<PAGE>
As filed with the Securities and Exchange Commission on June 25, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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DIGITAL INSIGHT CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 7375 77-0493142
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
26025 Mureau Road
Calabasas, CA 91302
(818) 871-0000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
John Dorman
Chairman of the Board, Chief Executive Officer and President
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91302
(818) 871-0000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
Steven E. Bochner Brooks Stough
Jeffrey A. Herbst Jay K. Hachigian
Susan P. Krause John F. Dietz
Joseph A. Pierce Gunderson Dettmer Stough
Wilson Sonsini Goodrich & Rosati Villeneuve Franklin & Hachigian, LLP
Professional Corporation 155 Constitution Drive
650 Page Mill Road Menlo Park, CA 94025
Palo Alto, CA 94304 (650) 321-2400
(650) 493-9300
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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,
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
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<S> <C> <C>
Common stock, $0.001 par value.................. $59,500,000 $16,541
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
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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, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities, and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued , 1999
Shares
[DIGITAL INSIGHT LOGO]
COMMON STOCK
-----------
Digital Insight is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be between $ and
$ per share.
-----------
We have filed an application for the common stock to be quoted on the Nasdaq
National Market under the symbol "DGIN."
-----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.
-----------
PRICE $ A SHARE
-----------
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<CAPTION>
Underwriting Proceeds
Price Discounts to
to and Digital
Public Commissions Insight
------ ------------ --------
<S> <C> <C> <C>
Per Share.......................................... $ $ $
Total.............................................. $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Digital Insight has granted the underwriters the right to purchase up to an
additional shares of common stock to cover over-allotments. Morgan
Stanley & Co. Incorporated expects to deliver the shares of common stock to
purchasers on , 1999.
-----------
MORGAN STANLEY DEAN WITTER
DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC
FRIEDMAN BILLINGS RAMSEY
, 1999
<PAGE>
[Artwork incorporating Digital Insight's logo and depicting its core product
offerings]
[One to two sentence statement summarizing Digital Insight's business offering
and value proposition]
[Short textual descriptions of current core business offerings and other
business strengths, including web site development, AXIS(TM) Home Banking and
AXIS(TM) Cash Management]
[Digital Insight logo followed by phrase "Beyond Internet Banking"]
[Short textual descriptions of Digital Insight's current products, product
features and business strategy]
<PAGE>
TABLE OF CONTENTS
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Page
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<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
</TABLE>
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<CAPTION>
Page
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<S> <C>
Business................................................................... 29
Management................................................................. 42
Certain Transactions....................................................... 51
Principal Stockholders..................................................... 53
Description of Capital Stock............................................... 55
Shares Eligible for Future Sale............................................ 57
Underwriters............................................................... 59
Legal Matters.............................................................. 60
Experts.................................................................... 61
Additional Information..................................................... 61
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock.
Until , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
We were incorporated in Delaware on March 18, 1997, and are the successor to
Digital Insight LLC, a Minnesota limited liability company established in
1995. "We," "our" and "us" refers to Digital Insight Corporation and Digital
Insight LLC unless the context requires otherwise. Our principal executive
offices are located at 26025 Mureau Road, Calabasas, California 91302, and our
telephone number is (818) 871-0000. Our fiscal year ends on December 31. We
maintain a worldwide web site at www.DigitalInsight.com. The information on
our web site is not incorporated by reference into this prospectus. We have
filed an application to register Digital Insight as our trademark. All other
names or trademarks appearing in this prospectus are the property of their
respective holders.
Unless otherwise indicated, all information in this prospectus:
. gives effect to the conversion of 3,951,419 outstanding shares of
preferred stock into shares of common stock effective upon the closing
of the offering;
. assumes no exercise of the underwriters' over-allotment option; and
. assumes no exercise of outstanding warrants to purchase 51,041 shares of
our common stock.
3
<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the more detailed information
regarding Digital Insight and the common stock being sold in this offering and
the financial statements and notes thereto appearing elsewhere in this
prospectus.
DIGITAL INSIGHT CORPORATION
Digital Insight is the leading provider of real time Internet banking
services to community financial institutions with assets of less than $10
billion. Over 380 of these institutions, including credit unions, small to mid-
sized banks and savings and loans, have contracted with us for one or more of
our products and services. We offer our customers a cost-effective, outsourced
service, branded in their name, which enables them to provide Internet banking
to their individual and small business customers. With our consumer product,
individuals can use the Internet to manage their accounts, transfer funds, pay
bills, complete online loan applications, check stock quotes and utilize other
services. Our small business product provides similar features, as well as the
ability to initiate payroll/direct deposits, make wire transfers and perform
other services. Our products can interface with leading personal financial
management and small business accounting software. To enable financial
institutions to sell additional financial services, we offer target marketing
programs. We also provide customized web site design, implementation,
maintenance and hosting services.
Financial institutions, businesses and individuals are increasingly embracing
the Internet as a means to conduct financial transactions 24 hours a day.
International Data Corporation estimates that the number of financial
institutions offering online banking services will increase from 1,150 in 1998
to 15,845 by 2003, and that these services will be offered primarily via the
Internet. However, while over 50% of the largest 100 banks in the United States
offer Internet banking, only 5% of community financial institutions do,
according to Online Banking Report and International Data Corporation,
respectively. In order to retain customers and remain competitive with larger
institutions, community financial institutions are under pressure to provide
Internet banking to their customers. We therefore see a large market
opportunity to deliver an outsourced Internet banking service that meets the
needs of the approximately 22,000 community financial institutions in the
United States.
We provide community financial institutions a customized, outsourced Internet
solution that can be rapidly and cost-effectively installed and is scalable and
secure. Additionally, our solution can interface in real time with the core
data processing systems of these institutions. This capability allows
transactions conducted on the web site to be posted immediately on the
financial institution's core system, and vice versa. To this end, we have
developed real time interfaces with 21 of the leading data processing vendors,
so that when we install our solution for a new customer supported by one of
these vendors, the product implementation is rapidly completed.
We generate revenues from our financial institution customers in the form of
implementation fees for establishing their Internet banking services, and
recurring service fees based on end user adoption and web site maintenance. An
increasing percentage of our revenues, approximately 79% in the quarter ended
March 31, 1999, comes from recurring monthly service fees. As of May 31, 1999,
we had contracted for home banking with financial institutions that have
approximately 8.8 million potential end users. Of these, over 382,000 were
actively using our home banking application, with active enrollment increasing
by more than 148% over the past twelve months.
Digital Insight was among the first companies to create an Internet banking
solution for community financial institutions. We intend to leverage our
leading market position to continue to increase the number of financial
institutions using our products and services, and to increase the adoption of
our solution by end users within those institutions. We are also continuing to
develop interfaces with data processing vendors in order to serve the broadest
possible base of financial institutions. Finally, by broadening our product and
service offerings, we intend to attract additional traffic onto our network of
community financial institutions and business partners and create the potential
for new e-commerce revenue sources for Digital Insight and our customers.
4
<PAGE>
THE OFFERING
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<S> <C>
Common stock offered............................ shares
Common stock to be outstanding after this
offering....................................... shares
Use of proceeds................................. For general corporate purposes,
including working capital and capital
expenditures. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.......... DGIN
</TABLE>
The foregoing information is based upon shares outstanding as of May 31, 1999
and excludes:
. 1,890,134 shares of common stock subject to outstanding options at May
31, 1999, at a weighted average exercise price of $1.74;
. 1,784,482 shares of common stock that have been set aside for future
stock options;
. 300,000 shares of common stock that have been set aside for our employee
stock purchase plan; and
. 51,041 shares of common stock issuable upon exercise of outstanding
warrants, at a weighted average exercise price of $3.13.
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from Three Months
July 17, 1995 Year Ended December 31, Ended March 31,
(inception) through ------------------------- ----------------
December 31, 1995 1996 1997 1998 1998 1999
------------------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 88 $ 1,561 $ 3,972 $ 8,230 $ 1,559 $ 3,165
Gross profit............ (54) 657 1,741 2,960 698 1,184
Loss from operations.... (315) (717) (2,538) (4,599) (747) (1,510)
Net loss................ (315) (712) (2,452) (4,356) (761) (1,474)
Basic and diluted net
loss per share......... $(.06) $ (.14) $ (.49) $ (.85) $ (.15) $ (.28)
Shares used to compute
basic and diluted net
loss per share......... 5,000 5,000 5,000 5,108 5,000 5,332
Pro forma basic and
diluted net loss per
share.................. $ (.50) $ (.16)
Shares used in computing
pro forma basic and
diluted net loss
per share.............. 8,712 9,283
</TABLE>
The pro forma basic and diluted share calculations above and the "pro forma"
column below reflect the conversion upon the closing of the offering of all
outstanding shares of preferred stock into 3,951,419 shares of common stock as
if the conversion occurred at the date of original issuance.
The "as adjusted" column below reflects our sale of shares of common stock in
this offering at an assumed initial public offering price of $ per share
and the application of the net proceeds, after deducting underwriting discounts
and commissions and estimated offering expenses payable by us, as described in
"Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 1999
---------------------------
Pro
Actual Forma As Adjusted
------- ------ -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 3,923 $3,923 $
Working capital................................... 1,741 1,741
Total assets...................................... 8,548 8,548
Total liabilities................................. 3,860 3,860
Mandatorily redeemable convertible preferred
stock............................................ 12,444 --
Total stockholders' equity (deficit) ............. (7,756) 4,688
</TABLE>
5
<PAGE>
RISK FACTORS
This offering and an investment in our common stock involve a high degree of
risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to
any of these risks, and you may lose part or all of your investment.
We Have a History of Losses and Our Business is Difficult to Evaluate Because
Our Operating History Is Limited
We began operations in July 1995. We incurred net losses of $712,000 in the
year ended December 31, 1996, $2.5 million in the year ended December 31, 1997
and $4.4 million in the year ended December 31, 1998. As of March 31, 1999, we
had an accumulated deficit of $9.3 million. We plan to increase our operating
expenses to expand our sales and marketing operations, broaden our customer
support capabilities and build our operational infrastructure. If growth in
our revenues does not outpace the increase in these expenses, our business,
results of operations and financial condition would be materially adversely
affected. In addition, we expect that we will continue to lose money at least
through 2001, and we may never achieve or sustain profitability. If we do
achieve profitability in some future period, we cannot be certain that we will
be able to sustain profitability on a quarterly or annual basis.
Our limited operating history and history of losses makes prediction of
future results difficult. Future operating results will depend on many
factors, including:
.the growth of the market for Internet banking solutions by community
financial institutions;
. the demand for our products, product enhancements and services by
community financial institutions and their end user customers;
. the introduction, timing and pricing of our products and services and
those of our competitors;
. the expansion and rate of success of our direct sales force;
. the attraction and retention of key personnel, particularly in our
sales, product development, services and support groups;
. our ability to maintain and increase the number of our interfaces to
data processing core banking systems; and
. the timing and successful integration of, and costs related to,
technologies and businesses that we may acquire in the future.
Our Operating Results May Fluctuate, Which May Adversely Affect Our Stock
Price
Our operating results may fluctuate in the future due to a variety of
factors, including:
. the overall level of demand for Internet banking services by consumers
and businesses and the demand for our products, product enhancements and
services in particular;
. spending patterns and budgetary resources of community financial
institutions and their end user customers;
. technical difficulties, system downtime, system failures or reductions
in service levels;
. the timing of upgrades to our computer hardware infrastructure;
. increases in operating costs beyond anticipated levels;
. the timing of customer product implementations or our failure to timely
complete scheduled product implementations;
6
<PAGE>
. delays in purchasing decisions or product implementations or decreases
in demand for Internet banking by financial institutions due to year
2000 concerns; and
. governmental actions affecting Internet operations or content.
The implementation and utilization of our products involves a commitment of
resources and recurring expense by us and our customers. Among other things,
we generally provide a significant level of education to prospective customers
regarding the use and benefits of our products. We may expend substantial
funds and management resources during the sales cycle and fail to make the
sale. Accordingly, our results of operations for a particular period may be
adversely affected if the sales forecasted for that period are delayed or do
not otherwise occur.
Due to the foregoing factors, we believe that period-to-period comparisons
of our operating results should not be relied upon as an indicator of our
future performance. In some future period our operating results may be below
the expectations of public market analysts or investors. If this occurs, the
price of our common stock would likely decrease.
We Currently Rely on One Data Center to Provide All of Our Internet Banking
Products and Services
In the event of a failure or interruption in our systems, our reputation
could be materially adversely harmed and we could lose many of our current and
potential customers. All of our communications and network equipment is
currently located at our corporate headquarters in Calabasas, California. We
do not have backup facilities to provide Internet services if this facility is
not functioning. A natural disaster, such as fire, earthquake or flood, or
other unanticipated problems at our Internet data centers could result in
failures or interruptions in providing our Internet banking products and
services to our customers, which could have a material adverse effect on our
business, financial condition and results of operations. For example, in April
1999, a failure of a critical router in our Internet banking data center
caused an outage of approximately six hours while the problem was corrected.
In addition, we have contracted to provide a certain level of service to our
customers and a failure or interruption of our system has in the past caused
and in the future could cause us to refund fees to some of our customers to
compensate for decreased levels of service. We have contracted to establish a
second functional Internet banking data center in Herndon, Virginia, but that
data center is not scheduled to be fully operational until the fourth quarter
of 1999. We cannot assure that this data center will become operational as
scheduled or that, when operational, this data center will perform as
expected. Even with the second data center, we could experience a failure or
interruption in the Internet products and services that we provide.
We Are Dependent on the Widespread Adoption of Internet Banking by Community
Financial Institutions
We expect that we will continue to depend on Internet banking products and
services for substantially all of our revenues in the foreseeable future.
However, the market for Internet banking has only recently begun to develop.
We cannot predict the size of the market for Internet banking by community
financial institutions, the rate at which that market will grow, or whether
there will be widespread end user acceptance of Internet banking products and
services such as ours. Internet banking has developed slowly to date within
financial institutions, and purchasing decisions for Internet banking products
are often delayed due to uncertainties relating to cost, return on investment
and customer acceptance. In particular, community financial institutions have
been slower to adopt Internet banking than larger banks. Accordingly, if the
market for Internet banking by community financial institutions fails to grow,
grows more slowly than anticipated, or becomes saturated with competitors, our
business, financial condition and results of operations would be materially
adversely affected.
We Depend on the Efficient Operation of the Internet, Other Networks and
Systems of Third Parties
We depend on the efficient operation of network connections from our
customer financial institutions and their data processing vendors to our
systems. Further, portions of our revenue are dependent on continued usage by
end users of Internet banking services and their connections to the Internet.
Each of these connections depends
7
<PAGE>
on the efficient operation of web browsers, Internet service providers and
Internet backbone service providers, all of which have had periodic
operational problems or have experienced outages. In addition, the majority of
our services depend on real time connections to the systems of financial
institutions and data processing vendors. Any operational problems or outages
in these systems would cause us to be unable to provide a real time connection
to these systems and we would be unable to process transactions for end users,
resulting in decreased revenues.
We Derive Substantially All of Our Revenues from Home Banking Products and
Services
To date, substantially all of our revenues have been attributable to fees
generated from our home banking products and services, and we expect to be
dependent upon these products and services for a majority of our revenues in
the foreseeable future. We derive revenue from our customers primarily through
recurring fees generated by use of our services by their end user customers
and, to a lesser extent, through one-time implementation fees for initial
service commencement.
A relatively large portion of our expenditures are fixed in the short-term,
and our success depends on a significant number of financial institutions
purchasing our products and services and their end user customers using our
products and services for a sufficient period of time to provide an attractive
return on our investment. We depend on our financial institution customers to
market and promote our products to their end user customers. Neither we nor
our financial institution customers may be successful in marketing our current
or future Internet banking products and services. Moreover, financial
institutions generally agree to use our products and services pursuant to
contracts with durations that range from one to five years. Upon expiration,
these contracts may be discontinued. Unless our Internet banking products and
services are successfully deployed and marketed by a large number of community
financial institutions and achieve widespread market acceptance by their end
user customers for a significant period of time, our business, operating
results and financial condition will be materially adversely affected.
We Depend on Cooperation from Data Processing Vendors for Financial
Institutions
Our products involve integration with products and systems developed by data
processing vendors that serve financial institutions. We rely on these vendors
to jointly develop technology with us and to disclose source code
specifications to enable our products to integrate effectively with their
products and systems. Several of these data processing vendors offer or are
planning to offer Internet banking products and services that are directly
competitive with our products and services and have resisted efforts to allow
us to integrate our products and services with their systems in the past. If
any of our products fail to be supported by our customers' data processing
vendors, it would be necessary to redesign our products. We cannot assure that
any redesign could be accomplished in a cost-effective or timely manner. In
addition, our customers' data processing vendors may develop new products and
systems that are incompatible with our products. Our failure to integrate our
products effectively with our customers' data processing vendors would have a
material adverse affect on our business, operating results and financial
condition.
The Market for Internet Banking Services is Highly Competitive
The market for Internet banking services is highly competitive, and we
expect that competition will intensify in the future. In the area of home
banking, we primarily compete with other companies that provide outsourced
Internet banking services to community financial institutions, including
FundsXpress, nFront, Online Resources, Q-Up and Virtual Financial. Also,
vendors such as Corillian, Edify (which Security First Technologies has
announced its intention to acquire), Integrion and Security First
Technologies, who primarily target the largest financial institutions,
occasionally compete with us for community financial institution customers. In
addition, several of the vendors offering data processing services to
financial institutions offer their own Internet banking solutions, including
EDS, Fiserv, Jack Henry and M&I Data Services. Local competition for home
banking services is provided by more than 100 smaller online service
outsourcing companies located throughout the United States.
8
<PAGE>
Our primary competition for providing the business banking services that
financial institutions offer their commercial customers are vendors of cash
management systems for large corporations such as ADP, Magnet and Pulitzer &
Haney.
We also face potential indirect competition from Internet portals such as
E*TRADE and Yahoo! which might serve as an alternative to financial
institutions' web sites, particularly for bill presentment services. In
addition, we could experience competition from our customer financial
institutions and potential customers who develop their own online banking
solutions. Rather than purchasing Internet banking products and services from
third-party vendors, community financial institutions could develop, implement
and maintain their own services and applications. These financial institutions
may not perceive sufficient value in our products and services to justify
investing in them.
We believe that our ability to compete successfully depends upon a number of
factors, including:
. our market presence with community financial institutions and related
scale advantages;
. the reliability, security, speed and capacity of our systems and
technical infrastructure;
. the comprehensiveness, scalability, ease of use and service level of our
products and services;
. our ability to interface with vendors of data processing software and
services;
. our pricing policies and the pricing policies of our competitors and
suppliers;
. the timing of introductions of new products and services by us and our
competitors; and
. our ability to support unique customer requirements.
We expect competition to increase significantly as new companies enter our
market and current competitors expand their product lines and services.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than us, significantly greater name recognition and a larger
installed base of customers. In addition, many of our competitors have well-
established relationships with our current and potential community financial
institution customers and have extensive knowledge of our industry. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their Internet banking products and services products to
address customer needs. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. We also expect that competition will increase as a result of industry
consolidations.
We may not be able to compete successfully against our current and future
competitors.
Security Breaches Could Damage Our Reputation and Business
Our networks may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. We transmit confidential financial information in
providing our services. Users of Internet banking and other electronic
commerce services are concerned about the security of transmissions over
public networks. Therefore, it is critical that our facilities and
infrastructure remain secure and that our facilities and infrastructure are
perceived by the marketplace to be secure. A material security breach
affecting us could damage our reputation, deter financial institutions from
purchasing our products, deter their customers from using our products, or
result in liability to us. Further, any material security breach affecting our
competitors could affect the marketplace's perception of Internet banking in
general and have the same effects.
Concerns over security and the privacy of users may inhibit the growth of
the Internet and other online services generally, especially as a means of
conducting commercial transactions. Any well-publicized compromise of security
could deter people from using the Internet or using it to conduct transactions
that involve
9
<PAGE>
transmitting confidential information. We may need to expend significant
capital or other resources protecting against the threat of security breaches
or alleviating problems caused by breaches. Although we intend to continue to
implement state of the art security measures, persons may be able to
circumvent the measures that we implement in the future. Eliminating computer
viruses and alleviating other security problems may result in interruptions,
delays or cessation of service to users accessing web sites that deliver our
services, any of which could harm our business.
The Market for Internet Banking Services Is Subject to Rapid Change
The market for Internet banking services is new and unproven and is subject
to rapid change. Our success will depend substantially upon our ability to
enhance our existing products and to develop and introduce, on a timely and
cost-effective basis, new products and features that meet changing financial
institution and end user requirements and incorporate technological
advancements. We are dependent upon sales of these products to sustain and
increase our revenues. If we are unable to develop new products and enhanced
functionalities or technologies to adapt to these changes or if we cannot
offset a decline in revenues of existing products by sales of new products,
our business would suffer. In addition, our product development process
involves a number of risks. Developing technologically advanced products is a
complex and uncertain process requiring innovation as well as the accurate
anticipation of technology and market trends. We may not be able to
successfully develop new products or we may experience delays or unexpected
costs in connection with our efforts. We budget our research and development
expenditures based on planned product introductions and enhancements. However,
the rapidly evolving nature of the Internet could cause our actual research
and development costs to differ significantly from our budget. If we fail to
timely and cost-effectively develop new products that respond to new
technologies and the needs of the Internet banking services market, we will
lose revenue and our business will suffer.
In addition, any new or enhanced products we introduce may contain
undetected or unresolved software or hardware defects when they are first
introduced or as new versions are released. In the past, we have discovered
errors in our products and it is possible that design defects will occur in
new products. These defects could result in a loss of sales and additional
costs as well as damage to our reputation and the loss of relationships with
our customers.
Our Performance Will Depend on the Growth of the Internet for Commerce
Our future success depends heavily on the Internet being accepted and widely
used for commerce. If Internet commerce does not continue to grow or grows
more slowly than expected, our business, operating results and financial
condition would be materially adversely affected. There are a number of
reasons that consumers and businesses may reject the Internet as a viable
commercial medium in general, or as a suitable vehicle for banking
transactions in particular. These reasons include potentially inadequate
network infrastructure, security concerns, slow development of enabling
technologies, reliability and quality problems, and issues relating to ease
and cost of access. In particular, the Internet infrastructure may not be able
to support the demands placed on it by increased Internet usage and bandwidth
requirements. In addition, delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity, or increased government regulation could cause the Internet to lose
its viability as a commercial medium. Even if the required infrastructure,
standards, protocols or complementary products, services or facilities are
developed, we may incur substantial expenses adapting our solutions to
changing or emerging technologies.
We Could Be Subject to Potential Liability Claims Related to Use of Our
Products and Services
Financial institutions use our products and services to provide Internet
banking services to their customers. Any errors, defects or other performance
problems in our products and services could result in financial or other
damages to these financial institutions for which we are liable. A product
liability claim brought against us, even if not successful, would likely be
time consuming and costly and could seriously harm our business. Although
10
<PAGE>
our contracts typically contain provisions designed to limit our exposure to
liability claims, existing or future laws or unfavorable judicial decisions
could negate these limitation of liability provisions. Moreover, we may be
liable for transactions executed using Internet services based on our products
and services even if the errors, defects or other problems are unrelated to
our products and services. Any claims or litigation resulting from this
potential liability could materially adversely affect our business, operating
results and financial condition.
We Are Currently Experiencing a Period of Significant Growth that Is Placing a
Strain on Our Resources
We have recently experienced significant growth, including expansion in the
number of our employees, and anticipate that additional expansion may be
required in order to continue our growth. In addition, we continue to invest
heavily in our technological infrastructure and to build and scale our systems
in order to meet the demands of our growing customer base. This growth places
a significant demand on management and operational resources. For example, we
restructured our sales and implementation organizations in the second half of
1998 which adversely impacted sales growth and implementation costs in that
time period. Our management, personnel, systems, procedures, controls and
customer service may be inadequate to support our existing and future
operations. Further, since September 1998, we have added a number of key
managerial, technical and information technology personnel, including our
president and chief executive officer, chief financial officer, and chief
information officer, and we expect to add additional key personnel in the near
future. As a result, some members of our management team have only worked
together for a brief period of time. Our failure to manage growth effectively
could have a material adverse effect on our business, financial condition and
results of operations.
Our Stock Price May Be Extremely Volatile
Our common stock has never been sold in a public market and an active
trading market for our common stock may not develop or be sustained upon the
completion of this offering. We are negotiating the initial offering price of
the common stock with the underwriters. However, the initial offering price
may not be indicative of the prices that will prevail in the public market
after the offering, and the market price of our common stock could fall below
the initial public offering price. You should read the "Underwriters" section
for a discussion of the factors considered in determining the initial public
offering price.
In addition, the market price of our common stock could fluctuate widely in
response to the following particular factors:
.actual or anticipated variations in operating results;
. announcements of technological innovations, new products or new services
by us or by our competitors or customers;
. changes in financial estimates or recommendations by stock market
analysts regarding us or our competitors;
. announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
. additions or departures of key personnel;
. future equity or debt offerings or our announcements of these offerings;
. economic well being of community financial institutions; and
. general market and economic conditions.
In addition, in recent years, the stock market in general, and the Nasdaq
National Market and the securities of technology companies in particular, have
experienced extreme price and volume fluctuations. These
11
<PAGE>
fluctuations have often been unrelated or disproportionate to the operating
performance of individual companies. These broad market fluctuations may
materially adversely affect our stock price, regardless of our operating
results.
The Financial Services Industry is Highly Regulated and Further Regulation
Could Adversely Impact Our Business
The financial services industry is subject to extensive and complex federal
and state regulation. Financial institutions such as commercial banks, savings
and loans and credit unions operate under high levels of governmental
supervision. Our customers must ensure that our services and related products
work within the
extensive and evolving regulatory requirements applicable to them. We do not
represent that our systems comply with such regulations.
We are not required to be licensed by the federal depository institution
regulators or other regulators of financial services. We are subject to
examination by the federal depository institution regulators under the Bank
Service Company Act and the Examination Parity and Year 2000 Readiness for
Financial Institutions Act. These regulators have broad supervisory authority
to remedy any shortcomings identified in any such examination.
Federal, state or foreign authorities could adopt laws, rules or regulations
relating to the financial services industry that affect our business, such as
by requiring us to comply with data, record keeping and processing and other
requirements. It is possible that laws and regulations may be enacted with
respect to the Internet, covering issues such as user privacy, pricing,
content, characteristics, taxation and quality of services and products.
Existing regulations may be modified. If enacted or deemed applicable to us,
these laws, rules or regulations could be imposed on our activities or our
business thereby rendering our business or operations more costly, burdensome,
less efficient or impossible, requiring us to modify our current or future
products or services. The adoption of laws or regulations affecting our
business or our financial institution customers' businesses could have a
material adverse effect on our business, financial condition and results of
operations.
We Must Attract and Retain Key Personnel
We believe that our future success will depend in large part upon our
continued ability to identify, hire, retain and motivate highly skilled
employees, who are in great demand. In particular, we believe that we must
expand our research and development, marketing, sales and customer support
capabilities in order to effectively serve the evolving needs of our present
and future customers. Competition for these employees is intense. Our failure
to hire additional qualified personnel in a timely manner and on reasonable
terms could adversely affect our business and results of operations. In
addition, our success depends on the continuing contributions of our senior
management and technical personnel, all of whom would be difficult to replace.
We cannot assure that we will be successful in retaining these key personnel.
The loss of any one of them could adversely affect our ability to execute our
business strategy, which could cause our business, financial condition and
results of operations to suffer.
Our Limited Ability to Protect Our Proprietary Technology May Adversely Affect
Our Ability to Compete
Our future success and ability to compete depends in part upon our
proprietary technology. None of our technology is currently patented. Instead,
we rely on a combination of contractual rights and copyright, trademark and
trade secret laws to establish and protect our proprietary technology. We
generally enter into confidentiality agreements with our employees,
consultants, resellers, customers and potential customers, limit access to and
distribution of our source code, and further limit the disclosure and use of
other proprietary information. We cannot assure that the steps taken by us in
this regard will be adequate to prevent misappropriation of our technology or
that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology. Despite our efforts to
protect our proprietary rights, unauthorized parties may
12
<PAGE>
attempt to copy or otherwise obtain or use our products or technology.
Monitoring unauthorized use of our products is difficult, and while we are
unable to determine the extent to which piracy of our software products
exists, software piracy can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States.
We are also subject to the risk of claims and litigation alleging
infringement of the intellectual property rights of others. Third parties may
assert infringement claims in the future with respect to our current or future
products. Any assertion, regardless of its merit, could require us to pay
damages or settlement amounts and could require us to develop non-infringing
technology or pay for a license for the technology that is the subject of the
asserted infringement. Any litigation or potential litigation could result in
product delays, increased costs or both. In addition, the cost of litigation
and the resulting distraction of our management resources could adversely
affect our results of operations. We also cannot assure that any licenses for
technology necessary for our business will be available or that, if available,
these licenses can be obtained on commercially reasonable terms. Our failure
to obtain these licenses, or to protect our proprietary technology, could have
a material adverse effect on our business, financial condition and results of
operations.
We May Engage in Future Acquisitions of Companies, Products or Technologies
As a part of our business strategy, we may make acquisitions of, or
significant investments in, complementary companies, products or technologies,
although no acquisitions or investments are currently pending. Any future
acquisitions would be accompanied by the risks encountered in acquisitions of
these types. These risks include:
. difficulties in assimilating the operations and personnel of acquired
companies;
. diversion of management's attention from ongoing business concerns;
. our potential inability to maximize our financial and strategic position
through the successful incorporation of acquired technology into our
products and services;
. additional expense associated with amortization of acquired assets;
. maintenance of uniform standards, controls, procedures and policies; and
. impairment of existing relationships with employees, suppliers and
customers as a result of the integration of new management personnel.
We cannot assure that we will be able to successfully integrate any
business, products, technologies or personnel that we might acquire in the
future, and our failure to do so could materially adversely affect our
business, operating results and financial condition.
Consolidation of the Banking and Financial Services Industry May Affect Our
Sales
Consolidation of the banking and financial services industry could result in
a smaller market for our products and services. After consolidation, banks and
other financial institutions may experience a realignment of management
responsibilities and a reexamination of strategic and purchasing decisions. We
may lose relationships with key constituencies within our customer's
organization due to budget cuts, layoffs, or other disruptions following a
consolidation. In addition, consolidation may result in a change in the
technological infrastructure of the combined entity. Our products and services
may not integrate with this new technological infrastructure. In addition, the
acquiring institution may have its own in-house system or outsource to
competitors. These factors could result in our customers reassessing their
purchase or potential purchase of our products and could result in termination
of services by existing customers. For example, in May 1999, we lost Home
Savings of America as a customer following its acquisition by Washington
Mutual, which decided to integrate Home Savings' end users into its existing
home banking system. Any of these factors would materially adversely affect
our business, operating results and financial condition.
13
<PAGE>
Our Failure or the Failure of Third Parties to Be Year 2000 Compliant Could
Negatively Impact Our Business
Many computers, software and other equipment include computer code in which
calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches, and are commonly referred to as the "Year 2000"
problem. Beginning in 1998, we began assessing the ability of our software and
products to operate properly as a result of the Year 2000 problem. We believe
that our current products are Year 2000 compliant. However, any undetected
Year 2000 problem in our products, or any problem which cannot be solved in a
timely and cost-effective manner could substantially damage our customer
relationships, disrupt our business, subject us to threatened or actual
litigation and result in reduced revenues.
The Year 2000 problem also affects the computers, software, other equipment
that we use, operate or maintain internally for our operations, and services
provided by third-party vendors. We employ widely available software
applications and other products from leading third-party vendors. To date, we
have obtained Year 2000 readiness verification from the majority of third-
party service and product providers associated with our critical development
and operations processes. However, any failure of third-party computer
products used by us to be Year 2000 compliant could interrupt and disrupt our
business. To fix any of these systems could require us to invest substantially
in our operating systems and to hire additional personnel.
As part of our Year 2000 compliance plan, we have also contacted our third-
party vendors of products and services integrated into our products, or that
our products work with, to identify and, to the extent possible, resolve
issues relating to the Year 2000 problem. However, we have limited or no
control over the actions of these third-party vendors. Thus, while we expect
that we will be able to resolve any significant Year 2000 issues with these
third parties, we cannot assure that these vendors will resolve any or all
Year 2000 issues before the occurrence of a material disruption to the
operation of our business. Any failure of these third parties to timely
resolve Year 2000 problems with their systems could cause a decline in our
revenues as a result of reduced fees from end user usage of our services and
could have a material adverse effect on our business, financial condition and
results of operations.
We are also subject to external forces that might generally affect industry
and commerce, such as a utility, telecommunications or transportation
companies' Year 2000 compliance failures and related service interruptions.
Any extended disruption in availability of electricity to our facilities
resulting from Year 2000 problems with utility service providers could
materially adversely affect our business, financial condition and results of
operations.
Our ability to achieve Year 2000 compliance, and the level of incremental
costs associated therewith, could be adversely affected by, among other
things, the availability and cost of contract personnel and external
resources, third-party suppliers' ability to modify proprietary software, and
unanticipated problems not identified in our ongoing compliance review. Since
we cannot forecast with any certainty the impact, extent and duration of any
Year 2000 problems on our operations, our customers or our third-party
vendors, we cannot assure that our resources will be adequate to withstand any
prolonged disruption.
Our Charter and Bylaws and Delaware Law Contain Provisions Which May Delay or
Prevent a Change of Control
Provisions of our charter and bylaws may make it more difficult for a third
party to acquire, or may discourage a third party from attempting to acquire,
control of us. These provisions could limit the price that investors might be
willing to pay in the future for shares of our common stock. These provisions
include:
.division of the board of directors into three separate classes;
.elimination of cumulative voting in the election of directors;
14
<PAGE>
.prohibitions on our stockholders from acting by written consent and
calling special meetings;
.procedures for advance notification of stockholder nominations and
proposals; and
.the ability of the board of directors to alter our bylaws without
stockholder approval.
In addition, our board of directors has the authority to issue up to
5,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The issuance of
preferred stock, while providing flexibility in connection with possible
financings or acquisitions or other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of our
outstanding voting stock.
We are also subject to Section 203 of the Delaware General Corporation Law
which, subject to 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 this stockholder became an interested
stockholder. The preceding provisions of our charter and bylaws, as well as
Section 203 of the Delaware General Corporation Law, could discourage
potential acquisition proposals, delay or prevent a change of control and
prevent changes in our management.
Members of Management and Our Board of Directors, and Their Affiliates, Will
Control % of Our Common Stock
Following this offering, members of our executive management team and our
board of directors and their affiliates will control approximately % of our
common stock. As a result, these management members and directors will be able
to significantly influence matters requiring stockholder approval. Moreover,
this concentration of ownership could have the effect of delaying or
preventing a change in control. For a more complete discussion of this
concentration of ownership, see "Principal Stockholders."
Future Sales of Our Common Stock May Depress Our Stock Price
Sales of a substantial number of shares of our common stock in the public
market, or the appearance that these shares are available for sale, could
materially adversely affect the trading price of our common stock. These sales
also might make it more difficult for us to sell equity securities or equity-
related securities in the future at a time and price that we deem appropriate.
Upon completion of this offering, we will have shares outstanding. Of
these shares, the shares sold in this offering may be freely tradable
in the public market. The remaining 10,620,839 shares of common stock
available for sale in the public market as of May 31, 1999 are limited by
restrictions under the securities laws and 180-day lock-up agreements entered
into with Morgan Stanley & Co. Incorporated. Of these shares, 9,255,403 shares
will be available for sale in the public market 180 days after the date of
this prospectus.
In addition, as of May 31, 1999 we had 1,890,134 shares subject to
outstanding options and 1,784,482 shares of our common stock available for
future grant pursuant to our stock option plans. All of these shares are
subject to a 180-day lock-up agreement. We intend to register, prior to the
expiration of the lock-up, the shares of common stock subject to outstanding
options and reserved for issuance under our stock option plans and shares of
common stock reserved for issuance under our employee stock purchase plan.
Accordingly, shares underlying vested options will be eligible for resale in
the public market beginning on expiration of the lock-up. We also have 51,041
shares underlying outstanding warrants, also subject to lock-ups, that will be
eligible for resale in the public market upon expiration of the warrant
holder's respective one-year holding periods under Rule 144, which will begin
upon the date of exercise or, in the case of a net exercise, on the date of
grant of the warrant.
Morgan Stanley & Co. Incorporated may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
its lock-up agreements.
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<PAGE>
We Do Not Intend to Pay Dividends on Our Common Stock
We currently intend to retain any future earnings for funding growth and,
therefore, do not anticipate paying any dividends in the foreseeable future.
See "Dividend Policy."
Investors in This Offering Will Suffer Immediate and Substantial Dilution
Investors in this offering will suffer an immediate and substantial dilution
of approximately $ in net tangible book value per share, or approximately
% of the offering price of $ per share. If the holders of options or a
warrant exercise these securities, investors will suffer further dilution.
See "Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "potential," or
"continue," the negative of these terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ
materially from any forward-looking statement. In evaluating these statements,
you should specifically consider various factors, including the risks outlined
under "Risk Factors."
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the
forward-looking statements. We undertake no obligation to update publicly any
forward-looking statements for any reason after the date of this prospectus to
conform these statements to actual results or to changes in our expectations.
Before you invest in our common stock, you should be aware that the occurrence
of the events described under "Risk Factors" and elsewhere in this prospectus
could have a material adverse effect on our business, operating results and
financial condition.
16
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of common
stock we are offering at an assumed initial public offering price of $
per share, after deducting underwriting discounts and commissions and
estimated offering expenses. If the underwriters' over-allotment option is
exercised in full, we estimate that our net proceeds will be approximately
$ million. We expect to use the net proceeds from this offering for
general corporate purposes, including working capital and capital
expenditures. A portion of the proceeds may also be used to acquire or invest
in complementary businesses or products, or to obtain the right to use
complementary technologies, although there are no current plans, negotiations
or discussions for any of these transactions. Pending use of the net proceeds
for the above purposes, we intend to invest these funds in short-term,
interest-bearing, investment grade obligations.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or
other securities. We currently anticipate that we will retain all of our
future earnings for use in the expansion and operation of our business and do
not anticipate paying any cash dividends in the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the conversion of all outstanding shares
of preferred stock into 3,951,419 shares of common stock effective upon
the closing of this offering; and
. on a pro forma as adjusted basis to reflect the receipt by Digital
Insight of the estimated net proceeds from the sale of common stock
offered by this prospectus at an estimated initial public offering price
of $ per share, after deducting underwriting discounts and
commissions and estimated offering expenses.
The following table does not include:
. 844,036 shares of preferred stock issued in May 1999;
. 1,790,402 shares of common stock subject to outstanding options as of
March 31, 1999;
. 442,447 shares of common stock that have been set aside for future stock
options under our 1997 Stock Plan as of March 31, 1999;
. 1,500,000 shares of our common stock that have been set aside for future
stock options under our 1999 Stock Plan, which was approved by our board
of directors in June 1999;
. 300,000 shares of common stock that have been set aside for our employee
stock purchase plan, which was approved by our board of directors in
June 1999; or
. 51,041 shares of common stock issuable upon exercise of outstanding
warrants.
This information should be read in conjunction with our financial statements
and related notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term portion of lease obligation........... $ 362 $ 362 $ 362
Mandatorily redeemable convertible preferred
stock, $.001 par value, 3,973,641 shares
authorized, 3,951,419 shares issued and
outstanding actual............................. 12,444 -- --
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000
shares authorized, no shares issued and
outstanding pro forma and pro forma as
adjusted....................................... -- -- --
Common stock, $.001 par value, 16,250,000 shares
authorized; 5,767,151 shares issued and
outstanding actual, 9,718,570 shares issued and
outstanding pro forma; 100,000,000 shares
authorized, shares issued and
outstanding pro forma as adjusted.............. 7 11
Additional paid-in capital...................... 6,015 18,455
Notes receivable from stockholders.............. (204) (204) (204)
Deferred stock-based compensation............... (4,266) (4,266) (4,266)
Accumulated deficit............................. (9,308) (9,308) (9,308)
------- ------- -------
Total stockholders' equity (deficit).......... (7,756) 4,688
------- ------- -------
Total capitalization........................ $ 5,050 $ 5,050 $
======= ======= =======
</TABLE>
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was approximately
$4,658,000 or $.48 per share of common stock, assuming the conversion of all
outstanding shares of preferred stock into 3,951,419 shares of common stock.
Pro forma net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities, divided by the
pro forma number of outstanding shares of common stock. After giving effect to
the sale of the shares of common stock in this offering, based upon an
assumed initial public offering price of $ per share and after deducting
underwriting discounts and commissions and estimated offering expenses, our
pro forma net tangible book value at March 31, 1999 would have been $ or
$ per share. This represents an immediate increase in pro forma net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to investors purchasing shares in this
offering. Dilution is determined by subtracting pro forma net tangible book
value per share after the offering from the assumed initial public offering
price per share. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share $
Pro forma net tangible book value per share as of March 31, 1999... $.48
Increase in pro forma net tangible book value per share
attributable to new investors.....................................
----
Pro forma net tangible book value per share after this offering......
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table sets forth, on the pro forma basis described above, as
of March 31, 1999 the difference between the number of shares of common stock
purchased from us, the total consideration paid, and the average price per
share paid by the existing stockholders and by investors purchasing shares in
this offering (based upon an assumed initial public offering price of $ per
share before deduction of underwriting discounts and commissions and estimated
offering expenses):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------- ------------------- Average Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 9,718,570 % $16,831,000 % $1.73
New investors...............
--------- ----- ----------- -----
Total..................... 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to or % of the total
shares of common stock outstanding after this offering.
In the event that we issue additional shares of common stock in the future,
investors purchasing shares in this offering may experience further dilution.
To the extent these outstanding options or warrant are exercised, or new
options or rights are issued under our stock plans, new investors will
experience further dilution.
The foregoing discussion and tables exclude:
. 1,790,402 shares subject to outstanding options at March 31, 1999 at a
weighted average exercise price of $1.06 per share;
. 442,447 shares set aside for future grant at March 31, 1999 under our
1997 Stock Plan;
. 1,500,000 shares set aside for future grant under our 1999 Stock Plan,
which was approved by our board of directors in June 1999;
. 300,000 shares set aside for future issuance under our employee stock
purchase plan, which was approved by our board of directors in June
1999; and
. 51,041 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $3.13 per share.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
financial statements and related notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," included
elsewhere in this prospectus. The selected statement of operations data for
the years ended December 31, 1996, 1997 and 1998 and the selected balance
sheet data as of December 31, 1997 and 1998 have been derived from our audited
financial statements and the notes thereto included elsewhere in this
prospectus. The selected balance sheet data as of December 31, 1996 have been
derived from our audited financial statements not included herein. The
selected statement of operations data for the period from July 17, 1995
(inception) to December 31, 1995 and for the three month periods ended March
31, 1998 and 1999 have not been audited. In the opinion of management, such
unaudited financial statements have been prepared on the same basis as the
audited financial statements referred to above and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of results of operations for the indicated periods. Results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
pro forma balance sheet data as of March 31, 1999 are unaudited and reflect
the conversion of all outstanding shares of preferred stock into 3,951,419
shares of common stock effective upon the closing of this offering.
<TABLE>
<CAPTION>
Period from
July 17,
1995 Three Months
(inception) Ended
through Year Ended December 31, March 31,
December 31, --------------------------- ---------------
1995 1996 1997 1998 1998 1999
------------ ------- -------- -------- ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Implementation fees.... $ 85 $ 1,053 $ 1,926 $ 2,409 $ 612 $ 680
Service fees........... 3 508 2,046 5,821 947 2,485
----- ------- -------- -------- ------ -------
Total revenues......... 88 1,561 3,972 8,230 1,559 3,165
Cost of revenues:
Implementation......... 141 643 1,217 1,804 278 621
Service................ 1 261 1,014 3,466 583 1,360
----- ------- -------- -------- ------ -------
Total cost of
revenues.............. 142 904 2,231 5,270 861 1,981
----- ------- -------- -------- ------ -------
Gross profit (loss)..... (54) 657 1,741 2,960 698 1,184
Operating expenses:
Sales, general and
administrative........ 167 809 2,516 4,016 796 1,533
Research and
development........... 94 565 1,612 2,699 536 927
Amortization of stock-
based compensation.... -- -- 151 844 113 234
----- ------- -------- -------- ------ -------
Total operating
expenses.............. 261 1,374 4,279 7,559 1,445 2,694
----- ------- -------- -------- ------ -------
Loss from operations.... (315) (717) (2,538) (4,599) (747) (1,510)
Interest income......... 89 262 20 42
Other income (expense),
net.................... -- 5 (3) (19) (34) (6)
----- ------- -------- -------- ------ -------
Net loss................ $(315) $ (712) $ (2,452) $ (4,356) $ (761) $(1,474)
===== ======= ======== ======== ====== =======
Basic and diluted net
loss per share......... $(.06) $ (.14) $ (.49) $ (.85) $ (.15) $ (.28)
===== ======= ======== ======== ====== =======
Shares used to compute
basic and diluted net
loss per share......... 5,000 5,000 5,000 5,108 5,000 5,332
===== ======= ======== ======== ====== =======
Pro forma basic and
diluted net loss per
share.................. $ (.50) $ (.16)
======== =======
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 8,712 9,283
======== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31,
---------------------- -----------------------
1996 1997 1998 1999 1999 Pro Forma
----- ------ ------- ------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..... $ 28 $ 886 $ 4,758 $ 3,923 $ 3,923
Working capital (deficit)..... (243) (16) 3,067 1,741 1,741
Total assets.................. 433 3,071 8,077 8,548 8,548
Total liabilities............. 422 1,949 2,417 3,860 3,860
Mandatorily redeemable
convertible preferred stock.. -- 4,444 12,444 12,444 --
Total stockholders' equity
(deficit).................... -- (3,322) (6,784) (7,756) 4,688
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Digital Insight is the leading provider of Internet banking solutions for
community financial institutions, with over 380 financial institution
customers. We offer these community financial institutions an outsourced
service, branded in their name, which includes home banking for their
individual customers, business banking for their commercial customers, a
target marketing program to enable them to sell additional financial services,
and customized web site design and implementation services. Since inception,
substantially all of our revenues have been derived from our Internet home
banking services, associated features and website development. As of March 31,
1999, we had an accumulated deficit of approximately $9.3 million.
Our revenues consist primarily of recurring monthly service fees and, to a
lesser extent, one-time implementation fees. Revenues increased from $88,000
in 1995 to $8.2 million in 1998, and were $3.2 million in the first quarter of
1999. Our recurring revenues consist of service fees paid to us by our
financial institution customers based on the number of end users or end user
transactions, and fees for hosting and maintaining their web sites and other
monthly services. Recurring service fees as a percentage of revenues have
grown from approximately 33% in 1996 to 79% for the quarter ended March 31,
1999. Our customer contracts range from one to five years.
We require a 50% non-refundable cash deposit of product implementation fees,
payable at the time that a contract is signed. We record these deposits as
deferred revenues and, together with the balance of the implementation fees,
we recognize them upon completion of implementation and customer approval.
Recognition is usually two to four months from the contract date. Upon
completion of implementation and customer approval, we begin to receive and
recognize recurring service fees. For the quarter ended March 31, 1999, our
installed base consisted of over 380 home banking and web site customers, with
no single customer accounting for more than 5% of revenues.
Cost of revenues consists of implementation and service costs.
Implementation costs are comprised primarily of salaries for implementation
personnel and fees paid to third parties, including bill payment and data
processing vendors. Service costs consist primarily of salaries and related
personnel expenses, network costs, expenses related to the operation of our
data center and fees paid to third parties, including bill payment vendors,
data processing vendors and communication services providers. Gross margin is
affected by the relative proportion of lower margin implementation fees and
higher margin service fees we generate, the mix of products we sell,
competitive pricing pressures and the size and complexity of our
implementations.
Sales, general and administrative expenses consist primarily of salaries and
related expenses for executive, sales, marketing, finance, human resources and
administrative personnel and other general corporate expenses. In addition,
these expenses include marketing expenses such as trade shows and promotional
costs.
Research and development expenses consist primarily of salaries, related
personnel expenses and consultant fees related to the design, development,
testing and enhancement of our products and our data processing vendor
interface software. We expense all research and development costs as incurred.
We have recorded aggregate deferred stock-based compensation of $5.5 million
through March 31, 1999. The remaining unamortized balance of $4.3 million will
be fully amortized by the quarter ended March 31, 2003.
On May 15, 1998 we entered into a lease, which expires in May 2003, for our
facility in Calabasas, California. By the end of 1999, this facility will be
fully utilized and we will require additional office space. In November 1998,
we signed a three-year contract with Exodus Communications for a redundant
data center facility in Herndon, Virginia, which is expected to be fully
operational in the fourth quarter of 1999.
21
<PAGE>
Selected Quarterly Results of Operations
Because we have a limited operating history, we believe that year-to-year
comparisons prior to 1999 are less meaningful than an analysis of recent
quarterly operating results. Accordingly, we are providing a discussion and
analysis of our results of operations for the five quarters ended March 31,
1999.
The following tables present, in dollars and as a percentage of revenues,
unaudited statements of operations for the five quarters ended March 31, 1999.
This information reflects all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of such
information in accordance with generally accepted accounting principles. The
results of any quarter are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
1998 1998 1998 1998 1999
--------- -------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Implementation fees.......... $ 612 $ 642 $ 538 $ 617 $ 680
Service fees................. 947 1,296 1,646 1,932 2,485
------ ------ ------- ------- -------
Total revenues............. 1,559 1,938 2,184 2,549 3,165
Cost of revenues:
Implementation............... 278 478 519 529 621
Service...................... 583 735 960 1,188 1,360
------ ------ ------- ------- -------
Total cost of revenues..... 861 1,213 1,479 1,717 1,981
------ ------ ------- ------- -------
Gross profit............. 698 725 705 832 1,184
Operating expenses:
Sales, general and
administrative.............. 796 933 1,092 1,195 1,533
Research and development..... 536 663 644 856 927
Amortization of stock-based
compensation................ 113 135 147 449 234
------ ------ ------- ------- -------
Total operating expenses... 1,445 1,731 1,883 2,500 2,694
------ ------ ------- ------- -------
Loss from operations........... (747) (1,006) (1,178) (1,668) (1,510)
Interest income................ 20 102 73 67 42
Other income (expense), net.... (34) 22 (5) (2) (6)
------ ------ ------- ------- -------
Net loss....................... $ (761) $ (882) $(1,110) $(1,603) $(1,474)
====== ====== ======= ======= =======
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
1998 1998 1998 1998 1999
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
As a Percentage of Revenues:
Revenues:
Implementation fees.......... 39.3 % 33.1 % 24.6 % 24.2 % 21.5 %
Service fees................. 60.7 66.9 75.4 75.8 78.5
----- ----- ----- ----- -----
Total revenues............. 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Implementation............... 17.8 24.7 23.8 20.8 19.6
Service...................... 37.4 37.9 44.0 46.6 43.0
----- ----- ----- ----- -----
Total cost of revenues..... 55.2 62.6 67.8 67.4 62.6
----- ----- ----- ----- -----
Gross profit............. 44.8 37.4 32.2 32.6 37.4
Operating expenses:
Sales, general and
administrative.............. 51.1 48.1 50.0 46.9 48.4
Research and development..... 34.4 34.2 29.5 33.6 29.3
Amortization of stock-based
compensation................ 7.2 7.0 6.7 17.6 7.4
----- ----- ----- ----- -----
Total operating expenses... 92.7 89.3 86.2 98.1 85.1
----- ----- ----- ----- -----
Loss from operations........... (47.9) (51.9) (54.0) (65.5) (47.7)
Interest income................ 1.3 5.3 3.3 2.6 1.3
Other income (expense), net.... (2.2) 1.1 (.2) (.1) (.2)
----- ----- ----- ----- -----
Net loss....................... (48.8)% (45.5)% (50.9)% (63.0)% (46.6)%
===== ===== ===== ===== =====
</TABLE>
Revenues. Revenues increased in each of the five quarters ended March 31,
1999. Service fees grew as a result of an increase in the number of financial
institution customers and a greater number of end users. Implementation fees
increased in each quarter, except for the quarter ended September 30, 1998.
The decrease in implementation fees for the quarter ended September 30, 1998
resulted from a reorganization of our sales and implementation force designed
to provide scalability for future growth. This decrease in implementation fees
was more than offset by service fee increases.
Gross Profit. Gross profit increased in each quarter except for the quarter
ended September 30, 1998. Gross profit for the quarter September 30, 1998 was
adversely affected by the increase in implementation costs and the reduction
in implementation fees due to the reorganization of our sales force. In
addition, we renegotiated our pricing schedule with our bill payment provider
for the quarter ended September 30, 1998, which resulted in higher minimum
fees payable by us. The increases in gross profit for the quarters ended
December 31, 1998 and March 31, 1999 reflect increased revenues due to
increased usage of our Internet banking services by end users. Gross margin
declined from the March 31, 1998 quarter to the September 30, 1998 quarter due
to investments related to the expansion of our data center and network
services to accommodate end-user growth and provide increased system
reliability and faster response times. Implementation gross margin may vary
from period to period based upon fluctuations in our implementation revenues
and increases in our implementation infrastructure. However, such fluctuations
should not have a significant impact on overall gross margin.
Sales, General and Administrative. Sales, general and administrative
expenses increased in each of the five quarters ended March 31, 1999. These
increases were primarily due to the increase in the number of direct sales
personnel and the addition of a telesales and client relations group. In
addition, we increased our investment in advertising, end-user marketing
programs and trade shows. We expect sales, general and administrative expenses
to increase as we add personnel and incur additional costs to support the
growth of our operations, including expanding sales and marketing activities.
23
<PAGE>
Research and Development. Research and development expenses increased
significantly from the March 31, 1998 quarter to the June 30, 1998 quarter and
again from the September 30, 1998 quarter to the December 31, 1998 quarter.
Research and development expenses generally increase in large increments as we
periodically undertake significant new development projects, such as
additional investments in data processing interfaces and introductions of new
products. We believe that continued investment in research and development is
critical to attaining our strategic objectives. As a result, we intend to
increase expenditures in research and development programs in future periods
for the purpose of enhancing current products, accelerating the completion of
additional data processing vendor interfaces and developing new products and
programs to facilitate or enhance our customers' Internet capabilities.
Our quarterly and annual results of operations have fluctuated in the past
and are likely to fluctuate significantly in the future due to a variety of
factors, many of which are beyond our control. Because of these and other
factors, our quarterly revenues, expenses and results of operations could vary
significantly in the future, and period-to-period comparisons should not be
relied upon as indicators of future performance. We may not be able to
increase our revenues in future periods or sustain our existing level of
revenues or our rate of revenue growth on a quarterly or annual basis. In
addition, our annual or quarterly results of operations may not meet the
expectations of securities analysts or investors. If this happens, the price
of our stock would likely decrease. See "Risk Factors--We Have a History of
Losses and Our Business is Difficult to Evaluate Because Our Operating History
is Limited" and "--Our Operating Results May Fluctuate, Which May Adversely
Affect Our Stock Price."
Results of Operations
The following table presents, for the periods indicated, certain statement
of operations data as a percentage of revenues.
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
--------------------- -----------------
1996 1997 1998 1998 1999
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Implementation fees.............. 67.5% 48.5% 29.3% 39.3% 21.5%
Service fees..................... 32.5 51.5 70.7 60.7 78.5
----- ----- ----- ------- -------
Total revenues................. 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Implementation................... 41.2 30.6 21.9 17.8 19.6
Service.......................... 16.7 25.5 42.1 37.4 43.0
----- ----- ----- ------- -------
Total cost of revenues......... 57.9 56.1 64.0 55.2 62.6
----- ----- ----- ------- -------
Gross profit................. 42.1 43.9 36.0 44.8 37.4
Operating expenses:
Sales, general and
administrative.................. 51.8 63.3 48.8 51.1 48.4
Research and development......... 36.2 40.6 32.8 34.4 29.3
Amortization of stock-based
compensation.................... -- 3.8 10.3 7.2 7.4
----- ----- ----- ------- -------
Total operating expenses....... 88.0 107.7 91.9 92.7 85.1
----- ----- ----- ------- -------
Loss from operations............... (45.9) (63.8) (55.9) (47.9) (47.7)
Interest income.................... -- 2.2 3.2 1.3 1.3
Other income (expense), net........ .3 (.1) (.2) (2.2) (.2)
----- ----- ----- ------- -------
Net loss........................... (45.6)% (61.7)% (52.9)% (48.8)% (46.6)%
===== ===== ===== ======= =======
</TABLE>
24
<PAGE>
Comparison of Quarters Ended March 31, 1998 and March 31, 1999
Revenues. Revenues increased from $1.6 million for the quarter ended March
31, 1998 to $3.2 million for the quarter ended March 31, 1999. This increase
was primarily due to the growth in service fees from $947,000 to $2.5 million.
The number of active home banking end users increased over the same period
from 126,000 to 353,000 and implementation fees increased from $612,000 to
$680,000.
Gross Profit. Gross profit increased from $698,000 for the quarter ended
March 31, 1998 to $1.2 million for the quarter ended March 31, 1999. Gross
margin declined from 44.8% to 37.4% due to the costs associated with
commencing installation of a redundant data center, increased service and
customer support levels, additional quality assurance, consulting expenses and
investment in networking services infrastructure. Implementation gross margin
declined from 54.6% to 8.7% and service gross margin increased from 38.4% to
45.3%. Implementation gross margin may vary from period to period based upon
fluctuations in our implementation revenues and increases in our
implementation infrastructure. However, such fluctuations should not have a
significant impact on overall gross margin.
Sales, General and Administrative. Sales, general and administrative
expenses increased from $796,000 for the quarter ended March 31, 1998 to $1.5
million for the quarter ended March 31, 1999. This increase was primarily due
to an increase in sales commissions associated with higher revenues, higher
personnel expenses for sales and marketing staff, trade show and other
promotional expenses, and expenses for additional marketing support programs.
This increase was also due to increased staffing for finance and accounting,
new senior management positions and growth in recruiting and human resources
expenses. Sales, general and administrative expenses as a percentage of
revenues decreased from 51.1% for the quarter ended March 31, 1998 to 48.4%
for the quarter ended March 31, 1999.
Research and Development. Research and development expenses increased from
$536,000 for the quarter ended March 31, 1998 to $927,000 for the quarter
ended March 31, 1999. This increase was due to higher personnel expenses
related to more full-time software engineering staff required for the
functional enhancement of existing products as well as the development of new
products. Research and development expenses as a percentage of revenues
decreased from 34.4% for the quarter ended March 31, 1998 to 29.3% for the
quarter ended March 31, 1999, primarily as a result of an increase in
revenues.
Comparisons of Years Ended December 31, 1996, 1997 and 1998
Revenues. Revenues increased from $1.6 million in 1996 to $4.0 million in
1997, and to $8.2 million in 1998. These increases were driven primarily by
growth in service fees, which increased from $508,000 in 1996 to $2.0 million
in 1997 and to $5.8 million in 1998. To a lesser extent, the increase in
revenues during these periods was the result of growth in implementation fees
related to new contracts. The total number of active home banking end users
rose from 16,000 at December 31, 1996, to 83,000 at December 31, 1997, and to
273,000 at December 31, 1998.
Gross Profit. Gross profit increased from $657,000 in 1996 to $1.7 million
in 1997, and to $3.0 million in 1998. These increases were primarily the
result of the increases in revenues, particularly from service fees. Gross
margin remained relatively stable at 42.1% in 1996 and 43.9% in 1997, and
declined to 36.0% in 1998. This decline was primarily due to increased
investments in our data center and network operations in order to improve
system reliability and significantly enhance customer support, quality
assurance and security.
Sales, General and Administrative. Sales, general and administrative
expenses increased from $809,000 in 1996 to $2.5 million in 1997, and to $4.0
million in 1998. These increases were primarily the result of increases in
personnel and personnel-related costs to support our expanded operations.
Research and Development. Research and development expenses increased from
$565,000 in 1996 to $1.6 million in 1997, and to $2.7 million in 1998. These
increases were primarily due to increases in personnel and personnel-related
costs, product testing and enhancement, new interface development expenses and
expenses related to the completion and commercial release of new products.
25
<PAGE>
Provision for Income Taxes
We incurred operating losses from inception through March 31, 1999, and
therefore have not recorded any significant provision for income taxes. We
have recorded a valuation allowance for the full amount of our net operating
loss carry-forwards, as the future realization of the tax benefit is not
currently likely.
As of March 31, 1999, we had net operating loss carry-forwards for federal
and state tax purposes of approximately $8.3 million. The state tax loss
carry-forwards expire in 2005 and the federal tax loss carry-forwards expire
in 2012. Under the provisions of the Internal Revenue Code, certain
substantial changes in ownership may limit the amount of net operating loss
carry-forwards that could be utilized annually in the future to offset taxable
income.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of equity securities, raising approximately $20.8 million,
including $8.4 million raised in May 1999.
At March 31, 1999, we had cash and cash equivalents of $3.9 million. We have
a $2.0 million equipment leasing line of credit with a bank, under which
$461,000 was outstanding at March 31, 1999. At March 31, 1999, we also had an
additional $136,000 in equipment financing outstanding with an equipment
leasing company.
Cash used in operating activities was $468,000 for the year ended December
31, 1996, $1.5 million for the year ended December 31, 1997, $2.1 million for
the year ended December 31, 1998 and $556,000 for the quarter ended March 31,
1999. The increases in cash used in operating activities were primarily due to
increases in net loss.
Cash used in investing activities was $254,000 for the year ended December
31, 1996, $768,000 for the year ended December 31, 1997, $2.0 million for the
year ended December 31, 1998 and $354,000 for the quarter ended March 31,
1999. The increases in cash used in investing activities were primarily due to
infrastructure expansion to meet end user growth and a $2.0 million
expenditure for computers and other equipment for our second data center.
We have no material commitments other than obligations under our credit
facilities and operating and capital leases. See note 11 of notes to financial
statements included elsewhere in this prospectus. Future capital requirements
will depend upon many factors, including the timing of research and product
development efforts and the expansion of our marketing efforts. We expect to
continue to expend significant amounts on expansion of facility
infrastructure, ongoing research and development, computer and related data
center equipment, and personnel.
We believe that our cash and cash equivalents balances and funds available
under our existing lines of credit, together with the proceeds of this
offering, will be sufficient to satisfy our cash requirements for at least the
next 18 months. We intend to invest our cash in excess of current operating
requirements in short-term, interest-bearing, investment grade securities.
Impact of Year 2000
Many computers, software and other equipment include computer code in which
calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches, and are commonly referred to as the "Year 2000"
problem.
General Readiness Assessment. The Year 2000 problem affects the computers,
software, other equipment that we use, operate or maintain for our operations,
and services provided by third-party vendors. As a result, we have formalized
our Year 2000 compliance plan, which is being implemented by a team of
employees led by our internal information technology staff. This staff is
responsible for monitoring the assessment, including
26
<PAGE>
potential effects and costs, of our Year 2000 projects and remediation of any
Year 2000 problems. To date, we have obtained Year 2000 readiness verification
from the majority of third-party service and product providers associated with
our critical development and operations processes.
Assessment of Digital Insight's Software and Products. Beginning in 1998, we
began assessing the ability of our software and products to operate properly
as a result of the Year 2000 problem. We believe that our current products are
Year 2000 compliant. Additionally, as we design and develop new products, we
subject them to testing for Year 2000 compliance and the ability to
distinguish between various date formats. We will continue to test our
software and products for stand-alone Year 2000 compliance as well as
compliance when used with other standard operating systems or computer
platforms. At present, we have conducted Year 2000 interface testing with our
data processing vendor partners.
Assessment of Internal Infrastructure. We have identified the majority of
information technology systems, software and other equipment that are
necessary to our internal operations. Other equipment includes office and
facilities equipment, such as fax machines, telephone switches, security
systems and other common devices which may be affected by the Year 2000
problem. We have evaluated this equipment to determine which items must be
modified, upgraded, or replaced to minimize the possibility of material
disruption to our business. Remediation is substantially complete. We expect
the remaining remediation and deployment activities to be completed by
September 30, 1999.
Costs of Remedy Necessary. We estimate the total cost of completing any
required modifications, upgrades or replacements of our internal systems will
be approximately $100,000, most of which we expect to incur during 1999. The
actual remediation costs may be substantially higher than our current
estimate.
Based on the activities described above, we do not believe that the Year
2000 problem will have a material adverse effect on our business or operating
results. In addition, we have not deferred any material information technology
projects or equipment purchases as a result of our Year 2000 problem
activities.
Suppliers. As part of our Year 2000 compliance plan, we have contacted our
third-party vendors of products and services integrated into our products to
identify and, to the extent possible, resolve issues relating to the Year 2000
problem. However, we have limited or no control over the actions of these
third-party vendors. Thus, while we expect that we will be able to resolve any
significant Year 2000 problems with these third parties, there can be no
assurance that these vendors will resolve any or all Year 2000 problems before
the occurrence of a material disruption to the operation of our business. Any
failure of these third parties to timely resolve Year 2000 problems with their
systems could have a material adverse effect on our business, financial
condition and results of operations.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 issues that could materially adversely affect our
business operations. However, we believe that it is not possible to determine
with complete certainty that all Year 2000 problems affecting us have been
identified or corrected. The number of devices and systems that could be
affected and the interactions among these devices and systems are too numerous
to address. In addition, no one can accurately predict which Year 2000-related
failures will occur or the severity, timing, duration, or financial
consequences of these potential failures. As a result, we believe that the
following consequences are possible:
. operational inconveniences and inefficiencies for us and our customers
that will divert management's time and attention and financial and human
resources from ordinary business activities; and
. business disputes alleging that we failed to comply with the terms of
contracts or industry standards of performance, some of which could
result in litigation or contract termination.
27
<PAGE>
Contingency Plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 problems
affecting our internal systems are not effective. We expect to complete our
contingency plans by September 30, 1999. Depending on the systems affected,
these plans could include:
. accelerated replacement of affected equipment or software;
. short to medium-term use of backup equipment and software or other
redundant systems;
. increased work hours for our personnel or the hiring of additional
information technology staff; and
. the use of contract personnel to correct, on an accelerated basis, any
Year 2000 problems that arise or to provide interim alternate solutions
for information system deficiencies.
Our failure to implement any of these contingency plans could have a
material adverse effect on our business, financial condition and results of
operations.
Disclaimer. The discussion of our efforts and expectations relating to Year
2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance, and the level of incremental costs associated therewith,
could be adversely affected by, among other things, the availability and cost
of contract personnel and external resources, third-party suppliers' ability
to modify proprietary software, and unanticipated problems not identified in
the ongoing compliance review.
Recently Issued Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." These statements, which
were adopted effective January 1, 1998, did not have a significant impact on
the financial statements.
28
<PAGE>
BUSINESS
Overview
Digital Insight is the leading provider of real time Internet banking
services to credit unions, small to mid-sized banks, and savings and loans
with assets of less than $10 billion. We offer these community financial
institutions a cost-effective outsourced service, branded in their name, which
includes home banking for their individual customers, business banking for
their commercial customers, a targeted marketing program to enable them to
effectively sell additional financial services to end users, and customized
web site design and implementation services. As of May 31, 1999, we had over
380 financial institution customers. The customers utilizing our home banking
application had over 8.8 million potential end users. Of these potential end
users, over 382,000 were actively using our home banking application.
We provide community financial institutions with a comprehensive, scalable
and secure Internet solution that can be installed rapidly with a high degree
of customization. Our solution also offers high levels of service and system
redundancy. We work closely with leading data processing vendors so that our
financial institution customers can leverage the investment they have made in
existing data processing systems by fully integrating them with an Internet
solution.
We earn revenues from implementation fees that our customer financial
institutions pay us for establishing their Internet banking services, and
recurring service fees based on end user adoption and usage, as well as web
site hosting and maintenance and other monthly services. During the quarter
ended March 31, 1999, approximately 79% of our revenues came from recurring
fees.
Industry Background
The Internet has emerged as the fastest growing communications medium in
history and is dramatically changing the way businesses and individuals
communicate and conduct commerce. International Data Corporation, a leading
provider of research for the information technology industry, estimates that
the number of Internet users worldwide will increase from approximately 97
million in 1998 to 320 million by 2002.
Businesses have embraced the Internet as an important means for
communicating and transacting business with customers. Although early business
web sites were primarily used for one-way presentation of basic product and
company information, technological advances now offer companies the
opportunity to make their web sites interactive and transaction-based,
enabling the development of a wide range of electronic commerce, or
e-commerce, applications. International Data Corporation estimates that
revenue from business to consumer e-commerce will increase from approximately
$15 billion in 1997 to more than $178 billion in 2003, a compound annual
growth rate of 51%. Forrester Research estimates that revenue from business to
business e-commerce will increase from approximately $43 billion in 1998 to
more than $1.3 trillion in 2003, a compound annual growth rate of 98%.
The Internet is increasingly being utilized as a medium for financial
transactions and services, including banking, brokerage and insurance.
Personal finance was the most heavily used content channel on America Online
in the first quarter of 1999, with an average of 10.7 million user hours per
month, as compared to 10.1 million user hours for games, 7.7 million user
hours for news and 4.7 million user hours for merchandise shopping. In
particular, consumers, businesses and financial institutions are recognizing
that the Internet is a powerful and efficient medium for the delivery of
banking services, including home banking, bill payment and other services for
individuals, and cash management, payroll and other services for the
commercial customers of financial
institutions. Consumers and small businesses use Internet banking because of
its 24-hour-a-day, 7-day-a-week convenience and the ability to perform a wide
range of transactions from any personal computer or Internet-enabled device.
29
<PAGE>
International Data Corporation estimates that there were approximately 3.4
million users banking over the Internet in the United States at the end of
1998 and projects that that number will increase to over 37 million by 2003.
In response to this demand, an increasing number of financial institutions are
offering Internet-based banking services. International Data Corporation
estimates the number of banks offering online banking services will increase
from 1,150 in 1998 to 15,845 by 2003, and that these services will be offered
primarily via the Internet. Internet banking enables financial institutions to
provide one-stop shopping to their customers by collecting and consolidating
financial data from a number of sources, including all of the customer's
accounts at that institution as well as information from other Internet
sources such as online brokerage and insurance firms. Internet banking also
allows a financial institution to collect and analyze customer data for use in
targeted marketing programs.
Customer service issues are motivating financial institutions to offer
Internet banking. According to a survey conducted by Mentis Corporation, a
recognized financial industry market research firm, financial institutions
offer Internet banking in order to:
. attract new customers, retain existing customers, increase customer
loyalty and improve customer access;
. offer additional value-added services and remain competitive;
. generate revenue;
. decrease service costs; and
. reduce branch traffic.
Early Internet banking initiatives were undertaken primarily by large
financial institutions. According to Online Banking Report, over 50% of the
100 largest banks in the United States offer Internet banking. By contrast,
only approximately 5% of community financial institutions currently offer
Internet banking. Nevertheless, there are approximately 22,000 credit unions,
banks, and savings and loans in the United States with assets of less than $10
billion each. These community financial institutions hold approximately $2.2
trillion in deposits, or 56% of total U.S. customer deposits. As a result of
the adoption of Internet banking services by their larger competitors,
community financial institutions are finding themselves under increasing
pressure to offer Internet home banking and business banking services.
Community financial institutions are realizing that if they do not provide
these services, or if their offerings are inadequate, they risk losing
customers to larger institutions, Internet-only banks, or locally competitive
community financial institutions who do offer these services.
Community financial institutions have been slow to adopt Internet banking
services as a result of several factors. A financial institution undertaking
its own Internet banking service must develop or acquire the relevant
expertise, dedicate appropriate information technology resources, and spend
significant time and capital on the project. In addition, a financial
institution must work closely with its data processing vendor or vendors to
develop workable interfaces between its core systems and its Internet
solution.
In order to remain competitive, community financial institutions require a
low-cost, outsourced Internet-based banking solution. The solution must be
rapidly and cost-effectively implemented, interface seamlessly and in real
time with the financial institution's data processing vendor or vendors,
preserve and extend the financial institution's own brand and provide suitable
features to end users. An Internet-based solution must also be secure,
reliable and scalable. Finally, the solution should provide a platform for
target marketing of financial services and potentially broader e-commerce
offerings. These offerings would provide community financial institutions with
additional revenue opportunities and appeal to end users who are increasingly
using the Internet to research, evaluate and purchase a broad array of
products and services.
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The Digital Insight Solution
Digital Insight is the leading provider of real time Internet banking
services to community financial institutions. The service includes a content-
rich home banking application for retail customers and a business banking
application for commercial customers. AXIS Home Banking, our consumer product,
includes account management, account transfers and interfaces to personal
financial management software, bill payment, stock quotes and other expanded
services. AXIS Cash Management, our small business product, includes similar
features as well as payroll/direct deposits and other services. To enable
financial institutions to sell additional financial services to their end
users based on individual profiles, we also offer target marketing programs to
our customers. We also provide customized web site design, implementation,
maintenance and hosting services to our customers.
Our solution offers the following benefits to community financial
institutions:
. Comprehensive and Customizable Solution. We provide full service bureau
support to customers who desire such an environment, including hosting
of web sites, web site maintenance, reporting tools and customized
online account presentations. Our home banking and business banking
applications can be configured to offer end users a variety of standard
and optional features. Our web site design and implementation services
also enable customers to establish Internet banking services with a look
and feel that preserves their unique brand identity.
. Real Time Online Architecture. Our architecture allows real time
communication with financial institutions' core data processing systems
in order to retrieve account information as needed. Unlike batch
processing, real time data processing allows for transactions conducted
on the web site to be immediately reflected on the host system, and
allows for transactions conducted at the financial institution to be
immediately reflected on the web site. As a result, the information we
present to consumers can be current with the financial institution's own
data, with as much transaction history as is then available from the
institution. For example, if an end user makes a withdrawal at a branch,
it will be reflected instantaneously online.
. Extensive Data Processing Vendor Relationships. Our solution provides
direct interfaces with multiple vendors of core banking software and
data processing services to financial institutions. We have developed
interfaces to the systems of 21 data processing vendors, who serve more
than 6,000 community financial institutions, and we have interfaces for
10 additional vendors in development. By working directly with these
vendors, we enable our customers to offer real time presentations of end
user account data and we can quickly and cost-effectively install our
systems with customers of these vendors. Our interfaces also allow for
tight integration with other functions supported by the data processing
vendor, such as loan origination and statement and check imaging.
. Scalable, Reliable and Secure Service. Our system can scale rapidly to
accommodate increased numbers of end users. A financial institution can
take advantage of our data center and the server infrastructure of its
data processing vendor to scale to meet demand, without building its own
separate server infrastructure. Our service is also highly reliable,
with an up-time availability record averaging 99.3% during the six-month
period ended May 31, 1999. Further, our systems incorporate
sophisticated data encryption techniques, a series of firewalls between
the Internet and our customers, and several layers of security
technology in order to minimize unauthorized access to our network.
. Rapid and Affordable Implementation. Our solution can be rapidly
implemented and represents an affordable alternative to internally
developed Internet banking services for community financial
institutions. Average implementation times for our home banking
application range from one to three months, depending on the complexity
of web site design requests and the availability of an existing
interface with a customer's data processing vendor. The typical
implementation cost for a home banking application is less than $50,000.
. Flexible Service Capabilities. Our applications are designed to be
deployed in a variety of environments, depending on a customer's needs.
A customer can use our data center in a service bureau arrangement,
house its own dedicated hardware in our data center or host our systems
in its own
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facility. Importantly, customers can migrate from one environment to
another as their needs evolve. In addition, we have the flexibility to
support data processing vendors whose systems are either batch or
realtime.
. Platform for Value-Added Services and Target Marketing. We enable
financial institutions to expand their Internet presence beyond their
core banking functions by providing additional value-added products and
services to their customers. These services include bill payment and
delivery of third- party services such as stock quotes. Our real time
solution is also capable of gathering relevant end-user account activity
information and usage profiles, enabling financial institutions to
target timely and appropriate services to their customers, thereby
creating additional revenue opportunities. We believe that these
additional product and service offerings will allow our customers to
derive additional revenue from existing and new end users.
The Digital Insight Strategy
Our objective is to increase our position as the leading provider of
Internet banking services to community financial institutions as well as to
provide these institutions with a competitive platform which will permit them
to exploit e-commerce opportunities.
. Increase the Number of Community Financial Institutions. We intend to
leverage our leading market position to further penetrate the
substantial market for an outsourced Internet banking solution among
community financial institutions. As of May 31, 1999, we had contracts
with over 380 community financial institutions in over 40 states. We
achieved early leadership among credit unions who, as a group, adopted
Internet banking more rapidly than community banks. Over the past two
years, we have begun to leverage our strong credit union customer base
to increase our sales efforts with banks. We also intend to increase the
number of customers by selectively expanding our international sales,
both directly and through strategic alliances with international
partners.
. Increase End User Penetration. As of May 31, 1999, our home banking
customers had more than 8.8 million potential end users. For the
financial institutions who had fully deployed our solution by May 31,
1998, the aggregate percentage of their customers utilizing home banking
rose from 3.8% at May 31, 1998 to 7.9% at May 31, 1999. We work with our
financial institution customers to expand the number of end users of our
home banking and business banking services through marketing assistance
programs and sharing best practices. We intend to continue to train the
staff of financial institutions in marketing and promoting Internet
banking services using the information and skills we have gained through
our experience in Internet banking implementations.
. Increase the Number of Interfaces to Core Data Processing Systems. We
intend to increase the number of our interfaces to core data processing
systems to allow our products to interface with more financial
institutions. Our strategy is to maintain neutrality among vendors, in
order to serve the broadest possible base of financial institutions. We
currently interface with vendors providing services to over 6,000
community financial institutions and our intermediate-term goal is to
increase this coverage to more than 12,000 community financial
institutions. A group of our engineers is dedicated to developing
interfaces to new data processing vendors.
. Broaden Product Offerings. We plan to offer new and enhanced products
and services to attract additional traffic onto our network of community
financial institutions and other business partners. We intend to add
functionality to our products to capitalize on the trend of consumers to
integrate financial services information and transactions and to expand
our target marketing capability. New functionality and services are
expected to include bill presentment, or the delivery of interactive
electronic bills over the Internet, online loan origination, online
check imaging and online statement delivery.
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Products and Services
Our primary products are home banking and business banking applications.
These applications allow a financial institution to create a customized
Internet banking service using an array of standard and optional features. We
complement our primary banking applications with additional tools, such as
target marketing, and with implementation and web site services.
Home Banking
Our AXIS Home Banking application is an Internet-based system through which
community financial institutions are able to provide home banking to their
retail customers. Standard features of this application include:
. Account information: End users can view balance information and
transaction history in real time for deposit accounts, such as checking
and savings, and loan accounts, such as consumer, credit cards,
automobile and mortgage.
. Funds transfer: End users can transfer funds among accounts, including
making loan payments.
. Interfaces with personal financial management software: End users can
download their account information into Quicken and Microsoft Money.
In addition to these standard features, financial institutions can also
choose to include the following home banking optional features:
. Bill payment: End users can pay bills electronically 24 hours a day,
seven days a week. End users can schedule one-time or recurring
payments, and can view payment history at their convenience.
. Online applications: End users can submit electronic loan, credit card
or other applications safely and securely to their financial
institution.
. Online services and additional features: End users can track stock
prices, calculate portfolio values, order U.S. Savings Bonds, make check
image requests and order checks.
Business Banking
Our AXIS Cash Management application provides a full range of Internet
business banking services for commercial customers of community financial
institutions. Standard features of this application include:
. Administration platform: Businesses can control access to business
banking and account features in order to provide financial and audit
controls for their staff.
. Account information: Businesses can view account balances and
transaction history, and reconcile accounts instantly.
. Funds transfer: Businesses can actively manage their accounts, setting
up future-dated transfers and automatic transfers of available balances
among accounts.
. Stop payment placement: Businesses can place stop payment orders on
checks.
. File export: Businesses can export their account information into a
computer file or into business financial management and accounting
software such as QuickBooks.
Optional features of AXIS Cash Management include:
. Bill payment: End users can pay bills electronically 24 hours a day,
seven days a week. End users can schedule one-time or recurring payments
and can view payment history at their convenience.
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. Automated Clearing House services: Businesses can initiate electronic
payments, including business to business, payroll direct deposit
disbursements and electronic state and federal tax payments.
. Wire transfers: Businesses can originate wire transfers of funds to
accounts with other financial institutions or trade partners.
. Online services and additional features: Businesses can complete
predefined loan and other applications, make photocopy requests, order
checks, and track portfolios.
Target Marketing
Our recently introduced Target Marketing module is designed to help make the
financial institution's web site a cost-effective sales tool. This module is
currently available for our home banking application and is expected to be
available for our business banking application later this year. Target
Marketing allows financial institutions to individually target their account
holders and present them with opportunities to buy products and services to
fit their needs. The Target Marketing module gives financial institutions the
ability to:
. analyze end users' demographic and financial profiles and online
activity, and apply a set of screening criteria to select appropriate
marketing promotions;
. present individually-targeted marketing promotions, such as
advertisements for loans, to end users when it is most appropriate;
. incorporate account sign-up forms and loan applications into specific
promotions;
. create time-limited promotions and seasonal messages; and
. change messages daily, hourly or randomly.
AXIS Management Console
Our Internet services management console provides our customers with a set
of tools to actively manage their Internet banking system. With this
management console, a financial institution can remotely manage its web site,
generate reports on daily activities and keep transaction logs and activity
records for all site events. A financial institution can also use this
management console to configure the Target Marketing module for specific
promotions.
Implementation Services and Web Site Development
For financial institutions without an existing web site, our team of experts
develop a fully interactive site. Working closely with the customer, the team
designs the site to incorporate the functionality required by the institution,
including the integration of proprietary and value-added financial services
such as application forms, financial calculators and links to other web sites.
For customers with an existing web site, our implementation services are
focused on integrating the home banking and/or business banking application
into that site. In both instances, financial institutions can elect to have
Digital Insight host and maintain their web site. We provide a team of web
site experts who program the placement and formatting of digitized text for a
financial institution's Internet site, including all connections to other web
sites.
Systems Architecture
Overview
Our applications are designed to be deployed in a service bureau
environment, resource managed environment, or an in-house environment. In a
service bureau environment, the financial institution's web site and home
banking application share resources, such as bandwidth and hardware, with
other financial institutions in our data center. In a resource managed
environment, a financial institution has dedicated bandwidth and hardware but
the system is still located in our data center. In an in-house environment, a
financial institution runs the system out of its own data center. In all
environments, connectivity is established by connecting the financial
institution or data processing vendor to Digital Insight through our private
frame relay network.
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Our systems architecture is designed to provide real time data acquisition,
processing and presentation for Internet home banking and other applications.
Our application servers make use of information exchange brokers that retrieve
and initiate transactions using data located on financial institutions' host
systems, bill payment providers' servers, stock information databases or
relational databases. Our applications are driven by templates which define
how data is to be presented. This template driven approach allows
customization by our financial institution customers by supporting multiple
languages and multiple web site designs.
We believe that our real time architecture is more scalable than traditional
batch systems, which warehouse and store duplicate data. Instead of
duplicating each financial institution's host system by daily batch
transmittal of customer information, we communicate in real time through a
private frame relay network to retrieve account information as needed. Real
time data processing allows for transactions conducted on the web site to be
immediately reflected on the host system and vice versa. In contrast, in batch
systems, home banking transactions are not immediately sent to the financial
institution's host system for processing but are stored in a database at the
home banking data center. In addition, transactions processed at the financial
institution are only reflected in a batch system home banking application
after this data is uploaded to the data center. As a result, batch systems can
result in impairment of data integrity, as information on the host system may
be different from that of the Internet home banking application at any
particular time.
Future Impact of Second Data Center
We currently provide our services out of one data center located at our
headquarters in Calabasas, California. We expect to open a second data center
that we will manage at an Exodus Communications facility in Herndon, Virginia.
This second data center is expected to be fully operational in the fourth
quarter of 1999. When operational, this data center will allow for greater
scalability and increased functionality. In addition to increased
functionality, the second data center will provide fault tolerance by
eliminating single points of failure caused by hardware failures or scheduled
maintenance at the Calabasas facility.
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Transaction Flow
The following simplified diagram illustrates the transaction flow in a
typical service bureau or resource managed home banking or business banking
application:
[DESCRIPTION OF GRAPHIC]
At the top center of the graphic is an image of a personal computer with the
words "End User" next to it. Arrows point at the end user from a cloud shape
directly below it with the word "Internet" within it. An arrow also points down
from the cloud shape to a picture of a server which says "Global Dispatch" and
has a "1" next to it. Two-way arrows point from this server to a large circle
on the left side of the graphic which is entitled "Digital Insight Calabasas
Data Center." Within this circle is a picture of an array of servers and the
words "Web Servers," with a two-way arrow pointing to a picture of a server with
the words "Firewall Server" and the number "2" next to it. From the firewall
server, two two-way arrows point to a picture of an array of servers with the
words "Information Exchange Servers" next to it. From this picture, two two-way
arrows point outside of the circle to a cloud shape with the words "Private
Frame Relay Network" in it. Three two-way arrows point from this cloud shape to
a picture of buildings and a dollar sign below it, with the words "Financial
Institution." Next to the three arrows is the number "4".
On the right side of the graphic is another circle with the same contents as the
circle described above. This circle has the heading "Digital Insight Herndon
Data Center." A two-way arrow with the number "3" next to it connects the two
firewall servers.
- -------------------------------------------------------------------------------
. Step 1: An end user initiates a banking transaction from his or her
browser by going to the financial institution's secure web site. Our
system will direct the transaction to the data center with the most
available capacity to handle the request.
. Step 2: Our protocol translation and delivery technology translates
the request from web messaging protocol into our internal messaging
protocol, and then into a protocol understood by the target host
processor.
. Step 3: At each point in the transaction flow, the banking
application can continue to process the transaction in either the
Calabasas or Herndon data center, or switch to the other data center
if the next resource at the original data center is unavailable.
. Step 4: Requests are sent over a private frame relay network and
processed in real time by the target host processor, which sends the
response back to us to be processed and ultimately delivered back to
the end user's browser.
Excluding presentation to the end user, all of this processing generally
takes less than five seconds.
-------------------------------------------------------------------------------
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Customers
Our target market is the approximately 22,000 community financial
institutions in the United States with assets of less than $10 billion each.
Within our target market, we focus on community financial institutions that
rely on one or more of the data processing vendors with whom we have developed
interfaces. At present, we have interfaces with data processing vendors
serving over 6,000 community financial institutions. We are seeking to expand
the number of vendors with whom we have interfaces.
As of May 31, 1999, we have contracts with over 380 financial institutions
to provide one or more of our products and services. Of these institutions,
over 230 have contracted with us for home banking, with more than 382,000
active end users. Based on publicly available regulatory submissions, as of
May 31, 1999, our home banking customers had more than 8.8 million potential
end users. For the year ended December 31, 1998 and the three months ended
March 31, 1999, no individual customer accounted for 5% or more of our
revenues.
The table below sets forth our ten largest home banking customers as of May
31, 1999 in the categories of banks/savings and loans and credit unions, based
on the number of potential end users.
<TABLE>
<CAPTION>
Banks/Savings and Loans Credit Unions
----------------------- -------------
<S> <C>
Trust Company of New Jersey The Golden 1 Credit Union
Reliance Federal Savings Government Employees Federal Credit Union
Commonwealth Bank, Pennsylvania AT&T Family Federal Credit Union
First Southern Bancorp Teachers Credit Union
Keystone Savings Bank Community Credit Union
Centier Bank Portland Teachers Credit Union
American Bank of Texas ESL Federal Credit Union
Commercial Bank of New York North Island Federal Credit Union
Brookline Savings Bank Mountain America Credit Union
Patriot Bank San Diego County Credit Union
</TABLE>
Third-Party Relationships
We have relationships with multiple vendors of core data processing software
and outsourced data processing services to financial institutions. Agreements
with these vendors allow us to interface to the financial institutions' host
systems to provide real time access to a financial institution's account data.
We have developed interfaces to the systems of 21 data processing vendors who
provide services to more than 6,000 community financial institutions. We
currently have interfaces for 10 additional vendors in development. Among the
data processing vendors with whom we interface are: BancTec, CSI, EDS Cube,
EDS Miser, Fiserv divisions such as Aftech, CBS, Galaxy and Summit, Jack
Henry, OSI, Symitar Systems, USERS Inc. and XP Systems. Among the interfaces
under development are ALLTEL and M&I Data Services.
To deliver bill payment services, we have relationships with major providers
such as M&I Data Services and CheckFree. We also have relationships with third
parties, including the U.S. Treasury, DecisionOne, 800 Support, Intuit and
Microsoft, to provide other related functions to our customers.
Sales and Marketing
We utilize a direct sales model. As of May 31, 1999, our sales and marketing
staff consisted of 23 professionals, who are regionally based to facilitate
the development of strong relationships with customers. The sales staff is
responsible for prospecting and acquiring new accounts as well as managing
current accounts and cross-selling additional products into those accounts. We
expect to significantly increase our sales and marketing infrastructure over
the next 12 months.
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Our typical sales cycle is approximately six months for new customers and
approximately two months for follow-on or upgrade sales to existing customers.
Our primary customer contact for new sales in smaller community financial
institutions is generally the chief executive officer, the chief financial
officer or the chief information officer, or a combination of these three, and
in larger community financial institutions, our primary contact is generally
the head of retail banking or business banking. Our primary customer contact
for follow-on sales is usually the functional manager for the community
financial institution or the direct manager of Internet banking for that
institution.
Our primary marketing efforts are focused on building brand awareness among
community financial institutions and identifying potential customers. Our
marketing efforts include:
. telemarketing, through which we make an average of 300 new financial
institution contacts a month;
. press relations, which are managed by an outside public relations firm
that specializes in banking and financial industries;
. direct mail, which uses product and service literature as well as
reprints of news articles;
. trade shows, with 26 appearances scheduled for 1999; and
. meetings with national and regional user groups of Internet banking
services and third-party data processing vendors, with 14 scheduled for
1999.
Product Development
As of May 31, 1999, our product development staff consisted of 32 software
developers and engineers. Their development efforts are focused on:
. Enhancements to Existing Products. We are developing new features and
functions for our home banking and business banking products in order to
provide a broader range of functions, including Internet loan
origination and bill presentment. For example, we are currently
developing a bill presentment graphical user interface for release in
1999.
. Interfaces with Data Processing Vendors. We are continuing to enhance
and expand our interfaces to financial institution core data processing
systems. A variety of different systems are utilized by both banks and
credit unions. We currently interface with vendors representing over
6,000 community financial institutions and our intermediate-term goal is
to increase this coverage to more than 12,000 community financial
institutions.
. Additional Web Site Customization. We intend to offer financial
institutions additional options and capabilities for customization of
their web sites by creating more templates and making these templates
more flexible.
. Enhancements to Target Marketing. We intend to add features to Target
Marketing to support a broader range of e-commerce activities.
. Other Products and Services. We are working to expand our offerings to
include related financial service capabilities such as online insurance,
brokerage, credit history management, tax preparation and filing and
merchant services.
Competition
The market for Internet banking services is highly competitive, and we
expect that competition will intensify in the future. In the area of home
banking, we primarily compete with other companies that provide outsourced
Internet banking services to community financial institutions, including
FundsXpress, nFront, Online Resources, Q-Up and Virtual Financial. Also,
vendors such as Corillian, Edify (which Security First Technologies has
announced its intention to acquire), Integrion and Security First
Technologies, who primarily target the largest
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financial institutions, occasionally compete with us for community financial
institution customers. In addition, several of the vendors offering data
processing services to financial institutions offer their own Internet banking
solutions, including EDS, Fiserv, Jack Henry and M&I Data Services. Local
competition for home banking services is provided by more than 100 smaller
online service outsourcing companies located throughout the United States.
Our primary competition for providing the business banking services that
financial institutions offer their commercial customers are vendors of cash
management systems for large corporations such as ADP, Magnet and Pulitzer &
Haney.
We also face potential indirect competition from Internet portals such as
E*TRADE and Yahoo! which might serve as an alternative to financial
institutions' web sites, particularly for bill presentment services. In
addition, we could experience competition from our customer financial
institutions and potential customers who develop their own online banking
solutions. Rather than purchasing Internet banking products and services from
third- party vendors, community financial institutions could develop,
implement and maintain their own services and applications. We can give no
assurance that these financial institutions will perceive sufficient value in
our products and services to justify investing in them.
We believe that our ability to compete successfully depends upon a number of
factors, including:
. our market presence with community financial institutions and related
scale advantages;
. the reliability, security, speed and capacity of our systems and
technical infrastructure;
. the comprehensiveness, scalability, ease of use and service level of our
products and services;
. our ability to interface with vendors of data processing software and
services;
. our pricing policies and the pricing policies of our competitors and
suppliers;
. the timing of introductions of new products and services by us and our
competitors; and
. our ability to support unique customer requirements.
We expect competition to increase significantly as new companies enter our
market and current competitors expand their product lines and services. See
"Risk Factors--The Market for Internet Banking Services is Highly
Competitive."
Government Regulation
The financial services industry is subject to extensive and complex federal
and state regulation. Our current and prospective customers, which consist of
financial institutions such as commercial banks, savings and loans, credit
unions, thrifts, securities brokers, finance companies, other loan
originators, insurers and other providers of financial services, operate in
markets that are also subject to rigorous regulatory oversight and
supervision. Our customers must ensure that our services and related products
work within the extensive and evolving regulatory requirements applicable to
them, including those under federal and state truth-in-lending and truth-in-
deposit rules, usury laws, the Equal Credit Opportunity Act, the Fair Housing
Act, the Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Bank
Secrecy Act and the Community Reinvestment Act. The compliance of our products
and services with these requirements depends on a variety of factors including
the particular functionality, the interactive design and the classification of
the customer. Our financial services customers must assess and determine what
is required of them under these regulations and are responsible for ensuring
that our system and the design of their site conform to their regulatory
needs. We do not make representations to customers regarding applicable
regulatory requirements, and rely on each customer to identify its regulatory
issues and to adequately specify appropriate responses. It is not possible to
predict the impact that any of these regulations could have on our business.
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We are not licensed by the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Office of Thrift
Supervision, the National Credit Union Administration or other federal or
state agencies that regulate or supervise depository institutions or other
providers of financial services. We are subject to examination by the Federal
depository institution regulators under the Bank Service Company Act and the
Examination Parity and Year 2000 Readiness for Financial Institutions Act.
These regulators have broad supervisory authority to remedy any shortcomings
identified in any such examination. We are also subject to encryption and
security export laws and regulations which, depending on future developments,
could render our business or operations more costly, less efficient or
impossible.
Federal, state or foreign authorities could adopt laws, rules or regulations
affecting our business operations, such as by requiring us to comply with
data, record keeping and other processing requirements. We may become subject
to additional regulation as the market for our business evolves. It is
possible that laws and regulations may be enacted with respect to the
Internet, covering issues such as user privacy, pricing, content,
characteristics and quality of services and products. Existing regulations may
be modified. For example, we are not subject to the disclosure requirements of
Regulation E of the Federal Reserve Board under the Electronic Fund Transfer
Act, because we do not agree with consumers to provide them with electronic
funds transfer services or provide access devices (such as cards, codes or
other means of accessing accounts to initiate electronic funds transfers) to
them. Regulation E regulates certain electronic funds transfers made by
providers of access devices and electronic fund transfer services. Under
Regulation E, our customers are required, among other things, to provide
certain disclosure to retail customers using electronic transfer services, to
comply with certain notification periods regarding changes in the terms of
service provided and to follow certain procedures for dispute resolutions. The
Federal Reserve Board could adopt new rules and regulations for electronic
funds transfers that could lead to increased operating costs and could also
reduce the convenience and functionality of our services, possibly resulting
in reduced market acceptance. If enacted or deemed applicable to us, the laws,
rules or regulations applicable to financial services activities would render
our business or operations more costly, burdensome, less efficient or
impossible. We cannot assure that federal, state or foreign governmental
authorities will not adopt new regulations addressing electronic financial
services or operations generally that could require us to modify our current
or future products and services. The adoption of laws or regulations affecting
our business or our customer banks' business could have a material adverse
effect on our business, financial condition and results of operations.
A number of proposals at the federal, state and local level and by certain
foreign governments would, if enacted, expand the scope of regulation of
Internet-based financial services and could impose taxes on the sale of goods
and services and certain other Internet activities. Any development that
substantially impairs the growth of the Internet or its acceptance as a medium
for transaction processing could have a material adverse effect on our
business, financial condition and operating results.
Proprietary Rights
Although we believe that our success is more dependent upon our technical
expertise than our proprietary rights, our future success and ability to
compete is dependent in part upon our proprietary technology. None of our
technology is currently patented. Instead, we rely on a combination of
contractual rights and copyright, trademark and trade secret laws to establish
and protect our proprietary technology. We generally enter into
confidentiality agreements with our employees, consultants, resellers,
customers and potential customers. We also limit access to and distribution of
our source code, and further limit the disclosure and use of other proprietary
information. We cannot assure that the steps taken by us in this regard will
be adequate to prevent misappropriation of our technology or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain or use our products or technology. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as
do the laws of the United States.
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Facilities
Our principal offices currently occupy approximately 30,385 square feet in
Calabasas, California, pursuant to a lease which expires in 2003. Our
principal data center is located in this facility. We have also entered into a
service agreement for a second data center serviced by Exodus Communications
in Herndon, Virginia. We are in the process of identifying additional
facilities to accommodate our growth and currently plan to add executive
administration and operating offices by the end of 1999. We believe that
suitable additional or alternative space will be available in the future on
commercially reasonable terms as needed.
Employees
As of May 31, 1999, we had a total of 116 full-time employees, including 45
in operations, 23 in sales and marketing, 32 in research and development and
16 in finance and administration. We have not experienced any work stoppages
and consider our relations with our employees to be good.
Legal Proceedings
From time to time we may be involved in litigation arising in the normal
course of our business. We are not a party to any litigation, individually or
in the aggregate, that we believe would have a material adverse effect on our
financial condition or results of operations.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding the executive officers
and directors of Digital Insight as of June 25, 1999:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John Dorman............. 48 Chairman of the Board, Chief Executive Officer and President
Paul Fiore.............. 34 Executive Vice President, Co-Founder and Director
Daniel Jacoby........... 33 Vice President, Chief Technology Officer and Co-Founder
Kevin McDonnell......... 37 Vice President, Finance, Chief Financial Officer and Secretary
Steven Reich............ 39 Vice President, Sales and Marketing
Stephen Zarate.......... 53 Vice President and Chief Information Officer
John Jarve(2)........... 43 Director
Nader Kazeminy.......... 34 Director
James McGuire(1)(2)..... 55 Director
Ofer Nemirovsky......... 41 Director
Robert North(1)(2)...... 63 Director
</TABLE>
- --------
(1) Member of the audit committee.
(2) Member of the compensation committee.
John Dorman. Mr. Dorman has been our President and Chief Executive Officer
and a director since October 1998. Mr. Dorman was appointed Chairman of the
Board in June 1999. Prior to his appointment as our President and Chief
Executive Officer, Mr. Dorman was Senior Vice President for Oracle Worldwide
Financial Services from August 1997 to October 1998. Prior to joining Oracle,
Mr. Dorman was founder, President, and Chief Executive Officer of Treasury
Services Corporation, known as TSC, a provider of management information
solutions to the financial services industry, from 1983 to 1997. TSC was sold
to Oracle in 1997. Prior to serving at TSC, Mr. Dorman spent 11 years in the
banking industry as a senior financial executive for Union Bank of California.
Mr. Dorman holds a BA degree in business administration and philosophy from
Occidental College and an MBA in finance from the University of Southern
California.
Paul Fiore. Mr. Fiore is a co-founder of Digital Insight and has served as
our Executive Vice President since October 1998 and as a director since March
1997. From March 1997 to October 1998, Mr. Fiore was President of Digital
Insight and from July 1995 to March 1997, Mr. Fiore served as President of
Digital Insight LLC, the predecessor of Digital Insight. Prior to co-founding
Digital Insight LLC in July 1995, Mr. Fiore was Vice President, Strategy &
Plans for XP Systems, a provider of turn-key data processing solutions for
credit unions, from March 1994 to July 1995. Before joining XP Systems, Mr.
Fiore was Vice President and Chief Financial Officer for AT&T Employees
Federal Credit Union from October 1989 to March 1994. Prior to joining AT&T,
Mr. Fiore was a financial analyst for Lehman Brothers. Mr. Fiore graduated
from New York University with a BS degree in management and finance.
Daniel Jacoby. Mr. Jacoby is a co-founder of Digital Insight and has served
as Vice President and Chief Technology Officer since March 1997. From July
1995 to March 1997, Mr. Jacoby served as Chief Technology Officer of Digital
Insight LLC. Prior to co-founding Digital Insight in 1995, Mr. Jacoby served
in various technical and managerial positions for XP Systems from February
1989 to June 1995. Mr. Jacoby holds a BS degree in biomechanical engineering
from the University of California, San Diego.
Kevin McDonnell. Mr. McDonnell joined Digital Insight as Vice President,
Chief Financial Officer and Secretary in March of 1999. Prior to joining
Digital Insight, Mr. McDonnell was Executive Vice President and
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Chief Financial Officer for Rockford Industries, a specialty finance company,
from July 1997 to February 1999. From October 1995 to July 1997, Mr. McDonnell
served as Vice President and Chief Financial Officer for Printrak
International, a provider of automated fingerprint identification systems.
From October 1992 to October 1995, Mr. McDonnell served as Vice President and
Chief Financial Officer of Mobile Technology, Inc., a medical services
company. Mr. McDonnell has a BA degree in business administration from Loyola
Marymount University and a JD degree from Loyola Law School.
Steven Reich. Mr. Reich joined Digital Insight as Vice President of Sales
and Marketing in May 1998. Prior to joining Digital Insight, Mr. Reich served
as a management consultant and spent ten years from 1987 to 1997 with TSC, a
provider of management information solutions to the financial services
industry, in a variety of management roles. Before joining TSC, Mr. Reich
worked at the consulting firm of Kaplan Smith and Associates as a Senior
Consulting Associate. He holds a BS degree in business administration from
Arizona State University and an MBA from Claremont Graduate School.
Stephen Zarate. Mr. Zarate has served as Vice President and Chief
Information Officer since March 1999. Prior to joining Digital Insight, Mr.
Zarate was Chief Information Officer for PeopleSoft from June 1993 to March
1999, where he was responsible for the company's worldwide internal
applications, communications, infrastructure and technology. Prior to joining
PeopleSoft, Mr. Zarate was the Managing Director of Golden Gate Bank from
October 1988 to April 1993. Mr. Zarate has a BA degree in political science
and history from San Francisco State University.
John Jarve. Mr. Jarve has been a director of Digital Insight since March
1997. He is a general partner and managing director of Menlo Ventures, a
venture capital firm, where he has been employed since 1985. Mr. Jarve
currently serves as a director of several privately held companies and also as
a trustee of the Massachussetts Institute of Technology. Mr. Jarve holds BS
and MS degrees in electrical engineering from the Massachusetts Institute of
Technology and an MBA from the Graduate School of Business at Stanford
University.
Nader Kazeminy. Mr. Kazeminy has been a director of Digital Insight since
February 1998. He has served as Vice President and Vice Chairman of NJK
Holding Corporation since April 1992. Mr. Kazeminy holds a BS in business and
organizational management from Gustavus Adolfus College.
James McGuire. Mr. McGuire has been a director of Digital Insight since
March 1997 and served as Chairman of the Board from our inception until June
1999. Mr. McGuire has served as President of NJK Holding Corporation since
1992. Mr. McGuire currently serves as a director for Sylvan Learning Systems,
a provider of educational services. Mr. McGuire holds a BBA in finance from
the University of Notre Dame.
Ofer Nemirovsky. Mr. Nemirovsky has served as a director of Digital Insight
since February 1998. Mr. Nemirovsky has been a Managing Director of
HarbourVest Partners, LLC since January 1997. HarbourVest Partners, LLC was
formed by the management team of Hancock Venture Partners, Inc., where
Mr. Nemirovsky had served in various capacities since 1986. Prior to joining
Hancock Venture Partners, Inc., Mr. Nemirovsky held various computer sales and
marketing positions at Hewlett-Packard Company. He is currently a director of
Primix Solutions, Inc., an electronic commerce consulting firm, Paradigm
Geophysical Limited, a provider of computer aided exploration software, and
The Ultimate Software Group, Inc., a provider of human resources management
and payroll software, as well as several privately-held companies. He holds a
BS in electrical engineering and a BS in finance from the University of
Pennsylvania and an MBA from Harvard Business School.
Robert North. Mr. North has been a director of Digital Insight since June
1997. Mr. North has served as Chief Executive Officer of HNC Software, a
provider of predictive software solutions, since 1987. Mr. North is also a
director of HNC Software, Peerless Systems, a provider of software-based
embedded imaging systems, and Abacus Direct, a provider of information
products and marketing research services. Mr. North holds BS and MS degrees in
electrical engineering from Stanford University.
Board Composition
We currently have seven directors. In accordance with the terms of our
certificate of incorporation, the terms of office of our board of directors
will be divided into three classes upon the closing of the offering: Class I,
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whose term will expire at the annual meeting of stockholders to be held in
2000, Class II, whose term will expire at the annual meeting of stockholders
to be held in 2001 and Class III, whose term will expire at the annual meeting
of stockholders to be held in 2002. The Class I directors will be Messrs.
Nemirovsky and Kazeminy, the Class II directors will be Messrs. Fiore and
Jarve and the Class III directors will be Messrs. Dorman, McGuire and North.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. Any additional directorships will be distributed among the
three classes so that, as nearly as possible, each class will consist of one-
third of our directors. This classification of the board of directors may have
the effect of delaying or preventing changes in control or our company. Our
directors may be removed for cause by the affirmative vote of the holders of a
majority of our common stock.
Board Committees
Our board of directors has a compensation committee and an audit committee.
The compensation committee consists of Messrs. Jarve, McGuire and North. The
compensation committee makes recommendations regarding our stock option plans
and all matters concerning executive compensation. The audit committee
consists of Messrs. McGuire and North. The audit committee approves our
independent auditors, reviews the results and scope of annual audits and other
accounting related services, and evaluates our internal controls. Each of
these committees was established in June 1999.
Director Compensation
We do not pay any compensation to directors for serving in that capacity.
Directors are reimbursed for all reasonable expenses incurred by them in
attending board and committee meetings. The board of directors has the
discretion to grant options and rights to directors pursuant to our stock
plans. Employee directors are also eligible to participate in our employee
stock purchase plan. See "--Employee Benefit Plans."
Compensation Committee Interlocks and Insider Participation
The compensation committee consists of Messrs. Jarve, McGuire and North,
none of whom is an employee of Digital Insight. None of our executive officers
serves as a director or member of the compensation committee or other board
committee performing equivalent functions of another entity that has one or
more executive officers serving on the board of directors or compensation
committee of Digital Insight.
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Executive Compensation
The following table sets forth information concerning the compensation
earned during the fiscal year ended December 31, 1998 by our Chief Executive
Officer and each of our other four most highly compensated executive officers
who earned more than $100,000 during the fiscal year ended December 31, 1998,
collectively referred to as the Named Executive Officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
---------------- ------------
Securities
Underlying All Other
Name and Principal Position(1) Salary Bonus Options Compensation(2)
- ------------------------------ -------- ------- ------------ ---------------
<S> <C> <C> <C> <C>
John Dorman(3)................... $ 56,250 $28,125 690,000 $157
Chairman, Chief Executive
Officer and President
Paul Fiore(4).................... 140,000 20,000 -- 616
Executive Vice President and
Co-Founder
Ole Eichhorn(5).................. 160,000 50,000 -- 631
Former Vice President, Research
& Development
Daniel Jacoby.................... 100,000 12,500 -- 616
Vice President, Chief
Technology Officer and Co-
Founder
Ken Mattice(6)................... 115,000 26,667 -- 624
Controller
</TABLE>
- --------
(1) This table excludes information for Steven Reich, our Vice President,
Sales and Marketing who joined Digital Insight in May 1998. Mr. Reich's
combined salary and bonus during 1998 was $96,634 and his annualized
salary for 1998 was $150,000. Mr. Reich was also granted an option for
115,000 shares during 1998. This table also excludes information for Kevin
McDonnell, our Vice President, Finance, Chief Financial Officer and
Secretary, and Stephen Zarate, our Vice President and Chief Information
Officer, each of whom joined Digital Insight in March 1999. Mr.
McDonnell's annualized salary for 1999 is $165,000 and he has been granted
an option to purchase 115,000 shares. Mr. Zarate's annualized salary for
1999 is $175,000 and he has been granted an option to purchase 286,285
shares.
(2) Consists of premiums paid by Digital Insight for term life insurance.
(3) Mr. Dorman joined Digital Insight in October 1998. His annualized salary
for 1998 was $225,000.
(4) Mr. Fiore served as our President from inception until October 1998.
(5) Mr. Eichhorn resigned effective June 1999. Bonus includes $20,000 earned
in 1997 but paid in 1998.
(6) Mr. Mattice was an executive officer during 1998 when he served as our
Chief Financial Officer. Bonus includes $6,667 earned in 1997 but paid in
1998.
Option Grants in Last Fiscal Year
The following table sets forth stock options and stock purchase rights
granted to each of the Named Executive Officers during the fiscal year ended
December 31, 1998. A total of 996,000 options and stock purchase rights were
granted in fiscal 1998, all pursuant to our 1997 Stock Plan. No stock
appreciation rights were granted during fiscal 1998.
Options and stock purchase rights were granted at an exercise price equal to
the fair market value of our common stock, as determined by the board of
directors, on the date of grant. In making this determination, the board
considered a number of factors, including:
. our historical and prospective future revenue and profitability;
. our cash balance and rate of cash consumption;
. the development and size of the market for our products;
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<PAGE>
. the status of our financing activities;
. the stability and tenure of our management team; and
. the breadth of our product offerings.
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
reflect Digital Insight's projections or estimates of future stock price
growth.
<TABLE>
<CAPTION>
Potential
Realizable Value
Individual Grants at Assumed Annual
-------------------------------------------------- Rates of Stock
Number of % of Total Price
Securities Options/Rights Appreciation for
Underlying Granted to Exercise Option Term
Options/Rights Employees Price Per Expiration -----------------
Name Granted in Fiscal Year Share Date 5% 10%
- ---- -------------- -------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John Dorman............. 115,000 11.5% $1.00 10/13/2008 $ 72,323 $183,280
575,000 57.7 1.00 10/13/2008 361,614 916,402
Paul Fiore.............. -- -- -- -- -- --
Ole Eichhorn............ -- -- -- -- -- --
Daniel Jacoby........... -- -- -- -- -- --
Ken Mattice............. -- -- -- -- -- --
</TABLE>
The 115,000 shares granted to Mr. Dorman were in the form of a stock
purchase right which was fully vested at the time of grant and has
subsequently been exercised. The 575,000 shares granted to Mr. Dorman were in
the form of a stock option which vests as to 25% percent of the shares on
October 13, 1999 and as to 1/48 of the shares each month thereafter.
Option Exercises and Holdings
The following table sets forth for each of the Named Executive Officers
certain information concerning the number of shares subject to both
exercisable and unexercisable stock options at December 31, 1998. Also
reported are values for "in-the-money" options that represent the positive
spread between the respective exercise prices of outstanding stock options and
$1.00, or the fair market value of the common stock as of December 31, 1998,
as determined in good faith by the board of directors. No shares were acquired
by the Named Executive Officers upon exercise of stock options or stock
purchase rights in the fiscal year ended December 31, 1998.
Aggregated Fiscal Year End Option/SPR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Year End Fiscal Year End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John Dorman................. 115,000 575,000 $ -- $ --
Paul Fiore.................. -- -- -- --
Ole Eichhorn................ 27,167 54,333 19,016 38,033
Daniel Jacoby............... -- -- -- --
Ken Mattice................. 12,656 27,844 8,859 19,490
</TABLE>
Employment and Change of Control Agreements
As of December 31, 1998, John Dorman, our Chairman, Chief Executive Officer
and President, had an outstanding option to purchase 575,000 shares of common
stock. Under the terms of Mr. Dorman's option
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<PAGE>
agreement with Digital Insight, 25% of the shares subject to the option vest
on October 13, 1999 and 1/48 of the shares vest at the end of each calendar
month thereafter, provided that 50% of the then unvested portion of the option
shall accelerate and immediately vest if a change in control of Digital
Insight occurs. As of December 31, 1998, no shares were vested under this
option.
As of December 31, 1998, Ken Mattice, our Controller, had an outstanding
option to purchase 40,500 shares of common stock. Under the terms of Mr.
Mattice's option agreement with Digital Insight, all shares subject to the
option shall accelerate and vest in full if Mr. Mattice is involuntarily
terminated, with or without cause. As of December 31, 1998, 27,844 shares were
unvested under this option.
Two of our current officers, Kevin McDonnell, our Vice President, Finance,
Chief Financial Officer and Secretary, and Stephen Zarate, our Vice President
and Chief Information Officer, were hired in 1999 and have been granted
options to purchase shares of our common stock. Under the terms of each of
their option agreements with Digital Insight, 50% of the then unvested portion
of the options will accelerate and immediately vest if a change in control of
Digital Insight occurs. None of the shares subject to these options are
currently vested.
Employee Benefit Plans
1997 Stock Plan
A total of 3,000,000 shares of common stock have been reserved for issuance
under our 1997 Stock Plan, as amended. Under the 1997 Stock Plan, as of March
31, 1999, options to purchase 1,790,402 shares were outstanding, 767,151
shares of common stock had been purchased pursuant to exercises of stock
options and stock purchase rights, or SPRs, and 442,447 shares were available
for future grant, although we do not plan to grant any additional options or
SPRs pursuant to this plan following this offering.
The 1997 Stock Plan provides for the grant of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code, nonstatutory stock
options and SPRs to our employees, directors and consultants. Nonstatutory
stock options and SPRs may be granted to our employees, directors and
consultants. Incentive stock options may be granted only to employees. The
1997 Stock Plan is administered by the board of directors, or a committee
appointed by the board of directors, which determines the terms of options
granted, including the exercise price and the number of shares subject to each
option. The board of directors also determines the schedule upon which options
become exercisable. Generally, initial options granted to an employee under
the 1997 Stock Plan vest 25% after the first year of employment and monthly
thereafter for 48 months and subsequent grants to an employee vest monthly
over 48 months from the date of grant. The maximum term of options granted
under the 1997 Stock Plan is ten years.
Options and SPRs granted under the 1997 Stock Plan are not transferable by
the optionee except by will or by the laws of descent or distribution, and
each option and SPR is exercisable during the lifetime of the optionee only by
that optionee. Options granted under the 1997 Stock Plan must generally be
exercised within three months after the end of optionee's status as our
employee, director or consultant, or within 12 months after the optionee's
termination by disability or death, to the extent the optionee is vested on
the date of termination. However, an option may not be exercised later than
the expiration of the option's term.
The 1997 Stock Plan provides that if we merge with or into another
corporation, or sell all or substantially all of our assets, each outstanding
option and SPR must be assumed or an equivalent option substituted for by the
successor corporation or a parent or subsidiary of the successor corporation.
If the outstanding options and SPRs are not assumed or substituted for, the
optionee will fully vest in and have the right to exercise the option or SPR
as to all of the optioned stock, including shares as to which it would not
otherwise be exercisable. The administrator shall notify the optionee that the
option or SPR shall be fully exercisable for a period of 15 days from the date
of this notice, and the option or SPR will terminate upon the expiration of
this period. If a dissolution or liquidation is proposed, the board of
directors, or any of its committees, in its discretion may accelerate the
vesting of any outstanding option or SPR before the effective date of the
proposed transaction.
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1999 Stock Plan
Our 1999 Stock Plan was adopted by the board of directors in June 1999 and
will be submitted for approval by the stockholders in July 1999. A total of
1,500,000 shares of common stock, plus annual increases beginning on March 1,
2001, equal to the lesser of 750,000 shares, 5% of our shares on that date or
a lesser amount determined by the board of directors are currently reserved
for issuance pursuant to our 1999 Stock Plan. Unless terminated sooner, the
1999 Stock Plan will terminate automatically in June 2009.
The 1999 Stock Plan provides for the discretionary grant of incentive stock
options to employees, the grant of nonstatutory stock options and SPRs to
employees, directors and consultants.
The 1999 Stock Plan may be administered by the board of directors or a
committee of the board. The administrator has the power to determine the terms
of the options or SPRs granted, including:
. the exercise price of the option or SPR;
. the number of shares subject to each option or SPR;
. the exercisability thereof; and
. the form of consideration payable upon exercise.
In addition, the administrator has the authority to amend, suspend or
terminate the 1999 Stock Plan, provided that this action shall not impair the
rights of any optionee, unless mutually agreed upon in writing.
The exercise price of all incentive stock options granted under the 1999
Stock Plan must be at least equal to the fair market value of the common stock
on the date of grant. The exercise price of nonstatutory stock options and
SPRs granted under the 1999 Stock Plan is determined by the administrator, but
with respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the exercise price must be at least equal to 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 our outstanding capital stock, the exercise price of any incentive
stock option granted must be at least equal 110% of the fair market value on
the grant date and the term of this incentive stock option must not exceed
five years. The term of all other incentive stock options granted under the
1999 Stock Plan may not exceed ten years.
In the case of SPRs, unless the administrator determines otherwise, the
restricted stock purchase agreement will grant us a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with us for any reason, including death or disability. The purchase
price for shares repurchased pursuant to the restricted stock purchase
agreement will be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to us. The repurchase option
will lapse at a rate determined by the administrator.
Options and SPRs granted under the 1999 Stock Plan are generally not
transferable by the optionee, except by will or the laws of descent or
distribution, and are exercisable during the lifetime of the optionee only by
that optionee. Options granted under the 1999 Stock Plan must generally be
exercised within three months after the end of optionee's status as an
employee, director or consultant of our company, or within 12 months after the
optionee's termination by disability or death, but in no event later than the
expiration of the option's term.
The 1999 Stock Plan provides that in the event of a merger of our company
with or into another corporation, or a sale of substantially all of our
assets, each outstanding option and SPR must be assumed or an equivalent
option substituted for by the successor corporation or a parent or subsidiary
of the successor corporation. If the outstanding options and SPRs are not
assumed or substituted for, the optionee will fully vest in and have the right
to exercise the option or SPR as to all of the optioned stock, including
shares as to which it would not otherwise be exercisable. The administrator
shall notify the optionee that the option or SPR shall be fully exercisable
for a period of 15 days from the date of this notice, and the option or SPR
will terminate upon the
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expiration of this period. In the event of our proposed dissolution or
liquidation, the board of directors, or any of its committees, in its
discretion may accelerate the vesting of any outstanding option or SPR prior
to the effective date of the proposed transaction.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan, or the 1999 Purchase Plan, was
adopted by the board of directors in June 1999 and will be submitted for
approval by the stockholders in July 1999. A total of 300,000 shares of common
stock has been reserved for issuance under the 1999 Purchase Plan, plus annual
increases beginning on March 1, 2001, equal to the lesser of 300,000 shares,
2% of the outstanding shares or a lesser amount determined by the board of
directors.
The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains successive, overlapping twenty-four month
offering periods. The offering periods generally start on the first trading
day on or after May 1 and November 1 of each year and end on the last trading
day of that twenty-four month period. Each offering period contains four six-
month purchase periods. The first offering period commences on the effective
date of this offering and ends on the last trading day on or before October
31, 2001.
Employees are eligible to participate if they are customarily employed by us
or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, the 1999 Purchase Plan excludes
from participation any employee who:
. immediately after the grant, owns stock and/or options to purchase stock
representing 5% or more of the total combined voting power or value of
all classes of our capital stock; or
. has rights to purchase stock under all of our employee stock purchase
plans that accrue at a rate which exceed $25,000 worth of stock for each
calendar year.
The 1999 Purchase Plan permits participants to purchase common stock through
payroll deductions of up to 15% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings
and commissions, but exclusive of payments for overtime shift premium,
incentive compensation, incentive payments, bonus and any other compensation.
The maximum number of shares a participant may purchase during a single
purchase period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the 1999 Purchase Plan is 85% of the lower of the fair market
value of the common stock at the beginning or end of the offering period. In
the event the fair market value at the end of a purchase period is less than
the fair market value at the beginning of the offering period, the
participants will be withdrawn from the current offering period following
exercise and automatically re-enrolled in a new offering period. The new
offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions credited to
their account without interest. Upon termination of employment a participant
will be deemed to have elected to withdraw from the 1999 Purchase Plan.
Payroll deductions credited to a participant's account and any rights
granted under the 1999 Purchase Plan are not transferable by a participant
other than by will, the laws of descent and distribution, or as otherwise
provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides that,
in the event of our merger with or into another corporation or a sale of
substantially all of our assets, each outstanding option may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding options, the offering
period then in progress will be shortened and a new exercise date will be set.
In addition, in the event of a proposed dissolution or liquidation of us the
offering period then in progress will be shortened and a new exercise date
will be set.
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The board of directors has the authority to amend or terminate the 1999
Purchase Plan, except that this action may not make a change in any option
previously granted which may adversely affect the rights of any participant,
provided that the board of directors may terminate an offering period on any
exercise date if the Board determines that the termination of the 1999
Purchase Plan is in our best interests and our stockholders' best interests.
The 1999 Purchase Plan will become effective on the consummation of this
offering and will terminate in ten years, unless sooner terminated by the
board of directors.
401(k) Plan
We maintain a tax-qualified retirement and deferred savings plan for our
employees, commonly known as a 401(k) plan. The 401(k) plan provides that each
participant may contribute up to 20% of his or her pre-tax gross compensation
up to a statutory limit, which was $10,000 in calendar year 1998. Under the
401(k) plan, we may make discretionary matching contributions. We made no
contributions to the 401(k) plan in 1998.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
. breach of their duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
Our bylaws provide that we shall indemnify our directors and officers, to
the maximum extent permitted by Delaware law. We believe that indemnification
under our bylaws covers at least negligence and gross negligence on the part
of indemnified parties. Our bylaws also permit us to secure insurance on
behalf of any current or former officer, director, employee or other agent of
Digital Insight, or of another enterprise if serving at our request, for any
liability arising out of his or her actions in that capacity, regardless of
whether we would have the power to indemnify him or her against liability
under the provisions of Delaware law.
We have entered into agreements to indemnify our directors and executive
officers, in addition to the indemnification provided for in our bylaws. These
agreements, among other things, indemnify our directors and executive officers
for any and all expenses (including any federal, state, local or foreign taxes
imposed on them as a result of the actual or deemed receipt of any payments
under the Indemnification Agreement), judgments, fines, penalties and amounts
paid in settlement (if such settlement is approved in advance by us, which
approval shall not be unreasonably withheld), actually and reasonably incurred
by the officer or director in any action or proceeding, including any action
by or in the right of Digital Insight arising out of a person's services as a
director, officer, employee, agent or fiduciary of Digital Insight, any
subsidiary of Digital Insight or any other company or enterprise to which the
person provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
At present, there is no pending litigation or proceeding involving a
director or officer in which indemnification is required or permitted, and we
are not aware of any threatened litigation or proceeding that may result in a
claim for indemnification.
50
<PAGE>
CERTAIN TRANSACTIONS
The following is a description of transactions since January 1, 1996 to
which we have been a party, in which the amount involved in the transaction
exceeds $60,000 and in which any director, executive officer or holder of more
than 5% of our capital stock had or will have a direct or indirect material
interest other than compensation arrangements which are otherwise described
under "Management."
Reorganization
We were incorporated in March 1997 as the successor to Digital Insight LLC.
As part of the reorganization of our company from a limited liability company
to a corporation, we issued an aggregate of 5,000,000 shares of common stock
and 481,500 shares of Series A preferred stock to the former members of
Digital Insight LLC in consideration for the transfer of all of the tangible
and intangible assets of Digital Insight LLC. During the time that they were
members of the limited liability company, certain of our executive officers
and directors and certain stockholders who own beneficially 5% or more of our
securities loaned funds to Digital Insight LLC. A portion of these loans were
subsequently contributed to the capital of Digital Insight LLC in
consideration for an increase in the lenders' respective membership interests
in the limited liability company. The remaining loans were repaid in March
1997. Listed below are those directors, executive officers and stockholders
who beneficially own 5% or more of our securities who were former members of
Digital Insight LLC and who received shares of our common stock and Series A
preferred stock and/or loaned money to Digital Insight LLC.
<TABLE>
<CAPTION>
Amount
Contributed to
Number of Shares Amount Loaned to Capital of Amount Repaid by
Number of Shares of Series A Digital Insight Digital Digital Insight
Stockholder of Common Stock Preferred Stock LLC Insight LLC LLC
- ----------- ---------------- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Nasser Kazeminy and
affiliated
entities(1)............ 2,226,750 214,435 $118,221 $118,221 $ --
Paul Fiore.............. 456,050 43,917 -- -- --
Edward Harris........... 791,750 76,245 109,589 67,555 42,034
Daniel Jacoby........... 456,050 43,917 -- -- --
</TABLE>
- --------
(1) Consists of shares purchased by and loans made by Nasser J. Kazeminy, The
Nasser J. Kazeminy Irrevocable Trust and Yvonne P. Kazeminy-Mofrad
Irrevocable Trust. Mr. Kazeminy is trustee of The Nasser J. Kazeminy
Irrevocable Trust and Yvonne P. Kazeminy-Mofrad, the wife of Nasser J.
Kazeminy, is the trustee of Yvonne P. Kazeminy-Mofrad Irrevocable Trust.
Mr. Kazeminy disclaims beneficial ownership of the shares held by these
trusts.
Equity Transactions
In March 1997, we sold an aggregate of 1,111,100 shares of our Series A
preferred stock at a price per share of $2.70 and issued warrants to purchase
up to 763,450 shares of Series B preferred stock. These warrants were
exercisable for an exercise price per share of $3.93 and have since expired
unexercised. In February 1998, we sold an aggregate of 2,305,475 shares of our
Series B preferred stock at a price per share of $3.47. In May 1999, we sold
an aggregate of 844,036 shares of our Series C preferred stock at a price per
share of $10.00. Simultaneously with the consummation of this offering, all
shares of these series of preferred stock will be converted into shares of
common stock. Listed below are those directors, executive officers and
stockholders who beneficially own 5% or more of our securities who
participated in these financings. We believe that the shares issued in these
transactions were sold at the then fair market value and that the terms of
these transactions were no less favorable than we could have obtained from
unaffiliated third parties.
51
<PAGE>
<TABLE>
<CAPTION>
Series A Series B Series C Aggregate
Preferred Preferred Preferred Cash
Stockholder Stock Stock Stock Consideration
- ----------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Entities affiliated with Menlo
Ventures(1)...................... 1,111,100 864,553 400,000 $9,999,969
HarbourVest Partners V-Direct
Fund, L.P........................ -- 1,440,922 101,328 6,013,280
Nasser Kazeminy and affiliated
entities(2)...................... -- -- 171,669 1,716,690
John Dorman....................... -- -- 40,000 400,000
Stephen Zarate.................... -- -- 30,000 300,000
Paul Fiore........................ -- -- 10,000 100,000
Daniel Jacoby..................... -- -- 10,000 100,000
Kevin McDonnell................... -- -- 10,000 100,000
Steven Reich...................... -- -- 10,000 100,000
</TABLE>
- --------
(1) Consists of shares purchased by Menlo Ventures VII, L.P. and Menlo
Entrepreneurs Fund VII, L.P. John Jarve, a director of Digital Insight, is
a managing member of MV Management VII, LLC, the general partner of Menlo
Ventures VII, L.P. and Menlo Entrepreneurs Fund VII, L.P. Mr. Jarve
disclaims beneficial ownership of the shares held by these funds, except
to the extent of his proportionate pecuniary interest therein.
(2) Consists of shares purchased by Nasser J. Kazeminy, The Nasser J. Kazeminy
Irrevocable Trust and Yvonne P. Kazeminy-Mofrad Irrevocable Trust. Mr.
Kazeminy is trustee of the Nasser J. Kazeminy Irrevocable Trust and Yvonne
P. Kazeminy-Mofrad, the wife of Nasser J. Kazeminy, is the trustee of the
Yvonne P. Kazeminy Irrevocable Trust. Mr. Kazeminy disclaims beneficial
ownership of the shares held by these trusts.
Stock Purchase Rights
In October 1997, Paul Fiore, our Executive Vice President, a director and
co-founder of Digital Insight, exercised a stock purchase right to purchase an
aggregate of 309,250 shares of common stock and entered into a restricted
stock purchase agreement with respect to this exercise. Mr. Fiore paid the
$.30 exercise price per share for these shares by delivery of a full-recourse
promissory note bearing interest at the rate of 7.0% per annum. The note is
secured by the shares of common stock purchased by Mr. Fiore. As of March 31,
1999, $102,125 in unpaid principal and interest was outstanding in the
aggregate under the note.
In October 1997, Daniel Jacoby, our Vice President, Chief Technology Officer
and a co-founder of Digital Insight, exercised a stock purchase right to
purchase an aggregate of 309,250 shares of common stock and entered into a
restricted stock purchase agreement with respect to this exercise. Mr. Jacoby
paid the $.30 exercise price per share for these shares by delivery of a full-
recourse promissory note bearing interest at the rate of 7.0% per annum. The
note is secured by the shares of common stock purchased by Mr. Jacoby. As of
March 31, 1999, $102,125 in unpaid principal and interest was outstanding in
the aggregate under the note.
In February 1999, John Dorman, our Chairman, Chief Executive Officer and
President, exercised a stock purchase right to purchase an aggregate of
115,000 shares of common stock. These shares are fully vested. Mr. Dorman paid
the $1.00 exercise price per share in cash.
Other Transactions
Digital Insight plans to enter into an indemnification agreement with each
of its executive officers and directors.
Holders of preferred stock are entitled to registration rights with respect
to the common stock issued or issuable upon conversion of preferred stock. See
"Description of Capital Stock--Registration Rights."
We believe that all related-party transactions described above were on terms
no less favorable than could have been otherwise obtained from unrelated third
parties. All future transactions between us and our principal officers,
directors and affiliates will be approved by a majority of the independent and
disinterested members of the board and will be on terms deemed to be no less
favorable than could be obtained from unrelated third parties.
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 31, 1999, and as adjusted to
reflect the sale of the shares of common stock offered hereby, certain
information with respect to the beneficial ownership of the common stock as
to:
. each person known by us to own beneficially more than 5% of the
outstanding shares of our common stock,
. each of the Named Executive Officers,
. each of our directors, and
. all of our directors and executive officers as a group.
Except as otherwise indicated, and subject to applicable community property
laws, the persons named below have sole voting and investment power with
respect to all shares of common stock held by them.
Applicable percentage ownership in the table is based on 10,620,839 shares
of common stock outstanding as of May 31, 1999 and shares outstanding
immediately following the completion of this offering. Beneficial ownership is
determined in accordance with the rules of the SEC. Shares of common stock
subject to options that are presently exercisable or exercisable within 60
days of May 31, 1999 are deemed outstanding for the purpose of computing the
percentage ownership of the person or entity holding the options, but are not
treated as outstanding for the purpose of computing the percentage ownership
of any other person or entity.
Unless otherwise indicated below, each person or entity named below has an
address in care of Digital Insight's principal executive offices.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
Number of Shares ------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
5% Stockholders:
Nasser J. Kazeminy and
affiliated entities(1).... 3,046,105 28.7%
Entities affiliated with
Menlo Ventures(2)......... 2,375,653 22.4
HarbourVest Partners V-
Direct Fund, L.P.(3)...... 1,542,250 14.5
Edward Harris.............. 929,034 8.7
Paul Fiore(4).............. 759,217 7.1
Daniel Jacoby(5)........... 759,217 7.1
Directors and Named Executive
Officers:
John Dorman................ 155,000 1.5
Ole Eichhorn(6)............ 90,704 *
Ken Mattice(7)............. 18,562 *
John Jarve(8).............. 2,375,653 22.4
Nader Kazeminy(9).......... -- --
James McGuire.............. 88,149 *
Ofer Nemirovsky(10)........ 1,542,250 14.5
Robert North(11)........... 21,094 *
All directors and officers
as a group
(13 persons)(12).......... 5,893,388 55.0%
</TABLE>
- --------
* Less than 1%
53
<PAGE>
(1) The address of record for Nasser J. Kazeminy and affiliated entities is
c/o NJK Holdings Corp., 7803 Glenroy Rd., Suite 300, Bloomington, MN
55439. Number of shares consists of (i) 1,553,162 shares held by Nasser
J. Kazeminy, (ii) 529,846 shares held by The Nasser J. Kazeminy
Irrevocable Trust and (iii) 529,846 shares held by the Yvonne P.
Kazeminy-Mofrad Irrevocable Trust. Mr. Kazeminy is trustee of both of
these trusts. Mr. Kazeminy disclaims beneficial ownership of the shares
held by these trusts except to the extent he is a beneficiary thereunder.
(2) The address of record for each entity affiliated with Menlo Ventures is
3000 Sand Hill Road, Building 4, Suite 100, Menlo Park, CA 94025. Number
of shares consists of 2,276,836 shares held by Menlo Ventures VII, L.P.,
and 98,817 shares held by Menlo Entrepreneurs Fund VII, L.P.
(3) The address of record for HarbourVest Partners V-Direct Fund, L.P. is One
Financial Center, 44th Floor, Boston, MA 02111.
(4) Number of shares includes 309,250 shares of common stock issued upon
exercise of a stock purchase right, 178,785 shares of which are subject
to a repurchase option held by Digital Insight as of May 31, 1999.
(5) Number of shares includes 309,250 shares of common stock issued upon
exercise of a stock purchase right, 178,785 shares of which are subject
to a repurchase option held by Digital Insight as of May 31, 1999.
(6) Number of shares includes 37,354 shares of common stock issuable upon
exercise of options exercisable within 60 days of May 31, 1999. Mr.
Eichhorn resigned effective June 1999.
(7) Number of shares includes 2,531 shares of common stock issuable upon
exercise of options exercisable within 60 days of May 31, 1999.
(8) Number of shares consists of 2,375,653 shares held by entities affiliated
with Menlo Ventures. John Jarve is a managing member of MV Management
VII, LLC, the general partner of Menlo Ventures VII, L.P. and Menlo
Entrepreneurs Fund VII, L.P. Mr. Jarve disclaims beneficial ownership of
the shares held by these entities except to the extent of his
proportionate pecuniary interest therein.
(9) Excludes 3,046,105 shares held by Nasser Kazeminy and affiliated
entities. Mr. Nader Kazeminy is the adult son of Mr. Nasser Kazeminy.
(10) Number of shares consists of 1,542,250 shares held by HarbourVest
Partners V-Direct Fund L.P. Ofer Nemirovsky is a member of HVP V-Direct
Associates L.L.C., a general partner of HarbourVest Partners V-Direct
Fund L.P. and a managing director of HarbourVest Partners, LLC the
manager of HarbourVest Partners V-Direct Fund L.P. Mr. Nemirovsky
disclaims beneficial ownership of these shares except to the extent of
his proportionate pecuniary interest therein.
(11) Number of shares consists of 21,094 shares of common stock issuable upon
exercise of options exercisable within 60 days of May 31, 1999.
(12) Number of shares consists of shares beneficially owned by our current
officers and directors as well as 18,562 shares beneficially owned by Ken
Mattice, our Controller and former Chief Financial Officer, and 90,704
shares beneficially owned by Ole Eichhorn, our former Vice President of
Research and Development. In addition, of the 5,893,388 shares listed,
94,521 shares are issuable upon exercise of options held by our officers
and directors exercisable within 60 days of May 31, 1999, 1,542,250
shares are held by HarbourVest Partners V-Direct Fund, L.P. (see footnote
3 above) and 2,375,653 shares are held by entities affiliated with Menlo
Ventures (see footnote 2 above).
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, $.001 par value, and 5,000,000 shares
of preferred stock, $.001 par value.
The following summary does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of our restated certificate of
incorporation, which is included as an exhibit to the registration statement
of which this prospectus is a part, and by the provisions of applicable law.
Common Stock
As of May 31, 1999, there were 10,620,839 shares of common stock outstanding
held of record by 51 stockholders, assuming the conversion of all outstanding
shares of preferred stock into common stock. After giving effect to the sale
of common stock offered hereby, there will be shares of common
stock outstanding.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of common
stock have no preemptive rights or rights to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and non-assessable, and the shares of common stock to be issued
upon completion of this offering will be fully paid and non-assessable.
Preferred Stock
Pursuant to our restated certificate of incorporation, the board of
directors has 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 designations, powers, preferences, privileges and relative
participating, optional or special rights and the qualifications, limitations
or restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the common stock. The board, without
stockholder approval, can issue preferred stock with voting, conversion or
other rights that could adversely affect the voting power and other rights of
the holders of common stock. Preferred stock could thus be issued quickly with
terms calculated to delay or prevent a change in control of Digital Insight or
make removal of management more difficult. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price of the
common stock, and may adversely affect the voting and other rights of the
holders of common stock. Upon the closing of this offering, there will be no
shares of preferred stock outstanding and we have no plans to issue any of the
preferred stock.
Warrants
Upon completion of the offering, we will have (i) a warrant outstanding to
purchase 28,819 shares of common stock at an exercise price of $3.47 per share
which expires in February 2006, and (ii) a warrant outstanding to purchase
22,222 shares of common stock at an exercise price of $2.70 per share which
expires on the earlier of January 2002 or two years from the closing of this
offering. In lieu of exercising the warrants for cash, the holders of the
warrants can elect a cashless exercise. The holders of the warrants are
entitled to registration rights with respect to the shares issued under the
warrants.
Registration Rights
Upon completion of this offering, the holders of an aggregate of 10,417,705
shares of common stock will be entitled to rights with respect to the
registration of shares under the Securities Act. In addition, the holders of
51,041 shares subject to outstanding warrants are entitled to registration
rights. Under the terms of an investor rights agreement, if we propose to
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, these holders are entitled to notice of this registration and are
entitled to include their shares of common stock in the registration. The
rights are subject to conditions and limitations, among them the right of the
underwriters to limit the number of shares
55
<PAGE>
included in the registration. Holders of common stock benefiting from these
rights may also require us to file a registration statement under the
Securities Act at our expense with respect to their shares of common stock,
and we are required to use our best efforts to effect this registration,
subject to conditions and limitations. Furthermore, the holders of
registration rights may require us to file additional registration statements
on Form S-3, subject to certain conditions and limitations.
Delaware Anti-Takeover Law and Certain Charter and Bylaws Provisions
Provisions of our charter and bylaws may make it more difficult for a third
party to acquire, or may discourage a third party from attempting to acquire,
control of us. These provisions could limit the price that investors might be
willing to pay in the future for shares of our common stock. These provisions
include:
. division of the board of directors into three separate classes;
. elimination of cumulative voting in the election of directors;
. prohibitions on our stockholders from acting by written consent and
calling special meetings;
. procedures for advance notification of stockholder nominations and
proposals; and
. the ability of the board of directors to alter our bylaws without
stockholder approval.
In addition, subject to limitations prescribed by law, our board of
directors has the authority to issue up to 5,000,000 shares of preferred stock
and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The issuance of preferred stock, while providing flexibility
in connection with possible financings or acquisitions or other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire a majority of our outstanding voting stock.
These and other provisions contained in our charter and bylaws could have
the effect of delaying or preventing a change in control.
We are also subject to Section 203 of the Delaware General Corporation Law
which, subject to 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 a stockholder became an interested
stockholder, unless:
. prior to that date, the board of directors approved either the business
combination or the transaction which resulted in the stockholder
becoming an interested stockholder; or
. 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 outstanding at the time the transaction
commenced; or
. on or following that date the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is BankBoston, N.A.
BankBoston, N.A.'s address is 150 Royall Street, Canton, Massachusetts 02021,
and its telephone number is (781) 575-2000.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock
and any sale of substantial amounts of common stock in the open market may
adversely affect the market price of our common stock. Furthermore, since only
a limited number of shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale (as described
below), sales of substantial amounts of our common stock in the public market
after the restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of options after May 31, 1999. Of these shares, the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act; provided however, that if
shares are purchased by "affiliates" as that term is defined in Rule 144 of
the Securities Act, their sales of shares would be subject to certain
limitations and restrictions that are described below.
The remaining 10,620,839 shares of common stock held by existing
stockholders as of May 31, 1999 were issued and sold by us in reliance on
exemptions from the registration requirements of the Securities Act. All of
these shares will be subject to "lock-up" agreements described below on the
effective date of the offering. Upon expiration of the lock-up agreements 180
days after the effective date of the offering, 9,255,403 shares will become
eligible for sale, subject in some cases to the limitations of Rule 144.
In addition, as of May 31, 1999 we had 1,890,134 shares subject to
outstanding options and 1,784,482 shares of our common stock available for
future grant pursuant to our stock plans. All of these outstanding options are
also subject to the 180-day lock-up. We intend to register, prior to the
expiration of the lock-up all of the shares of common stock subject to
outstanding options and reserved for issuance under our stock option plans and
an additional 300,000 shares of common stock reserved for issuance under our
employee stock purchase plan. This registration will permit the resale of
vested shares by non-affiliates in the public market without restriction
beginning on expiration of the lock-up. We also have 51,041 shares underlying
outstanding warrants, also subject to lock-ups, that will be eligible for
resale in the public market upon expiration of the warrant holder's respective
one-year holding periods under Rule 144, which will begin upon the date of
exercise or, in the case of a net exercise, on the date of grant of the
warrant.
Each of our officers, directors and substantially all other stockholders
have agreed with Morgan Stanley & Co. Incorporated not to sell or otherwise
dispose of any their shares for a period of 180 days after the date of this
prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated, however, may in its sole
discretion, at any time and without notice, release all or any portion of the
shares subject to its lock-up agreements.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market System during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to other requirements regarding the
manner of sale, notice filing and the availability of current public
information about us.
57
<PAGE>
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, would be entitled to
sell these shares under Rule 144(k) without regard to the requirements
described above. Therefore, unless otherwise restricted, "144(k) shares" may
be sold immediately upon the completion of this offering.
Rule 701
In general, any employee, director, officer, consultant or advisor who
purchases shares from us in connection with a compensatory stock or option
plan or other written agreement before the effective date of the offering is
entitled to resell these shares 90 days after the effective date of the
offering in reliance on Rule 144, without having to comply with certain
restrictions, including the holding period, contained in Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of these options, including exercises after the date of this
prospectus. Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than "affiliates" subject only to the manner of sale restrictions of
Rule 144 and by "affiliates" under Rule 144 without compliance with its one-
year minimum holding requirement.
58
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc., Banc of
America Securities LLC and Friedman, Billings, Ramsey & Co., Inc. are acting
as representatives, have severally agreed to purchase, and we have agreed to
sell to them the respective number of shares of common stock set forth
opposite the names of the underwriters below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
Deutsche Bank Securities Inc.......................................
Banc of America Securities LLC.....................................
Friedman, Billings, Ramsey & Co., Inc. ............................
Total............................................................
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept
delivery of the shares of common stock offered hereby are subject to the
approval of certain legal matters by their counsel and to other conditions.
The underwriters are obligated to take and pay for all of the shares of common
stock offered by this prospectus, other than those covered by the over-
allotment option described below, if any of these shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and part to certain dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. Any underwriters may allow, and any of these dealers may
reallow, a concession not in excess of $ per share to other underwriters
or to certain other dealers. After the initial offering of the shares of
common stock, the offering price and other selling terms may from time to time
be varied by the representatives of the underwriters.
Pursuant to the underwriting agreement, we have granted to the underwriters
an option, exercisable for 30 days from the date of this prospectus, to
purchase up to an aggregate of additional shares of common stock at
the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if any, made in
connection with this offering of common stock. To the extent this over-
allotment option is exercised, each underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of
additional shares of common stock as the number set forth next to that
underwriter's name in the preceding table bears to the total number of shares
of common stock set forth next to the names of all underwriters in the
preceding table.
At our request, the underwriters have reserved ten percent of the shares of
common stock to be issued by us and offered hereby for sale, at the initial
public offering price, to directors, officers, employees, business associates
and related persons of us. The number of shares of common stock available for
sale to the general public will be reduced to the extent these individuals
purchase such reserved shares. Any reserved shares which are not so purchased
will be offered by the underwriters to the general public on the same basis as
the other shares offered by this prospectus.
Each of the directors and officers, and certain other stockholders and
optionholders of Digital Insight have each agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, during the period ending 180 days after the date of this
prospectus, they will not, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
59
<PAGE>
common stock, or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of common stock, whether any transaction described in clause (i) or (ii) above
is to be settled by delivery of common stock or these other securities, in
cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
. the sale to the underwriters of the shares of common stock under the
underwriting agreement,
. the issuance by Digital Insight of shares of common stock upon exercise
of an option or a warrant or the conversion of a security outstanding on
the date of this prospectus which is described in this prospectus,
. transactions by any person other than Digital Insight relating to shares
of common stock or other securities acquired in open market transactions
after the completion of the offering of the shares, or
. issuances of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on
the date of this prospectus.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We will apply to have our common stock listed for quotation on the Nasdaq
National Market under the symbol "DGIN."
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering if the syndicate repurchases
previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
Pricing of the Offering
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares of
common stock was determined by negotiations between us and the representatives
of the underwriters. Among the factors considered in determining the initial
public offering price were our record of operations, our current financial
position and future prospects, the future prospects of Digital Insight's
industry in general, the experience of our management, sales, earnings and
certain of our other financial and operating information in recent periods,
the price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to ours.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Digital Insight by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, Menlo Park, California.
60
<PAGE>
EXPERTS
The financial statements as of December 31, 1997 and 1998 and for each of
the three years in the period ended December 31, 1998 included in this
prospectus and the financial statement schedules included in the Registration
Statement have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1, including
exhibits, schedules and amendments filed with this registration statement,
under the Securities Act with respect to the common stock to be sold under
this prospectus. Prior to the offering we were not required to file reports
with the SEC. This prospectus does not contain all the information set forth
in the registration statement. For further information about our company and
the shares of common stock to be sold in the offering, please refer to the
registration statement. Statements made in this prospectus concerning the
contents of any contract, agreement or other document filed as an exhibit to
the registration statement are summaries of the terms of contract, agreements
or documents and are not necessarily complete. Complete exhibits have been
filed with the registration statement.
The registration statement and exhibits may be inspected, without charge,
and copies may be obtained at prescribed rates, at the SEC's Public Reference
facility maintained by the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The registration
statement and other information filed with the SEC is available at the web
site maintained by the SEC on the worldwide web at http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent accountants and quarterly
reports for the first three quarters of each fiscal year containing unaudited
financial statements.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations .................................................. F-4
Statement of Stockholders' Deficit ........................................ F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Digital Insight Corporation
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all
material respects, the financial position of Digital Insight Corporation at
December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Costa Mesa, California
February 12, 1999, except as to note 12,
which is as of May 28, 1999
F-2
<PAGE>
DIGITAL INSIGHT CORPORATION
BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
-------------- March 31, March 31,
1997 1998 1999 1999
------ ------ --------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............. $ 886 $4,758 $3,923
Accounts receivable, net.............. 766 356 768
Tax refund receivable................. 73 73 73
Accumulated implementation costs...... 71 135 107
Other current assets.................. 45 80 368
------ ------ ------
Total current assets................. 1,841 5,402 5,239
Property and equipment, net............ 789 2,353 3,001
Deposits............................... 240 240 249
Intangible assets, net................. 201 53 30
Other assets........................... -- 29 29
------ ------ ------
$3,071 $8,077 $8,548
====== ====== ======
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable...................... $ 587 $ 214 $ 451
Accrued compensation and related
benefits............................. 91 542 592
Current portion of lease obligation... 41 71 235
Deferred revenue...................... 785 1,036 1,490
Other accruals........................ 353 472 730
------ ------ ------
Total current liabilities............ 1,857 2,335 3,498
Long-term portion of lease obligation.. 92 82 362
------ ------ ------
1,949 2,417 3,860
Commitments and contingencies (Note 11)
Mandatorily redeemable convertible
preferred stock:
$.001 par value; 2,431,616, 3,973,641,
and 3,973,641 shares authorized;
1,645,944, 3,951,419, and 3,951,419
(unaudited) shares issued and
outstanding; no shares pro forma
(unaudited).......................... 4,444 12,444 12,444 --
Stockholders' equity (deficit):
Common stock; $.001 par value,
16,250,000 shares authorized;
5,618,500, 5,621,156, and 5,767,151
(unaudited) shares issued and
outstanding; 9,718,570 shares issued
and outstanding pro forma
(unaudited).......................... 6 6 7 11
Additional paid-in-capital............ 1,994 3,977 6,015 18,455
Notes receivable from stockholders.... (186) (201) (204) (204)
Deferred stock-based compensation..... (1,658) (2,732) (4,266) (4,266)
Accumulated deficit................... (3,478) (7,834) (9,308) (9,308)
------ ------ ------ ------
Total stockholders' equity
(deficit)........................... (3,322) (6,784) (7,756) $4,688
------ ------ ------ ======
$3,071 $8,077 $8,548
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
DIGITAL INSIGHT CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Implementation fees... $ 1,053 $ 1,926 $ 2,409 $ 612 $ 680
Service fees.......... 508 2,046 5,821 947 2,485
--------- --------- --------- --------- ---------
Total revenues...... 1,561 3,972 8,230 1,559 3,165
--------- --------- --------- --------- ---------
Cost of revenues:
Implementation........ 643 1,217 1,804 278 621
Service............... 261 1,014 3,466 583 1,360
--------- --------- --------- --------- ---------
Total cost of
revenues........... 904 2,231 5,270 861 1,981
--------- --------- --------- --------- ---------
Gross profit............ 657 1,741 2,960 698 1,184
--------- --------- --------- --------- ---------
Operating expenses:
Sales, general and
administrative....... 809 2,516 4,016 796 1,533
Research and
development.......... 565 1,612 2,699 536 927
Amortization of stock-
based compensation... -- 151 844 113 234
--------- --------- --------- --------- ---------
Total operating
expenses........... 1,374 4,279 7,559 1,445 2,694
--------- --------- --------- --------- ---------
Loss from operations.... (717) (2,538) (4,599) (747) (1,510)
Interest income......... -- 89 262 20 42
Other income (expense),
net.................... 5 (3) (19) (34) (6)
--------- --------- --------- --------- ---------
Net loss................ $ (712) $ (2,452) $ (4,356) $ (761) $ (1,474)
========= ========= ========= ========= =========
Basic and diluted net
loss per share......... $ (.14) $ (.49) $ (.85) $ (.15) $ (.28)
========= ========= ========= ========= =========
Shares used to compute
basic and diluted net
loss per share......... 5,000,000 5,000,000 5,108,444 5,000,000 5,332,030
========= ========= ========= ========= =========
Pro forma basic and
diluted net loss per
share (unaudited)...... $ (.50) $ (.16)
========= =========
Shares used to compute
pro forma basic and
diluted net loss per
share (unaudited)...... 8,712,463 9,283,449
========= =========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
DIGITAL INSIGHT CORPORATION
STATEMENT OF STOCKHOLDERS' DEFICIT
(in thousands except share data)
<TABLE>
<CAPTION>
Common Stock
----------------
Additional Stockholders' Deferred Total
Members' Paid-In Notes Stock-Based Accumulated Stockholders'
Capital Shares Amount Capital Receivable Compensation Deficit Deficit
-------- --------- ------ ---------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... $ (11) -- $-- $ -- $ -- $ -- $ -- $ --
Contribution of
capital................ 750 -- -- -- -- -- -- --
Net loss................ (712) -- -- -- -- -- -- --
-----
Balance at December 31,
1996................... 27 -- -- -- -- -- -- --
Contribution of
capital................ 192 -- -- -- -- -- -- --
Distribution............ (50) -- -- -- -- -- -- --
LLC loss from January 1,
1997 through March 17,
1997................... (23) -- -- -- -- -- -- --
Conversion of members'
capital to Series A
preferred and common
stock.................. (146) 5,000,000 5 -- -- -- (1,049) (1,044)
Stock options exercised
with note receivable... -- 618,500 1 185 (186) -- -- --
Deferred stock-based
compensation........... -- -- -- 1,809 -- (1,809) -- --
Amortization of deferred
stock-based
compensation........... -- -- -- -- -- 151 -- 151
Net loss................ -- -- -- -- -- -- (2,429) (2,429)
----- --------- ---- ------ ----- ------- ------- -------
Balance at December 31,
1997................... -- 5,618,500 6 1,994 (186) (1,658) (3,478) (3,322)
Interest on stockholder
notes.................. -- -- -- -- (15) -- -- (15)
Stock options
exercised.............. -- 2,656 -- 1 -- -- -- 1
Warrants to purchase
Series A preferred
stock.................. -- -- -- 64 -- -- -- 64
Deferred stock-based
compensation........... -- -- -- 1,918 -- (1,918) -- --
Amortization of deferred
stock-based
compensation........... -- -- -- -- -- 844 -- 844
Net loss................ -- -- -- -- -- -- (4,356) (4,356)
----- --------- ---- ------ ----- ------- ------- -------
Balance at December 31,
1998................... -- 5,621,156 6 3,977 (201) (2,732) (7,834) (6,784)
Interest on stockholder
notes (unaudited)...... -- -- -- (3) -- -- (3)
Stock options exercised
(unaudited)............ -- 145,995 1 123 -- -- -- 124
Warrants to purchase
Series B preferred
stock (unaudited)...... -- -- -- 147 -- -- -- 147
Deferred stock-based
compensation
(unaudited)............ -- -- -- 1,768 -- (1,768) -- --
Amortization of deferred
stock-based
compensation
(unaudited)............ -- -- -- -- -- 234 -- 234
Net loss (unaudited).... -- -- -- -- -- -- (1,474) (1,474)
----- --------- ---- ------ ----- ------- ------- -------
Balance at March 31,
1999 (unaudited)....... $ -- 5,767,151 $ 7 $6,015 $(204) $(4,266) $(9,308) $(7,756)
===== ========= ==== ====== ===== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
DIGITAL INSIGHT CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
----------------------- -----------------
1996 1997 1998 1998 1999
----- ------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss......................... $(712) $(2,452) $(4,356) $ (761) $ (1,474)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 59 166 587 137 222
Amortization of debt issuance
cost............................ -- -- 20 4 9
Amortization of deferred stock-
based compensation.............. -- 151 844 113 234
Interest income on stockholder
notes........................... -- -- (15) (3) (3)
Net loss from sale of property
and equipment................... -- -- 33 -- --
Changes in operating assets and
liabilities:
Accounts receivable............. (50) (654) 410 282 (412)
Tax refund receivable........... -- (73) -- -- --
Accumulated implementation
costs.......................... (28) (43) (64) (29) 28
Other assets.................... (6) (36) (18) 13 (150)
Deposits........................ -- (240) -- (593) (9)
Accounts payable................ (38) 582 (373) (116) 237
Accrued compensation and related
benefits....................... 72 12 451 10 50
Deferred revenue................ 232 779 251 61 454
Other accruals.................. 3 341 119 71 258
----- ------- ------- ------- --------
Net cash used in operating
activities...................... (468) (1,467) (2,111) (811) (556)
----- ------- ------- ------- --------
Cash flows used in investing
activities:
Proceeds from sale of assets..... -- -- 29 -- --
Acquisition of property and
equipment....................... (254) (488) (1,987) (113) (354)
Acquisition of customer base..... -- (280) -- -- --
----- ------- ------- ------- --------
Net cash used in investing
activities...................... (254) (768) (1,958) (113) (354)
----- ------- ------- ------- --------
Cash flows provided by financing
activities:
Principal payments on lease
obligations..................... -- -- (60) (53) (49)
Distribution..................... -- (50) -- -- --
Contribution of capital.......... 750 -- -- -- --
Issuance of common stock......... -- -- 1 -- --
Proceeds from exercise of stock
options......................... -- -- -- -- 124
Proceeds from issuance of Series
A preferred stock............... -- 3,143 -- -- --
Proceeds from issuance of Series
B preferred stock............... -- -- 8,000 8,000 --
----- ------- ------- ------- --------
Net cash provided by financing
activities...................... 750 3,093 7,941 7,947 75
----- ------- ------- ------- --------
Net increase (decrease) in cash.... 28 858 3,872 7,023 (835)
----- ------- ------- ------- --------
Cash and cash equivalents,
beginning of period............... -- 28 886 886 4,758
----- ------- ------- ------- --------
Cash and cash equivalents, end of
period............................ $ 28 $ 886 $ 4,758 $ 7,909 $ 3,923
===== ======= ======= ======= ========
Supplementary disclosures of cash
flow information:
Cash paid during the year for
interest........................ $ -- $ -- $ 12 $ -- $ --
Non-cash financing activities:
Capital lease obligations
incurred........................ -- 133 80 -- 493
Series A warrants issued in
conjunction with capital lease.. -- -- 64 64 --
Series B warrants issued in
conjunction with capital lease.. -- -- -- -- 147
Conversion of members' capital to
Series A
preferred and common stock...... -- 1,305 -- -- --
Notes receivable from
stockholders.................... -- 186 -- -- --
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. The Company and Summary Significant Accounting Policies
The Company
Digital Insight Corporation (the "Company"), incorporated in March 1997,
provides real time Internet banking services to credit unions, small to mid-
sized banks and savings and loans. Banking services include home banking for
individual customers, business banking for commercial customers, a target
marketing program to increase financial services to end users, and customized
web site design and implementation services.
The Company originally operated as Digital Insight LLC, a Minnesota limited
liability company, which was formed in July 1995. On March 18, 1997, all
members of Digital Insight LLC, converted their members' capital balances to
shares of Series A mandatorily redeemable convertible preferred and common
stock of Digital Insight Corporation, a Delaware corporation, in accordance
with the Member Control Agreement (Note 6).
Cash and cash equivalents
Cash and cash equivalents consist of cash, money market funds, and other
highly liquid investments with maturities of three months or less at the date
of original purchase. The carrying value of these instruments approximates
fair value.
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation.
Assets held under capital leases are recorded at the present value of the
minimum lease payments at lease inception. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of the
assets, generally three to five years.
Use of estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Revenue recognition
Recurring fees are recognized as services are provided, and relate to the
number of end-users or end-user transactions and for hosting and maintaining
web sites. One-time implementation fees consist of salaries for implementation
personnel and fees for third parties, including bill payment and data
processing vendors. These fees are recognized upon completion of
implementation and customer approval. Implementation generally occurs over a
two to four month period. Costs and related revenues are deferred on the
balance sheet until that time. Accumulated implementation costs consist
primarily of salaries for implementation personnel in advance of related
billings. Losses on implementation, if any, are recognized in the period when
such losses are identified.
Income taxes
The Company accounts for income taxes under the liability method. Deferred
income tax assets are provided for as temporary differences between financial
and income tax reporting. The Company has not recorded any deferred tax assets
or liabilities prior to the recapitalization, since Digital Insight LLC was a
limited liability company treated as a partnership for federal and Minnesota
income tax purposes. As a result, prior to March 18, 1997, federal and
Minnesota income tax attributes passed to the Digital Insight LLC members.
Stock-based compensation
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans based on
the fair market value of options granted. The Company has chosen to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles
F-7
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation for stock options is measured as
the excess, if any, of the fair market value of the Company's stock price at
the date of grant as determined by the Board of Directors over the amount an
employee must pay to acquire the stock.
Net loss per share
The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share," and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss
per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of shares of common
stock outstanding during the period. Shares of common stock issued in
connection with the conversion of members' capital (Note 6) have been
considered outstanding for all periods presented. The calculation of diluted
net loss per share excludes potential common shares if the effect is
antidilutive. Potential common shares are composed of common stock subject to
repurchase rights and incremental shares of common stock issuable upon the
exercise of stock options and warrants and upon conversion of Series A and B
mandatorily redeemable convertible preferred stock.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
98, common shares issued in each of the periods presented for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No such shares have been
issued.
The following table sets forth the computation of basic and dilutive net
loss per share for the years indicated (in thousands, except share and per
share data):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1998
--------- ---------
<S> <C> <C>
Net loss............................................. $ 2,452 $ 4,356
========= =========
Weighted average shares............................ 5,000,000 5,348,183
Weighted average unvested common shares subject to
repurchase........................................ -- (239,739)
--------- ---------
Denominator for basic and diluted calculation........ 5,000,000 5,108,444
========= =========
Net loss per share:
Basic and diluted.................................. $ (.49) $ (.85)
========= =========
</TABLE>
The following table sets forth common stock equivalents that are not
included in the diluted net loss per share calculation above because to do so
would be antidilutive for the periods indicated:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1998
--------- ---------
<S> <C> <C>
Weighted average effect of common stock equivalents:
Series A mandatorily redeemable convertible preferred
stock............................................... 1,307,736 1,645,944
Series B mandatorily redeemable convertible preferred
stock............................................... -- 1,958,075
Warrants............................................. -- 21,065
Unvested common shares subject to repurchase......... -- 239,739
Employee stock options............................... 290,172 711,840
--------- ---------
1,597,908 4,576,663
========= =========
</TABLE>
F-8
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1998 and the
three months ended March 31, 1999 is computed using the weighted average
number of common shares outstanding, including the pro forma effects of the
automatic conversion of the Company's mandatorily redeemable convertible
Series A and Series B mandatorily convertible preferred stock into shares of
the Company's common stock effective upon the closing of the Company's initial
public offering as if such conversion occurred on January 1, 1998, or at date
of original issuance, if later. The resulting pro forma adjustment includes an
increase in the weighted average shares used to compute basic net loss per
share of 3,604,019 and 3,951,419 for the year ended December 31, 1998 and the
three months ended March 31, 1999, respectively. Pro forma diluted net loss
per share is computed using the pro forma weighted average number of common
and common equivalent shares outstanding. Pro forma common equivalent shares,
composed of common stock subject to repurchase and incremental common shares
issuable upon the exercise of stock options and warrants, are excluded from
diluted net loss per share as they are antidilutive.
Pro forma stockholder's equity (unaudited)
Effective upon the closing of this Offering, the outstanding shares of
mandatorily redeemable convertible preferred stock will automatically convert
into 3,951,419 shares of common stock. The pro forma effects of these
transactions are unaudited and have been reflected in the accompanying pro
forma balance sheet at March 31, 1999.
Interim financial information (unaudited)
The accompanying interim financial statement for the three months ended
March 31, 1998 and 1999 are unaudited. In the opinion of management, the
unaudited interim financial statements have been prepared on the same basis as
the annual audited financial statements and reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
Company's financial position as of March 31, 1999 and its results of
operations and its cash flows for the three months ended March 31, 1998 and
1999. The results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
Intangible assets
Intangible assets include a non-compete agreement and an acquired customer
base. The non-compete agreement is being amortized over the term of the
agreement, which is two years. The acquired customer base is being amortized
over one year. All intangibles are amortized using the straight-line method.
Long-lived assets
In 1997, the Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of." The statement
requires the recognition of an impairment loss on a long-lived asset including
the customer base held for use when events and circumstances indicate that the
estimate of undiscounted future cash flows expected to be generated by the
asset are less than its carrying amount.
Fair value of financial instruments
The Company's financial instruments include cash, accounts receivable,
accumulated implementation costs, deposits and other assets, accounts payable,
accrued and other current liabilities. The carrying value of these
F-9
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
financial instruments approximates fair value due to their short-term nature.
The mandatorily redeemable convertible preferred stock is carried at its
respective redemption price as such stock is not traded in the open market and
a market price is not readily available.
Concentration of credit risk of financial instruments
The Company performs ongoing credit evaluations of its customers' financial
condition and limits the amount of credit extended when deemed necessary, but
generally does not require collateral. Management believes that any risk of
loss is significantly reduced due to the diversity of its customers and
geographic sales areas. The Company maintains a provision for potential credit
losses, and write-offs of accounts receivable were insignificant during the
years ended December 31, 1997 and 1998.
New accounting standards
In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." These statements, which
were adopted effective January 1, 1998, did not have a significant impact on
the financial statements.
2. Related Party Transactions
The Company paid royalties totaling $0, $37,000 and $162,000 during 1996,
1997 and 1998, respectively, to a business partner who is also a stockholder
for web site referrals.
The Company paid $60,000, $169,000 and $0 in 1996, 1997 and 1998,
respectively, to a business partner, who is also a stockholder, for employee
medical benefits coverage under the affiliates plan.
3. Property and Equipment
Property and equipment includes the following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
-------------- -----------
1997 1998 1999
------ ------ -----------
(unaudited)
<S> <C> <C> <C>
Leasehold improvements............................. $ -- $ 282 $ 284
Data processing equipment.......................... 849 2,128 2,964
Furniture and fixtures............................. 186 597 606
------ ------ ------
1,035 3,007 3,854
Less accumulated depreciation and amortization..... (246) (654) (853)
------ ------ ------
$ 789 $2,353 $3,001
====== ====== ======
</TABLE>
Assets acquired under capitalized lease obligations are included in property
and equipment and totaled $133,000, $213,000, and $705,000 (unaudited) with
related accumulated amortization of $16,000, $85,000, and $143,000 (unaudited)
at December 31, 1997, December 31, 1998, and March 31, 1999, respectively.
4. Acquisition
On August 18, 1997, the Company acquired the customer base of RJE Internet
Services, Inc. ("RJE"). RJE develops, hosts and maintains web sites. The
acquisition of this customer base was accounted for as a purchase.
F-10
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
The results of operations and cash flows of the acquisition have been included
from the date of the acquisition of the customer base. The purchase price of
the customer base totaled $100,000 plus $180,000 for a covenant not to
compete. The accumulated amortization of the customer base was $42,000 at
December 31, 1997. The customer base was fully amortized at December 31, 1998.
Accumulated amortization of the covenant not to compete totaled $38,000 and
$128,000 at December 31, 1997 and 1998, respectively.
5. Income Taxes
Prior to March 18, 1997, Digital Insight was a limited liability company
that was treated as a partnership for federal and Minnesota income tax
purposes. As a result, all federal and Minnesota tax matters for Digital
Insight LLC, prior to March 18, 1997, are the responsibility of the members.
As of December 31, 1997 and 1998, the Company had net operating loss carry-
forwards for federal and state purposes of $2,429,000 and $6,785,000,
respectively. Federal and state net operating loss carry-forwards expire in
the years 2012 and 2005, respectively.
Temporary differences between the financial statement and tax bases of
assets and liabilities are primarily attributable to net operating loss carry-
forwards and capitalized costs. A full valuation allowance has been provided
for the entire amount of the deferred tax assets arising from these
differences.
6. Mandatorily Redeemable Convertible Preferred Stock
Mandatorily redeemable convertible preferred stock consists of the
following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------- March 31, 1999
1997 1998 (Unaudited)
---------------------- ---------------------- ----------------------
Issued and Issued and Issued and
Authorized Outstanding Authorized Outstanding Authorized Outstanding
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series A.. 1,668,166 1,645,944 1,668,166 1,645,944 1,668,166 1,645,944
Series B.. 763,450 -- 2,305,475 2,305,475 2,305,475 2,305,475
--------- --------- --------- --------- --------- ---------
2,431,616 1,645,944 3,973,641 3,951,419 3,973,641 3,951,419
========= ========= ========= ========= ========= =========
</TABLE>
The Company's mandatorily redeemable convertible preferred stockholders have
the option to require the Company to repurchase all of the preferred shares
upon written request (election) of at least 60% of the outstanding shares of
preferred holders. The shares shall be redeemed on the earlier of February 28,
2002 or 180 days following the date of the election. Shares are to be redeemed
from any source of funds legally available at the redemption price of $2.70
per share of Series A preferred stock or $3.47 per share of Series B preferred
stock, as originally issued, plus all declared but unpaid dividends, if any,
through the redemption date.
Effective on the incorporation and Member Control Agreement date, March 18,
1997, Digital Insight LLC converted its members' capital balances to shares of
Series A preferred stock and common stock in accordance with the Member
Control Agreement. As a result, 481,500 and 5,000,000 shares of Series A
preferred stock and common stock, respectively, were issued.
In October 1997, the Company issued 1,164,444 shares of Series A preferred
stock for $2.70 per share. In February 1998, the Company issued 2,305,475
shares of Series B preferred stock for $3.47 per share.
F-11
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Dividend rights
Dividends shall be paid, when and if declared by the Board of Directors, at
the rate of $0.24 and $0.31 per share of the outstanding Series A and Series B
preferred stock, respectively, and shall be payable out of funds legally
available. No dividends have been declared to date.
Liquidation
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of the Series A preferred stock and Series B
preferred stock will be entitled to be paid, before any payment shall be made
to the common shareholders, an amount in cash or property equal to the sum of
$2.70 per share of Series A preferred stock and $3.47 per share of Series B
preferred stock, plus all accrued but unpaid dividends.
Conversion right
Each share of preferred stock shall be convertible, at the option of the
holder, at any time after the date of issuance, into one share of common
stock, subject to adjustment. The preferred shares will automatically convert
into shares of common stock, at the then-applicable conversion price, upon the
closing of an underwritten public offering of the Company's common shares at a
price of not less than $8.68 per share and from which the gross proceeds to
the Company are not less than $20.0 million.
Voting rights
The holders of the preferred shares are entitled to the number of votes to
which they would be entitled if the preferred shares were converted into
common shares.
7. Notes Receivable from Stockholders
Effective October 23, 1997, pursuant to the Company's 1997 Stock Plan (the
"Option Plan"), two officers of the Company exercised their options to
purchase 309,250 shares each, of the Company's common stock. In consideration,
each officer executed a note payable to the Company for $93,000. The note is
payable at the earlier of ten years from the date of execution or 30 days
after termination. Interest is being charged at the rate of 7% per annum.
Interest income realized in 1998 and for the three months ended March 31, 1999
on the loans was $15,000 and $3,000, respectively. The officers have the
option to prepay all or any portion of the principal or interest without
penalty.
8. Preferred Stock Warrants
In March 1997, the Company issued warrants to purchase 763,450 shares of
Series B preferred stock at an exercise price of $3.93 per share in
conjunction with the issuance of 1,111,100 shares of Series A preferred stock.
The warrants expired without being exercised on January 31, 1998.
On January 31, 1998, the Company issued a warrant to purchase 22,222 shares
of Series A preferred stock, at $2.70 per share, to a leasing company in
connection with the Company obtaining certain leases which were accounted for
as capitalized leases. The warrant issued is exercisable for a period of
(i) four years or (ii) two years from the effective date of the Company's
initial public offering, whichever is shorter. The value of the warrant using
the Black-Scholes option pricing model totaled $64,000. This value was
recorded as capital lease issue costs and is being amortized as additional
interest costs over the three year life of the capitalized leases.
Accordingly, the Company has recorded additional interest expense of $20,000
and $5,000 at December 31, 1998 and March 31, 1999, respectively. The Company
has reserved 22,222 shares of Series A preferred stock for the exercise of
this warrant. The warrant was outstanding at December 31, 1998.
F-12
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. 1997 Stock Plan
The Company's 1997 Stock Plan (the "Plan") was approved by the Board of
Directors on August 11, 1997. Under the Plan, the maximum aggregate number of
shares which may be optioned and sold is 1,500,000 shares of common stock,
subject to adjustments upon changes in capitalization or merger. In February
1998, the Company adopted, and the Board of Directors and stockholders
approved, a resolution to increase the aggregate number of shares reserved for
options to 2,500,000 shares. Incentive and non-statutory stock options may be
granted to employees, and non-statutory stock options may be granted to
directors and consultants. Generally options granted under the Plan are fully
exercisable on and after the date of grant. Such shares generally vest in
monthly installments over four years following the date of grant (as
determined by the Board of Directors), subject to the optionee's continuous
service. However, for first time grants, the initial vesting shall occur
twelve months from the vesting start date, at which time 25% of the shares
will be vested. The remaining shares are vested monthly over the remaining
three years. Options expire ten years from the date of grant with the
exception of an incentive stock option granted to an optionee who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company or any parent or subsidiary, in which case the term of the option
shall be five years. An option shall generally terminate three months after
termination of employment. Options are generally granted at a fair market
value determined by the Board of Directors subject to the following:
(a) With respect to options granted to an employee or service provider who,
at the time of this grant owns stock representing more than 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 no less than 110% of
the fair market value on the date of the grant.
(b) With respect to options granted to any employee or service provider
other than described in the preceding paragraph, the exercise price
shall be no less than 100% for incentive stock options and 85% for non-
statutory stock options of the fair market value on the date of the
grant.
Stock option activity under the Plan was as follows:
<TABLE>
<CAPTION>
Exercise
Options Price Per
Outstanding Share
----------- -------------
<S> <C> <C>
Granted.......................................... 1,210,500 $ 0.30
Canceled......................................... (44,500) $ 0.30
Exercised........................................ (618,500) $ 0.30
--------- -------------
Balance December 31, 1997........................ 547,500 $ 0.30
Granted.......................................... 996,000 $0.30 - $1.00
Canceled......................................... (104,640) $0.30 - $0.50
Exercised........................................ (2,656) $ 0.30
--------- -------------
Balance December 31, 1998........................ 1,436,204 $0.30 - $1.00
Granted (unaudited).............................. 522,285 $1.75 - $2.25
Canceled (unaudited)............................. (22,092) $0.30 - $1.75
Exercised (unaudited)............................ (145,995) $1.00 - $1.75
--------- -------------
Balance March 31, 1999 (unaudited)............... 1,790,402 $0.30 - $2.25
========= =============
</TABLE>
F-13
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
------------------------------------------------------- --------------------
Weighted-
Average Weighted Weighted-
Remaining Average Average
Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
--------------- --------- ----------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
$0.30 496,821 8.7 $0.30 163,625 $0.30
$0.50 249,383 9.5 $0.50 10,283 $0.50
$1.00 690,000 9.8 $1.00 115,000 $1.00
--------- --- ----- ------- -----
$0.30-$1.00 1,436,204 9.4 $0.67 288,908 $0.59
========= === ===== ======= =====
</TABLE>
On March 17, 1997, the Board of Directors approved and the Company entered
into a stock option agreement (the "Agreement") with an officer of the
Company. The Company reserved 106,700 shares of Series A preferred stock for
issuance upon the exercise of options at an exercise price of $2.70. These
options expired on March 28, 1997. Prior to the expiration of these options,
53,350 shares were exercised for an aggregate purchase price of $145,000. Had
compensation cost for these options granted been determined using the Black-
Scholes option pricing model pursuant to SFAS No. 123, the difference between
the Company's net loss as reported and as adjusted for the compensation cost
for the year ended December 31, 1997 would have been insignificant.
The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" to account for its employee stock option plans. Under APB
No. 25, when the exercise price of the Company's employee stock options equals
or exceeds the fair value price of the underlying stock on the date of grant,
no compensation expense is recognized in the Company's financial statements.
The Company granted options at exercise prices based upon the fair value of
the underlying stock as determined by its Board of Directors. Subsequently, it
was determined that the Company had granted options in 1997, 1998 and the
three months ended March 31, 1999 at exercise prices that were below the fair
value price of the underlying stock. Accordingly, the Company has recorded
deferred stock-based compensation of $1,809,000, $1,918,000 and $1,768,000 in
the years ended December 31, 1997 and 1998 and the three months ended March
31, 1999, respectively, based upon the intrinsic value of the options at the
grant date. The deferred stock-based compensation is being amortized to
expense over the vesting periods of the underlying options which is generally
four years.
The fair value of each option grant is estimated on the date of grant using
the minimum value method as prescribed in SFAS 123. Assumptions used for
options granted during the year ended December 31, 1997 and 1998 were a risk-
free interest rate of 5.9% to 6.2%, and 4.6% to 5.8%, respectively, and a
weighted-average expected option term of four years.
The stock-based compensation cost associated with the Company's stock-based
compensation plan, determined using the minimum value method prescribed by
SFAS No. 123, did not result in a material difference from the reported net
loss for the years ended December 31, 1997 and 1998 and for the three months
ended March 31, 1998 and 1999 (unaudited).
The minimum value method requires input of highly subjective assumptions,
changes in which could materially affect the fair value estimate. In addition,
the minimum value method is only allowed for non-public entities as public
entities are required to include an expected volatility factor in addition to
the factors described above. As such, the effects on pro forma disclosures of
applying SFAS 123 are not likely to be representative of the effects on pro
forma disclosures of future years.
10. Employee Benefits
Effective September 1, 1998, the Company adopted a Defined Contribution
Profit Sharing Plan. This plan includes a 401(k) salary deferral plan. All
employees are eligible to participate in the plan after six months of
continued service. Contributions to the 401(k) are in the form of employee-
salary deferrals which are not subject to employer-matching contributions.
F-14
<PAGE>
DIGITAL INSIGHT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
11. Commitments and Contingencies
The Company leases its facilities and certain equipment under noncancelable
operating leases. Rent expense under the operating leases was $46,000, $71,000
and $174,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
Future minimum lease payments under all noncancelable capitalized and
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, Capital Operating
----------------------- ------- ---------
<S> <C> <C>
1999....................................................... $ 80 $ 321
2000....................................................... 80 401
2001....................................................... 11 419
2002....................................................... -- 438
2003....................................................... -- 219
---- ------
Total minimum lease payments............................... 171 $1,798
======
Amounts representing interest.............................. 18
----
Present value of capitalized lease obligations............. 153
Less: current portion...................................... 71
----
Noncurrent portion of capitalized lease obligations........ $ 82
====
</TABLE>
In December 1997, the Company entered into a Business Continuity Services
Master Agreement, which provides backup capability. The agreement is for a
term of five years with monthly payments of $6,000. Future minimum payments
under the agreement are $71,000 for each of the five years beginning 1998
through 2002.
12. Subsequent Events
In January 1999, the Company entered into an Internet Data Center Services
Agreement to obtain redundant data center capabilities. The initial term of
the agreement is for one year and will automatically renew for additional one
year terms. Minimum payments under the agreement are $31,000 per month through
the initial term ending February 2000.
On March 1, 1999, the Company entered into a Master Lease Agreement (the
"Agreement") with a leasing company. The Agreement provides a line of credit
of $2,000,000 for capital equipment purchases with an additional $500,000
based upon attaining revenue targets. As a condition to the lessor for
entering into the Agreement, the Company issued a warrant to purchase 28,819
shares of Series B preferred stock at $3.47 per share. The warrant issued is
exercisable for a period of seven years. The value of the warrant using the
Black-Scholes option pricing model totaled $147,000. This value is being
recorded as capital lease issue costs and is being amortized as additional
interest costs over the three year life of the capitalized leases. As of
May 13, 1999, the Company purchased approximately $493,000 of capital
equipment under the lease.
On March 30, 1999, the Board of Directors and stockholders approved a
resolution to increase the aggregate number of shares of common stock reserved
for options under the Company's 1997 Stock Plan to 3,000,000 shares.
In May 1999, the Company completed the private placement of 844,036 shares
of its Series C mandatorily redeemable convertible preferred stock at a price
per share of $10.00. Dividends shall be paid, when and if declared by the
Board of Directors, at the rate of $0.89 per share. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of Series C preferred stock will be entitled to be paid, before any payments
shall be made to common stockholders, an amount in cash or property equal to
the sum of $10.00 per share. The Series C preferred stock shall be
convertible, at the option of the holder, at any time after the date of
issuance, into one share of common stock, subject to adjustment. The Series C
preferred stock is mandatorily redeemable and will automatically convert into
shares of common stock on the same terms as the Series A and B mandatorily
redeemable convertible preferred stock.
F-15
<PAGE>
[DIGITAL INSIGHT LOGO]
<PAGE>
[DI LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of common stock being registered. All amounts are
estimates except the registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
Amount
To Be Paid
----------
<S> <C>
SEC Registration Fee................................................. $16,541
NASD Fee............................................................. 6,450
Nasdaq National Market Listing Fee................................... *
Legal Fees and Expenses.............................................. *
Accounting Fees and Expenses......................................... *
Blue Sky Fees and Expenses........................................... *
Transfer Agent Fees.................................................. *
Miscellaneous........................................................ *
-------
Total.............................................................. $ *
=======
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach of
their fiduciary duty as a director. In addition, as permitted by Section 145
of the Delaware General Corporation Law, the Bylaws of the Registrant provide
that: (1) the Registrant is required to indemnify its directors and executive
officers and persons serving in these capacities in other business enterprises
(including, for example, subsidiaries of the Registrant) at the Registrant's
request, to the fullest extent permitted by Delaware law, including in those
circumstances in which indemnification would otherwise be discretionary; (2)
the Registrant may, in its discretion, indemnify employees and agents in those
circumstances where indemnification is not required by law; (3) the rights
conferred in the Bylaws are not exclusive, and the Registrant is authorized to
enter into indemnification agreements with its directors, executive officers
and employees; and (4) the Registrant may not retroactively amend the Bylaw
provisions in a way that is adverse to the directors, executive officers and
employees who benefit from these protections.
The Registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum
indemnity allowed to directors and executive officers by Section 145 of the
Delaware General Corporation Law and the Bylaws, as well as certain additional
procedural protections. In addition, these indemnity agreements provide that
parties to the indemnification agreements will be indemnified to the fullest
possible extent not prohibited by law against any and all expenses (including
any federal, state, local or foreign taxes imposed on the Indemnitee as a
result of the actual or deemed receipt of any payments under the
Indemnification Agreement), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by Digital Insight,
which approval shall not be unreasonably withheld), actually and reasonably
incurred in relation to the Indemnitee's position as a director, officer,
employee, agent or fiduciary of the Registrant, or any subsidiary of the
Registrant, or in relation to the Indemnitee's service at the request of the
Registrant as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise or in
relation to Indemnitee's action or inaction while serving in such a capacity.
Digital Insight will not be obligated pursuant to the indemnity agreements to
indemnify or advance expenses to an indemnified party with respect to
proceedings or claims initiated by the indemnified party and not
II-1
<PAGE>
by way of defense, counterclaim or crossclaim, except with respect to
proceedings specifically authorized by Digital Insight's Board of Directors or
brought to enforce a right to indemnification under the indemnity agreement,
Digital Insight's Bylaws or any statute or law. Under the agreements, Digital
Insight is not obligated to indemnify the indemnified party (1) for any
expenses incurred by the indemnified party with respect to any proceeding
instituted by the indemnified party to enforce or interpret the agreement, if
a court of competent jurisdiction determines that each of the material
assertions made by the indemnified party in such proceeding was not made in
good faith or was frivolous; (2) for any amounts paid in settlement of a
proceeding unless Digital Insight consents to such settlement; (3) with
respect to any proceeding brought by Digital Insight against the indemnified
party for willful misconduct, unless a court determines that each of such
claims was not made in good faith or was frivolous; (4) on account of any suit
in which judgment is rendered against the indemnified party for an accounting
of profits made from the purchase or sale by the indemnified party of
securities of Digital Insight pursuant to the provisions of (S) 16(b) of the
Securities Exchange Act of 1934 and related laws; (5) on account of the
indemnified party's conduct which is finally adjudged to have been knowingly
fraudulent or deliberately dishonest, or to constitute willful misconduct or a
knowing violation of the law; (6) an account of any conduct from which the
indemnified party derived an improper personal benefit; (7) on account of
conduct the indemnified party believed to be contrary to the best interests of
Digital Insight or its stockholders; (8) on account of conduct that
constituted a breach of the indemnified party's duty of loyalty to Digital
Insight or its stockholders; or (9) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.
The indemnification provision in the Certificate of Incorporation, Bylaws
and the indemnification agreements entered into between the Registrant and its
directors and executive officers, may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
arising under the 1933 Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit
Document Number
- -------- -------
<S> <C>
Form of Underwriting Agreement......................................... 1.1
Second Amended and Restated Certificate of Incorporation of
Registrant............................................................ 3.1
Form of Restated Certificate of Incorporation of Registrant to be filed
upon closing of the offering.......................................... 3.2
Amended and Restated Bylaws of Registrant, as amended.................. 3.3
Form of Indemnification Agreement to be entered into by the Registrant
with each of its directors and executive officers..................... 10.1
</TABLE>
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued and sold the
following securities:
(a) During the past three years, the Registrant sold an aggregate of
854,134 shares of unregistered common stock to directors, officers,
employees, former employees and consultants at prices ranging from $.30
to $1.75 per share, for aggregate cash consideration of $344,781. These
shares were sold pursuant to the exercise of options granted by the
Board. As to each director, officer, employee, former employee and
consultant of the Registrant who was issued these securities, the
Registrant relied upon Rule 701 of the Securities Act of 1933, as
amended (the "Securities Act"). Each such person purchased securities
of the Registrant pursuant to a written contract between such person
and the Registrant. In addition, the Registrant met the conditions
imposed under Rule 701(b).
(b) On March 18, 1997, the Registrant issued 5,000,000 shares of common
stock and 481,500 shares of Series A Preferred Stock to a limited
liability company in consideration for the transfer of all of the
tangible and intangible assets of that limited liability company. The
Registrant relied upon Section 4(2) of the Securities Act in connection
with the sale of these shares. All of these shares have subsequently
been distributed by the limited liability company to its members.
II-2
<PAGE>
(c) On March 20, 1997, the Registrant sold in the aggregate (i) 1,111,100
shares of unregistered Series A Preferred Stock at a price per share of
$2.70 and (ii) warrants to purchase up to 763,450 shares of Series B
Preferred Stock, to two investors for aggregate cash consideration of
$2,999,970. The Registrant relied upon Section 4(2) of the Securities
Act in connection with the sale of these shares.
(d) On March 27, 1997, the Registrant sold 53,350 shares of unregistered
Series A Preferred Stock at a price per share of $2.70 to one investor
for aggregate cash consideration of $144,045. The Registrant relied
upon Section 4(2) of the Securities Act in connection with the sale of
these shares.
(e) On October 23, 1997, the Registrant sold 618,500 shares of unregistered
common stock at a price per share of $0.30 to two officers for
aggregate consideration of $185,550. These shares were sold pursuant to
a restricted stock purchase agreement between the Registrant and each
officer pursuant to the exercise of a stock purchase right. The
purchasers of the shares paid the aggregate consideration in the form
of full-recourse promissory notes bearing interest at 7.0% per year.
The Registrant relied upon Rule 701 of the Securities Act in connection
with the sale of these shares.
(f) On February 27, 1998, the Registrant sold in the aggregate 2,305,475
shares of unregistered Series B Preferred Stock at a price per share of
$3.47 to three investors for aggregate cash consideration of
$7,999,998.25. The Registrant relied upon Section 4(2) of the
Securities Act in connection with the sale of these shares.
(g) On February 1, 1999, the Registrant issued a warrant to purchase up to
28,819 shares of unregistered Series B Preferred Stock at a price per
share of $3.47 in connection with an equipment leasing transaction.
Such issuance was made in reliance upon Section 4(2) of the Securities
Act.
(h) On February 3, 1999, the Registrant sold 115,000 shares of unregistered
common stock at a price per share of $1.00 to an officer for aggregate
cash consideration of $115,000. These shares were sold pursuant to such
officer pursuant to the exercise of a stock purchase right. The
Registrant relied upon Rule 701 of the Securities Act in connection
with the sale of these shares.
(i) On May 26, 1999, the Registrant sold in the aggregate 844,036 shares of
unregistered Series C Preferred Stock at a price per share of $10.00 to
13 investors for aggregate cash consideration of $8,440,360. The
Registrant relied upon Section 4(2) of the Securities Act in connection
with the sale of these shares.
Appropriate legends were affixed to the share certificates issued in the
transactions described above. All recipients had adequate access, through
their relationships with the Registrant, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Second Amended and Restated Certificate of Incorporation of
Registrant, as currently in effect.
3.2 Form of Third Amended and Restated Certificate of Incorporation of
Registrant, to be in effect upon the closing of the offering.
3.3 Amended and Restated Bylaws of Registrant, as amended, as currently
in effect.
3.4 Form of Restated Bylaws of Registrant, to be in effect upon the
closing of the offering.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Second Amended and Restated Rights Agreement, dated as of May 26,
1999, between the Registrant and the parties named therein.
4.3 Warrant to Purchase Stock dated February 18, 1999 issued to Silicon
Valley Bank.
4.4* Warrant Agreement dated January 31, 1998 issued to Comdisco, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.1 Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers.
10.2 Stock Option Agreement dated October 13, 1998 between John Dorman
and the Registrant.
10.3 Stock Option Agreement dated March 30, 1999 between Kevin
McDonnell and the Registrant.
10.4 Stock Option Agreement dated March 30, 1999 between Stephen
Zarate and the Registrant.
10.5 1997 Stock Plan.
10.6 1999 Stock Plan and related agreements.
10.7 1999 Employee Stock Purchase Plan and related agreements.
10.8 Commercial Office Lease by and between Arden Realty Limited
Partnership, a Maryland Limited Partnership, and Registrant
dated August 4, 1997.
10.9 Master Lease Agreement dated March 1, 1999 between Registrant and
Silicon Valley Bank.
10.10 Internet Data Center Services Agreement dated March 1, 1999
between Registrant and Exodus Communications, Inc.
10.11** Moneyline Express (M&I) Agreement dated February 27, 1997.
11.1 Statement of computation of net loss per share and pro forma net
loss per share (see note 1 of notes to financial statements).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
24.1 Power of Attorney (See page II-6).
27.1 Financial Data Schedule.
</TABLE>
--------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain
portions of this exhibit. Omitted portions have been filed separately
with the Securities and Exchange Commission.
(b) Financial Statement Schedules.
Schedule II-Valuation and Qualifying Accounts and Reserves Allowance
for Doubtful Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
Item 17. Undertakings
The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel
II-4
<PAGE>
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 undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the 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 Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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 such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Calabasas, State of California, on this 25th day of June, 1999.
DIGITAL INSIGHT CORPORATION
/s/ John Dorman
By: _________________________________
John Dorman
Chairman of the Board, Chief
Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, John Dorman and Kevin
McDonnell and each one of them, his true and lawful attorney-in-fact and
agents, each with full power of substitution, 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 any
registration statement related to the offering contemplated by this
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933 and to file the same, with all
exhibits thereto and all 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 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 each of said attorneys-in-
fact and agents or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done or 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
--------- ----- ----
<S> <C> <C>
/s/ John Dorman Chairman of the Board, Chief June 25, 1999
____________________________________ Executive Officer and
John Dorman President (Principal
Executive Officer)
/s/ Kevin McDonnell Vice President of Finance, June 25, 1999
____________________________________ Chief Financial Officer and
Kevin McDonnell Secretary (Principal
Financial and Accounting
Officer)
/s/ Paul Fiore Executive Vice President and June 25, 1999
____________________________________ Director
Paul Fiore
/s/ John Jarve Director June 25, 1999
____________________________________
John Jarve
/s/ Nader Kazeminy Director June 25, 1999
____________________________________
Nader Kazeminy
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James McGuire Director June 25, 1999
____________________________________
James McGuire
/s/ Ofer Nemirovsky Director June 25, 1999
____________________________________
Ofer Nemirovsky
/s/ Robert North Director June 25, 1999
____________________________________
Robert North
</TABLE>
II-7
<PAGE>
SCHEDULE II
DIGITAL INSIGHT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Deductions- Balance at
Year Ended December 31, of Period Expenses Write-offs End of Period
----------------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
1996........................ $ 0 $ 0 $ 0 $ 0
1997........................ 0 40 0 40
1998........................ 40 1 22 19
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Second Amended and Restated Certificate of Incorporation of
Registrant, as currently in effect.
3.2 Form of Third Amended and Restated Certificate of Incorporation
of Registrant, to be in effect upon the closing of the offering.
3.3 Amended and Restated Bylaws of Registrant, as amended, as
currently in effect.
3.4 Form of Restated Bylaws of Registrant to be in effect upon the
closing of the offering.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Second Amended and Restated Rights Agreement, dated as of May 26,
1999, between the Registrant and the parties named therein.
4.3 Warrant to Purchase Stock dated February 18, 1999 issued to
Silicon Valley Bank.
4.4* Warrant Agreement dated January 31, 1998 issued to Comdisco, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers.
10.2 Stock Option Agreement dated October 13, 1998 between John Dorman
and the Registrant.
10.3 Stock Option Agreement dated March 30, 1999 between Kevin
McDonnell and the Registrant.
10.4 Stock Option Agreement dated March 30, 1999 between Stephen
Zarate and the Registrant.
10.5 1997 Stock Plan.
10.6 1999 Stock Plan and related agreements.
10.7 1999 Employee Stock Purchase Plan and related agreements.
10.8 Commercial Office Lease by and between Arden Realty Limited
Partnership, a Maryland Limited Partnership, and Registrant
dated August 4, 1997.
10.9 Master Lease Agreement dated March 1, 1999 between Registrant and
Silicon Valley Bank.
10.10 Internet Data Center Services Agreement dated March 1, 1999
between Registrant and Exodus Communications, Inc.
10.11** Moneyline Express (M&I) Agreement dated February 27, 1997.
11.1 Statement of computation of net loss per share and pro forma net
loss per share (see note 1 of notes to financial statements).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
24.1 Power of Attorney (See page II-6).
27.1 Financial Data Schedule.
</TABLE>
--------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain
portions of this exhibit. Omitted portions have been filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 1.1
_______________ Shares
Digital Insight Corporation
Common Stock, par value $0.001
UNDERWRITING AGREEMENT
__________, 1999
<PAGE>
_____________, 1999
Morgan Stanley & Co. Incorporated
Deutsche Bank Alex. Brown
Bank of America Securities LLC
Friedman, Billings, Ramsey & Co.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Digital Insight Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") for whom you (the "Managers") are acting as
representatives, _______________ shares of its voting Common Stock, par value
$0.001 (the "Firm Shares"). The Company also proposes to issue and sell to the
several Underwriters not more than an additional ______________ shares of its
voting Common Stock, par value $0.001 (the "Additional Shares") if and to the
extent that you, as Managers of the offering, shall have determined to exercise,
on behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares." The
shares of Common Stock, par value $0.001 of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
2
<PAGE>
As part of the offering contemplated by this Agreement, Morgan Stanley
& Co. Incorporated ("Morgan Stanley") has agreed to reserve out of the Shares
set forth opposite its name on Schedule II to this Agreement, up to
________________ shares, for sale to the Company's employees, officers, and
directors and other parties associated with the Company (collectively,
"Participants"), as set forth in the Prospectus under the heading "Underwriting"
(the "Directed Share Program"). The Shares to be sold by Morgan Stanley
pursuant to the Directed Share Program (the "Directed Shares") will be sold by
Morgan Stanley pursuant to this Agreement at the public offering price. Any
Directed Shares not orally confirmed for purchase by any Participants by the end
of the business day on which this Agreement is executed will be offered to the
public by Morgan Stanley as set forth in the Prospectus.
1. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, when it becomes
effective will not contain any 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, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder and (iii) the Prospectus
did not contain and, as of the date amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company.
3
<PAGE>
(d) The Company does not own or control, directly or indirectly, any
interest in any other corporation, association or other business entity.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or by-
laws of the Company or any agreement or other instrument binding upon the
Company that is material to the Company or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Company, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development reasonably likely to result in a material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company is a party or to which any of the
properties of the Company are subject to that are required to be described
in the Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described or
filed as required.
4
<PAGE>
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(n) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) has received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) is in compliance with all terms and conditions of any
such permit, license or approval. The representations and warranties set
forth in this paragraph do not apply where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the aggregate, have
a material adverse effect on the Company.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company.
(p) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement. Subsequent to
the respective dates as of which information is given in the Registration
Statement and the Prospectus, (1) the Company has not incurred any material
liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business; (2) the
Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind
on its capital stock other than ordinary and customary dividends; and (3)
there has not been any material change in the capital stock, except in
each case as described in the Prospectus.
5
<PAGE>
(q) The Company has good and marketable title to all personal
property owned by it which is material to the business of the Company, free
and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not interfere with the use made
and proposed to be made of such property by the Company; and any real
property and buildings held under lease by the Company is held by it 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, in each case except as
described in the Prospectus. The Company does not own any real property.
(r) The Company owns or possesses, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed
by them in connection with the business now operated by them, and the
Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a material adverse affect on the Company.
(s) No material labor dispute with the employees of the Company
exists, except as described in the Prospectus, or, to the knowledge of the
Company, is imminent that could have a material adverse effect on the
Company.
(t) The Company is insured against such losses and risks and in such
amounts as are customary in the businesses in which they are engaged; the
Company has not been refused any insurance coverage sought or applied for;
and the Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a material
adverse effect on the Company, except as described in the Prospectus.
(u) The Company has reviewed its operations and the operations of any
third parties with which the Company has a material relationship to
evaluate the extent to which the business or operations of the Company will
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe and does not believe that the Year 2000
Problem will have a material adverse effect on the general affairs,
management, the current or future financial position, business prospects,
stockholders' equity or results of operations of the Company or result in
any material loss or interference with the Company's business or
operations. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
6
<PAGE>
utilization of data or in the operation of mechanical or electrical systems
of any kind will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates
or time periods occurring prior to January 1, 2000.
(v) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business except where the absence of
such possession would not have a material adverse effect on the Company and
the Company has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
Company, except as described the Prospectus.
(w) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(x) The Company has not offered, or caused the Underwriters to offer,
Shares pursuant to the Directed Share Program to any person outside the
United States.
(y) The Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business
with the Company, or (ii) a trade journalist or publication to write or
publish favorable information about the Company or its products.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the
7
<PAGE>
Purchase Price. If you, on behalf of the Underwriters, elect to exercise such
option, you shall so notify the Company in writing not later than 30 days after
the date of this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the Underwriters and the date on which such shares are
to be purchased. Such date may be the same as the Closing Date (as defined
below) but not earlier than the Closing Date nor later than ten business days
after the date of such notice. Additional Shares may be purchased as provided in
Section 4 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. If any Additional Shares are to
be purchased, each Underwriter agrees, severally and not jointly, to purchase
the number of Additional Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
total number of Additional Shares to be purchased as the number of Firm Shares
set forth in Schedule I hereto opposite the name of such Underwriter bears to
the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, or (C) issuance of shares of Common
Stock or options to purchase shares of Common Stock pursuant to the Company's
employee benefit plans as in existence on the date hereof. In addition, the
Company hereby agrees not to release any shares of its Common Stock from any
lock-up agreements with its stockholders without the prior written consent of
Morgan Stanley & Co. Incorporated.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
8
<PAGE>
4. Payment and Delivery. Payment for the Firm Shares shall be made
to the Company by wire transfer in immediately available funds to the account
specified by the Company against delivery of such Firm Shares for the respective
accounts of the several Underwriters at 10:00 a.m., New York City time, on
____________, 1999, or at such other time on the same or such other date, not
later than _________, 1999, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made to the Company by wire
transfer in immediately available funds to the account specified by the Company
against delivery of such Additional Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on the date specified in
the notice described in Section 2 or at such other time on the same or on such
other date, in any event not later than _______, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to
as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 5:00 p.m.(New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
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<PAGE>
(ii) there shall not have occurred any change, or any
development reasonably likely to result in a change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Section 1 of this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements, and
satisfied all of the conditions, on its part to be performed or satisfied
hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati, A Professional Corporation
("Wilson Sonsini") outside counsel for the Company, dated the Closing Date,
to the effect that:
(i) the Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company;
(ii) to such counsel's knowledge, the Company does not own or
control, directly or indirectly, any interest in any other
corporation, association or other business entity;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully
paid and non-assessable;
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<PAGE>
(v) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights;
(vi) to the knowledge of such counsel, there is no legal or
beneficial owner of any securities of the Company who has any rights,
not effectively satisfied or waived, to require registration of any
shares of capital stock of the Company in connection with the filing
of the Registration Statement;
(vii) this Agreement has been duly authorized, executed and delivered
by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company that is material to the Company or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the captions
"Management - Employee Benefit Plans," "Certain Transactions,"
"Description of Capital Stock" and "Underwriters" and (B) in the
Registration Statement in Items 14 and 15, in each case insofar as
such statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company is
a party or to which any of the properties of the Company is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement
11
<PAGE>
or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(xi) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended;
(xii) to the best of such counsel's knowledge: (I) the Registration
Statement has become effective under the Securities Act, no stop order
proceedings with respect thereto have been instituted or are pending
or threatened under the Securities Act, and (II) any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b)
under the Securities Act has been made in the manner and within the
time period required by such Rule 424(b);
(xiii) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data derived therefrom
as to which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data derived therefrom
as to which such counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any 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 and (C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data
derived therefrom as to which such counsel need not express any
belief) the Prospectus contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
("Gunderson Dettmer"), counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 5(c)(v), 5(c)(vii),
5(c)(ix) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and 5(c)(xiii) above.
With respect to Section 5(c)(xiii) above, Wilson Sonsini and Gunderson
Dettmer may state that their opinion and belief are based upon their
participation
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<PAGE>
in the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification, except as
specified.
The opinion of Wilson Sonsini described in Section 5(c) above shall be
rendered to the Underwriters at the request of the Company and shall so
state therein.
(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from Pricewaterhouse Coopers LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain stockholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the Closing
Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five (5) signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
13
<PAGE>
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the reasonable opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the reasonable opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission
and furnish, at its own expense, to the Underwriters and to the dealers
(whose names and addresses you will furnish to the Company) to which Shares
may have been sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending ________ __, ____ that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky or
Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of
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<PAGE>
the Shares for offer and sale under state securities laws as provided in
Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements
of counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association of
Securities Dealers, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating
to the Common Stock and all costs and expenses incident to listing the
Shares on the Nasdaq National Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the reasonable costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants but
not of any representatives of the Underwriters, (ix) all fees and
disbursements of counsel incurred by the Underwriters in connection with
the Directed Share Program and stamp duties, similar taxes or duties or
other taxes, if any, incurred by the Underwriters in connection with the
Directed Share Program, and (x) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section. It is understood, however,
that except as provided in this Section, Section 7 entitled "Indemnity and
Contribution", and the last paragraph of Section 9 below, the Underwriters
will pay all of their costs and expenses, including fees and disbursements
of their counsel, stock transfer taxes payable on resale of any of the
Shares by them and any advertising expenses connected with any offers they
may make.
(g) that in connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation and in any event for a period of one hundred and eighty (180)
days following the date of the effectiveness of the Registration Statement.
All Participants shall be so restricted. The Company will direct the
transfer agent to place stop transfer restrictions upon such securities for
such period of time.
7. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the
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<PAGE>
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or
caused by 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, except insofar as (i) such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through
you expressly for use therein or (ii) if copies of the Prospectus were
timely delivered to the Underwriter pursuant to Section 6(a) and a copy of
the Prospectus (as then amended if the Company shall furnished any
amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(b) The Company agrees to indemnify and hold harmless Morgan Stanley
and each person, if any, who controls Morgan Stanley within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("Morgan Stanley Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by the failure of any Participant to
pay for and accept delivery of the shares which, immediately following the
effectiveness of the Registration Statement, were subject to a properly
confirmed agreement to purchase; or (ii) related to, arising out of, or in
connection with the Directed Share Program, provided that, the Company
shall not be responsible under this subparagraph (ii) for any losses,
claim, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of Morgan Stanley Entities.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
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<PAGE>
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to Section 7(a)(b) or (c), such person (the "indemnified
party") shall promptly notify the person against whom such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall
not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all such indemnified parties
and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 7(a)
and 7(b), and by the Company, in the case of parties indemnified pursuant
to Section 7(c). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding. Notwithstanding anything contained herein to the
contrary, if indemnity may be sought pursuant to Section 7(b) hereof in
respect of such action
17
<PAGE>
or proceeding, then in addition to such separate firm for the indemnified
parties, the indemnifying party shall be liable for the reasonable fees and
expenses of not more than one separate firm (in addition to any local
counsel) for Morgan Stanley for the defense of any losses, claims, damages
and liabilities arising out of the Directed Share Program, and all persons,
if any, who control Morgan Stanley within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act.
(e) To the extent the indemnification provided for in Section 7(a),
(b) or (c) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause 7(e)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 7(e)(i) above but also the
relative fault of the Company on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of
the Company on the one hand and the Underwriters on the other hand 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 by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 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 that does not take
account of the equitable considerations referred to in Section 7(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred
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to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, 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 Section 7, 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 that 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
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 7 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law
or in equity.
(g) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Shares.
8. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or
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they have agreed to purchase hereunder on such date, and the aggregate number of
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated
severally in the proportions that the number of Firm Shares set forth opposite
their respective names in Schedule I bears to the aggregate number of Firm
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as you may specify, to purchase the Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date; provided that in no event shall the number of Shares that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Shares without the written consent of such Underwriter. If, on the Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and
the aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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11. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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12. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
Digital Insight Corporation
By:
------------------------------
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Deutsche Bank Alex. Brown
Bank of America Securities LLC
Friedman, Billings, Ramsey & Co.
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
--------------------------------
Name:
Title:
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SCHEDULE I
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. Incorporated
Deutsche Bank Alex. Brown
Bank of America Securities LLC
Friedman, Billings, Ramsey & Co.
[NAMES OF OTHER UNDERWRITERS]
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EXHIBIT 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DIGITAL INSIGHT CORPORATION
Digital Insight Corporation (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the Corporation is Digital Insight Corporation. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on March 18, 1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Amended and Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Corporation's
Certificate of Incorporation.
3. The terms and provisions of this Amended and Restated Certificate of
Incorporation have been duly approved by written consent of the required number
of shares of outstanding stock of the Corporation pursuant to Subsection 228(a)
of the General Corporation Law of the State and written notice pursuant to
Subsection 228(d) of the General Corporation Law of the State has been given to
those stockholders whose written consent has not been obtained.
4. The text of the Second Amended and Restated Certificate of
Incorporation reads in its entirety as follows:
"FIRST. The name of the corporation is Digital Insight Corporation.
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SECOND. The address of the corporation's registered office in the State of
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Delaware is Corporation Trust Center, 1209 Orange St., Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
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activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. This corporation is authorized to issue two classes of stock to be
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designated, respectively, "Common Stock" ("Common Stock") and "Preferred Stock"
("Preferred Stock"). The total number of shares which the corporation is
authorized to issue is Twenty One Million Ninety Six Thousand Four Hundred and
Ninety Six (21,096,496) shares. Sixteen Million Two Hundred and Fifty Thousand
(16,250,000) shares shall be Common Stock, each of which shall have a par value
of $0.001 per share, and Four Million Eight Hundred Forty Six Thousand Four
Hundred and Ninety Six (4,846,496) shares shall be Preferred Stock.
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One Million Six Hundred and Sixty Eight Thousand One Hundred and Sixty Six
(1,668,166) shares of the Preferred Stock shall be designated "Series A
Preferred Stock" (hereinafter "Series A Preferred"), each of which shall have a
par value of $0.001 per share. Two Million Three Hundred Thirty Four Thousand
Two Hundred and Ninety Four (2,334,294) shares of the Preferred Stock shall be
designated "Series B Preferred Stock" (hereinafter "Series B Preferred"), each
of which shall have a par value of $0.001 per share. Eight Hundred Forty Four
Thousand and Thirty Six (844,036) shares of the Preferred Stock shall be
designated "Series C Preferred Stock" (hereinafter "Series C Preferred"), each
of which shall have a par value of $0.001 per share.
The rights, preferences, restrictions and other matters relating to the
stock of this corporation are as follows:
1. Dividends.
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(a) The holders of the outstanding Series A Preferred, Series B
Preferred and Series C Preferred shall be entitled to receive, when and as
declared by the Board of Directors, out of funds legally available therefor,
noncumulative dividends at the rate of $0.24, $0.308 and $0.889 per share,
respectively (as originally issued and as appropriately adjusted for any stock
split, dividend, combination, recapitalization or the like with regard to such
shares) per annum, payable in preference and priority to any payment of any
dividend on Common Stock of the corporation. No dividends or other
distributions shall be made with respect to the Common Stock, other than
dividends payable solely in Common Stock, until all declared dividends on the
Series A Preferred, Series B Preferred and Series C Preferred have been paid or
set apart.
(b) Notwithstanding paragraph (a) hereof, the corporation may at any
time, out of funds legally available therefor, repurchase shares of Common Stock
of the corporation issued to or held by employees 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,
whether or not dividends on the Series A Preferred, Series B Preferred or Series
C Preferred shall have been paid and whether or not such dividends shall have
been declared and funds set aside therefor.
2. Liquidation Preference.
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(a) In the event of any dissolution, liquidation or winding up of the
corporation, whether voluntary or involuntary, before any distribution or
payment is made to or upon any shares of Common Stock, from the available net
assets of the corporation, the holders of Series A Preferred, Series B Preferred
and Series C Preferred shall receive, for each share of such stock then held,
property or cash in an amount equal to the sum of (i) $2.70 per share of Series
A Preferred, $3.47 per share of Series B Preferred and $10.00 per share of
Series C Preferred (as originally issued and as appropriately adjusted for any
stock split, dividend, combination, recapitalization or the like with regard to
such shares) plus (ii) all declared but unpaid dividends thereon, if any,
through the date of
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such payment. If upon any dissolution, liquidation or winding up of the
corporation, the assets and funds thus available for distribution among the
holders of the Series A Preferred, Series B Preferred and Series C Preferred
shall be insufficient to permit the payment to such holders of their full
aforesaid preferential amount, then the entire amount of the assets and funds of
the corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred, Series B Preferred and Series C
Preferred in such a manner that the amount to be distributed to each holder of
Series A Preferred, Series B Preferred and Series C Preferred shall equal the
amount obtained by multiplying the entire assets and funds of the corporation
legally available for distribution hereunder by a fraction, the numerator of
which shall be the sum of the products obtained by multiplying the number of
shares of Series A Preferred, Series B Preferred and Series C Preferred then
held by the holder by the respective liquidation preference of each such series
of Preferred Stock, and the denominator of which shall be the sum of the
products obtained by multiplying the total then outstanding number of shares of
Series A Preferred, Series B Preferred and Series C Preferred by the respective
liquidation preference of each such series of Preferred Stock.
(b) Upon any such liquidation, dissolution or winding up, after
payment has been made to the holders of the Preferred Stock of the full
preferential amount set forth in subsection (a) above, the entire remaining
assets and funds of the corporation legally available for distribution, if any,
shall be distributed ratably among the holders of Preferred Stock and the
holders of Common Stock in a manner such that the amount distributed to each
holder of Common Stock and Preferred Stock shall equal the amount obtained by
multiplying the entire assets and funds of the corporation legally available for
distribution pursuant to this Section 2 by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock then held by the holder
and the number of shares of Common Stock issuable upon conversion of the shares
of Preferred Stock then held by the holder, and the denominator of which shall
be the sum of the total number of shares of Common Stock then outstanding and
the total number of shares of Common Stock issuable upon conversion of the total
number of shares of Preferred Stock then outstanding.
(c) For purposes of this Section 2, a merger or consolidation of the
corporation with or into any other corporation or corporations (except where a
majority of the outstanding equity securities of the surviving corporation
immediately after the merger or consolidation is held by persons who were
stockholders of this corporation immediately prior to the merger or
consolidation), or a sale or other transfer of all or substantially all of the
assets of the corporation (or any series of related transactions resulting in
the sale or other transfer of all or substantially all of the assets of the
corporation), shall be treated as a liquidation, dissolution or winding up.
(d) Notwithstanding the foregoing, such merger, consolidation or sale
of assets shall not be treated as a liquidation, dissolution or winding up with
regard to the Series A Preferred, Series B Preferred or Series C Preferred if
the per share consideration to be received by a holder of Series A Preferred,
Series B Preferred or Series C Preferred pursuant to any of the above-mentioned
transactions (without reference to the provisions of Sections 2(a), 2(b) and
2(c) above) is in the form of cash and/or securities, which securities are
publicly traded on the New York or American Stock
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Exchange or quoted on the Nasdaq National Market, and have a fair market value
on a fully distributed basis of at least two times the liquidation preference
for such series as set forth Section 2(a) above (as originally issued and as
appropriately adjusted for any stock split, dividend, combination,
recapitalization or the like with regard to such shares), in which event such
merger, consolidation or sale of all or substantially all of the assets, the
corporation shall be treated as set forth in Section 2(e) below with regard to
the Series A Preferred, Series B Preferred and Series C Preferred.
(e) In the event of a merger, consolidation or sale of all or
substantially all of the assets of the corporation which is not treated as a
liquidation, dissolution or winding-up pursuant to Section 2(d) above with
respect to the outstanding Series A Preferred, Series B Preferred and Series C
Preferred, the consideration to be paid by the acquiring corporation or entity
in such transaction shall be distributed among the holders of the Series A
Preferred, Series B Preferred, Series C Preferred and Common Stock on a pro rata
basis based on the number of Common Stock equivalent shares held by a holder,
with the outstanding shares of Series A Preferred, Series B Preferred and Series
C Preferred treated as though they had been converted into the appropriate
number of shares of Common Stock pursuant to Section 5 hereof as of the date of
such distribution.
(f) Any securities to be delivered to the stockholders pursuant to
this Section 2 shall be valued as follows:
(i) If traded on a securities exchange or the National Market
System of the National Association of Securities Dealers, Inc., the value shall
be deemed to be the average of the closing prices of the securities on such
exchange over the 30 trading day period ending three (3) days prior to the
closing of the dissolution, liquidation or winding up;
(ii) If actively traded over the counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever are
applicable) over the 30 trading day period ending three (3) days prior to the
closing of the dissolution, liquidation or winding up; and
(iii) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Board and the
holders of a majority of the then outstanding shares of Series A Preferred,
Series B Preferred and Series C Preferred or, if they are unable to agree, by an
independent appraiser mutually acceptable to the Board and to such holders.
3. Voting Rights.
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(a) Vote Other than for Directors. Except as otherwise provided
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herein or required by law, with regard to any matter submitted to the
stockholders for a vote the holder of each share of Common Stock issued and
outstanding shall have one vote and the holder of each share of Preferred Stock
issued and outstanding shall have the number of votes equal to the number of
shares of Common Stock into which such share of Preferred Stock could be
converted at the record date for
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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. Holders of Common Stock and Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the corporation.
(b) Voting for Directors. The number of directors of the corporation
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shall be seven (7). So long as at least 398,150 shares of Preferred Stock (as
originally issued and as appropriately adjusted for any stock split, dividend,
combination, recapitalization or the like with regard to such shares) shall
remain outstanding and so long as there shall not have occurred a closing of a
firm underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of shares of the corporation's Common Stock, the directors of this
corporation shall be elected as follows:
(i) The holders of shares of Series A Preferred, voting as a
separate series, shall be entitled to elect one (1) director (the "Series A
Preferred Director"). In the case of any vacancy in the office of a Series A
Preferred Director, a successor shall be elected to hold office for the
unexpired term of such Series A Preferred Director by the affirmative vote of
the holders of a majority, voting as a class, of the shares of Series A
Preferred represented at a duly called special or annual meeting of such
stockholders or by an action by written consent for that purpose. Except as
required by law, any Series A Preferred Director may be removed during the
aforesaid term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority, voting as a class, of the Series
A Preferred represented at a duly called special or annual meeting of such
stockholders or by an action by written consent for that purpose, and any such
vacancy thereby created, shall be filled by the vote of the holders of a
majority of the Series A Preferred represented at such meeting or in such
consent, voting as a class. For all purposes of this Section 3(b)(i), the holder
of each share of Series A Preferred issued and outstanding shall have the number
of votes equal to the number of shares of Common Stock into which such share of
Series A Preferred could be converted at the record date for determination of
the stockholders entitled to vote on the matters to be voted upon, or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited.
(ii) The holders of shares of Series B Preferred, voting as a
separate series, shall be entitled to elect one (1) director (the "Series B
Preferred Director"). In the case of any vacancy in the office of a Series B
Preferred Director, a successor shall be elected to hold office for the
unexpired term of such Series B Preferred Director by the affirmative vote of
the holders of a majority, voting as a class, of the shares of Series B
Preferred represented at a duly called special or annual meeting of such
stockholders or by an action by written consent for that purpose. Except as
required by law, any Series B Preferred Director may be removed during the
aforesaid term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority, voting as a class, of the Series
B Preferred represented at a duly called special or annual meeting of such
stockholders or by an action by written consent for that purpose, and any such
vacancy thereby
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created, shall be filled by the vote of the holders of a majority of the Series
B Preferred represented at such meeting or in such consent, voting as a class.
For all purposes of this Section 3(b)(ii), the holder of each share of Series B
Preferred issued and outstanding shall have the number of votes equal to the
number of shares of Common Stock into which such share of Series B Preferred
could be converted at the record date for determination of the stockholders
entitled to vote on the matters to be voted upon, or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited.
(iii) The holders of shares of Common Stock, voting as a class,
shall be entitled to elect two (2) directors (the "Common Directors"). In the
case of any vacancy in the office of a Common Director, a successor shall be
elected to hold office for the unexpired term of such Common Director by the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at a duly called special or annual meeting of such stockholders or
by an action by written consent for that purpose. Except as required by law, any
Common Director may be removed during the aforesaid term of office, either for
or without cause, by, and only by, the affirmative vote of the holders of a
majority of the Common Stock represented at a duly called special or annual
meeting of such stockholders or by an action by written consent for that
purpose, and any such vacancy thereby created, shall be filled by the vote of
the holders of a majority of the Common Stock represented at such meeting or in
such consent.
(iv) The holders of shares of Common Stock and Preferred Stock,
voting as a class, shall be entitled to elect three (3) directors (the "Other
Directors"). In the case of any vacancy in the office of an Other Director, a
successor shall be elected to hold office for the unexpired term of such Other
Director by the affirmative vote of the holders of a majority of the votes
represented at a duly called special or annual meeting of the holders of Common
Stock and Preferred Stock or by an action by written consent for that purpose.
Except as required by law, any Other Director may be removed during the
aforesaid term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the votes represented at a duly
called special or annual meeting of the holders of Common Stock and Preferred
Stock or by an action by written consent for that purpose, and any such vacancy
thereby created shall be filled by the vote of the holders of a majority of the
votes represented at such meeting or in such consent. For all purposes of this
Section 3(b)(iv), the holder of each share of Common Stock issued and
outstanding shall have one vote, and the holder of each share of Preferred Stock
issued and outstanding shall have the number of votes equal to the number of
shares of Common Stock into which such share of Preferred Stock could be
converted at the record date for determination of the stockholders entitled to
vote on the matters to be voted upon, or, if no such record date is established,
at the date such vote is taken or any written consent of stockholders is
solicited.
(v) A quorum for the holding of a meeting of the Board of
Directors shall consist of a majority of the Directors then in office
notwithstanding that there may be a vacancy in the Board of Directors and action
of the Board of Directors by unanimous written consent shall only require the
written consent of the Directors then in office notwithstanding that there may
be a
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vacancy in the Board of Directors. The provisions of this subparagraph (v) shall
take precedence over any inconsistent provision of the Bylaws of the
corporation.
(c) Protective Provisions of the Preferred Stock. In addition to any
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other rights provided by law, (i) so long as any shares of Series A Preferred
shall be outstanding, the corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of a majority of the
outstanding shares of the Series A Preferred, amend or repeal any provision of,
or add any provision to, the corporation's Certificate of Incorporation or
Bylaws if such action would (x) alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, the
Series A Preferred, (y) authorize any shares of any class or series of stock (or
reclassify any existing class or series of stock) or any securities convertible
into stock having any preference or priority as to dividend, redemption, voting
or conversion rights, liquidation preferences or otherwise, superior to or on a
parity with any such preference or priority to which the Series A Preferred is
entitled hereunder, or (z) increase or decrease the number of shares of Series A
Preferred authorized hereby; (ii) so long as any shares of Series B Preferred
shall be outstanding, the corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of a majority of the
outstanding shares of the Series B Preferred, amend or repeal any provision of,
or add any provision to, the corporation's Certificate of Incorporation or
Bylaws if such action would (x) alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, the
Series B Preferred, (y) authorize any shares of any class or series of stock (or
reclassify any existing class or series of stock) or any securities convertible
into stock having any preference or priority as to dividend, redemption, voting
or conversion rights, liquidation preferences or otherwise, superior to or on a
parity with any such preference or priority to which the Series B Preferred is
entitled hereunder, or (z) increase or decrease the number of shares of Series B
Preferred authorized hereby; and (iii) so long as any shares of Series C
Preferred shall be outstanding, the corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of a majority
of the outstanding shares of the Series C Preferred, amend or repeal any
provision of, or add any provision to, the corporation's Certificate of
Incorporation or Bylaws if such action would (x) alter or change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Series C Preferred, (y) authorize any shares of any class or
series of stock (or reclassify any existing class or series of stock) or any
securities convertible into stock having any preference or priority as to
dividend, redemption, voting or conversion rights, liquidation preferences or
otherwise, superior to or on a parity with any such preference or priority to
which the Series C Preferred is entitled hereunder, or (z) increase or decrease
the number of shares of Series C Preferred authorized hereby.
In addition, so long as any shares of Series A Preferred, Series B
Preferred or Series C Preferred shall be outstanding, the corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of two-thirds of the outstanding shares of the Series A Preferred, Series B
Preferred and Series C Preferred, voting together as a single class, change the
number of directors on the corporation's Board of Directors; sell, lease,
convey, exchange, transfer or otherwise dispose of all or substantially all of
the assets of the corporation; merge or consolidate with any other
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entity; or effect a reclassification or recapitalization of the outstanding
capital stock of the corporation.
4. Redemption.
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(a) Mandatory Redemption of Preferred Stock. Subject to the terms and
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conditions of this Section 4, to the extent that any outstanding shares of the
Preferred Stock have not previously been redeemed or converted into Common
Stock, in the event that the corporation shall receive at any time a written
request by the holders of at least two-thirds of the then outstanding shares of
Series A Preferred, Series B Preferred and Series C Preferred, voting together
as one class (the "Election"), for the redemption of all the Preferred Stock
under this subsection 4(a), redeem on (i) the later of February 27, 2003 or one
hundred and eighty days following the date of the Election and (ii) on the first
and second anniversary date thereof, (each a "Redemption Date"), a number of
shares of Preferred Stock equal to one-third, one-half and all, respectively, of
the remaining outstanding shares of Series A Preferred, Series B Preferred and
Series C Preferred that are outstanding on each of those respective dates. Such
shares are to be redeemed from any source of funds legally available therefor at
the redemption price therefor described in this subsection. The redemption
price for each share of Preferred Stock shall be the sum of (i) $2.70 per share
of Series A Preferred, $3.47 per share of Series B Preferred or $10.00 per
share of Series C Preferred (as originally issued and as appropriately adjusted
for any stock split, dividend, combination, recapitalization or the like with
regard to such shares) plus (ii) all declared but unpaid dividends thereon, if
any, through the respective Redemption Date. If upon any Redemption Date
scheduled under this subsection for the redemption of Preferred Stock, the funds
and assets of the corporation legally available to redeem such stock shall be
insufficient to redeem all shares of Preferred Stock then scheduled to be
redeemed, then any such unredeemed shares shall be carried forward and shall be
redeemed (together with any other shares of Preferred Stock then scheduled to be
redeemed) at the next such scheduled Redemption Date to the full extent of
legally available funds of the corporation at such time, and any such unredeemed
shares shall continue to be so carried forward until redeemed. Shares of
Preferred Stock which are subject to redemption but which have not been redeemed
due to insufficient legally available funds and assets of the corporation shall
continue to be outstanding and entitled to all dividend, liquidation, conversion
and other rights, preferences, privileges and restrictions of the Preferred
Stock until such shares have been converted or redeemed. Notwithstanding the
foregoing, in the event that the corporation shall give notice to each holder of
Preferred Stock at least 30 days prior to any Redemption Date, the corporation
may delay for up to one year from such Redemption Date its obligations with
regard to up to 50% of the shares of Series A Preferred, Series B Preferred and
Series C Preferred to be redeemed by it on such Redemption Date, provided that
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in such event, the corporation shall pay to the holders of Series A Preferred,
Series B Preferred and Series C Preferred, in addition to all other amounts
payable pursuant to the foregoing, from any source of funds legally available
therefor, interest payments on any amounts deferred hereby at the rate of
interest publicly announced from time to time by the Bank of America National
Trust and Savings Association in Los Angeles, California, as its reference rate,
payable on March 31, June 30, September 30, December 31 and on the date of
payment of the amounts deferred
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hereby. If upon any date scheduled under this subsection for payment pursuant to
the foregoing sentence, the funds and assets of the corporation legally
available for such payments shall be insufficient to make such payments, then
any such unpaid amounts shall be carried forward and shall be paid as soon as
practicable.
(b) Partial Redemption. No redemption shall be made under this
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Section 4 of only a part of the then outstanding Preferred Stock unless the
corporation shall effect such redemption pro rata among all holders of the then
outstanding Series A Preferred, Series B Preferred and Series C Preferred based
upon the aggregate redemption price of all shares of Preferred Stock held by
each holder thereof on the applicable Redemption Date.
(c) Redemption Notice. At least twenty (20) but no more than sixty
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(60) days prior to any Redemption Date, written notice shall be mailed by the
corporation, postage prepaid, to each holder of record (at the close of business
on the business day next preceding the day which notice is given) of the
Preferred Stock to be redeemed, at the address last shown on the records of the
corporation for such holder or given by the holder to the corporation for the
purpose of notice or, if no such address appears or is given, at the place where
the principal executive office of the corporation is located, notifying such
holder of the redemption to be effected, specifying the subsection hereof under
which such redemption is being effected, the Redemption Date, the applicable
redemption prices, the number of such holder's shares of Preferred Stock to be
redeemed and the place at which payment may be obtained and calling upon such
holder to surrender to the corporation, in the manner and at the place
designated, the certificate or certificates representing the shares to be
redeemed (the "Redemption Notice").
(d) Surrender of Certificates. On or before each designated
-------------------------
Redemption Date, each holder of Preferred Stock to be redeemed shall (unless
such holder has previously exercised his right to convert such shares of
Preferred Stock into Common Stock as provided in Section 5 below), surrender the
certificate(s) representing such shares of Preferred Stock to be redeemed to the
corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the applicable redemption price for such shares shall be payable
to the order of the person whose name appears on such certificate(s) as the
owner thereof, and each surrendered certificate shall be canceled and retired.
If less than all of the shares represented by such certificate are redeemed,
then the corporation shall promptly issue a new certificate representing the
unredeemed shares.
(e) Effect of Redemption. If the Redemption Notice shall have been
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duly given, and if on the Redemption Date the applicable redemption price is
either paid or made available for payment through the deposit arrangements
specified in subsection (f) below, then notwithstanding that the certificates
evidencing any of the shares of Preferred Stock so called for redemption shall
not have been surrendered, all dividends with respect to such shares shall cease
to accrue after the Redemption Date, such shares shall not thereafter be
transferred on the corporation's books and all of the rights of the holders of
such shares with respect to such shares shall terminate after the
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Redemption Date, except only the right of the holders to receive the applicable
redemption price without interest upon surrender of their certificate(s)
therefor.
(f) Deposit of Redemption Price. On or prior to a Redemption Date,
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the corporation may, at its option, deposit with a bank or trust company having
a capital and surplus of at least $100,000,000, as a trust fund, a sum equal to
the aggregate applicable redemption price for all shares of Preferred Stock to
be redeemed on such Redemption Date but not yet redeemed, with irrevocable
instructions and authority to the bank or trust company to pay, on or after the
Redemption Date, the applicable redemption price to the respective holders of
all shares of Preferred Stock called for redemption on that Redemption Date upon
the surrender of their share certificate duly endorsed for transfer in
accordance with the standard practice of such bank or trust company. From and
after the date of such deposit, the shares so called for redemption shall be
redeemed. The deposit shall constitute full payment for the shares to their
holders, and from and after the date of the deposit, the shares shall be deemed
to be no longer outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with respect
thereto except the right to receive from the bank or trust company payment of
the redemption price of the shares, without interest, upon surrender of their
certificates therefor, and the right to convert such shares as provided in
Section 5 below. Any funds so deposited and unclaimed at the end of one (1)
year after such Redemption Date shall be released or repaid to the corporation,
after which time the holders of shares called for redemption who have not
claimed such funds shall be entitled to receive payment of the redemption price
only from the corporation.
5. Conversion. The holders of stock of this corporation have conversion
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rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred, Series B
----------------
Preferred and Series C Preferred shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share at the
office of the corporation or any transfer agent for the Series A Preferred,
Series B Preferred or Series C Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing Two Dollars
and Seventy Cents ($2.70) in the case of the Series A Preferred, Three Dollars
and Forty Seven Cents ($3.47) in the case of the Series B Preferred or Ten
Dollars and No Cents ($10.00) in the case of the Series C Preferred, by the
Conversion Price for such series, determined as hereinafter provided, in effect
at the time of the conversion. The prices at which shares of Common Stock
shall be deliverable upon conversion (the "Conversion Prices" and each a
"Conversion Price") shall initially be Two Dollars and Seventy Cents ($2.70)
per share of Common Stock in the case of the Series A Preferred, Three Dollars
and Forty Seven Cents ($3.47) per share of Common Stock in the case of the
Series B Preferred or Ten Dollars and No Cents ($10.00) per share of Common
Stock in the case of the Series C Preferred. Such initial Conversion Prices
shall be subject to adjustment as hereinafter provided.
(b) Automatic Conversion of Preferred Stock. Each share of Series A
---------------------------------------
Preferred, Series B Preferred and Series C Preferred shall automatically be
converted into shares of Common
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<PAGE>
Stock at the then effective Conversion Prices upon (i) the closing of a firm
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
shares of the corporation's Common Stock at a price per share of Common Stock,
prior to underwriter commissions and offering expenses, of not less than $8.68
per share (as originally issued and as appropriately adjusted for any stock
split, dividend, combination, recapitalization or the like with regard to such
shares) and an aggregate offering price (before deduction of underwriter
commissions and offering expenses) of not less than $20,000,000; or, (ii) upon
the written election of holders of not less than two-thirds of the then
outstanding Series A Preferred, Series B Preferred and Series C Preferred,
voting as a single class.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of Series A Preferred, Series B Preferred or
Series C Preferred. In lieu of any fractional shares to which the holder would
otherwise be entitled (after aggregating all shares of Series A Preferred,
Series B Preferred and Series C Preferred held by such holder such that the
maximum number of whole shares of Common Stock is issued to such holder upon
conversion), the corporation shall pay cash equal to such fraction multiplied by
the then effective Conversion Price of the Series A Preferred, Series B
Preferred or Series C Preferred, respectively. Before any holder of Series A
Preferred, Series B Preferred or Series C Preferred shall be entitled to convert
the same into full shares of Common Stock and to receive certificates therefor,
he shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the corporation or of any transfer agent for the Series A
Preferred, Series B Preferred or Series C Preferred, and shall give written
notice to the corporation at such office that he elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
paragraph (b) hereof, the outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred 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 the certificates evidencing such shares of Series A Preferred,
Series B Preferred or Series C Preferred 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 Series A Preferred, Series B Preferred or Series C Preferred, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to the holder in
the amount of any cash amounts payable as the result of a conversion into
fractional shares of Common Stock. 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, Series B Preferred or Series C Preferred to be
converted, or, in the case of automatic conversion, on the date of closing of
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<PAGE>
the offering or the date of written election to convert, 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 of Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Adjustments for Dilutive Issuances.
----------------------------------
A. Special Definitions. For purposes of this Section 5(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) "Original Issue Date" shall mean the date of filing
of this Second Amended and Restated Certificate of Incorporation.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities, directly or indirectly convertible
into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 5(d)(i)(C), deemed to be
issued) by the corporation after the Original Issue Date, other than:
(aa) shares of Common Stock issued or issuable upon
conversion of the Series A Preferred, Series B Preferred or Series C Preferred
into Common Stock;
(bb) up to 2,204,155 shares (as appropriately
adjusted for any stock split, dividend, combination, recapitalization or the
like with regard to such shares) of Common Stock plus such additional number of
shares as the Board of Directors may approve (including the approval of the
Series A Preferred Director and the Series B Preferred Director), issued or
issuable to directors and employees of, and consultants to, the corporation
pursuant to an option plan, purchase plan or other employee or consultant
incentive plan, pursuant to stock grants or any other plan or arrangement
approved by the Board of Directors; or
(cc) shares of Common Stock issued or issuable as a
dividend or distribution on Series A Preferred, Series B Preferred or Series C
Preferred or pursuant to any event for which adjustment is made pursuant to
subparagraph (d)(ii), (iii) or (iv) hereof.
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<PAGE>
(5) "Issue Price" with respect to any issuance of
Additional Shares of Common Stock shall mean the price per share obtained by
dividing the total consideration received by the corporation in respect of such
Additional Shares of Common Stock, computed in accordance with Section
5(d)(i)(E) hereof, by the aggregate number of shares of such Additional Shares
of Common Stock issued, computed in accordance with Section 5(d)(i)(C) hereof.
B. No Adjustment of Conversion Price. No adjustment in
---------------------------------
the Conversion Price of a particular share of Series A Preferred, Series B
Preferred or Series C Preferred shall be made hereunder in respect of the
issuance of Additional Shares of Common Stock unless the consideration per share
for an Additional Share of Common Stock issued or deemed to be issued by the
corporation is less than the Conversion Price in effect on the date of, and
immediately prior to, such issue for such share of Series A Preferred, Series B
Preferred or Series C Preferred, respectively.
C. Deemed Issue of Additional Shares of Common Stock.
-------------------------------------------------
(1) Options and Convertible Securities. Except as
----------------------------------
otherwise provided in Section 5(d)(i)(B), 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 conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue of Options or Convertible Securities 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 Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 5(d)(i)(E) hereof)
of such Additional Shares of Common Stock 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 Stock are deemed to be issued:
(aa) 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;
(bb) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, 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 such expiration, be
recomputed as if:
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<PAGE>
(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the corporation upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised;
(cc) no readjustment pursuant to clause (bb) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(dd) in the case of any Options which expire by
their terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options.
D. Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common Stock. In the event the corporation shall after
- ---------------------------------
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
5(d)(i)(C)) without consideration or for a consideration per share less than the
Conversion Price of any series of Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event the Conversion Price of
such series of Preferred Stock shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying the
Conversion Price for such series of Preferred Stock 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 Stock so issued would purchase at the Conversion
Price of such series of Preferred Stock, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such issue
plus the number of
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<PAGE>
such Additional Shares of Common Stock so issued; and provided further that, for
the purposes of this Section 5(d)(i), all shares of Common Stock issuable upon
conversion of outstanding Options, Convertible Securities, Series A Preferred,
Series B Preferred and Series C Preferred shall be deemed to be outstanding.
E. Determination of Consideration. For purposes of this
------------------------------
Section 5(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
-----------------
(aa) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(bb) insofar as it consists of services or
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and
(cc) in the event Additional Shares of Common
Stock 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 (aa) and (bb) above,
as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
----------------------------------
consideration per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 5(d)(i)(C), relating
to Options and Convertible Securities, shall be determined by dividing
(aa) 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 in full of such
Options or the conversion or exchange in full of such Convertible Securities, or
in the case of Options for Convertible Securities, the exercise in full of such
Options for Convertible Securities and the conversion or exchange in full of
such Convertible Securities, by
(bb) 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 in full of such Options or the conversion or exchange in full
of such Convertible Securities.
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<PAGE>
(ii) Adjustments for Subdivisions, Combinations
------------------------------------------
or Consolidations of Common Stock. In the event the outstanding shares of
- ---------------------------------
Common Stock shall be subdivided (by stock split, stock dividend or otherwise),
into a greater number of shares of Common Stock, the Conversion Prices of the
Series A Preferred, the Series B Preferred and the Series C Preferred then in
effect shall, concurrently with the effectiveness of such subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Prices of the Series A
Preferred, the Series B Preferred and the Series C Preferred then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased. The corporation shall not subdivide, combine or
consolidate any series of Common Stock without effecting a proportional
subdivision, combination or consolidation of all other series of Common Stock.
(iii) Adjustments for Other Distributions. In
-----------------------------------
the event the corporation at any time or from time to time makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, any distribution payable in securities of the corporation other than
shares of Common Stock and other than as otherwise adjusted in this Section 5,
then and in each such event provision shall be made so that the holders of
Series A Preferred, Series B Preferred and Series C Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the corporation which they
would have received had their shares of Series A Preferred, Series B Preferred
or Series C Preferred been converted into Common Stock on the date of such event
and had they thereafter, during the period from the date of such event to and
including the date of conversion, retained such securities receivable by them as
aforesaid during such period, subject to all other adjustments called for during
such period under this Section 5 with respect to the rights of the holders of
the Series A Preferred, Series B Preferred or Series C Preferred. The
corporation shall not distribute securities of the corporation to holders of any
series of Common Stock without effecting a proportional and equivalent
distribution to the holders of all other series of Common Stock.
(iv) Adjustments for Reclassification, Exchange
------------------------------------------
and Substitution. If the Common Stock issuable upon conversion of the Series
- ----------------
A Preferred, Series B Preferred or Series C Preferred shall be changed into the
same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision, combination or consolidation of shares provided for above), the
Conversion Prices of the Series A Preferred, Series B Preferred and Series C
Preferred then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted such that the
Series A Preferred, Series B Preferred and Series C Preferred shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of such shares of Series A Preferred, Series B Preferred or Series C
Preferred immediately before that change. No series of Common Stock shall be so
changed into shares of any other class or classes of
-16-
<PAGE>
stock unless a proportional and equivalent change shall be made with respect to
all other series of Common Stock.
(e) No Impairment. The corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to 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 5 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 the
Series A Preferred, Series B Preferred and Series C Preferred against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of any Conversion Price pursuant to this Section 5,
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, Series B Preferred and 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, Series
B 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 Prices 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 such holder's shares of Series A
Preferred, Series B Preferred or Series C Preferred.
FIFTH. The Board of Directors of the corporation is expressly authorized
-----
to make, alter or repeal Bylaws of the corporation, but the stockholders may
make additional Bylaws and may alter or repeal any Bylaw whether adopted by them
or otherwise.
SIXTH. Elections of directors need not be by written ballot except and to
-----
the extent provided in the Bylaws of the corporation.
SEVENTH.
-------
1. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, trustee, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and,
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<PAGE>
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- ----------
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
2. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and expect that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court Chancery of the State of Delaware or such other court shall deem
proper.
3. To the extent that any person referred to in Paragraphs (1) and (2) of
this Article SEVENTH has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to therein, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
4. Any indemnification under paragraphs (1) and (2) of this Article
SEVENTH (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, trustee, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in such
paragraphs (1) and (2) of this Article SEVENTH. Such determination shall be
made (a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
5. Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of any
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<PAGE>
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 SEVENTH. Such expenses (including
attorneys' fees) incurred by other employees and agents of the corporation may
be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
6. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other Paragraphs of this Article SEVENTH shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, 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.
7. The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article SEVENTH.
8. For purposes of this Article SEVENTH, references to "the corporation"
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued would have had power and
authority to indemnify its directors, officers and employees or agents so that
any person who is or was a director, trustee, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article SEVENTH with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
9. For purposes of this Article SEVENTH, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, trustee, officer, employee or agent of
the corporation which imposes duties on, or involves services by, such director,
trustee, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article SEVENTH.
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<PAGE>
10. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article SEVENTH shall, unless otherwise provided when
authorized or ratified, 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 a person.
EIGHTH. A director of the corporation shall not be liable to the
------
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is not
permitted under the general Corporation Law of the State of Delaware as in
effect when such breach occurred. No amendment or repeal of this Article EIGHTH
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
NINTH. The corporation reserves the right, subject to Section 3(c) of
-----
Article FOURTH, to amend, alter, change, or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
the laws of the State of Delaware, and all rights conferred herein are granted
subject to this reservation.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, this Certificate has been signed this 25th day of May,
1999.
DIGITAL INSIGHT CORPORATION
/s/ John Dorman
---------------------------------------
John Dorman, Chief Executive Officer
ATTEST:
/s/ Kevin McDonnell
- ---------------------------------
Kevin McDonnell, Secretary
<PAGE>
EXHIBIT 3.2
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DIGITAL INSIGHT CORPORATION
Digital Insight Corporation (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the Corporation is Digital Insight Corporation. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on March 18, 1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Third Amended and Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Corporation's
Certificate of Incorporation.
3. The terms and provisions of this Third Amended and Restated Certificate
of Incorporation have been duly approved by written consent of the required
number of shares of outstanding stock of the Corporation pursuant to Subsection
228(a) of the General Corporation Law of the State and written notice pursuant
to Subsection 228(d) of the General Corporation Law of the State has been given
to those stockholders whose written consent has not been obtained.
4. The text of the Third Amended and Restated Certificate of Incorporation
reads in its entirety as follows:
"FIRST. The name of the Corporation is Digital Insight Corporation.
-----
SECOND. The address of the Corporation's registered office in the State of
------
Delaware is Corporation Trust Center, 1209 Orange St., Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
-----
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. This Corporation is authorized to issue two classes of shares to
------
be designated, respectively, Common Stock ("Common") and Preferred Stock
------
("Preferred"). The total number of shares of Common this Corporation shall have
---------
authority to issue is 100,000,000 with a par value of $0.001 per share. The
total number of shares of Preferred this Corporation shall have authority to
issue is 5,000,000 with a par value of $0.001 per share.
<PAGE>
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Preferred in series and, by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in such series,
and to fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) the number of shares constituting that series and the distinctive
designation of that series;
(b) the dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) whether that series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;
(d) whether that series shall have conversion privileges and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund; and
(g) the rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series.
FIFTH.
-----
A. The management of the business and the conduct of the affairs of
the Corporation shall be vested in the Board of Directors. Prior to the closing
of the first sale of Common Stock of the Corporation pursuant to a registration
statement declared effective by the Securities and Exchange Corporation under
the Securities Act of 1933, as amended, the number of directors which shall
constitute the whole Board of Directors shall be fixed in the manner designated
in the Bylaws of the Corporation.
B. At any time following the closing of the first sale of Common
Stock of the Corporation pursuant to a registration statement declared effective
by the Securities and Exchange
-2-
<PAGE>
Corporation under the Securities Act of 1933, as amended, the number of
directors which constitute the whole Board of Directors of the Corporation shall
be fixed exclusively by one or more resolutions adopted from time to time by the
Board of Directors. The Board of Directors shall be divided into three classes
designated as Class I, Class II, and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the date hereof, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the date hereof, the term of office of
the Class II directors shall expire and Class II directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the date hereof, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.
C. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
D. Elections of directors need not be by written ballot except and to
the extent provided in the Bylaws of the corporation.
E. Vacancies created by newly created directorships, created in
accordance with the Bylaws of this Corporation, may be filled by the vote of a
majority, although less than a quorum, of the directors then in office, or by a
sole remaining director
SIXTH.
-----
A. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer, employee or
agent of the Corporation or any predecessor of the Corporation or serves or
served at any other enterprise as a director, officer, employee or agent at the
request of the Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article SIXTH, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article SIXTH, shall eliminate or reduce the effect of
this Article SIXTH, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article SIXTH, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
SEVENTH. The Corporation is to have perpetual existence.
-------
-3-
<PAGE>
EIGHTH.
------
A. Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside of the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation.
B. At any time following the closing of the first sale of Common
Stock of the Corporation pursuant to a registration statement declared effective
by the Securities and Exchange Corporation under the Securities Act of 1933, as
amended, stockholders of the Corporation may not take any action by written
consent in lieu of a meeting and any action contemplated by stockholders after
such time must be taken at a duly called annual or special meeting of
stockholders.
C. Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or
-----
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation."
-4-
<PAGE>
IN WITNESS WHEREOF, this Certificate has been signed this _______ day of
_______, 1999.
DIGITAL INSIGHT CORPORATION
__________________________________________
John Dorman, President and Chief
Executive Officer
ATTEST:
___________________________
Kevin McDonnell, Secretary
-5-
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF AMENDED AND RESTATED BYLAWS OF
DIGITAL INSIGHT CORPORATION
That Article III, Section 3.2 of the Company's Amended and Restated Bylaws
be, and hereby is amended to read in full as follows (with the revised portions
highlighted in bold):
"Subject to any contrary provisions in the certificate of
incorporation, the authorized number of directors shall be seven(7). This
number may be changed by a duly adopted amendment to the certificate of
incorporation or by an amendment to this bylaw adopted by the vote or
written consent of the holders of a majority of the stock issued and
outstanding and entitled to vote or by resolution of a majority of the
board of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires."
This Certificate of Amendment of Amended and Restated Bylaws shall be
effective as of this 13th day of October, 1998.
/s/ James McGuire
-----------------------------
James McGuire, Secretary
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
DIGITAL INSIGHT CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
CORPORATE OFFICES............................................... 1
1.1 REGISTERED OFFICE.......................................... 1
1.2 OTHER OFFICES.............................................. 1
ARTICLE II
MEETINGS OF STOCKHOLDERS........................................ 1
2.1 PLACE OF MEETINGS.......................................... 1
2.2 ANNUAL MEETING............................................. 1
2.3 SPECIAL MEETING............................................ 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS........................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............... 2
2.6 QUORUM..................................................... 2
2.7 ADJOURNED MEETING; NOTICE.................................. 3
2.8 VOTING..................................................... 3
2.9 WAIVER OF NOTICE........................................... 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.... 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS 4
2.12 PROXIES.................................................... 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE...................... 5
ARTICLE III
DIRECTORS....................................................... 5
3.1 POWERS..................................................... 5
3.2 NUMBER OF DIRECTORS........................................ 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.... 6
3.4 RESIGNATION AND VACANCIES.................................. 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................... 7
3.6 FIRST MEETINGS............................................. 7
3.7 REGULAR MEETINGS........................................... 7
3.8 SPECIAL MEETINGS; NOTICE................................... 8
3.9 QUORUM..................................................... 9
3.10 WAIVER OF NOTICE........................................... 9
3.11 ADJOURNED MEETING; NOTICE.................................. 9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......... 9
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.13 FEES AND COMPENSATION OF DIRECTORS............................ 9
3.14 APPROVAL OF LOANS TO OFFICERS................................. 10
3.15 REMOVAL OF DIRECTORS.......................................... 10
ARTICLE IV
COMMITTEES......................................................... 10
4.1 COMMITTEES OF DIRECTORS....................................... 10
4.2 COMMITTEE MINUTES............................................. 11
4.3 MEETINGS AND ACTION OF COMMITTEES............................. 11
ARTICLE V
OFFICERS........................................................... 11
5.1 OFFICERS...................................................... 11
5.2 ELECTION OF OFFICERS.......................................... 12
5.3 SUBORDINATE OFFICERS.......................................... 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS........................... 12
5.5 VACANCIES IN OFFICES.......................................... 12
5.6 CHAIRMAN OF THE BOARD......................................... 12
5.7 PRESIDENT..................................................... 12
5.8 VICE PRESIDENT................................................ 13
5.9 SECRETARY..................................................... 13
5.10 CHIEF FINANCIAL OFFICER....................................... 13
5.11 ASSISTANT SECRETARY........................................... 14
5.12 ASSISTANT FINANCIAL OFFICER................................... 14
5.13 AUTHORITY AND DUTIES OF OFFICERS.............................. 14
ARTICLE VI
INDEMNITY.......................................................... 14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..................... 14
6.2 INDEMNIFICATION OF OTHERS..................................... 15
6.3 INSURANCE..................................................... 15
ARTICLE VII
RECORDS AND REPORTS................................................ 15
7.1 MAINTENANCE AND INSPECTION OF RECORDS......................... 15
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.2 INSPECTION BY DIRECTORS.................................... 16
7.3 ANNUAL STATEMENT TO STOCKHOLDERS........................... 16
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............. 16
ARTICLE VIII
GENERAL MATTERS................................................. 17
8.1 CHECKS..................................................... 17
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS........... 17
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES..................... 17
8.4 SPECIAL DESIGNATION ON CERTIFICATES........................ 18
8.5 LOST CERTIFICATES.......................................... 18
8.6 CONSTRUCTION; DEFINITIONS.................................. 18
8.7 DIVIDENDS.................................................. 19
8.8 FISCAL YEAR................................................ 19
8.9 SEAL....................................................... 19
8.10 TRANSFER OF STOCK.......................................... 19
8.11 STOCK TRANSFER AGREEMENTS.................................. 19
8.12 REGISTERED STOCKHOLDERS.................................... 19
ARTICLE IX
AMENDMENTS...................................................... 20
ARTICLE X
DISSOLUTION..................................................... 20
ARTICLE XI
CUSTODIAN....................................................... 21
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................ 21
11.2 DUTIES OF CUSTODIAN........................................ 21
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED BYLAWS
---------------------------
OF
--
DIGITAL INSIGHT CORPORATION
---------------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Trust Center.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday of April in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by
the board of directors, or by the chairman of the board, or by the president, or
by one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by
-2-
<PAGE>
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, 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. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully
-3-
<PAGE>
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that 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 in writing, setting forth the
action so taken, is 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.
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. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
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,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or 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, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) 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 day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
-4-
<PAGE>
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to 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.
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be
-5-
<PAGE>
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
Subject to any contrary provisions in the certificate of incorporation,
the authorized number of directors shall be six (6). This number may be changed
by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
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 as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies
-6-
<PAGE>
and newly created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
----------------
-7-
<PAGE>
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board may be called by the president on three (3)
days' notice to each director, either personally or by mail, telegram, telex, or
telephone; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors
unless the board consists of only one (1) director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
-8-
<PAGE>
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A 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 committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
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3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.1 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board 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. In the absence or
disqualification of a 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. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the
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corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the board of directors and its members; provided, however, that the
time of regular meetings of committees may also be called by resolution of the
board of directors and that notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
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5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of
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the corporation and shall, subject to the control of the board of directors,
have general supervision, direction, and control of the business and the
officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the office of president of a corporation
and shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
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The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT FINANCIAL OFFICER
---------------------------
The assistant financial officer, or, if there is more than one, the
assistant financial officers, in the order determined by the stockholders or
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the chief financial officer or in the
event of his or her inability or refusal to act, perform the duties and exercise
the powers of the chief financial officer and shall perform such other duties
and have such other powers as the board of directors or the stockholders may
from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the
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corporation includes any person (i) who is or was a director or officer of the
corporation, (ii) who is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was a director or officer of a corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who 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, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to
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inspect for any proper purpose the corporation's stock ledger, a list of its and
its other books and records and to make copies or extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other agent is the person
who seeks the right to inspection, the demand under oath shall be accompanied by
a power of attorney or such other writing that authorizes the attorney or other
agent to so act on behalf of the stockholder. The demand under oath shall be
directed to the corporation at its registered office in Delaware or at its
principal place of business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person
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directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
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 has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
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The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the 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 that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that 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, the designations,
the preferences, and the 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.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
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8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporate seal, if there shall be one, shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 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, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the
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part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the
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consent has been signed by or on behalf of all the stockholders entitled to vote
on a dissolution; in addition, there shall be attached to the consent a
certification by the secretary or some other officer of the corporation setting
forth the names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION
OF
AMENDED AND RESTATED BYLAWS
OF
DIGITAL INSIGHT CORPORATION
Certificate by Secretary of Adoption
------------------------------------
by Board of Directors and by Stockholders' Vote
-----------------------------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Digital Insight Corporation and that the foregoing
Amended and Restated Bylaws, comprising twenty-one (21) pages, were adopted as
the Bylaws of the corporation by the Board of Directors on February 13, 1998 and
were ratified by the vote of stockholders entitled to exercise the majority of
the voting power of the corporation on February 18, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 18th day of February 1998.
/s/ James McGuire
---------------------------------
James McGuire, Secretary
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<PAGE>
EXHIBIT 3.4
RESTATED BYLAWS
OF
DIGITAL INSIGHT CORPORATION
(as adopted on June __, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES........................................ 1
1.1 REGISTERED OFFICE........................................ 1
1.2 OTHER OFFICES............................................ 1
ARTICLE II MEETINGS OF STOCKHOLDERS................................ 1
2.1 PLACE OF MEETINGS........................................ 1
2.2 ANNUAL MEETING........................................... 1
2.3 SPECIAL MEETING.......................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS......................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............. 2
2.6 QUORUM................................................... 2
2.7 ADJOURNED MEETING; NOTICE................................ 2
2.8 VOTING................................................... 3
2.9 WAIVER OF NOTICE......................................... 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.. 3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS.......................................... 4
2.12 PROXIES.................................................. 4
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.................... 5
2.14 NOMINATIONS AND PROPOSALS................................ 5
ARTICLE III DIRECTORS.............................................. 5
3.1 POWERS................................................... 5
3.2 NUMBER OF DIRECTORS...................................... 5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.. 6
3.4 RESIGNATION AND VACANCIES................................ 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................. 7
3.6 FIRST MEETINGS........................................... 7
3.7 REGULAR MEETINGS......................................... 7
3.8 SPECIAL MEETINGS; NOTICE................................. 7
3.9 QUORUM................................................... 8
3.10 WAIVER OF NOTICE......................................... 8
3.11 ADJOURNED MEETING; NOTICE................................ 8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........ 8
3.13 FEES AND COMPENSATION OF DIRECTORS....................... 8
3.14 APPROVAL OF LOANS TO OFFICERS............................ 9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.15 REMOVAL OF DIRECTORS..................................... 9
ARTICLE IV COMMITTEES.............................................. 9
4.1 COMMITTEES OF DIRECTORS.................................. 9
4.2 COMMITTEE MINUTES........................................ 10
4.3 MEETINGS AND ACTION OF COMMITTEES........................ 10
ARTICLE V OFFICERS................................................. 10
5.1 OFFICERS................................................. 10
5.2 ELECTION OF OFFICERS..................................... 11
5.3 SUBORDINATE OFFICERS..................................... 11
5.4 REMOVAL AND RESIGNATION OF OFFICERS...................... 11
5.5 VACANCIES IN OFFICES..................................... 11
5.6 CHAIRMAN OF THE BOARD.................................... 11
5.7 PRESIDENT................................................ 11
5.8 VICE PRESIDENT........................................... 12
5.9 SECRETARY................................................ 12
5.10 CHIEF FINANCIAL OFFICER.................................. 12
5.11 ASSISTANT SECRETARY...................................... 13
5.12 ASSISTANT FINANCIAL OFFICER.............................. 13
5.13 AUTHORITY AND DUTIES OF OFFICERS......................... 13
ARTICLE VI INDEMNITY............................................... 13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................ 13
6.2 INDEMNIFICATION OF OTHERS................................ 14
6.3 INSURANCE................................................ 14
ARTICLE VII RECORDS AND REPORTS.................................... 14
7.1 MAINTENANCE AND INSPECTION OF RECORDS.................... 14
7.2 INSPECTION BY DIRECTORS.................................. 15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS......................... 15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........... 15
ARTICLE VIII GENERAL MATTERS....................................... 16
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.1 CHECKS................................................... 16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS......... 16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................... 16
8.4 SPECIAL DESIGNATION ON CERTIFICATES...................... 17
8.5 LOST CERTIFICATES........................................ 17
8.6 CONSTRUCTION; DEFINITIONS................................ 17
8.7 DIVIDENDS................................................ 18
8.8 FISCAL YEAR.............................................. 18
8.9 SEAL..................................................... 18
8.10 TRANSFER OF STOCK........................................ 18
8.11 STOCK TRANSFER AGREEMENTS................................ 18
8.12 REGISTERED STOCKHOLDERS.................................. 18
ARTICLE IX AMENDMENTS.............................................. 19
ARTICLE X DISSOLUTION.............................................. 19
ARTICLE XI CUSTODIAN............................................... 20
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.............. 20
11.2 DUTIES OF CUSTODIAN...................................... 20
</TABLE>
-iii-
<PAGE>
RESTATED BYLAWS
---------------
OF
--
DIGITAL INSIGHT CORPORATION
---------------------------
(As adopted on June __, 1999)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The address of the corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, 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. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
-2-
<PAGE>
2.8 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
2.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of the corporation, or any action that 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 in writing, setting forth the
action so taken, is 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.
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. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
In the event of the delivery, in the manner provided hereby, to the
corporation of the requisite written consent or consents to take corporate
action and/or any related revocation or revocations, the corporation may engage
independent inspectors of elections for the purpose of performing promptly a
ministerial review of the validity of the consents and revocations. For the
purpose of permitting the inspectors to perform such review, in the event such
inspectors are appointed, no action by written consent without a meeting shall
be effective until such date as such appointed independent
-3-
<PAGE>
inspectors certify to the corporation that the consents delivered to the
corporation in accordance herewith represent at least the minimum number of
votes that would be necessary to take the corporate action. Nothing contained in
these Bylaws shall in any way be construed to suggest or imply that the board of
directors or any stockholder shall not be entitled to contest the validity of
any consent or revocation thereof, whether before or after any certification by
any independent inspectors, or to take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation with
respect thereto, and the seeking of injunctive relief in such litigation).
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 (60) days of the
earliest dated written consent received in accordance herewith, a written
consent or consents signed by a sufficient number of holders to take such action
are delivered to the corporation in the manner prescribed herein.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
(i) Actions other than Written Consent. For the purpose of
----------------------------------
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock,
or other lawful purpose (other than the expression of consent to corporate
action in writing without a meeting) the directors may fix, in advance, a record
date, which, in the case of a meeting of stockholders, shall not be more than 60
days nor less than 10 days before the date of such meeting. If no record date is
fixed, 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 day on which the meeting is held
and the record date for determining stockholders for any other purpose pursuant
to this Section 2.11(i) shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto. A determination
of stockholders of record entitled to notice of or to vote at any 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.
(ii) Action by Written Consent. 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. Any stockholder of record seeking to have
the stockholders authorize or take corporate action by written consent shall, by
written notice to the secretary, request the board of directors to fix a record
date. The board of directors may, at any time within ten (10) days after the
date on which such a request is received, adopt a resolution fixing the record
date (unless a record date has previously been fixed by the first sentence of
this Section 2.11(ii)). If no record date has been fixed by the board of
directors pursuant
-4-
<PAGE>
to the first sentence of this Section 2.11(ii) or otherwise within ten (10) days
of the date on which such a request is received, 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
applicable 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 to any officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery 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 applicable 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 date on which the
board of directors adopts the resolution taking such prior action.
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.14 NOMINATIONS AND PROPOSALS
-------------------------
Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at any meeting of stockholders only (a) pursuant to the
corporation's notice of meeting, (b) by or at the direction of the
-5-
<PAGE>
board of directors or (c) by any stockholder of the corporation who was a
stockholder of record at the time of giving of notice provided for in these
bylaws, who is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 2.14.
For nominations or other business to be properly brought before a
stockholders meeting by a stockholder pursuant to clause (c) of the preceding
sentence, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the meeting; provided,
however, that in the event that less than 65 days notice of the meeting is given
to stockholders, notice by the stockholder to be timely must be so delivered not
earlier than the close of business on the seventh (7th) day following the day on
which the notice of meeting was mailed. In no event shall the public
announcement of an adjournment of a stockholders meeting commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (or any successor thereto) and Rule 14a-11 thereunder
(or any successor thereto) (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the corporation's books, and of such beneficial owner, and
(ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding any provision herein to the contrary, no business shall be
conducted at a stockholders meeting except in accordance with the procedures set
forth in this Section 2.14.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be
-6-
<PAGE>
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
Subject to any contrary provisions in the certificate of incorporation, the
authorized number of directors shall be seven (7). This number may be changed
by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in the certificate of incorporation and Section 3.4 of
these bylaws, directors shall be elected at each annual meeting of stockholders
to hold office until the next annual meeting. Directors need not be
stockholders unless so required by the certificate of incorporation or these
bylaws, wherein other qualifications for directors may be prescribed. Each
director, including a director elected to fill a vacancy, shall hold office
until his successor is elected and qualified or until his earlier resignation or
removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is 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 as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
-7-
<PAGE>
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and
-8-
<PAGE>
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held at such time and at
such place as shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail, or
facsimile or electronic delivery charges prepaid, addressed to each director at
that director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by facsimile or electronic delivery, it
shall be delivered personally or by telephone at least forty-eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the
-9-
<PAGE>
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the directors, or members
of a committee of directors, need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A 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 committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board 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. In the absence or
disqualification of a 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. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
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Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of
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directors at any regular or special meeting of the board or, except in the case
of an officer chosen by the board of directors, by any officer upon whom such
power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
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<PAGE>
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such
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other duties and have such other powers as the board of directors or the
stockholders may from time to time prescribe.
5.12 ASSISTANT FINANCIAL OFFICER
---------------------------
The assistant financial officer, or, if there is more than one, the
assistant financial officers, in the order determined by the stockholders or
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the chief financial officer or in the
event of his or her inability or refusal to act, perform the duties and exercise
the powers of the chief financial officer and shall perform such other duties
and have such other powers as the board of directors or the stockholders may
from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason
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of the fact that such person is or was an agent of the corporation. For purposes
of this Section 6.2, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (i) who is or was an employee or agent
of the corporation, (ii) who is or was serving at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who 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, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
6.4 AMENDMENT AND SCOPE.
-------------------
The rights conferred in these bylaws are not exclusive, and the corporation
is authorized to enter into indemnification agreements with its directors,
executive officers and employees. Neither any amendment nor repeal of this
Article VI nor the adoption of any provision of these bylaws inconsistent with
this Article VI shall eliminate or reduce the effect of this Article VI, in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article VI, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose
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<PAGE>
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
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ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant financial officer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. 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 has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the
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corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the 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 that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that 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, the designations,
the preferences, and the 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.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
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8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
This corporation may have a corporate seal, which may be adopted or altered
at the pleasure of the board of directors, and may use the same by causing it or
a facsimile thereof, to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 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, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the
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part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State
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shall have attached to it the affidavit of the secretary or some other officer
of the corporation stating that the consent has been signed by or on behalf of
all the stockholders entitled to vote on a dissolution; in addition, there shall
be attached to the consent a certification by the secretary or some other
officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION
OF
AMENDED AND RESTATED BYLAWS
OF
DIGITAL INSIGHT CORPORATION
Certificate by Secretary of Adoption
------------------------------------
by Board of Directors and by Stockholders' Vote
-----------------------------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Digital Insight Corporation and that the foregoing
Amended and Restated Bylaws, comprising twenty-one (21) pages, were adopted as
the Bylaws of the corporation by the Board of Directors on June __, 1999 and
were ratified by the vote of stockholders entitled to exercise the majority of
the voting power of the corporation on ____ __, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ____ day of ____, 1999.
------------------------------------------
Kevin McDonnell, Secretary
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EXHIBIT 4.2
---------------------------
DIGITAL INSIGHT CORPORATION
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
May 26, 1999
---------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1 Certain Definitions........................................... 2
Section 2 Piggyback Rights.............................................. 3
2.1 Notice of Registration...................................... 3
2.2 Underwriting................................................ 3
2.3 Right to Terminate Registration............................. 4
2.4 Termination of Piggy-back Rights............................ 4
Section 3 Demand Registration........................................... 4
3.1 Demand Registration......................................... 4
3.2 Underwritten Public Offering................................ 5
3.3 Inclusion of Additional Shares.............................. 5
3.4 Limitations................................................. 6
3.5 Termination of Demand Rights................................ 6
Section 4 Form S-3 Registration......................................... 7
4.1 Registrations on Form S-3................................... 7
4.2 Termination of S-3 Rights................................... 7
Section 5 Obligations of Company........................................ 7
Section 6 Expenses of Registration...................................... 8
Section 7 Indemnification............................................... 9
7.1 The Company................................................. 9
7.2 Holders..................................................... 9
7.3 Defense of Claims........................................... 10
Section 8 Rule 144 Reporting............................................ 10
Section 9 Holdback Agreement............................................ 11
Section 10 Limitations on Subsequent Registration Rights................. 11
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11 Information Rights........................................... 12
11.1 Delivery of Financial Statements............................ 12
11.2 Inspection.................................................. 12
11.3 Termination of Information and Inspection Covenants......... 13
Section 12 Covenants of the Company..................................... 13
12.1 Right to Maintain Percentage Ownership...................... 13
12.2 Directors and Officers Insurance............................ 15
12.3 Key Man Life Insurance...................................... 15
12.4 Proprietary Information Agreements.......................... 15
Section 13 Miscellaneous................................................ 15
13.1 Assignment.................................................. 15
13.2 Governing Law............................................... 16
13.3 Counterparts................................................ 16
13.4 Titles and Subtitles........................................ 16
13.5 Notices..................................................... 16
13.6 Attorney's Fees............................................. 16
13.7 Amendments and Waivers...................................... 17
13.8 Severability................................................ 17
13.9 Delays or Omissions......................................... 17
13.10 Entire Agreement............................................ 17
</TABLE>
-ii-
<PAGE>
DIGITAL INSIGHT CORPORATION
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement") is
entered into as of May 26, 1999 by and among DIGITAL INSIGHT CORPORATION, a
Delaware corporation (the "Company"), Paul Fiore and Daniel Jacoby (the
"Management Holders"), and Ole Eichhorn, Nasser J. Kazeminy, Edward Harris,
Robert Newkirk, Gary Mason, the Nasser J. Kazeminy Irrevocable Trust, the Yvonne
P. Kazeminy-Mofrad Irrevocable Trust, Kevin Savage, Robert Lucas, XP Systems
Corporation, Menlo Ventures VII, L.P. and Menlo Entrepreneurs Fund VII, L.P. and
HarbourVest Partners V-Direct Fund, L.P. (the "Existing Investor Holders"), and
John Dorman, Steve Zarate, Steve Reich and Kevin McDonnell (the "New Investor
Holders" and together with the Existing Investor Holders, the "Investor
Holders"). The Management Holders and the Investor Holders are sometimes
referred to herein as the "Holders."
RECITALS
A. The Company, the Existing Management Holders and the Investor Holders
are parties to that certain Rights Agreement dated February 27, 1998 (the
"Rights Agreement").
B. Certain of the Holders have purchased or will purchase shares of
Series C Preferred Stock of the Company (the "Series C Preferred") pursuant to
the terms of a Series C Preferred Stock Purchase Agreement dated of even date
herewith (the "Purchase Agreement").
C. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
D. The Company desires to enter into this Agreement and grant the Holders
the rights contained herein in order to fulfill such condition.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree that the Rights Agreement shall be
amended and restated to read in its entirety as follows:
Section 1
Certain Definitions
-------------------
Certain Definitions. As used in this Agreement, the following terms shall
-------------------
have the following respective meanings:
<PAGE>
1.1 "Sec" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
1.2 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at that time.
1.3 "Initial Public Offering" or "IPO" means the Company's sale of its
Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement under the Securities Act.
1.4 The terms "Register", "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), and the declaration or
ordering of the effectiveness of such registration statement.
1.5 "Registrable Securities" means (i) the shares of Common Stock of the
Company outstanding on the date of this Agreement and the shares of Common Stock
of the Company issuable or issued upon conversion of the Series A Preferred
Stock (the "Series A Preferred"), the Series B Preferred (the "Series B
Preferred") or the Series C Preferred (the Series A Preferred, the Series B
Preferred and the Series C Preferred being collectively referred to hereinafter
as the "Stock"), and (ii) any other shares of the Company's Common Stock issued
as (or issuable upon conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to or
in exchange for or replacement of the Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which a Holder's
rights under this Agreement are not assigned.
1.6 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder, all as the same
shall be in effect at the time.
1.7 An "Affiliate" of an entity referenced herein shall mean (i) any
entity who controls, is controlled by, or is under common control with such
entity, or (ii) any constituent partner or stockholder of such entity.
Section 2
Piggyback Rights
----------------
2.1 Notice of Registration. If at any time or from time to time, the
----------------------
Company shall determine to register any of its equity securities for its own
account in a firm commitment underwritten public offering, the Company will:
-2-
<PAGE>
(i) promptly give to the Holders written notice thereof; and
(ii) use its reasonable best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), and underwriting, all the Registrable Securities (subject to
cutback as set forth in Section 2.2) specified in a written request or requests
made within thirty (30) days after receipt of such written notice from the
Company by any Holder.
In connection with any registration pursuant to this Section 2, the Holders
participating in such registration shall provide all information to the Company
as may be required in order to permit the Company to comply with all applicable
requirements of the SEC in connection with such registration.
2.2 Underwriting. The right of any Holder to registration pursuant to
------------
this Section 2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. If any Holder proposes to distribute its securities
through such underwriting, such Holder shall (together with the Company and any
other stockholders 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 2, if the managing
underwriter advises the Holders registering shares of Common Stock in writing
that marketing factors require a limitation on the number of shares to be
underwritten, then the Registrable Securities of the Holders, the securities of
the Company and the securities held by any other stockholders distributing their
securities through such underwriting shall be excluded from the underwriting by
reason of the underwriter's marketing limitation to the extent so required by
such limitation as follows: (a) first, the securities held by such other
stockholders distributing their securities through such underwriting shall be
excluded in a manner such that the number of any shares that may be included by
such holders are allocated in proportion, as nearly as practicable to the
amounts of such securities proposed to be offered by such persons in such
registration, (b) if after all securities held by such other stockholders have
been excluded and additional shares shall be excluded, Registrable Securities of
the Holders shall be excluded in a manner such that the number of any
Registrable Securities that may be included by such Holders are allocated in
proportion, as nearly as practicable to the amounts of Registrable Securities
held by such Holders, and (c) if after all securities held by the Holders and
such other stockholders have been excluded and additional shares shall be
excluded, securities of the Company shall be excluded. If any Holder or other
stockholders disapprove of the terms of any such underwriting, he or she 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 ninety (90) days after the effective date of the
registration statement relating thereto.
-3-
<PAGE>
2.3 Right to Terminate Registration. The Company shall have the right to
-------------------------------
terminate or withdraw any registration initiated by it under this Section 2
prior to the effectiveness of such registration, whether or not any Holder has
elected to include securities in such registration.
2.4 Termination of Piggy-back Rights. The rights of any Holder to receive
--------------------------------
notice and to participate in a registration pursuant to the terms of this
Section 2 shall terminate at such time as such Holder could sell all of the
Registrable Securities held by such Holder in any one three month period under
the terms of Rule 144 under the Securities Act; provided, that such Investor
Holder holds fewer than 1% of the Company's outstanding capital stock; and
provided further, that the Company is subject to the reporting requirements of
the Securities Exchange Act of 1934.
Section 3
Demand Registration
-------------------
3.1 Demand Registration. At any time after the earlier of (a) January 1,
-------------------
2000, or (b) six months after the closing of the Company's IPO, the Investor
Holders shall be entitled to have the Company effect two (2) demand
registrations of Registrable Securities then owned by such Investor Holders
requesting such registration. A request for such registration (a "Registration
Request") must be made in writing and such Registrable Securities must have an
offering value of at least $10,000,000. The Company shall give notice of such
requested registration to all Investor Holders and shall use its reasonable best
efforts to cause the Registrable Securities specified in such Registration
Request to be registered as soon as reasonably practicable so as to permit the
sale thereof, and in connection therewith, shall prepare and file a registration
statement (on any appropriate form selected by the Company) with the SEC under
the Securities Act to effect such registration. Such registration statement
shall contain such required information pursuant to the rules and regulations
promulgated under the Securities Act and such additional information as deemed
necessary by the managing underwriter or if there is no managing underwriter, as
deemed necessary by mutual agreement between the Investor Holders requesting
registration and the Company. Such Registration Request shall (i) specify the
number of shares intended to be offered and sold; (ii) express the present
intention of the requesting Investor Holders to offer or cause the offering of
such shares for distribution; (iii) describe the nature or method of the
proposed offer and sale thereof; and (iv) contain the undertaking of the
requesting Investor Holders to provide all such information and materials and
take all such action as may be required in order to permit the Company to comply
with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement.
3.2 Underwritten Public Offering. If requested in the Registration
----------------------------
Request, and provided that the underwriter or underwriters are reasonably
satisfactory to the Company, the Company (together with all officers, directors
and other third parties proposing to distribute their securities
-4-
<PAGE>
through such underwriting pursuant to Section 3.3 hereof) shall enter into an
underwriting agreement with an investment banking firm or firms containing
representations, warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with respect to secondary
distributions. The Company shall not cause the registration under the Securities
Act of any other shares of its Common Stock to become effective (other than
registration of an employee stock plan, or registration in connection with any
Rule 145 or similar transaction) during the effectiveness of a registration
requested hereunder for an underwritten public offering if, in the judgment of
the underwriter or underwriters, marketing factors would adversely affect the
price of the Registrable Securities subject to such underwritten registration.
3.3 Inclusion of Additional Shares. The Company may include in a
------------------------------
registration pursuant to this Section 3 securities for its own account and by
other third parties (including officers and employees of the Company), in
amounts as determined by the Company's Board of Directors (the "Additional
Securities"). In the event that such Additional Securities are included in a
registration pursuant to this Section 3, and if the underwriter of such
registration advises the stockholders or the Company registering shares of
Common Stock in writing that marketing factors require a limitation on the
number of shares to be underwritten, then the Registrable Securities of the
Investor Holders, the securities of the Company, the securities held by officers
or directors of the Company and the securities held by other third parties shall
be excluded from the underwriting by reason of the underwriter's marketing
limitation to the extent so required by such limitation as follows: (a) first,
the securities held by officers or directors of the Company or other third
parties shall be excluded in a manner such that the number of any shares that
may be included by such holders are allocated in proportion, as nearly as
practicable to the amounts of such securities proposed to be offered by such
persons in such registration, (b) if after all securities held by officers or
directors of the Company or other third parties have been excluded and
additional shares shall be excluded, securities of the Company shall be
excluded, and (c) last, if after all securities of the Company or held by
officers or directors of the Company or other third parties have been excluded
and additional shares shall be excluded, Registrable Securities of the Investor
Holders shall be excluded in a manner such that the number of any Registrable
Securities that may be included by such Investor Holders are allocated in
proportion, as nearly as practicable to the amounts of Registrable Securities
held by such Investor Holders. No securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any officer, director or other stockholder (including Investor
Holders) who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Investor
Holders requesting registration. In the event that the Company has
substantially prepared and has filed, or is in a position to file, a
registration statement pursuant to this Section 3, and such registration does
not become effective by reason of the refusal of the Investor Holders to proceed
(other than refusal to proceed based upon the existence in the registration
statement, or the prospectus contained therein, of an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading), then a demand
registration shall be deemed to have been
-5-
<PAGE>
effected by the Company at the request of the Investor Holders. In the event
that 50% or more of the Registrable Securities proposed to be offered by any
Investor Holder in a registration pursuant to this Section 3 are excluded from
such proposed registration as a result of the underwriter's marketing
limitation, then the Investor Holders shall be entitled to an additional demand
registration pursuant to the terms of this Section 3.
3.4 Limitations. Notwithstanding the foregoing, if at the time of any
------------
request to register Registrable Securities pursuant to this Section 3, the
Company is engaged, or has formal plans to engage within ninety (90) days of the
time of the request, in a registered public offering or any other activity that,
in the good faith determination of the Board of Directors of the Company, would
be adversely affected by the requested registration to the material detriment of
the Company, then the Company may, at its option, direct that such request be
delayed for a period not in excess of ninety (90) days from the effective date
of such offering, or the date of commencement of such other material activity,
as the case may be. Such rights to delay a request may not be exercised more
than once in any twelve month period.
3.5 Termination of Demand Rights. The rights of any Investor Holder to
----------------------------
request a registration pursuant to the terms of this Section 3 shall terminate
upon the earlier of (i) such time as such Holder could sell all of the
Registrable Securities held by such Holder in any one three month period under
the terms of Rule 144 under the Securities Act; provided, that such Investor
Holder holds fewer than 1% of the Company's outstanding capital stock; and
provided further, that the Company is subject to the reporting requirements of
the Securities Exchange Act of 1934l; and (ii) three years following the closing
of the Company's IPO.
Section 4
Form S-3 Registration
---------------------
4.1 Registrations on Form S-3. Any Investor Holders shall be entitled to
-------------------------
request (an "S-3 Registration Request") an unlimited number of registrations of
Registrable Securities then owned by such requesting Investor Holders on a Form
S-3 registration statement under the Securities Act (an "S-3 Registration").
The S-3 Registration Request must be made in writing and the S-3 Registration
Request shall (i) specify the number of shares intended to be offered and sold;
(ii) express the present intention of the requesting Investor Holders to offer
or cause the offering of such shares for distribution; (iii) describe the nature
or method of the proposed offer and sale thereof and (iv) contain the
undertaking of the requesting Investor Holders to provide all such information
and materials and take all such action as may be required in order to permit the
Company to comply with all applicable requirements of the SEC and to obtain any
desired acceleration of the effective date of such registration statement. The
Company shall, as soon as practicable, file an S-3 Registration and proceed to
obtain all such qualifications and compliance as may be so requested and
-6-
<PAGE>
as would permit or facilitate the sale and distribution of all or such portion
of the requesting Investor Holders' Registrable Securities as are specified in
the S-3 Registration Request, within 30 days after receipt of such written
notice by the Company; provided, however, that the Company shall not be
-------- -------
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 4 if (i) Form S-3 is not available for such offering by the
requesting Investor Holders; or (ii) the Company has, within the twelve (12)
month period preceding the date of such request, already effected two
registrations on Form S-3 for any Investor Holders pursuant to this Section 4.
4.2 Termination of S-3 Rights. The rights of any Investor Holder to
-------------------------
request a registration pursuant to the terms of this Section 4 shall terminate
upon the earlier of (such time as such Holder could sell all of the Registrable
Securities held by such Holder in any one three month period under the terms of
Rule 144 under the Securities Act; provided, that such Investor Holder holds
fewer than 1% of the Company's outstanding capital stock; and provided further,
that the Company is subject to the reporting requirements of the Securities
Exchange Act of 1934; and (ii) three years following the closing of the
Company's IPO.
Section 5
Obligations Of Company
----------------------
Whenever the Company is required by the provisions of this Agreement to use
its reasonable best efforts to effect the registration of the Registrable
Securities, the Company shall (i) prepare and, as soon as possible, file with
the SEC a registration statement with respect to the Registrable Securities, and
use its reasonable best efforts to cause such registration statement to become
effective and to remain effective until the earlier of the sale of the
Registrable Securities so registered or ninety (90) days subsequent to the
effective date of such registration; (ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to make and to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
proposed to be registered in such registration statement until the earlier of
the sale of the Registrable Securities so registered or ninety (90) days
subsequent to the effective date of such registration statement, (iii) furnish
to any Holder such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus), in conformity with the
requirements of the Securities Act, as such Holder may reasonably request in
order to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while the Company shall be required under the
provisions hereof to cause the registration statement to remain current; (iv)
use its commercially reasonable efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such states as any Holder shall reasonably request, maintain any
such registration or qualification current until the earlier of the sale of the
Registrable Securities so registered or ninety (90) days subsequent to the
effective date of the
-7-
<PAGE>
registration statement, and take any and all other actions either necessary or
reasonably advisable to enable the Holders to consummate the public sale or
other disposition of the Registrable Securities in jurisdictions where such
Holders desire to effect such sales or other disposition; and (v) take all such
other actions either necessary or reasonably desirable to permit the Registrable
Securities held by a Holder to be registered and disposed of in accordance with
the method of disposition described herein. Notwithstanding the foregoing, the
Company shall not be required to register or to qualify an offering of the
Registrable Securities under the laws of a state if as a condition to so doing
the Company is required to qualify to do business or to file a general consent
to service of process in any such state or jurisdiction, unless the Company is
already subject to service in such jurisdiction.
Section 6
Expenses of Registration
------------------------
The Company shall pay all of the reasonable out-of-pocket expenses incurred
in connection with any registration statements that are initiated pursuant to
this Agreement, including, without limitation, all SEC and blue sky registration
and filing fees, printing expenses, transfer agent and registrar fees, the fees
and disbursements of the Company's legal counsel and independent accountants.
Any underwriting discounts, fees and disbursements of counsel to the Holders,
selling commissions and stock transfer taxes applicable to the Registrable
Securities registered on behalf of any Holders shall be borne by the Holders of
the Registrable Securities included in such registration.
Section 7
Indemnification
---------------
7.1 The Company. The Company will indemnify the Holders and each person
-----------
controlling any Holders within the meaning of Section 15 of the Securities Act,
and each underwriter if any, of the Company's securities, with respect to any
registration, qualification or compliance which has been effected pursuant to
this Agreement, 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, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse the Holders and each person controlling any Holders, and
each underwriter, if any, for any legal and any other
-8-
<PAGE>
expenses reasonably 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 such
Holder or controlling person or underwriter seeking indemnification.
7.2 Holders. 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 (the "Indemnifying Holder"),
indemnify the Company, each of its directors and officers and each underwriter,
if any, of the Company's securities covered by such registration statement and
each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any 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 such Holder of any rule or
regulation promulgated under the Securities Act applicable to such Holder in
connection with any such registration, qualification or compliance, and will
reimburse the Company, such directors, officers or control persons or
underwriters for any legal or any other expenses reasonably 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 Indemnifying Holder, provided that in no event
shall any indemnity under this Section 7.2 exceed the gross proceeds of the
offering received by such Indemnifying Holder.
7.3 Defense of Claims. Each party entitled to indemnification under this
-----------------
Section 7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of 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; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of the Indemnified Party by counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, and provided further that the
-------- -------
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 7 unless
the failure to give such notice is
-9-
<PAGE>
materially prejudicial to an Indemnifying Party's ability to defend such action.
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. No
Indemnifying Party shall be required to indemnify any Indemnified Party with
respect to any settlement entered into without such Indemnifying Party's prior
consent.
Section 8
Rule 144 Reporting
------------------
With a view to making available the benefits of certain rules and
regulations of the SEC which may at any time permit the sale of the Registrable
Securities to the public without registration, 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 from
and after ninety (90) days following the effective date of the IPO;
(b) File with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at any
time after it has become subject to such reporting requirements; and
(c) So long as an Investor Holder owns any Registrable Securities, furnish
to such Investor 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 from and after ninety (90) days following 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 Exchange
Act (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 such other reports and documents
so filed as an Investor Holder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Investor Holder to sell any such
securities without registration.
Section 9
Holdback Agreement
------------------
In connection with the Company's Initial Public Offering, if requested by
the Company and the managing underwriter of such Initial Public Offering, each
Holder of Registrable Securities
-10-
<PAGE>
agrees not to effect any public sale or distribution of Registrable Securities
(other than as part of such Initial Public Offering) without the prior written
consent of the Company or such managing underwriter for such period of time as
may be requested by the Company and such managing underwriter (not to exceed the
period beginning seven days prior to the effective date of the registration
statement for the Initial Public Offering and ending 180 days after the
effective date of such registration statement), provided that all officers and
directors and holders of at least 10% of the outstanding shares (calculated on
as-converted-to Common Stock basis) of the Company enter into similar
agreements.
Section 10
Limitations on Subsequent Registration Rights
---------------------------------------------
From and after the date of this Agreement, the Company shall not, without
the prior written consent of the Investor Holder(s) of at least a majority of
the outstanding Registrable Securities, enter into any agreement with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are more favorable
than the registration rights granted to any Holders hereunder or to require the
Company to effect a registration earlier than the date on which the Holders can
first require a registration under Section 3.1.
Section 11
Information Rights
------------------
11.1 Delivery of Financial Statements. The Company shall deliver to each
--------------------------------
Holder that holds shares of Series A Preferred, Series B Preferred or Series C
Preferred:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company as of the end of such year, and a
schedule as to the sources and applications of funds for such year, such year-
end financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles, and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) within thirty (30) days after the end of each calendar quarter
and within thirty (30) days after the end of each month, an unaudited income
statement and schedule as to the sources and applications of funds and balance
sheet and comparison to budget for and as of the end of such quarter or month,
respectively, in reasonable detail;
-11-
<PAGE>
(c) as soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget and business plan for the next 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; and
(d) such other information relating to the financial conditions,
business, prospects or corporate affairs of the Company as each such Holder; or
any assignee of such Holder may from time to time reasonably request; provided,
--------
however, that the Company shall not be obligated to provide information which it
- -------
deems in good faith to be proprietary or which the requesting Holder shall not
agree if so requested by the Company, in writing, to retain in confidence
(except to the extent disclosure is required by law or court order).
11.2 Inspection. The Company shall permit each Investor Holder, at such
----------
Investor Holder'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 Holder; provided, however, that the Company shall not
-------- -------
be obligated pursuant to this Section 11.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
11.3 Termination of Information and Inspection Covenants. The covenants
---------------------------------------------------
set forth in Sections 11.1 and 11.2 shall terminate as to each Holder and be of
no further force or effect immediately upon the consummation of a sale by the
Company of its Common Stock in a bona fide, firm commitment underwriting
pursuant to a registration statement under the Securities Act at an aggregate
offering price of not less than $20,000,000.
Section 12
Covenants of The Company
------------------------
12.1 Right to Maintain Percentage Ownership. The Company hereby
--------------------------------------
grants to each of Menlo Ventures VII, L.P., Menlo Entrepreneurs Fund VII, L.P.
and HarbourVest Partners V-Direct Fund, L.P. (collectively, the "Venture
Holders") the right to purchase a number of shares of any New Securities (as
such term is defined below) that the Company may, from time to time after the
date of this Agreement, sell and issue, equal to the difference between (i) the
total number of shares of the Company's capital stock that a Venture Holder
would need to own immediately following the issuance of New Securities to
maintain such Venture Holder's Percentage Interest (as defined below) and (ii)
the number of shares of the Company's capital stock held by the Venture Holder
immediately prior to the issuance of any New Securities. By way of example, if,
on a fully diluted basis and prior to the issuance of 500,000 shares of New
Securities, there were 1,000,000
-12-
<PAGE>
shares of the Company's capital stock issued and outstanding, of which a Venture
Holder held 100,000 shares, then such Venture Holder would have to purchase
50,000 shares of New Securities to maintain its Percentage Interest.
(i) "New Securities" shall mean any Common Stock or Preferred
Stock of the Company whether or not authorized on the date hereof, or rights,
options, or warrants to purchase such Common Stock or Preferred Stock, or
securities of any type whatsoever that are, or may become, convertible into said
Common Stock or Preferred Stock; provided, however, that "New Securities" does
not include the following:
(a) up to 2,204,155 shares (as appropriately adjusted
for stock splits and the like with regard to such shares) of Common Stock plus
such additional number of shares as the Board of Directors may approve
(including the approval of the Series A Preferred Director and the Series B
Preferred Director), issued or issuable to directors and employees of, and
consultants to, the corporation pursuant to an option plan, purchase plan or
other employee or consultant incentive plan, pursuant to stock grants or any
other plan or arrangement approved by the Board of Directors;
(b) shares of Common Stock issuable upon conversion of
the Company's Preferred Stock or upon conversion or exchange of any other
security as to which any Venture Holder had rights to acquire under this Section
12.1;
(c) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns not less than fifty-one percent (51%) of the voting power of such other
corporation following such reorganization;
(d) shares of Common Stock or Preferred Stock issued
in connection with any stock split, stock dividend, or recapitalization by the
Company;
(e) shares of Common Stock issued to the public by the
Company in a public offering registered under the Securities Act.
(f) securities of the Company that are purchased by
any Venture Holder pursuant to the rights provided in this Section 12.1;
(g) securities of the Company issued to any bank,
equipment lessor or consultant of the Company with respect to which the Board of
Directors has made a good faith determination that the primary purpose of such
transaction is the advancement of the business interests of the Company as
opposed to the raising of funds.
-13-
<PAGE>
(ii) "Percentage Interest" shall mean, immediately prior to the
issuance of any New Securities, a fraction, the numerator of which is (X) the
number of shares of the Company's Common Stock (including shares of Preferred
Stock and other securities convertible into or exchangeable for Common Stock on
an as-if-converted to Common Stock basis) then owned by a Venture Holder and the
denominator of which is (Y) the total number of shares of the Company's Common
Stock (including shares of Preferred Stock and other securities convertible into
or exchangeable for Common Stock on an as-if-converted to Common Stock basis)
then issued and outstanding.
(iii) In the event that the Company issues New Securities, it
shall give each Venture Holder written notice of such issuance, describing the
type of New Securities, the price, and the general terms upon which the Company
proposes to issue the same (the "COMPANY'S NOTICE"). Each Venture Holder shall
have twenty (20) days from the date such notice is given to agree to purchase a
number of shares of such New Securities to maintain its Percentage Interest (or
such lesser amount) at the price and upon the general terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
(iv) This right to maintain percentage ownership granted under
this Section 12.1 shall expire immediately prior to the issuance by the Company
of Common Stock in a firmly underwritten public offering at an aggregate
offering price of not less than $20,000,000 and an offering price per share of
at least $8.68 (as appropriately adjusted for stock splits and the like with
regard to such shares).
12.2 Directors and Officers Insurance. The Company shall use its
--------------------------------
commercially reasonable efforts to promptly obtain and maintain for so long as
any Venture Holder or any representative thereof shall serve on the Board of
Directors of the Company, directors' and officers' liability insurance policies
in favor of the Board of Directors of the Company in an amount not less than
$1,000,000.
12.3 Key Man Life Insurance. The Company shall use its commercially
----------------------
reasonable efforts to promptly obtain and maintain for so long as Paul D. Fiore
shall remain an employee of the Company, a key man life insurance policy in
favor of the Company in an amount not less than $1,000,000.
12.4 Proprietary Information Agreements. The Company will use its
----------------------------------
commercially reasonable efforts to have each current and former employee and
officer of the Company execute an agreement with the Company regarding
confidentiality and proprietary information substantially in the form attached
to the Purchase Agreement as Exhibit H and will thereafter use its commercially
---------
reasonable efforts to prevent any violations thereof.
-14-
<PAGE>
Section 13
Miscellaneous
-------------
13.1 Assignment. The rights to cause the Company to register Registrable
----------
Securities granted to the Investor Holders by the Company under this Agreement
may be transferred or assigned (but only with all related obligations) by the
Investor Holders to an Affiliate of any Investor Holder or a transferee which
acquires at least 10% of the Registrable Securities held by such Investor Holder
at any time; provided (i) that the Company is given written notice at the time
--------
of or within a reasonable time after said transfer or assignment, stating the
name and address of the transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned, and, (ii) provided further, that the transferee or assignee of such
-------- -------
rights assumes in writing the obligations of such Holder under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Any transferee or assignee shall thereafter be treated as an
Investor Holder, subject to the limitations herein. Until the Company receives
actual notice of any transfer or assignment, it shall be entitled to rely on the
then existing list of Holders and the failure to notify the Company of any
transfer or assignment shall not affect the validity of a notice properly given
by the Company to the Holders pursuant to lists maintained by the Company.
13.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware as applied to agreements entered into
solely between residents of, and to be performed entirely within, such state.
13.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.4 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
13.5 Notices.
-------
(a) All notices, requests, demands and other communications under this
Agreement or in connection herewith shall be given to or made upon the Holder at
the addresses set forth in the Company's records with a copy to Debevoise &
Plimpton, 875 Third Avenue, New York, New York 10022, attention: David Schwartz,
and, if to the Company, to: Digital Insight Corporation, 28025 Mureau Road,
Calabasas, California 91302, attention: Chief Financial Officer with a copy to
Wilson Sonsini Goodrich & Rosati, P.C. at 650 Page Mill Road, Palo Alto,
California 94304, attention: Steven E. Bochner.
-15-
<PAGE>
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
and shall be sent by airmail, return receipt requested, or by facsimile with
confirmation of receipt, and shall be deemed to be given or made when receipt is
so confirmed.
(c) Any party may, by written notice to the other, alter its address
or respondent, and such notice shall be considered to have been given three (3)
days after the airmailing or faxing thereof.
13.6 Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
13.7 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
with the written consent of the Company and the holders of at least two-thirds
in interest of the Holders. Any amendment or waiver effected in accordance with
this Section 12.7 shall be binding upon the Holders and each transferee of the
Registrable Securities, each future holder of all such Registrable Securities,
and the Company.
13.8 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
13.9 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an 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. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
13.10 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof and any other written or oral agreements between the
parties hereto are expressly canceled.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the
day and year first above written.
COMPANY: HOLDERS:
Digital Insight Corporation Menlo Ventures VII, L.P.
By: /s/ John Dorman By: MV Management VII, L.L.C.
----------------------- Its General Partner
John Dorman
Chief Executive Officer
By: /s/ John Jarve
-------------------------------
John Jarve
Its Managing Member
Menlo Entrepreneurs Fund VII, L.P.
By: MV Management VII, L.L.C.
Its General Partner
By: /s/ John Jarve
-------------------------------
John Jarve
Its Managing Member
HarbourVest Partners V-
Direct Fund, L.P.
By: HVP V-Direct Associates, L.L.C.
Its General Partner
By: HarbourVest Partners, L.L.C.
Its Managing Member
By: /s/ Ofer Nemirovsky
-------------------------------
Name: Ofer Nemirovsky
-------------------------------
Title: Managing Director
------------------------------
[Signature Page to Second Amended and Restated Rights Agreement]
<PAGE>
/s/ Ole Eichhorn
_______________________________ XP Systems Corporation
Ole Eichhorn
By: /s/ Edward Harris
_______________________________________
Name: Edward Harris
____________________________________
Title: President/CEO
____________________________________
/s/ Paul Fiore /s/ Dan Jacoby
________________________________ __________________________________________
Paul Fiore Dan Jacoby
/s/ Nasser J. Kazeminy /s/ Edward Harris
________________________________ __________________________________________
Nasser J. Kazeminy Edward Harris
/s/ Robert T. Newkirk /s/ Gary Mason
________________________________ __________________________________________
Robert Newkirk Gary Mason
The Nasser J. Kazeminy The Yvonne P. Kazeminy-Mofrad Irrevocable
Irrevocable Trust Trust
By: /s/ Nasser J. Kazeminy By: /s/ Yvonne P. Kazeminy-Mofrad
_____________________________ _______________________________________
Name: Nasser J. Kazeminy Name: Yvonne P. Kazeminy-Mofrad
___________________________ _____________________________________
Title:__________________________ Title:____________________________________
/s/ Kevin Savage /s/ Robert Lucas
________________________________ __________________________________________
Kevin Savage Robert Lucas
/s/ John Dorman /s/ Steve Zarate
________________________________ __________________________________________
John Dorman Steve Zarate
[Signature Page to Second Amended and Restated Rights Agreement]
<PAGE>
/s/ Steve Reich /s/ Kevin McDonnell
________________________________ __________________________________________
Steve Reich Kevin McDonnell
<PAGE>
EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Digital Insight Corporation, a Delaware corporation
Number of Shares: 28,819
Class of Stock: Series B Preferred
Initial Exercise Price: $3.47 per share
Issue Date: February 18, 1999
Expiration Date: February 18, 2006
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
--------
1.1 (a) Method of Exercise. Holder may exercise this Warrant by
------------------
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
(b) Vesting. The Right to purchase the Shares hereunder shall
-------
vest and become exercisable only as follows: (i) as to 23,055 of the Shares upon
the Issue Date and (ii) as to 5,764 of the Shares upon the funding by Holder of
an amount in excess of $2,000,000 pursuant to that certain Master Lease
Agreement dated February __, 1999 between Holder and the Company.
1.2 Conversion Right. In lieu of exercising this Warrant as specified
----------------
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3 Intentionally Omitted
---------------------
1.4 Fair Market Value. If the Shares are traded in a public market,
-----------------
the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
<PAGE>
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1. "Acquisition". For the purpose of this Warrant,
-----------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any Acquisition
---------------------
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Purchase Right. Notwithstanding the foregoing, at the
--------------
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Certificate of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for
2
<PAGE>
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
----------------------------------
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth in the Company's Certificate of Incorporation in the event of Diluting
Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its
-------------
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3
<PAGE>
(c) The capitalization table attached hereto is true and correct.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
------------------------
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company
shall give Holder (1) at least 20 days prior written notice of the date on
which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the
holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same notice as
is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant
------------------
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements) then within forty-five (45) days after the end of each of the
first three quarters of each fiscal year, the Company's quarterly, unaudited
financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The
-----------------------------------------------------
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth in the Company's Amended and Restated Rights Agreement, dated
February 27, 1998, which the Company shall promptly amend to add Holder as a
party.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole
--------------------------
or in part, at any time and from time to time on or before the Expiration Date
set forth above. The Company shall give Holder written notice of Holder's right
to exercise this Warrant in the form attached as Appendix 2 not more than 90
days and not less than 30 days before the Expiration Date. If the notice is not
so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the Securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4
<PAGE>
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c). Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares
or The Silicon Valley Bank Foundation, or to any affiliate of Holder, or, to any
other transferee by giving the Company notice of the portion of the Warrant
being transferred setting forth the name, address and taxpayer identification
number of the transferee and surrendering this Warrant to the Company for
reissuance to the transferee(s) (and Holder if applicable). Unless the Company
is filing financial information with the SEC pursuant to the Securities Exchange
Act of 1934, the Company shall have the right to refuse to transfer any portion
of this Warrant to any person who directly completes with the Company.
4.5 Notices. All notices and other communications from the Company to
-------
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time. All notices to be provided under this Warrant shall be send to the
following address:
Silicon Valley Bank
Attn: Treasury Department HG 250
3003 Tasman Drive
Santa Clara, CA 95054
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorney's fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
5
<PAGE>
"COMPANY"
DIGITAL INSIGHT CORPORATION
By: /s/ John Dorman
Name: John Dorman
Title: President
/s/ Ken Mattice
Name: KEN MATTICE
(Print) CORPORATE CONTROLLER
Title: Chief Financial Officer,
Secretary,
Assistant Treasurer or Assistant
Secretary
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _______ shares of the Series
B Preferred Stock of sample pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _____________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
__________________________________________
(Name)
_____________________________________
_____________________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
____________________________________
(Signature)
________________________
(Date)
<PAGE>
APPENDIX 2
Notice that Warrant Is About to Expire
--------------------------------------
______________, ____
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear: _____________________
This is to advise you that the Warrant issued to you described below will
expire on ___________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
_____________________________________
(Name of Issuer)
By:
_____________________________________
Its:
_____________________________________
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
(For Preferred Stock Warrants With Existing Anti-Dilution Protection)
-------------------------------------------------------------------
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Certificate of Incorporation which apply to
the Series B Preferred Stock with respect to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE>
Exhibit 10.1
DIGITAL INSIGHT CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of June 21,
1999 by and between Digital Insight Corporation, a Delaware corporation (the
"Company"), and the indemnitee listed on the signature page hereto
("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited;
WHEREAS, the Company and Indemnitee desire to continue to have in place the
additional protection provided by an indemnification agreement and to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law; and
WHEREAS, in view of the considerations set forth above, the Company and
Indemnitee desire to amend and restate the Prior Agreement as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Certain Definitions.
-------------------
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity 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, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
<PAGE>
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors 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 thereof,
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
which 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 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 of (in one transaction or a series of related
transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(c) References to the "Company" shall include, in addition to Digital
Insight Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which Digital Insight
Corporation (or any of its wholly owned subsidiaries) is a party which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(d) "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
(e) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to
-2-
<PAGE>
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld), actually and
reasonably incurred, of any Claim and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless otherwise
indicated.
(k) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
---------------
(a) Indemnification of Expenses. Subject to the provisions of Section
---------------------------
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be
-3-
<PAGE>
made a party to or witness or other participant in, any Claim (whether by reason
of or arising in part out of a Covered Event), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the
-------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid in indemnifying Indemnitee; provided, however, that if
-------- -------
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee is entitled to
be indemnified hereunder under applicable law, any determination made by any
Reviewing Party that Indemnitee is not entitled to be indemnified hereunder
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expenses theretofore paid in indemnifying
Indemnitee until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect.
--------------------------------------------------------------
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not
-----------------------------------------------
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages
-4-
<PAGE>
arising out of or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding any other provision of this Agreement, the Company shall not be
required to pay Expenses of more than one Independent Legal Counsel in
connection with all matters concerning a single Indemnitee, and such Independent
Legal Counsel shall be the Independent Legal Counsel for any or all other
Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee
shall provide a written statement setting forth in detail a reasonable objection
to such Independent Legal Counsel representing other Indemnitees.
(e) Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
----------------
(a) Obligation to Make Expense Advances. Upon receipt of a written
-----------------------------------
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefor by the Company, the Company shall make Expense Advances to Indemnitee.
(b) Form of Undertaking. Any written undertaking by the Indemnitee to
-------------------
repay any Expense Advances hereunder shall be unsecured and no interest shall be
charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree
--------------------------------------------
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
---------------------------------------------------
(a) Timing of Payments. All payments of Expenses (including without
------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against
-5-
<PAGE>
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
--------------------------------
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or 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 this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement or applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend
-6-
<PAGE>
such Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to
-----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense
--------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. 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 actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
----------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
-7-
<PAGE>
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most
favorablyinsured of the Company's directors, if Indemnitee is a director; or of
the Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement,
----------
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
----------------------------
Expenses resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; provided, however, that notwithstanding any limitation set forth in this
-------- -------
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense
------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification or insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
-8-
<PAGE>
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute; provided, however, that
-------- -------
notwithstanding any limitation set forth in this Section 10(d) regarding the
Company's obligation to provide indemnification, Indemnitee shall be entitled
under Section 3 to receive Expense Advances hereunder with respect to any such
Claim unless and until a court having jurisdiction over the Claim shall have
made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
--------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business 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. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
---------------------------------------------------------------------
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to such action
(including without limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of such action a
court having jurisdiction over such action makes a final judicial determination
(as to which all rights of appeal therefrom have been exhausted or lapsed) that
each of the material assertions made by Indemnitee as a basis for such action
was not made in good faith or was frivolous; provided, however, that until such
final judicial determination is made, Indemnitee shall be entitled under Section
3 to receive payment of Expense Advances hereunder with respect to such action.
In the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such
-9-
<PAGE>
final judicial determination is made, Indemnitee shall be entitled under Section
3 to receive payment of Expense Advances hereunder with respect to such action.
14. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and 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, illegal or
unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities,
-------------
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. 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 documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations,
-10-
<PAGE>
commitments, understandings and agreements relating to the subject matter hereof
between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
DIGITAL INSIGHT CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
Address: Digital Insight Corporation
26025 Mureau Road
Calabasas, California 91302
AGREED TO AND ACCEPTED
________________________________
(Signature)
--------------------------------
(Print Name)
-11-
<PAGE>
EXHIBIT 10.2
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
John Dorman
___________
___________
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of Grant October 13, 1998
----------------
Vesting Commencement Date October 13, 1998
----------------
Exercise Price per Share $1.00
----
Total Number of Shares Granted 575,000
-------
Total Exercise Price $575,000
--------
Type of Option: X Incentive Stock Option
---
Nonstatutory Stock Option
---
Term/Expiration Date: October 13, 2008
----------------
Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting
<PAGE>
Commencement Date, and 1/48 of the Shares subject to the Option shall vest at
the end of each calendar month thereafter, subject in each case to Optionee's
continuing to be a Service Provider on such dates; provided, however, that, 50%
-----------------
of the then unvested portion of the Option shall immediately vest and become
exercisable in full in the event of a Change of Control of the Company, and the
Optionee shall have the right to exercise such additional vested portion of the
Option at such time. For purposes hereof, a "Change of Control" shall include
any of the following shareholder-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) a transaction the principal purpose of which is
to change the state of the Company's incorporation, or (B) a transaction in
which the Company's shareholders immediately prior to such merger or
consolidation hold (by virtue of securities received in exchange for their
shares in the Company) securities of the surviving entity representing more than
fifty percent (50%) of the total voting power of such entity immediately after
such transaction;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company unless the Company's shareholders immediately
prior to such sale, transfer or other disposition hold (by virtue of securities
received in exchange for their shares in the Company) securities of the
purchaser or other transferee representing more than fifty percent (50%) of the
total voting power of such entity immediately after such transaction; or
(iii) any reverse merger in which the Company is the surviving entity
but in which the Company's shareholders immediately prior to such merger do not
hold (by virtue of their shares in the Company held immediately prior to such
transaction) securities of the Company representing more than fifty percent
(50%) of the total voting power of the Company immediately after such
transaction. Notwithstanding the foregoing, in the event the acceleration of
the vesting of this Option upon a Change in Control would prevent an acquisition
from being treated as a "pooling-of-interests" for financial accounting purposes
by the surviving entity, and such treatment is a condition to the acquisition,
the foregoing benefits shall be equitably adjusted to the extent necessary to
effectuate such pooling-of-interests treatment.
Termination Period:
------------------
This Option shall be exercisable for three months after Optionee ceases to
be a Service Provider. Upon Optionee's death or disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
<PAGE>
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by
------------------
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
<PAGE>
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal tax consequences of exercise of this
Option and disposition
<PAGE>
of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
---------------
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are
---------------------
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
<PAGE>
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: DIGITAL INSIGHT CORPORATION
/s/ John Dorman /s/ Paul Fiore
- --------------------------- ------------------------------
Signature By
John Dorman Executive Vice President
- --------------------------- ------------------------------
Print Name Title
- ---------------------------
Residence Address
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91032
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, ____, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Digital Insight
Corporation (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated ________, 1998 (the "Option
Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the
<PAGE>
Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
<PAGE>
(g) Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company 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.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company
-------
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
---------------------
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
<PAGE>
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: DIGITAL INSIGHT CORPORATION
- -------------------------------- -----------------------------------
Signature By
- -------------------------------- -----------------------------------
Print Name Its
Address: Address:
- ------- -------
- -------------------------------- 26025 Mureau Road
Calabasas, CA 91302
- --------------------------------
-----------------------------------
Date Received
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: DIGITAL INSIGHT CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee 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 Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
-----------------------------------------------
Date:
-----------------------------
<PAGE>
EXHIBIT 10.3
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Kevin McDonnell
___________________
___________________
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of Grant March 30, 1999
--------------
Vesting Commencement Date March 15, 1999
--------------
Exercise Price per Share $2.25
-----
Total Number of Shares Granted 115,000
-------
Total Exercise Price $258,750
--------
Type of Option: X Incentive Stock Option
--- (ISO to the maximum extent
permissible under law.)
Nonstatutory Stock Option
---
Term/Expiration Date: March 30, 2009
--------------
Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
<PAGE>
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest at the end of each calendar month thereafter, subject in each case to
Optionee's continuing to be a Service Provider on such dates; provided, however,
-----------------
that, 50% of the then unvested portion of the Option shall immediately vest and
become exercisable in full in the event of a Change of Control of the Company,
and the Optionee shall have the right to exercise such additional vested portion
of the Option at such time. For purposes hereof, a "Change of Control" shall
include any of the following shareholder-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) a transaction the principal purpose of
which is to change the state of the Company's incorporation, or (B) a
transaction in which the Company's shareholders immediately prior to such merger
or consolidation hold (by virtue of securities received in exchange for their
shares in the Company) securities of the surviving entity representing more than
fifty percent (50%) of the total voting power of such entity immediately after
such transaction;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company unless the Company's shareholders
immediately prior to such sale, transfer or other disposition hold (by virtue of
securities received in exchange for their shares in the Company) securities of
the purchaser or other transferee representing more than fifty percent (50%) of
the total voting power of such entity immediately after such transaction; or
(iii) any reverse merger in which the Company is the
surviving entity but in which the Company's shareholders immediately prior to
such merger do not hold (by virtue of their shares in the Company held
immediately prior to such transaction) securities of the Company representing
more than fifty percent (50%) of the total voting power of the Company
immediately after such transaction. Notwithstanding the foregoing, in the event
the acceleration of the vesting of this Option upon a Change in Control would
prevent an acquisition from being treated as a "pooling-of-interests" for
financial accounting purposes by the surviving entity, and such treatment is a
condition to the acquisition, the foregoing benefits shall be equitably adjusted
to the extent necessary to effectuate such pooling-of-interests treatment.
Termination Period:
------------------
This Option shall be exercisable for three months after Optionee ceases to
be a Service Provider. Upon Optionee's death or disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
<PAGE>
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by
------------------
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
<PAGE>
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this
<PAGE>
Option of some of the federal tax consequences of exercise of this Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are
---------------------
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
<PAGE>
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: DIGITAL INSIGHT CORPORATION
/s/ Kevin McDonnell /s/ John Dorman
- -------------------------- ------------------------------------
Signature By
Kevin McDonnell President and Chief Executive Officer
- -------------------------- -------------------------------------
Print Name Title
- --------------------------
Residence Address
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91032
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, ____, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Digital Insight
Corporation (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated ________, 1998 (the "Option
Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the
<PAGE>
Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
<PAGE>
(g) Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company 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.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
<PAGE>
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: DIGITAL INSIGHT CORPORATION
- --------------------------------- ---------------------------
Signature By
- --------------------------------- ---------------------------
Print Name Its
Address: Address:
- ------- -------
- --------------------------------- 26025 Mureau Road
Calabasas, CA 91302
- ---------------------------------
---------------------------
Date Received
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: DIGITAL INSIGHT CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee 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 Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
_____________________________________
Date:_________________________
<PAGE>
EXHIBIT 10.4
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Stephen P. Zarate
- -------------------
- -------------------
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of Grant March 30, 1999
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Vesting Commencement Date March 1, 1999
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Exercise Price per Share $2.25
----
Total Number of Shares Granted 286,285
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Total Exercise Price $644,141.25
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Type of Option: X Incentive Stock Option
---
(ISO to the maximum extent
permissible under law.)
Nonstatutory Stock Option
---
Term/Expiration Date: March 30, 2009
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Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
<PAGE>
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest at the end of each calendar month thereafter, subject in each case to
Optionee's continuing to be a Service Provider on such dates; provided, however,
-----------------
that, 50% of the then unvested portion of the Option shall immediately vest and
become exercisable in full in the event of a Change of Control of the Company,
and the Optionee shall have the right to exercise such additional vested portion
of the Option at such time. For purposes hereof, a "Change of Control" shall
include any of the following shareholder-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) a transaction the principal purpose of which is
to change the state of the Company's incorporation, or (B) a transaction in
which the Company's shareholders immediately prior to such merger or
consolidation hold (by virtue of securities received in exchange for their
shares in the Company) securities of the surviving entity representing more than
fifty percent (50%) of the total voting power of such entity immediately after
such transaction;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company unless the Company's shareholders immediately
prior to such sale, transfer or other disposition hold (by virtue of securities
received in exchange for their shares in the Company) securities of the
purchaser or other transferee representing more than fifty percent (50%) of the
total voting power of such entity immediately after such transaction; or
(iii) any reverse merger in which the Company is the surviving entity
but in which the Company's shareholders immediately prior to such merger do not
hold (by virtue of their shares in the Company held immediately prior to such
transaction) securities of the Company representing more than fifty percent
(50%) of the total voting power of the Company immediately after such
transaction. Notwithstanding the foregoing, in the event the acceleration of
the vesting of this Option upon a Change in Control would prevent an acquisition
from being treated as a "pooling-of-interests" for financial accounting purposes
by the surviving entity, and such treatment is a condition to the acquisition,
the foregoing benefits shall be equitably adjusted to the extent necessary to
effectuate such pooling-of-interests treatment.
Termination Period:
------------------
This Option shall be exercisable for three months after Optionee ceases to
be a Service Provider. Upon Optionee's death or disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
<PAGE>
II. AGREEMENT
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1. Grant of Option. The Plan Administrator of the Company hereby grants
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to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
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(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
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of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
<PAGE>
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by
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any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date of
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this
<PAGE>
Option of some of the federal tax consequences of exercise of this Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a regular
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federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
<PAGE>
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: DIGITAL INSIGHT CORPORATION
/s/ Steve Zarate /s/ John Dorman
- --------------------------- -------------------------------------
Signature By
Steve Zarate President and Chief Executive Officer
- --------------------------- -------------------------------------
Print Name Title
- ---------------------------
Residence Address
<PAGE>
EXHIBIT A
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1997 STOCK PLAN
EXERCISE NOTICE
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91032
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, , , the
------------------ ----------- ----
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
shares of the Common Stock (the "Shares") of Digital Insight
- ---------
Corporation (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated , 1998 (the "Option
--------
Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
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full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
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received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
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by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
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deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the
<PAGE>
Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
<PAGE>
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares upon the first sale of Common Stock of the
Company 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.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
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cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
<PAGE>
(c) Refusal to Transfer. The Company shall not be required (i) to
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transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: DIGITAL INSIGHT CORPORATION
- --------------------------------- ----------------------------------
Signature By
- --------------------------------- ----------------------------------
Print Name Its
Address: Address:
- ------- -------
26025 Mureau Road
- --------------------------------- Calabasas, CA 91302
- ---------------------------------
----------------------------------
Date Received
<PAGE>
EXHIBIT B
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INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: DIGITAL INSIGHT CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee 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 Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934); and, in the case of an affiliate, (2) the availability of certain
public information about the Company, (3) the amount of Securities being sold
during any three month period not exceeding the limitations specified in Rule
144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
-------------------------------------
Date:
-------------------------
<PAGE>
Exhibit 10.5
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
As adopted August 11, 1997
(as amended on February 13, 1998; as further amended on March 30, 1999)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Digital Insight Corporation, a Delaware
-------
corporation.
(h) "Consultant" means any person who is engaged by the Company or any
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Parent or Subsidiary to render consulting or advisory services to such entity.
(i) "Director" means a member of the Board of Directors of the
--------
Company.
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
<PAGE>
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee 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.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "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.
(q) "Option" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
(r) "Option Agreement" means a written or electronic agreement
----------------
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1997 Stock Plan.
----
(x) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(y) "Section 16(b) " means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(z) "Service Provider" means an Employee, Director or Consultant.
----------------
(aa) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(bb) "Stock Purchase Right" means a right to purchase Common
--------------------
Stock pursuant to Section 11 below.
(cc) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 3,000,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
-3-
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Administrator. The Plan shall be administered by the Board or a
-------------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any
Option or Stock Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
-4-
<PAGE>
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by
------------
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee 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 Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
-5-
<PAGE>
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of
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 exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(2) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(1) granted to a Service Provider who, at the time
of 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 exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(2) granted to any other Service Provider, the per
Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, 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). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder
-6-
<PAGE>
shall be tolled during any unpaid leave of absence. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 12 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
-7-
<PAGE>
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. The Options
--------------------------------------------------------
and Stock Purchase Rights 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
Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The terms of the offer shall comply in all
respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.
-8-
<PAGE>
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
-9-
<PAGE>
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the 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); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, 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
merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of such
grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and
-10-
<PAGE>
signed by the Optionee and the Company. Termination of the Plan shall not affect
the Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
-----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of
--------------------------
an Option, the Administrator may require the person exercising such Option 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.
16. Inability to Obtain Authority. 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.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
-11-
<PAGE>
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
(Name)
___________________
___________________
___________________
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Grant Number _____________________________
Date of Grant _____________________________
Vesting Commencement Date _____________________________
Exercise Price per Share $____________________________
Total Number of Shares Granted _____________________________
Total Exercise Price $____________________________
Type of Option: _____ Incentive Stock Option
_____ Nonstatutory Stock Option
Term/Expiration Date: _____________________________
Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to Optionee's continuing to be a Service
Provider on such dates.]
<PAGE>
Termination Period:
------------------
This Option shall be exercisable for three months after Optionee ceases to
be a Service Provider. Upon Optionee's death or disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form
-2-
<PAGE>
attached hereto as Exhibit B, and shall read the applicable rules of the
Commissioner of Corporations attached to such Investment Representation
Statement.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND
-3-
<PAGE>
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
-4-
<PAGE>
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: DIGITAL INSIGHT CORPORATION
________________________________ _______________________________
Signature By
_______________________________ _______________________________
Print Name Title
_______________________________
_______________________________
Residence Address
-5-
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91302
Attention: [Secretary]
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Digital Insight
Corporation (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated ________, 19______ (the "Option
Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed
<PAGE>
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder
shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for
--------------
the Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general
-2-
<PAGE>
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.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF
FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS
SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote
-3-
<PAGE>
or pay dividends to any purchaser or other transferee to whom such Shares shall
have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: DIGITAL INSIGHT CORPORATION
_______________________________ ____________________________________
Signature By
_______________________________ ____________________________________
Print Name Its
Address: Address:
- ------- -------
__________________ 26025 Mureau Road
Calabasas, CA 91302
_____________________________________
Date Received
-4-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: DIGITAL INSIGHT CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee 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 Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
______________________________________
Date:__________________________, 19___
-2-
<PAGE>
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the 1997 Stock Plan
(the "Plan") shall have the same defined meanings in this Notice of Grant.
(Name)
___________________
___________________
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's repurchase option and your ongoing Continuous Status as
an Employee or Consultant (as described in the Plan and the attached Restricted
Stock Purchase Agreement), as follows:
Grant Number __________________________
Date of Grant __________________________
Price Per Share __________________________
Total Number of Shares Subject __________________________
to This Stock Purchase Right
Total Purchase Price __________________________
Expiration Date __________________________
<PAGE>
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the Plan and the Restricted Stock Purchase
Agreement attached hereto as Exhibit A-1, each of which is hereby incorporated
herein by reference. You further agree to execute the Restricted Stock Purchase
Agreement and the Investment Representation attached hereto as Exhibit B as a
condition to purchasing any shares under this Stock Purchase Right.
GRANTEE: DIGITAL INSIGHT CORPORATION
____________________________ By: _______________________________
Signature
Title: ____________________________
___________________________
Print Name
-2-
<PAGE>
EXHIBIT A-1
-----------
DIGITAL INSIGHT CORPORATION
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
THIS AGREEMENT is made as of __________________, at 26025 Mureau Road,
Calabassas, CA 91302, between Digital Insight Corporation, a Delaware
corporation (the "Company"), and ________________________ (the "Purchaser").
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
THEREFORE, the parties agree as follows:
1. Sale of Stock. The company hereby agrees to sell the Purchaser and
-------------
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
-------------------------
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check or promissory note in the form of Exhibit C to the Notice of
---------
Grant, or some combination thereof.
3. Repurchase Option.
------------------
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section 4), but not in the event of Purchaser's change in status from Employee
to Consultant or Consultant to Employee, the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of sixty (60) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 4) at the original purchase price per share (the
"Repurchase Price"). Said option shall be
<PAGE>
exercised by the Company by delivering written notice to the Purchaser or the
Purchaser's executor (with a copy to the Escrow Holder (as defined in Section
7)) AND, at the Company's option, (i) by delivering to the Purchaser or the
Purchaser's executor a check in the amount of the aggregate Repurchase Price, or
(ii) by the Company canceling an amount of the Purchaser's indebtedness to the
Company equal to the aggregate Repurchase Price, or (iii) by a combination of
(i) and (ii) so that the combined payment and cancellation of indebtedness
equals such aggregate Repurchase Price. Upon delivery of such notice and the
payment of the aggregate Repurchase Price in any of the ways described above,
the Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the fair market value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) On ______________, 199__, 1/4 (25%) of the shares shall be
released from the Company's repurchase option and 1/48 of the Shares shall be
released each month thereafter, provided in each case that the Purchaser's
Continuous Status as an Employee or Consultant has not terminated prior to the
date of any such release.
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase
option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
5. Termination of Repurchase Option.
--------------------------------
(a) Notwithstanding Section 4 above, the Company's Repurchase Option
shall terminate as to any remaining Unreleased Shares upon a Change of Control
(as defined below).
(b) For purposes of this Agreement, a "Change of Control" shall
include any of the following shareholder-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) a transaction the principal purpose of which is
to change the state of the Company's incorporation, or (B) a transaction in
which the Company's shareholders
-2-
<PAGE>
immediately prior to such merger or consolidation hold (by virtue of securities
received in exchange for their shares in the Company) securities of the
surviving entity representing more than fifty percent (50%) of the total voting
power of such entity immediately after such transaction;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company unless the Company's shareholders
immediately prior to such sale, transfer or other disposition hold (by virtue of
securities received in exchange for their shares in the Company) securities of
the purchaser or other transferee representing more than fifty percent (50%) of
the total voting power of such entity immediately after such transaction; or
(iii) any reverse merger in which the Company is the surviving
entity but in which the Company's shareholders immediately prior to such merger
do not hold (by virtue of their shares in the Company held immediately prior to
such transaction) securities of the Company representing more than fifty percent
(50%) of the total voting power of the Company immediately after such
transaction.
(c) notwithstanding the foregoing, in the event the termination of
the Repurchase Option would prevent an acquisition from being treated as a
"pooling-of-interests" for financial accounting purposes by the surviving
entity, and such treatment is a condition to the acquisition, the foregoing
benefits shall be equitably adjusted to the extent necessary to effectuate such
treatment.
6. Restriction on Transfer. Except for the escrow described in Section 7
-----------------------
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
----------------
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section 3 above, the Purchaser shall, upon execution of
this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option terminates or expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
-3-
<PAGE>
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised, terminates or
expires unexercised or a portion of the Shares has been released from such
repurchase option, upon Purchaser's request the Escrow Holder shall promptly
cause a new certificate to be issued for such released Shares and shall deliver
such certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
8. Company's Right of First Refusal. Before any Shares that are permitted
--------------------------------
to be sold or otherwise transferred pursuant to this Agreement and that are held
by Purchaser or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
-4-
<PAGE>
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 3(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Purchaser's lifetime or on the Purchaser's death by will or
intestacy to the Purchaser's immediate family or a trust for the benefit of the
Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 3, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares upon the date of the first sale of Common Stock
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
1933 Act.
-5-
<PAGE>
9. Legends.
-------
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER, A RIGHT OF FIRST REFUSAL, AND A REPURCHASE
OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE
OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop
-6-
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the
difference between the purchase price for the Shares and the Fair Market Value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to its repurchase option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Company's repurchase option expires by filing an election under Section
83(b) of the Code with the I.R.S. within thirty (30) days from the date of
purchase. The form for making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. General Provisions.
------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware. This Agreement, subject to the terms and conditions of the Plan and
the Notice of Grant, represents the entire agreement between the parties with
respect to the purchase of Common Stock by the Purchaser. Subject to Section
14(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Agreement.
-7-
<PAGE>
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM
THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY
BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
-8-
<PAGE>
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
PURCHASER: DIGITAL INSIGHT CORPORATION
By:
______________________________ _______________________________
Signature
______________________________ By: _______________________________
Print Name
-9-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto _____________________________________________(__________) shares
of the Common Stock of Digital Insight Corporation standing in my name of the
books of said corporation represented by Certificate No. _____ herewith and do
hereby irrevocably constitute and appoint _____________________ to transfer the
said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Digital Insight Corporation and the undersigned
dated _______________, 19__.
Dated: _______________, 19
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
__________, 19
Corporate Secretary
Digital Insight Corporation
26025 Mureau Road
Calabassas, CA 91302
Dear ________________________:
As Escrow Agent for both Digital Insight Corporation, a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or
<PAGE>
notice of transfer of, the securities. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder
of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
-2-
<PAGE>
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91302
PURCHASER:
________________________________
________________________________
ESCROW AGENT: Corporate Secretary
Digital Insight Corporation
26025 Mureau Road
Calabasas, CA 91302
-3-
<PAGE>
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
Very truly yours,
DIGITAL INSIGHT CORPORATION
By:______________________________
Title:___________________________
PURCHASER:
_________________________________
(Signature)
_________________________________
(Typed or Printed Name)
ESCROW AGENT:
_____________________________
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
-----------
CONSENT OF SPOUSE
I, ____________________, spouse of _______________, have read and approve
the foregoing Agreement. In consideration of granting of the right to my spouse
to purchase shares of Digital Insight Corporation, as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 19
______________________________
<PAGE>
EXHIBIT A-5
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Digital
Insight Corporation (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ___________________, 19__ ________________________________
________________________________, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19__ ________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : DIGITAL INSIGHT CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Purchaser represents to the Company the following:
(a) Purchaser 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 Securities. Purchaser is
acquiring these Securities for investment for Purchaser's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Purchaser acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. In this connection, Purchaser
understands that, in the view of the Securities and Exchange Commission, the
statutory basis for such exemption may be unavailable if Purchaser's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one (1) year or any other fixed period in the
future. Purchaser further understands that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Purchaser further
acknowledges and understands that the Company is under no obligation to register
the Securities. Purchaser understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public
<PAGE>
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of the grant of the
Stock Purchase Right to the Purchaser, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the Securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three (3)
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than two (2) years after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Purchaser hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act, Purchaser
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company to become effective under the Securities Act which include securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
(e) Purchaser further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
-2-
<PAGE>
(f) Purchaser understands that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the Securities
without the consent of the Commissioner of Corporations of California.
Purchaser has read the applicable Commissioner's Rules with respect to such
restriction, a copy of which is attached.
Signature of Purchaser:
___________________________________
Date:________________, 19__
-3-
<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
---------- -----------------------
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the broker-
dealer, nor actually present in this state if the sale of such securities is not
in violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE>
EXHIBIT C
---------
NOTE
$_________ Camarillo, CA
_________________, 199__
FOR VALUE RECEIVED, the undersigned promises to pay to Digital Insight
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of ___________________($______________), together with interest on the unpaid
principal hereof from the date hereof at the rate of seven percent (7%) per
annum, compounded annually.
Principal and interest shall be due and payable on the earlier of (i) the
date ten (10) years from the date of execution of this Note, (ii) thirty (30)
days after termination of the undersigned's employment with the Company other
than for death or disability, or (iii) one (1) year after termination of the
undersigned's employment with the Company for death or disability. Should the
undersigned fail to make full payment of principal or interest for a period of
10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder. The holder of this Note shall have full recourse
against the undersigned, and shall not be required to proceed against the
collateral securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
___________________________________
(signature)
___________________________________
(printed name)
<PAGE>
EXHIBIT 10.6
DIGITAL INSIGHT CORPORATION
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as
-------------
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Digital Insight Corporation, a Delaware
-------
corporation.
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
<PAGE>
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee 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.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
-2-
<PAGE>
(p) "Notice of Grant" means a written or electronic notice
---------------
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "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.
(r) "Option" means a stock option granted pursuant to the Plan.
------
(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1999 Stock Plan.
----
(y) "Restricted Stock" means shares of Common Stock acquired
----------------
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.
-------------
(cc) "Service Provider" means an Employee, Director or Consultant.
----------------
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
-3-
<PAGE>
(ee) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 1,500,000 Shares plus an annual increase to be added on March
1 of the Company's fiscal year beginning in 2001 equal to the lesser of (i)
750,000 shares, (ii) 5% of the outstanding shares on such date or (iii) a lesser
amount determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are 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) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
-4-
<PAGE>
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
-5-
<PAGE>
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 750,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 750,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For
-6-
<PAGE>
this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined 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 or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock 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 per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
-7-
<PAGE>
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the
-8-
<PAGE>
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
-9-
<PAGE>
(e) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right 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 Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and
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<PAGE>
Stock Purchase Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase Right, as well as
the price per share of Common Stock covered by each such outstanding Option or
Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the
-11-
<PAGE>
merger or sale of assets by holders of Common Stock for each Share held on the
effective date of the 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); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, 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 merger or sale of
assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right 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.
-12-
<PAGE>
17. Inability to Obtain Authority. 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.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-13-
<PAGE>
EXHIBIT 10.7
DIGITAL INSIGHT CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of Digital Insight Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company
-------
and its Designated 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 Internal Revenue Code of 1986, as amended. 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.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean Digital Insight Corporation and any
-------
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
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 Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
-------------
Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately twenty-
----------------
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before October 31,
2001. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
-2-
<PAGE>
(o) "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.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues 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.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
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 prior
to the applicable Enrollment Date.
-3-
<PAGE>
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) 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's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of
-4-
<PAGE>
shares of the Company's Common Stock determined by dividing such Employee'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 that in no event shall an Employee be permitted to purchase during each
Purchase Period more than 5000 shares of the Company's Common Stock (subject to
any adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
-5-
<PAGE>
9. Delivery. As promptly as practicable after each Exercise Date on which
--------
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
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 or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 300,000 shares, plus an annual increase to be added on March 1 of the
Company's fiscal year beginning in 2001 equal to the lesser of (i) 300,000
shares, (ii) 2% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board.
-6-
<PAGE>
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. 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 parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may 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 subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. 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
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 Company), the Company, 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 Company,
then to such other person as the Company may designate.
16. 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 Section 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
17. 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.
-7-
<PAGE>
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
--------------------------
liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date"), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The New Exercise Date shall
be before the date of the Company's proposed dissolution or liquidation. The
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised
-8-
<PAGE>
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, 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 Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, 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 Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.
-9-
<PAGE>
21. 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 Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. 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 Securities Exchange Act of 1934, as
amended, 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 Company may require
the person exercising such option 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.
23. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board of Directors or its approval by the shareholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT A
---------
DIGITAL INSIGHT CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____ Original Application Enrollment Date: ___________
____ Change in Payroll Deduction Rate
____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Digital Insight
Corporation 1999 Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") and subscribes 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 (from 1 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said 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 an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete 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 my
ability to exercise the option under this Subscription Agreement is subject
to shareholder 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 (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, 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 purchased by me
<PAGE>
over the price which I paid for the shares. I hereby agree to notify the
----------------------------
Company in writing within 30 days after the date of any disposition of my
-------------------------------------------------------------------------
shares and I will make adequate provision for 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, 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
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain. I UNDERSTAND THAT THE COMPANY IS
NOT PROVIDING TAX ADVICE TO ME AND I HAVE BEEN ADVISED TO CONSULT WITH MY
OWN TAX ADVISOR WITH REGARD TO ALL TAX EFFECTS ON ME.
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)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________________
Employee's Address: ____________________________________________
____________________________________________
____________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________________
Signature of Employee
____________________________________________
Spouse's Signature (If beneficiary other than
spouse)
-3-
<PAGE>
EXHIBIT B
---------
DIGITAL INSIGHT CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Digital Insight
Corporation 1999 Employee Stock Purchase Plan which began on ____________,
______ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering 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 Offering Period. The
undersigned understands and agrees that his or her option for such Offering
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 Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:____________________________
<PAGE>
Exhibit 10.8
STANDARD OFFICE LEASE
FOR
CALABASAS COMMERCE CENTER
BY AND BETWEEN
ARDEN REALTY LIMITED PARTNERSHIP,
A MARYLAND LIMITED PARTNERSHIP,
AS LANDLORD,
AND
DIGITAL INSIGHT CORPORATION,
A DELAWARE CORPORATION,
AS TENANT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
ARTICLE 1 BASIC LEASE PROVISIONS 1
ARTICLE 2 TERM/PREMISES 2
ARTICLE 3 RENTAL 2
(a) Basic Rental 2
(b) Increase in Direct Costs 2
(c) Definitions 3
(d) Determination of Payment 4
ARTICLE 4 SECURITY DEPOSIT 5
ARTICLE 5 HOLDING OVER 6
ARTICLE 6 PERSONAL PROPERTY TAXES 6
ARTICLE 7 USE 7
ARTICLE 8 CONDITION OF PREMISES 7
ARTICLE 9 REPAIRS AND ALTERATIONS 8
ARTICLE 10 LIENS 9
ARTICLE 11 PROJECT SERVICES 10
ARTICLE 12 RIGHTS OF LANDLORD 10
ARTICLE 13 INDEMNITY; EXEMPTION OF LANDLORD FROM
LIABILITY 11
(a) Indemnity 11
(b) Exemption of Landlord from Liability 11
ARTICLE 14 INSURANCE 11
(a) Tenant's Insurance 11
(b) Form of Policies 11
(c) Landlord's Insurance 12
(d) Waiver of Subrogation 12
(e) Compliance with Law 12
ARTICLE 15 ASSIGNMENT AND SUBLETTING 13
ARTICLE 16 DAMAGE OR DESTRUCTION 15
ARTICLE 17 SUBORDINATION 16
ARTICLE 18 EMINENT DOMAIN 16
ARTICLE 19 DEFAULT 17
ARTICLE 20 REMEDIES 17
ARTICLE 21 TRANSFER OF LANDLORD'S INTEREST 19
ARTICLE 22 BROKER 19
ARTICLE 23 PARKING 19
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 24 WAIVER 19
ARTICLE 25 ESTOPPEL CERTIFICATE 20
ARTICLE 26 LIABILITY OF LANDLORD 20
ARTICLE 27 INABILITY TO PERFORM 21
ARTICLE 28 HAZARDOUS WASTE 21
ARTICLE 29 SURRENDER OF PREMISES; REMOVAL OF
PROPERTY 22
ARTICLE 30 MISCELLANEOUS 23
(a) Severability; Entire Agreement 23
(b) Attorneys' Fees; Waiver of Jury Trial 23
(c) Time of Essence 24
(d) Headings 24
(e) Reserved Area 24
(f) No Option 24
(g) Use of Project Name; Improvements 24
(h) Rules and Regulations 24
(i) Quiet Possession 24
(j) Rent 24
(k) Successors and Assigns 24
(l) Notices 25
(m) Persistent Delinquencies 25
(n) Right of Landlord to Perform 25
(o) Access, Changes in Project, Facilities, Name 25
(p) Corporate Authority 25
(q) Identification of Tenant 26
(r) Intentionally Deleted 26
(s) Survival of Obligations 26
(t) Confidentiality 26
(u) Exhibits and Addendum 27
(v) Americans With Disabilities Act 27
ARTICLE 31 OPTION TO EXTEND 27
(a) Option Right 27
(b) Option Rent 27
(c) Exercise of Option 27
(d) Determination of Market Rent 28
ARTICLE 32 RIGHT OF FIRST OFFER 28
(a) Procedure for Offer 28
(b) Procedure for Acceptance 29
(c) Construction of First Offer Space 29
(d) Lease of First Offer Space 29
(e) No Defaults 29
ARTICLE 33 DIRECTORY 29
Exhibit "A" Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Notice of Lease Term Dates and Tenant's Proportionate Share
Exhibit "D" Tenant Work Letter
</TABLE>
-ii-
<PAGE>
INDEX OF DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
DEFINED TERMS PAGE
- ------------- ----
<S> <C>
Additional Rent 2
Alterations 8
Approved Working Drawings Exhibit D
Architect Exhibit D
Base Year 1
Base, Shell and Core Exhibit D
Basic Rental 1
Brokers 1
Code Exhibit D
Commencement Date 1
Construction Drawings Exhibit D
Contractor Exhibit D
Control 14
Cosmetic Alterations 8
Cost Proposal Exhibit D
Cost Proposal Delivery Date Exhibit D
Designated Portion Exhibit D
Direct Costs 3
Economic Terms 29
Engineers Exhibit D
Estimate 4
Estimate Statement 4
Estimated Direct Costs 4
Event of Default 17
Expiration Date 1
Final Space Plan Exhibit D
Final Working Drawings Exhibit D
First Month's Rent 2
First Offer Notice 28
First Offer Space 28
Force Majeure 21
Hazardous Material 22
HVAC System 10
Landlord 1
Landlord Supervision Fee Exhibit D
Laws 22
Lease 1
Lease Year 2
Operating Costs 3
Over-Allowance Amount Exhibit D
Parking Passes 2
Partnership Tenant 26
Permits Exhibit D
Permitted Assignee 14
Permitted Use 1
Premises 1
Project 1
Real Property 3
Representative 20
Review Period 5
Security Deposit 1
Specifications Exhibit D
Square Footage 1
Standard Improvement Package Exhibit D
Statement 4
Substantial Completion Exhibit D
Superior Lease 28
Superior Rights 28
Tax Costs 3
Tenant 1
Tenant Delays Exhibit D
Tenant Improvement Allowance Exhibit D
Tenant Improvement Allowance Items Exhibit D
Tenant Improvements 7
Tenant's Proportionate Share 1
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Term 1
Termination Effective Date Exhibit D
Termination Notice Exhibit D
Time Deadlines Exhibit D
Transfer 13
Transfer Premium 14
Transferee 14
</TABLE>
-iv-
<PAGE>
STANDARD OFFICE LEASE
---------------------
This Standard Office Lease ("LEASE") is made and entered into as of this
4th day of August, 1997, by and between ARDEN REALTY LIMITED PARTNERSHIP, a
Maryland limited partnership ("LANDLORD"), and DIGITAL INSIGHT CORPORATION, a
Delaware corporation ("TENANT").
Landlord here by leases to Tenant and Tenant hereby leases from Landlord
the premises designated on the plan attached hereto and incorporated herein as
Exhibit "A" ("PREMISES"), located in the project ("PROJECT") now known as the
Calabases Commerce Center whose address is 26025 Maureau Road, Calabases,
California for the Term and upon the terms and conditions hereinafter set forth,
and Landlord and Tenant hereby agree as follows:
ARTICLE 1
---------
BASIC LEASE PROVISIONS
----------------------
A. TERM: Five (5) years.
COMMENCEMENT DATE: The earlier of (i) the date Tenant first
commences to conduct business in the Premises, or
(ii) the date of Substantial Completion of Tenant
Improvements in the Premises. The Commencement
Date is anticipated to occur on September 1,
1997. Upon Tenant's occupancy of the Premises,
Landlord and Tenants agree to execute and deliver
a Commencement Letter in a form substantially
similar to that attached hereto as Exhibit "C".
EXPIRATION DATE: The last day of the month which is sixty (60)
months after the month in which the Commencement
Date falls, unless extended or earlier terminated
pursuant to this Lease.
B. SQUARE FOOTAGE: 30,385 rentable square feet.
C. BASIC RENTAL:
Annual Monthly Monthly Basic Rental
Lease Year Basic Rental Basic Rental Per Rentable Square Foot
- ---------- ------------ ------------ ------------------------
1 $240,649.20 $20,054.10 $0.66
2-3 $401,082.00 $33,423.50 $1.10
4-5 $437,544.00 $36,462.00 $1.20
D. BASE YEAR: Not applicable (Triple Net Lease)
E. TENANT'S PROPORTIONATE SHARE: 65.60%
F. SECURITY DEPOSIT: A security deposit of $240,000.00 shall be
due and payable by Tenant to Landlord upon
Tenant's execution of this Lease.
G. PERMITTED USE: General office use
H. BROKERS: Grubb & Ellis Company; TOLD Partners, Inc.
<PAGE>
I. PARKING PASSES: Tenant shall have the use of three point seven
(3.7) unreserved parking passes for each 1,000
rentable square feet continued in the Premises,
which equals one hundred twelve (112) passes, at
the rate provided in Article 23 hereof.
J. FIRST MONTH'S RENT: The first full month's rent of $20,054.10 shall be
due and payable by Tenant to Landlord upon
Tenant's execution of this Lease.
ARTICLE 2
---------
TERM/PREMISES
-------------
The Term of this Lease shall commence on the Commencement Date as set forth
in Article 1.A. of the Basic Lease Provisions and shall end on the Expiration
Date set forth in Article 1.A. of the Basic Lease Provisions. For purposes of
this Lease, the term "LEASE YEAR" shall mean each consecutive twelve (12) month
period during the Lease Term, with the first Lease Year commencing on the
Commencement Date; however, (a) if the Commencement Date falls on a day other
than the first day of a calendar month, the first Lease Year shall end on the
last day of the eleventh (11th) month after the Commencement Date and the second
(2nd) and each succeeding Lease Year shall commence on the first day of the next
calendar month, and (b) the last Lease year shall end on the Expiration Date. If
Landlord is unable to deliver possession of the Premises to Tenant on or before
the anticipated Commencement Date as a result of the failure of the existing
occupant to surrender all or any portion of such space or for any other reason,
Landlord shall not be subject to any liability for its failure to do so, and
such failure shall not affect the validity of this Lease nor the obligations of
Tenant hereunder. Landlord and Tenant hereby stipulate that the Premises
contains the number of rentable square feet specified in Section 1.B of the
Basic Lease Provisions.
ARTICLE 3
---------
RENTAL
------
(a) Basic Rental. Tenant agrees to pay to Landlord during the Term hereof,
------------
at Landlord's office or to such other person or at such other place as directed
from time to time by written notice to Tenant from Landlord, the initial monthly
and annual sums as set forth in Article 1.C of the Basic Lease Provisions,
payable in advance on the first day of each calendar month, without demand,
setoff or deduction, and in the event this Lease commences or the date of
expiration of this Lease occurs other than on the first day or last day of a
calendar month, the rent for such month shall be prorated. Notwithstanding the
foregoing, the first full month's rent shall be paid to Landlord in accordance
with Article 1.J. of the Basic Lease Provisions.
(b) Increase in Direct Costs. Tenant shall pay an additional sum for each
------------------------
subsequent calendar year equal to the product of the amount set forth in Article
1.E. of the Basic Lease Provisions multiplied by the amount of "Direct Costs."
In the event either the Premises and/or the Project is expanded or reduced, then
Tenant's Proportionate Share shall be appropriately adjusted, and as to the
calendar year in which such change occurs, Tenant's Proportionate Share for such
year shall be determined on the basis of the number of days during that
particular calendar year that such Tenant's Proportionate Share was in effect.
In the event this Lease shall terminate on any date other than the last day of a
calendar year, the additional sum payable hereunder by Tenant during the
calendar year in which this Lease terminates shall be prorated on the basis of
the relationship which the number of days which have elapsed from the
commencement of said calendar year to and including said date on which this
Lease terminates bears to three hundred sixty (360). Any and all amounts due and
payable by Tenant pursuant to Article 3(b),(c) and (d) hereof shall be deemed
"ADDITIONAL RENT" and Landlord shall be entitled to exercise the same rights and
remedies upon default in these payments as Landlord is entitled to exercise with
respect to defaults in monthly Basic Rental payments.
-2-
<PAGE>
(c) Definitions. As used herein the term "DIRECT COSTS" shall mean the sum
-----------
of the following:
(i) "TAX COSTS", which shall mean any and all real estate taxes and
other similar charges on real property or improvements, assessments, water and
sewer charges, and all other charges assessed, reassessed or levied upon the
Project and appurtenances thereto and the parking or other facilities thereof,
or the real property thereunder (collectively the "REAL PROPERTY") or
attributable thereto or on the rents, issues, profits or income received or
derived therefrom which are assessed, reassessed or levied by the United States,
the State of California or any local government authority or agency or any
political subdivision thereof, and shall include Landlord's reasonable legal
fees, costs and disbursements incurred in connection with proceedings for
reduction of Tax Costs or any part thereof, provided, however, if at any time
after the date of this Lease the methods of taxation now prevailing shall be
altered so that in lieu of or as a supplement to or a substitute for the whole
or any part of any Tax Costs, there shall be assessed, reassessed or levied (a)
a tax, assessment, reassessment, levy, imposition or charge wholly or partially
as a net income, capital or franchise levy or otherwise on the rents, issues,
profits or income derived therefrom, or (b) a tax, assessment, reassessment,
levy (including but not limited to any municipal, state or federal levy),
imposition or charge measured by or based in whole or in part upon the Real
Property and imposed upon Landlord, or (c) a license fee measured by the rent
payable under this Lease, then all such taxes, assessments, reassessments or
levies or the part thereof so measured or based, shall be deemed to be included
in the term "Direct Costs."
(ii) "OPERATING COSTS", which shall mean all costs and expenses
incurred by Landlord in connection with the maintenance, operation, replacement,
ownership and repair of the Project, the equipment, the intrabuilding network
cable, adjacent walks, malls and landscaped and common areas and the parking
structure, areas and facilities of the Project, including, but not limited to,
salaries, wages, medical, surgical and general welfare benefits and pension
payments, payroll taxes, fringe benefits, employment taxes, workers'
compensation, uniforms and dry cleaning thereof for all persons who perform
duties connected with the operation, maintenance and repair of the Project, its
equipment, the intrabuilding network cable and the adjacent walks and landscaped
areas, including janitorial, gardening, security, parking, operating engineer,
elevator, painting, plumbing, electrical, carpentry, heating, ventilation, air
conditioning, window washing, hired services, a reasonable allowance for
depreciation of the cost of acquiring or the rental expense of personal property
used in the maintenance, operation and repair of the Project, accountant's fees
incurred in the preparation of rent adjustment statements, legal fees, real
estate tax consulting fees, personal property taxes on property used in the
maintenance and operation of the Project, capital expenditures incurred to
effect economies of operation and capital expenditures required by government
regulations, laws, or ordinances including, but not limited to the American with
Disabilities Act; the cost of all charges for electricity, gas, water and other
utilities furnished to the Project, including any taxes thereon; the cost of all
charges for fire and extended coverage, liability and all other insurance for
the Project carried by Landlord; the cost of all building and cleaning supplies
and materials; the cost of all charges for cleaning, maintenance and service
contracts and other services with independent contractors and administration
fees; a property management fee (which fee may be imputed if Landlord has
internalized management or otherwise acts as its own property manager) and
license, permit and inspection fees relating to the Project. In the event,
during any calendar year, the Project is less than ninety-five percent (95%)
occupied at all times, Operating Costs shall be adjusted to reflect the
Operating Costs of the Project as though ninety-five percent (95%) were occupied
at all times, and the increase or decrease in the sums owed hereunder shall be
based upon such Operating Costs as so adjusted. In no event shall costs for any
item of utilities included in Direct Costs for any year subsequent to the Base
Year be less than the amount included in Direct Costs for the Base Year for such
utility item. Notwithstanding anything to the contrary set forth in this Article
3, when calculating Operating Costs for the Base Year, Operating Costs shall
exclude (a) market-wide labor-rate increases due to extraordinary circumstances
including, but not limited to, boycotts and strikes, (b) utility rate increases
due to extraordinary circumstances including, but not limited to, conservation
surcharges, boycotts, embargoes or other shortages, and (c) amortization of any
capital items including, but not limited to, capital improvements, capital
repairs and capital replacements (including such amortized costs where the
actual improvement, repair or replacement was made in prior years).
-3-
<PAGE>
Notwithstanding anything above to the contrary, Operating Costs shall
not include (1) the cost of providing any service directly to and paid directly
by any tenant (outside of such tenant's Direct Cost payments); (2) the cost of
any items for which Landlord is reimbursed by insurance proceeds, condemnation
awards, a tenant of the Project, or otherwise to the extent so reimbursed; (3)
any real estate brokerage commissions or other costs incurred in procuring
tenants, or any fee in lieu of commission; (4) depreciation, amortization of
principal and interest on mortgages or ground lease payments (if any); (5) costs
of items considered capital repairs, replacements, improvements and equipment
under generally accepted accounting principles consistently applied except as
expressly included in Operating Costs pursuant to the definition above; (6)
costs incurred by Landlord due to the violation by Landlord or any tenant of the
terms and conditions of any lease of space in the Project or any law, code,
regulation, ordinance or the like; (7) Landlord's general corporate overhead and
general and administrative expenses; (8) any compensation paid to clerks,
attendants or other persons in commercial concessions operated by Landlord
(other than in the parking facility for the Project); (9) costs incurred in
connection with upgrading the Project to comply with disability, life, seismic,
fire and safety codes, ordinances, statutes, or other laws in effect prior to
the Commencement Date, including, without limitation, the ADA, including
penalties or damages incurred due to such non-compliance; and (10) costs
incurred to (i) comply with laws relating to the removal of any "Hazardous
Material," as that term is defined in Article 28 of this Lease, which was in
existence on the Project prior to the Commencement Date, and was of such a
nature that a federal, state or municipal governmental authority, if it had then
had knowledge of the presence of such Hazardous Material, in the state, and
under the conditions that it then existed on the Project, would have then
required the removal of such Hazardous Material or other remedial or containment
action with respect thereto, and (ii) to remove, remedy, contain, or treat any
Hazardous Material, which Hazardous Material is brought onto the Project after
the date hereof by Landlord or any other tenant of the Project and is of such a
nature, at that time, that a federal, state or municipal governmental authority,
if it had then had knowledge of the presence of such Hazardous Material, in the
state, and under the conditions, that it then exists on the Project, would have
then required the removal of such Hazardous Material or other remedial or
containment action with respect thereto.
(d) Determination of Payment.
------------------------
(i) Landlord shall give Tenant a yearly expense estimate statement
(the "ESTIMATE STATEMENT") which shall set forth Landlord's reasonable estimate
(the "ESTIMATE") of what the total amount of Direct Costs for the then-current
calendar year shall be the "ESTIMATED DIRECT COSTS". The failure of Landlord to
timely furnish the Estimate Statement for any calendar year shall not preclude
Landlord from enforcing its rights to collect any Estimated Direct Costs under
this Article 3. Tenant shall pay, with its next installment of Monthly Basic
Rental due, a fraction of the Estimated Direct Costs for the then-current
calendar year (reduced by any amounts paid pursuant to the last sentence of this
Section 3(d)(ii)). Such fraction shall have as its numerator the number of
months which have elapsed in such current calendar year to the month of such
payment, both months inclusive, and shall have twelve (12) as its denominator.
Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the
Monthly Basic Rental installments, an amount equal to one-twelfth (1/12) of the
total Estimated Direct Costs set forth in the previous Estimate Statement
delivered by Landlord to Tenant.
(ii) In addition, Landlord shall endeavor to give to Tenant on or
before the first day of April following the end of each calendar year, a
statement (the "STATEMENT") which shall state the Direct Costs incurred or
accrued for such preceding calendar year. Upon receipt of the Statement for each
calendar year during the Term, if amounts paid by Tenant as Estimated Direct
Costs are less than Tenant's actual Proportionate Share of Direct Costs as
specified on the Statement, Tenant shall pay, with its next installment of
Monthly Basic Rental due, the full amount of Tenant's Proportionate Share of
Direct Costs for such calendar year, less the amounts, if any, paid during such
calendar year as Estimated Direct Costs. If, however, the Statement indicates
that amounts paid by Tenant as Estimated Direct Costs are greater than Tenant's
actual Proportionate Share of Direct Costs as specified on the Statement, such
overpayment shall be credited against Tenant's next installments of Estimated
Basic Rental. The failure of Landlord to timely furnish the Statement for any
calendar year shall not prejudice Landlord from enforcing its rights under this
Article 3. Even though the Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's Proportionate Share of the
Direct
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<PAGE>
Costs for the calendar year in which this Lease terminates, if Tenant has
underpaid Direct Costs, Tenant shall immediately pay to Landlord an amount as
calculated pursuant to the provisions of this Article 3(d), and if Tenant has
overpaid Direct Costs, such excess shall be immediately refunded to Tenant. The
provisions of this Section 3(d)(iii) shall survive the expiration or earlier
termination of the Term.
(iii) Within one hundred twenty (120) days after receipt of a
Statement by Tenant ("REVIEW PERIOD"), if Tenant disputes the amount set forth
in the Statement, Tenant's employees or an independent certified public
accountant (which accountant is a member of a nationally or regionally
recognized accounting firm), designated by Tenant, may, after reasonable notice
to Landlord and at reasonable times, inspect Landlord's records at Landlord's
offices, provided that Tenant is not then in default after expiration of all
applicable cure periods and provided further that Tenant and such accountant or
representative shall, and each of them shall use their commercially reasonable
efforts to cause their respective agents and employees to, maintain all
information contained in Landlord's records in strict confidence.
Notwithstanding the foregoing, Tenant shall only have the right to review
Landlord's records one (1) time during any twelve (12) month period. Tenant's
failure to dispute the amounts set forth in any Statement within the Review
Period shall be deemed to be Tenant's approval of such Statement and Tenant,
thereafter, waives the right or ability to dispute the amounts set forth in such
Statement. If after such inspection, but within thirty (30) days after the
Review Period, Tenant notifies Landlord in writing that Tenant still disputes
such amounts, a certification as to the proper amount shall be made, at Tenant's
expense, by an independent certified public accountant selected by Landlord and
who is a member of a nationally or regionally recognized accounting firm.
Landlord shall cooperate in good faith with Tenant and the accountant to show
Tenant and the accountant the information upon which the certification is to be
based. However, if such certification by the accountant proves that the Direct
Costs set forth in the Statement were overstated by more than ten percent (10%),
then the cost of the accountant and the cost of such certification shall be paid
for by Landlord. Promptly following the parties receipt of such certification,
the parties shall make such appropriate payments or reimbursements, as the case
may be, to each other, as are determined to be owing pursuant to such
certification.
(iv) If the Project is a part of a multi-building development, those
Direct Costs attributable to such development as a whole (and not attributable
solely to any individual building therein) shall be allocated by Landlord to the
Project and to the other buildings within such development on an equitable
basis.
ARTICLE 4
---------
SECURITY DEPOSIT
----------------
Tenant has deposited with Landlord the sum set forth in Article 1.F. of the
Basic Lease Provisions as security for the full and faithful performance of
every provision of this Lease to be performed by Tenant. Upon the following
dates, the amount of the Security Deposit shall be reduced to the following
amounts, with the excess amount (plus interest earned thereon) being refunded by
Landlord to Tenant:
Upon expiration of the 1st $ 160,000.00
Lease Year
Upon expiration of the 2nd $ 80,000.00
Lease Year
Upon expiration of the 3rd $ 33,423.50
Lease Year
However, if (i) a default by Tenant occurs under this Lease, or (ii)
circumstances exist that would, with notice or lapse of time, or both,
constitute a default by Tenant, and Tenant has received notice but failed to
cure such default within the time period permitted by Article 19 or such lesser
time as may remain before the relevant date for any scheduled reduction of the
Security Deposit as provided above, the Security Deposit shall not thereafter be
reduced, unless
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and until such default shall have been fully cured pursuant to the terms of this
Lease, at which time the Security Deposit shall be reduced as hereinabove
described.
If Tenant breaches any provision of this Lease, including but not limited
to the payment of rent, Landlord may use all or any part of this security
deposit for the payment of any rent or any other sums in default, or to
compensate Landlord for 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 five (5) days after written demand therefore,
deposit cash with Landlord in an amount sufficient to restore the security
deposit to its original amount. Tenant agrees that Landlord shall not be
required to keep the security deposit in trust, segregate it or keep it separate
from Landlord's general funds but Landlord may commingle the security deposit
with its general funds and Tenant shall be entitled to simple interest at the
rate of three percent (3%) per annum on such deposit. At the expiration of the
Lease Term, and provided there exists no default by Tenant hereunder, the
security deposit or any balance thereof, plus any interest earned thereon, shall
be returned to Tenant (or, at Landlord's option, to Tenant's assignee), provided
that subsequent to the expiration of this Lease, Landlord may retain from said
security deposit any and all amounts permitted by California Civil Code Section
1950.7 or any successor or replacement statute. Tenant hereby waives the
provisions of Section 1950.7 of the California Civil Code and all other
provisions of law, now or hereafter in effect, which provide that Landlord may
claim from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of rent, to repair damage caused by Tenant or to clean
the Premises, it being agreed that Landlord may, in addition, claim those sums
reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the acts or omissions of Tenant or any
officer, employee, agent, contractor or invitee of Tenant.
ARTICLE 5
---------
HOLDING OVER
------------
Should Tenant, without Landlord's written consent, hold over after
termination of this Lease, Tenant shall become a tenant from month to month,
only upon each and all of the terms herein provided as may be applicable to a
month to month tenancy and any such holding over shall not constitute an
extension of this Lease. During such holding over, Tenant shall pay in advance,
monthly, rent at one hundred fifty percent (150%) of the rate in effect for the
last month of the Term of this Lease, in addition to, and not in lieu of, all
other payments required to be made by Tenant hereunder including but not limited
to Tenant's Proportionate Share of any increase in Direct Costs. Nothing
contained in this Article 5 shall be construed as consent by Landlord to any
holding over of the Premises by Tenant, and Landlord expressly reserves the
right to require Tenant to surrender possession of the Premises to Landlord as
provided in this Lease upon the expiration or earlier termination of the Term.
If Tenant fails to surrender the Premises upon the expiration or termination of
this Lease, Tenant agrees to indemnify, defend and hold Landlord harmless from
all costs, loss, expense or liability, including without limitation, claims made
by any succeeding tenant and real estate brokers claims and attorney's fees.
ARTICLE 6
---------
PERSONAL PROPERTY TAXES
-----------------------
Tenant shall pay, prior to delinquency, all taxes assessed against or
levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant located in the Premises. In the event any or all of Tenant's
trade fixtures, furnishings, equipment and other personal property shall be
assessed and taxed with property of Landlord, or if the cost or value of any
leasehold improvements in the Premises exceeds the cost or value of a Project-
standard buildout as determined by Landlord and, as a result, real property
taxes for the Project are increased, Tenant shall pay to Landlord its share of
such taxes within ten (10) days after delivery to Tenant by Landlord of a
statement in writing setting forth the amount of such taxes applicable to
Tenant's property or above-standard improvements. Tenant shall assume and pay to
Landlord at the time of paying Basic Rental any excise, sales, use, rent,
occupancy, garage, parking, gross receipts or other taxes (other than net income
taxes) which may be imposed on or on account of letting of the Premises or the
payment of Basic Rental or any other sums due or payable hereunder, and which
Landlord may be required to pay or collect under any law now in effect or
hereafter enacted.
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<PAGE>
Tenant shall pay directly to the party or entity entitled thereto all business
license fees, gross receipts taxes and similar taxes and impositions which may
from time to time be assessed against or levied upon Tenant, as and when the
same become due and before delinquency. Notwithstanding anything to the contrary
contained herein, any sums payable by Tenant under this Article 6 shall not be
included in the computation of "Tax Costs."
ARTICLE 7
---------
USE
---
Tenant shall use and occupy the Premises only for the use set forth in
Article 1.G. of the Basic Lease Provisions and shall not use or occupy the
Premises or permit the same to be used or occupied for any other purpose without
the prior written consent of Landlord, which consent may be given or withheld in
Landlord's sole and absolute discretion, and Tenant agrees that it will use the
Premises in such a manner so as not to interfere with or infringe the rights of
other tenants in the Project. Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental regulations
or requirements now in force or which may hereafter be in force relating to or
affecting (i) the condition, use or occupancy of Premises or the Project
excluding structural changes to the Project not related to Tenant's particular
use of the Premises, and (ii) improvements installed or constructed in the
Premises by or for the benefit of Tenant. Tenant shall not do or permit to be
done anything which would invalidate or increase the cost of any fire and
extended coverage insurance policy covering the Project and/or the property
located therein and Tenant shall comply with all rules, orders, regulations and
requirements of any organization which sets out standards, requirements or
recommendations commonly referred to by major fire insurance underwriters.
Tenant shall promptly upon demand reimburse Landlord for any additional premium
charges for any such insurance policy assessed or increased by reason of
Tenant's failure to comply with the provisions of this Article. Tenant hereby
acknowledges that the City of Calabasas, as of the date of this Lease first
above written, regulates and restricts shipping and receiving from the North
side of the Project and Tenant shall be responsible for complying with such
regulations and/or restrictions.
ARTICLE 8
---------
CONDITION OF PREMISES
---------------------
Landlord shall, at its sole cost and expense, utilizing Project-standard
materials only, install in the Premises, at a location designated by Landlord
and reasonably approved by Tenant, an elevator that provides service between the
first floor and mezzanine level of the Premises and perform any other work
required by law and resulting from the installation of such elevator. Tenant
hereby acknowledges that Landlord will be installing such elevator during the
Lease Term, and Landlord's performance of such work shall not be deemed a
constructive eviction of Tenant, nor shall Tenant be entitled to any abatement
of Rent in connection therewith. Tenant hereby agrees that, except as otherwise
provided herein and in the Tenant Work Letter attached hereto as Exhibit "D",
the Premises shall be taken "as is", "with all faults", "without any
representations or warranties", and Tenant hereby agrees and warrants that it
has investigated and inspected the condition of the Premises and the suitability
of same for Tenant's purposes, and Tenant does hereby waive and disclaim any
objection to, cause of action based upon, or claim that its obligations
hereunder should be reduced or limited because of the condition of the Premises
or the Project or the suitability of same for Tenant's purposes. Tenant
acknowledges that neither Landlord nor any agent nor any employee of Landlord
has made any representations or warranty with respect to the Premises or the
Project or with respect to the suitability of either for the conduct of Tenant's
business and Tenant expressly warrants and represents that Tenant has relied
solely on its own investigation and inspection of the Premises and the Project
in its decision to enter into this Lease and let the Premises in an "As Is"
condition. The existing leasehold improvements in the Premises as of the date of
this Lease, together with Landlord's work pursuant to the first sentence of this
Article 8, and the improvements work to be performed pursuant to the Tenant Work
Letter, may be collectively referred to herein as the "TENANT IMPROVEMENTS." The
taking of possession of the Premises by Tenant shall conclusively establish that
the Premises and the Project were at such time in satisfactory condition. Tenant
hereby waives Sections 1941 and 1942 of the Civil Code of California or any
successor provision of law.
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Landlord reserves the right from time to time, but subject to payment by
and/or reimbursement from Tenant as otherwise provided herein: (i) to install,
use, maintain, repair, replace and relocate for service to the Premises and/or
other parts of the Project pipes, ducts, conduits, wires, appurtenant fixtures,
and mechanical systems, wherever located in the Premises or the Project, (ii) to
alter, close or relocate any facility in the Premises or the Common Areas or
otherwise conduct any of the above activities for the purpose of complying with
a general plan for fire/life safety for the Project or otherwise and (iii) to
comply with any federal, state or local law, rule or order with respect thereto
or the regulation thereof not currently in effect. Landlord shall attempt to
perform any such work with the least inconvenience to Tenant as possible, but in
no event shall Tenant be permitted to withhold or reduce Basic Rental or other
charges due hereunder as a result of same or otherwise make claim against
Landlord for interruption or interference with Tenant's business and/or
operations.
ARTICLE 9
---------
REPAIRS AND ALTERATIONS
-----------------------
(a) Repairs and Alterations. Landlord shall maintain the structural
-----------------------
portions of the Project including the foundation, floor/ceiling slabs, roof,
curtain wall, exterior glass, columns, beams, shafts, stairs, stairwells,
elevator cabs and common areas and shall also maintain and repair the basic
mechanical, electrical, lifesafety, plumbing, sprinkler systems and heating,
ventilating and air-conditioning systems (provided, however, that Landlord's
obligation with respect to any such systems shall be to repair and maintain
those portions of the systems located in the core of the Project or in other
areas outside of the Premises, but Tenant shall be responsible to repair and
maintain any distribution of such systems throughout the Premises, except the
existing HVAC System in the Premises, the responsibility for repair and
maintenance of which shall be as provided in Article 11 hereof). Except as
expressly provided as Landlord's obligation in this Article 9, Tenant shall keep
the Premises in good condition and repair. Subject to the provisions of Article
14 hereof, all damage or injury to the Premises or the Project resulting from
the act or negligence of Tenant, its employees, agents or visitors, guests,
invitees or licensees or by the use of the Premises shall be promptly repaired
by Tenant, at its sole cost and expense, to the satisfaction of Landlord;
provided, however, that for damage to the Project as a result of casualty or for
any repairs that may impact the mechanical, electrical, plumbing, heating,
ventilation or air-conditioning systems of the Project, Landlord shall have the
right (but not the obligation) to select the contractor and oversee all such
repairs. Landlord may make any repairs which are not promptly made by Tenant
after Tenant's receipt of written notice and the reasonable opportunity of
Tenant to make said repair within five (5) business days from receipt of said
written notice, and charge Tenant for the cost thereof, which cost shall be paid
by Tenant within five (5) days from invoice from Landlord. Tenant shall be
responsible for the design and function of all non-standard improvements of the
Premises, whether or not installed by Landlord at Tenant's request. Tenant
waives all rights to make repairs at the expense of Landlord, or to deduct the
cost thereof from the rent. Tenant shall make no alterations, changes or
additions in or to the Premises (collectively, "ALTERNATIONS") without
Landlord's prior written consent, and then only by contractors or mechanics
approved by Landlord in writing and upon the approval by Landlord in writing of
fully detailed and dimensioned plans and specifications pertaining to the
Alterations in question, to be prepared and submitted by Tenant at its sole cost
and expense. Notwithstanding anything to the contrary contained herein, Tenant
may make strictly cosmetic changes to the finish work in the Premises (the
"COSMETIC ALTERATIONS"), without Landlord's consent, provided that the aggregate
cost of any such alterations does not exceed Ten Thousand Dollars ($10,000.00)
in any twelve (12) month period, and further provided that such alterations do
not (i) require any structural or other substantial modifications to the
Premises, (ii) require any changes to, nor adversely affect, the systems and
equipment, and (iii) affect the exterior appearance of the Project. Tenant shall
give Landlord at least thirty (30) days prior notice of such Cosmetic
Alterations, which notice shall be accompanied by reasonably adequate evidence
that such changes meet the criteria contained in this Article 9. Tenant shall at
its sole cost and expense obtain all necessary approvals and permits pertaining
to any Alterations approved by Landlord. If Landlord, in approving any
Alterations, specifies a commencement date therefor, Tenant shall not commence
any work with respect to such Alterations prior to such date. Tenant hereby
indemnifies, defends and agrees to hold Landlord free and harmless from all
liens and claims of lien, and all other liability, claims and demands arising
out of any work done or material supplied to the Premises by
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<PAGE>
or at the request of Tenant in connection with any Alterations. If permitted
Alterations are made, they shall be made at Tenant's sole cost and expense and
shall be and become the property of Landlord, except that Landlord may, by
written notice to Tenant given at least thirty (30) days prior to the end of the
Term, require Tenant at Tenant's expense to remove all partitions, counters,
railings and other Alterations installed by Tenant, and to repair any damages to
the Premises caused by such removal. Any and all costs attributable to or
related to the applicable building codes of the city in which the Project is
located (or any other authority having jurisdiction over the Project) arising
from Tenants plans, specifications, improvements, alterations or otherwise shall
be paid by Tenant at its sole cost and expense. With regard to repairs,
Alterations or any other work arising from or related to this Article 9,
Landlord shall be entitled to receive an administrative/supervision fee (which
fee shall vary depending upon whether or not Tenant orders the work directly
from Landlord) sufficient to compensate Landlord for all overhead, general
conditions, fees and other costs and expenses arising from Landlord's
involvement with such work.
(b) Backup Generator. Subject to Landlord's prior approval of all plans
----------------
and specifications, which approval shall not be unreasonably withheld, Landlord
shall permit Tenant to install and maintain, at Tenant's sole cost and expense,
a backup diesel-powered generator at a location designated by Landlord. Such
backup generator shall be used by Tenant only during (i) testing and regular
maintenance, and (ii) any period of electrical power outage in the Project.
Tenant shall be entitled to operate the generator for testing and regular
maintenance only upon notice to Landlord and at times reasonably approved by
Landlord. Tenant shall submit the specifications for design, operation,
installation and maintenance of the backup generator for Landlord's consent,
which consent shall not be unreasonably withheld or delayed and may be
conditioned on Tenant complying with such reasonable requirements imposed by
Landlord, based on the advice of Landlord's structural and mechanical engineers,
so that the Project's systems and equipment are not adversely affected. Any
repairs and maintenance of such generator shall be the sole responsibility of
Tenant and Landlord makes no representation or warranty with respect to such
generator. Tenant shall, at Tenant's sole cost and expense, remove such
generator upon the expiration or earlier termination of the Term and repair all
damage to the Project resulting from such removal. Such generator shall be
deemed to be a part of the Premises for purposes of Articles 13 and 14 of this
Lease.
ARTICLE 10
----------
LIENS
-----
Tenant shall keep the Premises and the Project free from any mechanics'
liens, vendors liens or any other liens arising out of any work performed,
materials furnished or obligations incurred by Tenant, and agrees to defend,
indemnify and hold harmless Landlord from and against any such lien or claim or
action thereon, together with costs of suit and reasonable attorneys' fees
incurred by Landlord in connection with any such claim or action. Before
commencing any work of alteration, addition or improvement to the Premises,
Tenant shall give Landlord at least ten (10) business days' written notice of
the proposed commencement of such work (to afford Landlord an opportunity to
post appropriate notices of non-responsibility). In the event that there shall
be recorded against the Premises or the Project or the property of which the
Premises is a part any claim or lien arising out of any such work performed,
materials furnished or obligations incurred by Tenant and such claim or lien
shall not be removed or discharged within ten (10) days of Tenant's receipt of
notice of such filing, Landlord shall have the right but not the obligation to
pay and discharge said lien without regard to whether such lien shall be lawful
or correct or to require that Tenant deposit with Landlord in cash, lawful money
of the United States, one hundred fifty percent (150%) of the amount of such
claim, which sum may be retained by Landlord until such claim shall have been
removed of record or until judgment shall have been rendered on such claim and
such judgment shall have become final, at which time Landlord shall have the
right to apply such deposit in discharge of the judgment on said claim and any
costs, including attorneys' fees incurred by Landlord, and shall remit the
balance thereof to Tenant.
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ARTICLE II
----------
PROJECT SERVICES
----------------
(a) Landlord shall provide electric current for normal lighting and normal
office machines, elevator service and water on the same floor as the Premises
for lavatory and drinking purposes in such reasonable quantities as in the
judgment of Landlord is reasonably necessary for general office use. All such
electricity shall be separately metered at Tenant's sole cost and expense and
Tenant shall make payment directly to the entity providing such electricity.
Tenant shall be responsible for employing a janitorial and maintenance service,
which contractor shall be reasonably approved by Landlord, and Tenant hereby
acknowledges that Landlord shall have no obligation whatsoever to provide such
services in the Premises. Landlord and Tenant hereby acknowledge that an
independent heating, ventilation and air conditioning system ("IIVAC System") is
installed in the Premises and that Landlord shall, as an Operating Cost,
maintain a service and/or maintenance contract for such HVAC System with a
contractor designated by Landlord in its reasonable discretion, which contractor
shall perform all maintenance and repairs establish for the proper functioning
and protection of the common area air conditioning, heating, elevator,
electrical intrabuilding network cable and plumbing systems. Landlord shall not
be liable for, and there shall be no rent abatement as a result of, any
stoppage, reduction or interruption of any such services caused by governmental
rules, regulations or ordinances, riot, strike, labor disputes, breakdowns,
accidents, necessary repairs or other cause. Except as specifically provided in
this Article 11, Tenant agrees to pay for all utilities and other services
utilities by Tenant and additional building services furnished to Tenant not
uniformly furnished to all tenants of the Project at the rate generally charged
by Landlord to tenants of the Project.
(b) Tenant will not, without the prior written consent of Landlord, use
any apparatus or device in the Premises which will in any way increase the
amount of water usually furnished or supplied for use of the Premises as general
office space; nor connect any apparatus, machine or device with water pipes for
the purpose of using water.
(c) Landlord may impose a reasonable charge for any utilities or services
(other than electric current and heating, ventilation and/or air conditioning
which shall be governed by Articles 11(a) and (b) above) utilized by Tenant in
excess of the amount or type that Landlord reasonably determines is typical for
general office use.
ARTICLE 12
----------
RIGHTS OF LANDLORD
------------------
Landlord and its agents shall have the right to enter the Premises at all
reasonable times upon twenty-four (24) hours prior notice (except in the case of
an emergency) for the purpose of cleaning the Premises, examining or inspecting
the same, serving or posting and keeping posted thereon notices as provided by
law, or which Landlord deems necessary for the protection of Landlord or the
Property, showing the same to prospective tenants (during the last nine (9)
months of the Term only), lenders or purchasers of the Project, and for making
such alternations, repairs, improvements or additions to the Premises or to the
Project as Landlord may deem necessary or desirable. If Tenant shall not be
personally present to open and permit an entry into the Premises at any time
when such an entry by Landlord is necessary or permitted hereunder, Landlord may
enter by means of a master key or may enter forcibly, only in the case of an
emergency, without liability to Tenant and without affecting this Lease. In
exercising Landlord's rights under this Article 12, Landlord shall use
commercially reasonable efforts not to interfere with Tenant's business
operations.
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ARTICLE 13
----------
INDEMNITY: EXEMPTION OF LANDLORD FROM LIABILITY
-----------------------------------------------
(a) Indemnity. Tenant shall indemnify, defend and hold Landlord harmless
---------
from any and all claims arising from Tenant's use of the Premises or the Project
or from the conduct of its business or from any activity, work or thing which
may be permitted or suffered by Tenant in or about the Premises or the Project
and shall further indemnify, defend and hold Landlord harmless from and against
any and all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under this Lease or arising from any
negligence of Tenant or any of its agents, contractors, employees or invitees,
patrons, customers or members in or about the Project and from any and all
costs, attorneys' fees, expenses and liabilities incurred in the defense of any
claim or any action or proceeding brought thereon, including negotiations in
connection therewith. Tenant hereby assumes all risk of damage to property or
injury to persons in or about the Premises from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord, excepting where the
damage is caused solely by the gross negligence or willful misconduct of
Landlord.
(b) Exemption of Landlord from Liability. Landlord shall not be liable for
------------------------------------
injury to Tenant's business, or loss of income therefrom, or for damage that may
be sustained by the person, goods, wares, merchandise or property of Tenant, its
employees, invites, customers, agents, or contractors, or any other person in,
on or about the Premises directly or indirectly caused by or resulting from
fire, steam, electricity, gas, water, or rain which may leak or flow from or
into any part of the Premises, or from the breakage, leakage, obstruction or
other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, light fixtures, or mechanical or electrical systems or from
intrabuilding network cable, whether such damage or injury results from
conditions arising upon the Premises or upon other portions of the Project or
from other sources or places and regardless of whether the cause of such damage
or injury or the means or repairing the same is inaccessible to Tenant, except
in connection with damage or injury resulting from the gross negligence or
willful misconduct of Landlord, or its authorized agents. Landlord shall not be
liable to Tenant for any damages arising from any act or neglect of any other
tenant of the building.
Tenant acknowledges that Landlord's election to provide mechanical
surveillance or to post security personnel in the Project is solely within
Landlord's discretion; Landlord shall have no liability in connection with the
decision whether or not to provide such services and Tenant hereby waives all
claims based thereon. Landlord shall not be liable for losses due to theft,
vandalism, or like causes. Tenant shall defend, indemnify, and hold Landlord
harmless from any such claims made by any employee, licensee, invitee,
contractor, agent or, other person whose presence in, on or about the Premises
or the Project is attendant to the business of Tenant.
ARTICLE 14
----------
INSURANCE
---------
(a) Tenant's Insurance. Tenant, shall at all times during the Term of this
------------------
Lease, and at its own cost and expense, procure and continue in force the
following insurance coverage: (i) Commercial General Liability Insurance with a
combined single limit for bodily injury and property damages of not less than
Two Million Dollars ($2,000,000) per occurrence and Three Million Dollars
($3,000,000) in the annual aggregate, including products liability coverage if
applicable, covering the insuring provisions of this Lease and the performance
of Tenant of the indemnity and exemption of Landlord from liability agreements
set forth in Article 13 hereof; (ii) a policy of standard fire, extended
coverage and special extended coverage insurance (all risks), including a
vandalism and malicious mischief endorsement, sprinkler leakage coverage and
earthquake sprinkler leakage where sprinklers are provided in an amount equal to
the full replacement value new without deduction for depreciation of all (A)
Tenant Improvements, Alterations, fixtures and other improvements in the
Premises and (B) trade fixtures, furniture, equipment and other personal
property installed by or at the expense of Tenant; (iii) Worker's Compensation
coverage as required by law; and (iv) business interruption, loss of income and
extra expense insurance covering failure of Tenant's telecommunications
equipment and covering all other perils, failures or interruptions. Tenant shall
carry and maintain during the entire Lease
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<PAGE>
Term (including any option periods, if applicable), at Tenant's sole cost and
expense, increased amounts of the insurance required to be carried by Tenant
pursuant to this Article 14 and such other reasonable types of insurance
coverage and in such reasonable amounts covering the Premises and Tenant's
operations therein, as may be reasonably required by Landlord.
(b) Form of Policies. The aforementioned minimum limits of policies and
----------------
Tenant's procurement and maintenance thereof shall in no event limit the
liability of Tenant hereunder. The Commercial General Liability Insurance policy
shall name Landlord, Landlord's property manager, Landlord's lender(s) and such
other persons or firms as Landlord specifies from time to time, as additional
insureds' with an appropriate endorsement to the policy(s). All such insurance
policies carried by Tenant shall be with companies having a rating of not less
than A-VIII in Best's Insurance Guide. Tenant shall furnish to Landlord, from
the insurance companies, or cause the insurance companies to furnish,
certificates of coverage. No such policy shall be cancelable or subject to
reduction of coverage or other modification or cancellation except after thirty
(30) days prior written notice to Landlord by the insurer. All such policies
shall be endorsed to agree that Tenant's policy is primary and that any
insurance covered by Landlord is excess and not contributing with any Tenant
insurance requirement hereunder. Tenant shall, at least twenty (20) days prior
to the expiration of such policies, furnish Landlord with renewals or binders.
Tenant agrees that if Tenant does not take out and maintain such insurance or
furnish Landlord with renewals or binders, Landlord may (but shall not be
required to) procure said insurance on Tenant's behalf and charge Tenant the
cost thereof, which amount shall be payable by Tenant upon demand with interest
(at the rate set forth in Section 20(e) below) from the date such sums are
extended. Tenant shall have the right to provide such insurance coverage
pursuant to blanket policies obtained by Tenant, provided such blanket policies
expressly afford coverage to the Premises and to Tenant as required by this
Lease.
(c) Landlord's Insurance. Landlord shall, as a cost to be included in
--------------------
Operating Costs, procure and maintain at all times during the Term of this
Lease, a policy or policies of insurance covering loss or damage to the Project
in the amount of the full replacement costs without deduction for depreciation
thereof (exclusive of Tenant's trade fixtures, inventory, personal property and
equipment), providing protection against all perils included within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage, and special extended coverage on
building. Additionally, Landlord may (but shall not be required to) carry: (i)
Bodily Injury and Property Damage Liability Insurance and/or Excess Liability
Coverage Insurance; and (ii) Earthquake and/or Flood Damage Insurance; and (iii)
Rental Income Insurance at its election or if required by its lender from time
to time during the Term hereof, in such amounts and with such limits as Landlord
or its lender may deem appropriate. The costs of such insurance shall be
included in Operating Costs.
(d) Waiver of Subrogation. Landlord and Tenant each agree to have their
---------------------
respective insurers issuing the insurance described in Sections 14(a)(ii),
14(a)(iv) and the first sentence of Section 14(c) waive any rights of
subrogation that such companies may have against the other party.
Notwithstanding to the contrary contained in this Lease, Tenant hereby waives
any right that Tenant may have against Landlord and Landlord hereby waives any
right that Landlord may have against Tenant as a result of any loss, liability
or damage to the extent such loss, liability or damage is or normally would be
insurable under such policies or any other property insurance carried by either
party with respect to the Project.
(e) Compliance with Law. Tenant agrees that it will not, at any time,
-------------------
during the Term of this Lease, carry any stock of goods or do anything in or
about the Premises that will in any way tend to increase the insurance rates
upon the Project. Tenant agrees to pay Landlord forthwith upon demand the amount
of any increase in premiums for insurance against loss by fire that may be
charged during the Term of this Lease on the amount of insurance to be carried
by Landlord on the Project resulting from the foregoing, or from Tenant doing
any act in or about said Premises that does so increase the insurance rates,
whether or not Landlord shall have consented to such act on the part of Tenant.
If Tenant installs upon the Premises any electrical equipment which constitutes
an overload of electrical lines of the Premises, Tenant shall at its own cost
and expense in accordance with all other Lease provisions, and subject to the
provisions of Article 9, 10 and 11, hereof, make whatever changes are necessary
to comply with requirements of the insurance underwriters and any governmental
authority having jurisdiction thereover, but nothing herein contained shall be
deemed to constitute Landlord's consent to such overloading.
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Tenant shall, at its own expense, comply with all requirements of the insurance
authority having jurisdiction over the Project necessary for the maintenance of
reasonable fire and extended coverage insurance for the Premises, including
without limitation thereto, the installation of fire extinguishers or an
automatic dry chemical extinguishing system.
ARTICLE 15
----------
ASSIGNMENT AND SUBLETTING
-------------------------
Tenant shall have no power to, either voluntarily, involuntarily, by
operation of law or otherwise, sell, assign, transfer or hypothecate this Lease,
or sublet the Premises or any part thereof, or permit the Premises or any part
thereof to be used or occupied by anyone other than Tenant or Tenant's employees
without the prior written consent of Landlord which shall not be unreasonably
withheld. If Tenant is a corporation, unincorporated association, partnership or
limited liability company, the sale, assignment, transfer or hypothecation of
any class of stock or other ownership interest in such corporation, association,
partnership or limited liability company in excess of twenty-five percent (25%)
in the aggregate shall be deemed an assignment within the meaning and provisions
of this Article 15. Tenant may transfer its interest pursuant to this Lease only
upon the following express conditions, which conditions are agreed by Landlord
and Tenant to be reasonable:
(a) That the proposed transferee shall be subject to the prior written
consent of Landlord, which consent will not be unreasonably withheld but,
without limiting the generality of the foregoing, it shall be reasonable for
Landlord to deny such consent if:
(i) The use to be made of the Premises by the proposed transferee is
(a) not generally consistent with the character and nature of all other
tenancies in the Project, or (b) a use which conflicts with any so-called
"exclusive" then in favor of, or for any use which is the same as that stated in
any percentage rent lease to, another tenant of the Project or any other
buildings which are in the same complex as the Project, or (c) a use which would
be prohibited by any other portion of this Lease (including but not limited to
any Rules and Regulations then in effect);
(ii) The financial responsibility of the proposed transferee is not
reasonably satisfactory to Landlord or in any event not at least equal to those
which were possessed by Tenant as of the date of execution of this Lease;
(iii) The proposed transferee is either a governmental agency or
instrumentality thereof; or
(iv) Either the proposed transferee or any person or entity which
directly or indirectly controls, is controlled by or is under common control
with the proposed transferee (A) occupies space in the Project at the time of
the request for consent, or (B) is negotiating with Landlord or has negotiated
with Landlord during the six (6) month period immediately preceding the date of
the proposed transfer, to lease space in the Project.
(b) Whether or not Landlord consents to any such transfer, Tenant shall pay
to Landlord Landlord's then standard processing fee and reasonable attorneys'
fees incurred in connection with the proposed transfer up to the aggregate sum
of $1,500.00;
(c) That the proposed transferee shall execute an agreement pursuant to
which it shall agree to perform faithfully and be bound by all of the terms,
covenants, conditions, provisions and agreements of this Lease applicable to
that portion of the Premises so transferred; and
(d) That an executed duplicate original of said assignment and assumption
agreement or other transfer on a form reasonably approved by Landlord, shall be
delivered to Landlord within five (5) days after the execution thereof, and that
such transfer shall not be binding upon Landlord until the delivery thereof to
Landlord and the execution and delivery of Landlord's consent thereto. It shall
be a condition to Landlord's consent to any subleasing, assignment or other
transfer of part or all of Tenant's interest in the Premises (hereinafter
referred to as a "TRANSFER") that (i) upon Landlord's consent to any Transfer,
Tenant shall pay and continue to pay fifty percent (50%) of any "Transfer
Premium" (defined below), received by Tenant from the
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transferee; (ii) any sublessee of part or all of Tenant's interest in the
Premises shall agree that in the event Landlord gives such sublessee notice that
Tenant is in default under this Lease, such sublessee shall thereafter make all
sublease or other payments directly to Landlord, which will be received by
Landlord without any liability whether to honor the sublease or otherwise
(except to credit such payments against sums due under this Lease), and any
sublessee shall agree to attorn to Landlord or its successors and assigns at
their request should this Lease be terminated for any reason, except that in no
event shall Landlord or its successors or assigns be obligated to accept such
attornment; (iii) any such Transfer and consent shall be effected on forms
supplied by Landlord and/or its legal counsel; (iv) Landlord may require that
Tenant not then be in default hereunder in any respect; and (v) Tenant or the
proposed subtenant or assignee (collectively, "TRANSFEREE") shall agree to pay
Landlord, upon demand, as additional rent, a sum equal to the additional costs,
if any, incurred by Landlord for maintenance and repair as a result of any
change in the nature of occupancy caused by such subletting or assignment.
"TRANSFER PREMIUM" shall mean all rent, additional rent or other consideration
payable by a Transferee in connection with a Transfer in excess of the rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer and if such Transfer is less than all of the Premises, the Transfer
Premium shall be calculated on a rentable square foot basis. "Transfer Premium"
shall also include, but not be limited to, key money, bonus money or other cash
consideration paid by a transferee to Tenant in connection with such Transfer,
and any payment in excess of fair market value for assets, rendered by Tenant to
the Transferee and any payment in excess of fair market value for assets,
fixtures, inventory, equipment, or furniture transferred by Tenant to the
Transferee in connection with such Transfer. Any sale assignment, hypothecation,
transfer or subletting of this Lease which is not in compliance with the
provisions of this Article 15 shall be void and shall, at the option of
Landlord, terminate this Lease. In no event shall the consent by Landlord to an
assignment or subletting be construed as relieving Tenant, any assignee, or
sublessee from obtaining the express written consent of Landlord to any further
assignment or subletting, or as releasing Tenant from any liability or
obligation hereunder whether or not then accrued and Tenant shall continue to be
fully liable therefor. No collection or acceptance of rent by Landlord from any
person other than Tenant shall be deemed a waiver of any provision of this
Article 15 or the acceptance of any assignee or subtenant hereunder, or a
release of Tenant (or of any successor of Tenant or any subtenant).
Notwithstanding anything to the contrary in this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent under this Article 15 or otherwise has breached or acted
unreasonably under this Article 15, their sole remedies shall be a declaratory
judgment and an injunction for the relief sought without any monetary damages,
and Tenant hereby waives all other remedies, including, without limitation, any
right at law or equity to terminate this Lease, on its own behalf and, to the
extent permitted under all applicable laws, on behalf of the proposed
Transferee.
(e) Notwithstanding anything to the contrary contained in this Article 15,
an assignment or subletting of all or a portion of the Premises to an affiliate
of Tenant (an entity which is controlled by, controls, or is under common
control with, Tenant) shall not be deemed a Transfer under this Article 15,
provided that Tenant notifies Landlord of any such assignment or sublease and
promptly supplies Landlord with any documents or information requested by
Landlord regarding such assignment or sublease, and further provided that such
assignment or sublease is not a subterfuge by Tenant to avoid its obligations
under this Lease. An assignee to whom Tenant's entire interest in this Lease is
assigned pursuant to this Section 15(e) may be referred to herein as a
"PERMITTED ASSIGNEE." "CONTROL," as used in this Section 15(e), shall mean the
ownership, directly or indirectly, of greater than fifty percent (50%) of the
voting securities of, or possession of the right to vote, in the ordinary
direction of its affairs, of greater than fifty percent (50%) of the voting
interest in, an entity.
Notwithstanding anything to the contrary contained in this Article 15,
Landlord shall have the option, by giving written notice to Tenant within thirty
(30) days after Landlord's receipt of a request for consent to a proposed
Transfer, to terminate this Lease as to the portion of the Premises that is the
subject of the Transfer; provided, however, that Tenant shall have the option to
withdraw such request and remain in possession of the Premises by giving written
notice of such election to Landlord within ten (10) days after receipt of
Landlord's election to terminate. If this Lease is so terminated with respect to
less than the entire Premises, the Basic Rental and Tenant's Proportionate Share
shall be prorated based on the number of rentable square feet retained by Tenant
as compared to the total number of rentable square feet contained in the
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original Premises, and this Lease as so amended shall continue thereafter in
full force and effect, and upon the request of either party, the parties, shall
execute written confirmation of the same.
ARTICLE 16
----------
DAMAGE OR DESTRUCTION
---------------------
If the Project is damaged by fire or other insured casualty and the
insurance proceeds have been made available therefor by the holder or holders of
any mortgages or deeds of trust covering the Premises or the Project, the damage
shall be repaired by Landlord to the extent such insurance proceeds are
available therefor and provided such repairs can, in Landlord's sole opinion, be
completed within two hundred seventy (270) days after the necessity for repairs
as a result of such damage becomes known to Landlord without the payment of
overtime or other premiums, and until such repairs are completed rent shall be
abated in proportion to the part of the Premises which is unusable by Tenant in
the conduct of its business (but there shall be no abatement of rent by reason
of any portion of the Premises being unusable for a period equal to one (1) day
or less). However, if the damage is due to the fault or neglect of Tenant, its
employees, agents, contractors, guests, invitees and the like, there shall be no
abatement of rent except to the extent of any rental loss insurance maintained
by Landlord with respect to the Premises. Upon the occurrence of any damage to
the Premises, Tenant shall assign to Landlord (or to any party designated by
Landlord) all insurance proceeds payable to Tenant under Section 14(a)(ii)(A)
above; provided, however, that if the cost of repair of improvements within the
Premises by Landlord exceeds the amount of insurance proceeds received by
Landlord from Tenant's insurance carrier, as so assigned by Tenant, such excess
costs shall be paid by Tenant to Landlord prior to Landlord's repair of such
damage. If repairs cannot, in Landlord's opinion, be completed within two
hundred seventy (270) days after the necessity for repairs as a result of such
damage becomes known to Landlord without the payment of overtime or other
premiums, Landlord may, at its option, either (i) make them in a reasonable time
and in such event this Lease shall continue in effect and the rent shall be
abated, if at all, in the manner provided in this Article 16, or (ii) elect not
to effect such repairs and instead terminate this Lease, by notifying Tenant in
writing of such termination within sixty (60) days after Landlord learns of the
necessity for repairs as a result of damage, such notice to include a
termination date giving Tenant sixty (60) days to vacate the Premises. In
addition, Landlord may elect to terminate this Lease if the Project shall be
damaged by fire or other casualty or cause, whether or not the Premises are
affected, and the damage is not fully covered, except for deductible amounts, by
Landlord's insurance policies. Finally, if the Premises or the Project is
damaged to any substantial extent during the last twelve (12) months of the
Term, then notwithstanding anything contained in this Article 16 to the
contrary, Landlord shall have the option to terminate this Lease by giving
written notice to Tenant of the exercise of such option within sixty (60) days
after Landlord learns of the necessity for repairs as the result of such damage;
provided, however, that Landlord shall not have such option if Tenant, at the
time of such damage, has an express option to extend the Term, and Tenant
exercises such option by written notice to Landlord in accordance with the terms
and conditions of Article 31 hereof, within twenty (20) days following Tenant's
receipt of Landlord's notice of termination. A total destruction of the Project
shall automatically terminate this Lease. Except as provided in this Article 16,
there shall be no abatement of rent and no liability of Landlord by reason of
any injury to or interference with Tenant's business or property arising from
such damage or destruction or the making of any repairs, alterations or
improvements in or to any portion of the Project or the Premises or in or to
fixtures, appurtenances and equipment therein. Tenant understands that Landlord
will not carry insurance of any kind on Tenant's furniture, furnishings, trade
fixtures or equipment, and that Landlord shall not be obligated to repair any
damage thereto or replace the same. Except for proceeds relating to Tenant's
furniture, furnishings, trade fixtures and equipment, Tenant acknowledges that
Tenant shall have no right to any proceeds of insurance relating to property
damage. With respect to any damage which Landlord is obligated to repair or
elects to repair, Tenant, as a material inducement to Landlord entering into
this Lease, irrevocably waives and releases its rights under the provisions of
Sections 1932 and 1933 of the California Civil Code.
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<PAGE>
ARTICLE 17
----------
SUBORDINATION
-------------
This Lease is subject and subordinate to all ground or underlying leases,
mortgages and deeds of trust which affect the property or the Project, including
all renewals, modifications, consolidations, replacements and extensions
thereof; provided, however, if the lessor under any such lease or the holder or
holders of any such mortgage or deed of trust shall advise Landlord that they
desire or require this Lease to be prior and superior thereto, upon written
request of Landlord to Tenant, Tenant agrees to promptly execute, acknowledge
and deliver any and all documents or instruments which Landlord or-such lessor,
holder or holders deem necessary or desirable for purposes thereof. Landlord
shall have the right to cause this Lease to be and become and remain subject and
subordinate to any and all ground or underlying leases, mortgages or deeds of
trust which may hereafter be executed covering the Premises, the Project or the
property or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided, however, that Landlord obtains from the lender or other party
in question a written undertaking in favor of Tenant to the effect that such
lender or other party in not disturb Tenant's right of possession under this
Lease if Tenant is not then or thereafter in breach of any covenant or
provisions of this Lease. Tenant agrees, within ten (10) days after Landlord's
written request therefor, to execute, acknowledge and deliver upon request any
and all documents or instruments requested by Landlord or necessary or proper to
assure the subordination of this Lease to any such mortgages, deed of trust, or
leasehold estates. Tenant agrees that in the event any proceedings are brought
for the foreclosure of any mortgage or deed of trust or any deed in Lieu
thereof, to attorn to the purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof as so requested to do so by such
purchaser and to recognize such purchaser as the lessor under this Lease; Tenant
shall, within five (5) days after request execute such further instruments or
assurances as such purchaser may reasonably deem necessary to evidence or
confirm such attornment. Tenant agrees to provide copies of any notices of
Landlord's default under this Lease to any mortgagee or deed of trust
beneficiary whose address has been provided to Tenant and Tenant shall provide
such mortgagee or deed of trust beneficiary a commercially reasonable time after
receipt of such notice within which to cure any such default. Tenant waives the
provisions of any current or future statute, rule or law which may give or
purport to give Tenant any right or election to terminate or otherwise adversely
affect this Lease and the obligations of the Tenant hereunder in the event of
any foreclosure proceeding or sale.
ARTICLE 18
----------
EMINENT DOMAIN
--------------
If the whole of the Premises or the Project or so much thereof as to render
the balance unusable by Tenant shall be taken under power of eminent domain, or
is sold, transferred or conveyed in lieu thereof, this Lease shall automatically
terminate as of the date of such condemnation, or as of the date possession is
taken by the condemning authority, at Landlord's option. No award for any
partial or entire taking shall be apportioned, and Tenant hereby assigns to
Landlord any award which may be made in such taking or condemnation, together
with any and all rights of Tenant now or hereafter arising in or to the same or
any part thereof; provided, however, that nothing contained herein shall be
deemed to give Landlord any interest in or to require Tenant to assign to
Landlord any award made to Tenant for the taking of personal property and trade
fixtures belonging to Tenant and removable by Tenant at the expiration of the
Term hereof as provided hereunder or for the interruption of, or damage to,
Tenant's business. In the event of a partial taking described in this Article
18, or a sale, transfer or conveyance in lieu thereof, which does not result in
a termination of this Lease, the rent shall be apportioned according to the
ratio that the part of the Premises remaining useable by Tenant bears to the
total area of the Premises. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of the California Code of Civil
Procedure.
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ARTICLE 19
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DEFAULT
-------
Each of the following acts or omissions of Tenant or of any guarantor of
Tenant's performance hereunder, or occurrences, shall constitute an "EVENT OF
DEFAULT":
(a) Failure or refusal to pay Basic Rental, Additional Rent or any other
amount to be paid by Tenant to Landlord hereunder within five (5) calendar days
after notice that the same is due or payable hereunder; said five (5) day period
shall be in lieu of, and not in addition to, the notice requirements of Section
1161 of the California Code of Civil Procedure or any similar or successor law;
(b) Except as set forth in items (a) above and (c) through and including
(g) below, failure to perform or observe any other covenant or condition of this
Lease to be performed or observed within thirty (30) days following written
notice to Tenant of such failure. Such thirty (30) day notice shall be in lieu
of, and not in addition to, any required under Section 1161 of the California
Code of Civil Procedure or any similar or successor law;
(c) Abandonment or failure to accept tender of possession of the Premises
or any significant portion thereof;
(d) The taking in execution or by similar process or law (other than by
eminent domain) of the estate hereby created;
(e) The filing by Tenant or any guarantor hereunder in any court pursuant
to any statute of a petition in bankruptcy or insolvency or for reorganization
or arrangement for the appointment of a receiver of all or a portion of Tenant's
property; the filing against Tenant or any guarantor hereunder of any such
petition, or the commencement of a proceeding for the appointment of a trustee,
receiver or liquidator for Tenant, or for any guarantor hereunder, or of any of
the property of either, or a proceeding by any governmental authority for the
dissolution or liquidation of Tenant or any guarantor hereunder, if such
proceeding shall not be dismissed or trusteeship discontinued within thirty (30)
days after commencement of such proceeding or the appointment of such trustee or
receiver; or the making by Tenant or any guarantor hereunder of an assignment
for the benefit of creditors. Tenant hereby stipulates to the lifting of the
automatic stay in effect and relief from such stay for Landlord in the event
Tenant files a petition under the United States Bankruptcy laws, for the purpose
of Landlord pursuing its rights and remedies against Tenant and/or a guarantor
of this Lease;
(f) Tenant's failure to cause to be released any mechanics liens filed
against the Premises or the Project within twenty (20) days after the date that
Tenant receives notice that the same has been filed or recorded; or
(g) Tenant's failure to observe or perform according to the provisions of
Articles 17 or 25 within two (2) business days after notice from Landlord.
All defaults by Tenant of any covenant or condition of this Lease shall be
deemed by the parties hereto to be material.
ARTICLE 20
----------
REMEDIES
--------
(a) Upon the occurrence of an Event of Default under this Lease as provided
in Article 19 hereof, Landlord may exercise all of its remedies as may be
permitted by law, including but not limited to the remedy provided by Section
1951.4 of the California Civil Code, and including without limitation,
terminating this Lease, reentering the Premises and removing all persons and
property therefrom, which property may be stored by Landlord at a warehouse or
elsewhere at the risk, expense and for the account of Tenant. If Landlord elects
to terminate this Lease, Landlord shall be entitled to recover from Tenant the
aggregate of all amounts permitted by law, including but not limited to (i) the
worth at the time of award of the amount of any unpaid rent which had been
earned at the time of such termination; plus (ii) the worth at the time of
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award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, specifically
including but not limited to, brokerage commissions and advertising expenses
incurred, expenses of remodeling the Premises or any portion thereof for a new
tenant, whether for the same or a different use, and any special concessions
made to obtain a new tenant; and (v) at Landlord's election, such other amounts
in addition to or in lieu of the foregoing as may be permitted from time to time
by applicable law. The term "rent" as used in this Article 20(a) shall be deemed
to be and to mean all sums of every nature required to be paid by Tenant
pursuant to the terms of this Lease, whether to Landlord or to others. As used
in items (i) and (ii), above, the "worth at the time of award" shall be computed
by allowing interest at the rate set forth in item (e), below, but in no case
greater than the maximum amount of such interest permitted by law. As used in
item (iii), above, the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(b) Nothing in this Article 20 shall be deemed to affect Landlord's right
to indemnification for liability or liabilities arising prior to the termination
of this Lease for personal injuries or property damage under the indemnification
clause or clauses contained in this Lease.
(c) Notwithstanding anything to the contrary set forth herein, Landlord's
re-entry to perform acts of maintenance or preservation of or in connection with
efforts to relet the Premises or any portion thereof, or the appointment of a
receiver upon Landlord's initiative to protect Landlord's interest under this
Lease shall not terminate Tenant's right to possession of the Premises or any
portion thereof and, until Landlord does elect to terminate this Lease, this
Lease shall continue in full force and effect and Landlord may enforce all of
Landlord's rights and remedies hereunder including, without limitation, the
remedy described in California Civil Code Section 1951.4 (lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes due, if Lessee has the right to sublet or assign, subject only to
reasonable limitations). Accordingly, if Landlord does not elect to terminate
this Lease on account of any default by Tenant, Landlord may, from time to time,
without terminating this Lease, enforce all of its rights and remedies under
this Lease, including the right to recover all rent as it becomes due.
(d) All rights, powers and remedies of Landlord hereunder and under any
other agreement now or hereafter in force between Landlord and Tenant shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Landlord by law, and the exercise of one or more rights or
remedies shall not impair Landlord's right to exercise any other right or
remedy.
(e) Any amount due from Tenant to Landlord hereunder which is not paid when
due shall bear interest at the lower of eighteen percent (18%) per annum or the
maximum lawful rate of interest from the due date until paid, unless otherwise
specifically provided herein, but the payment of such interest shall not excuse
or cure any default by Tenant under this Lease. In addition to such interest:
(a) if Basic Rental is not paid within ten (10) days after the same is due, a
late charge equal to ten percent (10%) of the amount overdue or $100, whichever
is greater, shall be assessed and shall accrue for each calendar month or part
thereof until such rental, including the late charge, is paid in full, which
late charge Tenant hereby agrees is a reasonable estimate of the damages
Landlord shall suffer as a result of Tenant's late payment and (b) an additional
charge of $25 shall be assessed for any check given to Landlord by or on behalf
of Tenant which is not honored by the drawee thereof; which damages include
Landlord's additional administrative and other costs associated with such late
payment and unsatisfied checks and the parties agree that it would be
impracticable or extremely difficult to fix Landlord's actual damage in such
event. Such charges for interest and late payments and unsatisfied checks are
separate and cumulative and are in addition to and shall not diminish or
represent a substitute for any or all of Landlord's rights or remedies under any
other provision of this Lease.
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ARTICLE 21
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TRANSFER OF LANDLORD'S INTEREST
-------------------------------
In the event of any transfer or termination of Landlord's interest in the
Premises or the Project by sale, assignment, transfer, foreclosure, deed-in-lieu
of foreclosure or otherwise whether voluntary or involuntary, Landlord shall be
automatically relieved of any and all obligations and liabilities on the part of
Landlord from and after the date of such transfer or termination, including
furthermore without limitation, the obligation of Landlord under Article 4 and
California Civil Code 1950.7 above to return the security deposit, provided said
security deposit is transferred to said transferee. Tenant agrees to attorn to
the transferee upon any such transfer and to recognize such transferee as the
lessor under this Lease and Tenant shall, within five (5) days after request,
execute such further instruments or assurances as such transferee may reasonably
deem necessary to evidence or confirm such attornment.
ARTICLE 22
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BROKER
------
In connection with this Lease, Tenant warrants and represents that it has
had dealings only with firm(s) set forth in Article 1.H. of the Basic Lease
Provisions and that it knows of no other person or entity who is or might be
entitled to a commission, finder's fee or other like payment in connection
herewith and does hereby indemnify and agree to hold Landlord, its agents,
members, partners, representatives, officers, affiliates, shareholders,
employees, successors and assigns harmless from and against any and all loss,
liability and expenses that Landlord may incur should such warranty and
representation prove incorrect, inaccurate or false.
ARTICLE 23
----------
PARKING
-------
Tenant shall rent from Landlord, commencing on the Commencement Date, the
number of unreserved parking passes set forth in Section 1(I) of the Basic Lease
Provisions, which parking passes shall pertain to the Project parking facility.
Landlord shall not charge Tenant for the use of such automobile parking passes
during the initial Lease Term. Tenant's continued right to use the parking
passes is conditioned upon Tenant abiding by all rules and regulations which are
prescribed from time to time for the orderly operation and use of the parking
facility where the parking passes are located, including any sticker or other
identification system established by Landlord, Tenant's cooperation in seeing
that Tenant's employees and visitors also comply with such rules and
regulations, and Tenant not being in default under this Lease. Landlord
specifically reserves the right to change the size, configuration, design,
layout and all other aspects of the Project parking facility at any time and
Tenant acknowledges and agrees that Landlord may, without incurring any
liability to Tenant and without any abatement of rent under this Lease, from
time to time, close-off or restrict access to the Project parking facility for
purposes of permitting or facilitating any such construction, alteration or
improvements. Landlord may delegate its responsibilities hereunder to a parking
operator or a lessee of the parking facility in which case such parking operator
or lessee shall have all the rights of control attributed hereby to the
Landlord. The parking passes rented by Tenant pursuant to this Article 23 are
provided to Tenant solely for use by Tenant's own personnel and such passes may
not be transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval.
ARTICLE 24
----------
WAIVER
------
No waiver by Landlord of any provision of this Lease shall be deemed to be
a waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provision. No provision of this Lease may be waived by
Landlord, except by an instrument in writing executed by Landlord. Landlord's
consent to or approval of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of any subsequent act of Tenant, whether or not similar
to the
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act so consented to or approved. No act or thing done by Landlord or Landlord's
agents during the Term of this Lease shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept such surrender shall be
valid unless in writing and signed by Landlord. Any payment by Tenant or receipt
by Landlord of an amount less than the total amount then due hereunder shall be
deemed to be in partial payment only thereof and not a waiver of the balance due
or an accord and satisfaction, notwithstanding any statement or endorsement to
the contrary on any check or any other instrument delivered concurrently
therewith or in reference thereto. Accordingly, Landlord may accept any such
amount and negotiate any such check without prejudice to Landlord's right to
recover all balances due and owing and to pursue its other rights against Tenant
under this Lease, regardless of whether Landlord makes any notation on such
instrument of payment or otherwise notifies Tenant that such acceptance or
negotiation is without prejudice to Landlord's rights.
ARTICLE 25
----------
ESTOPPEL CERTIFICATE
--------------------
Tenant shall, at any time and from time to time, upon not less than ten
(10) days' prior written notice from Landlord, execute, acknowledge and deliver
to Landlord a statement in writing certifying the following information, (but
not limited to the following information in the event further information is
requested by Landlord): (i) 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 modified, is in full force and effect); (ii) the dates to
which the rental and other charges are paid in advance, if any; (iii) the amount
of Tenant's security deposit, if any; and (iv) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
and no events or conditions then in existence which, with the passage of time or
notice or both, would constitute a default on the part of Landlord hereunder, or
specifying such defaults, events or conditions, if any are claimed. It is
expressly understood and agreed that any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the Real
Property. Tenant's failure to deliver such statement within such time shall
constitute an admission by Tenant that all statements contained therein are true
and correct. Tenant agrees to execute all documents required in accordance with
this Article 25 within ten (10) days after delivery of said documents. Tenant
hereby irrevocably appoints Landlord as Tenant's attorney-in-fact and in
Tenant's name, place and stead to execute any and all documents described in
this Article 25 if Tenant fails to do so within the specified time period.
ARTICLE 26
----------
LIABILITY OF LANDLORD
---------------------
Notwithstanding anything in this Lease to the contrary, any remedy of
Tenant for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default by Landlord
hereunder or any claim, cause of action or obligation, contractual, statutory or
otherwise by Tenant against Landlord concerning, arising out of or relating to
any matter relating to this Lease and all of the covenants and conditions or any
obligations, contractual, statutory, or otherwise set forth herein, shall be
limited solely and exclusively to an amount which is equal to the lesser of (i)
the interest of Landlord in and to the Project, and (ii) the interest Landlord
would have in the Project if the Project were encumbered by third party debt in
an amount equal to ninety percent (90%) of the then current value of the Project
(as such value is reasonably determined by Landlord). No other property or
assets of Landlord, or any member, officer, director, shareholder, partner,
trustee, agent, servant or employee of Landlord (the "REPRESENTATIVE") shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this Lease, Landlord's obligations
to Tenant, whether contractual, statutory or otherwise, the relationship of
Landlord and Tenant hereunder, or Tenant's use or occupancy of the Premises.
Tenant further understands that any liability, duty or obligation of Landlord to
Tenant, shall automatically cease and terminate as of the date that Landlord or
any of Landlord's Representatives no longer have any right, title or interest in
or to the Project.
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ARTICLE 27
----------
INABILITY TO PERFORM
--------------------
This Lease and the obligations of Tenant hereunder shall not be affected or
impaired because Landlord is unable to fulfill any of its obligations hereunder
or is delayed in doing so, if such inability or delay is caused by reason of any
prevention, delay, stoppage due to strikes, lockouts, acts of God, or any other
cause previously, or at such time, beyond the reasonable control or anticipation
of Landlord (collectively, a "FORCE MAJEURE") and Landlord's obligations under
this Lease shall be forgiven and suspended by any such Force Majeure.
ARTICLE 28
----------
HAZARDOUS WASTE
---------------
(a) Tenant shall not cause or permit any Hazardous Material (as defined in
Article 28(d) below) to be brought, kept or used in or about the Project by
Tenant, its agents, employee, contractors, or invitees, except for normal and
customary quantities and types of janitorial and office supplies (including
copier toner, cleaning agents and the like). Tenant indemnifies Landlord from
and against any breach by Tenant of the obligations stated in the preceding
sentence, and agrees to defend and hold Landlord harmless from and against any
and all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including, without limitation, diminution in value of the Project,
damages for the loss or restriction or use of rentable or usable space or of any
amenity of the Project, damages arising from any adverse impact or marketing of
space in the Project, and sums paid in settlement of claims, attorneys' fees,
consultant fees, and expert fees) which arise during or after the Term of this
Lease as a result of such breach. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state, or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Project. Without limiting the foregoing, if the
presence of any Hazardous Material on the Project caused or permitted by Tenant
results in any contamination of the Project and subject to the provisions of
Articles 9, 10 and 11, hereof, Tenant shall promptly take all actions at its
sole expense as are necessary to return the Project to the condition existing
prior to the introduction of any such Hazardous Material and the contractors to
be used by Tenant for such work must be approved by Landlord, which approval
shall not be unreasonably withheld so long as such actions would not potentially
have any material adverse long-term or short-term effect on the Project and so
long as such actions do not materially interfere with the use and enjoyment of
the Project by the other tenants thereof.
(b) Landlord and Tenant acknowledge that Landlord may become legally
liable for the costs of complying with Laws (as defined in Article 28(e) (below)
relating to Hazardous Material which are not the responsibility of Landlord or
the responsibility of Tenant, including the following: (i) Hazardous Material
present in the soil or ground water on the Project of which Landlord has no
knowledge as of the effective date of this Lease; (ii) a change in Laws which
relate to Hazardous Material which make that Hazardous Material which is present
on the Real Property as of the effective date of this Lease, whether known or
unknown to Landlord, a violation of such new Laws; (iii) Hazardous Material that
migrates, flows, percolates, diffuses, or in any way moves on to, or under, the
Project after the effective date of this Lease; or Hazardous Material present on
or under the Project as a result of any discharge, dumping or spilling (whether
accidental or otherwise) on the Project by other lessees of the Project or their
agents, employees, contractors, or invitees, or by others. Accordingly, Landlord
and Tenant agree that the cost of complying with Laws relating to Hazardous
Material on the Project for which Landlord is legally liable and which are paid
or incurred by Landlord shall be an Operating Cost (and Tenant shall pay
Tenant's Proportionate Share thereof in accordance with Article 3) unless the
cost of such compliance as between Landlord and Tenant, is made the
responsibility of Tenant pursuant to Article 28(a) above. To the extent any such
Operating Cost relating to Hazardous Material is subsequently recovered or
reimbursed through insurance, or recovery from responsible third parties or
other action, Tenant shall be entitled to a proportionate reimbursement to the
extent it has paid its share of such Operating Cost to which such recovery or
reimbursement relates.
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(c) It shall not be unreasonable for Landlord to withhold its consent to
any proposed Transfer if (i) the proposed transferee's anticipated use of the
Premises involves the generation, storage, use, treatment, or disposal of
Hazardous Material; (ii) the proposed Transferee has been required by any prior
landlord, lender, or governmental authority to take remedial action in
connection with Hazardous Material contaminating a property if the contamination
resulted from such Transferee's actions or use of the property in question; or
(iii) the proposed Transferee is subject to an enforcement order issued by any
governmental authority in connection with the use, disposal, or storage of a
Hazardous Material.
(d) As used herein, the term "HAZARDOUS MATERIAL" means any hazardous or
toxic substance, material, or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States Government.
The term "Hazardous Material" includes, without limitation, any material or
substance which is (i) defined as "Hazardous Waste," "Extremely Hazardous
Waste," or "Restricted Hazardous Waste" under Sections 25115, 25117 or 25122.7,
or listed pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a
"Hazardous Substance" under Section 25316 of the California Health and Safety
Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance
Account Act), (iii) defined as a "Hazardous Material," "Hazardous Substance," or
"Hazardous Waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory), (iv) defined as a "Hazardous Substance" under Section 25281 of the
California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage
of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under
Article 9 or defined as Hazardous or extremely hazardous pursuant to Article 11
of Title 22 of the California Administrative Code, Division 4, Chapter 20,
(viii) designated as a "Hazardous Substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as a
"Hazardous Waste" pursuant to Section 1004 of the Federal Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), or
(x) defined as a "Hazardous Substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. (42 U.S.C. Section 9601).
(e) As used herein, the term "LAWS" mean any applicable federal, state or
local laws, ordinances, or regulations relating to any Hazardous Material
affecting the Project, including, without limitation, the laws, ordinances, and
regulations referred to in Article 28(d) above.
ARTICLE 29
----------
SURRENDER OF PREMISES; REMOVAL OF PROPERTY
------------------------------------------
(a) The voluntary or other surrender of this Lease by Tenant to Landlord,
or a mutual termination hereof, shall not work a merger, and shall at the option
of Landlord, operate as an assignment to it of any or all subleases or
subtenancies affecting the Premises.
(b) Upon the expiration of the Term of this Lease, or upon any earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in as good order and condition as the same are now and
hereafter may be improved by Landlord or Tenant, reasonable wear and tear,
damage caused by casualty or condemnation, Hazardous Materials not released or
emitted by Tenant or its agents, employees or contractors, and repairs which are
Landlord's obligation excepted, and shall, without expense to Landlord, remove
or cause to be removed from the Premises all debris and rubbish, all furniture,
equipment, business and trade fixtures, free-standing cabinet work, moveable
partitioning and other articles of personal property owned by Tenant or
installed or placed by Tenant at its own expense in the Premises, and all
similar articles of any other persons claiming under Tenant unless Landlord
exercises its option to have any subleases or subtenancies assigned to it, and
Tenant shall repair all damage to the Premises resulting from the installation
and removal of such items to be removed.
(c) Whenever Landlord shall reenter the Premises as provided in Article 12
hereof, or as otherwise provided in this Lease, any property of Tenant not
removed by Tenant upon the expiration of the Term of this Lease (or within
forty-eight (48) hours after a termination by reason of Tenant's default), as
provided in this Lease, shall be considered abandoned and Landlord may remove
any or all of such items and dispose of the same in any manner or store the same
in a
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<PAGE>
public warehouse or elsewhere for the account and at the expense and risk of
Tenant, and if Tenant shall fail to pay the cost of storing any such property
after it has been stored for a period of ninety (90) days or more, Landlord may
sell any or all of such property at public or private sale, in such manner and
at such times and places as Landlord, in its sole discretion, may deem proper,
without notice or to demand upon Tenant, for the payment of all or any part of
such charges or the removal of any such property, and shall apply the proceeds
of such sale as follows: first, to the cost and expense of such sale, including
reasonable attorneys' fees for services rendered; second, to the payment of the
cost of or charges for storing any such property; third, to the payment of any
other sums of money which may then or thereafter be due to Landlord from Tenant
under any of the terms hereof; and fourth, the balance, if any, to Tenant.
(d) All fixtures, equipment, Alterations and/or appurtenances attached to
or built into the Premises prior to or during the Term, whether by Landlord or
Tenant and whether at the expense of Landlord or Tenant, or of both, shall be
and remain part of the Premises and shall not be removed by Tenant at the end of
the Term unless otherwise expressly provided for in this Lease or unless such
removal is required by Landlord pursuant to the provisions of Article 9, above.
Such fixtures, equipment, alterations, additions, improvements and/or
appurtenances shall include but not be limited to: all floor coverings, drapes,
paneling, built-in cabinetry, molding, doors, vaults (including vault doors),
plumbing systems, electrical systems, lighting systems, silencing equipment,
communication systems, all fixtures and outlets for the systems mentioned above
and for all telephone, radio, telegraph and television purposes, and any special
flooring or ceiling installations.
ARTICLE 30
----------
MISCELLANEOUS
-------------
(a) Severability: Entire Agreement. Any provision of this Lease which
------------------------------
shall prove to be invalid, void, or illegal shall in no way affect, impair or
invalidate any other provision hereof and such other provisions shall remain in
full force and effect. This Lease and the Exhibits and any Addendum attached
hereto constitute the entire agreement between the parties hereto with respect
to the subject matter hereof, and no prior agreement or understanding pertaining
to any such matter shall be effective for any purpose. No provision of this
Lease may be amended or supplemented except by an agreement in writing signed by
the parties hereto or their successor in interest. This Lease shall be governed
by and construed in accordance with the laws of the State of California.
(b) Attorneys' Fees: Waiver of Jury Trial.
-------------------------------------
(i) In any action to enforce the terms of this Lease, including any
suit by Landlord for the recovery of rent or possession of the Premises, the
losing party shall pay the successful party a reasonable sum for attorneys' fees
in such suit and such attorneys' fees shall be deemed to have accrued prior to
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment.
(ii) Should Landlord, without fault on Landlord's part, be made a
party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using the Premises by
license of Tenant, or for the foreclosure of any lien for labor or material
furnished to or for Tenant or any such other person or otherwise arising out of
or resulting from any act or transaction of Tenant or of any such other person,
Tenant covenants to save and hold Landlord harmless from any judgment rendered
against Landlord or the Premises or any part thereof and from all costs and
expenses, including reasonable attorneys' fees incurred by Landlord in
connection with such litigation.
(iii) When legal services are rendered by an attorney at law who is
an employee of a party, attorneys' fees incurred by that party shall be deemed
to include an amount based upon the number of hours spent by such employee on
such matters multiplied by an appropriate billing rate determined by taking into
consideration the same factors, including but not limited by, the importance of
the matter, time applied, difficulty and results, as are considered when an
attorney not in the employ of a party is engaged to render such service.
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(iv) EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION SEEKING SPECIFIC PERFORMANCE OF ANY PROVISION OF THIS LEASE, FOR DAMAGES
FOR ANY BREACH UNDER THIS LEASE, OR OTHERWISE FOR ENFORCEMENT OF ANY RIGHT OR
REMEDY HEREUNDER.
(c) Time of Essence. Each of Tenant's covenants herein is a condition and
---------------
time is of the essence with respect to the performance of every provision of
this Lease.
(d) Headings. The article headings contained in this Lease are for
--------
convenience only and do not in any way limit or amplify any term or provision
hereof. The terms "Landlord" and "Tenant" as used herein shall include the
plural-as well as the singular, the neuter shall include the masculine and
feminine genders and the obligations herein imposed upon Tenant shall be joint
and several as to each of the persons, firms or corporations of which Tenant may
be composed.
(e) Reserved Area. Tenant hereby acknowledges and agrees that the exterior
-------------
walls of the Premises and the area between the finished ceiling of the Premises
and the slab of the floor of the project thereabove have not been demised hereby
and the use thereof together with the right to install, maintain, use, repair
and replace pipes, ducts, conduits and wires leading through, under or above the
Premises in locations which will not materially interfere with Tenant's use of
the Premises and serving other parts of the Project are hereby excepted and
reserved unto Landlord.
(f) NO OPTION. THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR
----------
REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN
OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED
HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED
HEREBY THAT THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY
LANDLORD AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.
(g) Use of Project Name: Improvements. Tenant shall not be allowed to use
---------------------------------
the name, picture or representation of the Project, or words to that effect, in
connection with any business carried on in the Premises or otherwise (except as
Tenant's address) without the prior written consent of Landlord. In the event
that Landlord undertakes any additional improvements on the Real Property
including but not limited to new construction or renovation or additions to the
existing improvements, Landlord shall not be liable to Tenant for any noise,
dust, vibration or interference with access to the Premises or disruption in
Tenant's business caused thereby.
(h) Rules and Regulations. Tenant shall observe faithfully and comply
---------------------
strictly with the Rules and Regulations attached to this Lease as Exhibit "B"
and made a part hereof, and such other Rules and Regulations as Landlord may
from time to time reasonably adopt for the safety, care and cleanliness of the
Project, the facilities thereof, or the preservation of good order therein.
Landlord shall not be liable to Tenant for violation of any such Rules and
Regulations, or for the breach of any covenant or condition in any lease by any
other tenant in the Project. A waiver by Landlord of any Rule or Regulation for
any other tenant shall not constitute nor be deemed a waiver of the Rule or
Regulation for this Tenant.
(i) Quiet Possession. Upon Tenant's paying the Basic Rent, Additional Rent
----------------
and other sums provided hereunder and observing and performing all of the
covenants, conditions and provisions on Tenant's part to be observed and
performed hereunder, Tenant shall have quiet possession of the Premises for the
entire Term hereof, subject to all of the provisions of this Lease.
(j) Rent. All payments required to be made hereunder to Landlord shall be
----
deemed to be rent, whether or not described as such.
(k) Successors and Assigns. Subject to the provisions of Article 15
----------------------
hereof, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
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(l) Notices. Any notice required or permitted to be given hereunder shall
-------
be in writing and may be given by personal service evidenced by a signed receipt
or sent by registered or certified mail, return receipt requested, addressed to
Tenant at the Premises or to Landlord at the address of the place from time to
time established for the payment of rent and which shall be effective upon proof
of delivery. Either party may by notice to the other specify a different address
for notice purposes except that, upon Tenant's taking possession of the
Premises, the Premises shall constitute Tenant's address for notice purposes. A
copy of all notices to be given to Landlord hereunder shall be concurrently
transmitted by Tenant to such party hereafter designated by notice from Landlord
to Tenant. Any notices sent by Landlord regarding or relating to eviction
procedures, including without limitation three day notices, may be sent by
regular mail.
(m) Persistent Delinquencies. In the event that Tenant shall be delinquent
------------------------
by more than fifteen (15) days in the payment of rent on three (3) separate
occasions in any twelve (12) month period, Landlord shall have the right to
terminate this Lease by thirty (30) days written notice given by Landlord to
Tenant within thirty (30) days of the last such delinquency.
(n) Right of Landlord to Perform. All covenants and agreements to be
----------------------------
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and expense and without any abatement of rent. If
Tenant shall fail to pay any sum of money, other than rent, required to be paid
by it hereunder or shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue beyond any applicable cure
period set forth in this Lease, Landlord may, but shall not be obligated to,
without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such other act on Tenant's part to be made or
performed as is in this Lease provided. All sums so paid by Landlord and all
reasonable incidental costs, together with interest thereon at the rate of ten
percent (10%) per annum from the date of such payment by Landlord, shall be
payable to Landlord on demand and Tenant covenants to pay any such sums, and
Landlord shall have (in addition to any other right or remedy of Landlord) the
same rights and remedies in the event of the nonpayment thereof by Tenant as in
the case of default by Tenant in the payment of the rent.
(o) Access, Changes in Project, Facilities, Name.
--------------------------------------------
(i) Every part of the Project except the inside surfaces of all
walls, windows and doors bounding the Premises (including exterior building
walls, core corridor, walls and doors and any core corridor entrance), and any
space in or adjacent to the Premises used for shafts, stacks, pipes, conduits,
fan rooms, ducts, electric or other utilities, sinks or other building
facilities, and the use thereof, as well as access thereto through the Premises
for the purposes of operation, maintenance, decoration and repair, are reserved
to Landlord.
(ii) Tenant shall permit Landlord to install, use and maintain pipes,
ducts and conducts within the walls, columns and ceilings of the Premises.
(iii) Landlord reserves the right, without incurring any liability to
Tenant therefor, to make such changes in or to the Project and the fixtures and
equipment thereof, as well as in or to the street entrances, halls, passages,
elevators, stairways and other improvements thereof, as it may deem necessary or
desirable.
(iv) Landlord may adopt any name for the Project and Landlord
reserves the right to change the name or address of the Project at any time.
(p) Corporate Authority. If Tenant is a corporation, each individual
-------------------
executing this Lease on behalf of said corporation represents and warrants that
he or she is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation, said corporation and each individual
executing this Lease on behalf of said corporation covenants that Tenant shall
provide to Landlord a copy of such resolution of the Board of Directors
authorizing the execution of this Lease on behalf of such corporation, which
copy of resolution shall be duly certified by the secretary or an assistant
secretary of the corporation to be a true copy of a resolution duly adopted by
the Board of Directors of said
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corporation. In the event Tenant fails to comply with the requirements set forth
in this subparagraph (p), then each individual executing this Lease shall be
personally liable for all of Tenant's obligations in this Lease.
(q) Identification of Tenant.
------------------------
(i) If Tenant constitutes more than one person or entity, (A) each of
them shall be jointly and severally liable for the keeping, observing and
performing of all of the terms, covenants, conditions and provisions of this
Lease to be kept, observed and performed by Tenant, (B) the term "Tenant" as
used in this Lease shall mean and include each of them jointly and severally,
and (C) the act of or notice from, or-notice or refund to, or the signature of,
any one or more of them, with respect to the tenancy of this Lease, including,
but not limited to, any renewal, extension, expiration, termination or
modification of this Lease, shall be binding upon each and all of the persons or
entities executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted or so given or received such notice or refund
or so signed.
(ii) If Tenant is a partnership (or is comprised of two or more
persons, individually and as co-partners of a partnership) or if Tenant's
interest in this Lease shall be assigned to a partnership (or to two or more
persons, individually and as co-partners of a partnership) pursuant to Article
15 hereof (any such partnership and such persons hereinafter referred to in this
Article 30(q)(ii) as "Partnership Tenant"), the following provisions of this
Lease shall apply to such Partnership Tenant:
(A) The liability of each of the parties comprising Partnership
Tenant shall be joint and several.
(B) Each of the parties comprising Partnership Tenant hereby
consents in advance to, and agrees to be bound by, any written instrument which
may hereafter be executed, changing, modifying or discharging this Lease, in
whole or in part, or surrendering all or any part of the Premises to the
Landlord, and by notices, demands, requests or other communication which may
hereafter be given, by Partnership Tenant or any of the parties comprising
Partnership Tenant.
(C) Any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership Tenant or to any of the parties
comprising Partnership Tenant shall be deemed given or rendered to Partnership
Tenant and to all such parties and shall be binding upon Partnership Tenant and
all such parties.
(D) If Partnership Tenant admits new partners, all of such new
partners shall, by their admission to Partnership Tenant, be deemed to have
assumed performance of all of the terms, covenants and conditions of this Lease
on Tenant's part to be observed and performed.
(E) Partnership Tenant shall give prompt notice to Landlord of
the admission of any such new partners, and, upon demand of Landlord, shall
cause each such new partner to execute and deliver to Landlord an agreement in
form satisfactory to Landlord, wherein each such new partner shall assume
performance of all of the terms, covenants and conditions of this Lease on
Partnership Tenant's part to be observed and performed (but neither Landlord's
failure to request any such agreement nor the failure of any such new partner to
execute or deliver any such agreement to Landlord shall terminate the provisions
of clause (D) of this Article 30(q)(ii) or relieve any such new partner of its
obligations thereunder).
(r) Intentionally Deleted.
---------------------
(s) Survival of Obligations. Any obligations of Tenant occurring prior to
-----------------------
the expiration or earlier termination of this Lease shall survive such
expiration or earlier termination.
(t) Confidentiality. Tenant acknowledges that the content of this Lease
---------------
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal and space planning consultants and any proposed subtenants or assignees.
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<PAGE>
(u) Exhibits and Addendum. The Exhibits and Addendum, if applicable,
---------------------
attached hereto are incorporated herein by this reference as if fully set forth
herein.
(v) Americans With Disabilities Act. Landlord shall, at its sole cost and
-------------------------------
expense, take the necessary steps to comply with what Landlord reasonably
believes are the requirements of the ADA in effect as of the Commencement Date
as it pertains to the Premises and the common areas of the Project. Further,
Operating Costs shall not include any cost incurred by Landlord in connection
with upgrading the Project or the Premises, or in connection with Landlord's
installation of an elevator pursuant to Article 8 of this Lease, to comply with
the requirements of the ADA that are in effect as of the date of this Lease,
including penalties or damages incurred due to such noncompliance.
ARTICLE 31
----------
OPTION TO EXTEND
----------------
(a) Option Right. Landlord hereby grants the Tenant named in this Lease
------------
(the "ORIGINAL TENANT") one (1) option ("OPTIONS") to extend the Lease Term for
the entire Premises for a period of five (5) years (an "OPTION TERM"), which
option shall be exercisable only by written notice delivered by Tenant to
Landlord set forth below. The rights contained in this Article 31 shall be
personal to the Original Tenant and any Permitted Assignee and may only be
exercised by the Original Tenant or a Permitted Assignee (and not any other
assignee, sublessee or other transferee of the Original Tenant's interest in
this Lease) if the Original Tenant or such Permitted Assignee occupies the
entire Premises as of the date of Tenant's Acceptance (as defined in Section
31(c) below).
(b) Option Rent. The rent payable by Tenant during the Option Term
-----------
("OPTION RENT") shall be equal to ninety-five percent (95%) of the "Market Rent"
(defined below), but in no event shall the Option Rent be less than Tenant is
paying under the Lease on the month immediately preceding the Option Term for
Monthly Basic Rental, including all escalations, Direct Costs, additional rent
and other charges. "MARKET RENT" shall mean the applicable Monthly Basic Rental,
including all escalations, Direct Costs, additional rent and other charges at
which tenants, as of the commencement of the Option Term, are leasing non-
sublease, non-encumbered, space comparable in size, location and quality to the
Premises in renewal transactions for a term comparable to the Option Term which
comparable space is located in office buildings comparable to the Project in
Calabasas, California, taking into consideration the value of the existing
improvements in the Premises to Tenant, as compared to the value of the existing
improvements in such comparable space, with such value to be based upon the age,
quality and layout of the improvements and the extent to which the same could be
utilized by Tenant with consideration given to the fact that the improvements
existing in the Premises are specifically suitable to Tenant.
(c) Exercise of Option. The Option shall be exercised by Tenant only in
------------------
the following manner: (i) Tenant shall not be in default, after expiration of
any applicable cure period, on the delivery date of the Interest Notice and
Tenant's Acceptance; (ii) Tenant shall deliver written notice ("INTEREST
NOTICE") to Landlord not more than ten (10) months nor less than nine (9) months
prior to the expiration of the Lease Term, stating that Tenant is interested in
exercising the Option, (iii) within fifteen (15) business days of Landlord's
receipt of Tenant's written notice, Landlord shall deliver notice ("OPTION RENT
NOTICE") to Tenant setting forth the Option Rent; and (iv) if Tenant desires to
exercise such Option, Tenant shall provide Landlord written notice within five
(5) business days after receipt of the Option Rent Notice ("TENANT'S
ACCEPTANCE") and upon, and concurrent with such exercise, Tenant may, at its
option, object to the Option Rent contained in the Option Rent Notice. Tenant's
failure to deliver the Interest Notice or Tenant's Acceptance on or before the
dates specified above shall be deemed to constitute Tenant's election not to
exercise the Option. If Tenant timely and properly exercises its Option, the
Lease Term shall be extended for the Option Term upon all of the terms and
conditions set forth in this Lease, except that the rent for the Option Term
shall be as indicated in the Option Rent Notice unless Tenant, concurrently with
Tenant's acceptance, objects to the Option Rent contained in the Option Rent
Notice, in which case the parties shall follow the procedure and the Option Rent
shall be determined, as set forth in Section 31(d) below.
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<PAGE>
(d) Determination of Market Rent. If Tenant timely and appropriately
----------------------------
objects to the Market Rent in Tenant's Acceptance, Landlord and Tenant shall
attempt to agree upon the Market Rent using their best good-faith efforts! If
Landlord and Tenant fail to reach agreement within twenty-one (21) days
following Tenant's Acceptance (OUTSIDE AGREEMENT DATE), then each party shall
make a separate determination of the Market Rent which shall be submitted to
each other and to arbitration in accordance with the following items (i) through
(vii):
(i) Landlord and Tenant shall each appoint, within ten (10) days of
the Outside Agreement Date, one arbitrator who shall by profession be a current
real estate broker or appraiser of commercial high-rise properties in the
immediate vicinity of the Project, and who has been active in such field over
the last five (5) years. The determination of the arbitrators shall be limited
solely to the issue of whether Landlord's or Tenant's submitted Market Rent is
the closest to the actual Market Rent as determined by the arbitrators, taking
into account the requirements of item (b), above.
(ii) The two arbitrators so appointed shall within five (5) business
days of the date of the appointment of the last appointed arbitrator agree upon
and appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two arbitrators.
(iii) The three arbitrators shall within fifteen (15) days of the
appointment of the third arbitrator reach a decision as to whether the parties
shall use Landlord's or Tenant's submitted Market Rent, and shall notify
Landlord and Tenant thereof.
(iv) The decision of the majority of the three arbitrators shall be
binding upon Landlord and Tenant.
(v) If either Landlord or Tenant fails to appoint an arbitrator
within ten (10) days after the applicable Outside Agreement Date, the arbitrator
appointed by one of them shall reach a decision, notify Landlord and Tenant
thereof, and such arbitrator's decision shall be binding upon Landlord and
Tenant.
(vi) If the two arbitrators fail to agree upon and appoint a third
arbitrator, or both parties fail to appoint an arbitrator, then the appointment
of the third arbitrator or any arbitrator shall be dismissed and the matter to
be decided shall be forthwith submitted to arbitration under the provisions of
the American Arbitration Association, but subject to the instruction set forth
in this item (d).
(vii) The cost of arbitration shall be paid by Landlord and Tenant
equally.
ARTICLE 32
----------
RIGHT OF FIRST OFFER
--------------------
Landlord hereby grants to Tenant a right of first offer with respect to
that space in the Project outlined on Exhibit "A" attached hereto and made a
part hereof ("FIRST OFFER SPACE"). Notwithstanding the foregoing (i) such first
offer right of Tenant shall commence only following the expiration or earlier
termination of any existing lease pertaining to the First Offer Space (the
SUPERIOR LEASE), including any renewal or extension of such existing lease,
whether or not such renewal or extension is pursuant to an express written
provision in such lease, and regardless of whether any such renewal or extension
is consummated pursuant to a lease amendment or a new lease, and (ii) such first
offer right shall be subordinate and secondary to all rights of expansion, first
refusal, first offer or similar rights granted to the tenant of the Superior
Lease (the "SUPERIOR RIGHTS"). Tenant's right of first offer shall be on the
terms and conditions set forth in this Section 32.
(a) Procedure for Offer. Landlord shall notify Tenant (the "FIRST OFFER
-------------------
NOTICE") from time to time when Landlord determines that Landlord shall commence
the marketing of any First Offer Space because such space shall become available
for lease to third parties, where no holder of a Superior Right desires to lease
such space. The First Offer Notice shall describe the space so offered to Tenant
and shall set forth Landlord's proposed economic terms and conditions
-28-
<PAGE>
applicable to Tenant's lease of such space (collectively, the ECONOMIC TERMS").
Notwithstanding the foregoing, Landlord's obligation to deliver the First Offer
Notice shall not apply during the last nine (9) months of the initial Lease Term
unless Tenant has delivered an Interest Notice to Landlord pursuant to Section
31(c) above nor shall Landlord be obligated to deliver the First Offer Notice
during the last eight (8) months of the initial Lease Term unless Tenant has
timely delivered Tenant's Acceptance to Landlord pursuant to Section 31(c)
above.
(b) Procedure for Acceptance. If Tenant wishes to exercise Tenant's right
-------------------------
of first offer with respect to the space described in the First Offer Notice,
then within five (5) business days after delivery of the First Offer Notice to
Tenant, Tenant shall deliver notice to Landlord of Tenant's intention to
exercise its right of first offer with respect to the entire space described in
the First Offer Notice. If concurrently with Tenant's exercise of the first
offer right, Tenant notifies Landlord that it does not accept with Economic
Terms set forth in the First Offer Notice, Landlord and Tenant shall, for a
period of fifteen (15) days after Tenant's exercise, negotiate in good faith to
reach agreement as to such Economic Terms. If Tenant does not so notify Landlord
that it does not accept the Economic Terms set forth in the First Offer Notice
concurrently with Tenant's exercise of the first offer right, the Economic Terms
shall be as set forth in the First Offer Notice. In addition, if Tenant does not
exercise its right of first offer within the five (5) business day period, or,
if Tenant exercises its first offer right but timely objects to Landlord's
determination of the Economic Terms and if Landlord and Tenant are unable to
reach agreement on such Economic Terms within said fifteen (15) day period, then
Landlord shall be free to lease the space described in the First Offer Notice to
anyone to whom Landlord desires on any terms Landlord desires and Tenant's right
of first offer shall terminate as to the First Offer Space described in the
First Office Notice. Notwithstanding anything to the contrary contained herein,
Tenant must elect to exercise its right of first offer, if at all, with respect
to all of the space offered by Landlord to Tenant at any particular time, and
Tenant may not elect to lease only a portion thereof.
(c) Construction of First Offer Space. Tenant shall take the First Offer
---------------------------------
Space in its "as-is" condition, and Tenant shall be entitled to construct
improvements in the First Offer Space in accordance with the provisions of
Article 9 of this Lease.
(d) Lease of First Offer Space. If Tenant timely exercises Tenant's right
--------------------------
to lease the First Offer Space as set forth herein, Landlord and Tenant shall
execute an amendment adding such First Offer Space to this Lease upon the same
non-economic terms and conditions as applicable to the initial Premises, and the
economic terms and conditions as provided in this Section 32. Tenant shall
commence payment of rent for the First Offer Space and the Lease Term of the
First Offer Space shall commence upon the date of delivery of such space to
Tenant. The Lease Term for the First Offer Space shall expire co-terminously
with Tenant's lease of the initial Premises.
(e) No Defaults. The rights contained in this Section 32 shall be personal
-----------
to the Original Tenant, and may only be exercised by the Original Tenant and a
Permitted Assignee (and not any other assignee, sublessee or other transferee of
the Original Tenant's interest in this Lease) if Tenant or such Permitted
Assignee occupies the entire Premises as of the date of the First Offer Notice.
Tenant shall not have the right to lease First Office Space as provided in this
Section 32 if, as of the date of the First Offer Notice, or, at Landlord's
option, as of the scheduled date of delivery of such First Offer Space to
Tenant, Tenant is in default under this Lease or Tenant has previously been in
default under this Lease more than once.
ARTICLE 33
----------
DIRECTORY
---------
Provided Tenant is not in default hereunder, Tenant, at Tenant's sole cost
and expense, shall have the right to one (1) line in the lobby directory during
the Lease Term.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease, consisting of the
foregoing provisions and Articles, including all exhibits and other attachments
referenced therein, as of the date first above written.
"LANDLORD" ARDEN REALTY LIMITED PARTNERSHIP, a
Maryland limited partnership
By: ARDEN REALTY, INC., a Maryland
corporation, Its sole general partner
By: /s/ Victor J. Coleman
___________________________
Victor J. Coleman
Its: President and COO
By: ___________________________
Its: __________________________
"TENANT" DIGITAL INSIGHT CORPORATION,
a Delaware corporation
By: /s/ Paul D. Fiore
Print Name: Paul D. Fiore
Its: President / CEO
By: ___________________________
Print Name: ___________________
Its: __________________________
-30-
<PAGE>
EXHIBIT "A"
-----------
PREMISES AND FIRST OFFER SPACE
------------------------------
[CHART OMITTED]
-1-
<PAGE>
EXHIBIT "B"
-----------
RULES AND REGULATIONS
---------------------
1. No sign, advertisement or notice shall be displayed, printed or
affixed on or to the Premises or to the outside or inside of the Project or so
as to be visible from outside the Premises or Project without Landlord's prior
written consent. Landlord shall have the right to remove any non-approved sign,
advertisement or notice, without notice to and at the expense of Tenant, and
Landlord shall not be liable in damages for such removal. All approved signs or
lettering on doors and walls shall be printed, printed, affixed or inscribed at
the expense of Tenant by Landlord or by a person selected by Landlord and in a
manner and style acceptable to Landlord.
2. Tenant shall not obtain for use on the Premises ice, waxing, cleaning,
interior glass polishing, rubbish removal, towel or other similar services, or
accept barbering or bootblackening, or coffee cart services, milk, soft drinks
or other like services on the Premises, except from persons authorized by
Landlord and at the hours and under regulations fixed by Landlord. No vending
machines or machines of any description shall be installed, maintained or
operated upon the Premises without Landlord's prior written consent.
3. The sidewalks, halls, passages, exists, entrances, elevators and
stairways shall not be obstructed by Tenant or used for any purpose other than
for ingress and egress from Tenant's Premises. Under no circumstances is trash
to be stored in the corridors. Notice must be given to Landlord for any large
deliveries. Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Project only at times and in the manner
designated by Landlord, and always at Tenant's sole responsibility and risk.
Landlord may impose reasonable charges for use of freight elevators after or
before normal business hours. All damage done to the Project by moving or
maintaining such furniture, freight or articles shall be repaired by Landlord at
Tenant's expense. Tenant shall not take or permit to be taken in or out of
entrances or passenger elevators of the Project, any item normally taken, or
which Landlord otherwise reasonably requires to be taken, in or out through
service doors or on freight elevators. Tenant shall move all supplies, furniture
and equipment as soon as received directly to the Premises, and shall move all
waste that is at any time being taken from the Premises directly to the areas
designated for disposal.
4. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein.
5. Tenant shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, ceilings or floor or in any way
deface the Premises. Tenant shall not place typed, handwritten or computer
generated signs in the corridors or any other common areas. Should there be a
need for signage additional to the Project standard tenant placard, a written
request shall be made to Landlord to obtain approval prior to any installation.
All costs for said signage shall be Tenant's responsibility.
6. In no event shall Tenant place a load upon any floor of the Premises
or portion of any such flooring exceeding the floor load per square foot of area
for which such floor is designed to carry and which is allowed by law, or any
machinery or equipment which shall cause excessive vibration to the Premises or
noticeable vibration to any other part of the Project. Prior to bringing any
heavy safes, vaults, large computers or similarly heavy equipment into the
Project, Tenant shall inform Landlord in writing of the dimensions and weights
thereof and shall obtain Landlord's consent thereto. Such consent shall not
constitute a representation or warranty by Landlord that the safe, vault or
other equipment complies, with regard to distribution of weight and/or
vibration, with the provisions of this Rule 6 nor relieve Tenant from
responsibility for the consequences of such noncompliance, and any such safe,
vault or other equipment which Landlord determines to constitute a danger of
damage to the Project or a nuisance to other tenants, either alone or in
combination with other heavy and/or vibrating objects and equipment, shall be
promptly removed by Tenant, at Tenant's cost, upon Landlord's written notice of
such determination and demand for removal thereof.
EXHIBIT "B"
-----------
-1-
<PAGE>
7. Tenant shall not use or keep in the Premises or Project any kerosene,
gasoline or inflammable, explosive or combustible fluid or material, or use any
method of heating or air-conditioning other than that supplied by Landlord.
8. Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
9. Tenant shall not install or use any blinds, shades, awnings or screens
in connection with any window or door of the Premises and shall not use any
drape or window covering facing any exterior glass surface other than the
standard drapes, blinds or other window covering established by Landlord.
10. Tenant shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system by closing window coverings when the sun's
rays fall directly on windows of the Premises. Tenant shall not obstruct, alter,
or in any way impair the efficient operation of Landlord's heating, ventilating
and air-conditioning system. Tenant shall not tamper with or change the setting
of any thermostats or control valves.
11. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the permitted use of the
Premises. Tenant shall not, without Landlord's prior written consent, occupy or
permit any portion of the Premises to be occupied or used for the manufacture or
sale of liquor or tobacco in any form, or a barber or manicure shop, or as an
employment bureau. The Premises shall not be used for lodging or sleeping or for
any improper, objectionable or immoral purpose. No auction shall be conducted on
the Premises.
12. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises, or disturb or interfere with occupants of Project or
neighboring buildings or premises or those having business with it by the use of
any musical instrument, radio, phonographs or unusual noise, or in any other
way.
13. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises, and no cooking shall be done or permitted by any
tenant in the Premises, except that the preparation of coffee, tea, hot
chocolate and similar items for tenants, their employees and visitors shall be
permitted. No tenant shall cause or permit any unusual or objectionable odors to
be produced in or permeate from or throughout the Premises. The foregoing
notwithstanding, Tenant shall have the right to use a microwave and to heat
microwavable items typically heated in an office. No hot plates, toasters,
toaster ovens or similar open element cooking apparatus shall be permitted in
the Premises.
14. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Project shall not be covered or obstructed by any tenant, nor shall any bottles,
parcels or other articles be placed on the window sills.
15. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanisms thereof unless Landlord is first notified thereof, gives
written approval, and is furnished a key therefor. Each tenant must, upon the
termination of his tenancy, give to Landlord all keys and key cards of stores,
offices, or toilets or toilet rooms, either furnished to, or otherwise procured
by, such tenant, and in the event of the loss of any keys so furnished, such
tenant shall pay Landlord the cost of replacing the same or of changing the lock
or locks opened by such lost key if Landlord shall deem it necessary to make
such change. If more than two keys for one lock are desired, Landlord will
provide them upon payment therefor by Tenant. Tenant shall not key or re-key any
locks. All locks shall be keyed by Landlord's locksmith only.
16. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's opinion, tends to impair the reputation of the
Project or its desirability as an office building and upon written notice from
Landlord any tenant shall refrain from and discontinue such advertising.
EXHIBIT "B"
-----------
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<PAGE>
17. Landlord reserves the right to control access to the Project by all
persons after reasonable hours of generally recognized business days and at all
hours on Sundays and legal holidays. Each tenant shall be responsible for all
persons for whom it requests after hours access and shall be liable to Landlord
for all acts of such persons. Landlord shall have the right from time to time to
establish reasonable rules pertaining to freight elevator usage, including the
allocation and reservation of such usage for tenants' initial move-in to their
premises, and final departure therefrom.
18. Any person employed by any tenant to do janitorial work shall, while
in the Project and outside of the Premises, be subject to and under the control
and direction of the Office of the Project or its designated representative such
as-security personnel (but not as an agent or servant of Landlord, and the
Tenant shall be responsible for all acts of such persons).
19. All doors opening on to public corridors shall be kept closed, except
when being used for ingress and egress. Tenant shall cooperate and comply with
any reasonable safety or security programs, including fire drills and air raid
drills, and the appointment of "fire wardens" developed by Landlord for the
Project, or required by law. Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the Premises
and shut off all lights and water faucets in the Premises.
20. The requirements of tenants will be attended to only upon application
to the Office of the Project.
21. Canvassing, soliciting and peddling in the Project are prohibited and
each tenant shall cooperate to prevent the same.
22. All office equipment of any electrical or mechanical nature shall be
placed by tenants in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise or annoyance.
23. No air-conditioning unit or other similar apparatus shall be installed
or used by any tenant without the prior written consent of Landlord. Tenant
shall pay the cost of all electricity used for air-conditioning in the Premises
if such electrical consumption exceeds normal office requirements, regardless of
whether additional apparatus is installed pursuant to the preceding sentence.
24. There shall not be used in any space, or in the public halls of the
Project, either by any tenant or others, any hand trucks except those equipped
with rubber tires and side guards.
25. All electrical ceiling fixtures hung in offices or spaces along the
perimeter of the Project must be fluorescent and/or of a quality, type, design
and bulb color approved by Landlord. Tenant shall not permit the consumption in
the Premises of more than 2 1/2 watts per net usable square foot in the Premises
in respect of office lighting nor shall Tenant permit the consumption in the
Premises of more than 1 1/2 watts per net usable square foot of space in the
Premises in respect of the power outlets therein, at any one time. In the event
that such limits are exceeded, Landlord shall have the right to require Tenant
to remove lighting fixtures and equipment and/or to charge Tenant for the cost
of the additional electricity consumed.
26. Parking
-------
(a) Garage hours shall be 7:00 a.m. to 7:00 p.m., Monday through
Friday, and closed on weekends, state and federal holidays excepted, as such
hours may be revised from time to time by Landlord.
(b) Automobiles must be parked entirely within the stall lines on the
floor..
(c) All directional signs and arrows must be observed.
(d) The speed limit shall be 5 miles per hour.
(e) Parking is prohibited in areas not striped for parking.
(f) Parking cards or any other device or form of identification
supplied by Landlord (or its operator) shall remain the property of Landlord (or
its operator). Such parking identification device must be displayed as requested
and may not be mutilated in any manner. The serial number of the parking
identification device may not be obliterated. Devices are not
<PAGE>
EXHIBIT "B"
-----------
-3-
<PAGE>
transferable or assignable and any device in the possession of an unauthorized
holder will be void. There will be a replacement charge to the Tenant or person
designated by Tenant of $25.00 for loss of any parking card. There shall be a
security deposit of $25.00 due at issuance for each card key issued to Tenant.
(g) The monthly rate for parking is payable one (1) month in advance
and must be paid by the third business day of each month. Failure to do so will
automatically cancel parking privileges and a charge at the prevailing daily
rate will be due. No deductions or allowances from the monthly rate will be made
for days parker does not use Parking Facilities.
(h) Tenant may validate visitor parking by such method or methods as
the Landlord may approve, at the validation rate from time to time generally
applicable to visitor parking.
(i) Landlord (and its operator) may refuse to permit any person who
violates the within rules to park in the garage, and any violation of the rules
shall subject the automobile to removal from the garage at the parker's expense.
In either of said events, Landlord (or its operator) shall refund a prorata
portion of the current monthly parking rate and the sticker or any other form of
identification supplied by Landlord (or its operator) will be returned to
Landlord (or its operator).
(j) Garage managers or attendants are not authorized to make or allow
any exceptions to these Rules and Regulations.
(k) All responsibility for any loss or damage to automobiles or any
personal property therein is assumed by the parker.
(l) Loss or theft of parking identification devices from automobiles
must be reported to the garage manager immediately, and a lost or stolen report
must be filed by the parker at that time.
(m) The Parking facilities are for the sole purpose of parking one
automobile per space. Washing, waxing, cleaning or servicing of any vehicles by
the parker or his agents is prohibited.
(n) Landlord (and its operator) reserves the right to refuse the
issuance of monthly stickers or other parking identification devices to any
Tenant and/or its employees who refuse to comply with the above Rules and
Regulations and all City, State or Federal ordinances, laws or agreements.
(o) Tenant agrees to acquaint all employees with these Rules and
Regulations.
(p) No vehicle shall be stored in the garage for a period of more
than one (1) week.
EXHIBIT "B"
-----------
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<PAGE>
EXHIBIT "C"
-----------
NOTICE OF LEASE TERM DATES
AND TENANT'S PROPORTIONATE SHARE
--------------------------------
TO:_______________________________ DATE:_______________________
_______________________________
_______________________________
RE: Lease dated __________________________, 19____, between___________________
________________________________________ ("LANDLORD"), and _______________
_____________________________________________ ("TENANT"), concerning Suite
_________, located at ____________________________________________.
Ladies and Gentlemen:
In accordance with the Lease, Landlord wishes to advise and/or confirm the
following:
1. That the Premises have been accepted herewith by the Tenant as
being substantially complete in accordance with the Lease and that there is no
deficiency in construction.
2. That the Tenant has taken possession of the Premises and
acknowledges that under the provisions of the Lease the Term of said Lease shall
commence as of _____________ for a term of _____________________ ending on
________________________________.
3. That in accordance with the Lease, Basic Rental commenced to
accrue on _____________________________.
4. If the Commencement Date of the Lease is other than the first day
of the month, the first billing will contain a prorata adjustment. Each billing
thereafter shall be for the full amount of the monthly installment as provided
for in said Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the Term of said Lease. Your rent checks should be made
payable to ____________________________ at __________________________________.
6. The exact number of rentable square feet within the Premises is
_______________ square feet.
7. Tenant's Proportionate Share, as adjusted based upon the exact
number of rentable square feet within the Premises is _____________%.
AGREED AND ACCEPTED:
TENANT:
____________________________________________________,
a __________________________________________________,
By: ____________________________________
Its:________________________________
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<PAGE>
EXHIBIT "D"
-----------
TENANT WORK LETTER
------------------
This Tenant Work Letter shall set forth the terms and conditions relating
to the renovation of the tenant improvements in the Premises. This Tenant Work
Letter is essentially organized chronologically and addresses the issues of the
renovation of the Premises, in sequence, as such issues will arise.
SECTION 1
---------
LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES
-----------------------------------------------
Landlord has constructed, at its sole cost and expense, the base, shell and
core (i) of the Premises, and (ii) of the floor of the Project on which the
Premises is located (collectively, the "BASE, SHELL AND CORE"). Tenant has
inspected and hereby approves the condition of the Base, Shell and Core, and
agrees that the Base, Shell and Core shall be delivered to Tenant in its current
"as-is" condition. The improvements to be initially installed in the Premises
shall be designed and constructed pursuant to this Tenant Work Letter. Any costs
of initial design and construction of any improvements to the Premises shall be
a "Tenant Improvement Allowance Item", as that term is defined in Section 2.2 of
this Tenant Work Letter.
SECTION 2
---------
TENANT IMPROVEMENTS
-------------------
2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time
----------------------------
tenant improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount
of $100,000.00 for the costs relating to the initial design and construction of
Tenant's improvements which are permanently affixed to the Premises (the "TENANT
IMPROVEMENTS"). In no event shall Landlord be obligated to make disbursements
pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant
Improvement Allowance and in no event shall Tenant be entitled to any credit for
any unused portion of the Tenant Improvement Allowance.
2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise
------------------------------------------------
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord (each of which disbursements shall be made pursuant to
Landlord's disbursement process) for costs related to the construction of the
Tenant Improvements and for the following items and costs (collectively, the
"TENANT IMPROVEMENT ALLOWANCE ITEMS"): (i) payment of the fees of the
"Architect" and the "Engineers," as those terms are defined in Section 3.1 of
this Tenant Work Letter, and payment of the fees incurred by, and the cost of
documents and materials supplied by, Landlord and Landlord's consultants in
connection with the preparation and review of the "Construction Drawings," as
that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of
permits, construction supervision fees and the cost of installing data and voice
cabling throughout the Premises and the back-up generator referenced in Section
9(b) of the Lease; (iii) the cost of any changes in the Base, Shell and Core
required by the Construction Drawings; (iv) the cost of any changes in the base,
Shell and Core required by the Construction required by applicable building
codes (the "CODE"); and (v) the "Landlord Supervision Fee", as that term is
defined in Section 4.3.2 of this Tenant Work Letter. However, in no event shall
more than Three and 00/100 Dollars ($3.00) per usable square foot of the Tenant
Improvement Allowance be used for the items described in (i) and (ii) above, any
additional amount incurred as a result of (i) and (ii) above shall be deemed to
constitute an Over-Allowance Amount.
2.3. Standard Tenant Improvement Package. Landlord has established
-----------------------------------
specifications (the "SPECIFICATIONS") for the Project standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "STANDARD IMPROVEMENT PACKAGE"), which Specifications are
available upon request. The quality of Tenant Improvements shall be equal to or
of greater quality than the quality of the Specifications, provided that
Landlord may, at Landlord's option, require the Tenant Improvements to comply
with certain Specifications.
<PAGE>
EXHIBIT "D"
-----------
-1-
<PAGE>
SECTION 3
---------
CONSTRUCTION DRAWINGS
---------------------
3.1 Selection of Architect/Construction Drawings. Tenant shall retain an
--------------------------------------------
architect/space planner designated by Landlord (the "ARCHITECT") to prepare the
"Construction Drawings," as that term is defined in this Section 3.1. Tenant
shall also retain the engineering consultants designated by Landlord (the
"ENGINEERS") to prepare all plans and engineering working drawings relating to
the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of
the Tenant Improvements. The plans and drawings to be prepared by Architect and
the Engineers hereunder shall be known collectively as the "CONSTRUCTION
DRAWINGS." All Construction Drawings shall comply with the drawing format and
specifications as reasonably determined by Landlord, and shall be subject to
Landlord's reasonable approval. Tenant and Architect shall verify, in the field,
the dimensions and conditions as shown on the relevant portions of the base
building plans, and Tenant and Architect shall be solely responsible for the
same, and Landlord shall have no responsibility in connection therewith.
Landlord's review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord's review of the same,
or obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord's space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings.
3.2 Final Space Plan. On or before the date set forth in Schedule 1,
----------------
attached hereto, Tenant and the Architect shall prepare the final space plan for
Tenant Improvements in the Premises (collectively, the "FINAL SPACE PLAN"),
which Final Space Plan shall include a layout and designation of all offices,
rooms and other partitioning, their intended use, and equipment to be contained
therein, and shall deliver the Final Space Plan to Landlord for Landlord's
approval.
3.3 Final Working Drawings. On or before the date set forth in Schedule 1,
----------------------
Tenant, the Architect and the Engineers shall complete the architectural and
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "FINAL WORKING
DRAWINGS") and shall submit the same to Landlord for Landlord's approval.
3.4 Permits. The Final Working Drawings shall be approved by Landlord (the
-------
"APPROVED WORKING DRAWINGS") prior to the commencement of the construction of
the Tenant Improvements. Tenant shall cause the Architect to immediately submit
the Approved Working Drawings to the appropriate municipal authorities for all
applicable building permits necessary to allow "Contractor," as that term is
defined in Section 4.1, below, to commence and fully complete the construction
of the Tenant Improvements (the "PERMITS"). No changes, modifications or
alterations in the Approved Working Drawings may be made without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
3.5 Time Deadlines. Tenant shall use its best, good faith efforts and all
--------------
due diligence to cooperate with the Architect, the Engineers, and Landlord to
complete all phases of the Construction Drawings and the permitting process and
to receive the permits, and with Contractor for approval of the "Cost Proposal,"
as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as
possible after the execution of the Lease, and, in that regard, shall meet with
Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant's
progress in connection with the same. The applicable dates for approval of
items, plans and drawings as described in this Section 3, Section 4 below, and
in this Tenant Work Letter are set forth and further elaborated upon in Schedule
1 (the "TIME DEADLINES"), attached hereto. Tenant agrees to comply with the Time
Deadlines.
EXHIBIT "D"
-----------
-2-
<PAGE>
SECTION 4
---------
CONSTRUCTION OF THE TENANT IMPROVEMENTS
---------------------------------------
4.1 Contractor. The contractor which shall construct the Tenant
----------
Improvements shall be a contractor designated by Landlord. The contractor
selected may be referred to herein as the "CONTRACTOR".
4.2 Cost Proposal. After the Approved Working Drawings are signed by
-------------
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant Improvement Allowance
Items to be incurred by Tenant in connection with the construction of the Tenant
Improvements (the "COST PROPOSAL"). Tenant shall approve and deliver the Cost
Proposal to Landlord within three (3) business days of the receipt of the same,
and upon receipt of the same by Landlord, Landlord shall be released by Tenant
to purchase the items set forth in the Cost Proposal and to commence the
construction relating to such items. The date by which Tenant must approve and
deliver the Cost Proposal to Landlord shall be known hereafter as the "COST
PROPOSAL DELIVERY DATE".
4.3 Construction of Tenant Improvements by Contractor under the
-----------------------------------------------------------
Supervision of Landlord.
- -----------------------
4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date,
---------------------
Tenant shall deliver to Landlord an amount (the "OVER-ALLOWANCE AMOUNT") equal
to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the Tenant Improvement Allowance (less any portion thereof already
disbursed by Landlord, or in the process of being disbursed by Landlord, on or
before the Cost Proposal Delivery Date). The Over-Allowance Amount shall be
disbursed by Landlord prior to the disbursement of any then remaining portion of
the Tenant Improvement Allowance, and such disbursement shall be pursuant to the
same procedure as the Tenant Improvement Allowance. In the event that, after the
Cost Proposal Date, any revisions, changes, or substitutions shall be made to
the Construction Drawings or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions or any other
additional costs shall be paid by Tenant to Landlord immediately upon Landlord's
request as an addition to the Over-Allowance Amount.
4.3.2 Landlord's Retention of Contractor. Landlord shall
----------------------------------
independently retain Contractor, on behalf of Tenant, to construct the Tenant
Improvements in accordance with the Approved Working Drawings and the Cost
Proposal and Landlord shall supervise the construction by Contractor, and Tenant
shall pay a construction supervision and management fee (the "LANDLORD
SUPERVISION FEE") to Landlord in an amount equal to the product of (i) five
percent (5%) and (ii) an amount equal to the Tenant Improvement Allowance plus
the Over-Allowance Amount (as such Over-Allowance Amount may increase pursuant
to the terms of this Tenant Work Letter).
SECTION 5
---------
COMPLETION OF THE TENANT IMPROVEMENTS
-------------------------------------
5.1 Substantial Completion. For purposes of this Lease, "SUBSTANTIAL
----------------------
COMPLETION" of the Tenant Improvements in the Premises shall occur upon the
completion of construction of the Tenant Improvements in the Premises pursuant
to the Approved Working Drawings, with the exception of any punch list items and
any tenant fixtures, work-stations, built-in furniture, or equipment to be
installed by Tenant.
5.2 Delay of the Substantial Completion of the Premises. Except as
---------------------------------------------------
provided in this Section 5, the Commencement Date and Tenant's obligation to pay
rent for the Premises shall occur as set forth in the Lease. However, if there
shall be a delay or there are delays in the Substantial Competition of the
Tenant Improvements in the Premises as a result of the following (collectively,
"TENANT DELAYS"):
<PAGE>
EXHIBIT "D"
-----------
-3-
<PAGE>
5.2.1 Tenant's failure to comply with the Time Deadlines;
5.2.2 Tenant's failure to timely approve any matter requiring
Tenant's approval;
5.2.3 A breach by Tenant of the terms of this Tenant Work Letter or
the Lease;
5.2.4 Changes in any of the Construction Drawings after disapproval
of the same by Landlord or because the same do not comply with Code or other
applicable laws;
5.2.5 Tenant's request for changes in the Approved Working Drawings;
5.2.6 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Tenant Improvements in the
Premises, or which are different from, or not included in, the Standard
Improvement Package;
5.2.7 Changes to the Base, Shell and Core required by the Approved
Working Drawings; or
5.2.8 Any other acts or omissions of Tenant, or its agents, or
employees;
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of Tenant Improvements in the Premises, the date of Substantial
Completion thereof shall be deemed to be the date that Substantial Completion
would have occurred if no Tenant Delay or Delays, as set forth above, had
occurred.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1 Tenant's Representative. Tenant has designated Paul Fiore as its sole
-----------------------
representative with respect to the matters set forth in this Tenant Work Letter,
who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.
6.2 Landlord's Representative. Prior to commencement of construction of
-------------------------
Tenant Improvements, Landlord shall designate a representative with respect to
the matters set forth in this Tenant Work Letter, who, until further notice to
Tenant, shall have full authority and responsibility to act on behalf of the
Landlord as required in this Tenant Work Letter.
6.3 Time of the Essence in This Tenant Work Letter. Unless otherwise
----------------------------------------------
indicated, all references herein to a "number of days" shall mean and refer to
calendar days.
6.4 Tenant's Entry Into a Portion of the Premises Prior to Substantial
------------------------------------------------------------------
Completion. Provided that Tenant and its agents do not interfere with
- ----------
Contractor's work i the Building and the Premises, from and after the date of
execution of the Lease, Landlord shall allow Tenant access to a portion of the
Premises, to be designated by Landlord, which portion shall consist of
approximately Three Thousand (3,000) square feet (the "DESIGNATED PORTION"),
prior to the Substantial Completion of the Premises, for the purpose of Tenant
installing Tenant's data and telephone equipment in the Premises. Prior to
Tenant's entry into the Designated Portion as permitted by the terms of this
Section 6.4, Tenant shall submit a schedule to Landlord and Contractor, for
their approval, which schedule shall detail the timing and purpose of Tenant's
entry. Tenant shall hold Landlord harmless from and indemnify, protect and
defend Landlord against any loss or damage to the Building or Premises and
against injury to any persons caused by Tenant's actions pursuant to this
Section 6.4. The rights granted to Tenant pursuant to this Section 6.4 are
contingent upon the vacating of the Designated Portion by the existing tenant.
In the event Landlord is unable to deliver possession of the Designated Portion
to Tenant prior to the Lease Commencement Date, Landlord shall have no liability
therefor.
EXHIBIT "D"
-----------
-4-
<PAGE>
6.5 Outside Date. In the event that the Substantial Completion of the
------------
Premises has not occurred by the "Outside Date," which shall be December 31,
1997, as such December 31, 1997 date may be extended by the number of days of
Tenant Delays and by the number of days of "Force Majeure Delays" (as defined
below), then the sole remedy of Tenant shall be the right to deliver a notice to
Landlord (the "TERMINATION NOTICE") electing to terminate this Lease effective
upon receipt of the Termination Notice by Landlord (the "TERMINATION EFFECTIVE
DATE"). Except as provided hereinbelow, the Termination Notice must be delivered
by Tenant to Landlord, if at all, not earlier than the Outside Date and not
later than five (5) business days after the Outside Date. If Tenant delivers the
Termination Notice to Landlord, then Landlord shall have the right to suspend
the Termination Effective Date for a period ending thirty (30) days after the
original Termination Effective Date. In order to suspend the Termination
Effective Date, Landlord must deliver to Tenant, within five (5) business days
after receipt of the Termination Notice, a certificate of the Contractor
certifying that it is such Contractor's best good faith judgment that
Substantial Completion of the Premises will occur within thirty (30) days after
the original Termination Effective Date. If Substantial Completion of the
Premises occurs within said thirty (30) day suspension period, then the
Termination Notice shall be of no further force and effect; if, however,
Substantial Completion of the Premises does not occur within said thirty (30)
day suspension period, then this Lease shall terminate as of the date of
expiration of such thirty (30) day period. If prior to the Outside Date Landlord
determines that Substantial Completion of the Premises will not occur by the
Outside Date, Landlord shall have the right to deliver a written notice to
Tenant stating Landlord's opinion as to the date by which Substantial Completion
of the Premises shall occur and Tenant shall be required, within five (5)
business days after receipt of such notice, to either deliver the Termination
Notice (which will mean that this Lease shall thereupon terminate and shall be
of no further force and effect) or agree to extend the Outside Date to that date
which is set by Landlord. Failure of Tenant to so respond in writing within said
five (5) business day period shall be deemed to constitute Tenant's agreement to
extend the Outside Date to that date which is set by Landlord. If the Outside
Date is so extended, Landlord's right to request Tenant to elect to either
terminate or further extend the Outside Date shall remain and shall continue to
remain, with each of the notice periods and response periods set forth above,
until the Substantial Completion of the Premises or until this Lease is
terminated. For purposes of this Section 6.5, "Force Majeure Delays" shall mean
and refer to a period of delay or delays encountered by Landlord affecting the
work of construction of the Tenant Improvements because of delays due to excess
time in obtaining governmental permits or approvals beyond the time period
normally required to obtain such permits or approvals for similar space,
similarly improved, in first-class office buildings in the Calabasas, California
area; fire, earthquake or other acts of God; acts of the public enemy; riot;
insurrection; governmental regulations of the sales of materials or supplies or
the transportation thereof; strikes or boycotts; shortages of material or labor
or any other cause beyond the reasonable control of Landlord.
EXHIBIT "D"
-----------
-5-
<PAGE>
SCHEDULE 1
----------
TIME DEADLINES
--------------
Dates Actions to be Performed
----- -----------------------
A. August 18, 1997 Tenant to deliver Final Space Plan to
Landlord.
B. September 2, 1997 Tenant to deliver Final Working Drawings to
Landlord.
C. Three (3) business days Tenant to approve Cost Proposal and deliver
after the receipt of the Cost Proposal to Landlord.
Cost Proposal by Tenant.
-1-
<PAGE>
EXHIBIT 10.9
MASTER LEASE AGREEMENT
This Master Lease Agreement ("Master Agreement"), dated as of Mar 01, 1999
and referred to as Lease Number 0000003 is entered into by and between Silicon
Valley Bank ("Lessor"), with its principal place of business at 3003 Tasman
Drive, NC 400, Santa Clara, CA 95054 and Digital Insight Corporation, a
___________________ ("Lessee"), with its principal place of business at 26025
Murea Road, Calabasas, California 91302.
DEFINITIONS. As used herein, all terms shall have the meanings set forth below.
- -----------
"ACCEPTANCE CERTIFICATE" means the form of certificate provided by Lessor
to evidence Lessee's acceptance of the Equipment.
"ACCEPTANCE DATE" the date the Lessee signs and delivers to Lessor the
Acceptance Certificate.
"APPLICABLE TERM" the Initial Term and any renewal or extension thereof.
"ASSIGNEE" means any party to whom Lessor assigns Lessor's rights to any
Lease.
"CASUALTY" means any event upon which any Equipment is condemned, taken,
lost, destroyed, stolen or damaged beyond repair.
"CLAIMS" means any and all claims, actions, suits, proceedings, costs,
expenses (including court costs and reasonable attorneys' fees), damages,
obligations, penalties, injuries and liabilities, including actions based on
Lessor's strict liability in tort.
"COMMITMENT AMOUNT" has the meaning set forth in the Schedule.
"CUT-OFF DATE" means the date specified in Section 7 of the Schedule.
"DEFAULT" means any of the events of default described in Section 16 of
this Master Agreement.
"EQUIPMENT" means the items of Equipment leased under each Schedule.
"EQUIPMENT LOCATION" means the location of the Equipment specified in each
Schedule.
"FIRST PAYMENT DATE" has the meaning set forth in the Schedule.
"IMPOSITION" means each license fee, assessment, and sales, use, property,
excise and other tax.
"INTERIM RENT" has the meaning, if any, set forth in Section 5 of the
Schedule.
"INITIAL TERM" means the total monthly, quarterly or other term of each
Lease, as specified in the Schedule.
"LEASE" means each Schedule.
"LICENSE" means collectively, if the Equipment includes any software, a
license identical to that held by Lessee relating to the use of any software,
technical information, confidential business information and other
documentation.
"MATERIAL AGREEMENT" means collectively this Master Agreement, any Lease,
any Transaction Document or any other agreement between Lessee and Lessor, or
any material agreement between Lessee and any third party, specifically
including, without limitation, any agreement or agreements between Lessee and
any third party which in the aggregate give the third party the right, whether
or not exercised, to accelerate any indebtedness exceeding $100,000.
"ORIGINAL" means the single counterpart of the Schedule, including Rider 1
attached thereto and incorporated therein by reference, marked "Original".
"PURCHASE DOCUMENTS" means collectively any purchase order, contract or
other documents Lessee has approved or entered into with Supplier.
"RENT" means the amounts payable by Lessee to Lessor for the Equipment.
"RIDER 1" means the rider marked "Rider 1" which is attached to and
incorporated within each Schedule.
"SCHEDULE" means each schedule containing the specific terms of each
individual lease.
"STIPULATED LOSS VALUE" means the stipulated loss value of the Equipment as
specified in Rider 1 to the Schedule.
"SUPPLIER" means the seller of the Equipment.
"TOTAL COST" means the Equipment acquisition cost including such shipping,
delivery, installation and other charges as Lessor shall have approved set forth
in Section 3 of the Schedule, as adjusted pursuant to Section 6 of this Master
Agreement.
"TAX BENEFITS" means collectively certain deductions, credits, and other
tax benefits as are provided in the Internal Revenue Code of 1986, as amended,
including without limitation, accelerated depreciation and interest deductions
to which Lessor may be entitled.
"TRANSACTION DOCUMENTS" means collectively this Master Agreement, all
Leases and all other related instruments or documents executed and/or delivered
hereunder or in connection herewith.
1. LEASE OF EQUIPMENT. This Master Agreement sets forth the general terms
and conditions which apply to the lease of equipment from Lessor to Lessee. The
specific terms of each individual lease are set forth in a separate Schedule,
including the Equipment leased under the applicable Schedule. Each Schedule
constitutes a separate and distinct Lease, enforceable according to its terms.
In the event of any conflict between the terms of this Master Agreement and any
related Schedule, the provisions of the applicable
<PAGE>
Schedule shall govern. The parties agree that each Schedule incorporates this
Master Agreement by reference by listing the Lease Number (as specified above)
on the Schedule. A Lease shall not become effective until accepted by Lessor.
2. TERM. This Master Agreement shall commence upon the execution hereof
by both parties, and
<PAGE>
shall continue until the full performance of all terms hereunder. The Initial
Term shall be as specified in each Schedule. The Applicable Term shall be
automatically extended for successive one-month periods unless either party
gives the other party ninety days' prior written notice that it intends to
terminate the Lease at the end of the Applicable Term.
3. ACCEPTANCE. The Equipment is unconditionally accepted under the Lease
on the Acceptance Date. Lessee shall accept the Equipment as soon as it is
delivered or, if acceptance requirements are specified in the applicable
Purchase Documents, as soon as such requirements are met. Upon the execution of
the Acceptance Certificate, Lessee shall promptly deliver it to Lessor.
4. RENT; NON-CANCELLABLE NET LEASE. As Rent for the Equipment, Lessee
agrees to pay the amounts specified in the Schedule. Lessee acknowledges and
agrees that all Leases hereunder are non-cancellable net Leases, and Lessee
agrees that its obligation to pay Rent and all other amounts when due is
unconditional. Lessee is not entitled to abate or reduce rent or any other
amounts due, or to set off any charges against those amounts. Lessee is not
entitled to claim or assert any recoupments, cross-claims, counterclaims or any
other defenses to any rent payments or other amounts due hereunder, whether
those defenses arise out of claims by Lessee against Lessor, Supplier, this
Master Agreement, any Schedule or otherwise. If the Equipment is not properly
installed, does not operate as represented or warranted by Supplier or is
unsatisfactory for any reason whatsoever, Lessee shall make any claim or account
thereof solely against Supplier and shall nevertheless pay all sums payable
under any Lease. Lessee hereby waives any such claims against Lessor and any
Assignee.
5. ASSIGNMENT OF PURCHASE DOCUMENTS. Lessee assigns to Lessor all of
Lessee's right, title and interest in and to the Equipment described in the
Purchase Documents and in the Schedule. This assignment is an assignment of
rights only, and Lessee shall remain liable for all obligations under the
Purchase Documents, except that Lessor shall pay for the Equipment within 30
days of the Acceptance Date or as otherwise agreed by Lessor in writing. If
Lessee has not entered into Purchase Documents for such Equipment, Lessee
authorizes Lessor to act as Lessee's agent to execute such Purchase Documents.
Lessee also represents and warrants that it has received and approved a copy of
the Purchase Documents, or has been advised by Lessor of (a) the name of the
Supplier of the Equipment, (b) that Lessee may have rights under such Supplier's
Purchase Documents, and (c) that Lessee may contact the Supplier for information
on such rights. In addition, Lessee shall deliver to Lessor a document
acceptable to Lessor whereby Supplier acknowledges and provides any consent
required by Lessor or otherwise necessary to such assignment. If the Equipment
includes any software, Supplier shall agree in such acknowledgment and consent
that upon the return of the Equipment to Lessor the Supplier will either grant
Lessor a License and permit Lessor to assign such License to any subsequent end-
user of the Equipment, or grant any such subsequent end-user such a License, but
at no additional charge other than any regularly scheduled fee or charge
otherwise payable by Lessee; provided that Lessee shall at all times remain
liable to Supplier as the licensee under its license, and Lessor shall not have
any obligation thereunder unless and until such license is provided to Lessor in
accordance with these provisions. Lessor shall have no obligation or liability
with respect to Lessee's, or any subsequent third-party licensee's, compliance
under the applicable license. In addition, with respect to any such software,
Supplier shall agree that it will not terminate Lessee's license thereof without
first providing 90 days' prior written notice to Lessor of any intended
termination and providing Lessor the right to cure such breach by Lessee of its
license as gave rise to such notice of intended termination. Supplier shall also
agree to provide all software upgrades and modifications during the Applicable
Term to Lessee, or Lessor or other subsequent licensee, on the same basis as
offered to Supplier's other commercial customers. Lessee agrees that neither
Supplier nor any salesperson or other employee or representative of Supplier is
an agent of Lessor, nor is any such person authorized to waive or alter any
terms of this Master Agreement or any Lease.
6. ADJUSTMENTS. The Total Cost and Rent payment set forth in each
Schedule are estimates, and if the final invoice from the Supplier specifies a
Total Cost (including delivery, installation, taxes and other charges) that is
more or less than such estimated Total Cost, Lessee hereby authorizes Lessor to
adjust accordingly the Total Cost and Rent payment on the applicable Schedule.
All references in this Agreement and in any Schedule to Total Cost and Rent
payment shall mean the estimates thereof specified in the applicable Schedule,
as adjusted pursuant to this Section 6.
7. EQUIPMENT RETURN REQUIREMENTS. On or before the termination of a
Lease, Lessee shall pack the Equipment in accordance with the manufacturer's
guidelines and deliver such Equipment (along with all operating manuals) to
Lessor at any destination within the continental United States designated by
Lessor. All dismantling, packaging, transportation, in-transit insurance and
shipping charges shall be borne by Lessee. All Equipment shall be returned to
Lessor in the same condition and working order as when delivered to Lessee,
<PAGE>
reasonable wear and tear excepted, and, if applicable, shall be certifiable for
maintenance by the manufacturer at its standard rates.
8. EQUIPMENT USE AND MAINTENANCE. Lessee is solely responsible for the
selection, installation, operation and maintenance of the Equipment and all
costs related thereto, including shipping charges. Lessee shall at all times
operate and maintain the Equipment in good operating order, repair, condition
and appearance, normal wear and tear excepted, and in
<PAGE>
accordance with its manufacturer's specifications and recommendations. On
reasonable prior notice to Lessee, Lessor and Lessor's agents shall have the
right, during Lessee's business hours, to enter the premises where the Equipment
is located for the purpose of inspecting the Equipment and observing its use.
Lessee shall, at its expense, affix and maintain in a prominent position on each
item of Equipment any tags or identifying labels provided by Lessor to indicate
Lessor's ownership of the Equipment. Lessee shall, at its expense, enter into,
maintain and enforce at all times a maintenance agreement to service and
maintain the Equipment, upon terms and with a provider acceptable to Lessor.
9. EQUIPMENT OWNERSHIP; ATTACHMENTS; LOCATION. Lessor is the sole owner
of the Equipment and has sole title thereto. Lessee covenants that it will not
pledge or encumber the Equipment or Lessor's interest in the Equipment in any
manner whatsoever nor permit any liens to be attached thereto, other than liens
arising directly through Lessor. Lessee shall not make any representation to any
third-party inconsistent with Lessor's sole ownership of the Equipment. The
Equipment shall remain Lessor's personal property whether or not affixed to
realty and shall not become or be made to become a part of any real property on
which it is placed without Lessor's prior written consent. All additions,
attachments and accessories placed on the Equipment or repairs made to the
Equipment become a part thereof and Lessor's property. Lessee shall maintain the
Equipment so that it may be removed from any building in which it is placed
without damage thereto. The Equipment will be located at the Equipment Location,
and Lessee shall not move it and shall not permit it to be moved without the
prior written consent of Lessor.
10. INSURANCE. Lessee agrees to keep the Equipment insured at Lessee's
expense against all risks of loss, including theft or damage from any cause
whatsoever. Lessee agrees that such insurance shall name Lessor as a loss payee,
with a full waiver of warranties (Form BFU-438 or comparable) and provide
coverage not less than the greater of the Stipulated Loss Value of the Equipment
and the then-current fair market value of the Equipment. Lessee also agrees that
it shall carry public liability insurance in an amount consistent with prudent
business practices and customary to Lessee's industry. Each policy shall provide
that the insurance cannot be canceled without at least thirty (30) days prior
written notice to Lessor. Upon request by Lessor, Lessee agrees to furnish proof
of insurance coverage, including a certificate of insurance and a copy of the
policy. If Lessee fails to provide Lessor with such evidence, then Lessor will
have the right, but not the obligation, to have such insurance protecting Lessor
placed at Lessee's expense. Lessee's expense shall include a full premium paid
for such insurance and any customary charges, costs or fees of Lessor. Lessee
agrees to pay such amounts in equal installments allocated to each Rent payment
(plus interest on such amounts at the lesser of 1.5% per month or the maximum
rate allowable under applicable law). Lessee hereby appoints Lessor as its
attorney-in-fact while a Default exists to make any claim, receive payment or
execute or endorse all documents, checks or drafts for loss or damage or return
of any premium under such insurance and to apply any such amounts to satisfy
Lessee's obligations under this Master Agreement or any Lease.
11. RISK OF LOSS. In the event of any Casualty, on the next Rent payment
date Lessee shall pay Lessor the Stipulated Loss Value with respect to the item
of Equipment suffering the Casualty. Upon Lessor's full receipt of such
Stipulated Loss Value, the applicable Schedule shall terminate, and except as
provided in Section 22, Lessee shall be relieved of all obligations under the
applicable Schedule, and Lessor shall transfer all its interest in the Equipment
to Lessee "AS IS, WHERE IS," and without any warranty, express or implied from
Lessor, other than the absence of any liens or claims by, through, or under
Lessor. In the event of a partial destruction of or repairable damage to any
Equipment, the Lease shall continue with respect to such Equipment and Lease
shall at its expense promptly cause such Equipment to be repaired to a condition
acceptable to Lessor. There shall be no abatement of Rent in any such event.
Lessee shall immediately notify Lessor of any Casualty or partial destruction or
damage to any Equipment.
12. TAXES. On behalf of Lessee Lessor shall file and pay all Impositions
now or hereafter imposed or assessed by any foreign, federal, state or local
government upon the purchase, ownership, delivery, installation, leasing,
rental, use or sale of the Equipment, or the Rent or other charges payable
hereunder, whether assessed on Lessor or Lessee. As additional Rent, Lessee
shall reimburse Lessor for all Impositions, together with any penalties or
interest in connection therewith attributable to Lessee's acts or failure to
act, excepting only any Imposition on or measured by the net income of Lessor.
13. INDEMNITY. Lessee shall indemnify, defend and hold harmless Lessor,
its agents and assignees, from and against any and all Claims, arising, directly
or indirectly, out of or connected with any matter involving this Master
Agreement, the Equipment or any Lease, including but not limited to: (a) the
selection, manufacture, purchase, acceptance, rejection, ownership, delivery,
lease, possession, maintenance, use, condition, return or operation of the
Equipment; (b) any breach by Lessee of any representation, warranty or covenant
hereunder or any other Transaction Document; (c) any latent defects or other
<PAGE>
defects in any Equipment, whether or not discoverable by Lessor or by Lessee;
(d) any patent, trademark or copyright infringement; and (e) the condition of
any Equipment arising or existing during Lessee's use. Notwithstanding the
foregoing, Lessee shall have no indemnity obligation with respect to any Claims
which arise solely out of the gross negligence or willful misconduct of Lessor.
<PAGE>
14. DISCLAIMER OF WARRANTIES AND LESSEE WAIVERs. LESSEE LEASES THE
EQUIPMENT FROM LESSOR "AS IS" AND "WHERE IS." LESSEE HEREBY AGREES THAT: EXCEPT
AS TO QUIET ENJOYMENT, LESSOR MAKES ABSOLUTELY NO WARRANTIES, EXPRESS OR IMPLIED
TO LESSEE; LESSOR SHALL NOT BE LIABLE FOR ANY FAILURE OF ANY EQUIPMENT OR ANY
DELAY IN ITS DELIVERY OR INSTALLATION OR ANY BREACH OF ANY WARRANTY THAT SELLER
MAY HAVE MADE; LESSEE HAS SELECTED ALL EQUIPMENT WITHOUT LESSOR'S ASSISTANCE;
LESSOR IS NOT A MANUFACTURER OF ANY OF THE EQUIPMENT; LESSOR SHALL HAVE NO
LIABILITY TO LESSEE, LESSEE'S CUSTOMERS, OR ANY THIRD PARTIES FOR ANY DIRECT,
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR ANY
SCHEDULE OR CONCERNING ANY EQUIPMENT, OR FOR ANY DAMAGES BASED ON STRICT OR
ABSOLUTE TORT LIABILITY OR LESSOR'S NEGLIGENCE; LESSEE'S SOLE RECOURSE FOR ANY
AND ALL CLAIMS AND WARRANTIES RELATING TO THE EQUIPMENT SHALL BE AGAINST SELLER.
Lessor hereby assigns to Lessee for the Applicable Term the right to enforce,
provided that no Default then exists under this Master Agreement or any Lease
and such enforcement is pursued in Lessee's name, any representations,
warranties and agreements made by the Supplier pursuant to the Purchase
Documents, and Lessee may retain any recovery resulting from any such
enforcement efforts. LESSEE WAIVES ANY AND ALL RIGHTS AND REMEDIES CONFERRED
UPON A LESSEE BY ARTICLE 2A (CALIFORNIA COMMERCIAL CODE DIVISION 10) OF THE
UNIFORM COMMERCIAL CODE (INCLUDING LESSEE'S RIGHTS, CLAIMS AND DEFENSES UNDER
UCC ARTICLE 2A SECTIONS 508-522) AND ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE THAT MAY LIMIT OR MODIFY LESSOR'S RIGHTS AS DESCRIBED IN
THIS SECTION OR OTHER SECTIONS OF THIS MASTER AGREEMENT.
15. LESSEE WARRANTIES. Lessee represents, warrants and covenants to Lessor
that: (a) all Equipment is leased for business purposes only and not for
personal, family or household purposes; (b) Lessee is duly organized, validly
existing and in good standing under applicable law; (c) Lessee has the power and
authority to enter into the Transaction Documents; (d) the Transaction Documents
are enforceable against Lessee in accordance with their terms and do not violate
or create a default under any instrument or agreement binding on Lessee; (e)
there are no pending or threatened actions or proceedings before any court or
administrative agency which could have a material adverse effect on Lessee or
any Transaction Document, unless such actions are disclosed to Lessor and
consented to in writing by Lessor; (f) Lessee shall comply in all material
respects with all laws and regulations the violation of which could have a
material adverse effect upon the Equipment or Lessee's performance of its
obligations under any Transaction Document; (g) each Transaction Document shall
be effective against all creditors of Lessee under applicable law, including
fraudulent conveyance and bulk transfer laws, and shall raise no presumption of
fraud; (h) financial statements and other related information furnished by
Lessee shall be prepared in accordance with generally accepted accounting
principles and shall fairly present Lessee's financial position as of the dates
given on such statements; (i) Lessee shall furnish Lessor with its financial
statements certified by an officer of Lessee on a monthly basis within thirty
(30) days of the end of each month, and audited financial statements on an
annual basis within 120 days of the end of each fiscal year, resolutions, and
such other information and documents as Lessor may reasonably request; (j) all
Equipment is tangible personal property and shall not become a fixture or real
property under Lessee's use thereof; and (k) there has not been a material
adverse change in the general affairs, management, results of operations,
condition (financial or otherwise) or prospects of Lessee, whether or not
arising from transactions in the ordinary course of business. Lessee shall be
deemed to have reaffirmed the foregoing warranties each time it executes any
Transaction Document.
16. DEFAULT. Any of the following shall constitute a Default under this
Master Agreement and all Leases: (a) Lessee fails to pay any Rent payment or any
other amount payable to Lessor hereunder when due; or (b) Lessee fails to pay
any amounts payable under any Material Agreement when due; or (c) Lessee
defaults on or breaches any of the other material terms and conditions of any
Material Agreement which default or breach is not cured within five (5) days of
such default or breach; or (d) any representation or warranty made by Lessee in
a Material Agreement proves to be incorrect in any material respect when made or
reaffirmed; or (e) Lessee becomes insolvent or fails generally to pay its debts
as they become due; or (f) the Equipment is levied against, seized or attached
and the same is not bonded against, released or stayed within ten days; or (g)
Lessee makes an assignment for the benefit of creditors, whether voluntary or
involuntary; or (h) a proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency or receivership law is filed by or against
Lessee or Lessee takes any action to authorize any of the foregoing matters and,
if filed against Lessee, is not dismissed within 30 days; or (i) any letter of
credit, guaranty, surety bond or like instrument issued in support of a Lease is
revoked, breached, canceled or terminated; (j) any guarantor, surety or like
third-party obligor under this Master Agreement fails to fulfill any of the
obligations of Lessor which it agreed to perform; or (k) in the good faith,
reasonable commercial judgment of Lessor, there has occurred or will likely
occur a material adverse change in the general affairs, management, results of
operations, condition (financial or otherwise) or prospects of Lessee, whether
or not arising from transactions in the ordinary course of
<PAGE>
business, or in Lessee's or any such third-party obligor's willingness or
ability to perform under any Transaction Document.
17. REMEDIES. If a Default occurs, Lessor may, in its sole discretion,
exercise one or more of the following remedies, without notice of election and
without demand: (a) terminate this Master Agreement or any Lease; without notice
of election and without demand, (b) take possession of, or render unusable, any
Equipment wherever the Equipment may be located, without demand or notice,
without any court order or other process of law and without liability to Lessor
for any damages occasioned by such action, and no such action shall constitute a
termination of any Lease; or (c) require Lessee to deliver the Equipment to a
location specified by Lessor; or (d) declare the Stipulated Loss Value for any
or all Leases to be due and payable as liquidated damages for loss of a bargain
and not as a penalty and in lieu of any further Rent payments under the
applicable Lease or Leases; or (e) proceed by court action to enforce
performance by Lessee of any Lease and/or to recover all damages and expenses
incurred by Lessor by reason of any Default; or (f) terminate any other
agreement that Lessor may have with Lessee; or (g) suspend or terminate funding
of the Commitment Amount or any other amount in connection with the Transaction
Documents; or (h) exercise any other right or remedy available to Lessor at law
or in equity. Any Rent not received on or before the due date shall bear
interest at the lesser of 1.5% per month or the highest interest rate legally
permissible. Lessee shall pay Lessor all costs and expenses that Lessor may
incur to maintain, safeguard or preserve the Equipment, and other expenses
incurred by Lessor in enforcing any of the terms, conditions or provisions of
this Agreement (including reasonable legal fees and collection agency costs).
Upon repossession or surrender of any Equipment, Lessor shall lease, sell or
otherwise dispose of the Equipment in compliance with applicable law and apply
the net proceeds thereof (after deducting all expenses, including reasonable
legal fees and costs, incurred in connection therewith) to the amounts owed to
Lessor hereunder; provided, however, that Lessee shall remain liable to Lessor
for any deficiency that remains after any sale or lease of such Equipment. These
remedies are cumulative of every other right or remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise, and may be
enforced concurrently therewith or from time to time.
18. PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to perform any of
its obligations hereunder, Lessor may perform any act or make any payment that
Lessor deems reasonably necessary for the maintenance and preservation of the
Equipment and Lessor's interests therein; provided that the performance of any
act or payment by Lessor shall not be deemed a waiver of, or release Lessee
from, the obligation at issue. All sums so paid by Lessor, together with
expenses (including reasonable legal fees and costs) incurred by Lessor in
connection therewith, shall be considered Rent hereunder, will bear interest at
the lesser of 1.5% per month or the highest interest rate legally permissible,
and shall be, without demand, immediately due and payable to Lessor by Lessee.
19. ASSIGNMENT. Lessor may assign, pledge, transfer, mortgage or otherwise
convey any of its interest in this Master Agreement, any Lease, Schedule or
Equipment, in whole or in part, without notice to or the consent of Lessee. If
any Lease is assigned, Lessee shall: (a) unless otherwise specified by Lessor
and Assignee, pay all amounts due under the applicable Lease to such Assignee,
notwithstanding any defense, setoff or counterclaim whatsoever that Lessee may
have against Lessor or Assignee, all of which are hereby waived by Lessee as to
any Assignee; (b) not require the Assignee to perform any obligations of Lessor,
other than those that are expressly assumed in writing by such Assignee; and (c)
execute such acknowledgements thereto as may be requested by Lessor. It is
further agreed that: (x) each Assignee shall be entitled to all of Lessor's
rights, powers and privileges under the applicable Lease, to the extent
assigned; (y) any Assignee may reassign its rights and interests under the
applicable Lease with the same force and effect as the assignment described
herein; and (z) any payments received by the Assignee from Lessee with respect
to the assigned Lease shall, to the extent thereof, discharge the obligations of
Lessee to Lessor with respect to the assigned Lease. Lessee acknowledges that
any assignment or transfer by Lessor or any Assignee will not materially change
Lessee's obligations under the assigned Lease. Without Lessor's prior written
consent, Lessee shall not assign this Master Agreement or any Lease or assign
its rights in or sublet the Equipment or any interest therein.
20. FURTHER ASSURANCES. Lessee shall promptly execute and deliver to
Lessor such further documents and take such further action as Lessor may require
in order to more effectively carry out the intent and purpose of this Master
Agreement and any Lease, including executing and delivering any and all
financing statements which Lessor may request. Upon demand, Lessee will promptly
reimburse Lessor for any filing or recording fees or expenses (including
reasonable legal fees and costs) incurred by Lessor in perfecting or protecting
its interests in the Equipment.
21. SURVIVAL. All representations, warranties and covenants made by Lessee
hereunder shall survive the termination of this Agreement and shall remain in
full force
<PAGE>
and effect. All of Lessor's rights, privileges and indemnities, to the extent
they are fairly attributable to events or conditions occurring or existing on or
prior to the termination of this Agreement, shall survive such termination and
be enforceable by Lessor and Lessor's successors and assigns.
22. WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY EXPRESSLY WAIVE ANY
RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED
BY LESSOR OR
<PAGE>
LESSEE IN CONNECTION WITH THIS MASTER LEASE OR ANY LEASE OR SCHEDULE.
23. CAPTIONS; COUNTERPARTS; LESSOR'S AFFILIATES. The captions contained in
this Agreement are for convenience only and shall not affect the interpretation
of this Master Agreement. Only the Original shall be marked "Original", and all
other counterparts of the Schedule shall be marked as, and shall be, duplicates.
To the extent that any Schedule constitutes chattel paper (as such term is
defined in the Uniform Commercial Code in effect in the applicable
jurisdiction), no security interest in such Schedule may be created through the
transfer or possession of any counterpart other than the Original.
24. MISCELLANEOUS. This Master Agreement and each Lease hereunder shall be
governed by the internal laws (as opposed to conflicts of law provisions) of the
state of California. If any provision of this Master Agreement or any Schedule
shall be prohibited by or invalid under any law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Master Agreement or any Lease. Lessor and Lessee consent to the jurisdiction of
any local, state or federal court located within the County of Santa Clara,
State of California, and waive any objection relating to improper venue or forum
non conveniens to the conduct of any proceeding in any such court. This
Agreement and the other Transaction Documents constitute the entire agreement
between Lessor and Lessee relating to the leasing of the Equipment, and
supersede all prior agreements relating thereto, whether written or oral, and
may not be amended or modified except in a writing signed by the parties hereto.
Any failure of Lessor to require strict performance by Lessee, or any written
waiver by Lessor of any provision hereof, shall not constitute consent or waiver
of any other breach of the same or any other provision hereof.
IN WITNESS WHEREOF, LESSOR AND LESSEE HAVE EXECUTED THIS MASTER AGREEMENT AS OF
THE DATE SPECIFIED.
LESSEE LESSOR
DIGITAL INSIGHT CORPORATION SILICON VALLEY BANK
By: /s/ Ken Mattice By:_______________________
KEN MATICE CORPORATE CONTROLLER __________________________
Name and Title Name and Title
<PAGE>
CORPORATE RESOLUTION
LESSEE DIGITAL INSIGHT CORPORATION BANK: SILICON VALLEY BANK
26025 MUREA ROAD 3003 TASMAN DRIVE
CALABASAS, CALIFORNIA 91302 SANTA CLARA, CA 95054
I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF DIGITAL INSIGHT
CORPORATION ("LESSEE"), HEREBY CERTIFY that Lessee is a corporation duly
organized and existing under and by virtue of the laws of the State of Delaware
I FURTHER CERTIFY that at a meeting of the Directors of Lessee (or by other duly
authorized corporate action in lieu of a meeting), duly called and held, at
which a quorum was present and voting, the following resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of Lessee, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
John C. Dorman President and CEO /s/ John Dorman
KEN MATTICE CONTROLLER /s/ Ken Mattice
_________________ _________________ _________________
_________________ _________________ _________________
_________________ _________________ _________________
acting for and on behalf of Lessee and as its act and deed be, and they hereby
are, authorized and empowered:
FINANCE OR LEASE. To finance or lease from time to time from Silicon Valley
Bank ("Bank"), on such terms as may be agreed upon between the officers of
Lessee and Bank, such hardware products and related maintenance charges, if
any as in their judgment should be financed or leased.
EXECUTE FINANCING OR LEASE DOCUMENTS. To execute and deliver to Bank the
financing or lease documents of Lessee, on Bank's forms, upon such terms as
may be agreed upon, evidencing the indebtedness of Lessee to Bank, and also
to execute and deliver to Bank one or more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for one or
more of the financing or lease documents, or any portion thereof.
GRANT SECURITY. To grant a security interest to Bank in any of Lessee's
assets, which security interest shall secure all of Lessee's obligations to
Bank.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to Lessee or in which Lessee may have an interest, and
either to receive cash for the same or to cause such proceeds to be
credited to the account of Lessee with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
ISSUE WARRANTS. To issue warrants to purchase Lessee's capital stock, for
such class, series and number, and on such terms, as an officer of Lessee
shall deem appropriate.
FURTHER ACTS. To designate additional or alternate individuals as being
authorized to request financings or additional leases, and in all cases, to
do and perform such other acts and things, to pay any and all fees and
costs, and to execute and deliver such other documents and agreements,
including agreements waiving the right to a trial by jury, as they may in
their discretion deem reasonably necessary or proper in order to carry into
effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of Lessee's agreements or commitments in effect at the time
notice is given.
I FURTHER CERTIFY that the persons named above are principal officers of the
Lessee and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Lessee; and that
they are in full force and effect and have not been modified or revoked in any
manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on Mar 01, 1999 and attest that
<PAGE>
------------
the signatures set opposite the names listed above are their genuine signatures.
CERTIFIED TO AND ATTESTED BY
X /s/ James H. McGuire X_______________
*Secretary or Assistant Secretary
JAMES H. McGUIRE
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Lessee.
<PAGE>
RIDER 1
TO
ALL SCHEDULES
TO MASTER LEASE AGREEMENT
This Rider 1 applies to all Schedules (the "Schedule") to the Master Lease
Agreement between Silicon Valley Bank ("Lessor") and Digital Insight Corporation
("Lessee") and is attached to and made part of the Schedule.
A. END OF TERM PAYMENT. At the end of the term of this Lease, Lessee shall
exercise either (i) a fixed price purchase option of 15% of the Total Cost (the
"Fixed Purchase Price"); or (ii) a fixed price renewal option based on a
percentage of the monthly Rent payment to be mutually agreed upon in good faith
by Lessee and Lessor prior to Lessee's exercise of the fixed price renewal
option (the "Fixed Renewal Price"). Lessee hereby authorizes Lessor to adjust
the Fixed Purchase Price and Fixed Renewal Price to reflect the Total Cost.
B. PURCHASE AND RENEWAL. The following provisions shall govern the purchase
of the Equipment and the renewal of the Lease: (a) when Lessee elects to
purchase the Equipment or renew the Lease, in any such case, Lessee shall advise
Lessor thereof in writing at least 90 days prior to the expiration of the then
Applicable Term; (b) if Lessee elects to purchase the Equipment, it may do so by
purchasing all (but not less than all) of the Equipment at the end of the then
Applicable Term at the Fixed Purchase Price; or (c) if Lessee elects to renew
the Lease it may do so with respect to all (but not less than all) of the
Equipment by entering into a mutually agreeable renewal agreement with Lessor at
least 30 days prior to the expiration of the then Applicable Term, confirming
the length of the renewal term and the Rent for such period in an amount equal
to the Fixed Renewal Price; (d) in the event that Lessee fails to fulfill the
foregoing provisions of this Section B for either a purchase or renewal, as the
case may be, the Lease will be automatically extended for successive 30 day
periods until Lessee complies with the applicable purchase or renewal
provisions; (e) if this Lease is extended (as opposed to renewed) pursuant to
any of the provisions hereof, Lessee shall continue to pay Lessor the monthly
Rent payments in effect prior to the expiration of the Applicable Term and all
other provisions of the Master Agreement and this Schedule (including Lessee's
purchase and renewal options) shall remain in full force and effect; (f) if
Lessee elects to purchase the Equipment and has fulfilled the terms and
conditions of the Master Agreement and this Section B, then on the last day of
the Applicable Term: (A) this Schedule shall terminate and, except as provided
in Section 21 of the Master Agreement, Lessee shall be relieved of all
obligations under this Schedule; and (B) Lessor shall transfer all of its
interest in the Equipment to Lessee "AS IS, WHERE IS," and without any warranty,
express or implied from Lessor, other than the absence of any liens or claims
by, through, or under Lessor; and (g) notwithstanding any of the foregoing
provisions to the contrary, if Lessee is in Default of the Lease, Lessor may
cancel any extension or renewal of any term upon ten (10) days prior written
notice to Lessee.
C. STIPULATED LOSS VALUE. The parties agree that the stipulated loss value
of the Equipment ("Stipulated Loss Value") shall equal the sum of (i) all Rent
and other amounts then due and owing under the Lease; plus (ii) an amount
calculated by Lessor that is the present value (discounted at 5% per annum
compounded monthly) of all Rent payments from the date of the Casualty or
Default in question to the scheduled date of expiration of the Initial Term and
any renewal or extension term; plus (iii) the present value (computed as
described above and calculated by Lessor as of the date of the Casualty or
Default in question) of the Fixed Purchase Price. The applicable percentage
shall be 30% for any Lease of an Initial Term of less than 36 months; 25% for a
term of 36 months or more, but less than 48 months; 20% for a term of 48 months
or more, but less than 60 months; 15% for a term of 60 months or more, but less
than 72 months, and 10% for a term of 72 months or more.
INITIALS:
LESSEE Ken Mattice LESSOR
DIGITAL INSIGHT CORPORATION SILICON VALLEY BANK__________
<PAGE>
Exhibit 10.10
Exodus Communications, Inc.
Internet Data Center Services Agreement
This Internet Data Center Services Agreement (this "Agreement") is made
effective as of the Submission Date (March 01, 1999) indicated in the initial
Internet Data Center Services Order Form accepted by Exodus, by and between
Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
Parties:
Customer Name: Digital Insight
---------------------------------------
Address: 26025 Mureau Road
---------------------------------------
Calabasas CA 91302
---------------------------------------
Phone: (818) 871-0000
---------------------------------------
Fax: (818) 878-7555
---------------------------------------
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, CA 95051
Phone: (408) 346-2200
Fax: (408) 346-2206
1. Internet Data Center Services.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated by such form.
2. Fees and Billing.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services,
other than Setup Fees, indicated in the initial IDC Services Order Form shall
commence on the earlier to occur of (i) the "Installation Date" indicated in the
initial IDC Services Order Form, regardless of whether Customer has commenced
use of the Internet Data Center Services, unless Customer is unable to install
the Customer Equipment and/or use the Internet Data Center Services by the
Installation Date due to the fault of Exodus, then billing will not begin until
the date Exodus has remedied such fault and (ii) the date the "Customer
Equipment" (Customer's computer hardware and other tangible equipment, as
identified in the Customer Equipment List which is incorporated herein by this
reference) is placed by Customer in the "Customer Area" (the portion(s) of the
Internet Data Centers, as defined in Section 3.1 below, made available to
Customer hereunder for the placement of Customer Equipment) and is operational.
All Setup Fees will be billed upon receipt of a Customer signed IDC Services
Order Form. In the event that Customer orders additional Internet Data Center
Services, billing for such services shall commence on the date Exodus first
provides such additional Internet Data Center Services to Customer or as
otherwise agreed to by Customer and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in
advance of the provision of Internet Data Center Services, and payment of such
fees will be due within thirty (30) days of the date of each Exodus invoice. All
payments will be made in U.S. dollars. Late payments hereunder will accrue
interest at a rate of one and one-half percent (1 1/2%) per month, or the
highest rate allowed by applicable law, whichever is lower. If in its judgment
Exodus determines that Customer is not creditworthy or is otherwise not
financially secure, Exodus may, upon written notice to Customer, modify the
payment terms to require full payment before the provision of Internet Data
Center Services or other assurances to secure Customer's payment obligations
hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.
3. Customer's Obligations.
3.1 Compliance with Law and Rules and Regulations. Each party agrees
that it will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the content of the information passing through its sites containing the
Customer Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to ensure that the information it transmits and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely
responsible, and at Exodus's request will reimburse Exodus, for all costs and
expenses incurred at Customer's request (other than those included as part of
the Internet Data Center Services and except as otherwise expressly provided
herein) it incurs in connection with this Agreement.
Nonstandard - Digital Insight
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3.3 Access and Security. Except as to any unauthorized action by Exodus,
Customer will be fully responsible for any charges, costs, expenses (other than
those included in the Internet Data Center Services), and third party claims
that may result from its use of, or access to, the Internet Data Centers and/or
the Customer Area including but not limited to any unauthorized use of any
access devices provided by Exodus hereunder. Except with the advanced written
consent of Exodus, Customer's access to the Internet Data Centers will be
limited solely to the individuals identified and authorized by Customer to have
access to the Internet Data Centers and the Customer Area in accordance with
this Agreement, as identified in the Customer Registration Form, as amended from
time to time, which is hereby incorporated by this reference
("Representatives").
3.4 No Competitive Services. Customer may not resell Exodus' services
without prior written consent.
3.5 Insurance.
(a) Minimum Levels. Each party will keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability insurance
in an amount not less than $5 million per occurrence for bodily injury and
property damage; (ii) employer's liability insurance in an amount not less than
$1 million per occurrence; and (iii) workers' compensation insurance in an
amount not less than that required by applicable law. Each party also agrees
that it will, and will be solely responsible for ensuring that its agents
(including contractors and subcontractors) maintain, other insurance at levels
no less than those required by applicable law and customary in Customer's and
agents' industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above. (c)
Naming Exodus as an Additional Insured. Each party agrees to notify the other
party of any decrease in or cancellation of insurance coverage.
4. Confidential Information.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentially
of such information.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. Representations and Warranties.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it
owns or has the legal right and authority, and will continue to own or maintain
the legal right and authority during the term of this Agreement, to place and
use the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and Customer
Equipment used by Customer in connection with this Agreement as well as
Customer's and its permitted customers' and users' use of the Internet Data
Center Services (collectively, "Customer's Business") does not as of the
Installation Date, and will not during the term of this Agreement operate in any
manner that would violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and
Regulations and represents and warrants that Customer and Customer's Business
are currently in full compliance with the Rules and Regulations, and will remain
so at all times during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
5.2 Warranties and Disclaimers by Exodus.
(a) Service Level Warranty. In the event Customer experiences any of
the following and Exodus determines in its reasonable judgment that such
inability was caused by Exodus' failure to provide Internet Data Center Services
for reasons within Exodus' reasonable control and not as a result of any actions
or inactions of Customer or any third parties (including Customer Equipment and
third party equipment), Exodus will, upon Customer's request in
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accordance with paragraph (iii) below, credit Customer's account as described
below:
(i) Inability to Access the Internet (Downtime). If Customer
is unable to transmit and receive information from Exodus' Internet Data Centers
(i.e., Exodus' LAN and WAN) to other portions of the Internet because Exodus
failed to provide the Internet Data Center Services for more than fifteen (15)
consecutive minutes, Exodus will credit Customer's account the pro-rata
connectivity charges (i.e., all bandwidth related charges) for one (1) day of
service, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one calendar (1) month. Exodus' scheduled maintenance of
the Internet Data Centers and Internet Data Center Services, as described in the
Rules and Regulations, shall not be deemed to be a failure of Exodus to provide
Internet Data Center Services. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained packet loss in excess of 50% based on
Exodus' measurements.
(ii) Packet Loss and Latency. Exodus does not proactively
monitor the packet loss or transmission latency of specific customers. Exodus
does, however, proactively monitor the aggregate packet loss and transmission
latency within its LAN and WAN. In the event that Exodus discovers (either from
its own efforts or after being notified by Customer) that Customer is
experiencing packet loss in excess of one percent (1%) ("Excess Packet Loss") or
transmission latency in excess of 120 milliseconds round trip time between any
two points within Exodus' U.S. network (collectively, "Excess Latency", and with
Excess Packet Loss "Excess Packet Loss/Latency"), and Customer notifies Exodus
(or confirms that Exodus has notified Customer), Exodus will take all actions
necessary to determine the source of the Excess Packet Loss/Latency. In
determining any failure to meet the packet loss and latency service level,
Exodus will first consider Customer's measurements to determine if they indicate
a failure to meet these criteria.
(A) Time to Discover Source of Excess Packet
Loss/Latency; Notification of Customer. Within two (2) hours of discovering the
existence of Excess Packet Loss/Latency, Exodus will determine whether the
source of the Excess Packet Loss/Latency is limited to the Customer Equipment
and the Exodus equipment connecting the Customer Equipment to Exodus' LAN
("Customer Specific Packet Loss/Latency"). If the Excess Packet Loss/Latency is
not a Customer Specific Packet Loss/Latency, Exodus will determine the source of
the Excess Packet Loss/Latency within two (2) hours after determining that is
not a Customer Specific Packet Loss/Latency. In any event, Exodus will notify
Customer of the source of the Excess Packet Loss/Latency within sixty (60)
minutes after identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess
Packet Loss/Latency remedy is within the sole control of Exodus, Exodus will
remedy the Excess Packet Loss/Latency within two (2) hours of determining the
source of the Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is
caused from outside of the Exodus LAN or WAN, Exodus will notify Customer and
will use commercially reasonable efforts to notify the party(ies) responsible
for the source and cooperate with it (them) to resolve the problem as soon as
possible.
(C) Failure to Determine Source and/or Resolve Problem.
In the event that Exodus is unable to determine the source of and remedy the
Excess Packet Loss/Latency within the time periods described above (where Exodus
was solely in control of the source), Exodus will credit Customer's account
fifty percent (50%) of the pro-rata charges for one (1) day of service for every
two (2) hours after the time periods described above that it takes Exodus to
resolve the problem up to an aggregate maximum credit of connectivity charges
for seven (7) days of service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the
credits described in this section 5.2(a), Customer must notify Exodus within
three (3) business days from the time Customer becomes eligible to receive a
credit. Failure to comply with this requirement will forfeit Customer's right to
receive a credit.
(iv) Remedies Shall Not Be Cumulative; Maximum Credit: In the
event that Customer is entitled to multiple credits hereunder arising from the
same event, such credits shall not be cumulative and Customer shall be entitled
to receive only the maximum single credit available for such event. In no event
will Exodus be required to credit Customer in any one (1) calendar month
connectivity charges in excess of seven (7) days of service. A credit shall be
applied only to the month in which there was the incident that resulted in the
credit. Customer shall not be eligible to receive any credits for periods in
which Customer received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single
calendar month, Customer would be able to receive credits totaling fifteen (15)
or more days (but for the limitation in paragraph (iv) above) resulting from
three (3) or more events during such calendar month or, if any single event
entitling customer to credits under paragraph 5.2(a)(i) exists for a period of
eight (8) consecutive hours, then, Customer may terminate this Agreement for
cause and without penalty by notifying Exodus within five (5) days following the
end of such calendar month. Such termination will be effective thirty (30) days
after receipt of such notice by Exodus.
This warranty does not apply to any Internet Data Center Services that expressly
exclude this warranty (as described in the specification sheets for such
products). This Section 5.2(a) states customer's sole and exclusive remedy for
any failure by Exodus to provide Internet Data Center Services.
(b) No Other Warranty. Except For The express warranty set out in
subsection (a) above, the Internet Data Center Services are provided on an "as
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is" basis, and Customer's use of the Internet Data Center Services is at its own
risk. Exodus does not make, and hereby disclaims, any and all other express
and/or implied warranties, including, but not limited to, warranties of
merchantability, fitness for a particular purpose, noninpringement and title,
and any warranties arising from a course of dealing, usage, or trade practice.
Exodus does not warrant that the Internet Data Center Services will be
uninterrupted, error-free, or completely secure.
(c) Disclaimer of Actions Caused by and/or Under the Control of
Third Parties. Exodus does not and cannot control the flow of data to or from
Exodus' Internet Data Centers and other portions of the internet. Such flow
depends in large part on the performance of internet services provided or
controlled by third parties. At times, actions or inactions caused by these
third parties can produce situations in which Exodus' customers' connections to
the Internet (or portions thereof) may be impaired or disrupted. Although Exodus
will use commercially reasonable efforts to take actions it deems appropriate to
remedy and avoid such events, Exodus cannot guarantee that they will not occur.
Accordingly, Exodus disclaims any and all liability resulting from or related to
such events.
(d) Year 2000 Performance Compliance. Exodus warrants that none of
the computer hardware and software systems and equipment incorporated in, or
utilized in the delivery of the IDC services contain any date dependent routines
or logic which will fail to operate correctly after December 31, 1999, by reason
of such date dependence; provided however, that no representation or warranty is
made as to the adequacy of any Customer or third party service provider hardware
or software used in connection with the IDC services. In the event of any breach
of the warranties under this Section 5.2(d), Customer's sole remedy shall be its
ability to terminate this Agreement.
6. Limitations of Liability.
6.1 Personal Injury. Each Representative and any other persons visiting
the Internet Data Centers does so at its own risk and Exodus assumes no
liability whatsoever for any harm to such persons resulting from any cause other
than exodus' negligence or willful misconduct resulting in personal injury to
such persons during such a visit.
6.2 Damage to Customer Equipment or Business. Exodus assumes no
liability for any damage to, or loss relating to, Customer's Business resulting
from any cause whatsoever. Certain Customer Equipment, including but not limited
to Customer Equipment located on CyberRacks, may be directly accessible by other
customers. Exodus assumes no liability for any damage to, or loss of, any
Customer Equipment resulting from any cause other than Exodus' gross negligence
or willful misconduct. To the extent Exodus is liable for any damage to, or loss
of, the Customer Equipment for any reason, such liability will be limited solely
to the then-current value of the Customer Equipment.
6.3 Exclusions. Except as specified in Sections 6.1 and 6.2, in no event
will Exodus be liable to Customer, any Representative, or any third party for
any claims arising out of or related to this Agreement, Customer Equipment,
Customer's Business or otherwise, and any lost revenue, lost profits,
replacement goods, loss of technology, rights or services, incidental, punitive,
indirect or consequential damages, loss or data, or interruption or loss of use
of service or of any Customer Equipment or Customer's Business, even if advised
of the possibility of such damages, whether under theory of contract, tort
(including negligence), strict liability or otherwise.
6.4 Maximum Liability. Notwithstanding anything to the contrary in this
Agreement, Exodus's maximum aggregate liability to Customer related to or in
connection with this Agreement will be limited to the total amount paid by
Customer to Exodus hereunder for the prior Twelve (12) month period.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. Indemnification.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend
and hold Customer harmless from and against any and all costs, liabilities,
losses, and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action, or proceeding
(each, an "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus's gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify,
defend and hold Exodus, its affiliates and customers harmless from and against
any and all Losses
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resulting from or arising out of any Action brought by or against Exodus, its
affiliates or customers alleging: (a) with respect to the Customer's Business:
(i) infringement or misappropriation of any intellectual property rights; (ii)
deformation, libel, slander, obscenity, pornography, or violation of the rights
of privacy or publicity; or (iii) spamming, or any other offensive, harassing or
illegal conduct or violation of the Rules and Regulations; (b) any damage or
destruction to the Customer Area, the Internet Data Centers or the equipment of
Exodus or any other customer by Customer or Representative(s) or Customer's
designees; or (c) any other damage arising from the Customer Equipment or
Customer's Business.
7.3 Notice. Each party will provide the other party prompt written
------
notice upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof.
8. Term and Termination.
8.1 Term. This Agreement will be effective for a period of one (1) year
from the Installation Date, unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may
terminate this Agreement for convenience by providing written notice to Exodus
at any time during the thirty (30) day period beginning on the Installation
Date.
(ii) By Either Party. Either party may terminate this Agreement
for convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days' prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
receipt of written notice of the same, except in the case of failure to pay
fees, which must be cured within five (5) days after receipt of written notice
from Exodus; (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors; or (iii) the other
party becomes the subject of an involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors if such petition or proceeding is not
dismissed within sixty (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligations of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement; and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within the Internet
Data Centers within five (5) days of such expiration or termination and return
the Customer Area to Exodus in the same condition as it was on the Installation
Date, normal wear and tear excepted. If Customer does not remove such property
within such five-day period, Exodus will have the option to (i) move any and all
such property to secure storage and charge Customer for the cost of such removal
and storage, and/or (ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the Event that Customer fails to
pay Exodus all undisputed amounts owed Exodus under this Agreement when due,
Customer Agrees that upon written notice, Exodus may take possession of any
Customer Equipment and store it, at Customer's expense until taken in full or
partial satisfaction of any lien or judgment, all without being liable to
prosecution or for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. Miscellaneous Provisions.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No lease. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Space or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws regulations, or ordinances. For good cause, including the
exercise of any rights under Section 8.5 above, Exodus may
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suspend the right of any Representative or other person to visit the Internet
Data Centers.
9.3 Marketing. Subject to prior written approval, each party agrees that
the other party may refer to it by trade name and trademark, and may briefly
describe it Business, in its marketing materials and web site. Each party hereby
grants the other party a license to use any of such party's trade names and
trademarks solely in connection with the rights granted to the other party
pursuant to this Section 9.3. Notwithstanding anything to the contrary, Exodus
may list Customer in a generalized list of all or a representative group of
Exodus' customers.
9.4 Government Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation
Date and ending on the first anniversary of the termination or expiration of
this Agreement in accordance with its terms, each party agrees that it will not,
and will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by the other party during
such period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International State of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other pre-
judgment remedies) will be resolved at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of online services agreements; however the
arbitration will proceed even if such a person is unavailable. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
9.7 Assignment; Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or part.
This Agreement will bind and inure to the benefit of each party's successors and
permitted assigns. Any notice or communication required or permitted to be given
hereunder may be delivered by hand, deposited with an overnight courier, sent by
confirmed facsimile, or mailed by registered or certified mail, return receipt
requested, postage prepaid, in each case to the address of the receiving party
indicated on the signature page hereof, or at such other address as may
hereafter be furnished in writing by either party hereto the other. Such notice
will be deemed to have been given as of the date it is delivered, mailed or
sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ John Dorman Signature: /s/ Mary Anne Wellman
---------------------- ---------------------
Print Name: John Dorman Print Name: Mary Anne Wellman
---------------------- ---------------------
Title: President and CEO Title: Corporate Counsel
---------------------- ---------------------
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Exhibit 10.11
MONEYLINE EXPRESS, INC.
AGREEMENT
HOME BANKING BILL PAYMENT PROCESSING
AND FUNDS TRANSFER SERVICES
1. Parties. This Agreement is between Digital Insight, LLC ("Digital
-------
Insight") and Moneyline Express, Inc. ("Moneyline").
2. Effective Date. The effective date of this Agreement is February 27,
--------------
1997.
3. Purpose. Digital Insight provides a service to Financial Institutions
-------
for Financial Institution Customers ("Customers") to pay bills ("Bill Payment
Services" or "Program") and receive other banking services through telephone or
home computer activated instructions (collectively "Home Banking"). Moneyline
provides to Digital Insight as a part of the Bill Payment Services, back-room
processing of Customer activated payment instructions, funds transfer services
for payment to payees ("Vendors") listed in such instructions, and certain
Customer information services (collectively "Moneyline Services"). Digital
Insight shall provide Moneyline with a list of Financial Institutions under
contract with Digital Insight for Bill Payment Services, as well as additions or
deletions to such list as they occur.
4. Contractual Relationship. This Agreement is intended and shall be
------------------------
construed solely as an independent subcontract of Moneyline to Digital Insight
in the
<PAGE>
offering by Digital Insight of Bill Payment Services. This Agreement is not
intended for the benefit of Financial Institutions, Customers or any other third
persons, and shall not be deemed a joint venture, partnership or similar joint
undertaking.
Digital Insight grants Moneyline rights as an authorized and primary vendor
to provide those services described as Moneyline Services in any and all
offerings by Digital Insight of Bill Payment Services to Financial Institutions.
Financial Institutions are those depository institutions insured, or eligible
for insurance, by the Federal Deposit Insurance Corporation, or the National
Credit Union Administration.
5. Services. The Moneyline Services provided by Moneyline for Digital
--------
Insight, and the services provided by Digital Insight as a part of Bill Payment
Services ("Digital Insight Services") are described in EXHIBIT A.
6. Credit Risk.
-----------
A. Consumer DDA Accounts: Between the parties, Moneyline bears the
---------------------
credit risk associated with potential NSF/return items for all consumer DDA
accounts. Moneyline will manage the risk as provided in the procedures which
were previously provided to Company.
B. Business DDA Accounts: Between the parties, Moneyline bears the
---------------------
credit risk associated with potential NSF/return items for business DDA accounts
only when all of the following conditions are met:
2
<PAGE>
(i) Total exposure is limited to a maximum loss of $5,000.00
per business account.
(ii) Only top tier (A and B, as defined in Moneyline's credit
and risk evaluation system) business clients will be offered the
bill payment service. This means that the business is in good
financial condition and has been a customer of the financial
institution for at least two years. For businesses open less than
two years, Moneyline requires the opportunity to review and
approve or disapprove the financial condition of the business.
Costs associated with this credit review process will be paid by
the participating financial institution.
(iii) Each payment is capped the same as for consumer bill
payments. The cap on the effective date of this Agreement is
$9,999.00. Moneyline may change the cap from time to time with
the prior consent of Company.
C. Risk Reduction Measures: Moneyline may at its option implement
-----------------------
reasonable measures to reduce credit risks. These may include but are not
limited to pre-authorized drafts for business customers, verifying funds through
an ATM network, and separating
3
<PAGE>
debits from credits so that payments are not sent until after good
funds are received.
7. Performance Standards. The Parties agree that they will use all best
---------------------
efforts to meet the performance standards necessary to provide the Digital
Insight Services and Moneyline Services, respectively. Failure by any Party, or
the Parties, to meet such standards, shall obligate such Party(s) to take
corrective action as provided in Paragraph 14. Payments delivered over an
automated clearing house system ("ACH"), or other payments network, shall be
governed by and subject to the rules, regulations and performance standards of
such networks.
8. Fees. Digital Insight agrees to pay Moneyline those fees provided in
----
EXHIBIT B ("Fee Schedules").
9. Ownership. Each Party shall have and retain sole ownership of their
---------
respective proprietary source codes and software packages used as a part of the
services described in EXHIBIT A, including any enhancements or improvements
thereon. Digital Insight shall have and retain sole ownership of the interface
developed by it between the respective source codes and software packages,
including any enhances or improvements thereon; Moneyline shall have and retain
sole ownership of source codes provided by it in connection with said interface.
Moneyline shall also retain sole ownership of the Vendor list supplied by it as
a part of the Moneyline Services. No rights of ownership or use by one Party or
by third
4
<PAGE>
persons, of the proprietary source code and software of the other, or of the
Digital Insight interface by Moneyline or third persons, or of the interface
source data or Vendor list of Moneyline by Digital Insight or third persons,
shall arise by implication or otherwise as a result of this Agreement except
with the express written consent or license by the owner. Any and all rights by
one Party to use and/or possess proprietary property of the other Party shall be
extinguished and returned to the owner immediately upon termination of this
Agreement.
10. Confidentiality. The Parties agree to maintain the confidentiality of
---------------
information and records as described in EXHIBIT C ("Confidentiality").
11. Security. Moneyline shall not be responsible for the loss,
--------
confidentiality or security of data or other payment information while in
transmission over communications lines, in the postal system, or in an ACH or
other payments network over which payments are delivered.
12. Term. The initial term of this Agreement is three (3) years from the
----
effective date. The Agreement shall be automatically renewed for successive one
(1) year terms unless a Party shall give the other Party written notice of its
intent to terminate at least six (6) months prior to the expiration of the
initial or a renewal term.
5
<PAGE>
13. Cooperation. The Parties will meet periodically to discuss service
-----------
performance, service improvement, or any other issues related to the provision
of Bill Payment Services. Such meetings shall be held at least annually.
14. Errors. No Party shall be liable for payment errors, payment delays,
------
or other performance failures caused solely by software, computer, or other
Program defects under the control and responsibility of the other Party. Action
shall be taken by the responsible Party to correct such Program defects within
sixty (60) days after knowledge by that Party, or notice from the other Party,
of such defects. In the event that the cause of such defects is partly
attributable to both Parties, corrective action shall be the joint
responsibility of both Parties and the expense of any such corrective action
shall be shared.
15. Limitations of Liability.
------------------------
A. Liability of Moneyline as the result of any act or omission in
providing Moneyline Services shall not exceed three (3) times the
average amount of monthly fees paid by Digital Insight to Moneyline
(calculated based on the three month period immediately before the act
or omission that gives rise to the claim of liability).
B. Force Majeure - A Party will not be liable for a failure to
-------------
perform, or any loss occasioned thereby, arising out of an event or
condition beyond the reasonable control of such Party and having an
adverse
6
<PAGE>
affect on the performance by such Party under this Agreement. Such
events shall include, but not be limited to, communications breakdown
or interruption, acts of God, labor disputes, interruption of service
by ACH or other payment networks, and nonperformance by the other
Party under this Agreement. Loss or nonperformance caused by a
breakdown or malfunction of computer equipment under the control of a
Party are not excused, disclaimed or limited under this subparagraph
B.
C. The Parties will not be liable for punitive, consequential,
indirect, remote or special damages.
D. Moneyline will not be liable for any late charges assessed by
Vendors against Customers for payments made by Customers under the
Program.
E. The Parties shall be held to a standard of due care in accordance
with recognized industry practices of the highest standards.
16. Mediation. The Parties agree that any controversy or claim arising out
---------
of or relating to this Agreement shall be submitted to non-binding mediation
with a person or persons independent of the Parties and mutually acceptable to
them. The Parties shall use their best efforts and in good faith seek resolution
of any such claim
7
<PAGE>
or controversy through mediation, but in the event of failure to do so, may seek
such other remedies as provided by law.
17. Warranties - Cross Indemnification. The Parties hereby warrant and
----------------------------------
represent to each other that they have all rights necessary to perform their
respective obligations under this Agreement and that the respective Moneyline
Services and Digital Insight Services to be provided hereunder shall be
conducted in a professional, workmanlike manner. EXCEPT AS SPECIFICALLY PROVIDED
IN THIS PARAGRAPH, THE PARTIES MAKE NO WARRANTIES EITHER EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
The Parties shall each indemnify, defend and hold harmless the other Party
from and against any and all claims by third persons, together with all damages,
demands, liabilities, costs and expenses, including reasonable attorney's fees
and expenses, incurred by the indemnitee as the result of such claims, which
proximately results from and is solely caused by any act or omission of the
indemnitor, its employees, agents or representatives performing on behalf of the
indemnitor hereunder, or arises out of performance of the Services to be
provided by the indemnitor hereunder.
8
<PAGE>
18. Termination. A Party may terminate this Agreement by giving the other
-----------
Party six (6) months written notice of termination prior to a term expiration
date as provided in Paragraph 11.
A Party may also at its option terminate this Agreement prior to a term
expiration date upon occurrence of any of the following events ("Events of
Default"):
1. If either Party fails to correct errors or defects under the
conditions and within the period provided in Paragraph 14, including,
but not limited, to defects in software performance adversely
affecting the provision of Bill Payment Services.
2. If Digital Insight fails to pay to Moneyline the fees as required in
EXHIBIT B, and fails to make such payments within sixty (60) days
after demand by Moneyline to Digital Insight for such payments.
3. Any other material breach by a Party of its obligations under this
Agreement and said Party fails to cure said breach within one hundred
twenty (120) days after written notice from the other Party.
4. Immediately, upon written notice of a Party, when the other Party
becomes insolvent, makes an assignment for the benefit of creditors,
admits in writing an inability to pay its debts when they become due,
or files a petition for bankruptcy or reorganization under Federal or
State
9
<PAGE>
bankruptcy laws, or is subject to a proceeding commenced in bankruptcy
which is not vacated or stayed within thirty (30) days.
19. Rights after Termination. Upon termination, all rights and obligations
------------------------
of the Parties hereunder for the provision of Bill Payment Services shall cease
and be of no further effect whatsoever, provided that any payments by Customers
activated prior to termination date but not completed by termination date shall
be carried out in accordance with this Agreement. The continued use or
possession by a Party of proprietary property or confidential information of the
other Party shall cease and be immediately returned to the other Party provided,
however, that the universal Vendor list prepared by Moneyline for Digital
Insight's Customers of Moneyline Services may be purchased by Digital Insight at
a price established by Moneyline at its discretion.
20. Assignment/Guarantee. This Agreement shall be binding on the Parties
--------------------
and their respective successors and assigns. Digital Insight shall not assign
its rights and obligations hereunder without the express written consent of
Moneyline, its successors or assigns. Moneyline Company, Inc. guarantees the
performance of the obligations of PayMate, Inc. under this Agreement.
21. Notices. Notices may be sent by registered or certified mail, return
-------
receipt requested, or by facsimile transmission followed by overnight delivery
of the original copy addressed to:
10
<PAGE>
MONEYLINE EXPRESS, INC.
1550 Utica Ave. So.
Minneapolis, MN 55416
Fax: (612) 591-3859
Attn: Dave Roy, Vice President
DIGITAL INSIGHT, LLC
5155 Camino Ruiz
Camarillo, CA 93012
Fax: (805) 384-2275
Attn: Paul Fiore
Notices so addressed are effective when received and may be changed by prior
written notice to the other Party of the new address and effective date.
22. General Provisions. This Agreement, together with Exhibits, is the
------------------
entire agreement between the Parties and may be amended only in writing signed
by both Parties. The failure of either Party to exercise or enforce its rights
hereunder shall not be deemed as a waiver of such right or of the power to
enforce such rights. This Agreement may be executed in counterparts, all of
which taken together constitute one single agreement. Paragraph headings are for
reference and convenience only and are not a part of this Agreement.
23. Governing Law. This Agreement shall be governed by the laws of the
-------------
state of Minnesota and the Parties explicitly agree and submit to the
jurisdiction and venue of the United States District Court, District of
Minnesota, or any Minnesota Court of general jurisdiction, for any legal action
brought to enforce this Agreement.
11
<PAGE>
24. Effect. This Agreement terminates and replaces in entirety the PayMate
------
Agreement between the parties effective May 8, 1996, which Agreement, including
all exhibits thereto, shall be of no further effect whatsoever.
The Parties have caused this Agreement to be signed and delivered as of the
effective date provided above.
Digital Insight, LLC
By: /s/ Paul Fiore
Paul Fiore
Title: President/CEO
Date: Feb. 27, 1997
Moneyline Express, Inc.
By: /s/ David R. Roy
David R. Roy
Title: Vice President
Date: 3/2/97
12
<PAGE>
EXHIBIT A
SOFTWARE-SERVICE DEFINITIONS
MONEYLINE SERVICES
BILL PAYMENT BACK-END PROCESSING--
1. Accurate payment data, including Customer account number and payment
information, provided by Customers in files supplied Moneyline by Digital
Insight, will be processed under normal processing time frames and remitted
either via check or ACH to Vendors.
2. Funds transfer in accordance with Customer payment instructions activated
in accordance with paragraph 1.
3. Supplying of information and handling of Customer inquiries regarding
payments made on behalf of Customer Vendors.
4. Provide the use of voice software for telephone bill payment.
DIGITAL INSIGHT SERVICES
PC HOME BANKING AND BILL PAYMENT FRONT-END SOFTWARE--
1. Digital Insight will develop the applications software required to operate
Customer PC for home banking services including Web Site Offering for
activation of payment instructions through interface with Moneyline back-
end bill payment processing software and other home banking services.
2. Support for Digital Insight Payment Transactions
Digital Insight will, on request by Moneyline, cooperate to remedy Customer
account inquiries related to the applications software provided above.
<PAGE>
Exhibit A
to Software License Agreement
In this Agreement between Moneyline Digital Insights, Inc., and Digital
Insights, "Moneyline Software" means the software that resides on an NT server
and accepts, stores, and processes bill payment transactions from "Digital
Insight's" access devices. "Moneyline Software" includes voice software for
telephone bill payment which will reside on Digital Insights's hardware.
<PAGE>
Digital Insight pricing sheet
<TABLE>
<CAPTION>
2/20/97 Exhibit B
APPLICABLE FEE STRUCTURE
STOP PAY FLAT FEE TRANSACTION FEES
FL SET UP FEE NSF FEE FEE PER CUST./MO. APPLICABLE TO ALL MARKET SEGMENTS
<S> <C> <C> <C> <C> <C> <C>
Commercial Banks $**** $15.00 $15.00 $****
Mthly Trans Trans fees
After 5/98 FIRST 50,000 $****
XP Systems and Symitar $**** $15.00 $15.00 NEXT 50,000 $****
NEXT 100,000 $****
NEXT 150,000 $****
Users, Inc. and other $**** $15.00 $15.00 $**** Next 150,000 $****
new credit union alliances Over 500,000 $****
<CAPTION>
2/20/97
APPLICABLE FEE STRUCTURE
CUST. SERV.
APPLICATION FEE PER MO.
FEES PER USER
<S> <C> <C>
Commercial Banks $**** $****
AFTER 5/98 AFTER
XP Systems and Symitar $**** $****
Users, Inc. and other $**** $****
new credit union alliances
</TABLE>
MONTHLY MINIMUMS
MONTH VALUE
1-2 $****
3-5 $****
6-10 $****
11+ $****
These prices are gauranteed for one year with the exception of Xp Systems and
Symitar pricing which is good until the Credit Union contract renewal. at that
time, Xp Systems and Symitar FI's flat fee will be split 50/50 if less than
$****, and if more than $**** then $**** will go to Digital Insight and the
remainder will go to Moneyline Express.
If one renewal, the minimum flat fee stays at $****, one-half goes to Moneyline
Express. pricing for current Moneyline Express Home Banking and PC Bill Payment
Clients will be separate from this agreement Exceptions to the above pricing
include ****, with a flat fee will be $**** per mo/per user and ****, with a
flat fee will be $**** per mo/per user
These prices will be considered for adjustment on the anniversary date of the
agreement. Prices may increase no more than the cpi for the previous 12 month
period plus ****%.
Other services priced separately
MONEYLINE EXPRESS CO., INC. CONFIDENTIAL INFORMATION
[****] Certain information in this exhibit has been omitted and filed separately
with the commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
Exhibit C
CONFIDENTIALITY
1. CONFIDENTIAL INFORMATION. The parties may disclose to each other
information and materials including the following:
* business plans;
* qualitative aspects of the parties' businesses, including pricing,
marketing, customer/trustee selection, names and addresses of
customers/trustees;
* historical financial results;
* geographical distribution of customers/trustees and operations;
* methodology for projecting losses, including data used in the analysis and
benchmarks;
* financial statements;
* polices and procedures;
* risk assessment methods, risk evaluation systems;
* reports, data, figures, statistics, analysis, compilations, summaries,
plans, projections;
* charts, graphs, tapes, diskettes, papers, books, records, materials, and
information in any medium.
All of this information is confidential information except as specifically
excluded below.
2. RESTRICTIONS ON USE OR DISCLOSURE. The parties agree that they will not use
or disclose any confidential information that they receive except as is
reasonably necessary for the purposes of this agreement.
3. INFORMATION EXCLUDED. The following is not confidential information:
* information which is in the public domain;
* information which, through no fault of a party, becomes part of the public
domain;
* information which a party can show was in its possession prior to the time
of disclosure; or
* information which is rightfully received by a party from a third party
without obligation of confidentiality.
<PAGE>
4. COURT ORDERS AND SUBPOENAS. A party may disclose confidential information
as required by a court order or subpoena, but the information remains
confidential and subject to this confidentiality agreement. Each party
agrees to notify the other party immediately and to cooperate in any lawful
effort to contest the subpoena or other legal process.
5. MATERIALS. Materials in any medium containing confidential information,
whether furnished to a party by the other party or prepared by a party, are
the sole property of the party whose information is contained in the
materials and must be kept confidential and delivered to the party on
request.
6. REMEDIES. Any breach of this confidentiality agreement may cause
irreparable harm. Each party agrees that in the event of a breach the other
party may seek injunctive relief in addition to its other remedies.
<PAGE>
Exhibit D
SOFTWARE LICENSE AGREEMENT
1. INCORPORATION BY REFERENCE. This Software License Agreement is part of the
foregoing Agreement between Moneyline Express, Inc. ("Moneyline") and
Digital Insight, LLC ("Digital Insight").
2. SOFTWARE. "Moneyline Software" is defined as software that resides on an NT
server and accepts, stores and processes bill payment transactions from
Digital Insights access devices. Moneyline Software includes voice software
for telephone bill payments which will reside on Digital Insights hardware.
3. PURPOSE. This License authorizes Digital Insights to use Moneyline Software
at Digital Insight's site on its hardware for the purpose of selling any of
the Moneyline Express, inc. Bill payment and home banking services to
Digital Insights's customers.
4. LICENSE. Moneyline grants to digital insights a non-exclusive license to
use the Moneyline Software as provided herein. The Software remains the
sole property of Moneyline.
5. CONDITIONS OF THE LICENSE. Without the prior written consent of Moneyline,
Digital Insights shall not do any of the following:
A. Copy the Moneyline Software or manuals or other materials containing
information about the Software;
B. Reverse compile Moneyline Software or permit any other person to do
so;
C. Permit any third person to inspect the Moneyline Software, manuals, or
other materials containing information about the software;
D. Transfer the Moneyline Software, manuals or other materials containing
any information about the Software to any third person;
E. Make any modifications, additions, or upgrades to the Moneyline
Software.
<PAGE>
6. CONFIDENTIALITY.
A. "Confidential information" means the Moneyline Software, manuals, and
all information about the Software, except:
(1) information which is in the public domain before it is
received by Digital Insights from Moneyline;
(2) information which, through no fault of Digital Insights,
becomes part of the public domain after it is received by
Digital Insights from Moneyline;
(3) information which Digital Insights can show was in its
possession prior to the time of disclosure and was not
received directly or indirectly from Moneyline on a
confidential basis; or
(4) information which is rightfully received by Digital Insights
from a third party which did not acquire such information
directly or indirectly from Moneyline on a confidential
basis.
B. Digital Insights agrees to keep Confidential Information confidential
and not disclose it to any person other than Digital Insights's
employees or contractors who require knowledge in order for Digital
Insights to carry out the purpose of this License. Digital Insights
agrees to use the Confidential Information only to carry out the
purpose of this License and for no other purpose. Digital Insights
agrees that every person to whom any Confidential Information is
disclosed shall be required to comply with this confidentiality
agreement.
7. IDENTIFYING MARKS. Digital Insights will not remove or obscure any marks
which identify the Moneyline Software, manuals or other materials as
Moneyline's property. Digital Insights agrees to display screens a notice
of Moneyline's intellectual property rights as directed by Moneyline.
8. DISCLAIMER OF WARRANTIES. Moneyline DISCLAIMS ALL WARRANTIES, INCLUDING ANY
WARRANTY OF MERCHANTABILITY AND ANY WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE. Moneyline makes no warranty against infringement of patent or
intellectual property rights of third parties.
9. INSTALLATION. Digital Insights is responsible for installation of the
Moneyline Software.
<PAGE>
10. RISK OF LOSS AND INDEMNITY.
A. Digital Insights is responsible for any loss, theft, or damage to the
Moneyline Software, manuals or materials from the time that they are
delivered to the shipper until they are returned to Moneyline.
B. Digital Insights will indemnify Moneyline, its subsidiaries, its
corporate parent, and their directors, officers, employees and agents
for all losses, damages, claims, lawsuits, judgments, liabilities or
expenses (including reasonable attorneys' fees) which arise from or
relate to this License or Digital Insights's use of the Moneyline
Software.
11. TERM AND TERMINATION.
A. This License is in effect until terminated as provided in this section
11.
B. Moneyline may terminate this License immediately upon written notice
to Digital Insights if Digital Insights has materially breached this
License. In addition, either party may terminate at any time without
cause after 60 days advance written notice to the other party.
C. Upon termination of this License, Digital Insights shall immediately
stop using the Software, delete it from all computers, and promptly
certify compliance with this provision to Moneyline. Digital Insights
shall promptly return the Software, manuals and other materials
containing information about the Software to Moneyline at Digital
Insights's expense.
D. Sections 5, 6, 8, 9, and 11 survive termination of this License.
<PAGE>
EXHIBIT 21.1
Subsidiaries of Registrant
None.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 12, 1999, except as to Note 12, which is as of May 28,
1999 relating to the financial statements of Digital Insight Corporation, which
appears in such Registration Statement. We also consent to the application of
such report to the Financial Statement schedules for each of the thus years in
the period ended December 31, 1998 listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report
also included these schedules. We also consent to the references to us under
the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Costa Mesa, California
June 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS OF DIGITAL INSIGHT CORPORATION AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1998 AND UNAUDITED AS OF AND FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 4,758 3,923
<SECURITIES> 0 0
<RECEIVABLES> 429 841
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,402 5,239
<PP&E> 3,007 3,854
<DEPRECIATION> 654 853
<TOTAL-ASSETS> 8,077 8,548
<CURRENT-LIABILITIES> 2,335 3,498
<BONDS> 0 0
12,444 12,444
0 0
<COMMON> 6 7
<OTHER-SE> (6,790) (7,763)
<TOTAL-LIABILITY-AND-EQUITY> 8,077 8,548
<SALES> 8,230 3,165
<TOTAL-REVENUES> 8,230 3,165
<CGS> 5,270 1,981
<TOTAL-COSTS> 7,559 2,694
<OTHER-EXPENSES> (243) (36)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,356) (1,474)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,356) (1,474)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,356) (1,474)
<EPS-BASIC> .85 .28
<EPS-DILUTED> .85 .28
</TABLE>
