Employment. In the event of termination of an
optionee's advisory or consulting relationship or Continuous Status as an
Employee with the Company or its affiliates, as the case may be, such optionee
may, but only during the Termination Period specified below, exercise the option
to the extent that the optionee was entitled to exercise it at the date of such
termination. The Termination Period shall be thirty (30) days (or such longer
period of time as the Committee determines, provided that, in the case of an
incentive stock option, such
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determination shall be made at the time of grant of the option and such period
of time shall not be more than ninety (90) days) after the date of such
termination (but in no event later than the expiration date of the term of such
option as set forth in the option agreement). To the extent that the optionee
was not entitled to exercise the option at the date of such termination, or if
the optionee does not exercise such option to the extent so entitled within the
Termination Period, the option shall terminate. No termination shall be deemed
to occur and this Section 5 shall not apply if (i) the optionee is an advisor or
a consultant who becomes an employee within the Termination Period, or (ii) the
optionee is an employee who becomes an advisor or a consultant within the
Termination Period. In the case of an optionee who performs services as an
advisor or a consultant to the Company or its affiliates on a project-by-project
basis, completion of a project shall not constitute termination of the advisory
or consulting relationship, regardless of the period of time elapsed before the
next project, if any, unless the Committee determines otherwise. Change in
status from one type of advisor or consultant to another (e.g., from advisor or
consultant to director) shall not constitute termination of the advisory or
consulting relationship.
(b) Disability of Optionee. Notwithstanding the provisions of
Section 5(a) above, in the event of termination of an optionee's advisory or
consulting relationship or Continuous Status as an Employee as a result of
optionee's disability (within the meaning of Section 22(e)(3) of the Code), the
Optionee may exercise the Option at any time within one year (or such other
period of time as the Committee determines, provided that, in the case of an
incentive stock option, such determination shall be made at the time of the
grant of the option and such period of time shall not be more than twelve (12)
months) after such termination, but only to the extent that the Option is
exercisable on the date of such termination and does not otherwise expire. Upon
termination of an Optionee's employment or other relationship with the Company
by reason of the Optionee's disability other than as defined in Section 22(d)(3)
of the Code, the Optionee may exercise the Option at any time within six (6)
months after such termination, but only to the extent that the Option is
exercisable on the date of such termination and does not otherwise expire. To
the extent that Optionee was not entitled to exercise the option at the date of
termination, or if Optionee does not exercise such option to the extent so
entitled within the time specified herein, the option shall terminate.
(c) Death of Optionee. In the event of the death of an optionee,
the option may be exercised, at any time within twelve (12) months (or such
other period of time as the Committee determines, provided that, in the case of
an incentive stock option, such determination shall be made at the time of grant
of the option and such period of time shall not be more than twelve (12) months
following the date of optionee's death but in no event later than the expiration
date of the term of such option as set forth in the optionee's option
agreement), by the optionee's estate or by a person who acquired the right to
exercise the option by bequest or inheritance, but only to the extent the
optionee was entitled to exercise the option at the date of death. To the extent
that optionee was not entitled to exercise the option at the date of
termination, or if optionee does not exercise such option to the extent so
entitled within the time specified herein, the option shall terminate.
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6. EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN.
(a) The exercise price of a nonqualified stock option granted
under the Plan shall be the price determined by the Committee on the date the
option is granted; provided, however, that such price shall not be less than 85%
of the per share fair market value of such Stock on the date the option is
granted. The exercise price of an incentive stock option shall not be less than
100% of the per share fair market value of the Stock on the date the option is
granted; provided, however that the exercise price of incentive stock options
granted to any 10% shareholder shall be at least 110% of the per share fair
market value of the Stock on the date the option is granted. The price of an
incentive stock option or nonqualified stock option granted under the Plan shall
be subject to adjustment to the extent provided in Section 3(c).
(b) The fair market value of the Stock under this Plan shall be
determined as follows:
(i) if the Stock is quoted on the NASDAQ National Market
System or listed on a national securities exchange, the last reported sale price
or, if no such reported sale takes place on any day, the average of the closing
bid and asked prices, or
(ii) if such Stock shall not be quoted on such National
Market System nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices, as reported by
The Wall Street Journal for the over-the-counter market, or
(iii) if neither of the foregoing is applicable, then the
fair market value of a share of Stock shall be determined in good faith by the
Committee in its reasonable discretion.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Each option granted pursuant to the Plan shall be evidenced
by a written stock option agreement executed by the Company and the Participant
to whom such option is granted. The option agreement shall designate whether the
option is an incentive stock option or a nonqualified stock option.
(b) The term of each incentive stock option shall be for no more
than ten (10) years, provided, however, that the term of any incentive stock
option granted to a 10% shareholder shall not be more than five (5) years, and
no incentive stock option shall be granted more than ten (10) years after the
earlier of (i) the date the Plan was adopted or (ii) the date the Plan was
approved by the Company's shareholders. Notwithstanding the foregoing, no option
granted under the Plan may vest at less than 20% per year over five consecutive
years.
(c) If the aggregate fair market value of Stock with respect to
which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan or under any other plan of
the Company or any parent or subsidiary of the Company) exceeds $100,000, the
options for the first $100,000 worth of Stock to become exercisable in such
calendar year shall be incentive stock options and the options for the amount in
excess of $100,000 that becomes exercisable in that calendar year shall be
treated as nonqualified stock options.
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(d) The stock option agreement may contain such other terms,
provisions and conditions as may be determined by the Committee, provided that
they are not inconsistent with this Plan. If an option, or any part thereof, is
intended to qualify as an incentive stock option, the stock option agreement
shall contain those terms and conditions which are necessary to so qualify it.
(e) The Committee shall have full power and authority to extend
the period of time for which any option granted under the Plan is to remain
exercisable following the Participant's cessation of service as an employee,
director, advisor or consultant of the Company or its affiliates, including
without limitation cessation as a result of such Participant's death or
disability (as defined in Section 22(e)(3) of the Code); provided, however, that
in no event shall such option be exercisable after the expiration date of the
option term specified in such Participant's option agreement covering such
option; and provided further that incentive stock options shall not be
exercisable more than ninety (90) days following termination of any
Participant's employment for any reason other than death or disability (as
defined in Section 22(e)(3) of the Code) and more than one year following
termination of any Participant's employment due to death or disability (as
defined in Section 22(e)(3) of the Code).
(f) The Committee shall have full power and authority to effect
at any time and from time to time, with the consent of the affected
Participants, the cancellation of any or all outstanding options under the Plan
and to grant in substitution new options under the Plan covering the same or
different numbers of shares of Stock with the same or different exercise prices.
(g) In the event of any Participant's death or disability (as
defined in Section 22(e)(3) of the Code), and only in such an event, the
Committee shall have full power and authority to accelerate the times at which
any options issued under this Plan become exercisable and the times at which any
shares of Stock issued under this Plan are no longer subject to transfer
restrictions or repurchase rights in favor of the Company.
8. USE OF PROCEEDS.
Cash proceeds realized from the sale of Stock under the Plan shall
constitute general funds of the Company.
9. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
(a) The Committee may at any time suspend or terminate the Plan,
and may amend it from time to time in such respects as the Committee may deem
advisable, provided, however, that such amendment, suspension or termination
complies with all applicable state and federal requirements and requirements of
any stock exchange on which the Stock is then listed, including any applicable
requirement that the Plan or an amendment to the Plan be approved by the
Company's shareholders. The Plan shall terminate on the earlier of (i) ten (10)
years from the date the Plan is adopted or (ii) the date on which no additional
shares of Stock are available for issuance under the Plan.
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(b) No option may be granted during any suspension or after the
termination of the Plan, and no amendment, suspension or termination of the Plan
shall, without the Participant's consent, alter or impair any rights or
obligations under any option granted under the Plan or any shares issued upon
exercise of any option; provided, however, that the Committee shall have the
right to amend, suspend or terminate any option to (i) convert outstanding
incentive stock options into nonqualified stock options or (ii) provide for a
forfeiture of the Participant's rights in the event the Participant competes
with the Company or, if the Participant is an employee, in the event the
Participant is terminated for cause.
10. ASSIGNABILITY OF OPTIONS AND RIGHTS.
Each option granted pursuant to this Plan shall, during the
Participant's lifetime, be exercisable only by him or her, and no option shall
be transferable by the Participant by operation of law or otherwise other than
by will or the laws of descent and distribution.
11. PAYMENT UPON EXERCISE.
Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in whole or in part (a) in cash or, in the
discretion of the Committee, (i) by check, (ii) by delivery to the Company of
the optionee's promissory note, or (iii) by delivery of shares of Stock owned by
optionee for at least six (6) months or such other period as may be required to
avoid a charge to the Company's earnings; (b) with such other consideration as
the Committee, in its absolute discretion, determines is consistent with the
Plan's purpose and applicable law; or (c) in any combination of the foregoing.
Any Stock used to exercise options to purchase Stock shall be valued at its fair
market value on the date of the exercise of the option. Any notes used to
exercise options shall (i) be full recourse, (ii) bear interest at the lowest
rate required to avoid imputed interest under federal and state income tax laws,
(iii) be due in no more than five (5) years (subject to acceleration, if the
stock option agreement so provides, upon the optionee's termination of
employment or service) or upon sale of the Stock, (iv) provide for payment of
interest, compounded annually, at maturity, (v) be secured by the shares of
Stock in the Company acquired therewith, and (vi) contain such terms as the
Committee shall determine. Such consideration also may be paid through a
broker-dealer sale and remittance procedure pursuant to which the Participant
shall (a) provide irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased shares plus
all applicable federal and state income and employment taxes required to be
withheld by the Company in connection with such purchase and (b) provide written
directives to the Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
12. WITHHOLDING TAXES.
(a) Subject to subsection (b), shares of Stock issued hereunder
shall be delivered to a Participant only upon payment in cash by such person to
the Company of the amount of any withholding tax which may be imposed thereon
under the provisions of the Code as then in effect or any law of any other
taxing jurisdiction requiring such withholding tax.
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(b) The Committee may, under such terms and conditions as it
deems appropriate, authorize a Participant to satisfy withholding tax
obligations under this Section 12 by delivering shares of Stock or by electing
to have the Company withhold from the Stock to be issued to the Participant
shares of Stock, in each case having a fair market value equal to the amount of
the withholding tax required to be withheld.
13. RATIFICATION.
This Plan and all options issued under this Plan shall be void
unless this Plan is approved or ratified by a majority of the votes cast at a
shareholder meeting at which a quorum representing at least a majority of the
outstanding shares entitled to vote is (either in person or by proxy) present
and voting on the Plan within twelve (12) months of the date this Plan is
adopted by the Board. No incentive stock option shall be exercisable prior to
the date such shareholder approval is obtained.
14. LOANS.
(a) The Committee may, in its discretion, assist any Participant
in the exercise of options granted under this Plan, including the satisfaction
of any federal and state income and employment tax obligations arising
therefrom, by authorizing the extension of a loan from the Company to such
Participant. The terms of any loan (including the interest rate and terms of
repayment) will be upon such terms as the Committee specifies in the applicable
loan agreement or otherwise deems appropriate under the circumstances. Loans may
be granted with or without security or collateral (other than to Participants
who are not employees, in which event the loan must be adequately secured by
collateral other than the purchased shares). However, the maximum credit
available to the Participant may not exceed the exercise or purchase price of
the acquired shares of Stock plus any federal and state income and employment
tax liability incurred by the Participant in connection with the acquisition of
such shares of Stock.
(b) The Committee may, in its absolute discretion, determine that
one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Company in whole or in part upon such terms and
conditions as the Committee may deem appropriate.
15. REGULATORY APPROVALS.
All actions taken or proposed to be taken pursuant to this Plan
shall be subject to the Company's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over this Plan and
compliance with all applicable state and federal securities laws and listing
requirements of any securities exchange or trading system on which the Stock is
then listed or traded.
16. NO EMPLOYMENT/SERVICE RIGHTS.
Neither the action of the Company in establishing this Plan, nor
any action taken by the Committee hereunder, nor any provision of this Plan
shall be construed so as to grant any individual the right to remain in the
employ or service of the Company (or any parent, subsidiary
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or affiliated corporation) for any period of specific duration, and the Company
(or any parent, subsidiary or affiliated corporation retaining the services of
such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
17. MISCELLANEOUS PROVISIONS.
(a) The right to acquire Stock or other assets under this Plan
may not be assigned, encumbered or otherwise transferred by any Participant
except pursuant to Section 10 hereinabove.
(b) The provisions of this Plan shall be governed by the laws of
the State of California, as such laws are applied to contracts entered into and
performed in such State.
(c) The provisions of this Plan shall inure to the benefit of,
and be binding upon, the Company and its successors or assigns, and the
Participants and the legal representatives of their respective estates, their
respective heirs or legatees and their permitted assignees.
(d) The Company shall provide to each Participant, on a periodic
basis (but not less than annually), financial statements of the Company. The
Company may provide other information regarding the Company as determined by the
Board in its discretion.
(e) No Participant shall disclose any confidential information
about the Company disclosed to the Participant in his or her capacity as a
holder of Options. A Participant may, however, disclose such information to his
or her legal and financial advisers in connection with advice to be rendered by
them to the Participant, or to any transferee of the Shares, but only if the
advisor or transferee agrees not to further disclose such information or to use
the information for the benefit of anyone other than the Participant, the
transferee as a holder of the Shares, or the Company.
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EXHIBIT 10.15
INFINITY FINANCIAL TECHNOLOGY, INC.
1996 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees appointed
to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend Equivalent
Right, Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
of an Award executed by the Company and the Grantee, including any amendments
thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole
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number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing Directors.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means any committee appointed by the Board to
administer the Plan.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means Infinity Financial Technology, Inc., a Delaware
corporation.
(l) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services as an independent
contractor and is compensated for such services.
(m) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.
(n) "Continuous Status as an Employee, Director or Consultant" means
that the employment, director or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee, Director or Consultant shall not be considered interrupted in the case
of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
(o) "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
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(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.
(p) "Director" means a member of the Board.
(q) "Dividend Equivalent Right" means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.
(r) "Employee" means any person, including an Officer or Director, who
is an employee of the Company or any Parent or Subsidiary of the Company for
purposes of Section 422 of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(s) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(t) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing sales price for a Share for the last
market trading day prior to the time of the determination (or, if no sales were
reported on that date, on the last trading date on which sales were reported) on
the stock exchange determined by the Administrator to be the primary market for
the Common Stock or the Nasdaq National Market, whichever is applicable or (B)
if the Common Stock is not traded on any such exchange or national market
system, the average of the closing bid and asked prices of a Share on the Nasdaq
Small Cap Market, in each case, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(ii) In the absence of an established market of the type described
in (i), above, for the Common Stock, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(u) "Grantee" means an Employee, Director or Consultant who receives an
Award under the Plan.
(v) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(w) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(x) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
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(y) "Option" means a stock option granted pursuant to the Plan.
(z) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(aa) "Performance Shares" means Shares or an award denominated in
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(bb) "Performance Units" means an award which may be earned in whole or
in part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.
(cc) "Plan" means this 1996 Stock Incentive Plan.
(dd) "Registration Date" means the closing of the first sale of Common
Stock to the general public pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(ee) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(ff) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.
(gg) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(hh) "Share" means a share of the Common Stock.
(ii) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(jj) "Subsidiary Disposition" means the disposition by the Company of
its equity holdings in any subsidiary corporation effected by a merger or
consolidation involving that subsidiary corporation, the sale of all or
substantially all of the assets of that subsidiary corporation or the Company's
sale or distribution of substantially all of the outstanding capital stock of
such subsidiary corporation.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to Awards initially
shall be eight hundred
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thousand (800,000) Shares, and commencing with the first business day of each
calendar year thereafter beginning with January 2, 1997, such maximum aggregate
number of Shares shall be increased by a number equal to one and one-half
percent (1 1/2%) of the number of Shares outstanding as of December 31 of the
immediately preceding calendar year. Notwithstanding the foregoing, the maximum
aggregate number of Shares available for grant of Incentive Stock Options shall
be eight hundred thousand (800,000) Shares, and such number shall not be subject
to annual adjustment as described above. The Shares to be issued pursuant to
Awards may be authorized, but unissued, or reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Award exchange program, or
if any unissued Shares are retained by the Company upon exercise of an Award in
order to satisfy the exercise price for such Award or any withholding taxes due
with respect to such Award, such unissued or retained Shares shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers. With
respect to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority by requiring that
such Awards must be reported to and ratified by the Board or a Committee within
six (6) months of the grant date, and if so ratified, shall be effective as of
the grant date.
(iii) Administration Errors. In the event an Award is granted in a
manner inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
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(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under the
Plan, including a reduction in the exercise price (or base amount on which
appreciation is measured) of any Award to reflect a reduction in the Fair Market
Value of the Common Stock since the grant date of the Award, provided that any
amendment that would adversely affect the Grantee's rights under an outstanding
Award shall not be made without the Grantee's written consent;
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms of
the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee, Director or Consultant who has been granted an
Award may, if otherwise eligible, be granted additional Awards. Awards may be
granted to such Employees of
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the Company and its subsidiaries who are residing in foreign jurisdictions as
the Administrator may determine from time to time.
6. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the Plan to
award any type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with an exercise or conversion privilege at a fixed or variable price related to
the Common Stock and/or the passage of time, the occurrence of one or more
events, or the satisfaction of performance criteria or other conditions, or
(iii) any other security with the value derived from the value of the Common
Stock. Such awards include, without limitation, Options, SARs, sales or bonuses
of Restricted Stock, Dividend Equivalent Rights, Performance Units or
Performance Shares, and an Award may consist of one such security or benefit, or
two or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered thereby in excess of the foregoing
limitation, shall be treated as Non-Qualified Stock Options. For this purpose,
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Deferral of Award Payment. The Administrator may establish one or
more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
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earnings, if any, on amounts or Shares so deferred, and such other terms,
conditions, rules and procedures that the Administrator deems advisable for the
administration of any such deferral program.
(e) Award Exchange Programs. The Administrator may establish one or
more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as established by the Administrator from time to time.
(f) Term of Award. The term of each Award shall be the term stated in
the Award Agreement, provided, however, that the term of an Incentive Stock
Option shall be no more than ten (10) years from the date of grant thereof.
However, in the case of an Incentive Stock Option granted to a Grantee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
(g) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Grantee, only by the Grantee. Other Awards shall be
transferable to the extent provided in the Award Agreement.
(h) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price, if any,
for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be not less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
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(ii) In the case of other Awards, such price as is determined by
the Administrator.
(b) Consideration. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Administrator (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) surrender of Shares (including withholding of Shares otherwise
deliverable upon exercise of the Award) which have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Award shall be exercised (but only to the extent that such exercise
of the Award would not result in an accounting compensation charge with respect
to the Shares used to pay the exercise price unless otherwise determined by the
Administrator);
(v) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Award and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee
or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax withholding
of an Option is satisfied by the Company or the Grantee's employer withholding
Shares otherwise deliverable to the Grantee, the Administrator may issue the
Grantee an additional Option, with terms identical to the Award Agreement under
which the Option was exercised, but at an exercise price as determined by the
Administrator in accordance with the Plan.
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<PAGE> 10
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such times
and under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised has been received by the
Company. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to Shares subject
to an Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Award. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in the Award Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Employment, Director or
Consulting Relationship.
(i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Status as an Employee, Director or
Consultant only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Status as an
Employee, Director or Consultant for a specified period, the Award shall
terminate to the extent not exercised on the last day of the specified period or
the last day of the original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the
extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Status as an Employee, Director or Consultant shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
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9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Award unless
the exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of an Award, the Company may require
the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, as well as the price per share of Common Stock
covered by each such outstanding Award, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change in Control or
Subsidiary Disposition or at the time of an actual Corporate Transaction, Change
in Control or Subsidiary Disposition, and exercisable at the time of the grant
of an Award under the Plan or any time while an Award remains outstanding, to
provide for the full automatic vesting and exercisability of one or more
outstanding unvested Awards under the Plan and the release from restrictions on
transfer and repurchase or forfeiture rights of such Awards in connection with a
Corporate Transaction, Change in Control or Subsidiary Disposition, on such
terms and conditions as the Administrator may specify. The Administrator also
shall have the authority to condition any such Award vesting and exercisability
or release from such limitations upon the subsequent termination of the
Continuous Status as an Employee or Consultant of the Grantee within a specified
period following the effective date of the Change in Control or Subsidiary
Disposition. The Administrator may provide that any Awards so vested or released
from such limitations in connection with a Change in Control or Subsidiary
Disposition shall remain fully exercisable until the expiration or sooner
termination of the Award. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate unless
assumed by the successor company or its Parent.
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(b) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company.
It shall continue in effect for a term of ten (10) years unless sooner
terminated.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan shall not
affect Awards already granted, and such Awards shall remain in full force and
effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon any
Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws. Any Award exercised
before shareholder approval is obtained shall be
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<PAGE> 13
rescinded if shareholder approval is not obtained within the time prescribed,
and Shares issued on the exercise of any such Award shall not be counted in
determining whether shareholder approval is obtained.
17. California Securities Laws. Notwithstanding the foregoing provisions of
the Plan, during such time as the Company is subject to Section 260.140 of Title
10 of the California Code of Regulations, the Plan shall be administered in
accordance with the following:
(a) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing sales price for a Share for the last
market trading day prior to the time of the determination (or, if no sales were
reported on that date, on the last trading date on which sales were reported) on
the stock exchange determined by the Administrator to be the primary market for
the Common Stock or the Nasdaq National Market, whichever is applicable or (B)
if the Common Stock is not traded on any such exchange or national market
system, the average of the closing bid and asked prices of a Share on the Nasdaq
Small Cap Market, in each case, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(ii) In the absence of an established market of the type described
in (i), above, for the Common Stock, the Fair Market Value thereof shall be
determined by the Administrator in good faith and in a manner consistent with
Section 260.140.50 of Title 10 of the California Code of Regulations.
(b) Stock Subject to the Plan. Subject to the provisions of Section 10,
above, the maximum aggregate number of Shares which may be issued pursuant to
all Awards (including Incentive Stock Options) is eight hundred thousand
(800,000) Shares.
(c) Plan Administrator. With respect to grants of Awards to Employees,
Directors, Officers or Consultants, the Plan shall be administered by (A) the
Board or (B) a Committee (or a subcommittee of the Committee) designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. The Board may
authorize one or more Officers to grant such Awards and may limit such authority
by requiring that such Awards must be reported to and ratified by the Board or a
Committee within six (6) months of the grant date, and if so ratified, shall be
effective as of the grant date.
(d) Term of Award. The term of each Award shall be the term stated in
the Award Agreement, provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to a Grantee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of
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<PAGE> 14
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Award Agreement.
(e) Non-Transferability of Awards. Awards may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Grantee, only by the Grantee.
(f) Exercise or Purchase Price. The exercise or purchase price, if any,
for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be not less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option:
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be not less than one hundred ten percent (110%) of
the Fair Market Value per Share on the date of grant.
(B) granted to any person other than a person described in the
preceding paragraph, the per Share exercise price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.
(iii) In the case of the sale of Shares:
(A) granted to a person who, at the time of the grant of such
Award, or at the time the purchase is consummated, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share purchase price shall be not
less than one hundred percent (100%) of the Fair Market Value per share on the
date of grant.
(B) granted to any person other than a person described in the
preceding paragraph, the per Share purchase price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.
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<PAGE> 15
(iv) In the case of other Awards, such price as is determined by
the Administrator.
(g) Consideration. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Administrator (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares (including withholding of Shares
otherwise deliverable upon exercise of the Award) which have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Award shall be exercised (but only to the extent that such
exercise of the Award would not result in an accounting compensation charge with
respect to the Shares used to pay the exercise price unless otherwise determined
by the Administrator);
(v) if the exercise or purchase occurs on or after the Registration
Date, delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Award and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
(h) Procedure for Exercise; Rights as a Shareholder.
(i) Any Award granted hereunder shall be exercisable at such times
and under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement, but in the case of an Option, in
no case at a rate of less than 20% per year over five (5) years from the date
the Option is granted.
(ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised has been received by the
Company. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to Shares subject
to an Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to
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<PAGE> 16
be issued) such stock certificate promptly upon exercise of the Award. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in the
Award Agreement or Section 10, above.
(i) Exercise of Award Following Termination of Employment, Director or
Consulting Relationship. In the event of termination of an Grantee's Continuous
Status as an Employee, Director or Consultant with the Company for any reason
other than disability or death (but not in the event of an Grantee's change of
status from Employee to Consultant or from Consultant to Employee), such Grantee
may, but only within the time period specified in the Award Agreement which time
period shall not be less than thirty days (30) after the date of such
termination (but in no event later than the expiration date of the term of such
Award as set forth in the Award Agreement), exercise his or her Award to the
extent that the Grantee was entitled to exercise it at the date of such
termination or to such other extent as may be determined by the Administrator.
If the Grantee should die within three (3) months after the date of such
termination, the Grantee's estate or the person who acquired the right to
exercise the Award by bequest or inheritance may exercise the Award to the
extent that the Grantee was entitled to exercise it at the date of such
termination within twelve (12) months of the Grantee's date of death, but in no
event later than the expiration date of the term of such Award as set forth in
the Award Agreement. In the event of an Grantee's change of status from Employee
to Consultant, an Employee's Incentive Stock Option shall convert automatically
to a Non-Qualified Stock Option on the ninety-first (91) day following such
change of status. If the Grantee does not exercise such Award to the extent so
entitled within the time specified herein, the Award shall terminate.
(j) Disability of Grantee. In the event of termination of an Grantee's
Continuous Status as an Employee, Director or Consultant as a result of his or
her disability, Grantee may, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Award as set forth in the Award Agreement), exercise the Award to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a
Non-Qualified Stock Option on the day three (3) months and one day following
such termination. To the extent that Grantee is not entitled to exercise the
Award at the date of termination, or if Grantee does not exercise such Award to
the extent so entitled within the time specified herein, the Award shall
terminate.
(k) Death of Grantee. In the event of the death of an Grantee, the
Award may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Award as
set forth in the Award Agreement), by the Grantee's estate or by a person who
acquired the right to exercise the Award by bequest or inheritance, but only to
the extent that the Grantee was entitled to exercise the Award at the date of
death. If, at the time of death, the Grantee was not entitled to exercise his or
her entire Award, the Shares covered by the unexercisable portion of the Award
shall immediately revert to the Plan. If, after death, the Grantee's estate or a
person who acquired the right to exercise the
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<PAGE> 17
Award by bequest or inheritance does not exercise the Award within the time
specified herein, the Award shall terminate.
(l) Repurchase Rights. If the provisions of an Award Agreement grant to
the Company the right to repurchase Shares upon termination of the Grantee's
Continuing Status as an Employee, Director or Consultant, the Award Agreement
shall provide that the repurchase price will be either:
(i) The higher of the original purchase price or Fair Market Value
on the date of termination of the Grantee's Continuous Status as an Employee,
Director or Consultant, if the right to repurchase must be exercised for cash or
cancellation of purchase money indebtedness for the Shares within ninety (90)
days of the termination of the Grantee's Continuous Status as an Employee,
Director or Consultant, and the right terminates when the Company's securities
become publicly traded; or
(ii) The original purchase price, provided (i) the right to
repurchase at the original purchase price lapses at the rate of at least twenty
percent (20%) per year over five (5) years from the date the Award is granted
(without respect to the date the Award was exercised or became exercisable),
which right must be exercised for cash or cancellation of purchase money
indebtedness for the Shares within ninety (90) days of termination of the
Grantee's Continuous Status as an Employee, Director or Consultant, and (ii) if
the repurchase right is assignable, the assignee must pay the Company upon
assignment of the right, (unless the assignee is a one hundred percent (100%)
owned subsidiary of the Company or is the parent of the Company owning one
hundred percent (100%) of the stock of the Company) cash equal to the difference
between the original purchase price and Fair Market Value if the original
purchase price is less than Fair Market Value.
(m) Corporate Transaction. Section 11, above, shall not apply and in
the event of a proposed Corporate Transaction, the Administrator shall notify
the Grantee at least fifteen (15) days prior to such proposed Corporate
Transaction and for each Award which is at the time outstanding under the Plan,
the Administrator, in its discretion, may provide for the acceleration of
vesting and release from any restrictions on transfer and repurchase or
forfeiture rights of any such outstanding Award. To the extent it has not been
previously exercised, the Award will terminate immediately prior to the
consummation of such proposed Corporate Transaction, unless the Award is assumed
or an equivalent Award is substituted by the successor corporation or a Parent
or Subsidiary of such successor corporation. For the purposes of this
subsection, the Award shall be considered assumed if, following the Corporate
Transaction, the Award confers, for each Share subject to the Award immediately
prior to the Corporate Transaction, (i) the consideration (whether stock, cash,
or other securities or property) received in the Corporate Transaction by
holders of Common Stock for each Share subject to the Award held on the
effective date of the Corporate Transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares), or (ii) the right to purchase such
consideration in the case of an Option or similar Award; provided, however, that
if such consideration received in the Corporate Transaction was not solely
common stock of the successor corporation or its Parent, the Administrator may,
with
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the consent of the successor corporation, provide for the consideration to be
received upon the exercise or exchange of the Award for each Share subject to
the Award to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the Corporate Transaction.
(n) Information to Grantees. The Company shall provide to each Grantee,
during the period for which such Grantee has one or more Awards outstanding,
copies of financial statements at least annually and all annual reports and
other information which is provided to all shareholders of the Company.
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<PAGE> 1
EXHIBIT 10.16
INFINITY FINANCIAL TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee
Stock Purchase Plan of Infinity Financial Technology, Inc.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Parents or Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Accrual Period" shall mean a period of approximately six
months, commencing on February 1 and August 1 of each year and terminating on
the next following January 31 or July 31, respectively; provided, however, that
the first Accrual Period shall commence on the Effective Date and shall end on
January 31, 1997.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Common Stock" shall mean the common stock of the Company.
(e) "Company" shall mean Infinity Financial Technology, Inc.,
a Delaware corporation.
(f) "Compensation" shall mean an Employee's base salary from
the Company or one or more Designated Parents or Subsidiaries, including such
amounts of base salary as are deferred by the Employee (i) under a qualified
cash or deferred arrangement described in Section 401(k) of the Code, or (ii) to
a plan qualified under Section 125 of the Code. Compensation does not include
overtime, bonuses, annual awards, other incentive payments, reimbursements or
other expense allowances, fringe benefits (cash or noncash), moving expenses,
deferred compensation, contributions (other than contributions described in the
first sentence) made on the Employee's behalf by the Company or one or more
Designated Parents or Subsidiaries under any employee benefit or welfare plan
now or hereafter established, and any other payments not specifically referenced
in the first sentence.
(g) "Corporate Transaction" shall mean any of the following
stockholder- approved transactions to which the Company is a party:
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(1) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the
principal purpose of which is to change the state in which the
Company is incorporated;
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the
capital stock of the Company's subsidiary corporations) in
connection with complete liquidation or dissolution of the
Company; or
(3) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person
or persons different from those who held such securities
immediately prior to such merger.
(h) "Designated Parents or Subsidiaries" shall mean the
Parents or Subsidiaries which have been designated by the Board from time to
time in its sole discretion as eligible to participate in the Plan.
(i) "Effective Date" shall mean the effective date of the
Registration Statement relating to the Company's initial public offering of its
Common Stock. However, should any Designated Parent or Subsidiary become a
participating company in the Plan after such date, then such entity shall
designate a separate Effective Date with respect to its employee- participants.
(j) "Employee" shall mean any individual who is engaged in the
rendition of personal services to the Company or a Designated Parent or
Subsidiary for Compensation. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right to
reemployment is not guaranteed either by statute or by contact, the employment
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave.
(k) "Enrollment Date" shall mean the first day of each
Purchase Period.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(m) "Exercise Date" shall mean the last day of each Accrual
Period.
(n) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing sales
price for a share of Common Stock for the last market trading
day prior to the time of the determination (or, if no sales
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were reported on that date, on the last trading date on which
sales were reported) on the stock exchange determined by the
Plan Administrator to be the primary market for the Common
Stock or the Nasdaq National Market, whichever is applicable
or (B) if the Common Stock is not traded on any such exchange
or national market system, the average of the closing bid and
asked prices of a share of Common Stock on the Nasdaq Small
Cap Market, in each case, as reported in The Wall Street
Journal or such other source as the Plan Administrator deems
reliable; or
(2) In the absence of an established market of the
type described in (1), above, for the Common Stock, the Fair
Market Value thereof shall be determined by the Plan
Administrator in good faith.
(o) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Participant" means an Employee of the Company or
Designated Parent or Subsidiary who is actively participating in the Plan.
(q) "Plan" shall mean this Employee Stock Purchase Plan.
(r) "Plan Administrator" shall mean either the Board or a
committee of the Board that is responsible for the administration of the Plan.
(s) "Purchase Period" shall mean a purchase period established
pursuant to paragraph 4 hereof.
(t) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(u) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
(w) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
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3. Eligibility.
(a) General. Any individual who is an Employee on a given
Enrollment Date shall be eligible to participate in the Plan for the Purchase
Period commencing with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the
Plan to the contrary notwithstanding, no Employee shall be granted an option
under the Plan (i) if, immediately after the grant, such Employee (taking into
account stock owned by any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any Parent or Subsidiary, or (ii) which permits his/her rights to purchase
stock under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding subparagraph
(a), above, the following Employees shall not be eligible to participate in the
Plan for any relevant Purchase Period: (i) Employees whose customary employment
is twenty (20) hours or less per week; (ii) Employees whose customary employment
is for not more than five (5) months in any calendar year; (iii) Employees who
have been employed for fewer than three (3) months; and (iv) Employees who are
subject to rules or laws of a foreign jurisdiction that prohibit or make
impractical the participation of such Employees in the Plan.
4. Purchase Periods.
(a) The Plan shall be implemented through overlapping or
consecutive Purchase Periods until such time as (i) the maximum number of shares
of Common Stock available for issuance under the Plan shall have been purchased
or (ii) the Plan shall have been sooner terminated in accordance with paragraph
19 hereof. The maximum duration of a Purchase Period shall be twenty-seven (27)
months. Initially, the Plan shall be implemented through overlapping Purchase
Periods of twenty-four (24) months' duration commencing each February 1 and
August 1 following the Effective Date (except that the initial Purchase Period
shall commence on the Effective Date and shall end on July 31, 1998). The Plan
Administrator shall have the authority to change the length of any Purchase
Period and the length of Accrual Periods within any such Purchase Period
subsequent to the initial Purchase Period by announcement at least thirty (30)
days prior to the commencement of the Purchase Period and to determine whether
subsequent Purchase Periods shall be consecutive or overlapping.
(b) A Participant shall be granted a separate purchase right
for each Purchase Period in which he/she participates. The purchase right shall
be granted on the Enrollment Date
4
<PAGE> 5
and shall be automatically exercised in successive installments on the Exercise
Dates ending within the Purchase Period.
(c) An Employee may participate in only one Purchase Period at
a time. Accordingly, except as provided in paragraph 4(d), an Employee who
wishes to join a new Purchase Period must withdraw from the current Purchase
Period in which he/she is participating and must also enroll in the new Purchase
Period prior to the Enrollment Date for that Purchase Period.
(d) If on the first day of any Accrual Period in a Purchase
Period in which a Participant is participating, the Fair Market Value of the
Common Stock is less than the Fair Market Value of the Common Stock on the
Enrollment Date of the Purchase Period (after taking into account any adjustment
during the Purchase Period pursuant to paragraph 18(a)), the Purchase Period
shall be terminated automatically and the Participant shall be enrolled
automatically in the new Purchase Period which has its first Accrual Period
commencing on that date, provided the Participant is eligible to participate in
the Plan on that date and has not elected to terminate participation in the
Plan.
(e) Except as specifically provided herein, the acquisition of
Common Stock through participation in the Plan for any Purchase Period shall
neither limit nor require the acquisition of Common Stock by a Participant in
any subsequent Purchase Period.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
at least fifteen (15) business days prior to the Enrollment Date for the
Purchase Period in which such participation will commence, unless a later time
for filing the subscription agreement is set by the Plan Administrator for all
eligible Employees with respect to a given Purchase Period.
(b) Payroll deductions for a Participant shall commence with
the first payroll period following the Enrollment Date and shall end on the last
complete payroll period during the Purchase Period, unless sooner terminated by
the Participant as provided in paragraph 10.
6. Payroll Deductions.
(a) At the time a Participant files his/her subscription
agreement, he/she shall elect to have payroll deductions made during the
Purchase Period in an amount not exceeding ten percent (10%) of the Compensation
which he/she receives during the Purchase Period.
(b) All payroll deductions made for a Participant shall be
credited to his/her account under the Plan and will be withheld in whole
percentages only. A Participant may not make any additional payments into such
account.
5
<PAGE> 6
(c) A Participant may discontinue his/her participation in the
Plan as provided in paragraph 10, or may decrease the rate of his/her payroll
deductions during the Purchase Period by completing or filing with the Company a
new subscription agreement authorizing a decrease in the payroll deduction rate.
The decrease in rate shall be effective with the first full payroll period
commencing ten (10) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A Participant may increase the rate of his/her
payroll deductions for a future Purchase Period by filing with the Company a new
subscription agreement authorizing an increase in the payroll deduction rate
within ten (10) business days (unless the Company elects to process a given
change in participation more quickly) before the commencement of the upcoming
Purchase Period. A Participant's subscription agreement shall remain in effect
for successive Purchase Periods unless terminated as provided in paragraph 10.
The Plan Administrator shall be authorized to limit the number of payroll
deduction rate changes during any Purchase Period.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and paragraph 3(b) herein, a
Participant's payroll deductions may be decreased to 0% at such time during any
Accrual Period which is scheduled to end during the current calendar year (the
"Current Accrual Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Accrual Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Accrual Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement at the beginning of the first Accrual Period which is scheduled to end
in the following calendar year, unless terminated by the Participant as provided
in paragraph 10.
7. Grant of Option. On the Enrollment Date, each Participant
in such Purchase Period shall be granted an option to purchase on each Exercise
Date of such Purchase Period (at the applicable Purchase Price) up to a number
of shares of the Common Stock determined by dividing such Participant's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price;
provided (i) that such purchase shall be subject to the limitations set forth in
paragraphs 3(b) and 12 hereof, and (ii) the maximum number of shares of Common
Stock a Participant shall be permitted to purchase in any Accrual Period shall
be two thousand (2,000) (POST-SPLIT) shares, subject to adjustment as provided
in paragraph 18 hereof. Exercise of the option shall occur as provided in
paragraph 8, unless the Participant has withdrawn pursuant to paragraph 10, and
the option, to the extent not exercised, shall expire on the last day of the
Purchase Period.
8. Exercise of Option. Unless a Participant withdraws from the
Plan as provided in paragraph 10, below, his/her option for the purchase of
shares will be exercised automatically on each Exercise Date, and the maximum
number of full shares subject to the option shall be purchased for such
Participant at the applicable Purchase Price with the accumulated payroll
deductions in his/her account. No fractional shares will be purchased; any
payroll deductions accumulated in a Participant's account which are not
sufficient to purchase a full share shall be carried over to the next Purchase
Period or returned to the Participant, if the
6
<PAGE> 7
Participant withdraws from the Plan. Any amount remaining in a Participant's
account following the purchase of shares on the Exercise Date which exceeds the
cost of one full share of Common Stock on the Exercise Date shall be returned to
the Participant and shall not be carried over to the next Purchase Period.
During a Participant's lifetime, a Participant's option to purchase shares
hereunder is exercisable only by him/her.
9. Delivery. Upon receipt of a request from a Participant
after each Exercise Date on which a purchase of shares occurs, the Company shall
arrange the delivery to such Participant, as appropriate, of a certificate
representing the shares purchased upon exercise of his/her option.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all the
payroll deductions credited to his/her account and not yet used to exercise
his/her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the Participant's payroll
deductions credited to his/her account will be paid to such Participant promptly
after receipt of notice of withdrawal, such Participant's option for the
Purchase Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Purchase Period.
If a Participant withdraws from a Purchase Period, payroll deductions will not
resume at the beginning of the succeeding Purchase Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an Employee for any
reason or upon termination of a Participant's employment relationship (as
described in paragraph 2(j)), the payroll deductions credited to such
Participant's account during the Purchase Period but not yet used to exercise
the option will be returned to such Participant or, in the case of his/her
death, to the person or persons entitled thereto under paragraph 14, and such
Participant's option will be automatically terminated.
11. Interest. No interest shall accrue on the payroll
deductions credited to a Participant's account under the Plan.
12. Stock.
(a) The maximum number of shares of Common Stock which shall
be made available for sale under the Plan shall be three hundred thousand
(300,000) shares, subject to adjustment upon changes in capitalization of the
Company as provided in paragraph 18. If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Plan Administrator shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) A Participant will have no interest or voting right in
shares covered by his/her option until such shares are actually purchased on the
Participant's behalf in accordance
7
<PAGE> 8
with the applicable provisions of the Plan. No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or in the name of the
Participant and his/her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all persons. Members of the
Board who are eligible Employees are permitted to participate in the Plan except
to the extent limited by subparagraph (b) of this paragraph 13.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
subparagraph (a), above, in the event that Rule 16b-3 provides specific
requirements for the administrators of plans of this type, the Plan shall be
administered only by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3.
14. Designation of Beneficiary.
(a) Each Participant will file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of such Participant's death.
If a Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
Participant (and his/her spouse, if any) at any time by written notice. In the
event of the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Plan Administrator),
the Plan Administrator, in its discretion, may deliver such shares and/or cash
to the spouse or to any one or more dependents or relatives of the Participant,
or if no spouse, dependent or relative is known to the Plan Administrator, then
to such other person as the Plan Administrator may designate.
15. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Plan Administrator may treat such act as an election to
withdraw funds from a Purchase Period in accordance with paragraph 10.
8
<PAGE> 9
16. Use of Funds. All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) Adjustments Upon Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the Reserves, as well as the
Purchase Price, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other similar event resulting in an increase or decrease in
the number of issued shares of Common Stock. Such adjustment shall be made by
the Plan Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option. The Plan Administrator may, if it so determines in the exercise of
its sole discretion, make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the event
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock.
(b) Corporate Transactions. In the event of a proposed
Corporate Transaction, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Plan Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Purchase Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Plan Administrator
shortens the Purchase Period then in progress in lieu of assumption or
substitution in the event of a Corporate Transaction, the Plan Administrator
shall notify each Participant in writing, at least ten (10) days prior to the
New Exercise Date, that the Exercise Date for his/her option has been changed to
the New Exercise Date and that his/her option will be exercised automatically on
the New Exercise Date, unless prior to such date he/she has withdrawn from the
Purchase Period as provided in paragraph 10. For purposes of this subparagraph,
an option granted under the Plan shall be deemed to be assumed if, following the
Corporate Transaction, the option confers the right to purchase, for each share
of Common Stock subject to the option immediately prior to the Corporate
Transaction, the consideration (whether stock, cash or other securities or
property) received in the Corporate Transaction by holders of Common Stock for
each share of Common stock held on the effective date of the Corporate
Transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
9
<PAGE> 10
shares of Common Stock); provided, however, that if such consideration received
in the Corporate Transaction was not solely common stock of the successor
corporation or its Parent, the Plan Administrator may, with the consent of the
successor corporation and the Participant, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Corporate Transaction.
19. Amendment or Termination.
(a) The Plan Administrator may at any time and for any reason
terminate or amend the Plan. Except as provided in paragraph 18, no such
termination can affect options previously granted, provided that a Purchase
Period may be terminated by the Plan Administrator on any Exercise Date if the
Plan Administrator determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in paragraph
18, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any Participant. To the extent necessary to
comply with Rule 16b-3 or Section 423 of the Code (or any successor rule or
provision or any other applicable law or regulation), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether
any Participant rights may be considered to have been "adversely affected," the
Plan Administrator shall be entitled to change the Purchase Periods, limit the
frequency and/or number of changes in the amount withheld during Purchase
Periods, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
Participant properly correspond with amounts withheld from the Participant's
Compensation, and establish such other limitations or procedures as the Plan
Administrator determines in its sole discretion advisable and which are
consistent with the Plan.
20. Notices. All notices or other communications by a
Participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Plan
Administrator at the location, or by the person, designated by the Plan
Administrator for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an option, the
10
<PAGE> 11
Company may require the Participant to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law. In addition, no options shall
be exercised or shares issued hereunder before the Plan shall have been approved
by stockholders of the Company as provided in paragraph 24.
22. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under paragraph 19.
23. Additional Restrictions of Rule 16b-3. The terms and
conditions of options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, such
options shall contain, and the shares issued upon exercise thereof shall be
subject to, such additional conditions and restrictions as may be required by
Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
24. Stockholder Approval. Continuance of the Plan shall be
subject to approval by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted. If such stockholder approval is
obtained at a duly held stockholders' meeting, the Plan must be approved by a
majority of the votes cast at such stockholders' meeting at which a quorum
representing a majority of all outstanding voting stock of the Company is,
either in person or by proxy, present and voting on the Plan. If such
stockholder approval is obtained by written consent, it must be obtained by the
written consent of the holders of a majority of all outstanding voting stock of
the Company. However, approval at a meeting or by written consent may be
obtained by a lesser degree of stockholder approval if the Plan Administrator
determines, in its discretion after consultation with the Company's legal
counsel, that such a lesser degree of stockholder approval will comply with all
applicable laws and will not adversely affect the qualification of the Plan
under Section 423 of the Code.
25. No Employment Rights. The Plan does not, directly or
indirectly, create any right for the benefit of any employee or class of
employees to purchase any shares under the Plan, or create in any employee or
class of employees any right with respect to continuation of employment by the
Company or a Designated Parent or Subsidiary, and it shall not be deemed to
interfere in any way with such employer's right to terminate, or otherwise
modify, an employee's employment at any time.
26. Effect of Plan. The provisions of the Plan shall, in
accordance with its terms, be binding upon, and inure to the benefit of, all
successors of each Participant, including, without limitation, such
Participant's estate and the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Participant.
11
<PAGE> 12
27. Applicable Law. The laws of the State of California will
govern all matters relating to this Plan except to the extent it is superseded
by the laws of the United States.
12
<PAGE> 13
EXHIBIT A
INFINITY FINANCIAL TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
___ Original Application Enrollment Date:_____________
___ Change in Payroll Deduction Rate
___ Change of Beneficiary(ies)
1. I,________________________, hereby elect to participate in
the Infinity Financial Technology, Inc., 1996 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribe to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in
the amount of ______% of my Compensation on each payday (not to exceed 10%)
during the Purchase Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that the payroll deductions shall be
accumulated for the purchase of shares of Common Stock at the applicable
Purchase Price determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from a Purchase Period, any accumulated
payroll deductions will be used to automatically exercise my option.
4. I have received a copy of the complete "Infinity Financial
Technology, Inc., 1996 Employee Stock Purchase Plan." I understand that my
participation in the Employee Stock Purchase Plan is in all respects subject to
the terms of the Plan. I understand that the grant of the option by the Company
under this Subscription Agreement is subject to obtaining stockholder approval
of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase
Plan should be issued in the name(s) of:
----------------------------
----------------------------
6. I understand that if I dispose of any shares received by me
pursuant to the Employee Stock Purchase Plan within 2 years after the Enrollment
Date (the first day of the Purchase Period during which I purchased such shares)
or within 1 year after the Exercise Date (the date I purchased such shares), I
will be treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess of the
fair market value of the shares at the time such shares were delivered to me
over the price which
A-1
<PAGE> 14
I paid for the shares. I hereby agree to notify the Company in writing within 30
days after the date of any such disposition and I will make adequate provision
for foreign, federal, state or other tax withholding obligations, if any which
arise upon the disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods described above, I
understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser
of (1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15% of
the fair market value of the shares on the first day of the Purchase Period. The
remainder of the gain, if any, recognized on such disposition will be taxed as
capital gain. I also understand that the foregoing income tax consequences are
based on current federal income tax law and that the Company is not responsible
for advising me of any changes in the applicable tax rules.
7. I hereby agree to be bound by the terms of the Employee
Stock Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Employee Stock Purchase
Plan.
8. In the event of my death, I hereby designate the following
as my beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan.
NAME: (Please print)
----------------------------------------------------
(First) (Middle) (Last)
Relationship:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Employee's Social
Security Number:
----------------------------------------------------
Employee's Address:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
A-2
<PAGE> 15
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE PURCHASE PERIODS UNLESS TERMINATED BY ME
Employee's Signature:
----------------------------------------------------
Dated:
----------------------------------------------------
Signature of spouse
if beneficiary is other
than spouse:
----------------------------------------------------
Dated:
----------------------------------------------------
A-3
<PAGE> 16
EXHIBIT B
INFINITY FINANCIAL TECHNOLOGY, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NOTICE OF WITHDRAWAL
The undersigned participant in the Purchase Period of the
Infinity Financial Technology, Inc., 1996 Employee Stock Purchase Plan which
began on _________________, 19___, hereby notifies the Company that he or she
hereby withdraws from the Purchase Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Purchase Period. The
undersigned understands and agrees that his or her option for such Purchase
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Purchase Period and the undersigned shall be eligible to participate
in succeeding Purchase Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address
of Participant:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Signature:
----------------------------------------------------
Date:
----------------------------------------------------
B-1
<PAGE> 1
Exhibit 10.17
INFINITY FINANCIAL TECHNOLOGY, INC
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of January __, 1994 among Infinity Financial
Technology, Inc., a California corporation (the "Company"), and the entities
listed on the Schedule of Purchasers attached hereto as Exhibit A (the
"Purchasers").
SECTION I
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1. AUTHORIZATION. The Company will authorize the sale and
issuance of up to 1,041,667 shares (the "Shares") of its Series C Preferred
Stock (the "Preferred"), having the rights, preferences, privileges and
restrictions as set forth in the Certificate of Amendment of Articles of
Incorporation (the "Certificate of Amendment") in the form attached to this
Agreement as Exhibit B.
1.2. SALE OF PREFERRED. Subject to the terms and conditions hereof,
at the Closing (as defined below) the Company will severally issue and sell to
each of such Purchasers, and the Purchasers will severally buy from the Company,
the total number of shares of Preferred specified opposite such Purchaser's name
on the Schedule of Purchasers, at the aggregate purchase price set forth on the
Schedule of Purchasers. The Company's agreements with each of the Purchasers are
separate agreements, and the sales of the Preferred to each of the Purchasers
are separate sales.
SECTION II
CLOSING DATE; DELIVERY
2.1. CLOSING DATE. The closing of the purchase and sale of the
Preferred hereunder shall be held at the offices of Morrison & Foerster, 755
Page Mill Road, Palo Alto, CA at __:00 a.m., local time, on January __, 1994
(the "Closing") or at such other time and place upon which the Company and the
Purchasers acquiring in the aggregate more than a majority of the Shares being
sold pursuant hereto shall agree (the date of the Closing is hereinafter
referred to as the "Closing Date").
2.2. DELIVERY. At the Closing, the Company shall deliver to each
Purchaser a certificate or certificates, registered in such Purchaser's name set
forth on the Schedule of Purchasers, representing the number of Shares
designated on the Schedule of Purchasers to be purchased by such Purchaser,
against payment of the purchase price therefor, by check payable to the Company
or wire transfer per the Company's instructions.
1
<PAGE> 2
SECTION III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit C attached hereto, the Company
represents and warrants to the Purchasers as follows:
3.1. ORGANIZATION AND STANDING; CERTIFICATE OF AMENDMENT AND
BY-LAWS. The Company is a corporation duly organized and existing under, and
by virtue of, the laws of the State of California and is in good standing under
such laws. The Company has requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as currently
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties. The Company has furnished the Purchaser's special counsel with
copies of its Certificate of Amendment and By-Laws, as amended. Said copies are
true, correct and complete and contain all amendments through the Closing Date.
3.2. CORPORATE POWER. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, the
Investor Rights Agreement in substantially the form attached hereto as Exhibit D
(the "Rights Agreement"), and the Shareholder Agreement in substantially the
form attached hereto as Exhibit E (the "Shareholder Agreement"), to sell and
issue the Shares hereunder, to issue the Common Stock issuable upon conversion
of the Shares, and to carry out and perform all of its obligations under the
terms of this Agreement and such other agreements and instruments.
3.3. SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise control, directly or indirectly, or have any
ownership interest in any corporation, partnership, business trust, association
or business entity.
3.4. CAPITALIZATION. The authorized capital stock of the Company
consists, or will, upon the filing of the Certificate of Amendment, consist, of
25,000,000 shares of Common Stock, $0.001 par value per share, of which
4,753,239 shares will be issued and outstanding immediately prior to the
Closing, and 5,000,000 shares of Preferred Stock, $0.001 par value per share, of
which 500,000 shares have been designated "Series A Preferred," all of which
shares will be issued and outstanding immediately prior to the Closing, of which
700,000 shares have been designated "Series B Preferred," all of which shares
shall be issued and outstanding immediately prior to the Closing, and of which
1,041,667 shares have been designated "Series C Preferred," none of which will
be issued and outstanding prior to the Closing. All outstanding shares have been
duly authorized and validly issued, are fully paid and nonassessable, were
issued in compliance with all federal and state securities laws, and were not
issued in violation of any preemptive rights. The Company has reserved 2,241,667
shares of Common Stock for issuance upon conversion of the authorized Series A
Preferred, Series B Preferred and Preferred and 2,546,761 shares of its Common
Stock for issuance to employees, consultants, or directors under stock plans or
arrangements approved by the Board of Directors. The Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Certificate of
Amendment. Except
1
<PAGE> 3
as set forth above, there are no other authorized or outstanding subscription,
warrant, option or other rights or commitments (including, without limitation,
preemptive rights or rights of first refusal) to purchase or acquire from the
Company any shares of any class of capital stock of the Company or securities
convertible into or exchangeable for such capital stock.
3.5. AUTHORIZATION. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement, the Rights Agreement and
the Shareholder Agreement by the Company, the authorization, sale, issuance and
delivery of the Shares and the Common Stock issuable upon conversion of the
Shares and the performance of all of the Company's obligations hereunder and
thereunder has been taken or will be taken prior to the Closing. Each of this
Agreement, the Rights Agreement and the Shareholder Agreement, when each is
executed and delivered by the Company, shall constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except that
the indemnification provisions of Section 5.7 of the Rights Agreement may be
limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Shares, when issued in compliance with the provisions of
this Agreement, will be validly issued, fully paid and nonassessable, and will
have the rights, preferences, privileges and restrictions described in the
Certificate of Amendment. The Common Stock issuable upon conversion of the
Shares has been duly and validly reserved and, when issued in compliance with
the provisions of this Agreement and the Certificate of Amendment will be
validly issued, fully paid and nonassessable. The issuance and delivery of the
Shares and such Common Stock issuable upon conversion thereof, as applicable, is
not subject to any preemptive or other similar rights or any liens or
encumbrances; provided, however, that the Shares, and such Common Stock issuable
upon conversion thereof, as applicable, may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein and in
the Rights Agreement.
3.6. FINANCIAL STATEMENTS. The Company has furnished to each
Purchaser its unaudited balance sheet at November 30, 1993 and the related
statements of operations, shareholders' equity and cash flows for the
eleven-month period ended November 30, 1993 (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles (except for the omission of footnotes) and fairly present
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the period then ended. Except for liabilities
and obligations that are accrued or reserved against in the Financial
Statements, the Company has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except liabilities and
obligations which (i) have been incurred in the ordinary course of business
subsequent to November 30, 1993 or (ii) arise under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements.
3.7. BUSINESS CONDITION. Since November 30, 1993, the Company has
not:
(a) incurred any absolute or contingent material
obligation by way of guaranty, endorsement, indemnity or warranty;
2
<PAGE> 4
(b) suffered any damage, destruction or loss, whether or
not covered by insurance, to any of its material assets;
(c) waived or compromised a material right or debt owed
to it;
(d) made any loan to its employees, officers or
directors, other than travel advances made in the ordinary course of business;
(e) entered into any contract or other arrangement
relating to compensation of the Company's employees, officers or directors;
(f) declared or paid any dividend or other distribution
of the assets of the Company;
(g) redeemed, repurchased, canceled, granted or issued or
effected any other change to any of the capital stock of the Company or options
to purchase the same; or
(h) entered into any agreement obligating the Company to
make payments exceeding $50,000 in any fiscal year.
3.8. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its material properties and assets, and has good
title to all its material leasehold interests, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge of any kind, other than the
lien of current taxes not yet due and payable. All leases pursuant to which the
Company leases real or personal property material to its business are valid and
effective in accordance with their respective terms, and there exists no
material default on the part of the Company thereunder.
3.9. COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in breach or violation of any term of its Certificate of
Amendment or By-Laws, of any term or provision of any mortgage, deed of trust,
indebtedness, indenture, contract, agreement, instrument, judgment or decree, or
any order, statute, rule or regulation, in each case where such breach or
violation would have a material adverse effect on the Company. No event or
failure of performance has occurred that, with the passage of time or the giving
of notice, would constitute such a breach or violation by the Company. The
execution, delivery and performance of and compliance with this Agreement, the
Rights Agreement and the Shareholder Agreement and the issuance, sale and
delivery of the Shares and the Common Stock issuable upon conversion of the
Shares do not conflict with, and will not result in a breach or violation of the
terms, conditions or provisions of, or constitute a default (or an event that,
with the giving of notice or passage of time, or both, could result in a
default) under, or result in the creation or imposition of any lien pursuant to
the terms of, the Company's Certificate of Amendment or By-Laws, or any statute,
law, rule or regulation, any state or federal order, judgment or decree, or any
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company, or any of its properties, is subject, in each case where such
conflict, breach, violation, default or lien would have a material adverse
effect on the Company.
3
<PAGE> 5
3.10. LITIGATION, ETC. There is no action, proceeding or
investigation pending or threatened (nor to the Company's knowledge is there a
reasonable basis therefor) against the Company or any of its properties or
assets or that questions the validity of this Agreement, the Rights Agreement or
the Shareholder Agreement, or any action taken or to be taken in connection
herewith. The foregoing includes, without limitation, actions pending or
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. No action, suit or
proceeding has been instituted or is threatened by the Company.
3.11. REGISTRATION RIGHTS. Except as set forth in the Rights
Agreement, the Company is not under any contractual obligation to register (as
defined in Section 1 of the Rights Agreement) any of its currently outstanding
securities or any of its securities which hereafter may be issued.
3.12. CERTAIN TRANSACTIONS. Neither the Company nor, to the
Company's knowledge, any of its officers has any interest (other than as holders
of less than 1% of the voting securities of a publicly-traded company), either
directly or indirectly, in any entity that currently (i) provides any services
or designs, produces or sells any products or product lines that are the same,
similar to or competitive with any activity or business in which the Company is
engaged or proposes to engage; (ii) is a supplier, customer, or creditor of the
Company; or (iii) has any direct or indirect interest in any asset or property,
real or personal, tangible or intangible, of the Company or any property, real
or personal, tangible or intangible, that is necessary for the Company's
business as currently conducted or proposed to be conducted. No employee,
shareholder, officer or director of the Company, or their spouses or children,
is indebted to the Company, nor is the Company indebted to any of them.
3.13. INTANGIBLE PROPERTY. To the best of the Company's knowledge
(but without having conducted any special investigation or patent search), the
Company owns and possesses or is licensed under all patents, patent
applications, licenses, trademarks, service marks, trade names, inventions,
processes and copyrights necessary for the operation of its business as
currently conducted or proposed to be conducted. The Company has not received
any communication alleging that the Company has infringed or is infringing any
third party's patent, moral right, trademark, trade secret, trade name or
copyright. To the Company's knowledge, none of the Company's officers or
employees has improperly used or is making improper use of any confidential
information or trade secrets of others, including those of any former employer
of such officer or employee. The Company is not aware of any violation by a
third party of any of its trademarks, trade names, service marks, copyrights,
trade secrets or other proprietary rights.
3.14. EMPLOYEES. The Company does not have any collective bargaining
agreements with any of its employees, and no labor union organizing activity is
pending or threatened with respect to the Company. All key employees have signed
an Employee Proprietary Information Agreement in substantially the form attached
hereto as Exhibit F. To the Company's knowledge, no employee is obligated under
any agreement or judgment that would conflict with such
4
<PAGE> 6
employee's obligation to use his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as currently
conducted or proposed to be conducted. To the Company's knowledge, no employee
is in violation of any term of any employment agreement, proprietary information
agreement, non-competition agreement or any other agreement relating to such
employee's relationship with any previous employer. To the Company's knowledge,
neither the execution nor delivery of this Agreement, the Rights Agreement or
the Shareholder Agreement nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any of such employees is now obligated. The Company does not believe it is
or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement.
3.15. INSURANCE. The Company has fire, casualty and liability
insurance policies sufficient in amount to allow it to replace any of its
material tangible properties that might be damaged or destroyed and adequate to
protect the Company and its financial condition against the risks involved in
the business of the Company.
3.16. SECURITIES LAWS; GOVERNMENTAL CONSENT. Based in part on the
accuracy of the Purchasers' representations and warranties set forth in Section
4, the offer, sale and issuance of the Shares as provided in this Agreement are
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 (the "Securities Act"). Except for the filing of (a) the
Certificate of Amendment with the Secretary of State of the State of California,
and (b) notices required or permitted to be filed after the Closing Date with
certain United States federal and state securities commissions, which notices
the Company will file on a timely basis, no consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution,
delivery and performance of this Agreement, the Rights Agreement or the
Shareholder Agreement, the offer, sale or issuance of the Shares (and the
issuance of the Common Stock issuable upon conversion of the Shares) or the
consummation of any other transaction contemplated hereby or by the Rights
Agreement or Shareholder Agreement.
3.17. CONTRACTS AND OTHER COMMITMENTS. The Company is not a party
to any:
(a) agreement for the purchase of fixed assets that
involves an expenditure by the Company in excess of $50,000 or for the purchase
of materials, supplies or equipment in excess of that amount;
(b) indenture, loan or credit agreement, note agreement,
deed of trust, mortgage, security agreement, promissory note or other agreement
or instrument relating to or evidencing indebtedness for borrowed money in
excess of $50,000 or subjecting any material asset or property of the Company to
any lien or evidencing any indebtedness;
5
<PAGE> 7
(c) guaranty of any indebtedness in excess of $50,000;
(d) lease or agreement under which the Company is lessee
of or holds or operates any property, real or personal, owned by any other
person under which payments to such person exceed $50,000 per year;
(e) lease or agreement under which the Company is lessor
or permits any person to hold or operate any property, real or personal, owned
or controlled by the Company under which payments to the Company exceed $50,000
per year;
(f) exclusive license agreement, either as licensor or
licensee, that is material to the Company's business; or
(g) agreement or other commitment or arrangement with any
person, outside of the ordinary course of business of the Company, continuing
for a period of more than three months from the Closing Date which involves an
expenditure or receipt by the Company in excess of $50,000.
3.18. DISCLOSURE. The Company has fully provided the Purchasers
with all the information that the Purchasers have requested for deciding whether
to purchase the Shares. This Agreement with the Exhibits hereto, when taken as
a whole, do not contain any untrue statement of a material fact on the part of
the Company or omit to state a material fact necessary in order to make the
statements contained herein on the part of the Company not misleading.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of the Shares as follows:
4.1. INVESTMENT EXPERIENCE. It is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares and the underlying Common Stock.
4.2. INVESTMENT INTENT. It is acquiring the Shares and the
underlying Common Stock for investment only for its own account, and not with
the view to, or for resale in connection with, any distribution thereof. It
understands that the Shares to be purchased and the underlying Common Stock have
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent of such Purchaser as expressed herein.
4.3. RULE 144. It acknowledges that the Shares and the underlying
Common Stock must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. It is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permits limited resale of shares purchased in a private
6
<PAGE> 8
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after the security was last held by the Company or an
affiliate of the Company, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" and the number of
shares being sold during any three-month period not exceeding specified
limitations.
4.4. NO PUBLIC MARKET. It understands that no
public market now exists for any of the securities issued by the Company, and
that the Company has made no assurances that a public market will ever exist for
the Company's securities.
4.5. ACCESS TO DATA. It has had an opportunity to
discuss the Company's business, management and financial affairs with the
Company's management and the opportunity to review the Company's facilities. It
has also had an opportunity to ask questions of officers of the Company, which
questions were answered to its satisfaction. It understands that such
discussions, as well as any written information issued by the Company were
intended to describe certain aspects of the Company's business and prospects
which the Company believes to be material, but were not a thorough or exhaustive
description, except as set forth in Section 3 hereof.
4.6. AUTHORIZATION. Each of this Agreement, the
Rights Agreement and the Shareholder Agreement when executed and delivered by
such Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except that the
indemnification provisions of Section 5.7 of the Rights Agreement may be limited
by principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
4.7. ACCREDITED INVESTOR. It is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect.
SECTION V
CONDITIONS TO CLOSING
5.1. .1 CONDITIONS TO BOTH THE PURCHASERS' AND THE
COMPANY'S OBLIGATIONS. The obligations of the Purchasers to purchase and of the
Company to issue and sell the Shares at the Closing are subject to the
fulfillment, on or prior to the Closing Date, of all of
2
<PAGE> 9
the following conditions, any of which may be waived in whole or in part by
mutual agreement of the Purchasers and the Company:
(a) The Company shall have obtained all
consents, permits and waivers necessary or appropriate on the part of the
Company for consummation of the transactions contemplated by this Agreement, the
Rights Agreement and the Shareholder Agreement. Except for the notices required
to be filed after the Closing Date with certain federal and state securities
commissions, which notices the Company will file on a timely basis, the Company
shall have obtained all approvals of any federal or state governmental authority
or regulatory body that are required on the part of the Company in connection
with the lawful sale and issuance of the Shares and the Common Stock issuable
upon conversion of the Shares.
(b) At the Closing, the purchase of the Shares
by the Purchasers hereunder shall be legally permitted by all laws and
regulations to which the Purchasers or the Company is subject.
(c) The Certificate of Amendment shall have been
filed with the Secretary of State of the State of California.
(d) The Company and the Purchasers shall have
entered into the Rights Agreement.
(e) The Company, the Purchasers and the shareholders
named in the Shareholder Agreement shall have entered into the Shareholder
Agreement.
(f) The Company, Harpal Sandhu, Robin Vasan and
Rodger Lang shall have entered into an Agreement, substantially in the form
attached hereto as Exhibit H.
5.2. .2 ADDITIONAL CONDITIONS TO THE PURCHASERS'
OBLIGATIONS. In addition to the conditions set forth in Section 5.1 hereof,
each Purchaser's obligation to purchase the Shares is subject to the
fulfillment, on or prior to the Closing Date, of all of the following
conditions, any of which may be waived in whole or in part by such Purchaser:
(a) The representations and warranties made by
the Company in Section 3 hereof shall be true and correct when made, and shall
be true and correct on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
(b) The Company shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing Date.
(c) The Purchasers shall have received from
Morrison & Foerster, counsel to the Company, an opinion letter addressed to them
and dated the Closing Date, in substantially the form attached hereto as Exhibit
G.
3
<PAGE> 10
(d) The Company shall have delivered to the
Purchasers a certificate, executed by an officer of the Company and dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1(a), 5.2(a) and 5.2(b).
(e) The directors of the Company shall be
Messrs. Lang, Leone and Marston, and there shall be two (2) vacancies on the
Board of Directors.
5.3. .3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. In
addition to the conditions set forth in Section 5.1 hereof, the Company's
obligation to issue and sell the Shares to each Purchaser is subject to the
fulfillment to the Company's satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived in whole or in part by the
Company:
(a) The representations and warranties made by
such Purchaser in Section 4 hereof shall be true and correct when made, and
shall be true and correct on the Closing Date with the same force and effect as
if they had been made on and as of the Closing Date.
(b) Such Purchaser shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing Date.
(c) Such Purchaser shall have paid the consideration
for the Shares to be sold to such Purchaser as set forth on Exhibit A hereto.
SECTION VI
MISCELLANEOUS
6.1. .1 GOVERNING LAW. This Agreement shall be
governed in all respects by the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
6.2. .2 SURVIVAL. The representations,
warranties, covenants and agreements made herein shall survive any investigation
made by the Purchaser and the closing of the transactions contemplated hereby.
6.3. .3 SUCCESSORS AND ASSIGNS. Except as
otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
4
<PAGE> 11
6.4. .4 ENTIRE AGREEMENT; AMENDMENT. This
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof. Neither this Agreement nor any provision hereof may be
amended, changed, waived, discharged or terminated other than by a written
5
<PAGE> 12
instrument signed by the party against whom enforcement of any such amendment,
change, waiver, discharge or termination is sought; provided, however, that
holders of at least fifty percent (50%) of the outstanding Shares (or Common
Stock issued upon conversion of the Shares or a combination thereof) may waive
or amend, on behalf of all Purchasers and other holders of Shares, any
provisions hereof benefitting the Purchasers so long as the effect thereof will
be that all such Purchasers and other holders of Shares will be treated equally.
6.5. VI.5 NOTICES, ETC. All notices and other
communications required or permitted hereunder shall be effective upon receipt
and shall be in writing and may be delivered in person, by telecopy, electronic
mail, express delivery service or U.S. mail, in which event it may be mailed by
first-class, certified or registered, postage prepaid, addressed (a) if to a
Purchaser, at the address set forth on Exhibit A or at such other address as
such Purchaser shall have furnished the Company in writing, or (b) if to the
Company, at 2001 Landings Drive, Mountain View, California 94043, or at such
other address as the Company shall have furnished to the Purchaser in writing.
6.6. VI.6 SEVERABILITY. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.7. VI.7 FINDER'S FEES.
(a) The Company (i) represents and warrants that
it has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company, or any of its employees or representatives, is
responsible.
(b) Each Purchaser (i) represents and warrants
that it has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Company and the other Purchasers harmless of and from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which such Purchaser, or any of its
employees or representatives, is responsible.
6.8. VI.8 CALIFORNIA CORPORATE SECURITIES LAW. THE
SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT MAY NOT HAVE BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF
6
<PAGE> 13
SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
6.9. .9 TITLES AND SUBTITLES. The titles of the
Articles and Sections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement.
6.10. .10 COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
6.11. .11 DELAYS OR OMISSIONS. It is agreed that no
delay or omission to exercise any right, power or remedy accruing to any party
upon any breach or default of any other party under this Agreement shall impair
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein, or of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character of any breach or default under this Agreement,
or any waiver of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in
writing, and that all remedies, either under this Agreement, by law or
otherwise, shall be cumulative and not alternative.
6.12. .12 PAYMENT OF FEES AND EXPENSES. Each party
shall be responsible for paying its own fees, costs and expenses in connection
with this Agreement and the transactions herein contemplated; provided, however,
that if the Closing is effected, the Company agrees to pay at the Closing the
reasonable fees and expenses of special counsel to the Purchasers in an amount
not to exceed $7,500.00.
7
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first written above.
INFINITY FINANCIAL TECHNOLOGY, INC.
By:________________________________
Title:_____________________________
PURCHASER:
SEQUOIA CAPITAL GROWTH FUND
SEQUOIA TECHNOLOGY PARTNERS III
By:________________________________
Title:_____________________________
8
<PAGE> 15
EXHIBIT A
SCHEDULE OF SERIES C PURCHASERS
<TABLE>
<CAPTION>
Number of Aggregate
Shares Purchase
Name and Address Purchased Price
---------------- --------- ---------
<S> <C> <C>
Sequoia Capital Growth Fund 979,167 $ 1,651,267
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Sequoia Technology Partners III 62,500 $ 105,400
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
</TABLE>
9
<PAGE> 16
INFINITY FINANCIAL TECHNOLOGY, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
January __, 1994
10
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 - Authorization and Sale of Preferred Stock........................................................... 1
1.1 Authorization............................................................................. 1
1.2 Sale of Preferred......................................................................... 1
SECTION 2 - Closing Dates; Delivery............................................................................. 1
2.1 Closing Date.............................................................................. 1
2.2 Delivery.................................................................................. 1
SECTION 3 - Representations and Warranties of the Company....................................................... 2
3.1 Organization and Standing; Certificate of Amendment and By-Laws........................... 2
3.2 Corporate Power........................................................................... 2
3.3 Subsidiaries.............................................................................. 2
3.4 Capitalization............................................................................ 2
3.5 Authorization............................................................................. 3
3.6 Financial Statements...................................................................... 3
3.7 Business Condition........................................................................ 4
3.8 Title to Properties and Assets; Liens, etc................................................ 4
3.9 Compliance with Other Instruments, None Burdensome, etc................................... 4
3.10 Litigation, etc........................................................................... 5
3.11 Registration Rights....................................................................... 5
3.12 Certain Transactions...................................................................... 5
3.13 Intangible Property....................................................................... 6
3.14 Employees................................................................................. 6
3.15 Insurance................................................................................. 6
3.16 Securities Laws; Governmental Consent..................................................... 7
3.17 Contracts and Other Commitments........................................................... 7
3.18 Disclosure................................................................................ 8
SECTION 4 - Representations and Warranties of the Purchasers.................................................... 8
4.1 Investment Experience..................................................................... 8
4.2 Investment Intent......................................................................... 8
4.3 Rule 144.................................................................................. 8
4.4 No Public Market.......................................................................... 9
4.5 Access to Data............................................................................ 9
4.6 Authorization............................................................................. 9
4.7 Accredited Investor....................................................................... 9
</TABLE>
1
<PAGE> 18
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5 - Conditions to Closing............................................................................... 9
5.1 Conditions to Both the Purchasers' and the Company's Obligations......................... 9
5.2 Additional Conditions to the Purchasers' Obligations...................................... 10
5.3 Additional Conditions to Obligations of the Company....................................... 11
SECTION 6 - Miscellaneous....................................................................................... 11
6.1 Governing Law............................................................................. 11
6.2 Survival.................................................................................. 11
6.3 Successors and Assigns.................................................................... 11
6.4 Entire Agreement; Amendment............................................................... 11
6.5 Notices, etc.............................................................................. 12
6.6 Severability.............................................................................. 12
6.7 Finder's Fees............................................................................. 12
6.8 California Corporate Securities Law....................................................... 12
6.9 Titles and Subtitles...................................................................... 13
6.10 Counterparts.............................................................................. 13
6.11 Delays or Omissions....................................................................... 13
6.12 Payment of Fees and Expenses.............................................................. 13
EXHIBITS
A Schedule of Purchasers
B Certificate of Amendment of Articles of Incorporation
C Schedule of Exceptions
D Investor Rights Agreement
E Shareholder Agreement
F Proprietary Information and Rights Agreement
G Opinion of Counsel
</TABLE>
2
<PAGE> 1
EXHIBIT 11.1
INFINITY FINANCIAL TECHNOLOGY, INC.
COMPUTATION OF NET INCOME PER SHARE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net income................................... $ 717 $ 1,641 $ 3,449 $ 1,789 $ 2,483
Series B preferred stock redemption.......... (1,276)
----- ----- ----- ----- -----
Net income attributable to
common stockholders........................ $ 717 $ 1,641 $ 2,173 $ 1,789 $ 2,483
===== ===== ===== ===== =====
Primary:
Weighted average common
shares outstanding:........................ 8,845 9,578 11,115 10,528 12,365
Common stock equivalents:
Preferred stock using the as if converted
method.................................. 1,000 2,910 3,083 3,083 3,083
Stock options using the treasury stock
method.................................. 1,121 1,824 2,164 2,200 2,075
Shares related to staff accounting bulletin
topic 4D:
Shares of common stock.................. 770 770 770 770 770
Stock options........................... 1,272 1,272 1,272 1,272 1,272
----- ----- ----- ----- -----
Shares used in computing net income per
share...................................... 13,008 16,354 18,404 17,853 19,565
===== ===== ===== ===== =====
Net income per share......................... $ 0.06 $ 0.10 $ 0.12 $ 0.10 $ 0.13
===== ===== ===== ===== =====
Fully diluted:
Weighed average common
shares outstanding:........................ 8,845 9,578 11,115 10,528 12,365
Common stock equivalents:
Preferred stock using the as if converted
method.................................. 2,400 4,310 3,083 4,483 3,083
Stock options using the treasury stock
method.................................. 1,229 1,936 2,236 2,311 2,096
Shares related to staff accounting bulletin
topic 4D:
Shares of common stock.................. 770 770 770 770 770
Stock options........................... 1,272 1,272 1,272 1,272 1,272
----- ----- ----- ----- -----
Shares used in computing net income per
share...................................... 14,516 17,866 18,476 19,364 19,586
===== ===== ===== ===== =====
Net income per share......................... $ 0.05 $ 0.09 $ 0.12 $ 0.09 $ 0.13
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) For an explanation of the number of shares used to compute net income per
share, see Note 1 of Notes to Consolidated Financial Statements.
<PAGE> 1
Exhibit 21.1
List of Registrant's Material Subsidiaries
1. Infinity International Support, Inc.
Jurisdiction of Incorporation; California.
2. Infinity Financial Technology, Inc. K.K.
Jurisdiction of Incorporation: Japan.
3. Infinity Financial Technology U.K., Ltd.
Jurisdiction of Incorporation: England.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1995 AND JUNE 30, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 3,517 1,905
<SECURITIES> 0 0
<RECEIVABLES> 6,862 12,311
<ALLOWANCES> 195 120
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,984 15,443
<PP&E> 2,371 3,386
<DEPRECIATION> 922 1,242
<TOTAL-ASSETS> 12,848 17,999
<CURRENT-LIABILITIES> 6,712 9,390
<BONDS> 0 0
1,053 1,053
0 0
<COMMON> 1,570 2,340
<OTHER-SE> 3,143 4,994
<TOTAL-LIABILITY-AND-EQUITY> 12,848 17,999
<SALES> 24,738 17,947
<TOTAL-REVENUES> 24,738 17,947
<CGS> 2,915 1,865
<TOTAL-COSTS> 2,915 1,865
<OTHER-EXPENSES> 16,147 12,021
<LOSS-PROVISION> 195 120
<INTEREST-EXPENSE> 160 142
<INCOME-PRETAX> 5,707 4,004
<INCOME-TAX> 2,258 1,521
<INCOME-CONTINUING> 3,449 2,483
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,449 2,483
<EPS-PRIMARY> 0.12 0.13
<EPS-DILUTED> 0.12 0.13
</TABLE>
