<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 2000.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CORILLIAN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OREGON 7379 91-1795219
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or classification code number) identification number)
organization)
</TABLE>
3855 SW 153(RD) DRIVE
BEAVERTON, OREGON 97006
(503) 627-0729
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
TED F. SPOONER
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
3855 SW 153(RD) DRIVE
BEAVERTON, OREGON 97006
(503) 627-0729
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ROY W. TUCKER JOHN R. THOMAS
Perkins Coie LLP Stoel Rives LLP
1211 SW Fifth Avenue, 15th Floor 900 SW Fifth Avenue, Suite 2600
Portland, Oregon 97204 Portland, OR 97204
(503) 727-2000 (503) 224-3380
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 of 1933, 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,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Stock.................................. $69,000,000 $18,216
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457 based on the estimate of the maximum aggregate
offering price.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 2000.
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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Shares
[CORILLIAN LOGO]
Common Stock
-----------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We have applied to list our common
stock on The Nasdaq Stock Market's National Market under the symbol "CORI."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Corillian
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
Chase H&Q
Donaldson, Lufkin & Jenrette
Friedman Billings Ramsey
The date of this prospectus is , 2000.
<PAGE>
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUMMARY.................... 2
RISK FACTORS.......................... 5
USE OF PROCEEDS....................... 15
DIVIDEND POLICY....................... 15
CAPITALIZATION........................ 16
DILUTION.............................. 17
SELECTED FINANCIAL DATA............... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 19
BUSINESS.............................. 27
MANAGEMENT............................ 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
RELATED-PARTY TRANSACTIONS............ 50
PRINCIPAL SHAREHOLDERS................ 52
DESCRIPTION OF CAPITAL STOCK.......... 55
SHARES ELIGIBLE FOR FUTURE SALE....... 57
UNDERWRITING.......................... 59
NOTICE TO CANADIAN RESIDENTS.......... 62
LEGAL MATTERS......................... 63
EXPERTS............................... 63
WHERE YOU CAN FIND MORE INFORMATION
ABOUT US............................ 63
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE INFORMATION YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS FOR REASONS SUCH AS THOSE
SET FORTH UNDER "RISK FACTORS."
CORILLIAN
We are a leading provider of eFinance solutions. Our comprehensive suite of
software and professional services enable banks, brokers, financial portals and
other financial service providers to rapidly deploy Internet-based financial
services that allow consumers to conduct financial transactions, view personal
and market financial information, pay bills and access other financial services
on the Internet. We refer to these services generally as "eFinance."
The Internet is being used increasingly to deliver eFinance services. These
Internet-based financial services provide consumers significant benefits, such
as twenty-four hour, real-time access to information, convenient means to pay
bills and personal finance management tools. These benefits have made
Internet-based financial services extremely popular among consumers, and
eFinance content is one of the most popular content categories on the Internet.
International Data Corporation estimates that the number of users banking on the
Internet will expand from 8.1 million in 1998 to 39.8 million in 2003, and that
the number of banks offering Internet-based financial services will increase
from 1,150 in 1998 to 15,845 in 2003.
To meet the increasing demand for eFinance services, financial service
providers are enhancing and expanding their eFinance services. Traditional
financial service providers, such as banks, insurance companies and full-service
brokerages, are seeking to implement eFinance services rapidly as new
competitors, such as eFinance portals and Internet financial service providers,
threaten existing customer relationships. Our software, which scales to
accommodate millions of users, and our professional and content services enable
our customers to rapidly deploy new or enhanced eFinance solutions in today's
competitive environment. In addition, our software is designed to allow new
applications to be quickly added to our platform or other software platforms. By
using our comprehensive solutions, our customers lower their development costs
and avoid the time and expense of purchasing and integrating disparate
components from multiple vendors.
Our Voyager eFinance Suite is an open, server-based software platform
combined with a set of eFinance applications for Internet banking, electronic
bill presentment and payment, targeted marketing and online customer
relationship management. Voyager seamlessly integrates into our customers'
existing database applications and legacy systems, enabling our customers to
monitor transactions across all systems in real time. Our current Voyager
customers include Citibank, Quicken.com, SunTrust Bank and Wachovia Bank.
Our recently introduced OneSource service aggregates financial information
from numerous banks, brokerages and other financial service providers. By
subscribing to OneSource, financial institutions and financial portals can offer
their customers a consolidated view of their finances from disparate sources.
Our objective is to be the leading provider of eFinance solutions to both
traditional and emerging Internet financial service providers. We intend to
increase our market leadership and maintain our reputation as a technology
leader in the eFinance market by continuing to introduce new products and
solutions. For example, we recently made our solutions accessible to wireless
devices and intend to expand our product offerings to include additional retail
functions, such as brokerage transactions. We intend to leverage the recognition
we have gained as a technology leader and the strategic partnerships
2
<PAGE>
we have established with such companies as Intuit, Microsoft, Parkers' Edge and
Yahoo! to establish Voyager and OneSource as the solutions of choice for
eFinance.
We were incorporated in Oregon in 1997. Our principal office is located at
3855 SW 153(rd) Drive, Beaverton, Oregon 97006, our telephone number is
(503) 627-0729, and our World Wide Web site is located at
HTTP://WWW.CORILLIAN.COM. Information on our website does not constitute part of
this prospectus.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us................ shares
Common stock to be outstanding after the
offering................................ shares
Use of proceeds........................... Working capital and general corporate purposes. See "Use
of Proceeds" on page 15.
Proposed Nasdaq National Market symbol.... CORI
</TABLE>
- ------------------------
The share amounts in this table are based on shares outstanding as of
December 31, 1999. This table excludes:
- 5,358,836 shares of common stock issuable upon the exercise of stock
options outstanding under our 1997 stock option plan;
- additional shares of common stock available for issuance under our
2000 stock incentive compensation plan; and
- shares of common stock available for issuance under our 2000
employee stock purchase plan.
------------------------
EXCEPT AS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO THE EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND GIVES
EFFECT TO:
- A -FOR- REVERSE SPLIT OF THE COMMON STOCK, WHICH OCCURRED ON
, 2000;
- THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON
STOCK UPON THE CLOSING OF THIS OFFERING; AND
- THE FILING OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION.
CORILLIAN, VOYAGER, ONESOURCE and the Corillian logo are our trademarks.
Other trademarks or service marks appearing in this prospectus are trademarks or
service marks of the companies that use them.
3
<PAGE>
SUMMARY FINANCIAL DATA
The pro forma as adjusted balance sheet data below give effect to the sale
of the shares of common stock offered by us in the offering at an
estimated initial public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and estimated offering expenses
payable by us. The pro forma balance sheet data below also give effect to the
conversion of 22,084,835 shares of redeemable convertible preferred stock into
22,084,835 shares of common stock and the conversion of 2,459,595 shares of
convertible preferred stock into 2,459,595 shares of common stock. See note 2 of
the Notes to Financial Statements for an explanation of the method used to
calculate basic and diluted net loss per share.
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
APRIL 9, 1997 DECEMBER 31,
(DATE OF INCEPTION) -------------------
TO DECEMBER 31, 1997 1998 1999
--------------------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................................... $ 399 $ 3,393 $ 7,736
Gross profit....................................... 81 1,499 1,085
Total operating expenses........................... 1,504 3,426 11,478
Loss from operations............................... (1,423) (1,927) (10,393)
Net loss........................................... (1,396) (1,831) (9,994)
Basic and diluted net loss per share............... $ (0.25) $ (0.16) $ (0.91)
Shares used in computing basic and diluted
net loss per share............................... 5,657 11,141 11,099
Pro forma basic and diluted net loss per share..... $ (0.41)
Shares used in computing pro forma basic and
diluted net loss per share....................... 24,438
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 8,502 $ 8,502
Investments........................................... 10,357 10,357
Working capital....................................... 16,976 16,976
Total assets.......................................... 25,902 25,902
Capital lease obligations, less current portion....... 177 177
Redeemable convertible preferred stock................ 31,501 --
Total shareholders' (deficit) equity.................. (11,706) 19,795
</TABLE>
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING SHARES
IN THIS OFFERING. ANY OF THE FOLLOWING RISKS COULD MATERIALLY ADVERSELY AFFECT
OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION AND COULD RESULT IN A
COMPLETE LOSS OF YOUR INVESTMENT.
WE HAVE A LIMITED OPERATING HISTORY AND ARE SUBJECT TO THE RISKS THAT OUR
SOLUTIONS ARE NOT ADOPTED BY FINANCIAL SERVICE PROVIDERS OR USED BY CONSUMERS.
We were incorporated in April 1997. Accordingly, we have a limited operating
history with which you can evaluate our business and prospects. Our business is
new and will not be successful unless consumers adopt wide usage of
Internet-based financial services and financial service providers choose our
solutions to deliver those services. In addition, our prospects must be
considered in light of the risks and uncertainties encountered by early stage
companies in new and rapidly evolving markets such as the Internet-based
financial services market.
WE HAVE A HISTORY OF LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES AND WE MAY
NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We may never generate sufficient revenues for profitability. We have
incurred substantial net losses in every quarter since we began operations, and
we expect that we will continue to lose money at least through 2001. We incurred
net losses of $9,994,000 in 1999, and as of December 31, 1999, we had an
accumulated deficit of $13,221,000. In addition, we plan to increase our
operating expenses to expand our sales and marketing operations and professional
services organizations, develop new products and continue to build our
operational infrastructure. As a result, we expect to incur significant
operating losses on a quarterly and annual basis for the foreseeable future.
OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL SHORT OF ANTICIPATED
LEVELS, WHICH MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
Our quarterly operating results have varied in the past and we expect they
will continue to vary from quarter to quarter in the future. In future quarters
our operating results may be below the expectations of public market analysts
and investors, which could cause the price of our common stock to decline. In
addition, we have difficulty predicting the volume and timing of orders, and
delays in closing orders or implementation of products or services can cause our
operating results to fall substantially short of anticipated levels for any
quarter. As a result of these and other factors, we believe period-to-period
comparisons of our historical results of operations are not necessarily
meaningful and are not a good predictor of our future performance.
OUR PRODUCTS' LENGTHY SALES CYCLES MAY CAUSE LICENSE REVENUES AND OPERATING
RESULTS TO BE UNPREDICTABLE AND TO VARY SIGNIFICANTLY FROM PERIOD TO PERIOD.
One element of our strategy is to market our products and services directly
to large financial institutions. The sale and implementation of our products and
services are often subject to delays due to these institutions' internal budgets
and procedures for approving large capital expenditures and deploying new
technologies within their networks. As a result, the time between the date of
initial contact with a potential customer and the execution of a contract with
the customer typically ranges from three to nine months. In addition, our
prospective customers' decision-making processes require us to provide a
significant amount of information to them regarding the use and benefits of our
products. We may expend substantial funds and management resources during a
sales cycle and fail to make the sale.
5
<PAGE>
WE MAY NOT ACHIEVE ANTICIPATED REVENUES IF WE DO NOT SUCCESSFULLY INTRODUCE NEW
PRODUCTS OR DEVELOP UPGRADES OR ENHANCEMENTS TO OUR EXISTING PRODUCTS.
To date, we have derived substantially all of our revenues from licenses and
professional and support services related to the Voyager eFinance Suite. We
expect to add new products by acquisition or internal development and to develop
enhancements to our existing products. New or enhanced products may not be
released on schedule and may not achieve market acceptance. New products or
upgrades to existing products may contain defects when released, which could
damage our relationship with our customers and further limit market acceptance
of our products and services. If we are unable to ship or implement new or
enhanced products and services when planned, or fail to achieve timely market
acceptance of our new or enhanced products and services, we may lose sales and
fail to achieve anticipated revenues.
WE MAY NOT ACHIEVE ANTICIPATED REVENUES IF WE DO NOT SUCCESSFULLY INTRODUCE OR
ENHANCE OUR ONESOURCE SERVICE, OR IF CONSUMERS FAIL TO USE THE ONESOURCE
SERVICE ONCE IT HAS BEEN INTRODUCED.
The revenue and profit potential of our OneSource service is unproven. We
have an agreement to provide our OneSource service to one financial portal on a
test basis. We have not sold our OneSource service to any other customers and do
not anticipate that our OneSource service will be commercially available until
the second quarter of 2000. In addition, we may not be successful in
implementing important additional personal finance transactional capabilities as
part of OneSource. Even if we are successful in adding these capabilities,
OneSource may not achieve widespread consumer acceptance, which would adversely
affect demand for the service from the financial service providers that are our
target customers for OneSource.
OUR ONESOURCE SERVICE MAY NOT BE SUCCESSFUL IF FINANCIAL INSTITUTIONS DO NOT
FACILITATE ACCESS TO FINANCIAL INFORMATION FROM THEIR HOST SYSTEMS.
Unless a significant number of financial institutions facilitate our
OneSource service's ability to access their customers' account information, we
may not be successful in introducing OneSource or in making it sufficiently
useful to consumers to generate demand for the service. Our OneSource service
uses an end user's personal account information to gather financial data from
each financial institution where the end user has an account. Therefore, we are
dependent upon financial institutions facilitating OneSource's access to
customer account information residing within their host systems. Some financial
institutions may object to this account access and attempt to block or make more
difficult our aggregation service. We may also choose to cease aggregating
financial information from an objecting financial institution based on an
existing or potential customer relationship or other business purpose. To add
certain functional enhancements to OneSource, we must be able to access the Open
Financial Exchange, or OFX, servers of many financial institutions, which
requires their cooperation. If we are not able to access a sufficient number of
OFX servers of large financial institutions, our OneSource service may be
limited in functionality, which may decrease demand for this service.
THE MARKET FOR INTERNET-BASED FINANCIAL SERVICES HAS ONLY RECENTLY BEGUN TO
DEVELOP, AND IF CONSUMERS DO NOT WIDELY USE INTERNET-BASED FINANCIAL SERVICES,
OUR BUSINESS COULD BE HARMED.
Any event that results in decreased consumer use of financial services in
general and Internet-based financial services in particular could harm our
business. We expect to continue to depend on Internet-based financial products
and services for substantially all of our revenues in the foreseeable future.
However, the market for Internet-based financial services has only recently
begun to develop. Critical issues concerning commercial use of the Internet for
financial services--including security, reliability, ease and cost of access,
and quality of service--are still evolving. The delivery of financial services
over the Internet has developed slowly within financial institutions, and
purchasing decisions for Internet banking products are often delayed as a result
of uncertainties relating to cost, return on
6
<PAGE>
investment and financial institution acceptance. Financial service providers
could elect to implement their own platforms for providing Internet-based
financial services rather than relying upon our products and services.
We cannot predict the size of the market for Internet-based financial
services, the rate at which that market will grow, or whether consumers will
widely accept Internet-based financial services such as those enabled by our
products. We do not engage in marketing our products and services to consumers;
instead, we depend largely on our financial institution customers to do this for
us. Our financial institution customers may not be successful in marketing
Internet-based financial services to their customers. Changes in economic
conditions and unforeseen events, including recession, inflation or other
adverse occurrences, may result in a decline in the use of financial services in
general, and less consumer demand for Internet-based financial products and
services in particular, each of which could have a material adverse effect on
our business.
COMPETITION IN THE MARKET FOR INTERNET-BASED FINANCIAL SERVICES IS INTENSE, AND
COULD REDUCE OUR SALES AND PREVENT US FROM ACHIEVING PROFITABILITY.
The market for Internet-based financial services is new, intensely
competitive, highly fragmented and rapidly changing. We expect competition to
persist and intensify, which could result in price reductions, reduced gross
margins and loss of market share for our products and services.
We compete with a number of companies in various segments of the
Internet-based financial services industry, and our competitors vary in size and
in the scope and breadth of the products and services they offer. Our primary
competitors for software platforms designed to enable financial institutions to
offer Internet-based financial services include S1, Digital Insight, nFront,
HFN/Sybase, Online Resources and Communications, Integrion and, internationally,
Brokat. Within this segment of our industry, many companies are consolidating,
creating larger competitors with greater resources and a broader range of
products. For example, S1 recently acquired Edify, F.I.C.S. and VerticalOne, and
Digital Insight and nFront have agreed to merge.
Some of our applications and our OneSource service also compete with
companies that offer solutions with similar functionality to our solutions, such
as Broadvision for targeted marketing solutions, Just-in-Time for electronic
bill presentment and payment solutions, and Yodlee and S1 for aggregated
financial data solutions. We also compete with businesses delivering financial
services through Internet portals, banks marketing their own Internet-based
financial services, and non-bank financial service providers, such as brokerages
and insurance companies, seeking to expand the breadth of their Internet product
and services offerings. In addition, our customers may develop competing
products. For example, a bank may choose to develop its own software platform
for Internet-based financial services, or a financial portal may choose to
develop its own financial data aggregation service. Several of the vendors
offering data processing services to financial institutions, including EDS,
Fiserv, Jack Henry and M&I Data Services, also offer Internet banking solutions
that compete with our solutions.
Many of our competitors and potential competitors have a number of
significant advantages over us, including:
- a longer operating history;
- more extensive name recognition and marketing power;
- preferred vendor status with our existing and potential customers; and
- significantly greater financial, technical, marketing and other resources,
giving them the ability to respond more quickly to new or changing
opportunities, technologies and customer requirements.
7
<PAGE>
Our competitors may also bundle their products in a manner that may
discourage users from purchasing our products. Existing and potential
competitors may establish cooperative relationships with each other or with
third parties, or adopt aggressive pricing policies to gain market share.
A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR REVENUES IN
EACH PERIOD; OUR BUSINESS COULD SUFFER IF WE LOSE CUSTOMERS OR FAIL TO REPLACE
CUSTOMERS WHOSE CONTRACTS EXPIRE.
We derive a significant portion of our revenues from a limited number of
customers in each period. Accordingly, if we fail to close a sale with a major
potential customer, if a contract is delayed or deferred, or if an existing
contract expires or is cancelled and we fail to replace the contract with new
business, our revenues would be adversely affected. In 1999, two customers each
accounted for more than 10% of our revenues, for a total of 32% of our revenues.
We expect that a limited number of customers will continue to account for a
substantial portion of our revenues in each quarter in the foreseeable future.
If a customer terminates a Voyager contract with us early, we would lose ongoing
revenue streams from annual maintenance fees, hosting fees, professional service
fees and potential additional license and service fees for additional increments
of end users and for other Voyager eFinance software modules. If a customer
terminates a OneSource contract with us early, we would lose ongoing revenue
streams from subscription and professional service fees.
As a result of the mergers and acquisitions occurring in the banking
industry today, some of our existing customers could terminate their contracts
with us and potential customers could break off negotiations with us. An
existing or potential customer may be acquired by or merged with another
financial institution that uses competing Internet-based financial products and
services or does not desire to continue the relationship with us for some other
reason, which could result in the new entity terminating the relationship with
us.
WE MAY NOT BE ABLE TO RECRUIT OR RETAIN QUALIFIED PERSONNEL OR INTEGRATE
QUALIFIED PERSONNEL INTO OUR ORGANIZATION.
If we are unable to hire and retain additional qualified personnel, or if
newly hired personnel fail to develop the necessary skills or to reach
anticipated productivity levels, we may not be able to increase sales of our
products or expand our business. Our success depends on our ability to attract
and retain additional qualified personnel in engineering, marketing,
professional services and sales. Competition for these types of personnel is
intense, and these types of personnel may be in limited supply in the area where
our principal offices are located.
WE COULD LOSE CUSTOMERS IF CORE PROCESSING VENDORS, SOME OF WHICH MAY COMPETE
WITH US IN THE FUTURE, DO NOT SUPPORT THE INTEGRATION OF OUR SOLUTIONS WITH
THEIR SYSTEMS.
Our solutions require integration with products and systems developed by
core processing vendors serving financial institutions, such as ALLTEL, Bisys,
Fiserv, Hogan and M&I Data Services. If our customers' core processing vendors
fail to support our solutions, we would need to redesign our solutions to suit
these customers. Any redesign could be costly and time-consuming. We rely on
these vendors to jointly develop technology with us and to disclose application
programming interfaces to enable our products to integrate effectively with
their products and systems. Some of these vendors offer or are planning to offer
Internet-based financial products and services that compete with our products
and services. In addition, our customers' core processing vendors may develop
new products and systems that are incompatible with our products. Our failure to
integrate our products effectively with our customers' core processing vendors
could result in the loss of customers or potential customers.
8
<PAGE>
WE MAY NEED TO ESTABLISH AND MAINTAIN STRATEGIC MARKETING ALLIANCES TO GROW
SALES; HOWEVER, WE HAVE ENTERED INTO ONLY A SMALL NUMBER OF STRATEGIC
ALLIANCES.
To increase geographic sales coverage and to address new markets and
customer segments, we intend to complement our direct sales force with strategic
marketing alliances. We have only established a limited number of these
alliances, and these alliances are still relatively new and have not generated
significant revenue. If we fail to maintain or derive the anticipated benefit
from our existing relationships and establish new strategic alliances, we may
not be able to expand our sales as anticipated.
MANY OF OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE RECENT HIRES, AND IT WILL
TAKE TIME TO INTEGRATE THESE EMPLOYEES AND ANY NEW EMPLOYEES INTO OUR
ORGANIZATION.
Managing the expected growth of our operations and personnel will place
additional burdens on our executive officers. A significant portion of our
senior management team, including our Chief Financial Officer, Chief Marketing
Officer and Executive Vice President of Global Sales joined us after June 1999.
It may take time for our new executive officers to manage the personnel under
their supervision to full productivity. We have increased our number of
employees from 41 at December 31, 1998 to 150 at December 31, 1999, and expect
to further increase this number. Our new employees include a number of key
managerial, technical and operations personnel who we have not yet fully
integrated into our operations.
IF WE LOSE KEY PERSONNEL, WE COULD EXPERIENCE REDUCED SALES, DELAYED PRODUCT
DEVELOPMENT AND DIVERSION OF MANAGEMENT RESOURCES.
Our success depends largely on the continued contributions of our key
management, technical, sales and marketing and professional services personnel,
many of whom would be difficult to replace. If one or more members of our key
employees were to resign, the loss of personnel could result in loss of sales,
delays in new product development and diversion of management resources. We do
not have employment agreements with our senior managers or other key personnel.
We maintain "key person" life insurance in the amount of $2.0 million each on
our Chief Executive Officer and President, but this amount likely would be
inadequate to compensate us for the loss of their services.
ACQUISITIONS MAY BE COSTLY AND DIFFICULT TO INTEGRATE, DIVERT MANAGEMENT
RESOURCES OR DILUTE SHAREHOLDER VALUE.
We have considered strategic acquisitions in the past and in the future may
acquire or make investments in complementary companies, products or
technologies. We may not be able to successfully integrate these companies,
products or technologies. In connection with these acquisitions or investments,
we could:
- issue stock that would dilute our current shareholders' percentage
ownership;
- incur debt and assume liabilities; and
- incur amortization expenses related to goodwill and other intangible
assets or incur large and immediate write-offs.
Future acquisitions also could pose numerous additional risks to our
operations, including:
- problems combining the purchased operations, technologies or products;
- unanticipated costs;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers and
customers;
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<PAGE>
- entering markets in which we have no or limited prior experience; and
- potential loss of key employees, particularly those of the purchased
organization.
NEW TECHNOLOGIES COULD RENDER OUR PRODUCTS OBSOLETE.
If we are unable to develop products that respond to changing technology,
our business could be harmed. The market for Internet-based financial services
is characterized by rapid technological change, evolving industry standards,
changes in consumer demands and frequent new product and service introductions.
Advances in Internet technology or in applications software directed at
financial services could lead to new competitive products that have better
performance or lower prices than our products and could render our products
obsolete and unmarketable. Our Voyager eFinance Suite was designed to run on
servers using the Windows NT operating system. If a new software language or
operating system becomes standard or is widely adopted in our industry, we may
need to rewrite portions of our products in another computer language or for
another operating system to remain competitive.
DEFECTS IN OUR SOFTWARE PRODUCTS AND SYSTEM ERRORS IN OUR CUSTOMERS' SYSTEMS
AFTER INSTALLING OUR SOFTWARE COULD RESULT IN LOSS OF REVENUES, DELAY IN
MARKET ACCEPTANCE AND INJURY TO OUR REPUTATION.
Complex software products like ours may contain undetected errors or
defects, including year 2000 related errors, that may be detected at any point
in the life of the product. We have in the past discovered software errors in
our products. Errors may be found from time to time in our new products or
services, such as our OneSource solution, or our enhanced products or services,
such as new versions of the Voyager eFinance Suite, after implementation,
resulting in loss of revenues, delay in market acceptance and sales, liability
for damages, diversion of development resources, injury to our reputation or
increased warranty costs.
Our products are often used in transaction processing systems that include
other vendors' products, and, as a result, our products must integrate
successfully with these existing systems. System errors, whether caused by our
products or those of another vendor, could adversely affect the market
acceptance of our products, and any necessary modifications could cause us to
incur significant expenses.
WE MAY NOT BE ABLE TO IMPLEMENT OUR NEW MANAGEMENT INFORMATION SYSTEM IN A
TIMELY MANNER AND THE NEW SYSTEMS MAY NOT BE ADEQUATE TO SUPPORT OUR
OPERATIONS.
The growth in the complexity of our business has placed and will continue to
place a significant strain on our operational, financial and management
information systems. We recently began implementing a comprehensive accounting
and sales management information system to track our sales estimates, time spent
on projects, budgeting and forecasts, project management and accounting. We
expect the successful implementation of this system to be crucial to our
operations. We may not be able to implement this new system in an efficient and
timely manner and this new system may not be adequate to support our operations.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY LITIGATION, IT COULD BE COSTLY AND
TIME CONSUMING TO DEFEND.
Since our products are used to deliver services that are integral to our
customers' businesses, errors, defects or other performance problems could
result in financial or other damages to our customers. Product liability
litigation arising from these errors, defects or problems, even if it were
unsuccessful, would be time consuming and costly to defend. Existing or future
laws or unfavorable judicial decisions could negate any limitation of liability
provisions that are included in our license agreements.
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<PAGE>
IF OUR SYSTEMS AND THE SYSTEMS OF OUR KEY PARTNERS AND CUSTOMERS ARE NOT YEAR
2000 COMPLIANT, WE COULD INCUR INCREASED COSTS, DELAY OR LOSS OF REVENUES,
DIVERSION OF DEVELOPMENT RESOURCES OR DAMAGE TO OUR REPUTATION.
Computer systems problems relating to the year 2000 may be discovered months
after January 1, 2000. Our products are generally integrated into computer
systems involving sophisticated hardware and complex software products, which
may not be year 2000 compliant. The failure of our customers' systems to be year
2000 compliant and the related problems that may be discovered in early 2000
could impede the success of applications that we or our partners have developed
for them. Accordingly, known or unknown defects that affect the operation of our
software, including any defects or errors in applications that include our
products, could result in delay or loss of revenue, diversion of development
resources, damage to our reputation, or increased service or warranty costs and
litigation costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations, Year 2000 Issues" for a discussion of the
status of our year 2000 compliance review.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY LOSE A VALUABLE
COMPETITIVE ADVANTAGE OR BE FORCED TO INCUR COSTLY LITIGATION TO PROTECT OUR
RIGHTS.
Our future success and ability to compete depends in part upon our
proprietary technology, but our protective measures may prove inadequate to
protect our proprietary rights. We rely on a combination of copyright, trademark
and trade secret laws and contractual provisions to establish and protect our
proprietary rights. None of our technology is patented. We have applied for, but
have not yet obtained, federal trademark registration for some of our marks. If
we do not receive approval for registration of these marks, or our other
important trademarks, we may be unable to use these marks without restriction or
prevent others from using these marks.
Despite our efforts to protect our intellectual property, a third party
could copy or otherwise obtain our software or other proprietary information
without authorization, or could develop software competitive to ours. Our
competitors may independently develop similar technology, duplicate our products
or design around our intellectual property rights. In addition, the laws of some
foreign countries do not protect our proprietary rights to as great an extent as
do the laws of the United States, and we expect the use of our products will
become more difficult to monitor if we increase our international presence. We
may have to litigate to enforce our intellectual property rights, to protect our
trade secrets or know-how or to determine their scope, validity or
enforceability. Enforcing or defending our intellectual property rights is
expensive, could cause the diversion of our resources and may not prove
successful. If we are unable to protect our intellectual property, we may lose a
valuable competitive advantage.
IF WE BECOME SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, THESE CLAIMS
COULD BE COSTLY AND TIME CONSUMING TO DEFEND, DIVERT MANAGEMENT ATTENTION OR
CAUSE PRODUCT DELAYS.
Any intellectual property infringement claims against us, with or without
merit, could be costly and time-consuming to defend, divert our management's
attention, or cause product delays. We expect that software product developers
and providers of Internet-based financial services will increasingly be subject
to infringement claims as the number of products and competitors in our industry
grows and the functionality of products overlaps. If our products were found to
infringe a third party's proprietary rights, we could be required to enter into
royalty or licensing agreements in order to be able to sell our products.
Royalty and licensing agreements, if required, may not be available on terms
acceptable to us or at all. There has been substantial litigation in the
software and Internet industries regarding intellectual property rights. It is
possible that, in the future, third parties may claim that we or our current or
potential future products infringe their intellectual property.
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<PAGE>
INCREASING GOVERNMENT REGULATION OF THE INTERNET AND THE FINANCIAL SERVICES
INDUSTRY COULD LIMIT THE MARKET FOR OUR PRODUCTS AND SERVICES, IMPOSE ON US
LIABILITY FOR TRANSMISSION OF PROTECTED DATA AND INCREASE OUR EXPENSES.
As the Internet continues to evolve, we expect federal, state and foreign
governments to adopt laws and regulations covering issues such as user privacy,
taxation of goods and services provided over the Internet, pricing, content and
quality of products and services. If enacted, these laws and regulations could
limit the market for Internet-based financial services. Although many of these
regulations may not apply directly to our business, we expect laws regulating
the solicitation, collection or processing of personal or consumer information
could indirectly affect our business, especially the aggregation features of our
newly developed OneSource product.
If enacted or deemed applicable to us, some laws, rules or regulations
applicable to financial service activities could render our business or
operations more costly and less viable. The financial services industry is
subject to extensive and complex federal and state regulation, and financial
institutions operate under high levels of governmental supervision. Our
customers must ensure our services and related products work within the
extensive and evolving regulatory requirements applicable to them. We may become
subject to direct regulation as the market for our business evolves. Federal,
state or foreign authorities could adopt laws, rules or regulations affecting
our business operations, such as requiring us to comply with data, record
keeping and other processing requirements. Any of these laws, rules or
regulations, or new laws, rules and regulations affecting our customers'
businesses, could lead to increased operating costs and could also reduce the
convenience and functionality of our services, possibly resulting in reduced
market acceptance.
IF WE DO NOT DEVELOP INTERNATIONAL OPERATIONS AS EXPECTED OR FAIL TO ADDRESS
INTERNATIONAL MARKET RISKS, WE MAY NOT ACHIEVE ANTICIPATED SALES GROWTH.
To increase our revenues, we plan to pursue international sales
opportunities. International expansion of our business may be more difficult or
take longer than we anticipate, and we may not be able to successfully market,
sell, deliver and support our products internationally. We will need to develop
international sales, professional services and support organizations, and we
will need to form additional relationships with partners worldwide. If we are
unable to develop international operations and international sales on a timely
basis, we may not achieve anticipated sales growth.
IF WE ARE SUCCESSFUL IN DEVELOPING INTERNATIONAL SALES, WE WILL BE SUBJECT TO A
NUMBER OF RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS, INCLUDING:
- longer accounts receivable collection cycles;
- expenses associated with localizing products for foreign markets;
- difficulties in managing operations across disparate geographic areas;
- difficulties in hiring qualified local personnel;
- foreign currency exchange rate fluctuations;
- difficulties associated with enforcing agreements and collecting
receivables through foreign legal systems; and
- unexpected changes in regulatory requirements that impose multiple
conflicting tax laws and regulations.
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<PAGE>
RESTRICTIONS ON EXPORT OF ENCRYPTED TECHNOLOGY COULD CAUSE US TO INCUR DELAYS IN
INTERNATIONAL SALES.
Our software uses encryption technology, the export of which is regulated by
the United States government. If the United States adopts new legislation
restricting export of software and encryption technology, we may experience
delay or reduction in shipment of our products internationally. Existing or
future export regulations could limit our ability to distribute our products
outside of the United States. We cannot effectively control the unauthorized
distribution of software across the Internet.
NETWORK OR INTERNET SECURITY PROBLEMS COULD DAMAGE OUR REPUTATION AND BUSINESS.
Unknown security risks may result in liability to us and also may deter
financial service providers from purchasing our products and deter consumers of
financial services from using our products or services. We rely on standard
Internet security systems, all of which are licensed from third parties, to
provide the security and authentication necessary to effect secure transmission
of data over the Internet. Our networks may be vulnerable to unauthorized
access, computer viruses and other disruptive problems. In addition, advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments may render our Internet security measures inadequate.
Someone who is able to circumvent security measures could misappropriate
proprietary information or cause interruptions in our Internet operations. We
may need to expend significant capital or other resources protecting against the
threat of security breaches or alleviating problems caused by breaches.
Eliminating computer viruses and alleviating other security problems may result
in interruptions, delays or cessation of service to users accessing Internet
sites that deliver our services, any of which could harm our business.
OUR DIRECTORS AND EXECUTIVE OFFICERS WILL RETAIN SIGNIFICANT CONTROL AFTER THE
OFFERING, WHICH MAY LEAD TO CONFLICTS WITH OTHER SHAREHOLDERS OVER CORPORATE
GOVERNANCE.
Following the completion of this offering, our directors, executive officers
and entities affiliated with our directors and executive officers will
beneficially own approximately % of our outstanding common stock. These
shareholders, acting together, would be able to significantly influence all
matters requiring approval by our shareholders, including the election of
directors and significant corporate transactions, such as mergers or other
business combination transactions. This control may have the effect of delaying
or preventing a third party from acquiring or merging with us.
OUR CHARTER DOCUMENTS AND OREGON LAW MAY INHIBIT A TAKEOVER OR CHANGE IN OUR
CONTROL THAT A SHAREHOLDER MAY CONSIDER FAVORABLE.
Provisions in our articles of incorporation and bylaws may have the effect
of delaying or preventing a merger or acquisition of us, or making a merger or
acquisition less desirable to a potential acquirer, even where the shareholders
may consider the acquisition or merger favorable. Provisions of the Oregon
Business Corporation Act and the Control Share Act, to which we are subject, may
also delay, prevent or discourage someone from acquiring or merging with us. See
"Description of Capital Stock--Anti-Takeover Measures--Oregon Control Share and
Business Combination Statutes" for further discussion.
OUR STOCK PRICE MAY BE VOLATILE, WHICH MAY LEAD TO LOSSES BY INVESTORS.
You may not be able to resell your shares at or above the initial public
offering price. The stock prices of companies that offer solutions designed to
enable Internet-based financial services have historically been volatile and may
continue to be volatile. No public market for our shares existed before this
offering, and after the offering an active public market for the shares may not
develop. We will negotiate and determine the initial public offering price with
the representatives of the
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<PAGE>
underwriters based on several factors. This price will likely vary from the
market price of the common stock after the offering.
FUTURE SALES OF OUR STOCK COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
Sales of a substantial number of shares of our common stock in the public
market after this offering could cause the market price of our common stock to
decline. In addition, the sale of these shares could impair our ability to raise
capital through the sale of additional equity securities. Upon completion of
this offering, we will have approximately shares of common stock
outstanding, approximately if the underwriters' over-allotment option is
exercised in full, based on shares outstanding as of December 31, 1999.
Our officers and directors and all of our existing shareholders and holders
of options exercisable within 180 days of the date of this offering have agreed
with Credit Suisse First Boston Corporation not to sell or otherwise dispose of
any of their shares for a period of 180 days after the date of this offering.
When these lock-up agreements expire, these shares and the shares underlying any
options held by these individuals will become eligible for sale, in some cases
subject only to the volume, manner of sale and notice requirements of Rule 144
of the Securities Act of 1933. See "Shares Eligible for Future Sale" for further
discussion of the shares that will be freely tradable after the date of this
prospectus.
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements that involve risks and
uncertainties that may cause our actual results to differ materially from any
forward-looking statement. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology including "could," "may," "will," "should," "expect,"
"plan," "anticipate," "believe," "estimate," "predict," "potential" or
"continue," the negative of these terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially.
In evaluating these statements, you should specifically consider various
factors, including the risks described above and in other parts of the
prospectus.
We cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results
or to changes in our expectations.
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<PAGE>
USE OF PROCEEDS
Our net proceeds from the offering will be approximately $ million after
deducting estimated underwriting discounts and estimated offering expenses
payable by us. If the underwriters exercise their over-allotment option to
purchase additional shares in full, our net proceeds will be approximately $
million.
We expect to use the proceeds from this offering for working capital and
other general corporate purposes. In addition, although we have no commitments
or agreements with respect to any acquisition, we might in the future use a
portion of the remaining proceeds to pay for acquisitions. We intend to invest
the net proceeds from this offering in investment grade, interest-bearing
securities until they are used.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We intend
to retain earnings, if any, to fund the operation and growth of our business and
do not anticipate paying any cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table should be read in conjunction with our Financial
Statements and related notes included elsewhere in this prospectus. The table
below sets forth the following information:
- our actual capitalization as of December 31, 1999;
- our pro forma capitalization after giving effect to the conversion of all
22,084,835 outstanding shares of redeemable convertible preferred stock
into 22,084,835 shares of common stock, and after giving effect to the
conversion of all 2,459,595 outstanding shares of convertible preferred
stock into 2,459,595 shares of common stock; and
- our pro forma as adjusted capitalization to give effect to the sale of
shares of common stock at the initial public offering price of
$ per share, less underwriting discounts and commissions and
estimated expenses we expect to pay in connection with this offering.
The table below excludes the following shares:
- 5,358,836 shares of common stock issuable upon the exercise of stock
options outstanding under our 1997 stock option plan with a weighted
average exercise price of $0.57 per share;
- additional shares of common stock available for issuance under our
2000 stock incentive compensation plan; and
- shares of common stock available for issuance under our 2000
employee stock purchase plan.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Capital lease obligations, less current portion............ $ 177 $ 177 $ 177
Redeemable convertible preferred stock, no par value;
22,084,835 shares issued and outstanding, actual, no
shares issued and outstanding, pro forma and pro forma as
adjusted................................................. 31,501 -- --
Shareholders' (deficit) equity:
Convertible preferred stock, 40,000,000 shares
authorized, no par value; 2,459,595 shares issued and
outstanding, actual; no shares issued and outstanding,
pro forma and pro forma as adjusted.................... 910 -- --
Common stock, 80,000,000 shares authorized, no par value;
10,880,325 shares issued and outstanding, actual;
35,424,755 shares issued and outstanding, pro
forma; shares issued and outstanding, pro forma as
adjusted............................................... 3,482 35,893
Deferred stock-based compensation.......................... (2,877) (2,877)
Accumulated deficit........................................ (13,221) (13,221)
-------- -------- --------
Total shareholders' (deficit) equity..................... (11,706) 19,795
-------- -------- --------
Total capitalization................................... $ 19,972 $ 19,972 $
======== ======== ========
</TABLE>
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DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. We calculate net tangible book value per share by
dividing the net tangible book value, which equals total assets less intangible
assets and total liabilities, by the number of shares outstanding after giving
effect to the conversion into common stock of all our outstanding shares of
preferred stock. Our pro forma net tangible book value at December 31, 1999 was
$19.8 million, or $0.56 per share, based upon 35,424,755 shares outstanding.
After giving effect to the sale in this offering of shares of common stock
at an assumed initial public offering price of $ per share, and after
deducting the estimated underwriting discount and estimated offering expenses
payable by us, our pro forma net tangible book value as of December 31, 1999
would have been approximately $ million or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
shareholders and an immediate dilution in net tangible book value of $ per
share to new investors, or approximately % of the offering price of $ per
share. The following table illustrates this dilution on a per share basis.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
-------
Pro forma net tangible book value per share as of
December 31, 1999................................... $ 0.56
-------
Increase 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 shows on a pro forma basis at December 31, 1999, after
giving effect to the automatic conversion into common stock of all of our
outstanding shares of preferred stock, the total cash consideration paid to us
and the average price per share paid by existing shareholders and by new
investors at an assumed initial public offering price of $ per share,
before deducting estimated underwriting discounts and estimated offering
expenses payable by us:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders...............
New investors.......................
---- ---- ---- ---- ----
Total
==== ==== ==== ==== ====
</TABLE>
At December 31, 1999, options to purchase an aggregate of 5,358,836 shares
of common stock at a weighted average exercise price of $0.57 per share were
outstanding. This discussion of dilution, and the table quantifying it, assume
no exercise of any outstanding stock options after December 31, 1999. The
exercise of stock options outstanding under our stock option plans having an
exercise price less than the offering price would increase the dilutive effect
to new investors. If the underwriters exercise their over-allotment option in
full, the following will occur:
- the number of shares of common stock held by existing shareholders will
decrease to approximately % of the total number of shares of our common
stock outstanding after this offering; and
- the number of shares held by new investors will increase to ,
or approximately % of the total number of shares of our common stock
outstanding after this offering.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data and other operating information are
derived from our financial statements, which have been audited by KPMG LLP,
independent auditors. The tables shown below represent portions of our financial
statements and are not complete. This selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our Financial Statements and related notes
included elsewhere in this prospectus. Historical results are not necessarily
indicative of the results of operations in future periods. See note 2 of the
Notes to Financial Statements for an explanation of the method used to calculate
basic and diluted net loss per share.
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 9, 1997 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31,
TO DECEMBER 31, -------------------
1997 1998 1999
------------------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues............................................... $ 399 $ 3,393 $ 7,736
Cost of revenues....................................... 318 1,894 6,651
------- ------- -------
Gross profit........................................... 81 1,499 1,085
------- ------- -------
Operating expenses:
Sales and marketing.................................. 239 840 4,074
Research and development............................. 594 1,353 3,165
General and administrative........................... 671 1,233 3,272
Amortization of deferred stock-based compensation.... -- -- 967
------- ------- -------
Total operating expenses............................... 1,504 3,426 11,478
------- ------- -------
Loss from operations................................... (1,423) (1,927) (10,393)
Other income........................................... 27 96 399
------- ------- -------
Net loss............................................... $(1,396) $(1,831) $(9,994)
======= ======= =======
Basic and diluted net loss per share................... $ (0.25) $ (0.16) $ (0.91)
Shares used in computing basic and diluted net loss per
share................................................ 5,657 11,141 11,099
Pro forma basic and diluted net loss per share......... $ (0.41)
Shares used in computing pro forma basic and diluted
net loss per share................................... 24,438
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 768 $ 290 $ 8,502
Investments................................................. -- -- 10,357
Working capital............................................. 424 (1,392) 16,976
Total assets................................................ 1,164 948 25,902
Capital lease obligations, less current portion............. -- -- 177
Redeemable convertible preferred stock...................... -- -- 31,501
Total shareholders' equity (deficit)........................ 659 (1,165) (11,706)
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND THE FINANCIAL STATEMENTS AND RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We license software and provide professional and content services to
financial service providers, such as banks, brokerages, insurance companies and
financial portals. Our Voyager eFinance Suite enables our customers to provide
scalable, reliable, and advanced eFinance services, including Internet banking,
electronic bill presentment and payment, and customer relationship management.
Our recently introduced OneSource service enables financial service providers to
provide their customers with a consolidated view of their financial information
from disparate sources. Until the release of Voyager in December 1997, we were
primarily engaged in research and development. Since then, we have released
enhanced versions of Voyager in July 1998, April 1999 and December 1999. In
December 1999, we entered into our first agreement to provide our OneSource
service.
We obtained our first subscriber to our OneSource service in December 1999,
and we have not generated significant revenues from this service to date. We
anticipate recognizing more significant revenues from our OneSource service in
2000. Revenues derived from our OneSource service generally involve three
elements, which include implementation fees, monthly service fees based upon
financial institution interfaces and client user fees. Revenues associated with
implementation are recognized ratably over the term of the service agreement.
Revenues earned from OneSource monthly service fees and client user fees are
recognized as services are performed.
To date, we have derived a substantial portion of our revenues from
licensing our software. We generally license Voyager on an end user basis, with
our initial license fee based on a fixed number of end users. This fixed number
currently ranges from 10,000 to 500,000 end users. As a customer increases its
installed base of end users beyond the initial fixed number of end users, our
software license requires the customer to pay us an additional license fee to
cover additional increments of end users.
We also derive revenues from providing professional services to customers.
These professional services include implementation, custom software engineering,
consulting, maintenance, training and hosting. Our software licenses are
functionally dependent on implementation and certain custom software engineering
services. Revenues derived from software licenses, therefore, are combined with
revenues derived from the associated implementation and certain custom software
engineering services and treated for revenue recognition purposes as one bundled
revenue element. In most cases, revenues from this bundled element are
recognized using the percentage of completion method. Revenues derived from
maintenance, training, hosting and certain custom software engineering services
are not essential to the functionality of the software license or any other
service and, therefore, are each treated as separate revenue elements.
Maintenance revenues are recognized ratably over the term of the associated
maintenance contract. Revenues derived from training, hosting and certain custom
software engineering services are recognized as the services are performed.
We record the unrecognized portion of billable fees as deferred revenues.
Revenues recognized in excess of contractual billings are recorded as revenues
in excess of billings.
Historically, we have priced our implementation and associated custom
software engineering services on a fixed fee basis, which we believe did not
adequately price the time and materials required
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<PAGE>
to complete implementation on some of our more complex projects. Because the
licenses are functionally dependent on implementation and certain custom
engineering services, the revenues associated with these elements are bundled.
The bundled revenues from each of our contracts exceeded the cost of revenues
associated with each contract. Recently, we began pricing our implementation and
certain custom software engineering services on a time and materials basis.
Cost of revenues consists primarily of salaries and related expenses for
professional service personnel and outsourced professional service providers who
are responsible for the implementation and customization of our software. Our
cost of revenues also includes a royalty and purchases of equipment and
materials. In connection with the purchase of the Voyager technology in 1997, we
agreed to pay a royalty of seven percent of our revenues, up to a maximum of
$1.75 million, of which we have incurred $815,000 as of December 31, 1999. We
anticipate this royalty expense will cease in 2000. Any equipment we purchase to
provide services to our customers is depreciated over the life of the equipment.
From time to time to accommodate specific customers, we resell equipment and
materials to these customers, and the expenses associated with the purchase of
this equipment and materials is included within the cost of revenues in the year
in which the resale occurs.
Since incorporation, we have incurred substantial costs to develop and
market our technology and to provide professional services. As a result, we have
incurred net losses in each quarter of operation since inception and have
accumulated a deficit of $13.2 million as of December 31, 1999. As we continue
to grow our professional services, sales and marketing and research and
development organizations and aggressively market our solutions both nationally
and internationally, we anticipate that our cost of revenues and operating
expenses will increase substantially in future quarters. Our limited operating
history makes it difficult to forecast future operating results. As a result of
the rapid evolution of our business and our limited operating history, we
believe period-to-period comparisons of our results of operations, including our
revenues and costs of revenues and operating expenses as a percentage of sales,
are not necessarily indicative of our future performance.
To date, our results of operations are substantially derived from operations
in the United States. In 1999, two customers each accounted for more than 10% of
our revenues, for a total of 32% of our revenues.
RESULTS OF OPERATIONS
We have included our results of operations for the period from April 9,
1997, the date of our inception, to December 31, 1997 and the years ended
December 31, 1998 and 1999. We believe period-to-period comparisons involving
the period before the year ended December 31, 1998 are less meaningful than an
analysis of more recent annual operating results. Accordingly, our discussion
and analysis of our operating results are primarily focused on comparisons
between the years ended December 31, 1998 and 1999.
20
<PAGE>
The table below sets forth our results of operations as a percentage of
revenues for the periods indicated:
<TABLE>
<CAPTION>
PERIOD FROM APRIL 9, YEAR ENDED
1997 DECEMBER 31,
(DATE OF INCEPTION) TO ----------------------
DECEMBER 31, 1997 1998 1999
---------------------- -------- --------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues................................................ 100.0 % 100.0 % 100.0 %
Cost of revenues........................................ 79.7 55.8 86.0
------ ----- ------
Gross profit............................................ 20.3 44.2 14.0
------ ----- ------
Operating expenses:
Sales and marketing................................... 59.9 24.8 52.7
Research and development.............................. 148.9 39.9 40.9
General and administrative............................ 168.1 36.3 42.2
Amortization of deferred stock-based compensation..... -- -- 12.5
------ ----- ------
Total operating expenses................................ 376.9 101.0 148.3
------ ----- ------
Loss from operations.................................... (356.6) (56.8) (134.3)
Other income............................................ 6.5 2.8 5.1
------ ----- ------
Net loss................................................ (350.1)% (54.0)% (129.2)%
====== ===== ======
</TABLE>
REVENUES
Revenues increased from $399,000 for the period ended December 31, 1997, to
$3.4 million for 1998, to $7.7 million for 1999. Higher revenues for each period
were primarily due to sales to an increased number of customers, the timing of
revenue recognition in accordance with authoritative guidelines and an increase
in our average transaction size. We believe that our customer growth resulted
from greater market acceptance of our solutions.
COST OF REVENUES
Cost of revenues increased from $318,000 for the period ended December 31,
1997, to $1.9 million for 1998, to $6.7 million for 1999. Gross profit increased
as a percentage of revenues from 20.3% for the period ended December 31, 1997,
to 44.2% for 1998. For the year ended December 31, 1999, gross profit declined
to 14.0% primarily due to two factors. First, we incurred higher than
anticipated expenses for outsourced professional service providers as our
professional services personnel focused their efforts on implementing more
complex and customized solutions for a larger number of customers and addressing
Year 2000 issues associated with third-party products. We have increased the
number of our professional services personnel from 10 at the end of 1998 to 51
at the end of 1999 to reduce the need for service outsourcing. Second, our
customer contracts provided for a fixed implementation fee, which was less than
the cost of the time and materials required to complete implementation of some
of our more complex projects. We now use a method of pricing for the
implementation of our solutions that is based on the actual time and materials
required to complete implementation. In connection with the purchase of the
Voyager technology in 1997, we agreed to pay a royalty of seven percent of our
revenue, up to a maximum of $1.75 million, of which we incurred $294,000 and
$493,000 in 1998 and 1999, respectively. We anticipate this royalty expense will
cease in 2000.
OPERATING EXPENSES
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist of
salaries, commissions, and related expenses for personnel involved in marketing,
sales and support functions, as well as costs
21
<PAGE>
associated with trade shows and other promotional activities. Sales and
marketing expenses increased from $239,000 for the period ended December 31,
1997, to $840,000 for 1998, to $4.1 million for 1999. The increase from 1998 to
1999 was primarily attributable to the expansion of our sales and marketing
organization from four at the end of 1998 to 36 at the end of 1999 resulting in
increased costs of $1.7 million. The remaining increase was attributable to
increased sales commissions associated with higher revenues and higher expenses
associated with increased brand awareness efforts. We expect to continue to
invest in our sales and marketing organizations to expand our customer base and
increase brand awareness. We also anticipate sales and marketing expenses as a
percentage of revenues will fluctuate from period to period in the near term
depending on when new personnel are hired, the timing of new marketing programs
and the levels of revenues recognized in each period.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist primarily of salaries and related expenses for engineering personnel and
costs of materials and equipment associated with the design, development,
testing and enhancement of our products. Research and development expenses
increased from $594,000 for the period ended December 31, 1997, to $1.4 million
for 1998, to $3.2 million for 1999. The increase from 1998 to 1999 was primarily
attributable to the expansion of our research and development organization from
21 at the end of 1998 to 32 at the end of 1999, and to a lesser extent,
increased costs of materials and equipment. We anticipate increased research and
development expenses in the future as we hire additional engineering personnel
and fund the development of new products and enhancements to existing products.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of salaries and related expenses for executive, finance, human
resources, legal, information systems management and administration personnel,
as well as professional fees, corporate facility expenses, travel and other
general corporate expenses. General and administrative expenses increased from
$671,000 for the period ended December 31, 1997, to $1.2 million for 1998, to
$3.3 million for 1999. The increase from 1998 to 1999 was primarily attributable
to the expansion of our general and administrative personnel from six at the end
of 1998 to 31 at the end of 1999, resulting in increased costs of $868,000. The
remaining increase was attributable to expenses necessary to support our growing
operations. We expect general and administrative expenses to increase in
absolute dollars as we add personnel and incur additional expenses related to
the anticipated growth of our business, the management of our international
operations and our operation as a public company.
AMORTIZATION OF DEFERRED STOCK-BASED COMPENSATION. In 1999, we recorded
deferred stock-based compensation of $3.8 million in connection with stock
options granted during 1999. This amount represents the difference between the
exercise price of stock options granted to employees and the deemed fair value
of our common stock at the time of the grants. In addition, this amount includes
the fair value of stock options granted to non-employees. This amount is being
amortized over the respective vesting periods of these options on an accelerated
basis. Amortization of deferred stock-based compensation was $1.0 million for
1999. We did not record any deferred stock-based compensation during the period
ended December 31, 1997 or for 1998. We expect amortization related to options
granted in 1999 of $1.7 million, $788,000, $318,000 and $60,000 for 2000, 2001,
2002, and 2003 respectively. Based on grants of stock options in January 2000,
we expect to record additional deferred stock-based compensation of
approximately $3.0 million.
OTHER INCOME
Other income consists primarily of interest earned on cash and cash
equivalents and short-term investments and, to a lesser extent, gains and losses
recognized upon sale of our assets, interest expense, and other miscellaneous
items. Other income increased from $96,000 for 1998 to $399,000 for 1999 as a
result of interest earned on proceeds from the sale of preferred stock in 1999.
22
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The tables below set forth our quarterly results of operations in dollars
and as a percentage of revenues for our last five quarters. This data has been
derived from unaudited financial statements that have been prepared on the same
basis as our annual audited financial statements and, in our opinion, include
all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation of this information. These unaudited quarterly
results should be read in conjunction with the annual audited financial
statements and notes thereto included elsewhere in this prospectus. The results
of operations for any quarter are not necessarily indicative of the results for
any future period and, therefore, conclusions should not be drawn about our
future results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1999 1999 1999 1999
-------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues............................................. $ 923 $1,405 $ 1,337 $ 2,287 $ 2,707
Cost of revenues..................................... 432 762 1,232 2,045 2,612
------ ------ ------- ------- -------
Gross profit......................................... 491 643 105 242 95
------ ------ ------- ------- -------
Operating expenses:
Sales and marketing................................ 289 207 469 1,143 2,255
Research and development........................... 383 468 535 703 1,459
General and administrative......................... 476 320 515 1,015 1,422
Amortization of deferred stock-based
compensation..................................... -- -- -- -- 967
------ ------ ------- ------- -------
Total operating expenses............................. 1,148 995 1,519 2,861 6,103
------ ------ ------- ------- -------
Loss from operations................................. (657) (352) (1,414) (2,619) (6,008)
Other income......................................... 27 25 80 62 232
------ ------ ------- ------- -------
Net loss............................................. $ (630) $ (327) $(1,334) $(2,557) $(5,776)
====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1999 1999 1999 1999
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................................... 46.8 54.2 92.1 89.4 96.5
----- ----- ------ ------ ------
Gross profit.......................................... 53.2 45.8 7.9 10.6 3.5
----- ----- ------ ------ ------
Operating expenses:
Sales and marketing................................. 31.3 14.7 35.1 50.0 83.3
Research and development............................ 41.5 33.3 40.0 30.7 53.9
General and administrative.......................... 51.6 22.9 38.6 44.4 52.6
Amortization of deferred stock-based compensation... -- -- -- -- 35.7
----- ----- ------ ------ ------
Total operating expenses.............................. 124.4 70.9 113.7 125.1 225.5
----- ----- ------ ------ ------
Loss from operations.................................. (71.2) (25.1) (105.8) (114.5) (222.0)
Other income.......................................... 2.9 1.8 6.0 2.7 8.6
----- ----- ------ ------ ------
Net loss.............................................. (68.3)% (23.3)% (99.8)% (111.8)% (213.4)%
===== ===== ====== ====== ======
</TABLE>
23
<PAGE>
Revenues increased in each of the five quarters ended since December 31,
1998, except for the quarter ended June 30, 1999. Revenue increases were
primarily due to sales to an increased number of customers, the timing of
revenue recognition in accordance with authoritative guidelines and an increase
in our average transaction size. As compared to the quarter ended December 31,
1998, our gross profit as a percentage of revenues decreased in each of the
quarters of 1999, primarily due to higher than anticipated expenses for
outsourced professional service providers and to our use of a fixed
implementation fee rather than a fee based on time and materials. We have
increased the number of our professional services personnel from 10 at the end
of 1998 to 51 at the end of 1999 to reduce the need for professional service
outsourcing, and we now use a method of pricing for the implementation of our
solutions that is based on the actual time and materials required to complete
the project.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through
private sales of preferred stock, with net proceeds of $31.4 million. At
December 31, 1999, we had $8.5 million in cash and cash equivalents, in addition
to $10.4 million in short-term investments consisting of commercial paper with
original maturities between three and six months. In January 2000, we obtained a
$3.0 million equipment line of credit with a financial institution. To a lesser
extent, we have financed our operations through equipment and facility leasing
arrangements.
Net cash used in operating activities was $948,000 for the period ended
December 31, 1997, $372,000 for 1998, and $8.6 million for 1999. In 1999, we
used cash primarily to fund our net losses from operations.
Net cash used in investing activities was $109,000 for the period ended
December 31, 1997, $113,000 for 1998, and $13.1 million for 1999. In 1999, net
cash used in investing activities was primarily attributable to purchases of
property, plant and equipment and short-term investments. We expect that, in the
future, any cash in excess of current requirements will be invested in
short-term, investment-grade securities.
Net cash provided by financing activities was $1.8 million for the period
ended December 31, 1997, $7,000 for 1998, and $30.0 million for 1999. In 1999,
net cash provided by financing activities consisted primarily of net proceeds
from the issuance of preferred stock, offset by our repurchase of common stock
from certain of our shareholders.
We have no material financing commitments other than obligations under our
line of credit facilities and operating and capital leases. Future capital
requirements will depend on many factors, including the timing of research and
development efforts and the expansion of our facilities.
We believe our current cash and cash equivalents and investments together
with the net proceeds from the sale of the common stock in this offering will be
sufficient to meet our working capital requirements for at least the next
12 months. Thereafter, we may find it necessary to obtain additional equity or
debt financing. If additional financing is required, we may not be able to raise
it on acceptable terms or at all. Additional financing could result in dilution
to our shareholders. If we are unable to obtain additional financing, we may be
required to reduce the scope of our planned research and development and sales
and marketing efforts, as well as the further development of our infrastructure.
YEAR 2000 ISSUES
Many currently installed computer systems, software and hardware devices are
coded to two digits for time-sensitive dating purposes. Beginning with the year
2000, these date code fields need to be coded to four digits to distinguish
between twentieth century and twenty-first century dates. For example, computer
programs that have date-sensitive software may recognize a date using "00" as
the
24
<PAGE>
year 1900 rather than the year 2000. This error could result in system failures
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in other normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to properly perform
date-sensitive functions after December 31, 1999.
Our business is dependent on the operation of numerous systems that could be
affected by problems related to the "Year 2000" issue. Those systems include,
among others:
- software products sold to our customers;
- hardware and software systems used by us to deliver products and services
to our customers, including our proprietary solutions and software
supplied by third parties;
- hardware and software systems used internally by us in the management of
our business;
- communication networks such as the Internet and private intranets;
- internal systems of our customers and suppliers; and
- non-information technology systems and services, such as energy and
utility suppliers, telephone systems and building systems, and financial
institutions and transportation providers.
We are not currently aware of any Year 2000 compliance problems internally
or externally that would have a material adverse effect on our business. In
early 1999, we created a team to oversee the audit and resolution of potential
Year 2000 problems. Since that time, we have evaluated the readiness of our
systems and products for Year 2000 compliance and believe these systems will be
able to properly perform date-sensitive functions after December 31, 1999.
To date, we have incurred $30,000 in costs to improve our internal
information technology systems and prepare for Year 2000 readiness efforts. We
have not tracked internal costs such as payroll costs for our information
systems group for our Year 2000 review activities. We expect that any additional
costs for Year 2000 compliance of internal systems will be minimal.
Because we have not found any systems on which we depend to be
non-compliant, we have determined that a contingency plan is not required.
However, we may not have identified and remediated all significant Year 2000
problems, and any unknown problems may adversely affect our business. Further
remediation efforts may involve significant time and expense, and customer
difficulties with Year 2000 issues might require us to allocate additional
resources to resolve underlying problems. Finally, although we have not been
made a party to any litigation or arbitration proceeding related to Year 2000
issues, we may in the future be required to defend our products or services in
these types of proceedings or to negotiate resolutions of claims based on Year
2000 issues. The costs of defending and resolving Year 2000-related disputes,
regardless of the merits of these disputes, and any liability for Year
2000-related damages, including consequential damages, could harm our business.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, we had cash and cash equivalents and short-term
investments of $18.9 million, which consist of cash and highly liquid short-term
commercial paper. Our investments may be subject to interest rate risk and will
decrease in value if market interest rates increase. A decline in interest rates
over a sustained period would reduce our interest income. All of our revenues
recognized to date have been denominated in United States dollars and
substantially all of our revenues are from customers in the United States.
Although substantially all of our revenues have been from United States
customers, we expect to recognize more significant revenues from international
markets, and those revenues will likely be denominated in currency from those
international markets. As a result, our operating results could become subject
to significant fluctuations based upon changes
25
<PAGE>
in the exchange rates of certain international currencies in relation to the
U.S. dollar and could be harmed.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging
Activities, (SFAS No. 133). SFAS No. 133 is effective for all fiscal quarters
beginning with the quarter ending June 30, 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
We will adopt SFAS No. 133 in the quarter ending June 30, 2000. We do not expect
the adoption of SFAS No. 133 to have a significant impact on our results of
operations, financial position or cash flows.
26
<PAGE>
BUSINESS
OVERVIEW
We are a leading provider of eFinance solutions. Our comprehensive suite of
software and professional services enable banks, brokers, financial portals and
other financial service providers to rapidly deploy Internet-based financial
services that allow consumers to conduct financial transactions, view personal
and market financial information, pay bills and access other financial services
on the Internet. We refer to these services generally as "eFinance." Our Voyager
eFinance Suite is an open, server-based software platform combined with a set of
eFinance applications for Internet banking, electronic bill presentment and
payment, targeted marketing and online customer relationship management. Our
recently introduced Corillian OneSource service aggregates financial information
from numerous banks, financial institutions and financial portals and other
financial service providers. By subscribing to OneSource, financial service
providers can offer consumers a consolidated view of their finances from
disparate sources. Our software seamlessly integrates into existing database
applications and legacy systems, enabling our customers to monitor transactions
across all systems in real time. They are also designed to easily scale to
support millions of users. Our current Voyager customers include Citibank,
Quicken.com, SunTrust Bank and Wachovia Bank.
INDUSTRY BACKGROUND
The use of the Internet to communicate and conduct business and transactions
continues to increase rapidly. According to estimates from International Data
Corporation, or IDC, there were approximately 97 million Internet users
worldwide at the end of 1998, and this number is expected to grow to
320 million by the end of 2002. To exploit the revenue opportunities this
growing base of users represents, businesses are devoting significant resources
to create Internet sites that are compelling and differentiated and are
transforming many traditional business processes, such as purchasing and sales,
to online processes. Businesses are moving their operations aggressively to the
Internet to exploit new business opportunities, streamline operations and reduce
costs.
GROWTH OF INTERNET-BASED FINANCIAL SERVICES--EFINANCE
The Internet has already become an integral part of the daily lives of
millions of consumers because of the functionality and convenience it offers. In
addition to more traditional uses such as email, the Internet is being used
increasingly to conduct financial transactions and deliver financial services.
Internet users are increasingly demanding Internet-based financial services,
such as access to financial information over the Internet, real-time access to
stock quotes and investment portfolio information, and Internet bill payment
services. The benefits that consumers derive from eFinance include:
- twenty-four hour, real-time access to information and financial services
from any Internet device;
- convenient and inexpensive bill presentment and payment tools;
- improved personal finance management; and
- the presentation of comprehensive, consolidated financial data.
As a result of these benefits, eFinance content is one of the most popular
content categories on the Internet.
The growth in Internet usage and the popularity of personal finance content
have changed the competitive landscape of the financial service industry by
attracting new competitors that face lower barriers to entry. Examples of these
are Internet brokerages and portals, such as E*Trade, Schwab, AOL, Quicken.com
and Yahoo!, that have established Internet sites that offer consumers real-time
access to personalized financial information. We believe these new competitors
within the financial
27
<PAGE>
service industry will need to enhance and expand their eFinance services to
attract new customers and retain and capture greater attention from their
existing customers.
Within this environment, we believe many traditional financial institutions
such as banks, insurance companies and full-service brokerages, risk losing
customers if they do not use the Internet to offer high-quality eFinance
services. Financial institutions, especially banks, have traditionally adopted
technologies that have allowed them to create closer, more profitable
relationships with their customers. The reliance on automated teller machines
and telephone banking exemplifies how banks have used technology in the past to
retain customers. With the rise of the Internet, many financial institutions are
recognizing they will require more cost-effective eFinance solutions with
greater functionality to help them differentiate their service and product
offerings and expand their market share. According to estimates from IDC, the
number of users banking on the Internet will expand from 8.1 million in 1998 to
39.8 million in 2003, and the number of banks offering Internet-based financial
services will increase from 1,150 in 1998 to 15,845 in 2003.
Traditional financial institutions, online brokerages, Internet portals and
other Internet financial service providers are competing to become full-service
financial portals that offer consumers a simple, one-stop site for all of their
financial needs. To offer competitive eFinance products and services on their
Internet sites, we believe these competitors will need to deploy sophisticated
and comprehensive eFinance solutions.
Significant challenges are involved in deploying eFinance solutions. Most
notably, multiple heterogeneous computing environments, including legacy
systems, packaged applications, Internet application servers and other emerging
technologies, must be integrated and must be able to communicate with each other
to provide customers with real-time data and to allow them to conduct financial
transactions. In addition, external systems, such as those of credit card
companies and bill payment providers, must be integrated with internal systems
in a secure and reliable manner. These technical challenges are magnified by the
speed with which these services must be brought to market. Most financial
institutions do not have the technical skills or resources to rapidly design and
deploy these services. In addition, although some online brokers and financial
portals have the technical skills and resources to develop and deploy eFinance
solutions, they are subject to significant time-to-market competitive pressures
and are driven to maintain their focus on their core competencies. For most of
these financial service providers, internally developing and deploying eFinance
solutions can be extremely expensive. As a result, many of these financial
service providers are realizing that rapidly deploying a differentiated,
low-cost eFinance product or service requires a comprehensive, outsourced
packaged software and service solution.
THE CORILLIAN SOLUTION
We are a leading provider of eFinance solutions. Our comprehensive suite of
software and our professional and content services enable our customers to
quickly and easily deploy Internet-based financial services.
Our Voyager eFinance Suite consists of an open, server-based software
platform and a menu of eFinance applications built upon that platform, all of
which we can provide on a hosted basis or which can run on our customers'
premises. Voyager can seamlessly integrate with our customers' existing
databases and legacy systems, enabling our customers to monitor transaction
across all systems in real-time. We have developed software applications for
Internet banking, electronic bill presentment and payment, targeted marketing
and online customer relationship management. We can provide our customers with
wireless delivery capabilities for all these solutions.
Our recently introduced OneSource service aggregates financial information
from banks, brokerages and other financial service providers. By subscribing to
OneSource, financial service providers can offer their customers a consolidated
view of their finances from disparate sources.
28
<PAGE>
We believe our products and services provide the following benefits to our
customers:
ACCELERATED TIME TO MARKET. Using our Voyager platform, financial
institutions can quickly deploy Internet-based financial services to their
customers. Our software easily integrates into the financial institutions'
existing databases and back-end legacy systems, permitting rapid deployment. In
addition, we provide comprehensive systems integration and implementation
services and customer support to complement the flexible architecture of our
solutions.
HIGHLY SCALABLE AND EXTENSIBLE PLATFORM. Our server platform has been
designed to be highly scalable to meet the evolving needs of our customers.
Independent laboratory test results indicate that Voyager can support Internet
banking programs for more than 3.5 million users. In addition, Voyager has been
designed using open standards including eXtensible Markup Language, commonly
known as XML, for communication, Open Financial Exchange, commonly known as OFX,
for financial transactions, and Microsoft's Distributed interNet Applications
Architecture for Financial Services, commonly known as DNAFS, for
interoperability. This architecture enables our customers to deploy new
Internet-based financial services rapidly by adding applications to our platform
at any time and by integrating future applications to any Internet connected
point-of-presence.
FLEXIBILITY AND CONTROL. We offer our customers the option of hosting the
Voyager suite on their own premises or having the Voyager suite hosted in our
managed facility. Our customers may request that we host their Voyager
deployment because they lack sufficient resources or the appropriate systems to
host Voyager on their premises. In addition, our customers can reduce their
information technology costs by outsourcing application hosting services with
us. We offer customers the opportunity to transfer operation of Voyager to their
own premises at any time. This flexibility provides our customers with the
option to gain or retain operational control of a Voyager deployment as they add
qualified resources and gain experience.
LEADING TECHNOLOGY AND CONTINUED INNOVATION. Our Voyager software and
OneSource service have been developed to provide customers with leading
technology. We believe our offerings provide the only comprehensive solution
that addresses the mission-critical nature of financial services with a broad
range of applications that can be delivered on the desktop or by wireless
access. We were the first to offer OFX-certified Internet financial
applications, and we have more production implementations of OFX than any other
eFinance solutions provider. We have worked actively to shape the future of
Internet financial applications by helping to define industry standards such as
DNAFS.
REDUCED COST OF INTERNET OPERATIONS. Our products lower the costs
associated with our customers' Internet operations primarily by reducing the
high cost of specialized, internal development. Our software solutions provide
all of the functionality for Internet-based financial services in a single
comprehensive package. This eliminates the cost of purchasing, integrating and
installing separate solution components from multiple vendors. In addition, the
reliability of our products lowers the ongoing costs of maintenance for our
customers.
STRATEGY
Our objective is to be the leading provider of eFinance solutions to both
traditional and emerging Internet financial service providers. To that end, we
seek to establish Voyager and OneSource as the platform of choice for eFinance.
To achieve this objective, we intend to pursue the following strategies:
INCREASE MARKET LEADERSHIP. To date, we have focused our sales and
marketing efforts to target the largest financial institutions and financial
portals. We intend to continue targeting large, industry-leading financial
institutions and financial portals by aggressively increasing our sales and
marketing efforts. We believe our efforts to date with these companies have
helped establish us as a market
29
<PAGE>
leader and we intend to leverage this position to other markets including small
to mid-size financial institutions, insurance companies, brokerages and consumer
finance companies.
EXPAND BREADTH OF PRODUCT AND SERVICE OFFERINGS. We have a history of
technical innovation in eFinance and delivering first-of-a-kind solutions that
provide our customers with time-to-market advantages. The majority of our
current financial applications support retail product delivery, including
features for Internet banking, electronic bill presentment and payment,
interfacing with personal finance managers through OFX, access to wireless
devices like the Palm VII, and consolidated financial information access. We
intend to expand our product offerings to include new functions, such as loan
origination, deposit account origination and brokerage transactions. Although we
already provide balance reporting and other treasury functions for the
commercial needs of some of our customers, we intend to expand our commercial
banking products.
EXTEND TECHNOLOGY LEADERSHIP. We are a recognized leader in developing and
setting industry standards for eFinance service solutions. Our products and
services adhere to existing industry standards and have been designed to meet
the openness and scalability required of Internet solutions. We will continue to
collaborate with innovative companies to develop new technologies and to
encourage the adoption and implementation of open standards that can foster and
simplify the exchange of financial information through the Internet. We intend
to continue investing in research and development to meet the needs of our
customers as they evolve their Internet offerings.
LEVERAGE AND EXPAND STRATEGIC RELATIONSHIPS. We intend to leverage our
relationships with leading systems integrators and value-added resellers, to
extend our reach and provide our customers with more comprehensive, customized
solutions. We believe these firms have relationships that facilitate access with
the most senior levels of management and decision-makers at our potential
customers and provide us with a significant endorsement of our solutions for
strategic projects. We intend to continue to expand and build additional
relationships with key systems integrators and value-added resellers. In
addition, we believe that forging relationships with key technology vendors is
critical to delivering a comprehensive solution to financial service providers.
Our existing strategic partners include Intuit, Microsoft, Parkers' Edge and
Yahoo!. We intend to develop additional relationships to expand the scope of our
functionality, and for co-marketing and distribution purposes.
INCREASE INTERNATIONAL SALES. As the Internet adoption rate accelerates
overseas, we believe international financial services will rapidly follow the
transformation seen in the United States. We believe significant international
market demand will exist for eFinance solutions as financial institutions in
Europe and Asia, in particular, move to deliver services on the Internet. In
January 2000, we entered into a reseller agreement with Parkers' Edge for the
distribution of our solutions in Australia and New Zealand. We intend to devote
significant resources to penetrate international markets, both through direct
sales channels and indirect sales partners.
PRODUCTS AND SERVICES
Our eFinance applications enable financial institutions, Internet portals
and other Internet financial service providers to offer their customers a
variety of financial services over the Internet, including Internet banking,
electronic bill presentment and payment, and consolidated financial account
access. We also offer a variety of services to support our customers throughout
the process of implementing and maintaining our solutions.
VOYAGER EFINANCE SUITE
The Voyager eFinance Suite is a software suite composed of a variety of
applications, each of which can be licensed individually or as an entire suite,
depending on customer preference. Any
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application not initially licensed by a customer can be added at any time
following the initial implementation.
The Voyager eFinance Suite includes the following applications:
CONSUMER BANKING. Our Consumer Banking Suite enables financial institutions
to offer their retail customers secure, real-time access to transactional
banking services through the Internet. These services can be delivered to the
desktop or accessed by wireless devices. Internet users can receive their
consolidated account information and transaction history and conduct financial
transactions, such as transfers and loan payments, over the Internet in a quick
and convenient manner 24 hours a day, seven days a week. The financial
institutions can choose standard browser-based user interfaces or more
customized Internet templates and online screens.
ELECTRONIC BILL PRESENTMENT AND PAYMENT. Our Electronic Bill Presentment
and Payment Suite enables financial service providers to offer their customers
electronic bill payment services and to deliver bills to their customers through
a standard Internet page, through supported personal finance management
software, such as Quicken or Microsoft Money, or as a digital image of a scanned
paper bill. A financial service provider can choose to deliver its own bills,
the bills of direct billing businesses, or the bills of third party bill
presentment providers, such as CheckFree and TransPoint. By consolidating all
bill presentment and payment options, our solution enables Internet users to pay
bills in the same program where they do most of their financial transactions.
Our solution also enables financial institutions to extend their product and
service features for their customers and to present bills on behalf of their
business customers.
SMALL BUSINESS BANKING. Our Small Business Banking Suite enables financial
institutions to offer their small business customers secure, real-time access to
account history and the ability to conduct cash management functions through an
Internet browser or accounting packages like QuickBooks. Businesses can control
access to business banking and account features to provide financial and audit
controls for their staff and can reconcile accounts instantly.
OFX PUBLISHING. Our OFX Publishing Suite enables financial institutions to
offer their customers the ability to integrate their financial information with
personal financial management software, such as Quicken, QuickBooks and
Microsoft Money or internet portals such as Yahoo! Finance and MSN MoneyCentral.
Each of our solutions was designed using the OFX data standard. This data
specification streamlines the process financial service companies must employ to
connect with financial data centers and to interface with personal financial
management software. We received the world's first OFX certification in 1998 and
continue to be a leader in the delivery of OFX solutions.
TARGETED MARKETING. Our Ad Manager Suite provides financial institutions
with the tools to individually target their customers and present them with
opportunities to purchase products and services to fit their needs and desires.
Advertisements can be customized using profile information gathered from the
financial institutions' data system and from data derived from customer usage of
the Voyager system. For example, a financial institution can segment customers
who have a balance of $10,000 or greater in a savings account, pay three credit
cards online, and have a high profitability index, and establish a targeted
marketing campaign for selling certificates of deposit to these customers. The
targeted campaign can contain any number of messages, each of which can convey
complex product information in different styles or formats and in different
sequences. Our application can react immediately to customer profile changes and
terminate messages to customers who have already purchased the marketed product.
CONTROL CENTER. Voyager Control Center is an application that allows our
customers to monitor and administer other applications in the Voyager eFinance
Suite. Optional modules, including Report Center and Relationship Center, may be
added for additional capabilities. For example, an
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administrator may use Control Center to view Internet usage, track new customer
additions and monitor the effectiveness of Internet advertising.
CORILLIAN ONESOURCE
Our recently implemented OneSource is a service that acquires and aggregates
financial information from disparate banks, brokerages and other financial
service providers. By subscribing to OneSource, financial portals, banks,
brokers and other financial service providers will be able to offer their
customers the following benefits:
CONSOLIDATED ACCOUNT ACCESS FROM MULTIPLE SOURCES. After a financial
service provider's customer inputs the necessary account information and access
codes into the OneSource system, OneSource is able to gather financial
information from multiple financial transaction systems and aggregate the
information in one centralized location. This enables the customer to collect in
one comprehensive location his or her financial information from banks,
brokerages, insurance companies, credit card companies and other financial
institutions. Each time the customer accesses his or her personal financial
Internet page on the financial service provider's Internet site, the financial
information can be updated to present a snapshot of the customer's
up-to-the-minute financial picture. Financial service providers perceive
significant value in the frequency and duration of consumers' access to their
Internet sites for this type of information.
CHOICE OF OPTIONS FOR DEPLOYMENT. OneSource was designed to support the
needs of many different financial service providers. Some financial service
providers have their own platforms for deploying eFinance solutions and only
want to retrieve consumer data using open standards. We built OneSource using
the OFX standard, so a customer can simply treat OneSource as a source of
content to display in its own user interface. Other financial service providers
require a complete solution for deploying consumer aggregation services. For
these customers, we have created a version of our Voyager Suite for deploying
OneSource.
PROFESSIONAL SERVICES
We offer a complete package of professional services designed to fulfill our
customers' needs throughout the process of product design, implementation and
operation. Our services include:
IMPLEMENTATION SERVICES. Our implementation services begin during the
pre-sales stage. Our implementation experts perform a customized analysis of a
potential customer's product requirements and determine how these products can
best be integrated with the customer's existing host infrastructure. We then
develop a tailored site survey and a comprehensive project plan recommendation.
Once we are chosen to install our applications, our professional service team
works with the customer to ensure that every solution is integrated with the
customer's legacy financial transaction system for delivery over the Internet.
If necessary, we write custom interfaces to handle transaction requests,
validate those requests and convert them to a standard format for Internet-based
presentation or to OFX format for delivery to personalized financial management
software. We also customize our Internet templates to provide our customers with
a quick-to-market user interface that complements its well-established brand
recognition, design elements, color schemes and corporate logos. The
implementation process is generally completed in 90 to 180 days, depending on
the complexity of the project. The fees for our implementation services vary
from project to project, depending on the size of the customer and the products
and services selected by the customer.
HOSTING SERVICES. We offer complete hosting services to our customers that
prefer to have us handle all of their eFinance systems. Under this service
option, the Voyager servers reside at our managed facility, and our professional
staff monitors and maintains the servers. Our services include weekly log
auditing, installation and configuration of servers within our secure
environment, and a
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professional staff to help our customers manage system performance and daily
operations. We charge a monthly hosting fee that varies based on the number of
users of the hosted site.
CONSULTING SERVICES. Our staff has experience in a variety of electronic
commerce areas, including technology, marketing, product development, security
and customer service. By consulting with our staff, our customers can select and
design the most effective electronic commerce strategy. In addition to
consulting with our customers on the range of products and services available to
them, we help our customers with creative product and Internet site design. For
customers that lack in-house network security professionals, we help these
customers develop the appropriate network and security protection features to
ensure a secure system.
SUPPORT SERVICES. We offer several levels of technical and maintenance
support for our customers. These levels are designed to meet our customers'
needs and those of their customers. Our support fees vary based on which level
of support the customer selects. In addition to technical support, we provide
annual maintenance support for each customer. These maintenance services entitle
the customer to updates and modifications of the Voyager application server and
licensed software solutions.
TRAINING SERVICES. We make available to our customers a variety of training
modules and supporting materials to help them use our applications to their
greatest benefit. All courses are led by our staff and can be conducted at
either a customer's location or at our headquarters.
CUSTOMER CASE STUDIES
The following case studies illustrate how some of our customers are using
the Voyager eFinance Suite to meet their customers' eFinance needs:
CITIBANK
Citibank is one of the world's largest banks and serves over a million
consumers through the Internet.
Opportunity: As a major bank servicing its customers' remote banking needs,
Citibank needed a solution to enable its customers to connect directly to the
bank using OFX-enabled interfaces such as Quicken and Microsoft Money and to
have access to real-time financial data.
Solution: Citibank recently licensed the Voyager OFX Publishing Suite. This
solution will allow Citibank's customers to have real-time access to their
Citibank accounts over the Internet and to interface with personal financial
management software, such as Quicken and Microsoft Money. By selecting us as its
outsourced solutions provider, Citibank saved considerable internal development
costs and was able to license a more cost-effective and functional solution for
Internet banking than its previous outsourced solution.
INTUIT
Intuit is a financial software and Internet-based services company that
develops and markets Quicken, TurboTax, QuickBooks and the Quicken.com Internet
site. Quicken.com is a leading financial Internet site, offering a comprehensive
set of financial news, information and tools, including insurance, mortgage,
investment and tax preparation services. Intuit's products and services enable
individuals, small businesses and financial professionals to better manage their
financial lives and businesses.
Opportunity: As a major provider of eFinance services to consumers, Intuit
needed to quickly deploy Internet-based bill payment and presentment services to
the millions of users who use its Quicken.com Internet site.
Solution: Intuit incorporated Voyager Electronic Bill Payment technology
into its bill payment and presentment service. The Voyager technology enables
consumers to pay all their household bills over the Internet. By licensing
Voyager, Intuit saved significant time in getting to market with these services
and was easily able to connect to its preferred bill payment processor,
CheckFree.
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SUNTRUST BANK
SunTrust is the ninth largest bank in the United States, with assets of over
$92.8 billion as of September 30, 1999.
Opportunity: SunTrust needed to rapidly deploy a comprehensive solution to
provide a broad range of Internet-based financial services to it customers.
Additionally, SunTrust sought a solutions provider that could implement the
solution initially on a hosted basis, but that provided the flexibility to
migrate the solution in-house if the need arose.
Solution: SunTrust has licensed the Voyager eFinance Suite for complete
Internet banking and bill payment. The solution enables SunTrust customers to
use their browser or personal financial manager (Quicken or Microsoft Money) to
perform balance and statement reviews, fund transfers, and bill payment.
SunTrust chose to have us host the applications initially in our managed data
center for time to market reasons. SunTrust retains the ability to easily
transfer the platform to its own location at a future date.
CUSTOMERS
We target large financial institutions, financial portals and other
financial service providers that are seeking scalable, reliable and advanced
solutions for eFinance. We have provided eFinance applications primarily to two
major industry groups--large financial institutions (primarily banks) and
financial Internet portals. In 1999, Wachovia and Intuit each represented more
than 10% of our revenue. As of December 31, 1999, our customers included:
<TABLE>
<CAPTION>
BANKS CREDIT UNIONS INTERNET PORTALS
- ----- ------------- ----------------
<S> <C> <C>
Desert Schools Credit Union Intuit's
AmSouth Bank Quicken.com
Bank of Stockton Luke Federal MSN's MoneyCentral
Capitol Federal Savings Bank Meriwest Credit Union
Citibank Mission Federal Credit Union
Crestar Bank Provident Federal Credit Union
Downey Savings & Loan Royal Credit Union
Hibernia Bank State Employees Credit Union
M&T Bank Suncoast Federal Credit Union
Sanwa Bank Tech Federal Credit Union
SunTrust Bank Tennessee Valley Credit Union
Wachovia Bank United Airlines Credit Union
Vista Credit Union
</TABLE>
SYSTEMS AND TECHNOLOGY
THE VOYAGER SYSTEM
The Voyager application server is a scalable platform that uses a
three-tiered architecture, connecting end-users to the legacy hosts of financial
institutions. As a middleware product, Voyager routes and validates requests,
formats transaction responses and stores and forwards bill payment instructions.
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The three layers of the Voyager application server each have a specific
functional focus. The Web Server layer is responsible for presentation
interaction with the customer, handling hyper-text mark-up language, or HTML, to
the browser, or OFX to the connected financial software or wireless device. The
Transaction Processor layer controls the business logic for the user's request,
directs the request to the appropriate host target, and assembles the results.
The Host Server layer interprets and formats the transaction for the legacy host
system, then analyzes and returns the data fields from the response. Optional
modules provide incremental services, such as batch processing of bill payment
transactions or collection of electronic bills.
Our software modules and OneSource service also compete with companies that
offer solutions with similar functionality to our solutions, such as Broadvision
for targeted marketing solutions; Just-in-Time for electronic bill presentment
and payment solutions; and Yodlee and S1 for aggregated financial data
solutions. We also compete with businesses delivering financial services through
Internet portals, banks marketing their own Internet-based financial services,
and non-bank financial institutions, such as brokerages and insurance companies,
looking to expand the breadth of their Internet product and services offerings.
In addition, our customers may develop competing products. For example, a bank
may choose to develop its own software platform for Internet-based financial
services, or a financial portal may choose to develop its own financial data
aggregation service.
We also face competition from our customers and potential customers who
develop their own eFinance solutions. Rather than purchasing eFinance solutions
and services from third-party vendors, our customers and potential customers
could develop, implement and maintain their own services and applications. We
give no assurance that these financial service providers 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 financial service providers;
- the reliability, scalability, security, speed and performance of our
solutions and services;
- the comprehensiveness, ease of use and service level of our products and
services;
- our ability to continue to interface with financial service providers and
their technology;
- 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 meet our customers' expectations.
We expect competition to increase significantly as new companies enter our
market and existing competitors expand their product lines and services. In
addition, many companies that provide outsourced eFinance solutions are
consolidating, creating larger competitors with greater resources and more
products than us. For example, S1 recently acquired Edify, F.I.C.S. and
VerticalOne, and Digital Insight and nFront have agreed to merge. We expect this
trend to continue.
THE ONESOURCE SYSTEM
OneSource is a solution that allows a subscribing financial service provider
to display aggregated information from banks, brokerages, and other financial
service providers. Rather than visiting each financial institution's Internet
site individually, consumers can authorize OneSource to collect all of their
account information on their behalf. OneSource will then utilize OFX, HTML, XML,
or other interfaces to gather and store updated data. When the consumer next
signs on to the subscribing financial service provider, the aggregated list will
be available for viewing.
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CORILLIAN TECHNOLOGY
Our systems are designed to provide real-time data acquisition, processing
and presentation for eFinance applications. Specific components and features of
the technology we use to provide these benefits include:
- SCALABLE FRAMEWORK. Each of the layers of the Voyager application server
is a software component that can be replicated within the Voyager
configuration for redundancy and scalability. By adding an incremental
component, work is distributed among servers across a network. Internal
load balancing is managed by the Voyager Transaction Request Broker, a
transaction monitor technology that is our original design and is the key
to Voyager's scalability.
- FLEXIBLE INTERFACES. Voyager is designed to integrate with virtually any
legacy host, providing a means for financial service providers to easily
bring existing applications to the Internet. Our host server technology
allows multiple simultaneous access to disparate legacy and third party
systems. In addition, browser interfaces are customizable in form and
function, allowing the financial service provider to display unique
branding, advertising, and extended functionality.
- DNAFS ARCHITECTURE. Voyager is among the first of a new generation of
financial service solutions to use Microsoft's DNAFS, a standards-based
framework. This architectural standard allows our applications to
interoperate with other application servers, such as teller and call
center platforms and automated teller machine delivery systems.
- OFX DATA STANDARD. Voyager employs the OFX data standard, which was
developed by Microsoft, CheckFree and Intuit to provide a unified
specification for the electronic exchange of financial data among
financial institutions, businesses and consumers over the Internet. This
data specification standardizes the connection to financial data centers
and to personal financial management software. By using the OFX data
standard, all financial information retrieved from a financial institution
can be seamlessly downloaded to consumer software programs such as
Microsoft Money and Quicken.
STRATEGIC ALLIANCES AND PARTNERSHIPS
We have marketing, technology, and resale alliances with a number of
companies in the technology and financial services industries and will continue
to pursue new alliances with additional companies within these industries. These
alliances are intended to help us address new vertical markets and market
segments and to enable us to provide our customers with access to additional
resources and technology to enhance and customize our solutions. Some of our
more significant strategic partners include:
CHECKFREE
CheckFree designs, develops and markets services that enable consumers to
make electronic payments and collections, automate paper-based recurring
financial transactions and conduct secure transactions on the Internet.
CheckFree is our primary partner for remittance processing and was a developer
with Intuit and Microsoft of the OFX data standard. We have developed a number
of Voyager interfaces to CheckFree systems.
INTUIT
Intuit is a financial software and Internet-based services company that
develops and markets the following products: Quicken, the personal finance
software; TurboTax, the tax preparation software; and QuickBooks, the small
business accounting software. As a developer of OFX, Intuit works closely with
us to test new OFX transaction sets for Quicken and QuickBooks. Intuit has also
deployed our Voyager platform for bill presentment and payment on the
Quicken.com Internet site.
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MICROSOFT
Microsoft is the publisher of the Windows NT platform, the Microsoft Money
personal financial management program and the provider of the financial portal,
MoneyCentral. As an early supporter of Windows NT, OFX, and other Microsoft
technologies, we have provided a reliable banking platform from which a
financial institution can deploy its Internet-based financial services. Because
of our successful implementation of these systems and protocols, Microsoft
invited us to participate in the technical definition of DNAFS, Microsoft's
application interoperability architecture. We demonstrated the reference
implementation of DNAFS on stage at Microsoft's FinNet conference in
October 1998 and work directly with the Microsoft Financial Desktop team in
testing new OFX transaction sets for Microsoft Money. We are a vendor for
Windows NT products and retain a seat on the DNAFS work group.
PARKERS' EDGE
Parkers' Edge is an independent Internet commerce and voice commerce
consulting and solutions company based in Sydney, Australia and Auckland, New
Zealand. As a leading provider of Internet banking solutions in Australia,
Parkers' Edge focuses on delivering Internet commerce solutions to the financial
services industry. In January 2000, we entered into a reseller agreement with
Parkers' Edge for the distribution of our solutions in Australia and New
Zealand.
TRANSPOINT
TransPoint is a joint venture of Microsoft and First Data Corporation that
uses existing payment systems to allow consumers to access and pay their bills
through the branded home-banking services of participating financial
institutions as well as other customer service providers.
YAHOO!
Yahoo! is a leading global Internet media company serving 105 million users
worldwide through its Yahoo! portal site. Yahoo! Personal Finance is an area of
Yahoo! where consumers can manage their personal financial assets, including
stocks and bank account information. We have certified that our Voyager OFX
Publishing Suite will enable a financial institution that has licensed the
application to permit its customers to customize Yahoo! in order to retrieve and
display their account data on Yahoo! We have entered into a joint sales and
marketing agreement with Yahoo! to market our OFX Publishing Suite to financial
institutions that want to display account information on Yahoo!.
SALES AND MARKETING
We sell our software and services primarily through our direct sales
organization. As of December 31, 1999, our sales force consisted of 19 personnel
operating out of our headquarters. Our direct sales efforts have been primarily
focused on domestic financial service providers, such as banks and financial
portals. We recently began complementing our direct sales efforts through joint
sales and marketing arrangements with Internet companies, eFinance technology
vendors and financial service providers such as Yahoo!. In January 2000, we
entered into a reseller agreement with Parkers' Edge for the distribution of our
solutions in Australia and New Zealand. We intend to increase our international
sales by pursuing new reseller arrangements and establishing a direct sales
effort abroad.
Our sales process features a multi-tiered approach that requires the
involvement of our field sales personnel, our technical professionals and
members of our senior management. Our sales process simultaneously targets
senior business executives, personnel responsible for eFinance initiatives and
systems engineers. We employ this multi-leveled approach to accelerate the
purchasing cycle. Our products are complex, however, and sales and
implementations can be delayed due to our customers' procedures for approving
large capital expenditures and deploying new technologies within their
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networks. As a result, our sales cycle can vary significantly and typically
ranges from three to nine months.
RESEARCH AND DEVELOPMENT
As of December 31, 1999, our product development staff consisted of 32
engineers with experience in Internet technology, financial services solutions,
object-oriented software design, customer server systems, and wireless
technology. Their development efforts are focused on:
- ENHANCEMENTS TO EXISTING PRODUCTS AND SERVICES. We continue to update and
modify our solutions to enhance quality, performance and scalability, to
extend functionality to address our customers' changing needs, and to take
advantage of improved technology within our industry.
- DEVELOP NEW PRODUCTS AND SERVICES. We are working to expand our product
and service offerings. We intend to expand our product offerings to
include new retail functions, such as loan origination, deposit account
origination and brokerage transactions. We also intend to explore
opportunities within the wholesale banking channel to include features for
cash management and other commercial banking products.
- PARTICIPATE IN TECHNOLOGY TESTING AND COLLABORATION. We have participated
in the development of industry data standards as the chair of the OFX
Committee for Financial Applications, as a contributing member of the
Windows DNAFS Working Group, and as a voting member of the Interactive
Financial Exchange Forum. We will continue to collaborate with innovative
companies to develop new technologies and to encourage the adoption and
implementation of open standards that can foster and simplify the exchange
of financial information through the Internet.
COMPETITION
The market for providing eFinance solutions is highly competitive, and we
expect that competition will intensify in the future. We compete with a variety
of companies in various segments of the Internet-based financial services
industry, and our competitors vary in size and in the scope and breadth of the
products and services they offer. In the area of Internet consumer banking, we
primarily compete with other companies that provide outsourced eFinance
solutions to large financial institutions, including S1, Integrion, HFN/Sybase
and Brokat. In addition, vendors such as Digital Insight, FundsXpress, nFront,
Online Resources and Communications and Virtual Financial, who primarily target
community financial institutions, occasionally compete with us for large
financial institutions. In addition, several of the vendors offering data
processing services to financial institutions, including EDS, Fiserv, Jack Henry
and M&I Data Services, offer their own Internet banking solutions. Local
competition for Internet consumer banking services is provided by many smaller
Internet 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, Brokat, Magnet and Politzer & Haney.
INTELLECTUAL PROPERTY
Although we believe 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. We have filed applications
to register Voyager, OneSource and Corillian as our trademarks and have
registered corillian.com as a domain name. None of our technology is patented,
but we have established an internal patent team of engineers and in-house
counsel to monitor and evaluate as part of the new product development cycle our
technologies and business methods for patentability.
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We rely on a combination of contractual rights and copyright, trademark and
trade secret laws to establish and protect our proprietary technology. We
require all of our employees to sign an assignment of patents and inventions
agreement and 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 do not assure you 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. We also do not assure you that we will not infringe upon the
intellectual property rights of third parties.
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. The costs of
defending our proprietary rights or claims that we infringe third-party
proprietary rights may be high.
GOVERNMENT REGULATION
As the Internet continues to evolve, we expect federal, state and foreign
governments to adopt laws and regulations covering issues such as user privacy,
taxation of goods and services provided over the Internet, pricing, content and
quality of products and services. If enacted, these laws and regulations could
limit the market for Internet-based financial services. Although many of these
regulations may not apply directly to our business, we expect laws regulating
the solicitation, collection or processing of personal or consumer information
could indirectly affect our business, especially the aggregation features of our
newly developed OneSource product.
If enacted or deemed applicable to us, some laws, rules or regulations
applicable to financial service activities could render our business or
operations more costly and less viable. The financial services industry is
subject to extensive and complex federal and state regulation, and financial
institutions operate under high levels of governmental supervision. Our
customers must ensure our services and related products work within the
extensive and evolving regulatory requirements applicable to them. We may become
subject to direct regulation as the market for our business evolves. Federal,
state or foreign authorities could adopt laws, rules or regulations affecting
our business operations, such as requiring us to comply with data, record
keeping and other processing requirements. Any of these laws, rules or
regulations, or new laws, rules and regulations affecting our customers'
businesses, could lead to increased operating costs and could also reduce the
convenience and functionality of our services, possibly resulting in reduced
market acceptance.
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.
EMPLOYEES
As of December 31, 1999, we had a total of 150 full-time employees,
including 51 in operations, 17 in marketing, 19 in sales, 32 in technology and
31 in general and administration. None of our work force is unionized. We have
not experienced any work stoppages and consider our relations with our employees
to be good.
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FACILITIES
Our corporate headquarters are located in Beaverton, Oregon. We lease
approximately 30,000 square feet in one office building, which serves as our
principal executive office, and the lease for this space expires in
December 2000. We lease approximately 21,000 square feet in another office
building, which serves as our facilities for research and development as well as
certain administrative functions, and the lease for this space expires in
February 2005. We do not own or lease any other properties or facilities.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages and positions, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ted F. Spooner............................ 42 Chairman of the Board and Chief Executive
Officer
Kirk H. Wright............................ 41 President and Director
Steven Sipowicz........................... 47 Chief Financial Officer and Secretary
Terrence Ishida........................... 46 Chief Technology Officer
Matt Cone................................. 36 Chief Marketing Officer
Andrew Ian White.......................... 38 Executive Vice President, Global Sales
Robert G. Barrett......................... 55 Director
Robert Huret.............................. 54 Director
Edmund P. Jensen.......................... 62 Director
Ravi Mohan................................ 33 Director
Jay N. Whipple III........................ 43 Director
</TABLE>
TED F. SPOONER founded Corillian and has served as our Chairman of the Board
and Chief Executive Officer since our inception in April 1997. From September
1995 to April 1997, he served as Senior Vice President of Internet Services for
CheckFree Corporation, a financial transaction processing company. Mr. Spooner
was the founder of Interactive Solutions Corporation, a developer of financial
services software, and served as its Chief Executive Officer from October 1994
until it was acquired by CheckFree in September 1995. Mr. Spooner holds a B.S.
degree in Business Administration from Portland State University.
KIRK H. WRIGHT has served as our President and a member of our board of
directors since July 1997. From May 1997 to July 1997, he served as our Vice
President, Marketing and Sales. From September 1995 to April 1997, Mr. Wright
was Director of Internet Services, Internet Marketing and Strategy at CheckFree
Corporation, and he served as Director of Marketing from October 1994 to
September 1995 at Interactive Solutions Corporation. Mr. Wright holds a B.A.
degree in Economics and Philosophy from Earlham College, and an M.B.A. degree
from The Drucker Graduate Management Center in Claremont, California.
STEVEN SIPOWICZ has served as our Chief Financial Officer since
November 1999 and our Secretary since January 2000. From October 1997 to
November 1999, Mr. Sipowicz served as Chief Financial Officer of F.I.C.S. Group,
N.V., a financial software and services company. From October 1996 to
September 1997, he was Vice President, Finance and Administration and Chief
Financial Officer of Intrinsa Corporation, a development tools company. From
April 1993 to September 1996, he served as Vice President, Finance and Chief
Financial Officer of Integrated Systems, Inc., an operating system software
company. Mr. Sipowicz holds a B.S. degree in Chemistry from Bristol University
(U.K.) and an M.B.A. degree from Santa Clara University.
TERRENCE ISHIDA is our Chief Technology Officer, a position he has held
since September 1999. From May 1997 to September 1999, Mr. Ishida served as our
Vice President of Development. From June 1996 to May 1997, Mr. Ishida was
Director of Systems and Software Development at CheckFree Corporation. From
May 1990 to June 1996, Mr. Ishida served as Director of Quality and Manager of
Technical Support at Mentor Graphics Corporation, an electronic design
automation company. Mr. Ishida holds a B.A. degree in Computer Science from the
University of California, Berkeley, an M.S. degree in Computer and Information
Science from Ohio State University and an M.B.A. degree from the University of
Oregon.
41
<PAGE>
MATT CONE has served as our Chief Marketing Officer since July 1999. From
March 1998 to July 1999, he was the Vice President of Business Development for
TransPoint, LLC, an electronic bill presentment and payment joint venture
between Microsoft Corporation and First Data Corporation. From July 1994 to
March 1998, Mr. Cone served as a Product Manager and Business Development
Manager at Microsoft, overseeing Microsoft Money, OFX and the Microsoft Internet
Finance Server. Mr. Cone holds a B.A. degree in Business Administration from
Ithaca College and an M.B.A. degree from University of Connecticut.
ANDREW IAN WHITE has served as our Executive Vice President, Global Sales
and Business Development since November 1999. From August 1998 to
November 1999, he was Vice President, Marketing and Business Development of
SageMaker, Inc., an enterprise portal company. From March 1992 to August 1998,
Mr. White served as Vice President and Business Manager, Open Systems at Reuters
America Inc., a business information and software company. Mr. White is a
graduate of the Royal Military Academy at Sandhurst, United Kingdom.
ROBERT G. BARRETT has served as a director of Corillian since April 1999. He
was a founding partner of Battery Ventures, and has been a partner there since
1984. Mr. Barrett serves on the boards of Brooktrout Technology, Inc.,
Interspeed, Inc. and Peerless Corporation. Mr. Barrett holds a B.A. degree in
History from Harvard College and an M.B.A. degree from the Harvard Business
School.
ROBERT HURET has served as a director of Corillian since October 1999. Since
July 1998, he has been a managing member of Financial Technology Ventures. He
serves as Vice Chairman of Newell Associates, a money mangagement firm, and is a
director of Third Age Media, a targeted audience website company. Since
November 1984, Mr. Huret has served as Chairman of Huret, Rothenberg & Co., a
merchant banking firm. Mr. Huret holds a B.S. degree in Industrial and Labor
Relations from Cornell University and an M.B.A. degree from Harvard Business
School.
EDMUND P. JENSEN has served as a director of Corillian since November 1999.
From January 1994 to January 1999, he served as President and CEO of Visa
International. Mr. Jensen holds a B.A. degree in Finance from University of
Washington.
RAVI MOHAN has served as a director of Corillian since April 1999. Since
September 1996, he has been a principal at Battery Ventures. He is a member of
the board of SupplierMarket.com, a business-to-business Internet commerce
website company. During 1995, Mr. Mohan was an associate with McKinsey &
Company, a consulting firm, where he assisted consumer packaged goods companies
in developing sales and marketing strategies for clients. Mr. Mohan holds a B.S.
degree in Operations Research and Industrial Engineering from Cornell University
and an M.B.A. degree from the University of Michigan Business School.
JAY N. WHIPPLE III has served as a director of Corillian since
November 1997. Since November 1997, Mr. Whipple has served as President of J.N.
Whipple, Inc., a money management firm, and as Chairman of Osprey Partners, LLP,
a software services company. From May 1996 to November 1997, he was Executive
Vice President and Vice-Chairman of CheckFree Corporation. From November 1978 to
May 1996, Mr. Whipple served as President of Security APL, Inc., a provider of
software and services for portfolio accounting and performance measurement.
Mr. Whipple holds a B.A. degree in Economics from Yale University and an M.B.A.
degree from the University of Chicago Business School.
BOARD COMPOSITION
Our board of directors currently consists of seven members. Each director
holds office until his or her term expires or until his or her successor is duly
elected and qualified. Upon completion of this offering, our bylaws will provide
for a classified board of directors. Our board of directors will be
42
<PAGE>
divided into three classes whose terms will expire at different times. The three
classes will consist of the following directors:
- Class I consists of Messrs. and , who will serve until
the annual meeting of shareholders to be held in 2000;
- Class II consists of Messrs. and , who will serve until
the annual meeting of shareholders to be held in 2001; and
- Class III consists of Messrs. , and , who
will serve until the annual meeting of shareholders to be held in 2002.
At each annual meeting of shareholders beginning with the 2000 annual
meeting, 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 and until their successors have been duly
elected and qualified. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of an equal number of directors.
Messrs. Barrett, Huret, Mohan and Whipple were elected to the board of
directors pursuant to a voting agreement among Corillian and some of its
principal shareholders. This voting agreement will terminate upon completion of
this offering. Each of our current directors will continue to serve on the board
of directors upon completion of this offering.
BOARD COMMITTEES
The board of directors has an audit committee and a compensation committee.
Our audit committee consists of Messrs. Jensen, Mohan and Whipple. The audit
committee reviews and makes recommendations to the board of directors concerning
our internal accounting procedures, reviews and consults with our independent
accountants on the accounting principles and auditing practices used for our
financial statements and makes recommendations to the board of directors
concerning the engagement of independent accountants and the scope of the audit
to be undertaken by the accountants.
Our compensation committee consists of Messrs. Barrett, Huret, Spooner and
Whipple. The compensation committee reviews and recommends to the board of
directors the compensation and benefits of our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1999, the members of the compensation committee of our
board of directors were Messrs. Barrett and Whipple.
Messrs. Barrett and Whipple have at no time been officers or employees of
Corillian. Mr. Barrett is a partner of Battery Ventures, a 5% shareholder of our
stock. We have issued and sold shares of stock to Battery Ventures in two
private placement transactions, as indicated below.
<TABLE>
<CAPTION>
PURCHASE PRICE NUMBER
TYPE OF STOCK DATE PER SHARE OF SHARES
- ------------- ------------ -------------- ----------
<S> <C> <C> <C>
Series B preferred................... April 1999 $0.60 11,717,898
Series C preferred................... October 1999 2.51 2,988,047
</TABLE>
In September 1999, we granted Mr. Barrett options to purchase 20,000 shares
of common stock, which have an exercise price of $1.00 per share and vest over
three years, with one-third of the option shares vesting annually.
We entered into two loan agreements with Mr. Whipple in late 1997, under
which we issued him two convertible promissory notes in an aggregate amount of
$960,000. On December 31, 1997, these
43
<PAGE>
notes were converted into a total of 2,594,595 shares of Series A preferred
stock at a purchase price of $0.37 per share. In September 1999, we granted
Mr. Whipple options to purchase 40,000 shares of common stock, which have an
exercise price of $1.00 per share and vest over three years, with one-third of
the option shares vesting annually. In November 1999, we repurchased 135,000
shares of common stock from Mr. Whipple, which he acquired upon the conversion
of 135,000 shares of his Series A preferred stock, at a price of $2.51 per
share.
Richard W. Comandich served on the compensation committee from
December 1997 until November 1999. Mr. Comandich has never been an officer or
employee of Corillian. In September 1997, we issued and sold to Mr. Comandich
100,002 shares of common stock at a purchase price of $0.10 per share. In 1999,
we granted Mr. Comandich the following options to purchase shares of common
stock, which vest annually in equal installments over three years.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
DATE OF GRANT SHARES PER SHARE
- ------------- --------- --------------
<S> <C> <C>
September 28, 1999.............................. 40,000 $1.00
November 23, 1999............................... 10,000 1.25
</TABLE>
Kirk H. Wright served on the compensation committee from December 1997 to
May 1999. Mr. Wright has been our President since July 1997 and served as our
Vice President, Marketing and Sales, from May 1997 to July 1997. We issued and
sold shares of common stock to Mr. Wright in two private placement transactions,
as indicated below.
<TABLE>
<CAPTION>
NUMBER OF PURCHASE PRICE
DATE SHARES PER SHARE
- ---- --------- --------------
<S> <C> <C>
July 1997...................................... 510,000 $0.10
September 1997................................. 560,001 0.10
</TABLE>
In November 1999, we repurchased 130,000 shares of common stock from
Mr. Wright at a price of $2.51 per share. We also granted Mr. Wright options to
purchase our common stock as described in the Executive Compensation section
below.
In January 2000, Messrs. Huret and Spooner were appointed to our
compensation committee.
ADVISORY BOARD
We have created an advisory board consisting of accomplished professionals
with expertise in software and finance. Members of our advisory board may from
time to time be invited to attend meetings of the board of directors but may not
vote. The advisory board provides us with strategic advice and other assistance
in the growth of our business.
Our advisory board includes the following individuals:
- Douglas Braun--President and Chief Executive Officer of Internet Payment
Exchange, a provider of electronic bill payment clearing services; former
Chief Technology Officer of Intelidata Technologies Corporation, which
developed the Interpose Financial Engine.
- Richard W. Comandich--former Senior Vice President, Convenience Banking at
U.S. Bancorp, and a director of Corillian from June 1997 to
November 1999.
- Richard Field--former Senior Executive Vice President and Policy Committee
member, The Bank of New York; a former director of MasterCard
International, and a current director of Lending Tree, Inc., Integra
Information and Epigen, Inc.
- John Grispon--Worldwide Industry Banking Manager of Microsoft Corporation.
- David M. Williams--former Director, Newmedia at Intel Corporation, and a
director of Corillian from May 1997 to November 1999.
- Michael Zucchini--former Vice Chairman and Chief Technology Officer of
Fleet Boston Financial; a former director of Visa, U.S.A. and American Re
Corporation and a current director of Technology Solutions Company and its
eLoyalty division.
44
<PAGE>
COMPENSATION OF DIRECTORS AND SPECIAL ADVISORY BOARD MEMBERS
We do not pay directors cash compensation. However, we reimburse directors
for reasonable expenses incurred in connection with their attendance at board
and committee meetings. Also, we have granted options to purchase common stock
to non-employee directors and the members of the advisory board, except John
Grispon.
The following non-employee members of our board of directors and of our
advisory board have received the respective numbers of stock options indicated
below. The options vest over three years, with one-third of the option shares
vesting annually.
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
NAME DATE OF GRANT OF SHARES PER SHARE
- ---- ------------------ --------- --------------
<S> <C> <C> <C>
Robert G. Barrett.................. September 28, 1999 20,000 $1.00
Douglas Braun...................... November 23, 1999 10,000 1.25
Richard W. Comandich............... September 28, 1999 40,000 1.00
Richard W. Comandich............... November 23, 1999 10,000 1.25
Richard Field...................... November 23, 1999 10,000 1.25
Robert Huret....................... November 23, 1999 20,000 1.25
Edmund P. Jensen................... November 23, 1999 20,000 1.25
Ravi Mohan......................... September 28, 1999 20,000 1.00
Jay N. Whipple III................. September 28, 1999 40,000 1.00
David M. Williams.................. September 28, 1999 40,000 1.00
David M. Williams.................. November 23, 1999 10,000 1.25
Michael Zucchini................... November 23, 1999 10,000 1.25
</TABLE>
EXECUTIVE COMPENSATION
The table below summarizes the compensation earned for services rendered to
us in all capacities for the fiscal year ended December 31, 1999 by our named
executive officers, specifically, our chief executive officer and our most
highly compensated executive officers who earned more than $100,000 during the
fiscal year ended December 31, 1999. Other than our chief executive officer,
only two of our executive officers earned more than $100,000 in the year ended
December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- -------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Ted F. Spooner.......................... 1999 $185,730 $63,100 150,000 $1,314(1)
Chairman of the Board and
Chief Executive Officer
Kirk H. Wright.......................... 1999 144,598 37,013 150,000 2,259(2)
President
Terrence Ishida......................... 1999 121,167 36,130 50,000 3,112(3)
Chief Technology Officer
</TABLE>
- ------------------------
(1) Consists of $1,136 of 401(k) matching contributions and $178 of life
insurance premiums paid by Corillian.
(2) Consists of $2,081 of 401(k) matching contributions and $178 of life
insurance premiums paid by Corillian.
(3) Consists of $2,934 of 401(k) matching contributions and $178 of life
insurance premiums paid by Corillian.
45
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
to each of the named executive officers in the fiscal year ended December 31,
1999, including the potential realizable value over the term of the options,
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
In the fiscal year ended December 31, 1999, we granted options to purchase
up to of 4,370,500 shares to employees, directors and members of our advisory
board. Substantially all options were granted under our 1997 stock option plan
at exercise prices at the fair market value of our common stock on the date of
grant (as determined by the board of directors), except for options granted to
holders of 10% or more of our stock, which were granted at exercise prices equal
to 110% of fair market value. All options listed in the table below have a term
of four years from the date the options first became exercisable. All option
shares listed in the table below vest over three years, with one-third of the
option shares vesting annually.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERMS
OPTIONS IN LAST PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ----------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ted F. Spooner.................... 150,000 3.4% $0.41 5/14/03 $ 9,334 $27,883
Kirk H. Wright.................... 150,000 3.4 0.37 5/14/03 15,334 33,883
Terrence Ishida................... 50,000 1.1 0.37 5/14/03 5,111 11,294
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table describes exercisable and unexercisable options held by
the named executive officers as of December 31, 1999. No options were exercised
by the named executive officers during the fiscal year ended December 31, 1999.
The "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
on a value of $5.40 per share, the deemed fair market value of our common stock
as of December 31, 1999, less the per share exercise price, multiplied by the
number of shares to be issued upon full exercise of the option. All options
listed in the table below were granted under our 1997 stock option plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ted F. Spooner............................. 150,000 150,000 $748,500 $748,500
Kirk H. Wright............................. 150,000 150,000 754,500 754,500
Terrence Ishida............................ 134,666 90,334 677,370 454,380
</TABLE>
46
<PAGE>
STOCK PLANS
1997 STOCK OPTION PLAN
Our 1997 stock option plan permits the grant of options to our employees,
officers, directors, consultants and advisors. Options may be either incentive
stock options within the meaning of Section 422 of the Internal Revenue Code to
employees or nonstatutory stock options. A total of 6,365,692 shares of common
stock have been reserved for issuance upon the exercise of options granted under
the 1997 Plan. As of December 31, 1999, options to purchase a total of 5,358,836
shares of common stock were outstanding under our 1997 stock option plan. Upon
the approval of our 2000 stock incentive compensation plan by our board of
directors, the 1997 stock option plan will be capped at the number of options
outstanding and no further options will be granted under the 1997 stock option
plan. The 1997 stock option plan provides that if we are involved in any merger,
consolidation or reorganization in which we are not the surviving corporation,
each outstanding option will terminate unless assumed or substituted for by the
surviving corporation.
In the event of a corporate transaction, such as a merger or sale, each
outstanding option to purchase shares under the 1997 stock option plan will
terminate on the effective date of such transaction unless the successor
corporation assumes or provides an equivalent substitute for the option.
2000 STOCK INCENTIVE COMPENSATION PLAN
Our 2000 stock incentive compensation plan will enhance long-term
shareholder value by offering opportunities to our employees, directors,
officers, consultants, agents, advisors and independent contractors to
participate in our growth and success, to encourage them to remain in our
service, and to own our stock. The 2000 stock incentive compensation plan
permits both option and stock grants. We have reserved the following shares of
common stock for the 2000 stock incentive compensation plan:
- shares; plus
- any shares returned to the 1997 stock option plan upon termination of
options other than terminations due to exercise or settlement of such
options; plus
- an automatic annual increase, to be added on the first day of our fiscal
year beginning in 2002, equal to the lesser of shares or %
of the average common shares outstanding as used to calculate fully
diluted earnings per share as reported to our shareholders in our annual
report for the preceding year.
The plan administrator will make proportional adjustments to the aggregate
number of shares issuable under the 2000 stock incentive compensation plan and
to outstanding awards in the event of stock splits or other capital adjustments.
STOCK OPTION GRANTS. The compensation committee will serve as the plan
administrator of the 2000 stock incentive compensation plan. The plan
administrator will select individuals to receive option and specify the terms
and conditions of each option granted, including:
- the exercise price;
- the vesting provisions; and
- the option term.
The exercise price must not be less than the fair market value of the common
stock on the date of the grant for incentive stock options and not less than 85%
of the fair market value of the common stock on the date of the grant for
nonqualified stock options.
47
<PAGE>
Unless otherwise provided by the plan administrator, options granted under
the 2000 stock incentive compensation plan vest over a three-year period, and
generally will expire on the earliest of:
- ten years from the date of grant;
- one year after the optionee's retirement, death or disability;
- notice to the optionee of termination of employment or service for cause;
and
- three months after other terminations of employment or service.
STOCK AWARDS. The plan administrator is authorized under the 2000 stock
incentive compensation plan to issue shares of common stock to eligible
participants with terms, conditions, and restrictions established by the plan
administrator in its sole discretion. Restrictions may be based on continuous
service or the achievement of performance goals. Holders of restricted stock are
shareholders of Corillian and have, subject to established restrictions, all the
rights of shareholders with respect to such shares.
CORPORATE TRANSACTIONS. In the event of a corporate transaction, such as a
merger or sale, each outstanding option to purchase shares under the 2000 stock
incentive compensation plan may be assumed or an equivalent option substituted
by the buyer. If the successor corporation does not assume or provide an
equivalent substitute for the option, the option will fully vest and the holder
has the right to exercise the option immediately before the corporate
transaction. Except to the extent assumed by the buyer, all options shall
terminate following the corporate transaction.
TERMINATION OF THE PLAN. Unless terminated sooner by the board of
directors, the 2000 stock incentive compensation plan will terminate ten years
from the date of its approval by the board of directors.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 employee stock purchase plan is an employee benefit program that
allows eligible employees to purchase shares of our common stock at a discount
from fair market value. It will be implemented upon the effectiveness of this
offering.
ELIGIBILITY. All employees are eligible if they typically work over
20 hours per week and do not own 5 percent or more of our voting stock.
LEVEL OF PARTICIPATION. Funds are accrued for purchases through payroll
deductions of not more than 20 percent of an employee's regular cash
compensation. No employee may purchase common stock worth more than $25,000 in
any calendar year, valued as of the first day of each offering period described
below, or more than shares of common stock during a single purchase
period as described below.
OFFERING PERIODS AND PURCHASE PERIODS. The first offering period will
commence on the effective date of this offering and end on January 31, 2001.
Subsequent offering periods will commence on February 1 and August 1 each year
and will have a 12 month duration. Each offering period consists of two
consecutive purchase period of six months' duration, except that the last date
of the first purchase period will be July 31, 2000.
PURCHASES. Participants purchase common stock on the last day of each
purchase period. The purchase price will be the lesser of 85% of the fair market
value of the common stock on the first day of an offering period and 85% of the
fair market value of the common stock on the purchase date, except that the
purchase price for the first offering period will be equal to the lesser of 100%
of the initial public offering price and 85% of the fair market value of the
common stock on the purchase date.
48
<PAGE>
NUMBER OF SHARES. We will reserve the following shares of common stock for
the 2000 employee stock purchase plan:
- shares; plus
- an annual increase to be added on the first day of our fiscal year
beginning in 2002 equal to the least of:
- shares;
- % of the average common shares outstanding as used to calculate fully
diluted earnings per share as reported to our shareholders in our
annual report for the preceding year; and
- a lesser amount determined by the board of directors.
The plan administrator will make proportional adjustments to the aggregate
number of shares issuable under the 2000 employee stock purchase plan and to
outstanding awards in the event of stock splits or other capital adjustments.
CORPORATE TRANSACTION. In the event of a corporate transaction, such as a
merger or sale, the 2000 employee stock purchase plan provides that each
outstanding option to purchase shares will be assumed or an equivalent option
substituted by the successor corporation. If the successor corporation refuses
to assume or provide an equivalent substitute, the offering period then in
progress will be shortened by setting a new purchase date before the date the
corporate transaction is to be effective. In the event of a proposed liquidation
or dissolution of Corillian, the offering period then in progress will be
shortened by setting a new purchase date before the date of the proposed
liquidation or dissolution.
TERMINATION OF THE PLAN. Unless terminated sooner by the board of
directors, the 2000 employee stock purchase plan will terminate ten years from
the date of its approval by the board of directors.
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
Our articles of incorporation eliminate, to the fullest extent permitted by
Oregon law, liability of a director to Corillian or our shareholders for
monetary damages resulting from conduct as a director. Although liability for
monetary damages has been eliminated to this extent, equitable remedies such as
injunctive relief or rescission remain available. In addition, a director is not
relieved of his responsibilities under any other law, including the federal
securities laws.
Our articles of incorporation and bylaws provide that we shall indemnify our
directors and may indemnify our officers, employees and other agents to the
fullest extent permitted by law. We also carry an insurance policy for the
protection of our officers and directors against any liability asserted against
them in their official capacities. We believe these provisions for the
limitation of liability enhance our ability to attract and retain qualified
persons as directors and officers.
To the extent that indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Corillian under the above provisions, Corillian has been advised that
in the opinion of the Securities and Exchange Commission this indemnification is
against public policy as expressed in the act and is, therefore, unenforceable.
49
<PAGE>
RELATED PARTY TRANSACTIONS
In May 1997, we purchased contract and intellectual property rights,
equipment and other assets from CheckFree Corporation in exchange for a $125,000
note payable and the surrender by our Chairman of the Board and Chief Executive
Officer, Ted F. Spooner, of shares of CheckFree common stock valued at $115,000.
The note was paid in full in 1997. In connection with this transaction, we
issued Mr. Spooner 3,450,000 shares of our common stock, then valued at
$115,000.
During early 1998, we entered into a development contract with Osprey
Partners, LLP, an entity controlled by Jay N. Whipple III, one of our directors.
Osprey Partners paid us $138,000 under the contract, which was completed and
paid in full in 1998.
In April 1999, we sold 11,717,898 shares of Series B preferred stock to
Battery Ventures, a holder of more than 5% of our stock, at a purchase price of
$0.60 per share. Robert G. Barrett and Ravi Mohan, two of our directors, are
current partners of Battery Ventures.
In October 1999, we sold shares of Series C preferred stock to investors at
a purchase price of $2.51 per share, including, among others, the following:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASER SHARES
- --------- ---------
<S> <C>
Battery Ventures 2,988,047
Financial Technology Ventures 1,992,032
BCI Partners 1,992,031
First Union Capital Partners 1,992,031
</TABLE>
Robert Huret, one of our directors, is a managing member of Financial
Technology Ventures, a holder of more than 5% of our stock. BCI Partners and
First Union Capital Partners are each holders of more than 5% of our stock.
In 1999, we granted the following options to purchase shares of common stock
to our executive officers not listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
EXECUTIVE OFFICER DATE OF GRANT OF SHARES PER SHARE
----------------- ----------------- ------------- --------------
<S> <C> <C> <C>
Matt Cone July 30, 1999 550,000 $0.40
Matt Cone November 23, 1999 150,000 1.00
Steven Sipowicz November 23, 1999 410,000 1.00
Andrew Ian White November 23, 1999 410,000 1.00
</TABLE>
The options granted to Mr. Cone in July have a term of five years and vest
as follows:
- 137,500 options vested immediately upon grant; and
- the remaining 412,500 options vest over three years, with one-third of
these options shares vesting annually, except that (i) 137,500 of these
options will vest immediately upon the completion of this offering,
(ii) all of these options will vest immediately if Mr. Cone's role at
Corillian changes as a result of Mr. Spooner leaving us, and (iii) if we
terminate Mr. Cone without cause, 50% of these options not then vested
will vest immediately.
The options granted to Mr. Cone in November have a term of ten years and
vest as follows:
- 50,010 options vested immediately upon grant; and
- the remaining 99,990 vest over two years, with one-half of these option
shares vesting annually.
50
<PAGE>
The options granted to Messrs. Sipowicz and White each have a term of ten
years and vest as follows:
- 102,500 options vested immediately upon grant; and
- the remaining 307,500 options vest over three years, with one-third of
these option shares vesting annually.
In October 1999, we repurchased shares of common stock from Mr. Spooner, Mr.
Whipple and Kirk H. Wright at a purchase price of $2.51 per share. Mr. Wright is
one of our directors and our President, and Mr. Whipple is one of our directors.
<TABLE>
<CAPTION>
NUMBER AGGREGATE
SELLER OF SHARES REPURCHASE PRICE
- ------ --------- ----------------
<S> <C> <C>
Ted F. Spooner...................................... 95,000 $238,450
Jay N. Whipple III.................................. 135,000 338,850
Kirk H. Wright...................................... 130,000 326,300
</TABLE>
51
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table contains information about the beneficial ownership of
our common stock as of December 31, 1999 for
- each person who beneficially owns more than 5% of our common stock;
- our chief executive officer and each of the executive officers named in
the summary compensation table; and
- all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and except
for community property laws where applicable, the persons named in the following
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. The percentage of beneficial
ownership before the offering is based on shares of common stock
outstanding as of December 31, 1999, as adjusted to reflect the conversion of
all outstanding shares of preferred stock into common stock upon the closing of
this offering. The percentage of beneficial ownership after the offering
additionally reflects the shares offered by this prospectus.
The table assumes no exercise of the underwriters' over-allotment option. If
the underwriters' over-allotment option is exercised in full, we will sell up to
a total of additional shares of our common stock, and up to shares
of common stock will be outstanding after the completion of this offering.
52
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OUTSTANDING
NUMBER OF SHARES --------------------------------
NAME AND ADDRESS BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ---------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Battery Ventures(1)............................... 14,705,945 41.5% %
901 Mariners Island Boulevard, Suite 475
San Mateo, California 94404
Ted F. Spooner(2)................................. 5,085,001 14.3
c/o Corillian Corporation
3855 SW 153rd Drive
Beaverton, Oregon 97006
Jay N. Whipple III................................ 2,459,595 6.9
135 South LaSalle Street, Suite 2412
Chicago, Illinois 60603
Financial Technology Ventures(3).................. 1,992,032 5.6
601 California Street, Suite 2200
San Francisco, California 94108
BCI Partners(4)................................... 1,992,031 5.6
Glenpointe Centre West
Tenneck, New Jersey 07666
First Union Capital Partners, Inc................. 1,992,031 5.6
One First Union Center, TW-S
Charlotte, North Carolina 28288-0732
Robert C. Barrett(5).............................. 14,705,945 41.5
c/o Battery Ventures
901 Mariners Island Boulevard, Suite 475
San Mateo, California 94404
Ravi Mohan(5)..................................... 14,705,945 41.5
c/o Battery Ventures
901 Mariners Island Boulevard, Suite 475
San Mateo, California 94404
Robert Huret(6)................................... 1,992,032 5.6
c/o Financial Technology Ventures
601 California Street, Suite 2200
San Francisco, California 94018
Kirk H. Wright(2)................................. 1,090,001 3.1
Terrence Ishida(7)................................ 394,667 1.1
Edmund P. Jensen.................................. * * *
All directors and executive officers as a group
(11 persons)(8)................................. 26,257,251 72.2
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1%.
(1) Consists of 12,578,179 shares held by Battery Ventures V, L.P.; 1,838,243
shares held by Battery Ventures Convergence Fund, L.P.; and 289,523 shares
held by Battery Investment Partners V, LLC.
(2) Includes 150,000 shares subject to options exercisable within 60 days of
December 31, 1999.
53
<PAGE>
(3) Consists of 1,920,916 shares held by Financial Technology Ventures (Q), L.P.
and 71,116 shares held by Financial Technology Ventures, L.P.
(4) Consists of 1,960,079 shares held by BCI Growth V, LLC and 31,952 shares
held by BCI Investors, LLC.
(5) Consists of 12,578,179 shares held by Battery Ventures V, L.P.; 1,838,243
shares held by Battery Ventures Convergence Fund, L.P.; and 289,523 shares
held by Battery Investment Partners V, LLC. Messrs. Barrett and Mohan
disclaim beneficial ownership of all of these shares, except to the extent
of their respective pecuniary interests.
(6) Consists of 1,920,916 shares held by Financial Technology Ventures (Q), L.P.
and 71,116 shares held by Financial Technology Ventures, L.P. Mr. Huret
disclaims beneficial ownership of all of these shares, except to the extent
of his pecuniary interest.
(7) Consists of 260,001 shares held by Mr. Ishida and Connie Jean Ishida as
co-trustees of the Ishida Living Trust, under agreement dated December 10,
1987 and amended December 17, 1992, and 134,666 shares subject to options
exercisable within 60 days of December 31, 1999.
(8) Includes 964,676 shares subject to options exercisable within 60 days of
December 31, 1999.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At December 31, 1999, assuming conversion of all shares of preferred stock
into common stock, 35,424,755 shares of our common stock would have been
outstanding and held by 63 shareholders of record. Upon completion of this
offering, our authorized capital stock will consist of 80 million shares of
common stock and 40 million shares of preferred stock.
The following description of our capital stock gives effect to the amendment
to our articles of incorporation to be filed upon completion of this offering.
Our articles of incorporation and bylaws, to be effective after the closing of
this offering, provide further information about our capital stock.
COMMON STOCK
Following this offering, shares of common stock will be issued
and outstanding. This number does not reflect the exercise of stock options
after December 31, 1999. Holders of common stock are entitled to one vote per
share on all matters to be voted upon by the shareholders. Because holders of
common stock do not have cumulative voting rights, the holders of a majority of
the shares of common stock can elect all of the members of our board of
directors standing for election. Subject to the preferences of any preferred
stock that may be issued in the future, the holders of common stock are entitled
to receive any dividends that may be declared by our board of directors. If we
are liquidated, dissolved or wound up, the holders of common stock are entitled
to receive pro rata all of the assets available for distribution after payment
of liquidation preferences of any outstanding shares of preferred stock. 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.
PREFERRED STOCK
Following this offering, there will be no shares of preferred stock issued
and outstanding. Our board of directors has the authority, without further
action by our shareholders, to issue up to 40 million shares of preferred stock
in one or more series and to fix the privileges and rights of each series. These
privileges and rights may be greater than those of the common stock. Our board
of directors, without further shareholder 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. This type of "blank check
preferred stock" makes it possible for us to issue preferred stock quickly with
terms calculated to delay or prevent a change in our control or make removal of
our management more difficult. Additionally, if we issue this preferred stock,
the market price of our common stock may decrease, and its voting and other
rights may be diminished. We have no plans to issue any of this preferred stock.
REGISTRATION RIGHTS
After this offering, the holders of 24,544,430 shares of common stock will
be entitled to rights with respect to the registration of these shares under the
Securities Act. Under the terms of the agreement between us and the holders of
these registrable securities, if we propose to register any securities under the
Securities Act for our own account, these holders are entitled to notice of
registration and are entitled to include their shares of common stock in the
registration. The holders of at least two-thirds of these registrable securities
are also entitled to specified demand registration rights under which they may
require us to file a registration statement under the Securities Act at our
expense with respect to shares of our common stock, and we are required to use
our best efforts to effect this registration. Further, the holders of these
registrable securities may require us to file additional registration statements
on Form S-3. All of these registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in the registration.
55
<PAGE>
ANTI-TAKEOVER MEASURES
ARTICLES AND BYLAWS
Our articles and bylaws contain provisions that may have the effect of
delaying, deferring or preventing a change in control. These provisions include:
- the ability of the board of directors, without further shareholder
approval, to issue up to 40 million shares of preferred stock;
- requiring a classified board whenever there are six or more directors,
with each class containing as nearly as possible one-third of the total
number of directors and the members of each class serving for staggered
three-year terms;
- prohibiting cumulative voting for the election of directors;
- requiring supermajority approval of the shareholders to effect amendments
to the bylaws; and
- requiring no less than 60 days' advance notice with respect to nominations
of directors or other matters to be voted on by shareholders other than by
or at the direction of the board of directors.
OREGON CONTROL SHARE AND BUSINESS COMBINATION STATUTES
Oregon law may restrict the ability of significant shareholders of Corillian
to exercise voting rights. The law generally applies to a person who acquires
voting stock of an Oregon corporation in a transaction that results in that
person holding more than 20%, 33 1/3% or 50% of the total voting power of the
corporation. If such a transaction occurs, the person cannot vote the shares
unless voting rights are restored to those shares by:
- a majority of the outstanding voting shares, including the acquired
shares; and
- the holders of a majority of the outstanding voting shares, excluding the
acquired shares and shares held by the corporation's officers and inside
directors.
This law is construed broadly and may apply to persons acting as a group.
The restricted shareholder may, but is not required to, submit to the
corporation a statement setting forth information about itself and its plans
with respect to the corporation. The statement may request that the corporation
call a special meeting of shareholders to determine whether voting rights will
be granted to the shares acquired. If a special meeting of shareholders is not
requested, the issue of voting rights of the acquired shares will be considered
at the next annual or special meeting of shareholders. If the acquired shares
are granted voting rights and they represent a majority of all voting power,
shareholders who do not vote in favor of granting voting rights will have the
right to receive the appraised fair value of their shares. The appraised fair
value will, at a minimum, be equal to the highest price paid per share by the
person for the shares acquired in the transaction subject to this law.
We are also subject to provisions of Oregon law that govern business
combinations between corporations and interested shareholders. These provisions
generally prohibit a corporation from entering into a business combination
transaction with a person, or affiliate of that person, for a period of three
years from the date the person acquires 15% or more of the voting stock of the
corporation. For the purpose of this law, the prohibition generally applies to
the following:
- a merger or plan of share exchange;
- any sale, lease, mortgage, or other disposition of 10% or more of the
assets of the corporation; and
56
<PAGE>
- transactions that result in the issuance of capital stock of the
corporation to the 15% shareholder.
The general prohibition does not apply, however, if:
- the 15% shareholder, as a result of the transaction in which the person
acquired 15% of the shares, owns at least 85% of the outstanding voting
stock of the corporation;
- the board of directors approves the share acquisition or business
combination before the shareholder acquired 15% or more of the
corporation's outstanding voting stock; or
- the board of directors and the holders of at least two-thirds of the
outstanding voting stock of the corporation, excluding shares owned by the
15% shareholder, approve the transaction after the shareholder acquires
15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, L.L.C., Seattle, Washington.
LISTING
We have applied to list our common stock on The Nasdaq National Market under
the symbol "CORI."
SHARES ELIGIBLE FOR FUTURE SALE
As described below, no shares outstanding immediately before this offering
will be available for sale immediately after this offering as a result of
various contractual and securities law restrictions on resale. 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 this offering, we will have outstanding
shares of common stock, assuming no exercise of the underwriter's over-allotment
option and no exercise of outstanding options. Of these shares, the shares
offered for sale through the underwriters will be freely tradable without
restriction under the Securities Act unless purchased by our affiliates or
covered by a separate lock-up agreement with the underwriters.
The remaining shares of common stock held by existing shareholders are
restricted securities. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration
described below under rules 144, 144(k) or 701 promulgated under the Securities
Act.
As a result of the lock-up agreements and the provisions of Rules 144,
144(k) and 701 described below, these restricted shares will be available for
sale in the public market as follows:
- no shares may be sold before 180 days from the date of this prospectus
without the written consent of Credit Suisse First Boston Corporation;
- shares will have been held long enough to be sold under Rule 144 or
Rule 701 beginning 181 days after the date of this prospectus; and
- the remaining shares may be sold under Rule 144 or 144(k) once they have
been held for the required period of time.
LOCK-UP AGREEMENTS. All of our shareholders and holders of options
exercisable within 180 days of the date of this offering have agreed not to
transfer or dispose of, directly or indirectly, any shares
57
<PAGE>
of our common stock or any securities exercisable for shares of our common
stock, for a period of 180 days after the date the registration statement of
which this prospectus is a part is declared effective. Transfers or dispositions
can be made sooner only with the prior written consent of Credit Suisse First
Boston Corporation.
RULE 144. In general, under Rule 144, a person who has beneficially owned
restricted securities 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 our common stock then outstanding, which
will equal approximately shares immediately after this offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market 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 limited by manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(K). Under Rule 144(k), a person who is not deemed to have been one
of our affiliates 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, is
entitled to sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144 discussed above.
RULE 701. In general, under Rule 701, any of our employees, officers,
directors, consultants or advisors who purchased shares from us before the
offering under an option plan or other written agreement will be eligible to
resell their shares beginning 90 days after the date of this prospectus.
Non-affiliates will be able to sell their shares subject only to the manner of
sale provisions of Rule 144. Affiliates will be able to sell their shares
without compliance with the holding period requirements of Rule 144.
REGISTRATION RIGHTS. Upon completion of this offering, the holders of
24,544,430 shares of our common stock will be entitled to rights with respect to
the registration of their shares under the Securities Act. See "Description of
Capital Stock--Registration Rights." Except for shares purchased by affiliates,
registration of these shares under the Securities Act would result in these
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration statement.
STOCK OPTIONS. Immediately after this offering, we intend to file a
registration statement on Form S-8 under the Securities Act covering the shares
of common stock reserved for issuance upon exercise of outstanding options. The
Form S-8 registration statement is expected to be filed and become effective as
soon as practicable after the closing of this offering. Accordingly, shares
registered under the Form S-8 registration statement will be available for sale
in the open market beginning 180 days after the effective date of the
registration statement of which this prospectus is a part, except with respect
to Rule 144 volume limitations that apply to our affiliates.
58
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation, Hambrecht & Quist LLC and Friedman, Billings,
Ramsey & Co., Inc. are acting as representatives, the following respective
numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- -----------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................
Friedman, Billings, Ramsey & Co., Inc.......................
-----------
Total.................................................
===========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions
paid by us............................ $ $ $ $
Expenses payable by us.................. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We and our executive officers, directors and other of our security holders
have agreed that we will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to, any
shares of common stock or securities convertible into or exchangeable or
exercisable for any common stock without the prior written consent of Credit
Suisse First Boston Corporation for a period of 180 days after the date of this
prospectus.
These restrictions do not prohibit us from issuing stock options and common
stock issuable upon the exercise of currently outstanding options.
59
<PAGE>
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in this offering. The number of shares available for sale to the
general public in this offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CORI."
In October 1999, we sold 10,358,561 shares of our Series C preferred stock
in a private placement at a price of $2.51 a share. Donaldson, Lufkin & Jenrette
Securities Corporation acted as placement agent in connection with the private
placement and was paid customary compensation. Donaldson, Lufkin & Jenrette
elected to receive 76,494 shares of our Series C preferred stock valued at
approximately $192,000 as part of its compensation. An additional 122,707 shares
of our Series C preferred stock were purchased by affiliates of Donaldson,
Lufkin & Jenrette in the private placement on the same terms and conditions as
the other purchasers of our Series C preferred stock. The shares of Series C
preferred stock owned by Donaldson Lufkin & Jenrette and its affiliates
represent less than 1% of our outstanding shares before the offering.
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined by negotiation between us
and the underwriters and may not reflect the market price of the common stock
following the offering. The principal factors to be considered in determining
the public offering price include:
- the information in this prospectus and otherwise available to the
underwriters;
- market conditions for initial public offerings;
- the history and the prospects for the industry in which we will compete;
- the ability of our management;
- the prospects for our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
We offer no assurances that the initial public offering price will
correspond to the price at which the common stock will trade in the public
market following the offering or that an active trading market for the common
stock will develop and continue after the offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with
Regulation M under the Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
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<PAGE>
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
61
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws, which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice before any resale of the
common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, such purchaser is purchasing as principal and not as agent, and
(iii) such purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
62
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby and other legal matters will
be passed upon for Corillian by Perkins Coie LLP, Portland, Oregon. Legal
matters will be passed upon for the underwriters by Stoel Rives LLP, Portland,
Oregon.
EXPERTS
The financial statements of Corillian Corporation as of December 31, 1998
and 1999, and for the period from April 9, 1997 (date of inception) to
December 31, 1997 and for each of the years in the two-year period ended
December 31, 1999, have been included in this prospectus and elsewhere in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, appearing elsewhere herein and upon the authority of KPMG LLP as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission. This prospectus, which is a part of the registration
statement, does not contain all of the information included in the registration
statement. Some information is omitted and you should refer to the registration
statement and its exhibits. With respect to references made in this prospectus
to any contract, agreement or other document of Corillian, these references are
not necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract, agreement or other
document. You may review a copy of the registration statement, including
exhibits, at the Commission's public reference room at Judiciary Plaza,
450 Fifth Street, Washington, D.C. 20549, or Seven World Trade Center,
Suite 13th floor, New York, New York 10048, or Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms.
Statements contained in this prospectus concerning the provisions of
documents are necessarily summaries of the material provisions of such
documents, and each statement is qualified by reference to the copy of the
applicable document filed with the Commission.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
Commission.
Our Commission filings and the registration statement can also be reviewed
by accessing the Commission's Internet site at HTTP://WWW.SEC.GOV, which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
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<PAGE>
CORILLIAN CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the period from April 9, 1997
(date of inception) to December 31, 1997, and for the
years ended December 31, 1998 and 1999.................... F-4
Statements of Redeemable Convertible Preferred Stock and
Shareholders' Equity (Deficit) for the period from
April 9, 1997 (date of inception) to December 31, 1997,
and for the years ended December 31, 1998 and 1999........ F-5
Statements of Cash Flows for the period from April 9, 1997
(date of inception) to December 31, 1997, and for the
years ended December 31, 1998 and 1999.................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Corillian Corporation:
We have audited the accompanying balance sheets of Corillian Corporation as
of December 31, 1998 and 1999, and the related statements of operations,
redeemable convertible preferred stock and shareholders' equity (deficit), and
cash flows for the period from April 9, 1997 (date of inception) to
December 31, 1997 and for each of the years in the two-year period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Corillian Corporation as of
December 31, 1998 and 1999, and the results of its operations and cash flows for
the period from April 9, 1997 (date of inception) to December 31, 1997 and for
each of the years in the two-year period ended December 31, 1999 in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
Portland, Oregon
January 21, 2000
F-2
<PAGE>
CORILLIAN CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- SHAREHOLDERS'
1998 1999 EQUITY
-------- -------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 290 $ 8,502
Investments............................................... -- 10,357
Accounts receivable....................................... 382 2,849
Other receivables......................................... 29 288
Revenue in excess of billings............................. -- 363
Prepaid expenses and deposits............................. 20 547
------- --------
Total current assets.................................... 721 22,906
Property and equipment, net................................. 179 2,927
Other assets................................................ 48 69
------- --------
Total assets............................................ $ 948 $ 25,902
======= ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable.......................................... $ 226 $ 1,990
Accrued liabilities....................................... 474 2,097
Deferred revenue.......................................... 1,403 1,767
Current portion of capital lease obligations.............. -- 66
Other current liabilities................................. 10 10
------- --------
Total current liabilities............................... 2,113 5,930
Capital lease obligations, less current portion............. -- 177
------- --------
Total liabilities....................................... 2,113 6,107
------- --------
Redeemable convertible preferred stock, no par value; 0 and
22,084,835 shares issued and outstanding at December 31,
1998 and 1999, respectively, aggregate liquidation
preference of $33,000 at December 31, 1999................ -- 31,501
------- --------
Commitments and contingencies
Shareholders' (deficit) equity:
Convertible preferred stock, no par value; 40,000,000
shares authorized, liquidation preference of $910 at
December 31, 1999; 2,594,595 and 2,459,595 shares issued
and outstanding at December 31, 1998 and 1999,
respectively............................................ 960 910 $ --
Common stock, no par value; 80,000,000 shares authorized;
11,141,325 and 10,880,325 shares issued and outstanding
at December 31, 1998 and 1999, respectively (35,424,755
pro forma).............................................. 1,114 3,482 35,893
Stock subscriptions receivable............................ (12) -- --
Deferred stock-based compensation......................... -- (2,877) (2,877)
Accumulated deficit....................................... (3,227) (13,221) (13,221)
------- -------- --------
Total shareholders' (deficit) equity.................... $(1,165) $(11,706) $ 19,795
------- --------
========
Total liabilities and shareholders' (deficit) equity.... $ 948 $ 25,902
======= ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CORILLIAN CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 9, 1997 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31,
TO DECEMBER 31, -------------------
1997 1998 1999
------------------- -------- --------
<S> <C> <C> <C>
Revenues.................................................. $ 399 $ 3,393 $ 7,736
Cost of revenues.......................................... 318 1,894 6,651
------- ------- --------
Gross profit.......................................... 81 1,499 1,085
------- ------- --------
Operating expenses:
Sales and marketing..................................... 239 840 4,074
Research and development................................ 594 1,353 3,165
General and administrative.............................. 671 1,233 3,272
Amortization of deferred stock-based compensation....... -- -- 967
------- ------- --------
Total operating expenses.............................. 1,504 3,426 11,478
------- ------- --------
Loss from operations.................................. (1,423) (1,927) (10,393)
------- ------- --------
Other income:
Interest income......................................... -- -- 311
Other income, net....................................... 27 96 88
------- ------- --------
Total other income.................................... 27 96 399
------- ------- --------
Net loss.............................................. (1,396) (1,831) (9,994)
Redeemable convertible preferred stock accretion.......... -- -- (102)
------- ------- --------
Net loss attributed to common shareholders............ $(1,396) $(1,831) $(10,096)
======= ======= ========
Basic and diluted net loss per share...................... $ (0.25) $ (0.16) $ (0.91)
Shares used in computing basic and diluted net loss per
share................................................... 5,657 11,141 11,099
Pro forma basic and diluted net loss per share............ $ (0.41)
Shares used in computing pro forma basic and diluted net
loss per share.......................................... 24,438
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CORILLIAN CORPORATION
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
(DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY (DEFICIT)
REDEEMABLE ------------------------------------------------------------
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK STOCK
--------------------- -------------------- --------------------- SUBSCRIPTIONS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE
---------- -------- --------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 9, 1997
(date of
inception).......... -- $ -- -- $ -- -- $ -- $ --
Conversion of
convertible debt to
Series A convertible
preferred stock..... -- -- 2,594,595 960 -- -- --
Issuance of common
stock............... -- -- -- -- 6,196,824 850 --
Issuance of common
stock in
acquisition......... -- -- -- -- 3,450,000 115 --
Issuance of common
stock for stock
subscriptions
receivable.......... -- -- -- -- 1,494,501 149 (149)
Receipts on stock
subscriptions
receivable.......... -- -- -- -- -- -- 130
Net loss.............. -- -- -- -- -- -- --
---------- ------- --------- ----- ---------- ------- ----
Balance, December 31,
1997................ -- -- 2,594,595 960 11,141,325 1,114 (19)
Receipts on stock
subscriptions
receivable.......... -- -- -- -- -- -- 7
Net loss.............. -- -- -- -- -- -- --
---------- ------- --------- ----- ---------- ------- ----
Balance, December 31,
1998................ -- -- 2,594,595 960 11,141,325 1,114 (12)
Exercise of common
stock options....... -- -- -- -- 199,000 70 --
Conversion of
Series A
convertible
preferred stock into
common stock........ -- -- (135,000) (50) 135,000 50 --
Purchase of common
stock............... -- -- -- -- (595,000) (1,494) --
Issuance of Series B
redeemable
convertible
preferred stock, net
of issuance costs... 11,726,274 6,983 -- -- -- -- --
Issuance of Series C
redeemable
convertible
preferred stock, net
of issuance costs... 10,358,561 24,416 -- -- -- -- --
Accretion of
redeemable
convertible
preferred stock..... -- 102 -- -- -- (102) --
Receipts on stock
subscriptions
receivable.......... -- -- -- -- -- -- 12
Deferred stock-based
compensation........ -- -- -- -- -- 3,844 --
Amortization of
deferred stock-based
compensation........ -- -- -- -- -- -- --
Net loss.............. -- -- -- -- -- -- --
---------- ------- --------- ----- ---------- ------- ----
Balance, December 31,
1999................ 22,084,835 $31,501 2,459,595 $ 910 10,880,325 $ 3,482 $ --
========== ======= ========= ===== ========== ======= ====
<CAPTION>
SHAREHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
TOTAL
DEFERRED SHAREHOLDERS'
STOCK-BASED ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
------------- ------------ -------------
<S> <C> <C> <C>
Balance, April 9, 1997
(date of
inception).......... $ -- $ -- $ --
Conversion of
convertible debt to
Series A convertible
preferred stock..... -- -- 960
Issuance of common
stock............... -- -- 850
Issuance of common
stock in
acquisition......... -- -- 115
Issuance of common
stock for stock
subscriptions
receivable.......... -- -- --
Receipts on stock
subscriptions
receivable.......... -- -- 130
Net loss.............. -- (1,396) (1,396)
------- -------- --------
Balance, December 31,
1997................ -- (1,396) 659
Receipts on stock
subscriptions
receivable.......... -- -- 7
Net loss.............. -- (1,831) (1,831)
------- -------- --------
Balance, December 31,
1998................ -- (3,227) (1,165)
Exercise of common
stock options....... -- -- 70
Conversion of
Series A
convertible
preferred stock into
common stock........ -- -- --
Purchase of common
stock............... -- -- (1,494)
Issuance of Series B
redeemable
convertible
preferred stock, net
of issuance costs... -- -- --
Issuance of Series C
redeemable
convertible
preferred stock, net
of issuance costs... -- -- --
Accretion of
redeemable
convertible
preferred stock..... -- -- (102)
Receipts on stock
subscriptions
receivable.......... -- -- 12
Deferred stock-based
compensation........ (3,844) -- --
Amortization of
deferred stock-based
compensation........ 967 -- 967
Net loss.............. -- (9,994) (9,994)
------- -------- --------
Balance, December 31,
1999................ $(2,877) $(13,221) $(11,706)
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CORILLIAN CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 9, 1997 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31,
TO DECEMBER 31, -------------------
1997 1998 1999
------------------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,396) $(1,831) $ (9,994)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 75 188 278
Amortization of deferred stock-based compensation....... -- -- 967
Purchased in-process research and development........... 185 -- --
Gain on sale of assets.................................. (15) (96) (96)
Changes in operating assets and liabilities:
Accounts receivable................................... (25) (367) (2,467)
Other receivables..................................... -- (19) (259)
Revenue in excess of billings......................... (37) 37 (363)
Prepaid expenses, deposits and other assets........... (38) 12 (548)
Accounts payable and accrued liabilities.............. 275 425 3,387
Deferred revenue...................................... 28 1,279 460
------- ------- --------
Net cash used in operating activities............... (948) (372) (8,635)
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment........................ (171) (113) (2,750)
Purchase of investments................................... -- -- (10,357)
Proceeds from the sale of property and equipment.......... 204 -- --
Capitalization of software................................ (142) -- --
------- ------- --------
Net cash used in investing activities............... (109) (113) (13,107)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible debt securities..... 960 -- --
Proceeds from issuance of preferred stock, net of issuance
costs................................................... -- -- 31,399
Proceeds from the issuance of common stock, net of
issuance costs.......................................... 850 -- --
Proceeds from exercise of stock options................... -- -- 70
Repurchase of common stock................................ -- -- (1,494)
Receipts on stock subscriptions receivable................ 130 7 12
Payments on notes payable................................. (115) -- --
Principal payments on capital lease obligations........... -- -- (33)
------- ------- --------
Net cash provided by financing activities........... 1,825 7 29,954
------- ------- --------
Increase (decrease) in cash and cash equivalents.... 768 (478) 8,212
Cash and cash equivalents at beginning of period............ -- 768 290
------- ------- --------
Cash and cash equivalents at end of period.................. $ 768 $ 290 $ 8,502
======= ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ -- $ -- $ 6
Income taxes............................................ -- -- --
Supplemental disclosures of non-cash investing and financing
activities:
Property and equipment acquired through capital leases.... -- -- 276
Issuance of preferred stock upon conversion of convertible
debt securities......................................... 960 -- --
Common stock issued for stock subscriptions receivable.... 149 -- --
Recorded through business combinations:
Assets.................................................. 240 -- --
Liabilities............................................. 125 -- --
Common shares........................................... 115 -- --
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND REPORTING ENTITY
Corillian Corporation was incorporated in April 1997. Corillian provides
solutions to enable banks, brokers, financial portals and other Internet
financial service providers to offer their customers a variety of financial
services over the Internet, including Internet banking, electronic bill
presentment and payment, and consolidated financial account access. Corillian
also provides a variety of services to support customers throughout the process
of implementation, customization and maintaining its Internet finance solutions.
On May 15, 1997, Corillian purchased property and equipment, certain
contract and intellectual property rights and other assets from Checkfree
Corporation (Checkfree) in exchange for a $125,000 note payable and the
simultaneous surrender of Corillian's Chief Executive Officer's Checkfree common
stock to Checkfree and issuance of 3,450,000 shares of Corillian Corporation
common stock valued at $115,000 to the Chief Executive Officer. Under the
purchase method, the purchase price was allocated to the acquired assets
pro-rata, according to the fair value of each asset purchased. Of the purchase
price, $185,000 was allocated to purchased research and development costs and
was immediately expensed in the current period; $30,000 was allocated to
capitalized software and was fully amortized during the period ended
December 31, 1997; and $9,000 was allocated to property and equipment. The
remaining purchase price of $16,000 relates to various deposits acquired from
the seller and was allocated to other assets. In addition, Corillian is
obligated to pay Checkfree a royalty of 7% of gross revenues on a quarterly
basis for five years or up to a maximum of $1,750,000.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
Corillian derives revenues from providing software licensing and
professional services to customers, including implementation, hosting services
for transactions processed using Corillian's hardware, custom software
engineering and development, consulting, and post-contractual customer support.
Revenues derived from implementation include reimbursable expenses and equipment
sales. Corillian recognizes revenue from software licensing agreements in
accordance with the provisions of Statement of Position (SOP) No. 97-2, SOFTWARE
REVENUE RECOGNITION, and SOP No. 98-9, MODIFICATION OF SOP NO. 97-2, SOFTWARE
REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS.
Revenue on software arrangements involving multiple elements, which
generally include software licenses, implementation and custom software
engineering services, post-contractual customer support (PCS), training services
and hosting services, is allocated to the elements using the residual method
under SOP No. 98-9. Corillian has determined that PCS, training and hosting
services can be separated from software licenses, implementation and custom
software engineering services because (a) PCS, training and hosting services are
not essential to the functionality of any other element in the arrangement, and
(b) sufficient vendor-specific objective evidence exists to permit the
allocation of revenue to these service elements. Vendor-specific objective
evidence has been established on PCS and hosting services using the price the
customer is required to pay when they are sold separately (the renewal rate),
and on training based on the price customers are charged when these services are
sold separately. Under the residual method, the fair value of PCS, training, and
hosting services is deferred and subsequently recognized as the services are
performed, and the difference between the total software arrangement fee and the
amount deferred for training, hosting and PCS services is allocated to software
license, implementation and custom software engineering services and recognized
using contract accounting.
F-7
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Corillian's software licenses are functionally dependent on implementation
and certain custom software engineering services; therefore, software licenses
and implementation services, together with certain custom software engineering
services that are essential to the functionality of the software, are recognized
using the percentage of completion method of contract accounting. The percentage
of completion is measured by the percentage of contract hours incurred to date
compared to the estimated total contract hours for each contract. Corillian has
the ability to make reasonable, dependable estimates relating to the extent of
progress towards completion, contract revenues and contract costs. Provisions
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined.
Revenues associated with software developed for others in which Corillian
has an obligation to successfully complete specified activities are deferred
until acceptance by the customer, whereas agreements in which Corillian is
providing services on a best-efforts basis are recognized as services are
performed.
Revenues associated with custom software engineering services that are not
essential to the core functionality of the software are recognized on a
time-and-materials basis as services are performed. Custom software engineering
services in which Corillian retains and reserves title and all ownership rights
to the software products and anticipates generating revenues from future sales
of the resulting product are accounted for following the provisions of Statement
of Financial Accounting Standards No. 68, RESEARCH AND DEVELOPMENT ARRANGEMENTS
(SFAS No. 68).
Revenues for post-contractual customer support are recognized ratably over
the term of the support services period, generally a period of one year.
Services provided to customers under customer support and maintenance agreements
generally include technical support and unspecified product upgrades. Revenues
from hosting services for transactions processed by Corillian are recognized
ratably as services are performed, beginning subsequent to customer acceptance
of the software licenses.
Customers are billed in accordance with contractual specifications.
Corillian records the unrecognized portion of billable fees as deferred revenue.
Revenues recognized in excess of contractual billings are recorded as revenues
in excess of billings.
(B) CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments with
original maturities of ninety days or less, which are carried at market value,
which approximates cost.
(C) INVESTMENTS
Investments consist of commercial paper which have original maturities
between three and six months. These investments are classified as
held-to-maturity and are recorded at market value, which approximates cost.
(D) ACCOUNTS RECEIVABLE
Corillian performs ongoing credit evaluations of its customers' financial
condition. Credit is extended to customers as deemed necessary and generally
does not require collateral. Management believes that the risk of loss is
significantly reduced due to the quality and financial position of its
customers. Management provides an allowance for doubtful accounts based on
current customer information and historical statistics. Management evaluates
customer information and historical
F-8
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statistics in providing for an allowance of doubtful accounts receivable.
Historically, Corillian has incurred no write-offs of accounts receivable. At
December 31, 1998 and 1999, Corillian's allowance for doubtful accounts
receivable was $0.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets, generally
three to five years. Equipment recorded under capital lease agreements are
depreciated over the shorter of the estimated useful life of the equipment or
the lease term. Leasehold improvements are depreciated over the shorter of the
remaining term of the related leases or the estimated economic useful lives of
the improvements.
During 1997, Corillian sold fixed assets in a sale-leaseback transaction,
resulting in gain totaling $192,000. The gain, which was classified as deferred
revenue, was amortized over the two-year lease term. Corillian amortized
$12,000, $96,000 and $84,000 into other income during the period ended
December 31, 1997 and the years ended December 31, 1998 and 1999, respectively.
(F) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Arrangements in
which Corillian's research and development activities are partially funded by
others are accounted for by applying the provisions of SFAS No. 68.
(G) CAPITALIZED SOFTWARE
Corillian accounts for software development costs in accordance with SFAS
No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR
OTHERWISE MARKETED. Software development costs are capitalized beginning when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for general
release to customers. In 1997, costs totaling $172,000 were capitalized under
SFAS No. 86. Amortization of these costs totaled $30,000, $142,000 and $0 during
the period ended December 31, 1997 and the years ended December 31, 1998 and
1999, respectively.
In 1998 and 1999, completion of a working model of Corillian's products and
general release have substantially coincided. As a result, Corillian did not
capitalize any software development costs during the two years ended
December 31, 1999 and charged all such costs to research and development expense
as incurred.
(H) CONCENTRATION OF CREDIT RISK
Results of operations are substantially derived from United States
operations and all assets reside in the United States. Corillian is exposed to
concentration of credit risk principally from accounts receivable. For the year
ended December 31, 1999, two customers individually accounted for greater than
10% of Corillian's revenues: our largest customer accounted for $1,333,000, or
17% of total revenues; our next largest customer accounted for $1,147,000, or
15% of total revenues.
Corillian is subject to concentrations of credit risk from its cash and cash
equivalents, investments and trade receivables. Corillian limits its exposure to
credit risk associated with cash and cash equivalents and investments by placing
its cash and cash equivalents with a major financial institution and by
investing in investment-grade securities. At December 31, 1999, Corillian had
accounts
F-9
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
receivable from three customers representing approximately 70% of trade accounts
receivable. Loss of or non-performance by these significant customers could
adversely affect Corillian's financial position, liquidity or results from
operations.
(I) RISK OF TECHNOLOGICAL CHANGE
A substantial portion of Corillian's revenues are generated from the
development, and rapid release to market of computer software products newly
introduced during the year. In the extremely competitive industry environment in
which Corillian operates, such product generation, development and marketing
processes are uncertain and complex, requiring accurate prediction of market
trends and demand as well as successful management of various risks inherent in
such products. Additionally, Corillian's production strategy relies on certain
employees' ability to deliver implemented products in time to meet critical
development and distribution schedules. In light of these dependencies, it is
reasonably possible that failure to successfully manage a significant product
introduction or failure of certain employees to deliver implemented products as
needed could have a severe impact on Corillian's growth and results of
operations.
(J) STOCK-BASED COMPENSATION
Corillian accounts for stock-based compensation using the Financial
Accounting Standard Board's (FASB) Statement of Financial Accounting Standards
No. 123 (SFAS No. 123), ACCOUNTING FOR STOCK-BASED COMPENSATION. This statement
permits a company to choose either a fair value based method of accounting for
its stock-based compensation arrangements or to comply with the current
Accounting Principles Board Opinion 25 (APB 25) intrinsic value based method
adding pro forma disclosures of net income (loss) computed as if the fair
value-based method had been applied in the financial statements. Corillian
applies SFAS No. 123 by retaining the APB 25 (and interpretations) method of
accounting for stock-based compensation for employees with annual pro forma
disclosures of net income (loss). Corillian accounts for stock and stock options
issued to non-employees in accordance with the provisions of SFAS No. 123 and
Emerging Issues Task Force (EITF) consensus on Issue No. 96-18, ACCOUNTING FOR
EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
CONJUNCTION WITH SELLING, GOODS OR SERVICES. Expense associated with stock-based
compensation is amortized on an accelerated basis over the vesting period of the
individual stock option awards consistent with the method prescribed in FASB
Interpretation No. 28.
(K) NET LOSS PER SHARE
Corillian computes net loss per share in accordance with SFAS No. 128,
EARNINGS PER SHARE, and SEC Staff Accounting Bulletin No. 98 (SAB No. 98). Under
the provisions of SFAS No. 128 and SAB No. 98, basic and diluted net loss per
share is computed by dividing the net loss available to common shareholders for
the period by the weighted-average number of shares of common stock outstanding
during the period. Net loss attributed to common shareholders includes the
accretion of discounts on redeemable convertible preferred stock, which is
amortized over four years.
The following table sets forth for the periods indicated the
weighted-average potential shares of common stock issuable under stock options
using the treasury stock method and convertible preferred
F-10
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
stock on an if-converted basis, which are not included in calculating net loss
per share due to their antidilutive effect:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED DECEMBER 31, PRO FORMA
DECEMBER 31, ------------------------ DECEMBER 31,
1997 1998 1999 1999
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issuable under stock options... 1,943 604,300 1,109,755 1,109,755
Shares of convertible preferred
stock............................... -- 2,594,595 13,338,719 --
----- --------- ---------- ---------
1,943 3,198,895 14,448,474 1,109,755
===== ========= ========== =========
</TABLE>
Pro forma net loss per share is computed using the weighted-average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock into shares of common
stock effective upon the closing of Corillian's initial public offering as if
such conversion occurred at the date of original issuance.
Pursuant to SAB No. 98, common shares issued for nominal consideration in
each of the periods presented, 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 diluted net loss
per share and pro forma basic and diluted net loss per share for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31, PRO FORMA
DECEMBER 31, ------------------- DECEMBER 31,
1997 1998 1999 1999
------------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Numerator:
Net loss............................... $(1,396) $(1,831) $ (9,994) $ (9,994)
Redeemable convertible preferred stock
accretion............................ -- -- (102) (102)
------- ------- -------- --------
Net loss attributed to common
shareholders......................... $(1,396) $(1,831) $(10,096) $(10,096)
======= ======= ======== ========
Denominator:
Weighted-average common shares
outstanding.......................... 5,657 11,141 11,099 11,099
------- ------- --------
Denominator for basic and diluted
calculation.......................... 5,657 11,141 11,099
======= ======= ========
Weighted-average effect of pro forma
conversion of securities:
Series A convertible preferred
stock.............................. 2,568
Series B redeemable convertible
preferred stock.................... 8,803
Series C redeemable convertible
preferred stock.................... 1,968
--------
Denominator for pro forma basic and
diluted calculation.................... 24,438
========
</TABLE>
F-11
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) COMPREHENSIVE INCOME
Corillian has adopted the provisions of SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. Comprehensive income is defined as changes in
shareholders' equity exclusive of transactions with owners, such as capital
contributions and dividends. There are no differences between net loss and
comprehensive loss for the periods presented.
(M) INCOME TAXES
Corillian accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences of events that have been included in the financial statements and
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to be recovered or settled. Valuation
allowances are established to reduce deferred tax assets to the amount expected
to be realized.
(N) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts and notes receivable, revenues in excess of billings,
accounts payable, accrued liabilities and deferred revenue approximate fair
values due to the short-term maturities of those instruments. The carrying
amount of capital leases approximate fair value as the stated interest rates
reflect current market rates. Fair value estimates are made at a specific point
in time, based on relevant market information about the financial instruments
when available. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision.
(O) ADVERTISING
Advertising costs are expensed as incurred. Advertising expense was $10,000,
$104,000 and $110,000 for the period ended December 31, 1997 and years ended
December 31, 1998 and 1999, respectively.
(P) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES, (SFAS No. 133). SFAS
No. 133 is effective for all fiscal quarters beginning with the quarter ending
June 30, 2000. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and for hedging activities. Corillian will adopt SFAS No. 133 in the
quarter ending June 30, 2000. Corillian does not expect the adoption of SFAS No.
133 to have a significant impact on our results of operations, financial
position or cash flows.
(Q) USE OF ESTIMATES
The preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingencies at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) BALANCE SHEET COMPONENTS
(A) PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment and software............................. $ 9 $2,580
Furniture, fixtures and other equipment..................... 217 571
Leasehold improvements...................................... -- 101
---- ------
226 3,252
Less accumulated depreciation and amortization.............. (47) (325)
---- ------
$179 $2,927
==== ======
</TABLE>
Depreciation and amortization expense was $15,000, $46,000 and $278,000 for
the period ended December 31, 1997 and the years ended December 31, 1998 and
1999, respectively.
(B) ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Payroll and related expenses................................ $ 53 $ 706
Royalties................................................... 280 814
Accrued sales taxes......................................... 57 383
Other accrued liabilities................................... 84 194
---- ------
$474 $2,097
==== ======
</TABLE>
(4) INCOME TAXES
Due to Corillian's losses before the provision for income taxes for the
period ended December 31, 1997 and the years ended December 31, 1998 and 1999,
there has been no provision for federal and state taxes. The reconciliation of
the statutory federal income tax rate to the Corillian's effective income tax
rate is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate................................ (34)% (34)% (34)%
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit...... (4) (4) (4)
Change in valuation allowance....................... 40 50 40
Research and experimentation credits................ (2) (12) (2)
--- --- ---
--% --% --%
=== === ===
</TABLE>
F-13
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences and net operating loss
carryforwards which give rise to significant portions of deferred tax assets and
deferred tax liabilities are as follows at December 31:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Research and experimentation credit carryforwards....... $ 156 $ 384
Accrued expenses and allowances......................... 19 217
Deferred compensation................................... -- 371
Net operating loss carryforwards........................ 930 4,307
Capitalized research and development.................... 205 154
Other................................................... 73 14
------- -------
Total gross deferred tax assets....................... 1,383 5,447
Less valuation allowance.................................. (1,374) (5,412)
------- -------
9 35
------- -------
Deferred tax liabilities:
Depreciable assets...................................... 9 35
------- -------
Total gross deferred tax liabilities.................. 9 35
------- -------
Net deferred tax assets............................... $ -- $ --
======= =======
</TABLE>
The net change in the total valuation allowance was an increase of $565,000,
$809,000 and $4,038,000 for the period ended December 31, 1997 and the years
ended December 31, 1998 and 1999, respectively.
At December 31, 1999, Corillian had net operating loss carryforwards of
approximately $11,229,000 to offset against future income for federal and state
tax purposes and research and experimentation credits of $426,000. These
carryforwards expire in 2012 through 2019.
A provision of the Internal Revenue Code requires the utilization of net
operating losses and research and experimentation credits be limited when there
is a change of more than 50% in ownership of Corillian. Such a change occurred
with the sale of Series A convertible preferred stock in December 1997 and sale
of Series B redeemable convertible preferred stock in April 1999. Accordingly,
the utilization of the net operating loss carryforwards generated from periods
prior to April 1999 is limited.
F-14
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) REDEEMABLE CONVERTIBLE PREFERRED STOCK
Corillian has designated shares of authorized preferred stock as redeemable
convertible preferred stock. The title and number of shares issued and
outstanding are as follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
-----------------------
DECEMBER 31,
DESIGNATED -----------------------
SHARES 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Series B redeemable convertible preferred
stock, $0.60 per share liquidation
preference............................. 11,726,274 -- 11,726,274
Series C redeemable convertible preferred
stock, $2.51 per share liquidation
preference............................. 10,358,561 -- 10,358,561
---------- ---------- ----------
22,084,835 -- 22,084,835
========== ========== ==========
</TABLE>
Series B and Series C redeemable convertible preferred stock (Series B and
Series C) is subject to certain mandatory redemption features following the
affirmative vote of at least 75% of the outstanding shares of Series B and
Series C. The Series B and Series C are redeemable no earlier than April 2003
and October 2003, respectively. Corillian shall redeem all of the then
outstanding Series B and Series C by paying cash equal to the greater of the
original issue price per share plus any declared and unpaid dividends or the
fair value of such shares as mutually determined. See note 6 for additional
features of redeemable convertible preferred stock.
(6) SHAREHOLDER'S EQUITY
(A) PREFERRED STOCK
Corillian has designated 2,594,595 shares of preferred stock as Series A
convertible preferred stock (Series A). In addition, the Company has designated
and issued shares of Series B and Series C. The significant terms of each series
of preferred stock are summarized below:
DIVIDENDS. Series B and Series C shareholders are entitled to receive, when
and as declared by the Board of Directors, cash dividends on each outstanding
share of Series B and Series C. The right to receive dividends on preferred
stock is not cumulative and no right to receive dividends shall accrue to
holders of preferred stock in the event the Board of Directors does not declare
dividends. No dividends may be declared or paid on Series A or common stock
until all dividends declared on Series B and Series C have been paid.
LIQUIDATION PREFERENCES. Upon dissolution, liquidation or winding-up of
Corillian, either voluntary or involuntary, the Series B and Series C
shareholders receive preference over Series A preferred and common shareholders.
The liquidation value for each outstanding share is $0.60 for Series B and $2.51
for Series C, as adjusted for all declared and unpaid dividends. If upon
liquidation Corillian's assets are insufficient to pay the Series B and
Series C shareholders the full preference, then Corillian's assets would be
distributed among the Series B and Series C shareholders, ratably in proportion
to the full amounts to which they would otherwise be entitled. After the full
liquidation payment is made to Series B and Series C shareholders, Series A
would receive a liquidation value of $0.37 for each outstanding share, as
adjusted for all declared and unpaid dividends. If upon liquidation Corillian's
assets are insufficient to pay the Series A shareholders the full preference,
then Corillian's assets would
F-15
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) SHAREHOLDER'S EQUITY (CONTINUED)
be distributed among the holders of Series A, ratably in proportion to the full
amounts to which they would otherwise be entitled. After the full liquidation
payment is made to Series A shareholders, Corillian's remaining assets would be
distributed ratably to the holders of common stock.
VOTING. Each preferred stock shareholder has the right to the number of
votes the holder would be entitled to if the shares of preferred stock were
converted to common stock. In addition, each preferred stock shareholder has
special voting rights on certain equity issuances and fundamental transactions,
such as asset sales or mergers. The holder of Series A has the right to
designate one member of the Board of Directors, and the holders of Series B have
the right to designate two members of the Board of Directors.
CONVERSION. Each share of preferred stock is voluntarily convertible into
common stock at any time after the date of issuance at a rate equal to the
original issue price divided by the conversion price at the time in effect,
subject to certain adjustments. Automatic conversion of each share of preferred
stock into common stock at the then effective conversion rate will occur upon
(a) the closing and issuance of shares following the effectiveness of a
registration statement under the Securities Act of 1933 in which the price per
share is at least $5.00 and in which the aggregate price to the public is at
least $20,000,000, or (b) upon the approval of the conversion by holders of a
majority of the issued shares.
PRE-EMPTIVE RIGHTS. Each holder of preferred stock has the pre-emptive
right to purchase a portion of any new issuance of equity securities.
(B) SHAREHOLDERS' AGREEMENTS
Corillian and its shareholders have entered into agreements that include
restrictions on the transfer of Corillian's common stock. Except for expressly
provided exceptions, no shareholder is allowed to transfer ownership of stock
without the shares being first offered for sale to Corillian or its designee.
(7) 1997 STOCK OPTION PLAN
In 1997, Corillian's Board of Directors approved and adopted a Stock Option
Plan (the Plan). As adopted, the maximum aggregate number of shares awardable
under the plan was 3,000,000 shares of common stock for the grant of stock
options to employees, officers, directors, consultants or advisors. Options
granted pursuant to the Plan may be either incentive stock options as defined in
Section 442A of the Internal Revenue Code of 1986, as amended, or non-qualified
stock options, at the discretion of the Board of Directors. In April 1999,
Corillian's Board of Directors approved an increase of 3,365,692 shares
available for grant under the Plan, increasing the total shares available for
grant to 6,365,692. Additionally, the aggregate fair market value of common
stock which incentive stock options are exercisable for the first time by an
optionee during any calendar year may not exceed $100,000. Shares generally vest
in yearly installments over a period of three or four years. Options generally
have a five or ten year term and terminate three months after termination of
service with Corillian.
F-16
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 1997 STOCK OPTION PLAN (CONTINUED)
Stock option activity under the Plan was as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Granted............................................ 775,000 $ 0.10
Exercised.......................................... -- --
Cancelled.......................................... (50,000) (0.10)
---------
Balance December 31, 1997.......................... 725,000 0.10
Granted............................................ 1,195,000 0.30
Exercised.......................................... -- --
Cancelled.......................................... (575,000) (0.26)
---------
Balance December 31, 1998.......................... 1,345,000 0.21
Granted............................................ 4,370,500 0.66
Exercised.......................................... (199,000) (0.35)
Cancelled.......................................... (157,664) (0.26)
---------
Balance December 31, 1999.......................... 5,358,836 0.57
=========
</TABLE>
The following table summarizes information regarding stock options
outstanding and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ------------------------------
WEIGHTED-AVERAGE EXERCISABLE
EXERCISE NUMBER OF REMAINING WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
PRICE SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- ---------- --------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.10 747,167 3.01 $0.10 512,175 $0.10
0.37 1,103,669 3.93 0.37 369,351 0.37
0.40 1,490,000 4.55 0.40 53,750 0.40
0.41 300,000 3.91 0.41 150,000 0.41
1.00 1,259,500 5.06 1.00 255,000 1.00
1.25 458,500 9.78 1.25 -- 1.25
--------- ---------
0.10-1.25 5,358,836 4.74 0.57 1,340,276 0.39
========= =========
</TABLE>
At December 31, 1999, 807,856 shares were available for grant.
Corillian has elected to follow APB No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and interpretations, to account for its employee stock option plan.
Under APB No. 25, no compensation expense is recognized when the exercise price
of Corillian's employee stock options is equal to or greater than the fair value
of the underlying stock on the date of grant. Deferred stock-based compensation
is recorded for those situations where the exercise price of an option was lower
than the deemed fair value for financial reporting purposes of the underlying
common stock. Corillian recorded deferred stock-based compensation of $0, $0 and
$3,694,000 for the period ended December 31, 1997 and for the years ended
December 31, 1998 and 1999, respectively. Amortization of stock-based
F-17
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 1997 STOCK OPTION PLAN (CONTINUED)
compensation was $0, $0 and $952,000 for the period ended December 31, 1997 and
the years ended December 31, 1998 and 1999, respectively.
During 1999, Corillian issued 50,000 stock options to non-employees. The
fair value of these stock options, using the Black-Scholes option pricing model
and applying the assumptions in the table below, totaled $149,000. This amount,
which is included in deferred stock-based compensation, is amortized over the
stock option vesting period. Amortization of stock-based compensation was $0,
$0, and $15,000 for the period ended December 31, 1997 and the years ended
December 31, 1998 and 1999, respectively.
The deferred stock-based compensation is being amortized on an accelerated
basis over the vesting period of the stock option award, generally three or four
years, consistent with the method prescribed in FASB Interpretation No. 28.
The per share weighted-average fair value, as determined by applying the
Black-Scholes option pricing model to stock options granted under the Plan was
$0.07, $0.25 and $1.28 during the period ended December 31, 1997 and the years
ended December 31, 1998 and 1999, respectively, using the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
DECEMBER 31, ----------------------
1997 1998 1999
------------- -------- --------
<S> <C> <C> <C>
Risk free interest rate........................ 5.7% 5.4% 5.6%
Expected volatility............................ 100% 100% 100%
Expected life in years......................... 3.5 3.5 3.5
Dividend yield................................. -- -- --
</TABLE>
Had the stock-based compensation for Corillian's stock option plan been
determined based on the provisions of SFAS No. 123, net loss and basic and
diluted net loss per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
DECEMBER 31, ---------------------
1997 1998 1999
-------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss attributed to common shareholders:
As reported................................ $(1,396) $(1,831) $(10,096)
======= ======= ========
Pro forma.................................. $(1,425) $(1,925) $(10,795)
======= ======= ========
Basic and diluted net loss per share:
As reported................................ $ (0.25) $ (0.16) $ (0.91)
======= ======= ========
Pro forma.................................. $ (0.25) $ (0.17) $ (0.97)
======= ======= ========
</TABLE>
F-18
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) COMMITMENTS AND CONTINGENCIES
(A) ROYALTY
Subject to the purchase agreement relating to the right to license software,
Corillian agreed to pay Checkfree a royalty of 7% of gross revenues on a
quarterly basis for five years or up to a maximum of $1,750,000. Corillian has
the option to pre-pay any unpaid portion of the $1,750,000 at present value at
any time prior to the end of the royalty period. Royalties are charged to cost
of revenues in the accompanying financial statements. Corillian recorded
$28,000, $294,000 and $493,000 in royalty expenses for the period ended
December 31, 1997 and for the years ended December 31, 1998 and 1999,
respectively.
(B) 401(K) PLAN
Corillian maintains a profit-sharing retirement plan for eligible employees
under the provisions of Internal Revenue Code Section 401(k). Participants may
defer up to 15% of their annual compensation on a pre-tax basis, subject to
maximum limits on contributions set forth by the Internal Revenue Service.
Corillian's contributions are equal to 50% of a participant's contribution, up
to a maximum of 6% of the participant's annual compensation.
(C) LEASE OBLIGATIONS
Corillian is obligated under capital lease agreements for computer and other
equipment which expire over the next four years. Gross amounts of property and
equipment and related accumulated depreciation recorded under capital leases are
as follows at December 31:
<TABLE>
<CAPTION>
1998 1999
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Computer and other equipment................................ $ -- $276
Less accumulated depreciation............................... -- (18)
---------- ----
$ -- $258
========== ====
</TABLE>
Corillian also has noncancelable operating leases, primarily for facilities
and computer and other equipment, which expire over the next five years. Rental
expense under operating leases was $114,000, $341,000 and $304,000 for the
period ended December 31, 1997 and the years ended December 31, 1998 and 1999,
respectively.
F-19
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments on operating and capital leases are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31:
2000..................................................... $102 $ 596
2001..................................................... 99 327
2002..................................................... 92 331
2003..................................................... 11 341
2004..................................................... -- 351
---- ------
Total minimum lease payments........................... $304 $1,946
======
Less amounts representing interest......................... (61)
----
Present value of minimum lease payments................ 243
Less current portion....................................... (66)
----
Long-term portion of minimum lease payments............ $177
====
</TABLE>
(9) SEGMENT INFORMATION
(A) GEOGRAPHIC INFORMATION
Corillian derives its revenue from a single operating segment, providing
electronic finance software and applications. Revenue is generated in this
segment through software and service license arrangements.
Results of operations are derived from United States operations and all
assets reside in the United States.
(B) MAJOR CUSTOMERS
Revenue from the Company's major customers are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Customer A...................................... $ -- $ 928 $1,333
Customer B...................................... -- -- 1,147
Customer C...................................... 65 681 --
Customer D...................................... 116 42 37
Customer E...................................... 45 33 96
---- ------ ------
$226 $1,684 $2,613
==== ====== ======
</TABLE>
F-20
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(10) RELATED PARTY TRANSACTIONS
During 1997, Corillian loaned $10,000 to ISC Company, an entity of which Ted
Spooner, CEO of Corillian, was the president. The balance at December 31, 1998,
including interest, was $11,000. In 1999, Corillian forgave the loan principal
and accrued interest in exchange for equipment.
On November 26, 1997 and December 31, 1997, Corillian entered into loan
agreements, pursuant to which Corillian issued convertible promissory notes to
an individual for $600,000 and $360,000, respectively. Both of these notes
included an interest rate component of 6% per annum. The principal and accrued
interest on the $600,000 convertible note became due on December 31, 1997 and
the principal and accrued interest on the $360,000 convertible note became due
on January 10, 1998. The principal of both of these notes was converted into
Series A preferred stock at $0.37 a share on December 31, 1997. The accrued
interest on these notes was forgiven by the noteholder.
During early 1998, Corillian entered into a development contract, totaling
$138,000, with Osprey Partners, LLP, an entity of which Jay N. Whipple III, a
director of Corillian and the sole holder of Series A, is the president and
majority owner. The arrangement was negotiated at arms length in a manner
consistent with arrangements with other customers of Corillian. The contract was
completed and paid in full in 1998.
In November 1999, the holder of Series A converted 135,000 shares into
common stock. In November 1999, Corillian repurchased 595,000 shares of common
stock from certain shareholders for $2.51 per share.
In December 1999, Corillian entered into a software license and services
arrangement totaling $4,500,000 with a holder of Series C. The arrangement was
negotiated at arms-length in a manner consistent with arrangements with other
customers of Corillian.
F-21
<PAGE>
[CORILLIAN 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 the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
SEC registration fee........................................ $*
NASD filing fee............................................. *
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Miscellaneous expenses...................................... *
------
Total..................................................... $*
</TABLE>
- ------------------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As an Oregon corporation, the Registrant is subject to the laws of the State
of Oregon governing private corporations and the exculpation from liability and
indemnification provisions contained therein. Pursuant to Section 60.047(2)(d)
of the Oregon Revised Statutes ("ORS"), the Registrant's Restated Articles of
Incorporation to be in effect upon the closing of the offering (the "Articles")
eliminate the liability of the Registrant's directors to the Registrant or its
shareholders except for any liability related to (i) breach of the duty of
loyalty or (ii) acts or omissions not in good faith or that involve an
intentional transaction from which the director derived an improper personal
benefit.
ORS Section 60.391 allows corporations to indemnify their directors and
officers against liability where the director or officer has acted in good faith
and with a reasonable belief that actions taken were in the best interests of
the corporation or at least not opposed to the corporation's best interests and,
if in a criminal proceeding, the individual had no reasonable cause to believe
the conduct in question was unlawful. Under ORS Sections 60.387 to 60.414,
corporations may not indemnify a director or officer against liability in
connection with a claim by or in the right of the corporation or for any
improper personal benefit in which the director or officer was adjudged liable
to the corporation. ORS Section 60.394 mandates indemnification for all
reasonable expenses incurred by the director or officer in the successful
defense of any claim made or threatened whether or not such claim was by or in
the right of the corporation. Finally, pursuant to the ORS Section 60.401, a
court may order indemnification in view of all the relevant circumstances,
whether or not the director or officer met the good-faith and reasonable belief
standards of conduct set out in ORS Section 60.391.
ORS Section 60.414 also provides that the statutory indemnification
provisions are not deemed exclusive of any other rights to which directors or
officers may be entitled under a corporation's articles of incorporation or
bylaws, any agreement, general or specific action of the board of directors,
vote of shareholders, or otherwise.
The Articles provide that the Registrant is required to indemnify to the
fullest extent not prohibited by law any current or former director who is made,
or threatened to be made, a party to an action or proceeding by reason of the
fact that such person serves or served as a director of the
II-1
<PAGE>
Registrant. The Articles also provide that the Registrant is permitted to
indemnify to the fullest extent not prohibited by law any current or former
officer who is made, or threatened to be made, a party to an action or
proceeding by reason of the fact that such person is or was an officer of the
Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Registrant since April 9,
1997 (the date the Registrant was incorporated), involving sales of the
Registrant's securities that were not registered under the Securities Act. We
relied on exemptions under Rule 701, Section 4(2) and Rule 506 of the Securities
Act for these issuances.
In May 1997, the Registrant issued a total of 7,187,511 shares of common
stock to 15 investors, most of whom were employees or directors of Corillian, at
a price of $0.10 per share, for a total purchase price of $718,751.
In September 1997, the Registrant issued a total of 3,953,814 shares of
common stock to 28 investors, most of whom were employees or directors of
Corillian, at a price of $0.10 per share, for a total purchase price of
$395,381.
In December 1997, the Registrant issued a total of 2,594,595 shares of
Series A preferred stock to one investor at a price of $0.37 per share, for a
total purchase price of $960,000. The Series A preferred stock was issued upon
conversion of promissory notes in the amount of $960,000, which were issued in
November and December 1997.
In April 1999, the Registrant issued a total of 11,276,724 shares of
Series B preferred stock to two investors at a price of $0.60 per share, for a
total purchase price of $6,766,034.
In October 1999, the Registrant issued a total of 10,358,561 shares of
Series C preferred stock to 15 investors at a price of $2.51 per share, for a
total purchase price of $25,999,988.
As of December 31, 1999, a total of 48,332 shares of common stock had been
issued upon exercise of options under the Registrant's 1997 stock option plan.
As set forth in the chart below, since December 1997 the Registrant has
granted to employees, consultants and directors stock options under the
Registrant's 1997 stock option plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE
SUBJECT TO OPTIONS PRICE PER SHARE
------------------ ---------------
<S> <C> <C>
December 1997 to January 1998.................. 1,070,000 $0.10
March 1998 to March 1999....................... 1,554,000 $0.37
August 1998 and February 1999.................. 300,000 $0.41
May 1999 to September 1999..................... 1,683,500 $0.40
September 1999 to November 1999................ 1,269,500 $1.00
November 1999.................................. 463,500 $1.25
January 2000................................... 776,000 $2.51
</TABLE>
II-2
<PAGE>
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Registrant's Restated Articles of Incorporation, as
currently in effect
3.2* Form of Registrant's Restated Articles of Incorporation, to
be in effect upon the closing of the offering
3.3 Registrant's Bylaws, as currently in effect
3.4* Form of Registrant's Bylaws, to be in effect upon the
closing of the offering
4.1 See Articles and of Exhibit 3.2 and Sections 2
and 6 of Exhibit 3.4
4.2 Amended and Restated Investor Rights Agreement, dated
October 20, 1999
4.3* Form of Common Stock Certificate
5.1* Opinion of Perkins Coie LLP as to the legality of the
securities being registered, including consent
10.1* Registrant's 2000 Stock Incentive Compensation Plan
10.2* Registrant's 2000 Employee Stock Purchase Plan
10.3 Registrant's 1997 Stock Option Plan
10.4(1) Voyager License Agreement between Registrant and Wachovia
Operational Services Corporation, dated December 21, 1999
10.5 Lease agreement between Registrant and Murray Oregon
Equities, LLC, as amended as of August 30, 1998
10.6 Sublease agreement between Registrant and First Technology
Credit Union, dated August 15, 1999
10.7 Master Loan and Security Agreement between Registrant and
Transamerica Business Credit Corporation, dated as of
January 28, 2000
10.8(1) Reseller Agreement between Registrant and Parkers' Edge
Ltd., dated as of January 22, 2000
23.1 Consent of KPMG LLP, Independent Accountants
23.2* Consent of Perkins Coie LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* to be filed by amendment
(1) Portions of these Exhibits have been omitted based on a request for
confidential treatment. These portions have been filed separately with the
Commission.
ITEM 17. UNDERTAKINGS
The undersigned Registrant 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 by the Registrant for liabilities arising under
the Securities 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 Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the
II-3
<PAGE>
securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
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 Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, State of
Oregon, on January 27, 2000.
<TABLE>
<S> <C> <C>
CORILLIAN CORPORATION
By: /s/ TED F. SPOONER
-----------------------------------------
Ted F. Spooner
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Ted F. Spooner, Steven
Sipowicz and Kirk H. Wright, and each of them, attorneys-in-fact for the
undersigned, each with the power of substitution, for the undersigned in any and
all capacities to sign any and all amendments to this Registration Statement
(including post-effective amendments and any registration statement relating to
the same offering as 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 exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITIES DATE
--------- ---------- ----
<C> <S> <C>
Chairman of the Board and
/s/ TED F. SPOONER Chief Executive Officer
------------------------------------ PRINCIPAL EXECUTIVE January 27, 2000
Ted F. Spooner OFFICER
/s/ STEVEN SIPOWICZ Chief Financial Officer
------------------------------------ PRINCIPAL FINANCIAL AND January 27, 2000
Steven Sipowicz ACCOUNTING OFFICER
/s/ KIRK H. WRIGHT
------------------------------------ President and Director January 27, 2000
Kirk H. Wright
/s/ ROBERT G. BARRETT
------------------------------------ Director January 27, 2000
Robert G. Barrett
/s/ ROBERT HURET
------------------------------------ Director January 27, 2000
Robert Huret
/s/ EDMUND P. JENSEN
------------------------------------ Director January 27, 2000
Edmund P. Jensen
/s/ RAVI MOHAN
------------------------------------ Director January 27, 2000
Ravi Mohan
/s/ JAY N. WHIPPLE III
------------------------------------ Director January 27, 2000
Jay N. Whipple III
</TABLE>
II-6
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Registrant's Restated Articles of Incorporation, as
currently in effect
3.2* Form of Registrant's Restated Articles of Incorporation, to
be in effect upon the closing of the offering
3.3 Registrant's Bylaws, as currently in effect
3.4* Form of Registrant's Bylaws, to be in effect upon the
closing of the offering
4.1 See Articles and of Exhibit 3.2 and Sections 2
and 6 of Exhibit 3.4
4.2 Amended and Restated Investor Rights Agreement, dated
October 20, 1999
4.3* Form of Common Stock Certificate
5.1* Opinion of Perkins Coie LLP as to the legality of the
securities being registered, including consent
10.1* Registrant's 2000 Stock Incentive Compensation Plan
10.2* Registrant's 2000 Employee Stock Purchase Plan
10.3 Registrant's 1997 Stock Option Plan
10.4(1) Voyager License Agreement between Registrant and Wachovia
Operational Services Corporation, dated December 21, 1999
10.5 Lease agreement between Registrant and Murray Oregon
Equities, LLC, as amended as of August 30, 1998
10.6 Sublease agreement between Registrant and First Technology
Credit Union, dated August 15, 1999
10.7 Master Loan and Security Agreement between Registrant and
Transamerica Business Credit Corporation, dated as of
January 28, 2000
10.8(1) Reseller Agreement between Registrant and Parkers' Edge
Ltd., dated as of January 22, 2000
23.1 Consent of KPMG LLP, Independent Accountants
23.2* Consent of Perkins Coie LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* to be filed by amendment
(1) Portions of these Exhibits have been omitted based on a request for
confidential treatment. These portions have been filed separately with the
Commission.
<PAGE>
____________ SHARES
CORILLIAN CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
________________, 2000
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. INTRODUCTORY. Corillian Corporation, an Oregon corporation
("COMPANY"), proposes to issue and sell shares ("FIRM
SECURITIES") of its common stock ("SECURITIES") and also proposes to issue and
sell to the Underwriters, at the option of the Underwriters, an aggregate of not
more than additional shares ("OPTIONAL SECURITIES") of its
Securities as set forth below. The Firm Securities and the Optional Securities
are herein collectively called the "OFFERED SECURITIES." As part of the offering
contemplated by this Agreement, Credit Suisse First Boston Corporation (the
"DESIGNATED UNDERWRITER") has agreed to reserve out of the Firm Securities
purchased by it under this Agreement, up to shares,
for sale to the Company's directors, officers, employees and other parties
associated with the Company (collectively, "PARTICIPANTS"), as set forth in the
Prospectus (as defined herein) under the heading "Underwriting" (the "DIRECTED
SHARE PROGRAM"). The Firm Securities to be sold by the Designated Underwriter
pursuant to the Directed Share Program (the "DIRECTED SHARES") will be sold by
the Designated Underwriter pursuant to this Agreement at the public offering
price. Any Directed Shares not orally confirmed for purchase by a Participant by
the end of the business day on which this Agreement is executed will be offered
to the public by the Underwriters as set forth in the Prospectus. The Company
hereby agrees with the several Underwriters named in Schedule A hereto
("UNDERWRITERS") as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333- ) relating to the
Offered Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("COMMISSION") and either (i) has been
declared effective under the Securities Act of 1933 ("ACT") and is not
proposed to be amended or (ii) is proposed to be amended by amendment or
post-effective amendment. If such registration statement ("INITIAL
REGISTRATION STATEMENT") has been declared effective, either (i) an
additional registration statement ("ADDITIONAL REGISTRATION STATEMENT")
relating to the Offered Securities may have been filed with the Commission
pursuant
1
<PAGE>
to Rule 462(b) ("RULE 462(b)") under the Act and, if so filed, has
become effective upon filing pursuant to such Rule and the Offered
Securities all have been duly registered under the Act pursuant to the
initial registration statement and, if applicable, the additional
registration statement or (ii) such an additional registration statement is
proposed to be filed with the Commission pursuant to Rule 462(b) and will
become effective upon filing pursuant to such Rule and upon such filing the
Offered Securities will all have been duly registered under the Act
pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or if an additional registration statement
has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("RULE 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (i) if the
Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment thereto
(if any) filed prior to the execution and delivery of this Agreement, was
declared effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (ii) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission. If
an additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "EFFECTIVE TIME" with respect
to such additional registration statement means the date and time as of
which such registration statement is filed and becomes effective pursuant
to Rule 462(b). "EFFECTIVE DATE" with respect to the initial registration
statement or the additional registration statement (if any) means the date
of the Effective Time thereof. The initial registration statement, as
amended at its Effective Time, including all information contained in the
additional registration statement (if any) and deemed to be a part of the
initial registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form on
which it is filed and including all information (if any) deemed to be a
part of the initial registration statement as of its Effective Time
pursuant to Rule 430A(b) ("RULE 430A(b)") under the Act, is hereinafter
referred to as the "INITIAL REGISTRATION STATEMENT". The additional
registration statement, as amended at its Effective Time, including the
contents of the initial registration statement incorporated by reference
therein and including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION
STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION STATEMENT."
The form of prospectus relating to the Offered Securities, as first filed
with the Commission pursuant to and in accordance with Rule 424(b)
("RULE 424(b)") under the Act or (if no such filing is required) as
included in a Registration Statement, is hereinafter referred to as the
"PROSPECTUS". No document has been or will be prepared or distributed in
reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the Effective
Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act and the
2
<PAGE>
rules and regulations of the Commission ("RULES AND REGULATIONS") and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the requirements of the Act
and the Rules and Regulations and did not include, or will not include, any
untrue statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (iii) on the date of this
Agreement, the Initial Registration Statement and, if the Effective Time of
the Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects to
the requirements of the Act and the Rules and Regulations, and neither of
such documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. If the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement: on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act and the Rules and Regulations, neither of such
documents will include any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to th Company by any
Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the state of Oregon, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.
(d) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus; and
each subsidiary of the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires
such qualification; all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly issued and
is fully paid and nonassessable; and the capital stock of each subsidiary
owned by the Company, directly or through subsidiaries, is owned free from
liens, encumbrances and defects.
(e) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement on each Closing Date (as defined below), such Offered Securities
will have been, validly issued, fully paid and nonassessable and will
conform to the description thereof contained in the Prospectus; and the
shareholders of the Company have no preemptive rights with respect to the
Securities.
3
<PAGE>
(f) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection with
this offering.
(g) 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 Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the
Act.
(h) The Offered Securities have been approved for listing on the
Nasdaq Stock Market's National Market subject to notice of issuance.
(i) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and such
as may be required under state securities laws.
(j) The execution, delivery and performance of this Agreement, and
the issuance and sale of the Offered Securities will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over
the Company or any subsidiary of the Company or any of their properties, or
any agreement or instrument to which the Company or any such subsidiary is
a party or by which the Company or any such subsidiary is bound or to which
any of the properties of the Company or any such subsidiary is subject, or
the charter or bylaws of the Company or any such subsidiary, and the
Company has full power and authority to authorize, issue and sell the
Offered Securities as contemplated by this Agreement.
(k) This Agreement has been duly authorized, executed and delivered
by the Company.
(l) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Prospectus, the Company and its subsidiaries
hold any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made
or to be made thereof by them.
(m) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("MATERIAL
ADVERSE EFFECT").
4
<PAGE>
(n) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(o) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(p) Except as disclosed in the Prospectus, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to
such a claim.
(q) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the context of the
sale of the Offered Securities; and no such actions, suits or proceedings
are threatened or, to the Company's knowledge, contemplated.
(r) The financial statements included in each Registration Statement
and the Prospectus present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis;
the schedules included in each Registration Statement present fairly the
information required to be stated therein; and the assumptions used in
preparing the pro forma financial statements included in each Registration
Statement and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts.
(s) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated
by the Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
5
<PAGE>
(t) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(u) Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection with
the Directed Share Program, and that (ii) no authorization, approval,
consent, license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than such as have
been obtained, is necessary under the securities law and regulations of
foreign jurisdictions in which the Directed Shares are offered outside the
United States.
(v) The Company has not offered, or caused the Underwriters to offer,
any offered Securities 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.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $ per share, the
respective numbers of shares of Firm Securities set forth opposite the names of
the Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for the
accounts of the Underwriters, against payment of the purchase price in Federal
(same day) funds by official bank check or checks or wire transfer to an account
at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC") drawn
to the order of the Company at the office of Perkins Coie LLP, at 10:00 A.M.,
New York time, on , or at such other time not later than
seven full business days thereafter as CSFBC and the Company determine, such
time being herein referred to as the "FIRST CLOSING DATE". For purposes of Rule
15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if
later than the otherwise applicable settlement date) shall be the settlement
date for payment of funds and delivery of securities for all the Offered
Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the above office of Perkins Coie LLP at least 24 hours
prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously
6
<PAGE>
have been, or simultaneously are, sold and delivered. The right to purchase
the Optional Securities or any portion thereof may be exercised from time to
time and to the extent not previously exercised may be surrendered and
terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of the Company, at the office of Perkins Coie LLP. The certificates
for the Optional Securities being purchased on each Optional Closing Date will
be in definitive form, in such denominations and registered in such names as
CSFBC requests upon reasonable notice prior to such Optional Closing Date and
will be made available for checking and packaging at the above office of Perkins
Coie LLP at a reasonable time in advance of such Optional Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the fifteenth business day after the Effective Date of the Initial
Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule
424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, on or prior to the time the Prospectus is printed and
distributed to any Underwriter, or will make such filing at such later date
as shall have been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend
or supplement the initial or any additional registration statement as filed
or the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of a
Registration Statement and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
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(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will promptly
notify CSFBC of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "AVAILABILITY DATE" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"AVAILABILITY DATE" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement (five of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such documents, in each
case in such quantities as CSFBC requests. The Prospectus shall be so
furnished on or prior to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other documents
shall be so furnished as soon as available. The Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to shareholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of 1934 or mailed to
shareholders, and (ii) from time to time, such other information concerning
the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, for the
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filing fee incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the
National Association of Securities Dealers, Inc. of the Offered
Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the
Offered Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any amendments and
supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act relating
to, any additional shares of its Securities or securities convertible into
or exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFBC except
issuances of Securities pursuant to the conversion or exchange of
convertible or exchangeable securities or the exercise of warrants or
options, in each case outstanding on the date hereof, grants of employee
stock options pursuant to the terms of a plan in effect on the date hereof,
issuances of Securities pursuant to the exercise of such options or the
exercise of any other employee stock options outstanding on the date
hereof.
(j) 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 for a
period of three months following the date of the effectiveness of the
Registration Statement. The Designated Underwriter will notify the Company
as to which Participants will need to be so restricted. The Company will
direct the transfer agent to place stop transfer restrictions upon such
securities for such period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Shares Program
and stamp duties, similar taxes or duties or other taxes, if any, incurred
by the underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with the Underwriters that the
Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement
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<PAGE>
to be filed shortly prior to such Effective Time), of KPMG LLP confirming
that they are independent public accountants within the meaning of the
Act and the applicable published Rules and Regulations thereunder and
stating to the effect that:
(i) in their opinion the financial statements and schedules and
summary of earnings examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards
No. 71, Interim Financial Information, on the unaudited financial
statements included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii) above, a
reading of the latest available interim financial statements of the
Company, inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements and summary of
earnings included in the Registration Statements do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations or any material modifications should be made to such
unaudited financial statements and summary of earnings for them
to be in conformity with generally accepted accounting
principles;
(B) the unaudited consolidated net sales, net operating
income, net income and net income per share amounts for the
nine-month periods ended September 30, 1999, 1998 and 1997
included in the Prospectus do not agree with the amounts set
forth in the unaudited consolidated financial statements for
those same periods or were not determined on a basis
substantially consistent with that of the corresponding amounts
in the audited statements of income;
(C) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of such letter, there
was any change in the capital stock or any increase in short-term
indebtedness or long-term debt of the Company and its
consolidated subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included in the
Prospectus; or
(D) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date
of the latest available income statement read by such accountants
there were any decreases, as compared with the corresponding
period of the previous year and with the period of corresponding
length ended the date of the latest income statement included in
the Prospectus, in consolidated net sales, or net operating
income, or in the total or per share amounts of consolidated
income before extraordinary items or net income,
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except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Registration Statements (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "REGISTRATION STATEMENTS" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective
amendment to be filed shortly prior to its Effective Time, (ii) if the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement but the Effective Time of the
Additional Registration is subsequent to such execution and delivery,
"REGISTRATION STATEMENTS" shall mean the Initial Registration Statement and
the additional registration statement as proposed to be filed or as
proposed to be amended by the post-effective amendment to be filed shortly
prior to its Effective Time, and (iii) "PROSPECTUS" shall mean the
prospectus included in the Registration Statements.
The Company shall have received from KPMG LLP (and furnished to the
Representatives) an examination report with respect to Management's
Discussion and Analysis of Financial Condition and Results of Operations of
the Company for the three fiscal years ending December 31, 1999, in
accordance with Statement on Standards for Attestation Engagement No. 8
issued by the Auditing Standards Board of the American Institute of
Certified Public Accountants, and such examination report shall be
included in the Registration Statement.
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time the Prospectus
is printed and distributed to any Underwriter, or shall have occurred at
such later date as shall have been consented to by CSFBC. If the Effective
Time of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with the
Commission in accordance with the Rules and Regulations and Section 5(a) of
this
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Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall be contemplated by
the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of a majority
in interest of the Underwriters including the Representatives, is material
and adverse and makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities; (ii) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange or any
setting of minimum prices for trading on such exchange, or any suspension
of trading of any securities of the Company on any exchange or in the
over-the-counter market; (iii) any banking moratorium declared by U.S.
Federal or New York or authorities; or (iv) any outbreak or escalation
of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority in
interest of the Underwriters including the Representatives, the effect of
any such outbreak, escalation, declaration, calamity or emergency makes
it impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Perkins Coie LLP, counsel for the Company, to the effect
that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the state of Oregon,
with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) The Offered Securities delivered on such Closing Date and
all other outstanding shares of the Common Stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus; and the shareholders of the Company have no preemptive
rights with respect to the Securities;
(iii) There are no contracts, agreements or understandings known
to such counsel between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant
to any other registration statement filed by the Company under the
Act;
(iv) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940.
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<PAGE>
(v) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws;
(vi) The execution, delivery and performance of this Agreement
and the issuance and sale of the Offered Securities will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any
such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject, or the charter or bylaws of the
Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement;
(vii) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable)
specified in such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in
such opinion on the date specified therein or was included in the
Initial Registration Statement or the Additional Registration
Statement (as the case may be), and, to the best of the knowledge of
such counsel, no stop order suspending the effectiveness of a
Registration Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and each Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all
material respects with the requirements of the Act and the Rules and
Regulations; such counsel have no reason to believe that any part of a
Registration Statement or any amendment thereto, as of its effective
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto, as of its issue date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statements and
Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know of any
legal or governmental proceedings required to be describedin a
Registration Statement or the Prospectus which are not described as
required or of any contracts or documents of a character required to
be described in a Registration Statement or the Prospectus or to be
filed as exhibits to a Registration Statement which are not described
and filed as required; it being understood that such counsel need
express no opinion as to the financial statements or other financial
data contained in the Registration Statements or the Prospectus; and
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(viii) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The Representatives shall have received from Stoel Rives LLP,
counsel for the Underwriters, such opinion or opinions, dated such Closing
Date, with respect to the incorporation of the Company, the validity of the
Offered Securities delivered on such Closing Date, the Registration
Statements, the Prospectus and other related matters as the Representatives
may require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(f) The Representatives shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date; no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated by
the Commission; the Additional Registration Statement (if any) satisfying
the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed
pursuant to Rule 462(b), including payment of the applicable filing fee in
accordance with Rule 111(a) or (b) under the Act, prior to the time the
Prospectus was printed and distributed to any Underwriter; and, subsequent
to the dates of the most recent financial statements in the Prospectus,
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(g) The Representatives shall have received a letter, dated such
Closing Date, of KPMG LLP which meets the requirements of subsection (a)
of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing
Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or
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omission or alleged omission from any of such documents in reliance upon and
in conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in subsection (b)
below.
The Company agrees to indemnify and hold harmless the Designated
Underwriter and each person, if any, who controls the Designated Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act (the "DESIGNATED 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 any untrue statement or
alleged untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program 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; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase; or (iii) related to, arising out of, or
in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any who
controls the Company within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the
paragraph under the caption "Underwriting" and the information contained in the
and paragraphs under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by
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such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding anything contained herein to
the contrary, if indemnity may be sought pursuant to the last paragraph in
Section 7 (a) hereof in respect of such action 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 the Designated Underwriter for the
defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control the Designated
Underwriter within the meaning of either Section 15 of the Act of Section 20 of
the Exchange Act. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action 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 (i) includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (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 from the offering of the Securities
or (ii) if the allocation provided by clause (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 (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities 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 shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending anyaction or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each
16
<PAGE>
officer of the Company who has signed a Registration Statement and to each
person, if any, who controls the Company within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 3855 S.W. 153rd Avenue,
Beaverton, Oregon 97004, Attention: ; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
17
<PAGE>
11. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
12. REPRESENTATION OF UNDERWRITERS. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
CORILLIAN CORPORATION
By..................................................
[Name, title]
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
Acting on behalf of themselves and as the
Representatives of the several Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By.......................................................
[Name, title]
18
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER FIRM SECURITIES
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Hambrecht & Quist LLC
Friedman, Billings, Ramsey & Co., Inc.
-------------
Total ............................... -------------
-------------
</TABLE>
19
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
CORILLIAN CORPORATION
These Restated Articles of Incorporation of CORILLIAN CORPORATION
supersede the heretofore existing Articles of Incorporation of Corillian
Corporation and any and all amendments thereto and restatements thereof.
I.
The name of the Corporation is CORILLIAN CORPORATION (the "CORPORATION"
or the "COMPANY").
II.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is one hundred twenty
million (120,000,000) shares, eighty million (80,000,000) shares of which shall
be Common Stock (the "COMMON STOCK") and forty million (40,000,000) shares of
which shall be Preferred Stock (the "PREFERRED STOCK").
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Restated Articles of Incorporation, to fix or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
of any wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series prior or subsequent to
the issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
C. Two million five hundred ninety-four thousand five hundred ninety-five
(2,594,595) of the authorized shares of Preferred Stock are hereby designated
"Series A Preferred Stock" (the "SERIES A PREFERRED").
D. Eleven million seven hundred twenty-six thousand two hundred seventy-
four (11,726,274) of the authorized shares of Preferred Stock are hereby
designated "Series B Preferred Stock" (the "SERIES B PREFERRED").
E. Ten million three hundred fifty-eight thousand five hundred sixty-six
(10,358,566) of the authorized shares of Preferred Stock are hereby designated
"Series C
1.
<PAGE>
Preferred Stock" (the "SERIES C PREFERRED"). The Series A Preferred, the
Series B Preferred and the Series C Preferred are sometimes collectively
referred to herein as the "SERIES PREFERRED".
F. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. DIVIDEND RIGHTS.
a. Holders of Series B Preferred and Series C Preferred on a pari
passu basis, in preference to the holders of any other stock of the Company
("JUNIOR STOCK"), shall be entitled to receive, when and as declared by the
Board of Directors, but only out of funds that are legally available therefor,
cash dividends on each outstanding share of Series B Preferred and Series C
Preferred. Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be non-cumulative.
b. So long as any shares of Series B Preferred or Series C
Preferred shall be outstanding, no dividend, whether in cash or property,
shall be paid or declared, nor shall any other distribution be made, on any
Junior Stock, nor shall any shares of any Junior Stock of the Company be
purchased, redeemed, or otherwise acquired for value by the Company (except
for acquisitions of Common Stock by the Company pursuant to agreements which
permit the Company to repurchase such shares upon termination of services to
the Company or in exercise of the Company's right of first refusal upon a
proposed transfer) until all dividends declared (as set forth in Section 1(a)
above) on the Series B Preferred and Series C Preferred shall have been paid.
In the event dividends are paid on any share of Common Stock, an identical
dividend shall be paid with respect to all outstanding shares of Series
Preferred in an amount equal per share (on an as-if-converted to Common Stock
basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock
in exchange for shares of any other Junior Stock, or (iii) any repurchase of
any outstanding securities of the Company that is unanimously approved by the
Company's Board of Directors.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Company and not as a separate class, at any annual or
special meeting of shareholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES B PREFERRED AND SERIES C PREFERRED. For
so long as at least five million one hundred seventy-nine thousand two hundred
eighty-three (5,179,283) shares of Series C Preferred (subject to adjustment for
any stock split, reverse stock
2.
<PAGE>
split or other similar event affecting the Series C Preferred) or three
million nine hundred eight thousand seven hundred fifty-nine (3,908,759)
shares of Series B Preferred (subject to adjustment for any stock split,
reverse stock split or other similar event affecting the Series C Preferred)
remain outstanding, in addition to any other vote or consent required herein
or by law, the vote or written consent of the holders of at least
three-fourths of the outstanding Series B Preferred and Series C Preferred,
voting together as a single voting group, shall be necessary for effecting or
validating the following actions:
(i) Any increase in the authorized number of shares of
Common Stock reserved for issuance pursuant to stock purchase or stock option
plans to employees, officers or directors of, or consultants to, the Company;
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any
other securities convertible into equity securities of the Company ranking on
a parity with or senior to the Series B Preferred or Series C Preferred in
rights of redemption, liquidation preference, voting or dividends or any
increase in the authorized or designated number of any such new class or
series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company
to repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(iv) Any agreement by the Company or its shareholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(d));
(v) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock; or
(vi) Any voluntary dissolution or liquidation of the
Company.
c. SEPARATE VOTE OF SERIES B PREFERRED. In addition to any other
vote or consent required herein or by law, the vote or written consent of the
holders of at least a majority of the outstanding Series B Preferred, voting as
a separate voting group, shall be necessary for effecting or validating any
amendment, alteration, or repeal of any provision of the Articles of
Incorporation or the Bylaws of the Company that changes the voting powers,
preferences, or other special rights or privileges, or restrictions of the
Series B Preferred so as to affect them adversely.
d. SEPARATE VOTE OF SERIES C PREFERRED. In addition to any other
vote or consent required herein or by law, the vote or written consent of the
holders of at least three-fourths of the outstanding Series C Preferred, voting
as a separate voting group, shall be necessary for effecting or validating any
amendment, alteration, or repeal of any provision of the Articles of
Incorporation or the Bylaws of the Company that changes the voting powers,
3.
<PAGE>
preferences, or other special rights or privileges, or restrictions of the
Series C Preferred so as to affect them adversely.
e. SEPARATE VOTE OF SERIES A PREFERRED. For so long as shares of
Series A Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least a majority of the outstanding Series A Preferred shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Articles of Incorporation or the Bylaws of the Company that changes the
voting powers, preferences, or other special rights or privileges, or
restrictions of the Series A Preferred so as to affect them adversely;
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any
other securities convertible into equity securities of the Company ranking
senior to the Series A Preferred in rights of redemption, liquidation
preference, voting or dividends or any increase in the authorized or
designated number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company
to repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer); or
(iv) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock.
f. ELECTION OF BOARD OF DIRECTORS. For so long as the
authorized size of the Company's Board of Directors is five (5) or more, (i)
the holders of Series A Preferred, voting as a separate class, shall be
entitled to elect one (1) member of the Company's Board of Directors at each
meeting or pursuant to each consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill
any vacancy caused by the resignation, death or removal of such director;
(ii) the holders of Series B Preferred, voting as a separate class, shall be
entitled to elect two (2) members of the Company's Board of Directors at each
meeting or pursuant to each consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill
any vacancy caused by the resignation, death or removal of such director;
(iii) the holders of Common Stock, voting as a separate class, shall be
entitled to elect two (2) members of the Board of Directors at each meeting
or pursuant to each consent of the Company's shareholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors; and (iv) the
holders of Common Stock and Series Preferred, voting together as a single
class on an as-if-converted basis, shall be entitled to elect all remaining
members of the Board of Directors at each meeting or pursuant to each consent
of the Company's shareholders for the election of directors, and to remove
from office such directors and to fill any vacancy caused by the resignation,
death or removal of such directors.
4.
<PAGE>
g. SERIES B PREFERRED AND SERIES C PREFERRED SPECIAL VOTING
RIGHTS. In the event that the Company shall be in arrears in the redemption of
Series B Preferred and Series C Preferred pursuant to Section 5 for more than
ninety (90) days, then, upon notice to the Company given by the holders of not
less than fifty percent (50%) of the Series B Preferred and Series C Preferred
then outstanding, the holders of the Series B Preferred and Series C Preferred
shall as a voting group become entitled to Series B and Series C Special Voting
Rights (as defined below). The Series B and Series C Special Voting Rights shall
continue until all redemptions in arrears shall have been paid, whereupon all
Series B and Series C Special Voting Rights shall cease, subject to being again
revived from time to time upon the recurrence of the conditions above described.
Failure by the holders of the Series B Preferred and Series C Preferred to
exercise their Series B and Series C Special Voting Rights promptly upon the
occurrence of the conditions described above shall not be deemed to be a waiver
of such rights, such rights being exercisable at any time that such conditions
shall have occurred or be continuing.
For purposes of this Section 2(g), the term "SERIES B AND SERIES C
SPECIAL VOTING RIGHTS" shall mean the right to elect a majority of the Board of
Directors upon the occurrence and during the continuance of specified defaults
in the redemption of shares as provided in the foregoing paragraph.
Immediately upon the accrual of the Series B and Series C Special
Voting Rights, the number of directors of the Company shall, IPSO FACTO, be
increased by that number of directors required to permit the holders of Series B
Preferred and Series C Preferred to elect a majority of the Board of Directors
and the directors of the Company shall thereupon be divided into two classes.
One of such classes shall consist of a majority of the Board of Directors to be
elected by the Series B Preferred and Series C Preferred, which directors shall
be known as the Series B and Series C Preferred Directors and the other class
shall consist of the remaining directors. The Series B and Series C Preferred
Directors shall be elected only by vote of the holders of Series B Preferred and
Series C Preferred, voting as a voting group. Whenever the number of directors
of the Company shall have been so increased, the number as so increased may
thereafter be further increased or decreased in such manner as may be permitted
by the Bylaws and without the vote of the holders of the Series B Preferred or
Series C Preferred; PROVIDED that no such action shall impair the right of the
holders of the Series B Preferred and Series C Preferred to elect a majority of
the Board of Directors. The holders of the Series B Preferred and Series C
Preferred may at their option at any time exercise the Series B and Series C
Special Voting Rights by written consent without a meeting.
The Series B and Series C Preferred Directors shall serve for a
term of one (1) year and until their successors are elected and qualified, or
until the earlier termination of the Series B and Series C Special Voting
Rights of the holders of the Series B Preferred and Series C Preferred. Upon
the election of the Series B and Series C Preferred Directors, then so long as
the holders of the Series B Preferred and Series C Preferred are entitled to
the Series B and Series C Special Voting Rights, the presence of the Series B
and Series C Preferred Directors shall be required for there to be a QUORUM at
all meetings of the Board of Directors of the Company and the affirmative vote
of a majority of the Series B and Series C Preferred Directors shall be
5.
<PAGE>
required for any action to be taken by the Board of Directors of the Company.
So long as the holders of the Series B Preferred and Series C Preferred are
entitled to the Series B and Series C Special Voting Rights, any vacancy in the
position of Series B and Series C Preferred Directors may be filled only by the
holders of the Series B Preferred and Series C Preferred. The Series B and
Series C Preferred Directors may, during such director's term of office, be
removed at any time, with or without cause, by and only by the affirmative
votes, at a special meeting of holders of the Series B Preferred and Series C
Preferred called for such purpose, or the written consent, of the holders of
record of a majority of the outstanding shares of the Series B Preferred and
Series C Preferred. Any vacancy created by such removal may also be filled at
such meeting or by such consent. Upon the termination of the Series B and
Series C Special Voting Rights of the holders of the Series B Preferred and
Series C Preferred, the term of office of the Series B and Series C Preferred
Directors shall forthwith terminate and the number of directors of the Company
shall thereupon be appropriately decreased.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series B
Preferred and Series C Preferred shall be entitled to be paid out of the assets
of the Company on a pari passu basis an amount per share of Series B Preferred
or Series C Preferred, as the case may be, equal to the Original Issue Price (as
defined below) of such Series plus all declared and unpaid dividends on shares
of such Series Preferred (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
share of Series B Preferred or Series C Preferred held by them. The Original
Issue Price of the Series B Preferred is $0.59695. The Original Issue Price of
the Series C Preferred is $2.51. If, upon any such liquidation, distribution, or
winding up, the assets of the Company shall be insufficient to make payment in
full to all holders of Series B Preferred and Series C Preferred of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of Series B Preferred and Series C Preferred at
the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
b. After the payment of the full liquidation preference of the
Series B Preferred and Series C Preferred as set forth in Section 3(a) above,
before any distribution or payment shall be made to the holders of any Common
Stock, the holders of Series A Preferred shall be entitled to be paid out of the
remaining assets of the Company an amount per share of Series A Preferred equal
to the Original Issue Price of the Series A Preferred (as defined below) plus
all declared and unpaid dividends on such shares of Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series A Preferred held
by them. The Original Issue Price of the Series A Preferred is $0.37. If, upon
any such liquidation, distribution, or winding up, the assets of the Company
shall be insufficient to make payment in full to all holders of Series A
Preferred of the liquidation preference set forth in this Section 3(b), then
such assets shall be distributed among the holders of Series A Preferred at the
time outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
6.
<PAGE>
c. After the payment of the full liquidation preferences of the
Series Preferred as set forth in Sections 3(a) and 3(b) above, the remaining
assets of the Company legally available for distribution, if any, shall be
distributed ratably to the holders of the Common Stock.
d. The following events shall be considered a liquidation under
this Section 3:
(i) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the shareholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than fifty percent (50%)
of the Company's voting power immediately after such consolidation, merger or
reorganization, or any transaction or series of related transactions to which
the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred, excluding any consolidation or merger
effected exclusively to change the domicile of the Company (an "ACQUISITION");
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "ASSET TRANSFER");
(iii) in any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair
market value as determined in good faith by the Board of Directors. Any
securities shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Board of Directors and the holders of a least a majority of the voting power of
all then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A)(1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by the Board of Directors and the
7.
<PAGE>
holders of at least a majority of the voting power of all then outstanding
shares of such Preferred Stock.
e. The Board of Directors may disregard the liquidation
preferences of the Series Preferred in making the determination as to whether a
repurchase of shares of the Company's Common Stock would be prohibited by Oregon
law, provided that the aggregate number of shares of Common Stock repurchased
does not exceed 597,610 shares (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares).
4. CONVERSION RIGHTS. The holders of the Series Preferred shall have the
following rights with respect to the conversion of the Series Preferred into
shares of Common Stock (the "CONVERSION RIGHTS"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the applicable "Series Preferred Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series
Preferred being converted.
b. SERIES PREFERRED CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A Preferred (the "SERIES A
PREFERRED CONVERSION RATE") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Preferred
Conversion Price," calculated as provided in Section 4(c). The conversion
rate in effect at any time for conversion of the Series B Preferred (the
"SERIES B PREFERRED CONVERSION RATE") shall be the quotient obtained by
dividing the Original Issue Price of the Series B Preferred by the "Series B
Preferred Conversion Price," calculated as provided in Section 4(c). The
conversion rate in effect at any time for conversion of the Series C
Preferred (the "SERIES C PREFERRED CONVERSION RATE") shall be the quotient
obtained by dividing the Original Issue Price of the Series C Preferred by
the "Series C Preferred Conversion Price," calculated as provided in Section
4(c). The Series A Preferred Conversion Rate, the Series B Conversion Rate
and the Series C Conversion Rate are collectively referred to herein as the
"SERIES PREFERRED CONVERSION RATE".
c. SERIES PREFERRED CONVERSION PRICE. The conversion price for the
Series A Preferred shall initially be the Original Issue Price of the Series A
Preferred (the "SERIES A PREFERRED CONVERSION PRICE"). Such initial Series A
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series A Preferred Conversion Price
herein shall mean the Series A Preferred Conversion Price as so adjusted. The
conversion price for the Series B Preferred shall initially be the Original
Issue Price of the Series B Preferred (the "SERIES B PREFERRED CONVERSION
PRICE"). Such initial Series B Preferred Conversion Price shall be adjusted from
time to time in accordance with this Section 4. All references to the Series B
Preferred Conversion Price herein shall mean the Series B
8.
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Preferred Conversion Price as so adjusted. The conversion price for the
Series C Preferred shall initially be the Original Issue Price of the Series
C Preferred (the "SERIES C PREFERRED CONVERSION PRICE"). Such initial Series
C Preferred Conversion Price shall be adjusted from time to time in
accordance with this Section 4. All references to the Series C Preferred
Conversion Price herein shall mean the Series C Preferred Conversion Price as
so adjusted. The Series A Preferred Conversion Price, the Series B Conversion
Price and the Series C Conversion Price are collectively referred to herein
as the "SERIES PREFERRED CONVERSION PRICE".
d. MECHANICS OF CONVERSION. Each holder of Series Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted;
and (ii) in cash (at the Common Stock's fair market value determined by the
Board of Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series Preferred. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series C Preferred is issued (the "ORIGINAL ISSUE DATE") effect a subdivision
of the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series Preferred Conversion Prices in effect immediately
before that subdivision shall be each proportionately decreased. Conversely,
if the Company shall at any time or from time to time after the Original
Issue Date combine the outstanding shares of Common Stock into a smaller
number of shares without a corresponding combination of the Preferred Stock,
the Series Preferred Conversion Prices in effect immediately before the
combination shall each be proportionately increased. Any adjustment under
this Section 4(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series Preferred Conversion
Prices that are then in effect shall be decreased as of the time of such
issuance or, in the event such record date is fixed, as of the close of business
on such record date,
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by multiplying the applicable Series Preferred Conversion Price then in
effect by a fraction (i) the numerator of which is the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; PROVIDED, HOWEVER, that
if such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the applicable
Series Preferred Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the applicable Series
Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to
reflect the actual payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series Preferred is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(d) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If
at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(d) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series Preferred shall
thereafter be entitled to receive upon conversion of the Series Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the applicable Series Preferred
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series Preferred) shall be applicable after that event and be
as nearly equivalent as practicable.
i. SALE OF SHARES BELOW SERIES PREFERRED CONVERSION PRICE.
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(i) If at any time or from time to time after the
Original Issue Date, the Company issues or sells, or is deemed by the express
provisions of this subsection (i) to have issued or sold, Additional Shares of
Common Stock (as defined in subsection i(iv) below)), other than as a dividend
or other distribution on any class of stock as provided in Section 4(f) above,
and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in
subsection i(iv) below) less than the then effective applicable Series
Preferred Conversion Price for any Series, then and in each such case the then
existing applicable Series Preferred Conversion Price for such Series shall be
reduced, as of the opening of business on the date of such issue or sale, to a
price determined by multiplying the applicable Series Preferred Conversion
Price by a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
aggregate consideration received (as defined in subsection i(ii)) by the
Company for the total number of Additional Shares of Common Stock so issued
would purchase at such applicable Series Preferred Conversion Price; and (ii)
the denominator of which shall be the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale plus the
total number of Additional Shares of Common Stock so issued. For the purposes
of the preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date shall be the sum of (A) the number of shares of
Common Stock actually outstanding; and (B) the number of shares of Common Stock
into which the then outstanding shares of Series Preferred could be converted
if fully converted on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required
under this Section 4(i), the consideration received by the Company for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company; (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors; and (C) if Additional
Shares of Common Stock, Convertible Securities (as defined in subsection i(iii)
below) or rights or options to purchase either Additional Shares of Common
Stock or Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable
to such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required under
this Section 4(i), if the Company issues or sells any (i) stock or other
securities convertible into or exercisable for, Additional Shares of Common
Stock (such convertible or exercisable stock or securities being herein
referred to as "CONVERTIBLE SECURITIES") or (ii) rights or options for the
purchase of Additional Shares of Common Stock or Convertible Securities and if
the Effective Price of such Additional Shares of Common Stock is less than the
applicable Series Preferred Conversion Price, in each case the Company shall be
deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional
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Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any,
payable to the Company upon the exercise of such rights or options, plus, in
the case of Convertible Securities, the minimum amounts of consideration, if
any, payable to the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; PROVIDED that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Company shall be deemed to have
received the minimum amounts of consideration without reference to such
clauses; PROVIDED, FURTHER, that if the minimum amount of consideration payable
to the Company upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to
which such minimum amount of consideration is reduced; PROVIDED, FURTHER, that
if the minimum amount of consideration payable to the Company upon the exercise
or conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the applicable Series Preferred Conversion Price, as adjusted
upon the issuance of such rights, options or Convertible Securities, shall be
made as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the applicable Series Preferred Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the applicable Series Preferred Conversion Price which
would have been in effect had an adjustment been made on the basis that the
only Additional Shares of Common Stock so issued were the Additional Shares of
Common Stock, if any, actually issued or sold on the exercise of such rights or
options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities; PROVIDED that
such readjustment shall not apply to prior conversions of Series Preferred.
(iv) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i), other than (A) shares of Common Stock issued upon conversion
of the Series Preferred; (B) up to six million three hundred sixty-five
thousand six hundred ninety-two (6,365,692) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights and the Common Stock
issued pursuant to such options, warrants or other rights (as adjusted for any
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stock dividends, combinations, splits, recapitalizations and the like) to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board; (C) shares of Common Stock or
Convertible Securities (together with the shares of Common Stock issued or
issuable upon the conversion or exercise of such securities) issued pursuant to
any equipment leasing arrangement, or debt financing from a bank or similar
financial institution that are approved by the Company's Board of Directors;
and (D) shares of Common Stock or Convertible Securities (together with the
shares of Common Stock issued or issuable upon the conversion or exercise of
such securities) issued in connection with bona fide acquisitions that are
approved by the Board of Directors or strategic transactions involving the
Company and other entities (including joint ventures, manufacturing, marketing
or distribution arrangements and technology transfer and development
arrangements) that are approved by the Company's Board of Directors, including
the representatives designated by the holders of Series Preferred. References
to Common Stock in the subsections of this clause (iv) above shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i). The "EFFECTIVE PRICE" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(i), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this
Section 4(i), for such Additional Shares of Common Stock.
j. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price, Series B Preferred
Conversion Price or Series C Preferred Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series A Preferred, Series B Preferred or Series C Preferred, respectively, if
the Series Preferred is then convertible pursuant to this Section 4, the
Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series Preferred at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold; (ii) the Series A Preferred Conversion Price, Series B Preferred
Conversion Price or Series C Preferred Conversion Price at the time in effect;
(iii) the number of Additional Shares of Common Stock; and (iv) the type and
amount, if any, of other property which at the time would be received upon
conversion of the Series A Preferred, Series B Preferred or Series C Preferred.
k. NOTICES OF RECORD DATE. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(d) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(d)),
13.
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or any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Series Preferred at least ten
(10) days prior to the record date specified therein (or such shorter period
approved by a majority of the outstanding Series Preferred) a notice specifying
(A) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution;
(B) the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up is expected to become effective; and (C) the date, if any, that is
to be fixed as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up.
l. AUTOMATIC CONVERSION.
(i) Each share of Series Preferred shall automatically
be converted into shares of Common Stock, based on the then-effective
applicable Series Preferred Conversion Price, immediately upon (A) the closing
of a firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company in which (i) the per share
price is at least $5.00 (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like); and (ii) the net cash proceeds to the
Company (after underwriting discounts, commissions and fees) are at least
twenty million dollars ($20,000,000), or (B) the affirmative vote of the
holders of a majority of the Series Preferred. Upon such automatic conversion,
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(d).
(ii) Upon the occurrence of the event specified in
Section 4(l)(i) above, the outstanding shares of Series 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 Company or its transfer agent; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series Preferred are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series Preferred, the holders of
Series Preferred shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Series Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series Preferred surrendered were convertible on
the date on which such automatic conversion occurred, and any declared and
unpaid dividends shall be paid in accordance with the provisions of Section
4(d).
14.
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m. FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share
of Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's fair market value (as determined by
the Board of Directors) on the date of conversion.
n. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series Preferred,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
o. NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iv) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
p. PAYMENT OF TAXES. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series Preferred, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of Series
Preferred so converted were registered.
q. NO DILUTION OR IMPAIRMENT. Without the consent of the
holders of the then outstanding Series Preferred, as required under Sections
2(c), 2(d) and 2(e), the Company shall not amend its Restated Articles of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series Preferred
against dilution or other impairment.
15.
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5. REDEMPTION.
a. The Company shall be obligated to redeem the Series B
Preferred and Series C Preferred as follows:
(i) The holders of at least three-fourths of the then
outstanding shares of Series B Preferred and Series C Preferred, voting
together as a separate voting group, may require the Company, to the extent it
may lawfully do so, to redeem the Series B Preferred and Series C Preferred in
two (2) annual installments beginning on the fourth (4th) anniversary of the
Original Issue Date, and ending on the date one (1) year from such first
redemption date (each a "REDEMPTION DATE"). The Company shall effect such
redemptions on the applicable Redemption Date by paying in cash in exchange for
the shares of Series B Preferred and Series C Preferred to be redeemed a sum
equal to the greater of (i) the Original Issue Price per share of such Series
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus declared and
unpaid dividends with respect to such shares; and (ii) the fair market value
per share of such Series Preferred (as mutually determined by the Company and a
majority in interest of such Series Preferred). The total amount to be paid for
the Series B Preferred is hereinafter referred to as the "SERIES B REDEMPTION
PRICE," and the total amount to be paid for the Series C Preferred is
hereinafter referred to as the "SERIES C REDEMPTION PRICE." The number of
shares of Series B Preferred and Series C Preferred that the Company shall be
required to redeem on any one Redemption Date shall be equal to the amount
determined by dividing (A) the aggregate number of shares of Series B Preferred
and Series C Preferred outstanding immediately prior to the Redemption Date by
(B) the number of remaining Redemption Dates (including the Redemption Date to
which such calculation applies). Shares subject to redemption pursuant to this
Section 5(a) shall be redeemed from each holder of Series B Preferred and
Series C Preferred on a PRO RATA basis in proportion to the full amounts to
which they would otherwise be respectively entitled.
(ii) At least thirty (30) days but no more than sixty
(60) days prior to the first Redemption Date, the Company shall send a notice
(a "REDEMPTION NOTICE") to all holders of Series B Preferred and Series C
Preferred to be redeemed setting forth (A) the applicable Redemption Price for
the shares to be redeemed; and (B) the place at which such holders may obtain
payment of the applicable Redemption Price upon surrender of their share
certificates. If the Company does not have sufficient funds legally available
to redeem all shares to be redeemed at the Redemption Date, then it shall
redeem such shares PRO RATA (in proportion to the full amounts to which they
would otherwise be respectively entitled) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available; PROVIDED that in the event that the shares of Series B
Preferred and Series C Preferred are not redeemed due to a default in payment
by the Company or because the Company does not have sufficient legally
available funds, the portion of the aggregate applicable Redemption Price
remaining unpaid shall accrue interest at the rate of fifteen percent (15%) PER
ANNUM, payable quarterly in arrears.
b. On or prior to the Redemption Date, the Company shall
deposit the applicable Redemption Price of all shares to be redeemed on such
Redemption Date with a bank
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or trust company having aggregate capital and surplus in excess of one hundred
million dollars ($100,000,000), as a trust fund, with irrevocable instructions
and authority to the bank or trust company to pay, on and after such Redemption
Date, the applicable Redemption Price of the shares to their respective holders
upon the surrender of their share certificates. Any moneys deposited by the
Company pursuant to this Section 5(b) for the redemption of shares thereafter
converted into shares of Common Stock pursuant to Section 4 hereof no later
than the fifth (5th) day preceding the Redemption Date shall be returned to the
Company forthwith upon such conversion. The balance of any funds deposited by
the Company pursuant to this Section 5(b) remaining unclaimed at the expiration
of one (1) year following such Redemption Date shall be returned to the Company
promptly upon its written request.
c. On or after such Redemption Date, each holder of shares of
Series B Preferred and Series C Preferred to be redeemed shall surrender such
holder's certificates representing such shares to the Company in the manner and
at the place designated in the Redemption Notice, and thereupon the applicable
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
urrendered certificate shall be canceled. In the event less than all the shares
represented by such certificates are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after such Redemption Date,
unless there shall have been a default in payment of the applicable Redemption
Price or the Company is unable to pay the applicable Redemption Price due to
not having sufficient legally available funds, all rights of the holders of
such shares as holders of Series B Preferred (except the right to receive the
Series B Redemption Price without interest upon surrender of their
certificates) and the holders of such shares as holders of Series C Preferred
(except the right to receive the Series C Redemption Price without interest
upon surrender of their certificates), shall cease and terminate with respect
to such shares; PROVIDED that in the event that shares of Series B Preferred or
Series C Preferred are not redeemed due to a default in payment by the Company
or because the Company does not have sufficient legally available funds, such
shares of Series B Preferred and Series C Preferred shall remain outstanding
and shall be entitled to all of the rights and preferences provided herein.
d. In the event of a call for redemption of any shares of
Series B Preferred or Series C Preferred, the Conversion Rights (as defined in
Section 4) for such Series B Preferred and Series C Preferred shall terminate
as to the shares designated for redemption at the close of business on the
fifth (5th) day preceding the Redemption Date, unless default is made in
payment of the Redemption Price.
6. NO REISSUANCE OF SERIES PREFERRED.
No share or shares of Series Preferred acquired by the Company
by reason of redemption, purchase, conversion or otherwise shall be reissued;
and in addition, the Articles of Incorporation shall be appropriately amended
to effect the corresponding reduction in the Company's authorized stock.
7. RIGHTS OF FIRST REFUSAL.
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a. SUBSEQUENT OFFERINGS. Each holder of Series Preferred shall
have a right of first refusal to purchase its pro rata share of all Equity
Securities, as defined below, that the Company may, from time to time, propose
to sell and issue after the Original Issue Date, other than the Equity
Securities excluded by Section 7(e) hereof. Each holder of Series Preferred's
PRO RATA share is equal to the ratio of (a) the number of shares of the
Company's Preferred Stock which such holder of Series Preferred is deemed to be
a holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Preferred Stock immediately
prior to the issuance of the Equity Securities. The term "EQUITY SECURITIES"
shall mean (i) any Common Stock, Preferred Stock or other security of the
Company; (ii) any security convertible, with or without consideration, into any
Common Stock, Preferred Stock or other security (including any option to
purchase such a convertible security); (iii) any security carrying any warrant
or right to subscribe to or purchase any Common Stock, Preferred Stock or other
security; or (iv) any such warrant or right.
b. EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each holder of Series Preferred written notice
of its intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each holder of
Series Preferred shall have fifteen (15) days from the giving of such notice to
agree to purchase its PRO RATA share of the Equity Securities for the price and
upon the terms and conditions specified in the notice by giving written notice
to the Company and stating therein the quantity of Equity Securities to be
purchased. Notwithstanding the foregoing, the Company shall not be required to
offer or sell such Equity Securities to any holder of Series Preferred who
would cause the Company to be in violation of applicable federal securities
laws by virtue of such offer or sale.
c. ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all
of the holders of Series Preferred elect to purchase their PRO RATA share of
the Equity Securities, then the Company shall promptly notify in writing the
holders of Series Preferred who do so elect and shall offer such holders the
right to acquire such unsubscribed shares. Such holders of Series Preferred
shall then have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the holders of Series Preferred fail to exercise in
full the rights of first refusal, the Company shall have ninety (90) days
thereafter to sell the Equity Securities in respect of which any holder of
Series Preferred rights were not exercised, at a price and upon general terms
and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the holders of Series Preferred pursuant
to Section 7(b) hereof. If the Company has not sold such Equity Securities
within ninety (90) days of the notice provided pursuant to Section 7(b), the
Company shall not thereafter issue or sell any Equity Securities, without first
offering such securities to the holders of Series Preferred in the manner
provided above.
d. TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The
rights of first refusal established by this Section 7 shall not apply to, and
shall terminate upon the earliest of (i) the effective date of the registration
statement pertaining to the Company's initial public offering; (ii) the closing
of an Asset Transfer or Acquisition; or (iii) less than five million
(5,000,000) shares of Series Preferred (as adjusted for any stock splits,
recapitalizations or the
18.
<PAGE>
like with respect to such shares) remain outstanding. The rights of first
refusal established by this Section 7 may be amended with the written consent
of holders of at least a majority of the outstanding Series Preferred.
e. EXCLUDED SECURITIES. The rights of first refusal
established by this Section 7 shall have no application to any of the following
Equity Securities:
(i) up to an aggregate amount of six million three
hundred sixty-five thousand six hundred ninety-two (6,365,692) shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants or other rights) (as adjusted for any stock
splits, recapitalizations or the like with respect to such shares) issued or to
be issued to employees, officers or directors of, or consultants or advisors to
the Company or any subsidiary, pursuant to stock purchase or stock option plans
or other arrangements that are approved by the Board of Directors;
(ii) stock issued pursuant to any rights or agreements
outstanding as of the Original Issue Date, options and warrants outstanding as
of the Original Issue Date and stock issued pursuant to any such rights or
agreements after the date of the Original Issue Date; provided that the rights
of first refusal established by this Section 7 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(iii) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(iv) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(v) shares of Common Stock issued upon conversion of the
Series Preferred;
(vi) any Equity Securities issued pursuant to any
equipment leasing arrangement, or debt financing from a bank or similar
financial institution that are approved by the Company's Board of Directors;
(vii) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act;
(viii) shares of the Company's Common Stock or Preferred
Stock issued in connection with strategic transactions involving the Company
and other entities, including (i) joint ventures, manufacturing, marketing or
distribution arrangements or (ii) technology transfer or development
arrangements; provided that such strategic transactions and the issuance of
shares therein, has been approved by the Company's Board of Directors,
including the representatives designated by the holders of Series Preferred;
and any right, option or warrant to acquire any security convertible into any
of the foregoing excluded securities; and
19.
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(ix) shares of Series C Preferred sold pursuant to
Subsequent Closings (as that term is defined in the Series C Preferred Stock
Purchase Agreement, dated October 20, 1999, by and among the Company and the
parties identified on Exhibit A to such agreement).
III.
A. The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under Oregon law.
B. To the fullest extent authorized by law, the board of directors of the
Corporation, acting on behalf of the Corporation, may indemnify or advance
costs of defense, or commit the Corporation to indemnify or advance costs of
defense in the future, to any person who is made, or threatened to be made, a
party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the Corporation) by reason of the fact that
the person is or was a director, officer, employee or agent of the Corporation
or a fiduciary within the meaning of the Employee Retirement Income Security
Act of 1974 with respect to any employee benefit plan of the Corporation, or
serves or served at the request of the Corporation as a director, officer,
partner, trustee, agent or employee, or fiduciary of an employee benefit plan,
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. In exercising the authority granted by this Article,
the board of directors may choose, on the Corporation's behalf, to utilize the
procedures provided in the Act, prescribe other approval processes or eliminate
any procedures for specific findings or further approval in the individual
matter. This Article shall not be deemed exclusive of any other provision for
indemnification of directors, officers, fiduciaries, employees or agents that
may be included in any statute, bylaw, resolution of shareholders or directors,
agreement or otherwise, either as to action in any official capacity or action
in another capacity while holding office.
C. Any repeal or modification of this Article shall only be prospective
and shall not affect the rights under this Article in effect at the time of the
alleged occurrence of any action or omission to act giving rise to liability."
20.
<PAGE>
BYLAWS
OF
CORILLIAN CORPORATION
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Article I. Offices..................................................1
1.1 Registered Office..........................................1
1.2 Principal and Other Offices................................1
Article II. Shareholder.............................................1
2.1 Annual Meetings............................................1
2.2 Special Meetings...........................................1
2.3 Action Without a Meeting...................................2
2.4 Place of Meeting...........................................2
2.5 Notice of Meetings.........................................2
2.6 Waiver of Notice...........................................3
2.7 Record Date................................................3
2.8 Organization of Meetings...................................4
2.9 List of Shareholdas for Meetings...........................4
2.10 Quorum.....................................................5
2.12 Proxies....................................................6
2.13 Acceptance of Votes........................................6
ARTICLE III. Board of Directors.....................................7
3.1 General Powprs.............................................7
3.2 Number, Qualification and Term.............................8
3.4 Removal by Shareholders....................................8
3.5 Vacancies..................................................9
3.6 Compensation...............................................9
i
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3.7 Regular Meetings...........................................9
3.8 Special Meetings...........................................9
3.9 Teleiphone Meetings.......................................10
3.10 Acton Without a Meeting...................................10
3.11 Notice of Meetings........................................10
3.12 Waiver of Notice..........................................10
3.13 Organizatign of Meetings..................................11
3.14 Quorum....................................................11
3.15 Voting....................................................11
3.16 Committees................................................12
3.17 Conflicts of Interest.....................................13
3.18 Loans to Directors........................................13
Article IV. Officers...............................................14
4.1 Number....................................................14
4.2 Term of Office............................................14
4.3 Resignation...............................................14
4.4 Removal...................................................14
4.5 Contract Rights of Officers...............................14
4.6 Chairman of the Board.....................................14
4.7 President.................................................15
4.8 Vice Presidents...........................................15
4.9 Secretary.................................................15
4.10 Treasurer.................................................16
ii
<PAGE>
4.11 Salaries..................................................16
Article V. Shares..................................................16
5.1 Issuance of Shares........................................16
5.2 Share Options.............................................16
5.3 Certfficates for Shares...................................17
5.4 Transfer of Shares........................................17
5.5 Restrictions an Transfer..................................18
5.6 No Fractional Shares......................................18
Article VI. Contracts, Loans, Checks and Deposits..................18
6.1 Contracts.................................................18
6.2 Loans.....................................................18
6.3 Checks and Drafts.........................................18
6.4 Deposits..................................................19
Article VII. Dividends.............................................19
Article VII. Notice................................................19
8.1 Written Notice............................................19
8.2 Methods of Notice.........................................19
8.3 When Notice Effective.....................................19
8.4 Notice to a Corporation...................................20
Article IX. Seal...................................................20
Article X. Amendments..............................................20
</TABLE>
iii
<PAGE>
BYLAWS
OF
CORILLIAN CORPORATION
ARTICLE I. OFFICES
1.1 REGISTERED OFFICE
The corporation shaJ1 continuously maintain in the State of Oregon a
registered office that may be, but need not be, the same as any of its places of
business. (ORS 60.111(1))
1.2 PRINCIPAL AND OTHER OFFICES
The corporation may locate its principal office and such other offices '
either within or without the State of Oregon, as the Board of Directors may
designate or as the business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDER
2.1 ANNUAL MEETINGS
(a) The corporation shall hold an annual meeting of the shareholders on
such date and at such time as may be designated by the Board of Directors, or,
if not so designated, then on the fourth Thursday of April in each year
beginning with the year 1995 at 10:00 o'clock a.m., for the purpose of electing
Directors and transacting such other business as may come before the meeting. If
the day fixed for the annual meeting is a legal holiday in the State of Oregon,
the meeting shall be held on the next succeeding business day. (ORS 60.201(1),
.307(3))
(b) The failure to hold an annual meeting on the date fixed in accordance
with Subsection (a) of this Section shall not affect the validity of any
corporate action. (ORS 60.201(3))
2.2 SPECIAL MEETINGS
(a) The corporation shall hold a special meeting of shareholders on the
call of the Board of Directors or if the holders of at least ten percent (10%)
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date and deliver to the Secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held- (ORS 60.204(1))
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(b) Only business within the purpose or purposes described in the meeting
notice may be conduct4 at a special meeting of shareholders. (ORS 60.204(4))
2.3 ACTION WITHOUT A MEETING
(a) Action required or permitted to be taken at a meeting of shareholders
may be taken without a meeting if the action is taken by all the shareholders
entitled to vote on t I he action. The action must be evidenced by one or more
written consents describing the action taken, signed by all the shareholders
entitled to vote on the action delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Action taken under this Section is
effective when the last shareholder signs the consent, unless the consent
specifies an earlier or later effective date. (ORS 60.211(1))
(b) A consent signed under this Section has the effect of a meeting vote
and may be described as such in any document. (ORS 60.211(3))
(c) If applicable law, requires that notice of proposed action be given to
nonvoting shareholders and the action is to be taken by unanimous consent of the
voting shareholders, the corporation must give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before the action
is taken. The notice must contain or be accompanied by the same material that
would have been required to be sent to nonvoting shareholders in a notice of
meeting at which the proposed action would have bee submitted to the
shareholders for action. (ORS 60.211(4), .034)
2.4 PLACE OF MEETING
The Board of Directors may designate any place, within or without the State
of Oregon, as the place of meeting for any annual or special meeting. If no
designation is made, the place of meeting shall be the corporation's principal
office. (ORS 60.201(2), .204(3))
2.5 NOTICE OF MEETINGS
(a) The corporation shall notify shareholders of the date, time and place
of each annual and special meeting of shareholders not earlier than sixty (60)
days or less than ten (10) days before the meeting date. Unless required
otherwise by law or the Articles of Incorporation, the corporation is required
to give notice only to shareholders entitled to vote at the meeting. (ORS
60.214(1), .034)
(b) Unless required, otherwise by law or the Articles of Incorporation,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called. (ORS 60.214(2))
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<PAGE>
(c) Notice of a special meeting must include a description of the purpose
or purposes for which the meeting is called. (ORS 60.214(3))
(d) If an annual or special meeting of shareholders is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment. If a new record date for the adjourned meeting is or must be fixed,
however, then notice of the adjourned meeting must be given to persons who are
shareholders as of the new record date. (ORS 60.214(5))
2.6 WAIVER OF NOTICE
(a) A shareholder at any time may waive any notice required by law, the
Articles of Incorporation or these Bylaws. The waiver must be in writing, signed
by the shareholder entitled to the notice and delivered to the corporation for
inclusion in the minutes or filing with the corporate records. (ORS 60.217(1))
(b) A shareholder's, attendance at a meeting waives objection to:
(1) Lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting; and
(2) Consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
sharehol4ei objects to considering the matter when it is presented.
(ORS 60.217(2))
2.7 RECORD DATE
(a) The Board of Directors shall fix in advance a record date in order to
determine the shareholders entitled to notice of a meeting of shareholders, to
demand a special meeting of shareholders, to vote, to receive payment of a
dividend other distribution or to take any other action or exercise any other
right of shareholders. The record date shall not be more than seventy (70) clays
before the meeting or action requiring a determination of shareholders. (ORS
60.221(1), (2))
(b) If the Board of Directors fails to fix the record date for determining
shareholders entitled to demand special meeting of shareholders, then the record
date shall be the date the first shareholder signs the demand. (ORS 60.204(2))
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<PAGE>
(c) If the Board of Directors fails to fix the record date for
determining shareholders entitled to take action without a meeting of
shareholders, then the record date shall be the date the first shareholder
signed as the consent. (ORS 60.211(2))
(d) If the Board of Directors fails to fix the record date for
determining shareholders entitled to notice of, and to vote at an Annual or
special meeting of shareholders, then the record date shall be the close of
business on the clay before the first notice is delivered to shareholders.
(ORS 60.214(4))
(e) If the Board of Directors fails to fix the record date for
determining shareholders entitled to a share dividend, then the record date
shall be the date the Board authorizes the share dividend. (ORS 60.154(3))
(f) If the Board of Directors fails to fix the record date for
determining shareholders entitled to a distribution, other than, a date
involving a repurchase or reacquisition of shares, then the record date shall
be the date the Board authorizes the distribution. (ORS 60.181(2))
(g) A determination of shareholders entitled to notice of or to vote at
a meeting of shareholders is effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date, which it must do if
the meeting is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting. (ORS 60.221(3))
2.8 ORGANIZATION OF MEETINGS
At every meeting of shareholders:
(a) The President, or if the President is absent then the Chairman of
the Board, or if the Chairman of the Board has not been elected or is absent
then any Vice President, or if no Vice President has been elected or is
present then any individual chosen by a majority in interest of the
shareholders entitled to vote at the meeting., shall act as chairman of the
meeting.
(b) The Secretary, or if the Secretary is absent then any Assistant
Secretary, or if no Assistant Secretary has been elected or is present, then
any individual chosen by a majority in interest of the shareholders entitled
to vote at the meeting, shall act as secretary of the meeting.
2.9 LIST OF SHAREHOLDERS FOR MEETINGS
(a) After fixing a record date for a meeting of shareholders, the
Secretary shall prepare an alphabetical list of the names of all of the
shareholders who are entitled
PAGE 4
<PAGE>
to notice of the meeting. The list shall be arranged by voting group, and
within each voting group by class or series of shares, and show the address
of and number of shares held by each shareholder. (ORS 60.224(1))
(b) The list of shareholders must be available for inspection by any
shareholder, beginning two (2) business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder or the shareholders agent
or attorney is entitled on written demand to inspect and, subject to the
requirement of law, to copy the list during regular business hours and at the
shareholder's expense during the period it is available for inspection. (ORS
60.224(2), .034, .774(3))
(c) The Secretary shall make the list of shareholders available at the
meeting, and any shareholder or the shareholder's agent or attorney is entitled
to inspect the list at any time during the meeting, or any adjournment. (ORS
60.224(3))
(d) Refusal or failure to prepare or make available the list of
shareholders does not affect the validity of action taken at the meeting. (ORS
60.224(5))
2.10 QUORUM
(a) Shares entitled to vote as a separate voting group may take action on
a matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the Articles of Incorporation or law provide for a lesser or
greater number, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter. (ORS 60.241(1))
(b) Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting. (ORS 60.241(2))
2.11 Voting
(a) Except as the Articles of Incorporation or these Bylaws provide
otherwise, each outstanding share, regardless of class, is entitled to one vote
on each matter voted on at a meeting of shareholders. Only shares are entitled
to vote. (ORS 60.227(1))
(b) If a quorum exists, action on a matter, other than the election of
Directors, by a voting group is approved if the votes cast within the voting
group favoring the
PAGE 5
<PAGE>
action exceed the votes cast opposing the action, unless the Articles of
Incorporation or law require a greater number of affirmative votes. (ORS
60.241(3))
(c) Unless otherwise provided in the Articles of Incorporation,
Directors axe elected by a plurality of the votes cast by the shares entitled
to vote in the election at a meeting at which a quorum is present. (ORS
60.251(1))
(d) If the Articles of Incorporation or law provide for voting by a
single group on a matter, action on that matter is taken when voted upon by
that voting group. (ORS 60.244(1))
(e) If the Articles of Incorporation or law provide for voting for two
(2) or more voting groups on a matter, action on that matter is taken only
when voted upon by each of those voting groups counted separately, Action may
be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter. (ORS 60.244(2))
2.12 PROXIES
(a) A shareholder may vote shares in person or by proxy. (ORS
60.231(1))
(b) A shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by the
shareholder's attorney-in-fact. (ORS 60.231(2))
(c) An appointment of a proxy is effective when received by the
Secretary. An appointment is valid for eleven (11) months unless a longer
periods expressly provided in the appointment form. (ORS 60.231(3))
2.13 ACCEPTANCE OF VOTES
(a) If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver or proxy appointment
and give it effect as the act of the shareholder. (ORS 60.237(1))
(b) If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of its shareholder, the corporation, if
acting in good faith, nevertheless is entitled to accept the vote, consent,
waiver or proxy appointment and give it effect as the act of the shareholder
if:
(1) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
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<PAGE>
(2) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment;
(3) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect
to the vote, consent, waiver or proxy appointment;
(4) The name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's
authority to sign for the shareholder has been presented with respect to
the vote, consent, waiver or proxy appointment; or
(5) Two (2) or more persons are the shareholder as covenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners. (ORS 60.237(2))
(c) The corporation is entitled to reject a vote, consent, waiver or
proxy appointment if the Secretary, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder. (ORS 60.237(3))
(d) Redeemable shares are not entitled to vote after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares. (ORS 60.227(4), .034)
(e) The shares of the corporation axe not entitled to vote if they are
owned, directly or indirectly, by a second domestic or foreign corporation,
and the corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation. The preceding
sentence does not limit the power of the corporation to vote any shares,
including its own shares, held by it in a fiduciary capacity. (ORS
60.227(2), (3))
PAGE 7
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ARTICLE III. BOARD OF DIRECTORS
3.1 GENERAL POWERS
All corporate powers of the corporation shall be exercised by or under the
authority of, and the business and affairs of the corporation managed under the
direction of, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation. (ORS 60.301(2))
3.2 NUMBER, QUALIFICATION AND TERM
(a) The number of Directors shall be between one (1) and seven (7), as
established by resolution of the Board of Directors. The number of Directors may
be increased or decreased from time to time by amendment of these Bylaws, but no
decrease shall shorten the term of an incumbent Director. (ORS 60.307(1), (2),
.314(3))
(b) Directors need not be residents of the State of Oregon or shareholders
of the corporation, unless required by the Articles of Incorporation. (ORS
60.304)
(c) The terms of the initial Directors expire at the first meeting of
shareholders at which Directors are elected. The terms of all other Directors
expire at the next annual meeting of shareholders following their election.
Despite the expiration of a Director's term, the Director continues to serve
until the Director's successor is elected and qualifies or until there is a
decrease in the number of Directors. (ORS 60.314(1), (2), (5))
3.3 Resignation
(a) A Director may resign at any time by delivering written notice to
the Board of Directors, the Chairman of the Board or the corporation. (ORS
60.321(1))
(b) A resignation is effective when the notice is effective under
Article VIII unless the notice specifies a later effective date. (ORS
60.321(2), .034)
(c) Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors. (ORS 60.321(3))
3.4 REMOVAL BY SHAREHOLDERS
(a) The shareholders may remove one or more Directors with or without
cause unless the Articles of Incorporation provide that Directors may be
removed only for cause. (ORS 60.324(1))
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(b) A Director may be removed only if the number of votes cast to
remove the Director exceed the number of votes cast not to remove the
Director. (ORS 60.324(3))
(c) A Director may be removed by the shareholders only at a meeting
called for the purpose of removing the Director and the meeting notice must
state that the purpose, or one of the purposes, of the meeting is removal of
the Director. (ORS 60.324(4))
3.5 VACANCIES
(a) Unless the Articles of Incorporation provide otherwise, if a
vacancy occurs on the Board of Directors, including a vacancy resulting from
an increase in the number of Directors:
(1) The shareholders may fill the vacancy;
(2) The Board may fill the vacancy; or
(3) If the Directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office. (ORS60.331(1))
(b) The term of a Director elected to fill a vacancy expires at the next
meeting of shareholders at which Directors are elected. (ORS 60.314(4))
3.6 COMPENSATION
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, by resolution, may pay each Director his or her expenses, if any,
of attendance at each meeting of the Board, as well as a stated salary f6r
his or her service as a Director or a fixed sum for attendance at each
meeting of the Board or both. No such payment shall preclude any Director
from serving the corporation in any other capacity and receiving compensation
therefor. (ORS 60.334)
3.7 REGULAR MEETINGS
Unless the Articles of Incorporation provide otherwise, regular meetings
of the Board of Directors may be held without notice of the date, time, place
or purpose of the meeting. The Board may provide, by resolution, the time and
place, either within or without the State of Oregon, for the holding of
regular meetings without other notice than such resolution. (ORS 60.344(1),
.337(1))
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3.8 SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by or at the
request of the President, the Chairman of the Board or any two (2) of the
Directors. The person or persons authorized to call special meetings as the
Board may fix the time and place, either within or without the State of
Oregon, as the time and place for holding any special meeting of the Board
called by him, her or them. (ORS 60.337(1))
3.9 TELEPHONE MEETINGS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors may permit any or all Directors to participate in a regular or
special meeting by, or conduct the meeting through, use of any means of
communication by which all Directors participating may simultaneously hear
each other during the meeting. A Director participating in a meeting by this
means is deemed to be present in person at the meeting. (ORS 60.337(2))
3.10 ACTON WITHOUT A MEETING
(a) Unless the Articles of Incorporation provide otherwise, action
required or permitted to be taken at a meeting of the Board of Directors may
be taken without a meeting if the action is taken by all members of the
Board. The action must be evidenced by one or more written consents
describing the action taken, signed by each Director and included in the
minutes or Bled with the corporate records reflecting the action taken. (ORS
60.341(1))
(b) Action taken under this Section is effective when the last Director
signs the consent, unless the consent specifies an earlier or later effective
date. (ORS 60.341(2))
(c) A consent signed under this Section has the effect of a meeting
vote and may be described as such in any document. (ORS 60.341(3))
3.11 NOTICE OF MEETINGS
Unless the Articles of Incorporation provide for a longer or shorter
period, special meetings of the Board of Directors must be preceded by at
least two (2) days notice of the date, time and place of the meeting. The
notice need not describe the purpose of the special meeting unless required
by the Articles of Incorporation. (ORS 60.344(2), .034)
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3.12 WAIVER OF NOTICE
(a) A Director at any time may waive any notice required by law, the
Articles of Incorporation or these Bylaws. Except as provided in Subsection
(b) of this Section, the waiver must be in writing, must be signed by the
Director entitled to the notice, must specify the meeting for which notice is
waived and must be f3led with the minutes or corporate records. (ORS
60.347(1))
(b) A Director's attendance at or participation in a meeting waives any
required notice to the Director of the meeting unless the Director at the
beginning of the meeting, or promptly upon the Director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. (ORS 60.347(2))
3.13 ORGANIZATION OF MEETINGS
At every meeting of the Board of Directors:
(a) The Chairman. of the Board, or if the Chairman of the Board has not
been elected or is absent then the President, or if the President is absent
then any Director chosen by a majority of the Directors present at the
meeting, shall act as chairman of the meeting.
(b) The Secretary, or if the Secretary is absent then any Assistant
Secretary, or if no Assistant Secretary has been elected or is present, then
any individual chosen by a majority of the Directors present at the meeting,
shall act as secretary of the meeting.
3.14 QUORUM
Unless the Articles of Incorporation requires a greater number, a quorum
of the Board of Directors consists of:
(a) If the corporation has a fixed Board size, a majority of the fixed
number of Directors; or
(b) If the corporation has a variable-range size Board, a majority of
the number of Directors prescribed, or if no number is prescribed, a majority
of the number in office immediately before the meeting begins. (ORS
60.351(1))
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3.15 VOTING
(a) If a quorum is present when a vote is taken, the affirmative vote
of a majority of Directors present is the act of the Board of Directors
unless the Articles of Incorporation requires the vote of a greater number of
Directors. (ORS 60.351(3))
(b) A Director who is present at a meeting of the Board of Directors or
a committee of the Board when corporate action is taken is deemed to have
assented to the action taken unless:
(1) The Director objects at the beginning of the meeting, or promptly
upon the Director's arrival, to holding the meeting or transacting business
at the meeting;
(2) The Director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
(3) The Director delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a Director who votes
in favor of the action taken. (ORS 60.351(4))
3.16 COMMITTEES
(a) Unless the Articles of Incorporation provide otherwise, the Board
of Directors may create one or more committees and appoint members of the
Board to serve on them. Each committee shall have two (2) or more members,
who serve at the pleasure of the Board. (ORS 60.354(1))
(b) The creation of a committee and appointment of members to it must
be approved by the greater of a majority of all the Directors in office when
the action is taken or the number of Directors required to take action under
Section 3.15. (ORS 60.354(2))
(c) The provisions of the Articles of Incorporation and these Bylaws
governing meetings, action without meetings, notice, waiver of notice and
quorum and voting requirements of the Board of Directors apply to committees
and their members as well. (ORS 60.354(3))
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(d) Except as provided in Subsection (e) of this Section, to the extent
specified by the Board of Directors or in the Articles of Incorporation, each
committee may exercise the authority of the Board. (ORS 60.354(4))
(e) A committee may not:
(1) Authorize distributions;
(2) Approve or propose to shareholders actions that are required to
be approved by shareholders;
(3) Fill vacancies on the Board of Directors or on any of its
committees;
(4) Amend the Articles of Incorporation;
(5) Adopt, amend or repeal bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
(7) Authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the Board; or
(8) Authorize or approve the issuance or sale or contract for
issuance or sale of shares or any other securities of the corporation, or
determine the designation and relative rights, preferences and limitations
of a class or series of shares of the corporation. (ORS 60.354(5))
3.17 CONFLICTS OF INTEREST
A conflict of interest transaction is not voidable by the corporation
solely because of a Director's interest in the transaction if any one of the
following is true:
(a) The material facts of the transaction and the Director's interest
were disclosed or known to the Board of Directors or a committee of the Board
and the Board or committee authorized, approved or ratified the transaction;
(b) The material facts of the transaction and the Director's interest
were disclosed or known to the shareholders entitled to vote and they
authorized, approved or ratified the transaction; or
(c) The transaction was fair to the corporation. (ORS 60.361(1))
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3.18 LOANS TO DIRECTORS
(a) The corporation may not lend money to or guarantee the obligation
of a Director unless:
(1) The particular loan or guaranty is approved by a majority of the
votes represented by the outstanding voting shares of all classes, voting
as a single voting group, excluding the votes of shares owned by or voted
under the control of the benefited Director; or
(2) The Board of Directors determines that the loan or guaranty
benefits the corporation and either approves the specific loan or guaranty
or a general plan authorizing loans and guaranties. (ORS 60.364(1))
(b) The fact that a loan or guaranty is made in violation of this
Section does not affect the borrower's liability on the loan. (ORS
60.364(2))
ARTICLE IV. OFFICERS
4.1 NUMBER
(a) The officers of the corporation shall include a President and a
Secretary and may also include a Chairman of the Board, one or more Vice
Presidents and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers, assistant officers and agents as may be
deemed necessary may be elected or appointed by the Board and shall. have
such powers and duties as maybe prescribed by the Board. (ORS 60.371(1))
(b) The same individual may simultaneously hold more than one office in
the corporation. (ORS 60.371(4))
4.2 TERM OF OFFICE
Each officer shall hold office until a successor shall have been duly
elected and shall have qualified or until the officer's resignation or
removal.
4.3 RESIGNATION
(a) An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is effective under
Article VIII unless the notice specifies a later effective date. (ORS
60.381(1), .034)
(b) Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors. (ORS 60.381(3))
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4.4 REMOVAL
The Board of Directors may remove any officer at any time with or
without cause. (ORS 60.381(2))
4.5 CONTRACT RIGHTS OF OFFICERS
The election of an officer does not itself create contract rights.
Removal or resignation of an officer does not affect the contract rights, if
any, of the corporation or the officer. (ORS 60.384)
4.6 CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board of
Directors and shall perform such other duties as from time to time may be
prescribed by the Board. (ORS 60.374)
4.7 PRESIDENT
The President shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, in general
shall supervise, direct and control the business and affairs and the other
officers (except the Chairman of the Board) of the corporation. The President
shall perform all duties commonly incident to the office of President and
such other duties as from time to time may be assigned by the Board. (ORS
60.374)
4.8 VICE PRESIDENTS
The Board of Directors may elect one or more Vice Presidents. In the
absence of the President or in the event of the President's death or
inability or refusal to act, the Vice President (or if more than one, then
the Vice Presidents in the order designated at the time of their election, or
in the absence of any such designation, then in the order of their election)
shall perform 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. Each
Vice President shall perform such other duties as from time to time may be
assigned by the President or the Board. (ORS 60.374)
4.9 SECRETARY
The Secretary shall:
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(a) Prepare the minutes of all meetings of the Board of Directors and
all committees of the Board and of all meetings of shareholders and shall
have custody of the minute book, seal and other corporate records,
(b) Countersign all instruments requiring the seal of the corporation
except when the power to sign or execute is expressly delegated to another
officer by the Board of Directors or these Bylaws;
(c) See that all notices provided for in these Bylaws are duly given;
(d) Keep a register of the mailing address of each shareholder as
furnished to the Secretary by such shareholder;
(e) Have general charge of the stock transfer books of the corporation,
(f) Authenticate records of the corporation; and
(g) In general perform all duties commonly incident to the office of
Secretary and such other duties as from time to time may be assigned by the
President or the Board. (ORS 60.374, .371(3))
4.10 TREASURER
The Treasurer shall:
(a) Have charge and custody of and be responsible for all funds and
securities of the corporation;
(b) Receive and. give receipts for monies due and payable to the
corporation from any source whatsoever and deposit all such monies in the
name of the corporation in such banks, trust companies or other depositories
as shall be selected in accordance with the provisions of Article VI of these
Bylaws;
(c) If required by the Board, give a bond fox the faithful discharge of
his or her duties in such sum and with such surety or sureties as the Board
shall determine; and
(d) In general perform all duties commonly incident to the office of
Treasurer and such other duties as from time to time may be assigned by the
President or the Board of Directors. (ORS 60.374)
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4.11 SALARIES
The salaries of the officers shall be fixed from time to time by the
Board of Directors and no officer shall be prevented from receiving such
salary because the officer is also a Director of the corporation. Any
officer who also is a Director may vote upon his or her own salary.
ARTICLE V. SHARES
5.1 ISSUANCE OF SHARES
The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed,
contracts for services to be performed or other securities of the
corporation. (ORS 60.147(2))
5.2 SHARE OPTIONS
The corporation may issue rights, Options Or warrants for the purchase
of shares of the corporation. The Board of Directors shall determine the
terms upon which such rights, options or warrants are issued, their form and
content and the consideration for which the shares are to be issued. (ORS
60.157)
5.3 CERTIFICATES FOR SHARES
(a) All shares issued by the corporation shall be represented by
certificates. (ORS 60.161(1), .164(1))
(b) Certificates representing shares of the corporation shall be in
such form as shall be determined by the Board of Directors, provided that
each certificate shall state on its face:
(1) The name of the corporation and that it is organized under the
laws of the State of Oregon;
(2) The name of the person to whom the shares are issued; and
(3) The number and class of shares and the designation of the series,
if any, the certificate represents. (ORS 60.161(2))
(c) If the corporation is authorized in its Articles of Incorporation
to issue different classes of shares or different series within a class, the
designations, relative rights, preferences and limitations applicable to each
class, the variations in rights, preferences and limitations determined for
each series and the authority of the Board of
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Directors to determine variations for future series either shall be
summarized on the front or back of each certificate or each certificate shall
state conspicuously on its front or back that the corporation will furnish
the shareholder with this information on request in writing and without
charge. (ORS 60.161(3))
(d) Certificates shall be signed, either manually or with a facsimile
of manual signatures, by the President or a Vice President and by the
Secretary or an Assistant Secretary and may be sealed with the seal of the
corporation or a facsimile thereof. (ORS 60.161(4))
(e) All certificates surrendered to the corporation for transfer shall
be canceled and no new certificate shall be issued until the former
certificate shall have been surrendered and canceled, except that in case of
a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors
may prescribe.
5.4 TRANSFER OF SHARES
Transfer of shares of the corporation shall be made only by the holder
of record thereof, the holder's legal representative (who shall furnish
proper evidence of authority to transfer) or the holder's attorney (who shall
furnish a proper power of attorney duly executed and filed with the Secretary
of the corporation). The person in whose name shares stand on the books of
the corporation shall be deemed by the corporation to be the owner thereof
for all purposes.
5.5 RESTRICTIONS AN TRANSFER
No securities of the corporation and no certificate representing such
securities shall be transferred in violation of any:
(a) Law;
(b) Restriction on such transfer set forth in the Articles of
Incorporation; or
(c) Restriction contained in any stock purchase, buy-sell, right of
list refusal or other agreement, if such agreement has been f3led with the
corporation and such restriction has been noted on the certificates
representing such securities. The corporation shall not be bound by any
restriction unless such agreement has been filed and such restriction has
been noted on such certificates. The corporation and any party to any such
agreement shall have the right to have a restrictive legend imprinted on any
such certificates and on any certificates issued in replacement or exchange
thereof. (ORS 60.167)
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5.6 NO FRACTIONAL SHARES
The corporation shall not issue fractions of shares. (ORS 60.141)
ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS
6.1 CONTRACTS
Except as provided otherwise by law or these Bylaws, the Board of
Directors may authorize any officer or officers and agent or agents to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
6.2 LOANS
No loans shall be contracted on behalf of the corporation and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
6.3 CHECKS AND DRAFTS
All checks, drafts or other orders for the payment of money and notes or
other evidences of indebtedness issued in the name of the c6rporation shall
be signed by such officer or officers and agent or agents of the corporation
as from time to time shall be determined by resolution of the Board Of
Directors.
6.4 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board of Directors may select.
ARTICLE VII. DIVIDENDS
From time to time, the Board of Directors in the exercise of sound
discretion may declare and the corporation may pay dividends or make other
distributions to its shareholders subject to the requirements of law and the
Articles of Incorporation. (ORS 60.181)
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ARTICLE VII. NOTICE
8.1 WRITTEN NOTICE
Notice shall be in writing unless oral notice is specifically permitted
under the circumstances by the Articles of Incorporation or these Bylaws. All
notices by the corporation to the shareholders shall be in writing. (ORS
60.034(1), (3))
8.2 METHODS OF NOTICE
Notice may be communicated in person, by telephone, telegraph, teletype
or other form of wire or wireless communication or by mail or private
carrier. (ORS 60.034(2))
8.3 WHEN NOTICE EFFECTIVE
(a) Written notice by the corporation to a shareholder, if in a
comprehensible form, is effective when mailed if it is mailed postpaid and is
correctly addressed to the shareholder's address shown in the corporation's
current record of shareholders. (ORS 60.034(3))
(b) Except as provided in Subsection (a) of this Section, written
notice, if in a comprehensible form, is effective at the earliest of the
following:
(1) When received;
(2) Five (5) days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or
on behalf of the addressee. (ORS 60.034(5))
(c) Oral notice is effective when communicated if communicated in a
comprehensible manner. (ORS 60.034(6))
8.4 NOTICE TO A CORPORATION
Written notice to a domestic or foreign corporation authorized to
transact business in the State of Oregon may be addressed to its registered
agent at its registered office or to the domestic or foreign corporation or
its president or secretary at its principal office or mailing address as
shown in the records of the office. (ORS 60.034(4))
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ARTICLE IX. SEAL
The seal of the corporation shall be circular in form and shall have
inscribed thereon the name of the corporation and the words "Oregon" and
"Corporate Seal".
ARTICLE X. AMENDMENTS
Unless the Articles of Incorporation or law provide otherwise, these
Bylaws may be amended or repealed and new bylaws may be adopted by the Board
of Directors at any regular or special meeting, subject to repeal or change
by action of the shareholders of the corporation. (ORS 60.461, .464, .467,
.061(2))
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CERTIFICATE OF SECRETARY
I, Tracy Schmerber, hereby certify that I am the duly elected Secretary
of Corillian Corporation (the "Company") and that the foregoing Bylaws were
duly adopted by the Board of Directors of the Company as of May 1, 1997.
Date: May 1, 1997
/s/ Tracy Schmerber
--------------------------------------
Tracy Schmerber, Secretary
PAGE 22
<PAGE>
CORILLIAN CORPORATION
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
OCTOBER 20, 1999
i
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER. . . . . . . . . . . 6
2.1 Restrictions on Transfer. . . . . . . . . . . . . . . . . . 6
2.2 Demand Registration.. . . . . . . . . . . . . . . . . . . . 7
2.3 Piggyback Registrations.. . . . . . . . . . . . . . . . . . 9
2.4 Form S-3 Registration.. . . . . . . . . . . . . . . . . . . 10
2.5 Expenses of Registration. . . . . . . . . . . . . . . . . . 11
2.6 Obligations of the Company. . . . . . . . . . . . . . . . . 12
2.7 Termination of Registration Rights. . . . . . . . . . . . . 13
2.8 Delay of Registration; Furnishing Information.. . . . . . . 14
2.9 Indemnification.. . . . . . . . . . . . . . . . . . . . . . 14
2.10 Assignment of Registration Rights.. . . . . . . . . . . . . 17
2.11 Amendment of Registration Rights. . . . . . . . . . . . . . 17
2.12 Limitation on Subsequent Registration Rights. . . . . . . . 17
2.13 "Market Stand-Off" Agreement; Agreement to Furnish
Information . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . 18
SECTION 3. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . 19
3.1 Basic Financial Information and Reporting.. . . . . . . . . 19
3.2 Inspection Rights.. . . . . . . . . . . . . . . . . . . . . 20
3.3 Confidentiality of Records. . . . . . . . . . . . . . . . . 20
3.4 Reservation of Common Stock.. . . . . . . . . . . . . . . . 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
3.5 Key Man Insurance.. . . . . . . . . . . . . . . . . . . . . 20
3.6 Proprietary Information and Inventions Agreement. . . . . . 20
3.7 Assignment of Right of First Refusal. . . . . . . . . . . . 21
3.8 Directors' Expenses.. . . . . . . . . . . . . . . . . . . . 21
3.9 Indemnification.. . . . . . . . . . . . . . . . . . . . . . 21
3.10 Stock Vesting.. . . . . . . . . . . . . . . . . . . . . . . 21
3.11 Qualified Small Business. . . . . . . . . . . . . . . . . . 22
3.12 Year 2000.. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13 Termination of Covenants. . . . . . . . . . . . . . . . . . 22
SECTION 4. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . 23
4.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 23
4.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . 23
4.7 Delays or Omissions.. . . . . . . . . . . . . . . . . . . . 24
4.8 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.9 Attorneys' Fees.. . . . . . . . . . . . . . . . . . . . . . 25
4.10 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . 25
4.11 Additional Investors. . . . . . . . . . . . . . . . . . . . 25
4.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
iii
<PAGE>
CORILLIAN CORPORATION
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this
"AGREEMENT") is entered into as of the20th day of October 1999, by and among
CORILLIAN CORPORATION, an Oregon corporation (the "COMPANY"), the holders of
the Company's Series A Preferred Stock set forth on Exhibit A hereto (the
"SERIES A INVESTORS"), the holders of the Company's Series B Preferred Stock
set forth on Exhibit A hereto (the "SERIES B INVESTORS"), and the purchasers
of the Company's Series C Preferred Stock set forth on Exhibit A hereto
("SERIES C STOCK") under that certain Series C Preferred Stock Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT"). The purchasers
of the Series C Stock (the "SERIES C INVESTORS"), the Series A Investors and
the Series B Investors shall be referred to collectively hereinafter as the
"INVESTORS" and each individually as an "INVESTOR."
RECITALS
WHEREAS, the Company, the Series A Investors and the Series B Investors
entered into an Investor Rights Agreement, dated as of April 2, 1999 (the
"ORIGINAL AGREEMENT");
WHEREAS, the Company proposes to sell and issue up to Ten million three
hundred fifty-eight thousand five hundred sixty-six (10,358,566) shares of its
Series C Stock pursuant to the Purchase Agreement;
WHEREAS, as a condition of entering into the Purchase Agreement, the
Series C Investors have requested that the Company extend to them registration
rights, information rights and other rights as set forth below; and
WHEREAS, the Company and the Investors desire to amend and restate the
Original Agreement in its entirety as set forth below.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
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SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment underwritten
public offering of its Common Stock registered under the Securities Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company issued or
issuable upon conversion of the Shares; and (b) any Common Stock of the Company
issued as (or issuable upon the 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 in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public pursuant to a registration statement
or Rule 144 or sold in a private transaction in which the transferor's rights
under Section 2 of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the selling Holders (to be selected by the Holders of
a majority of the Registrable Securities
PAGE 5
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proposed to be registered), blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be
paid in any event by the Company).
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean the Company's (i) Series A Preferred Stock, (ii)
Series B Preferred Stock and (iii) Series C Stock held by the Investors listed
on Exhibit A hereto and their permitted assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act and applicable state securities laws. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D)
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to the Holder's family member or trust for the benefit of an individual
Holder; provided that in each case the transferee will be subject to the
terms of this Agreement to the same extent as if he were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with a legend substantially similar
to the following (in addition to any legend required under applicable state
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, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, upon the
earlier of (i) eighteen (18) months after the date of this Agreement and (ii)
six (6) months after the Company's Initial Offering, the Holders of two-thirds
of the Registrable Securities then outstanding (the "INITIATING HOLDERS") may,
upon written request delivered to the Company, request that the Company file a
registration statement under the Securities Act covering the registration of the
shares of the Company's Common Stock at a price per share that results in total
gross proceeds of at least five million dollars ($5,000,000). Upon such a
demand, the Company shall, within thirty (30) days of the receipt thereof, give
written notice of such request to all Holders, and subject to the limitations of
this
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Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a)
or Section 2.4(a), as applicable. In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding
any other provision of this Section 2.2 or Section 2.4, if the underwriter
advises the Company that marketing factors require a limitation of the number
of securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may
be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders);
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting and registration shall not be reduced unless
all other securities of the Company are first entirely excluded from the,
underwriting and registration. Any Registrable Securities excluded. or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
(ii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to a public offering;
provided that the Company makes reasonable good faith efforts to cause such
registration statement to become effective;
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of
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the Board stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of the
Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period;
or
(iv) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS.
The Company shall notify all Holders of Registrable Securities in
writing at least fifteen (15) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of
the Securities Act) and will afford each such Holder an opportunity to
include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
it shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder.
If a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities
in any subsequent registration statement or registration statements as may be
filed by the Company with respect to offerings of its securities, all upon
the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which.
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing
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factors require a limitation of the number of shares to be underwritten, the
number of shares that may be included in the underwriting shall be allocated,
first, to the Company; second, to the Holders on a pro rata basis based on
the total number of Registrable Securities held by the Holders; and third, to
any shareholder of the Company (other than a Holder) on a pro rata basis. No
such reduction shall (i) reduce the securities being offered by the Company
for its own account to be included in the registration and underwriting, or
(ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
shareholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding
sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which
may be included by Holders without the written consent of Holders of not less
than a majority of the Registrable Securities proposed to be sold in the
offering. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company
and the underwriter, delivered at least ten (10) business, days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation,
the partners, retired partners and shareholders of such Holder, or the
estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing person shall be deemed to be a
single "HOLDER", and any pro rata reduction with respect to such "HOLDER"
shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "HOLDER," as
defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under
this Section 2.3 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.5 hereof
2.4 FORM S-3 REGISTRATION.
In case the Company shall receive from any Holder or Holders of
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
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(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated
to effect any such registration, qualification or compliance pursuant to this
Section 2.4
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at
an aggregate price to the public of less than one million dollars
($1,000,000);
(iii) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 -registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than ninety (90) days
after receipt of the request of the Holder or Holders under this Section 2.4;
provided that such right to delay a request shall be exercised by the Company
not more than once in any twelve (12) month period;
(v) if, at the time of the request, there is less
than one-third of the Shares (or shares of Common Stock issuable upon
conversion thereof) outstanding; or
(vi) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
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(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. Registrations effected pursuant to
this Section 2.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION.
Except as specifically provided herein, all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 2.2 or any registration under Section 2.3 or Section 2.4
herein shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses
of any registration proceeding begun pursuant to Section 2.2 or 2.4, the
request of which has been subsequently withdrawn by the Initiating Holders
unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of two-thirds of Registrable
Securities agree to forfeit their right to one requested registration
pursuant to Section 2.2 or Section 2.4, as applicable, in which event such
right shall be forfeited by all Holders). If the Holders are required to pay
the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If
the Company is required to pay the Registration Expenses of a withdrawn
offering pursuant to clause (a) above, then the Holders shall not forfeit
their rights pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY.
Whenever required to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to thirty (30)
days or, if earlier, until the Holder or Holders have completed the
distribution related thereto. The Company shall not be required to file,
cause to become effective or maintain the effectiveness of any registration
statement that contemplates a
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distribution of securities on a delayed or continuous basis pursuant to Rule
415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period set
forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any,
and (ii) a letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily
given by
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independent certified public accountants to underwriters in an
underwritten public offering addressed to the underwriters.
2.7 TERMINATION OF REGISTRATION RIGHTS.
All registration rights granted under this Section 2 shall terminate
and be of no further force and effect eight (8) years after the date of the
Company's Initial Offering. In addition, a Holder's registration rights shall
expire, if (a) the Company has completed its Initial Offering and is subject
to the provisions of the Exchange Act, (b) such Holder (together with its
affiliates, partners and former partners) holds less than one percent (1%) of
the Company's outstanding Common Stock (treating all share of convertible
Preferred Stock on an as converted basis) and (c) all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners, former
partners, members and former members) may be sold under Rule 144 during any
ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included. in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's
obligation to initiate such registration as specified in Section 2.2 or
Section 2.4, whichever is applicable.
2.9 INDEMNIFICATION.
In the event any Registrable Securities are included in a registration
statement under Sections. 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any
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underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "VIOLATION") by the Company: (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred- by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
2.9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, nor
shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by such Holder, partner, officer, director, underwriter or controlling person
of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers
and each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors
or officers or any person who controls such Holder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Holder,
or partner, director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation by the
Holder, in each case to the extent (and only to the extent) that such
Violation occurs in
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reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such
Holder will pay as incurred any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person, underwriter
or other Holder, or partner, officer, director or controlling person of such
other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there
was such a Violation; provided, however, that the indemnity agreement
contained in this Section 2.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 2.9 of notice of the commencement of any indemnifiable action
(including any governmental action), such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party under this
Section 2.9, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice. to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.9.
(d) If the indemnification provided for in this Section 2.9
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified
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party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided that in no event
shall any contribution by a Holder hereunder exceed the net proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this agreement.
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.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to cause the Company to register Registrable Securities
pursuant to this Section 2 may be assigned by a Holder to a transferee or
assignee of Registrable Securities which (a) is a subsidiary, parent, general
partner, limited partner, retired partner, member or retired member of a
Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder, or (c) acquires at least five hundred thousand (500,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10)
days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (ii) such transferee
shall agree to be subject to all restrictions set forth in this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS.
Any provision of this Section 2 may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the Holders of at least two-thirds of the Registrable Securities
then outstanding. Any amendment or waiver effected in accordance with this
Section 2.11 shall be binding upon each Holder and the Company. By acceptance
of any benefits under this Section 2, Holders of Registrable Securities
hereby agree to be bound by the provisions hereunder.
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2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS.
After the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of two-thirds of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such
holder registration rights pari passu or senior to those granted to the
Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell, transfer,
make any short sale of, grant any option for the purchase of, or enter into
any hedging or similar transaction with the same economic effect as a sale,
any Common Stock (or other securities) of the Company held by such Holder
(other than those included in the registration) for a period specified by the
representative of the underwriters of Common Stock (or other securities) of
the Company not to exceed one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that:
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company and holders of
at least two percent (2%) of the Company's voting securities enter into
similar agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of
the underwriters of Common Stock (or other securities) of the Company, each
Holder shall provide, within ten (10) days of such request, such information
as may be required by the Company or such representative in connection with
the completion of any public offering of the Company's securities pursuant to
a registration statement filed under the Securities Act. The obligations
described in this Section 2.13 shall not apply to a registration relating
solely to employee benefit plans on Form S-1 or Form S-8 or similar forms
that may be promulgated in the future, or a registration relating solely to a
Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to
the foregoing restriction until the end of said one hundred eighty (180) day
period.
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2.14 RULE 144 REPORTING.
With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which may 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 SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times after the effective
date of the first registration filed by the Company for an offering of its
securities to the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of 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 as a Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing it to sell any such securities without
registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered
in accordance with generally accepted accounting principles consistently
applied, and will set aside on its books all such proper accruals and
reserves as shall be required under generally accepted accounting principles
consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company beginning with the fiscal year of 1999, and in any event
within ninety (90) days thereafter, the Company will furnish each Investor a
balance sheet of the Company, as at the end of such fiscal year, and a
statement of income and a statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements
PAGE 19
<PAGE>
shall be accompanied by a report and opinion thereon by independent public
accountants of national standing selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within
forty-five (45) days thereafter, a balance sheet of the Company as of the end
of each such quarterly period, and a statement of income and a statement of
cash flows of the Company for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles,
with the exception that no notes need be attached to such statements and
year-end audit adjustments may not have been made.
(d) The Company will furnish each such Investor (i) at least
thirty (30) days prior to the beginning of each fiscal year an annual budget
and operating plans for such fiscal year (and as soon as available, any
subsequent revisions thereto); and (ii) as soon as practicable after the end
of each month, and in any event within twenty (20) days thereafter, a balance
sheet of the Company as of the end of each such month, and a statement of
income and a statement of cash flows of the Company for such month and for
the current fiscal year to date, including a comparison to plan figures for
such period, prepared in accordance with generally accepted accounting
principles consistently applied, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.
3.2 INSPECTION RIGHTS.
Each Investor shall, have the right to visit and inspect any of the
properties of the Company or any of its subsidiaries, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers, and to review such information as is reasonably requested all
at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated under this Section
3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS.
Each Investor agrees to use, and to use its best efforts to insure
that its authorized representatives use, the same degree of care as such
Investor uses to protect its own confidential information to keep
confidential any information furnished to it which the Company identifies as
being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
PAGE 20
<PAGE>
confidential information to any partner, subsidiary or parent of such
Investor for the purpose of evaluating its investment in the Company as long
as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the conversion of the Shares, all Common Stock
issuable from time to time upon such conversion.
3.5 KEY MAN INSURANCE.
The Company will use its commercially reasonable efforts to maintain
in full force and effect term life insurance in the amount of two million
dollars ($2,000,000) on the lives of each of Ted Spooner and Kirk Wright,
naming the Company as beneficiary.
3.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.
The Company shall require all employees and consultants to execute and
deliver a Proprietary Information and Inventions Agreement in the form
attached to the Purchase Agreement.
3.7 ASSIGNMENT OF RIGHT OF FIRST REFUSAL.
In the event the Company elects not to exercise any right of first
refusal or right of first offer the Company may have on a proposed transfer
of any of the Company's outstanding capital stock pursuant to the Company's
charter documents, by contract or otherwise, the Company shall, to the extent
it may do so, assign such right of first refusal or right of first offer to
each Investor. In the event of such assignment, each Investor shall have a
right to purchase its pro rata portion (based on its percentage ownership of
all Registrable Securities held by the Investors) of the capital stock
proposed to be transferred.
3.8 DIRECTORS' EXPENSES.
The Company shall reimburse all non-employee members of the Company's
Board of Directors for their reasonable expenses incurred in connection with
their attendance at board meetings.
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<PAGE>
3.9 INDEMNIFICATION.
The Company will indemnify members of the Board of Directors to the
broadest extent permitted by applicable law and will indemnify each Investor
for any claims brought against the Investors by any third party (including
any other shareholder of the Company) solely as a result of purchasing the
Shares.
3.10 STOCK VESTING.
Unless otherwise approved by the Board of Directors, all stock options
and other stock equivalents issued after the date of this Agreement to
employees, directors, consultants and other service providers in connection
with their services to or with the Company (the "SERVICE STOCK") shall be
subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the twelfth (12th) month following the earlier of
the date of issuance or such person's services commencement date with the
Company, and (b) seventy-five percent (75%) of such stock shall vest over the
remaining thirty-six (36) months. With respect to any shares of Service Stock
purchased by any such person, the Company's repurchase option shall provide
that upon such person's termination of employment or service with the
Company, with or without cause, the Company or its assignee (to the extent
permissible under applicable securities laws and other laws) shall have the
option to purchase at cost any unvested shares of Service Stock held by such
person.
3.11 QUALIFIED SMALL BUSINESS.
The Company will use reasonable efforts to comply with the reporting
and record-keeping requirements of Section 1202 of the Code, any regulations
promulgated thereunder and any similar state laws and regulations, and agrees
not to repurchase any stock of the Company if such repurchase would cause the
Shares not to so qualify as "QUALIFIED SMALL BUSINESS STOCK," so long as the
Company's Board of Directors determines that it is in the best interests of
and not unduly burdensome to the Company to comply with the provisions of
Section 1202 of the Code.
3.12 YEAR 2000.
The Company shall use its commercially reasonable best efforts to
ensure that the computer systems and software owned or licensed by the
Company after the date hereof are able to accurately process date data,
including, but not limited to, calculating, comparing and sequencing from,
into and between the twentieth century (through 1999), the year 2000 and the
twenty-first century, including leap year calculations.
PAGE 22
<PAGE>
3.13 TERMINATION OF COVENANTS.
All covenants of the Company contained in Section 3 of this Agreement
shall expire and terminate as to each Investor upon the earlier of (i) the
effective date of the registration statement pertaining to the Initial
Offering or (ii) upon (a) the sale, lease or other disposition of all or
substantially all of the assets of the Company or (b) an acquisition of the
Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of
the corporation or other entity surviving such transaction (a "CHANGE IN
CONTROL"); provided that this Section 3.13 (ii)(b) shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Company.
SECTION 4. MISCELLANEOUS
4.1 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of
the State of Oregon as applied to agreements among Oregon residents entered
into and to be performed entirely within Oregon.
4.2 SURVIVAL.
The representations, warranties, covenants, and agreements made herein
shall survive any investigation made by any Holder and the closing of the
transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
4.3 SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors, and administrators of the parties hereto and shall inure to
the benefit of and be enforceable by each person who shall be a holder of
Registrable Securities from time to time; provided, however, that prior to
the receipt by the Company of adequate written notice of the transfer of any
Registrable Securities specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder, of such
PAGE 23
<PAGE>
shares in its records as the absolute owner and holder of such shares for all
purposes, including the payment of dividends or any redemption price.
4.4 ENTIRE AGREEMENT.
This Agreement, the Exhibits and Schedules hereto, the Purchase
Agreement and the other documents delivered pursuant thereto constitute the
full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in
any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein. This Agreement amends,
restates and supersedes in its entirety the terms and conditions set forth in
the Original Agreement, and the Original Agreement shall be of no further
force or effect.
4.5 SEVERABILITY.
In the event one or more of the provisions of this Agreement should,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
4.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of the Company and
the holders of at least two-thirds of the Registrable Securities.
Notwithstanding the foregoing, any amendment that would adversely affect a
Holder in a manner different than other Holders shall require the consent of
the affected Holder.
(b) Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders under this Agreement may be
waived only with the written consent of the Holders of at least two-thirds of
the Registrable Securities. Notwithstanding the foregoing, any waiver that
would adversely affect a Holder in a manner different than other Holders
shall require the consent of the affected Holder.
(c) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include additional
purchasers of Shares as "INVESTORS," "HOLDERS" and parties hereto.
PAGE 24
<PAGE>
4.7 DELAYS OR OMISSIONS.
It is agreed that no delay or omission to exercise any right, power,
or remedy accruing to any Holder, upon any breach, default or noncompliance
of the Company under this Agreement shall impair any such right, power, or
remedy, nor shall it be construed to be a waiver of any such breach, default
or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under this Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and
not alternative.
4.8 NOTICES.
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to
be notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on the signature
pages hereof or Exhibit A hereto or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
4.9 ATTORNEYS' FEES.
In the event that any suit or action is instituted to enforce any
provision in this Agreement, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
4.10 TITLES AND SUBTITLES.
The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
PAGE 25
<PAGE>
4.11 ADDITIONAL INVESTORS.
Notwithstanding anything to the contrary contained herein, if the
Company shall issue additional shares of its Preferred Stock pursuant to the
Purchase Agreement, any purchaser of such shares of Preferred Stock may become
a party to this Agreement by executing and delivering an additional counterpart
signature page to this Agreement and shall be deemed an "Investor" hereunder.
4.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
PAGE 26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
CORILLIAN CORPORATION BATTERY VENTURES V, L.P.
By: Battery Partners V, LLC
its General Partner
By: /s/ Ted F. Spooner By: /s/ R.G. Barrett
--------------------------------- -----------------------------------
TED SPOONER, CHIEF EXECUTIVE Member Manager
OFFICER
Address: 3601 SW Murray Boulevard BATTERY VENTURES CONVERGENCE, L.P.
Suite 300 By: Battery Convergence Partners,
Beaverton, OR 97005 LLC,
its General Partner
By: /s/R.G. Barrett
-----------------------------------
Member Manager
BATTERY INVESTMENT PARTNERS V, LLC
By: /s/ R.G. Barrett
-----------------------------------
Member Manager
/s/ Jay N. Whipple III
--------------------------------------
JAY N. WHIPPLE III
/s/ John Abraham
--------------------------------------
JOHN ABRAHAM
FINANCIAL TECHNOLOGY VENTURES, L.P.
By: /s/ Scott Wu
-----------------------------------
Managing Member
PAGE 27
<PAGE>
FINANCIAL TECHNOLOGY VENTURES (Q), L.P.
By: /s/ Scott Wu
------------------------------------
Managing Member
BCI GROWTH V, LLC
By: Glenpointe Associates V, LLC,
------------------------------------
General Partner
By: /s/
------------------------------------
Managing Member
BCI INVESTORS, LLC
By: /s/
------------------------------------
Managing Member
DEITCH LIMITED
By: /s/ Richard Deitch III
------------------------------------
Rick Deitch
/s/ Richard J. Barrett
---------------------------------------
RICHARD J. BARRETT
/s/ Steven L. Ossad
---------------------------------------
STEVE L. OSSAD
/s/ Douglas A. Fordyce
---------------------------------------
DOUGLAS A. FORDYCE
PAGE 28
<PAGE>
/s/ T.E. Sullivan
---------------------------------------
THOMAS E. SULLIVAN
/s/ Devlin Lander
---------------------------------------
DEVLIN LANDER
/s/ Erik M. Jensen
---------------------------------------
ERIK M. JENSEN
/s/ Anthony M. DeLuise
---------------------------------------
ANTHONY M. DELUISE
/s/ Jess G. Hibbard
---------------------------------------
JESSE G. HIBBARD
/s/ Patrick M. McCloskey
---------------------------------------
PATRICK M. MCCLOSKEY
PAGE 29
<PAGE>
ADDITIONAL SIGNATURE PAGE TO CORILLIAN CORPORATION AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ David Scanlan
------------------------------------
David Scanlan
Vice President
ACKNOWLEDGED AND AGREED
AS OF OCTOBER 26, 1999:
CORILLIAN CORPORATION
By: /s/ Ted F. Spooner
---------------------------------
TED SPOONER, CHIEF EXECUTIVE
OFFICER
PAGE 30
<PAGE>
ADDITIONAL SIGNATURE PAGE TO CORILLIAN CORPORATION
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
WACHOVIA CAPITAL INVESTMENTS, INC.
By: /s/
-----------------------------------
Lawrence J. DeAngelo
Senior Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
ACKNOWLEDGED AND AGREED
AS OF NOVEMBER 12, 1999:
CORILLIAN CORPORATION
By: /s/ Ted F. Spooner
-----------------------------------
TED SPOONER, CHIEF EXECUTIVE
OFFICER
PAGE 31
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
SERIES A INVESTORS
- ------------------
Jay N. Whipple III
135 South LaSalle Street, Suite 2460
Chicago, IL 60603
SERIES B INVESTORS
- ------------------
Battery Ventures V, L.P.
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404.
Battery Ventures Convergence Fund, L.P.
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404
Battery Investment Partners V, LLC
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404
John Abraham
Add-Vision
1305 Palmetto Avenue, Suite D
Pacifica, CA 94044
SERIES C INVESTORS
- ------------------
Battery Ventures V, L.P.
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404.
Battery Ventures Convergence Fund, L.P.
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404
Battery Investment Partners V, LLC
901 Mariners Island Boulevard, Suite 475
San Mateo, CA 94404
PAGE 1
<PAGE>
Financial Technology Ventures, L.P.
601 California Street, Suite 2200
San Francisco, CA 94108
Financial Technology Ventures Q, L.P.
601 California Street, Suite 2200
San Francisco, CA 94108
BCI Investors, LLC
Glenpointe Centre West
Teaneck, NJ 07666
BCI Growth V, LLC
Glenpointe Centre West
Teaneck, NJ 07666
Deitch Limited
3505 Drexel
Dallas, TX 75205
Richard J. Barrett
1 East 66th Street, #14A
New York, NY 10021
Steve L. Ossad
3875 Clay Street
San Francisco, CA 94118
Erik M. Jensen
44 West 62nd Street, #25B
New York, NY 10023
Douglas A. Fordyce
4406 Northcrest Road
Dallas, TX 75229
Anthony M. DeLuise
401 East 85th Street, #17B
New York, NY 10028
PAGE 2
<PAGE>
Thomas E. Sullivan
3615 Yarrow Point Road
Yarrow Point, WA 98004
Jesse G. Hibbard
906 Allen Street, #1313
Dallas, TX 75204
Devlin Lander
2331 Pacific Avenue
San Francisco, CA 94115
Patrick M. McCloskey
4 Crows Nest
Bronxville, NY 10708
First Union Capital Partners, Inc.
One First Union Center, TW-5
Charlotte, NC 28288-0732
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York. NY 10072
Wachovia Capital Investments, Inc.
c/o Wachovia Capital Associates, Inc.
191 Peachtree Street, 26th Floor
Atlanta, GA 30303
PAGE 3
<PAGE>
CORILLIAN CORPORATION
1997 STOCK OPTION PLAN
(AS AMENDED AND RESTATED APRIL 15, 1999)
1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.
(a) The Corillian Corporation 1997 Stock Option Plan (the "Plan")
is hereby adopted as of October 1, 1997, subject to shareholder approval.
(b) The purpose of the Plan is to give employees, directors,
officers, consultants and advisors of Corillian Corporation (the "Company")
and its affiliates an opportunity to purchase shares of the Common Stock of
the Company (the "Stock"). It is intended that some of the options granted
to employees of the Company will qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code as it is now in effect or as it may
hereafter be amended (the "Code"). The Plan is adopted in the belief that
providing employees, directors, officers, consultants and advisors of the
Company with a stake in the Company's successful operation will act as an
incentive to them to expand and improve the profit position of the Company
and will materially aid the Company in obtaining and retaining such persons.
(c) The term "affiliates" means parent or subsidiary corporations
as defined in Code Section 425, including parents or subsidiaries which
become such after adoption of the Plan.
2. SHARES SUBJECT TO THE PLAN.
(a) Options may be granted under the Plan to purchase an aggregate
of not more than six million three hundred sixty-five thousand six hundred
ninety-two (6,365,692) shares of Stock. Shares subject to the unexercised
portion of an option which expires, is surrendered or for any other reason
ceases to be exercisable may again be made subject to option under the Plan.
(b) If there is any change in the Stock through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend or other change in the corporate structure of the Company,
appropriate adjustments shall be made by the Board of Directors in the
aggregate number of shares subject to the Plan and the number of shares and
the price per share subject to outstanding options, to preserve, but not to
increase, the benefits of the optionees. If the Company is not the surviving
corporation in any merger, consolidation or reorganization, every option
outstanding under the Plan shall terminate as of the effective date of such
merger, consolidation or
PAGE 1
<PAGE>
reorganization, unless the surviving corporation (subject to applicable
provisions of the Code) issues a new option therefor or assumes (with
appropriate changes) the existing option.
3. ELIGIBILITY.
(a) The Board of Directors shall designate those employees, directors,
officers, consultants and advisors of the Company who shall be eligible to have
granted to them the options provided for by the Plan. The Board of Directors
shall also determine, at the time of grant, which options granted to employees
of the Company shall be treated as incentive stock options.
(b) The aggregate fair market value (determined at the times the
options are granted) of the shares of Stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year (under all incentive stock option plans of the Company and its
affiliates) shall not exceed One Hundred Thousand Dollars ($100,000).
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board of Directors. The Board
shall have full power to grant options, construe and interpret the Plan,
prescribe, amend and rescind rules and regulations relating to the Plan and
make all other determinations necessary or advisable for administration of
the Plan. The Board shall exercise its powers with respect to incentive stock
options only in a manner consistent with the meaning of Code Section 422.
All decisions, determinations and interpretations of the Board shall be
binding on all optionees.
5. TERMS AND CONDITIONS OF OPTIONS.
(a) Each option granted pursuant to the Plan shall be evidenced by
a written agreement (the "Option Agreement") executed by the Company and the
optionee, which shall contain terms and conditions consistent with the terms
of the Plan as determined by the Board of Directors.
(b) An option shall be exercisable, during the lifetime of the
optionee, only by the optionee and only during the option period set forth in
the Option Agreement. The option period for an incentive stock option shall
not extend for more than ten (10) years from the date such option is granted;
if, however, the optionee currently holds more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company, such
option period shall not extend for more than five (5) years from the date
such incentive stock option is granted.
PAGE 2
<PAGE>
(c) The exercise price of an option shall be not less than the fair
market value of the Stock covered by such option on the date such option is
granted. However, if the optionee currently holds more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company, the purchase price of an incentive stock option shall be not less
than one hundred ten percent (110%) of the fair market value of the Stock
covered by such incentive stock option on the date such option is granted.
(d) Options are not transferrable otherwise than by will or the
laws of descent and distribution, as set forth in the Option Agreement.
6. USE OF PROCEEDS.
Proceeds realized from the sale of Stock upon exercise of options
granted under the Plan shall constitute general funds of the Company.
7. SUSPENSION, TERMINATION OR AMENDMENT OF THE PLAN.
The Board of Directors may suspend, terminate or amend the Plan. No
action of the Board to amend the Plan in any of the following respects shall
be effective without prior shareholder approval:
(a) to increase the maximum number of shares subject to the
Plan (except as provided in Subsection 2(b)); or
(b) to make any change in the Plan the effect of which would
be to disqualify incentive stock options granted under the Plan from
favorable tax treatment as "incentive stock options" under the Code.
The Plan shall terminate automatically on September 29, 2007, unless
terminated prior to such date. No option may be granted during any
suspension or after the termination of the Plan, and no such amendment,
suspension or termination of the Plan shall, without the optionee's consent,
alter or impair any rights or obligations under any option previously granted
under the Plan.
PAGE 3
<PAGE>
CORILLIAN CORPORATION
VOYAGER LICENSE AGREEMENT
Effective Date: December 21, 1999
<TABLE>
<S> <C>
Wachovia Operational Services Corporation ("Client") Corillian Corporation ("Corillian")
809 W. 4-1/2 Street 3601 SW Murray Blvd., Suite 300
Winston-Salem, North Carolina 27150 Beaverton, Oregon 97005
(503) 627-0729
FAX (503) 641-5575
</TABLE>
On the terms and subject to the conditions set forth below Corillian and Client
(each a "Party" and collectively the "Parties") hereby enter into this License
Agreement (the "Agreement").
TERMS AND CONDITIONS
1. GRANT OF LICENSE
1.1 Corillian hereby grants to Client a non-exclusive, non-transferable,
perpetual license to use, as more particularly described in this
Section 1 and in Section 2 hereof, production copies of certain
computer software programs and associated documentation (the
"Products"), as more particularly described in the Voyager Product
Schedule (the "Product Schedule") executed contemporaneously and made a
part of this Agreement, for the benefit of itself and its Affiliates
(as defined in Paragraph 1.2 below).
1.2 Clients license to use the Products (including any third party software
sublicensed through Corillian ("Third Party Software")) under this
Agreement may not be assigned, sublicensed or otherwise transferred,
whether by operation of law or otherwise, without Corillian's prior
written consent which may be granted or withheld in Corillian's sole
discretion; provided, however, that Client may assign its rights under
this Agreement (without amendment or alteration of such rights) to an
Affiliate of Client provided that Client gives Corillian written notice
of such assignment and that such Affiliate agrees in writing to be
bound by the terms of this Agreement and to assume Client's obligations
hereunder. For purposes of this Agreement, the term "Affiliate" means
an entity directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with an entity. For
purposes of this definition, "control" shall mean the right to vote or
direct the voting of at least fifty percent (50%) of the common stock
or other ownership interest in the entity. An "Affiliate" shall also
include any entity by or for which the Products had been used while
such Affiliate was controlling, controlled by or under common control
with Client, which, by reason of a spin-off, public offering, or the
like, ceases to be controlling, controlled by or under common control
with Client, provided, however, that such Affiliate shall cease to be
an Affiliate in the event that an entity which is not an Affiliate
subsequently acquires all of the common stock of such Affiliate. An
affiliate shall not include an entity that acquires all of the common
stock of Client, or an entity that acquires all of the common stock of
the entity that owns all of the common stock of Client, unless such
entity was an Affiliate of Client prior to such acquisition. In the
event of such an acquisition, if the acquiring entity so desires, the
parties agree to negotiate in good faith a license agreement for the
Products, under which the acquiring entity would receive a credit for
all license and other fees paid pursuant to Section 11 of the Product
Schedule.
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1.3 No later than December 30, 1999, the parties, along with a mutually
agreed upon escrow agent, agree to execute a Source Code Escrow
Agreement (the "Escrow Agreement") substantially in the form attached
as Exhibit A to this Agreement, and agree to maintain the same in
effect for the term of the Agreement. The Escrow Agreement shall
provide for the ongoing escrow of (i) the source code version of all
Products in such form that will allow Client, upon release, to build
and compile useable object code (ii) the similar source code version of
any and all updates, modifications, revisions and enhancements to be
delivered pursuant to this Agreement, as well as any other Products
provided pursuant to the Product Schedule, Support Services Schedule,
or otherwise pursuant to any agreement with the Client, and (iii) any
and all documentation developed by Corillian or in its possession
relating to the applicable source code (the "Source Code"). The Escrow
Agreement shall provide for the release of the Source Code for any
reason at any time upon written request by Client, in which event
certain obligations to pay an exit fee may come into effect as more
particularly described herein. In addition, the Escrow Agreement shall
provide for the provision by Corillian of certain knowledge transfer
and training services upon release of the Source Code from escrow and
for the continuous updating of the Source Code so that the Source Code
in escrow corresponds to the Products in use by Client. Upon any
release of the Source Code from Escrow, Client shall be granted a
license to the Source Code pursuant to the terms of the Escrow
Agreement, and the Source Code shall become part of the Products for
all purposes of this Agreement. After such release, Corillian will
provide Client directly with new versions of the Source Code
incorporating any Product modification, upgrades or enhancements or
other change to the Products made by Corillian pursuant to the Product
Schedule, Support Services Schedule or otherwise pursuant to any other
agreement with Client within thirty (30) days of acceptance by Client
of such modifications, upgrades or enhancements or other changes. In
the event the parties are unable, by December 30, 1999, to execute such
an Escrow Agreement, Client shall have the right to terminate this
Agreement and shall receive a full refund of all fees (including, but
not limited to, license, implementation and custom engineering) paid
pursuant to Section 11 of the Product Schedule, and any other fees paid
hereunder.
1.4 The license grant provided under this Agreement is an enterprise
license. Client may utilize any number of copies of the Products in
test, stress, development, production and business continuity
environments at any facility of the Client or its Affiliates as the
Client may elect. There shall be no license limitation on the number of
customers accessing or utilizing the Products licensed herein to
Client.
2. SCOPE OF USE
2.1 The Products may be used only for, by, or on behalf of, Client and its
Affiliates by employees of Client or its Affiliates or agents, vendors,
contractors and consultants (including third party hosts) of Client or
its Affiliates ("Consultants") at any facility of the Client or its
Affiliates to: (i) process Client's or its Affiliates' own data in a
production environment, including a backup mirrored system, (ii) to
maintain, support, modify, enhance or upgrade the Products (iii) to
otherwise perform testing and stress testing and development and (iv)
to establish, test and operate a business continuity or off-site
disaster recovery system. Client may not make any other use of the
Products without the prior written consent of Corillian which may be
granted or withheld in Corillian's sole discretion.
2.2 The parties agree that Client may, at its election, engage a Consultant
or Consultants to use and operate or host the Products on behalf of
Client or its Affiliates consistent with the terms and conditions as
set forth herein, and that in such case the Products may be used at a
facility owned or controlled by such Consultant or Consultants.
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2.3 Corillian and Client agree to negotiate in good faith the terms and
conditions for a Private Label or Servicing Agreement under which
Client would have the right to sublicense the Products to certain
designated institutions, and under which Client would have the right to
use the Products to process data and provide other services to third
parties in a service bureau environment.
2.4 Except as set forth in Section 1.1, 1.2 and 4.1 hereof, and except as
may be provided in any Private Label or Servicing Agreement as set
forth in Section 2.3 hereof, Client will not sublicense, sell, rent,
lease, give, transfer, assign, convey or otherwise dispose of any
portion of the Products, including any Third-Party Software, including,
but not limited to, any enhancement or modification thereto.
3. FEES AND EXPENSES
3.1 Client shall pay Corillian the fees and expenses set forth in Section
11 of the Product Schedule, in accordance with the schedule of payments
set forth in such Product Schedule.
3.2 Any federal, state, excise, and local government fees, assessments,
charges, and taxes connected with Client's license and use of the
Products, other than taxes based upon the net income of Corillian,
shall be the responsibility of Client.
4. PROPRIETARY RIGHTS
4.1 Corillian retains and reserves title and all ownership rights to the
Products. All general modifications, enhancements and releases provided
to Client pursuant to the Support Services Schedule between Corillian
and Client as well as modifications and enhancements made specifically
for Client and modifications and enhancements made by Client shall be
considered as part of the Products and owned by Corillian; provided,
however, that in the event that Client terminates support pursuant to
Section 13 of the Support Services Schedule, or pursuant to Section
6.2, 11.2, 11.3 or 15 hereof, or pursuant to Section 7 or 8 of the
Product Schedule, or in the event Corillian terminates support pursuant
to Section 12.2 of the Support Services Schedule, all modifications and
enhancements made thereafter specifically by or on behalf of Client
shall be owned solely by Client, but such ownership shall only
encompass the specific code modification or enhancement and does not
include any of the underlying code to the Products The parties agree to
negotiate in good faith the ownership of any modifications or
enhancements which in the future may be developed by Corillian for
Client pursuant to any engagement for additional custom engineering
services. All physical documents and media containing Products sent to
Client shall be deemed to be leased and not sold and their use
licensed. Client acknowledges that this Agreement conveys a limited
license, as expressed in this Agreement, and does not convey title or
any ownership rights to the Products. Excepting the foregoing and all
other work or services performed by Corillian pursuant to the
Agreements, including any subsequent Change Orders, Amendments or
Addenda thereto or related Work Orders, the parties acknowledge and
agree that Client is and will be developing or will be having developed
for it certain applications and interfaces that are complimentary to or
are used in conjunction with the Products as a part of an integrated
suite of financial and other services more broadly known as the "Prism
Project." The parties acknowledge and agree that such applications,
interfaces, discoveries, developments, concepts and other intellectual
property associated with the Prism Project shall be the sole property
of Client.
4.2 Client will not delete or in any manner alter the notices of
intellectual property rights of Corillian (or of the vendor of any
Third-Party Software licensed through Corillian) appearing on or
resulting from use of the Products delivered to Client. As a condition
of the license
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rights granted to Client in this Agreement, Client will reproduce and
display such notices on each copy it makes of any Product.
5. CONFIDENTIAL INFORMATION
5.1 Corillian and Client acknowledge that in order to perform the services
called for in this Agreement, it shall be necessary for each party to
disclose to the other certain Confidential Information, as defined in
Section 5.2 hereof. For purposes of this Section, a party disclosing
Confidential Information shall be referred to as the "disclosing party"
and a party receiving Confidential Information shall be referred to as
a "receiving party". The receiving party recognizes, acknowledges and
agrees that the Confidential Information of the disclosing party is a
special, valuable and unique asset of the disclosing party, its
affiliate(s) and its Consultant(s) which is considered secret and is
disclosed to the receiving party in confidence. The receiving party
agrees to take all reasonable precautions to prevent any portion of
disclosing party's Confidential Information, in any form or medium,
from being disclosed or made available by the receiving party or by any
of the receiving party's employees to any other person, firm, or
corporation except as is expressly permitted herein. In no event shall
the receiving party take precautions any less stringent than those
employed to protect its own trade secrets and proprietary information.
The receiving party will use the disclosing party's Confidential
Information only for the purposes set forth in this Agreement. The
receiving party agrees that it shall not disclose, transfer, use, copy
or allow access to any such Confidential Information of the disclosing
party to any employees or any third parties, including Consultants,
except for those who have a need to know such Confidential Information
in order to accomplish the requirements of this Agreement and who are
otherwise legally bound by obligations of confidentiality and
limitation of use sufficient to give effect to this Section 5, except
as otherwise permitted in this Agreement. The receiving party will
.promptly return or certify the destruction of the Confidential
Information of the disclosing party and all copies or extractions
thereof to the disclosing party within five days of the termination of
this Agreement. The receiving party shall promptly advise the other in
writing of any misappropriation or misuse of the Confidential
Information of the disclosing party by any person which may come to a
receiving party's attention, and shall cooperate with the disclosing
party in any action relating thereto.
5.2 As used herein, the term "Confidential Information" shall mean any
information about a disclosing party's (or its affiliates' or
Consultants') customers, data, operations, products, plans, processes,
programs (including software and data processing programs), procedures,
formulas, or other information that is confidential and proprietary to
a disclosing party (or its affiliates or Consultants). Confidential
Information shall not include any information which (i) is or becomes
generally available to the public other than as a result of disclosure
by the receiving party, its employees or agents; (ii) was within the
receiving party's possession on a non-confidential basis prior to its
disclosure by the disclosing party to the receiving party pursuant
hereto; (iii) is lawfully obtained by the receiving party from a third
party without any obligation of by the receiving party to maintain the
information as confidential or proprietary and without a known breach
of an obligation of confidentiality; (iv) is independently developed by
the receiving party without reference to the Confidential Information
of the disclosing party; or (v) receiving party is required to disclose
by law, regulation or judicial or regulatory order, provided that the
receiving party shall promptly notify the disclosing party of such
requirement so that the disclosing party may have such opportunity as
may be available to seek an appropriate protective order or otherwise
seek to protect the confidentiality of such Confidential Information.
The parties may also disclose each other's Confidential Information to
its internal and external auditors, accountants and attorneys, and to
its regulators. Without limiting the generality of the foregoing,
Corillian acknowledges and agrees that the terms of confidentiality
under this Agreement shall not be construed to limit Client's right to
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independently develop or acquire, or have developed for it, products
concepts, systems or techniques without use of the Confidential
Information that are similar to or compete with the products, concepts,
systems or techniques contemplated by or embodied in the Confidential
Information.
5.3 The parties hereto acknowledge that (i) the restrictions contained in
this Agreement are necessary to protect each of the parties'
proprietary interest in its Confidential Information, (ii) remedies at
law will be inadequate and any violation of these restrictions will
cause irreparable harm or damage to a disclosing party not compensable
in monetary damages and accordingly (iii) a disclosing party shall be
entitled to injunctive relief against any violation by the receiving
party
5.4 The obligations set forth in this Section 5 as they pertain to
Confidential Information shall survive the termination of this
Agreement and shall continue for so long as the relevant information
remains confidential.
6. WARRANTY, REMEDY AND LIMITATION OF LIABILITY
6.1 Corillian represents and warrants as follows:
6.1.1 That the Products are compatible with Client's data processing
system.
6.1.2 That at the time each Component of Products is accepted (as
defined in Section 7 of the Product Schedule) and for a period
of ninety (90) days thereafter, the such Component of the
Products will perform all the functions described in Exhibit 1
to the Product Schedule. Corillian does not warrant that the
Products will operate uninterrupted or error-free.
6.1.3 That Corillian has the right to license the Products to Client
as provided herein and that the Products, as used within the
scope of this Agreement, do not infringe copyright, patent,
trademark or other proprietary rights of a third party.
6.1.4 That the Products provided pursuant to this Agreement and used
by Client and its customers prior to, during or after the
calendar year 2000 include or shall include, at no additional
cost to Client, design and performance capabilities so that
Client shall not experience abnormally ending and/or invalid
and/or incorrect results from their use in the operation of
the business of Client. Furthermore, Corillian represents and
warrants that the Products will under normal use and service,
record, store, process and present calendar dates failing on
or after January 1, 2000, in the same manner, and with the
same functionality, data integrity and performance, as the
Products record, store, process and present calendar dates on
or before December 31, 1999. Corillian warrants that the
Products will lose no functionality with respect to the
introduction of records containing dates falling on or after
January 1, 2000.
The warranty set forth above applies only to the Products.
Corillian cannot, and does not, warrant that any hardware or
software with which the Products interact or to which the
Products are connected will be Year 2000 compliant. If the
Products do not operate, execute or otherwise function
properly as a result of flaws, errors, problems or defects in
hardware or software not provided or supplied by Corillian,
then Corillian shall have no obligations under this warranty.
6.1.5 The warranties provided in Sections 6.1.1, 6.1.2, 6.1.3 and
6.1.4 shall not apply if (i) the Products are used other than
in a manner contemplated by the parties,
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consistent with the features and functions defined in the
Product Schedule and in accordance with Corillian's
instructions, (ii) the Products are altered or modified by
Client without the written approval of Corillian, (iii) if the
Products do not perform because data communication is
interrupted by the action or inaction of Client or a third
party; or (iv) any other cause within the reasonable control
of Client shall cause the alleged breach.
6.1.6 OTHER THAN AS EXPRESSLY STATED IN THIS AGREEMENT, CORILLIAN
MAKES NO OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCTS OR ANY SERVICES PROVIDED IN CONNECTION
WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
6.1.7 The vendors of Third-Party Software make no warranties,
express or implied, to Client.
6.2 Client's remedies are as follows:
6.2.1 In all situations involving performance or non-performance of
the Products, Corillian's liability and Client's remedy shall
be limited to having Corillian supply as soon as practicable
code corrections as required to enable the Products to perform
the functions described in the Product Schedule. If after
sixty (60) days, Corillian is unable to make the Products
operate as warranted, Client may, at its option, (i)
regardless of whether Client shall have previously received
the Source Code pursuant to the Escrow Agreement, discontinue
use of the Products, terminate this Agreement, and the license
granted hereunder and receive a refund of the fees paid for
such license, less the reasonable value of use, calculated
using a three year straight line depreciation (if occurring
during the warranty period, there shall be no deduction for
reasonable use), and cancel all obligations with respect to
payment of custom engineering and implementation fees not
previously incurred prior to notice of termination and
terminate the Support Services Schedule without payment of an
exit fee thereunder and receive a pro-rata refund of fees paid
thereunder; (ii) Client may continue to use the Products with
reductions in the License Fee or Support Services Fee as the
parties may mutually agree shall be fair and equitable or
(iii) continue to use the Products, terminate the Support
Services Schedule, receive a pro-rata refund of the Support
Fees paid thereunder, pay Corillian an exit fee of $1,000,000,
or the amount owing under Section 13.2 of the Support Services
Schedule, whichever is less and shall receive the Source Code
pursuant to the Escrow Agreement, including the knowledge
transfer obligation specified in Section 11 of the Support
Services Schedule and thereunder. In the event that Client has
previously exercised its election to receive the Source Code
pursuant to the Escrow Agreement, Client shall have the same
three remedies available to it. With respect to option (i),
Client shall return to Corillian or certify to Corillian
destruction of all copies of the Source Code thereof within 30
days of notice of termination and with respect to option
(iii), regardless of whether Client shall have previously
exercised its election to receive the Source Code, Corillian
shall complete the knowledge transfer obligation specified in
Section 11 of the Support Services Schedule and under the
Escrow Agreement, if it has not already done so, and until
such completion shall continue to provide problem resolution
services on a time and materials basis, and Client shall pay
the exit fee upon completion of knowledge transfer.
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6.2.2 For personal injury caused by Corillian's fault or negligence,
Client's remedies shall be provided as under applicable law
subject to the limitation contained in section 6.3 below.
6.3 EXCEPT AS SET FORTH IN SECTION 7.1 HEREOF, UNDER NO CIRCUMSTANCES SHALL
EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE PRODUCTS
OR ANY SERVICES PROVIDED IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
ASPECT OF THIS AGREEMENT, INCLUDING LOST REVENUES OR PROFITS, LOSS OF
BUSINESS, OR LOSS OF DATA, REGARDLESS OF WHETHER A CLAIM IS BASED ON
CONTRACT, TORT, OR OTHERWISE, EVEN IF SUCH PARTY WAS ADVISED OR HAD
REASON TO KNOW OF THE POSSIBILITY THEREOF.
6.4 THE PARTIES HAVE AGREED THAT THE LIMITATIONS SPECIFIED IN THIS SECTION
SIX WILL SURVIVE AND APPLY EVEN IF ANY LIMITED REMEDY SPECIFIED IN THIS
AGREEMENT IS FOUND TO HAVE FAILED OF ITS ESSENTIAL PURPOSE.
7. INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS; INDEMNIFICATION
7.1 Corillian agrees to defend, indemnify and hold harmless Client and its
Affiliates against any third-party claims, liabilities, losses,
damages, costs and expenses (including reasonable attorneys' fees)
arising from or in connection with any claim that the Products, as used
within the scope of this Agreement, infringe or otherwise violate or
misappropriate any copyright, patent, trademark or other proprietary
rights of a third party. Notwithstanding the foregoing, Corillian shall
have no obligation to indemnify Client or its Affiliates if any such
third-party claim is caused by a modification or customization of the
Products made by Client or its Affiliates without the written consent
of Corillian, and Corillian shall also have no obligation to indemnify
Client or its Affiliates to the extent such a claim arises out of the
negligence or willful misconduct of Client or its Affiliates.
7.2 In the case of any claim arising under this Section 7 or under Section
8 hereof, (i) the indemnified party shall notify the indemnifying party
in writing within a reasonable time of receipt of written notice of any
such claim, (ii) the indemnifying party shall have control of the
defense and all related negotiations, including settlement
negotiations, provided, however that the indemnifying party shall not
impose any obligations upon the party seeking indemnification in the
absence of such party's written consent, and (iii) the indemnified
party shall provide the indemnifying party with reasonable assistance,
information and authority necessary to perform the above obligations.
Reasonable out-of-pocket expenses incurred by the indemnified party in
providing such assistance will be reimbursed as promptly as practicable
by the indemnifying party.
7.3 If Client's use of any Products under the terms of this Agreement is,
or in Corillian's opinion is likely to be, enjoined due to
infringement, violation or misappropriation claims, then Corillian may,
at its sole option and expense, either: (i) procure for Client the
right to continue using such Products under the terms of this
Agreement; (ii) replace or modify such Products so that they are
non-infringing, violating or misappropriating and substantially
equivalent in function; or (iii) if options (i) or (ii) above cannot be
accomplished despite the reasonable efforts of Corillian, then
Corillian may both:
7.3.1 Terminate Client's rights and Corillian's obligations under
this Agreement with respect to such Products, and
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7.3.2 Refund to Client the unamortized portion of the license fees
paid by Client to Corillian. Amortization is to be calculated
using a five-year straight line depreciation method.
7.4 THE FOREGOING ARE CORILLIAN'S SOLE AND EXCLUSIVE OBLIGATIONS, AND
CLIENT'S SOLE AND EXCLUSIVE REMEDIES, WITH RESPECT TO INFRINGEMENT,
VIOLATION OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY RIGHTS.
7.5 Corillian shall have no obligations under this section 7 with respect
to infringement or misappropriation arising from (i) modifications to
the Products that were not authorized by Corillian, (ii) Product
specifications requested by Client, unless approved by Corillian or
(iii) the use of the Products in combination with products not
provided, recommended or otherwise contemplated by Corillian, unless
Corillian has been given prior written notice of such use and has
approved it in writing, which approval may be granted or withheld in
Corillian's sole discretion.
7.6 The provisions of this Section 7 shall survive the termination of this
Agreement.
8. INDEMNIFICATION BY CLIENT
Client agrees to defend, indemnify and hold harmless Corillian against
any third-party claims, liabilities, losses, damages, costs and
expenses (including reasonable attorneys' fees) arising out of any acts
or omissions of Client in breach of its obligations under this
Agreement.
9. EXPORT RESTRICTIONS
This Agreement is expressly made subject to all laws, regulations, and
orders relating to or other restrictions on, the export of the Products
from the United States of America, which may be imposed from time to
time. Client may not export or re-export the Products, including
Third-Party Software, or Confidential Information of Corillian. The
foregoing restrictions shall not prevent a Client customer located
outside of the United States from accessing the Products to perform
account transactions supported by the Products.
10. MUTUAL RESTRICTION ON EMPLOYEE SOLICITATION
So long as Corillian is performing services under any Support Services
Schedule, neither Client nor Corillian shall either directly or
indirectly, through any person with direct knowledge of the terms of
this Agreement, solicit or offer employment to any of such other
Party's employees, with whom such hiring Party has had contact in the
course of performance of services under such Support Services Schedule
either for its own business or for the business of a third party,
except with the prior written approval of the other. The foregoing
restriction shall not apply to Client in the event Corillian fails to
provide any knowledge transfer or training services required pursuant
to the Support Services Schedule or the Escrow Agreement.
11. TERM AND TERMINATION
11.1 The term of this Agreement and the license granted pursuant to this
Agreement shall commence upon the effective date specified above, or if
not specified, then upon execution of this Agreement by Corillian and
Client. The license granted hereunder is a perpetual license. Corillian
may, in its sole discretion, sooner terminate this Agreement and the
license granted hereunder (i) immediately if Client materially violates
or permits the material violation of any of the provisions of section 5
of this Agreement provided that such violation relates to a disclosure
concerning Corillian's intellectual property rights in the Products, or
(ii) thirty (30)
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days after Corillian notifies Client in writing of any other breach by
Client, provided such breach remains uncorrected thirty (30) days
following receipt by Client of written notification of such breach,
unless such breach is not capable of being cured within such thirty
(30) day period, in which case such cure period shall be reasonably
extended by Corillian. In either event, Client shall receive no refund
of any license fee or other charges paid hereunder.
11.2 If Corillian (i) is the subject of an order for relief under Chapter 7
or Chapter 11 of the Bankruptcy Code; (ii) is operated by a receiver,
custodian, trustee or liquidator or as debtor in possession; (iii)
makes an assignment for the benefit of creditors; or (iv) terminates
substantially all of its ongoing business operations relating to the
Products or is liquidated, Client may upon thirty (30) days prior
written notice (a) sooner terminate this Agreement, the Support
Services Schedule and discontinue use of the Products or (b) terminate
the Support Services Schedule, elect to obtain Source Code pursuant to
the Source Code Escrow Agreement, including knowledge transfer
thereunder and pursuant to the Support Services Schedule, and
thereafter continue to utilize the Products and the Source Code without
payment of an exit fee. The parties agree that, in the event any of the
contingencies set forth in this paragraph shall occur, or in the event
Corillian files a voluntary petition for bankruptcy relief or an
involuntary bankruptcy petition is filed against Corillian and an order
for relief is entered, Client shall have all the rights and obligations
provided to it under 11 U.S.C. Section 365(n).
11.3 In addition, except as otherwise expressly set forth herein, if
Corillian commits a material breach of this Agreement, and such breach
remains uncured thirty (30) days after Client has provided written
notice thereof to Corillian, unless such breach is not capable of being
cured within such thirty (30) day period, in which case such cure
period shall be reasonably extended by Client, Client may, at its
option (i) regardless of whether Client shall have previously received
the Source Code pursuant to the Escrow Agreement, discontinue use of
the Products, terminate this Agreement and cancel all obligations with
respect to payment of custom engineering and implementation fees not
previously incurred prior to notice of termination, and receive a
refund of any license fees for applications not previously accepted and
terminate the Support Services Schedule without payment of an exit fee
and receive a pro-rata refund of fees paid thereunder; (ii) continue to
use the Products with reductions in the License Fee and Support
Services Fee as the parties may mutually agree shall be fair and
equitable, or (iii) continue to use the Products, terminate the Support
Services Schedule, receive a pro-rata refund of the Support Fees paid
thereunder, pay Corillian an exit fee of $[ * ], or the amount owing
under Section 13.2 of the Support Services Schedule, whichever is less
and shall receive the Source Code pursuant to the Escrow Agreement,
including the knowledge transfer obligation specified in Section 11 of
the Support Services Schedule and thereunder. In the event that Client
has previously exercised its election to receive the Source Code
pursuant to the Escrow Agreement, Client shall have the same three
remedies available to it. With respect to option (i), Client shall
return to Corillian all copies of the Source Code or certify the
destruction thereof within 30 days of notice of termination and with
regard to option (iii), regardless of whether Client shall have
previously exercised its election to receive the Source Code, Corillian
shall complete the knowledge transfer obligation specified in Section
11 of the Support Services Schedule and under the Escrow Agreement, if
it has not already done so, and until such completion shall continue to
provide problem
- ----------------------
* Portion has been omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
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resolution services on a time and materials basis and Client shall pay
the exit fee upon completion of knowledge transfer.
11.4 Notwithstanding the termination of this Agreement pursuant to Sections
11.2 or 11.3, Client may not, under any circumstances, sell, disclose,
assign, transfer in any way or dispose of the Products, any part or
portion thereof, or the associated documentation, except as expressly
permitted herein.
12. AUTHORITY; COMPLIANCE WITH LAW
Each Party represents and warrants that (i) it has the power and
authority to enter into this Agreement and has taken all necessary
corporate action to authorize its performance under this Agreement,
(ii) this Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of each such Party, enforceable in
accordance with its terms, (iii) no consent or authorization of, filing
with, or notice to any governmental authority is required in connection
with its performance under this Agreement, and (iv) its entering into
this Agreement or performance by it hereunder will not violate any
federal, state or local licensing or other statute, rule or regulation,
or any contractual obligation of such Party. Each Party agrees to
comply in all material respects with all applicable laws, rules and
regulations in connection with its activities under this Agreement.
Without limiting the generality of the foregoing, Corillian represents
and warrants that the Products, when implemented, will comply, or shall
contain the functionality to permit Client to comply with all federal,
state and local laws and regulations then applicable to the
functionality of and services to be performed by the Products.
13. ESSENTIAL PERSONNEL
The Parties agree that the services of the following Corillian
employees (individually, an "Essential Party" and collectively
"Essential Parties") are essential to the satisfactory performance by
Corillian of the services called for in the Product Schedule: Darrell
Johnsrud, Stephen Schaefer, Terry Ishida and Jeff Grossman. The Parties
further agree that if any Essential Party leaves the employ of
Corillian prior to Client acceptance of all of the Products, as defined
in the Product Schedule, for any reason or is unavailable to continue
to support the performance of services called for herein, in the
Product Schedule or Support Services Schedule, and if substitute
individuals acceptable to Client are not available to continue within
thirty (30) days, Client shall have the rights set forth in Section
11.3 hereof.
14. ARBITRATION
14.1 All disputes and controversies arising out of or in any way related to
this Agreement, the Product Schedule and the Support Services Schedule
shall be submitted to arbitration proceedings, which proceedings shall
be conducted under the commercial rules then prevailing of the American
Arbitration Association by a panel of three arbitrators. Corillian and
Client shall modify the time schedules provided under such rules and
shall use their best efforts to meet deadlines such that the
arbitration is concluded within ninety (90) days following its
initiation, or such other reasonable time as may be agreed by the
parties. The decisions of the arbitrators shall be final and binding
for all purposes on Corillian and Client and may be entered and
enforced in any court of competent jurisdiction.
14.2 Both Corillian and Client acknowledge that important issues are at
stake related to Corillian and Client's rights under this Agreement,
the Product Schedule, the Escrow Agreement and the Support Services
Schedule. Therefore, both Corillian and Client shall be entitled, at
their discretion, to seek interim court relief, including, but not
limited to, preliminary injunctive,
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emergency, specific performance, and other equitable relief without
proof of monetary damages, by application to a court of competent
jurisdiction. Corillian's and Client's agreement immediately above to
submit to arbitration shall not preclude Corillian or Client from
seeking such relief pending the outcome of arbitration.
15. FORCE MAJEURE
Neither Party shall be held liable for failure to fulfill its
obligations hereunder if such failure is due to a natural calamity, act
of government, or similar cause beyond the control of such Party.
Notwithstanding the foregoing, unless agreed to in writing by the
non-defaulting Party, any delay exceeding ninety (90) days shall be
grounds for termination by the non-defaulting Party if such delay is
not cured after thirty (30) days written notice of a Party's intent to
terminate. Client's termination rights shall be governed by Section
11.3 hereof.
16. SEVERABILITY
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, that provision will be
enforced to the maximum extent permissible and the remaining provisions
of this Agreement will remain in full force and effect.
17. NOTICES
All notices, reports, instructions, requests, and other communications
given under this Agreement shall be in writing and shall be deemed to
have been given or made (i) if by mail, when received by certified
mail, postage prepaid, return receipt requested; or (ii) if by
facsimile, when sent by facsimile to the facsimile number set forth
below with evidence of receipt by sender or (iii) if by courier, when
received; provided, however, that either party may change its address
or facsimile number for notices by providing notice to the other party
of such change in the manner provided herein. Notices shall be directed
to the following addresses or facsimile numbers:
To Corillian: Corillian Corporation
3601 S.W. Murray Blvd., Suite 300
Beaverton, OR 97005
Telephone: (503) 627-0729
Facsimile: (503) 641-5575
Attention: Thomas Brooke
To Client: Wachovia Operational Services Corporation
("Client")
c/o Wachovia Bank, N.A.
101 N. Cherry Street
Winston-Salem, North Carolina 27102
Telephone: (336) 735-5815
Facsimile: (336) 735-5831
Attention: Digital Platform Manager
(Joanna Giacobbe)
18. GENERAL GOVERNING LAW
This Agreement shall be interpreted, construed and enforced under the
laws of the State of New York without reference to its choice of law
rules.
PAGE 11
<PAGE>
19. PRESS RELEASES
Upon acceptance of the Products in accordance with this Agreement, or
at such earlier time as may be mutually agreed by the parties in
writing, the parties may issue a mutually agreed to joint press release
describing the Agreement and the provision of Products and services
under the Product Schedule and Support Services Schedule. Neither party
shall issue any other public statement or press release regarding this
Agreement or the relationship of the parties without the prior written
approval of the other. The terms of this Agreement shall in all
respects be considered to be Confidential Information. In the event
that either party is required by law to make any public statement or to
otherwise disclose the terms of this Agreement, that party agrees to
provide reasonable notice of such disclosure and to provide a copy of
the content of such disclosure a reasonable time prior to the time such
disclosure shall be made.
20. GENERAL
20.1 The failure at any time by either Party to enforce, or to exercise any
election under, any provision of this Agreement will not be construed
as a waiver of such provision or election, or in any way as affecting
the validity of this Agreement or any part thereof, or the right of
such Party thereafter to enforce, or to exercise any election under,
each and every provision of this Agreement.
20.2 This Agreement shall inure to the benefit of, and be binding upon, the
Parties hereto and their permitted successors and assigns.
Corillian and Client acknowledge and agree that all rights and benefits
of and duties owing to Client under this Agreement shall also be deemed
to be rights and benefits of and duties owing to Client Affiliates,
provided that such Affiliates have agreed in writing to be bound by the
terms of this Agreement.
20.3 No amendment of this Agreement shall be binding unless it is in writing
and signed by both Parties.
20.4 This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall together constitute one and
the same agreement.
20.5 This Agreement does not create, and shall not be construed to create,
any joint venture or partnership between the Parties. No officer,
employee, agent, servant or independent contractor of either Party
shall be at any time be deemed to be an employee, servant, agent or
contractor of the other Party for any purpose. The Parties are
independent contractors, not employees, agents or representatives of
each other. Neither Party has the right to bind the other to any
agreement except as may be specifically provided herein.
20.6 Except to the extent such remedies are expressly stated to be
exclusive, no remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy. The
election of any one remedy by a Party shall not be deemed to constitute
a waiver of the right to pursue other available remedies.
20.7 In the event of any dispute arising out of the subject matter of this
Agreement, the prevailing Party shall recover, in addition to any other
damages assessed, its reasonable attorneys' fees and court costs
incurred in arbitrating or litigating such dispute.
PAGE 12
<PAGE>
20.8 This Agreement, the Product Schedule, the Escrow Agreement and the
Support Services Schedule constitute the entire agreement between the
Parties with respect to the subject matter hereof and supersede all
prior discussions, negotiations, communications and agreements, oral or
written, relating to the subject matter hereof.
Each Party represents that it has read this Agreement, understands its
terms and conditions and agrees to be bound by the Agreement, and that
the person signing on behalf of each such Party is duly authorized to
sign the Agreement on behalf of the Party for which s/he signs and to
bind that Party to the terms and conditions of the Agreement.
Wachovia Operational Services Corporation Corillian Corporation
("Client")
Date: 12/22/99 Date: 12/23/99
-------------------------------------- --------------------------
By: /s/ By: /s/ Kirk Wright
--------------------------------------- ---------------------------
Kirk Wright, President
PAGE 13
<PAGE>
CORILLIAN CORPORATION
VOYAGER PRODUCT SCHEDULE
Effective Date: December 21, 1999
Wachovia Operational Services Corillian Corporation ("Corillian")
Corporation ("Client") 3601 SW Murray Blvd., Suite 300
809 W. 41/2Street. Beaverton, Oregon 97005
Winston-Salem, North Carolina 27150 (503) 627-0729
FAX (503) 641-5575
Corillian Corporation ("Corillian"), an Oregon corporation, and Client agree
that this Voyager Product Schedule (the "Product Schedule") shall be
incorporated into and made subject to the provisions of the Corillian Voyager
License Agreement (the "Agreement") as of the effective date set forth above.
1. PRODUCTS
The following products, as modified for Client's use, have been licensed to
Client pursuant to the Agreement:
Voyager 2.4 Transaction Processing System/Control Center
1.0.2 OFX Banking & Bill Payment
V-Bill Presentment 2.6
Small Business 1.0
Target Marketing 1.0
Each of the foregoing is referred to as a "Component". The foregoing
Components together with any applications, custom engineering items or
deliverables, scripts, templates or other software created by Corillian in
the course of performing implementation or other professional services for
Client as well as all product documentation, if any, in electronic or hard
copy formats, all related technical information, and all updates and
enhancements thereto are collectively referred to as the "Products." In
addition, the term "Products" shall include the Source Code, as defined in
the Agreement.
2. FEATURES AND FUNCTIONS
The Products shall have the features and functions and be installed in
accordance with the Project Deliverables Schedule, attached hereto as Exhibit
1. With regard to any Phase 2 or later Component of the Products, unless
otherwise agreed, the features and functions set forth on Exhibit 1 shall be
minimum features and functions. Such Components shall have at least the
features and functions set forth on Exhibit 1, and the features and functions
of the previous version of such Component, unless otherwise agreed by the
parties, and shall have such other or additional features and functions as
may be mutually agreed by the parties.
3. BILL PAYMENT PROCESSING
The Voyager system, and any related or later custom engineering deliverables,
will acquire bill payment instructions from Client's customers and forward
the electronic payment instructions to Client's bill pay system for
processing and payment. Client shall provide all appropriate infrastructure
and support agreements for bill payment. Bill Payment functionality is
included in this agreement based on Client's selection of a standard
implementation to CheckFree for bill pay processing.
1
<PAGE>
4. OFX SPECIFICATION AND CERTIFICATION
Corillian's Voyager OFX product has been designed to meet OFX specification
version 1.0.2 as distributed by the Open Financial Exchange committee.
Corillian is not responsible for any changes to the OFX specification and
transaction set. Corillian will make its best effort to accommodate changes
to the OFX specifications, including adoption of IFX, XML or other data
specifications, that may be distributed by the OFX standards committee,
Corillian will support subsequent versions of OFX, or versions of IFX or XML,
which are required to support banking and bill pay transactions in subsequent
commercial releases of Microsoft Money(R) and Quicken(R). Corillian shall not
be held responsible for any delays caused by any change to such
specifications unless Corillian does not exercise due diligence to
accommodate such changes.
A third party certification company shall be authorized to perform OFX
certifications by the OFX alliance companies (CheckFree, Intuit and
Microsoft.) Corillian shall not be held responsible for any delays or missed
delivery dates by a third party unless and to the extent Corillian has
contributed to such delays or missed delivery dates.
5. INSTALLATION AND CONFIGURATION
5.1 The Products shall be installed and configured by Wachovia,
with the assistance or supervision of Corillian, or its
agents.
5.2 Client shall make available computer equipment and software
configurations approved by Corillian as adequate to facilitate
the installation and implementation of the Products.
5.3 Installation of Product Components shall be in accordance with
the Project Deliverables Schedule, which is attached hereto as
Exhibit 1, and according to such time frames as may be
mutually agreed by the parties.
5.4 Client agrees to install, with Corillian's assistance, all
product updates, which support the features and functions
described in Exhibit 1.
6. TRAINING SERVICES
Corillian shall provide the following training services at Client's location
as a part of the total project cost:
- - One-day, instructor-led training, in the use of Control Center for customer
service supervisors and one-half day for customer service and call center
employees.
- - One-day, instructor-led training in the use of Marketing Center for
individuals who will be responsible for planning and executing targeted
marketing campaigns delivered to electronic banking customers.
- - One-day, instructor-led training, for individuals who will be responsible
for establishing, monitoring, and troubleshooting daily bill pay processing
runs.
- - One-half day, instructor-led training, for individuals will be responsible
for post-run bill pay reconciliation.
- - One day classroom presentation of the system architecture of all Voyager
components, their functions and configuration, tuning and debug parameters.
The training will identify how each type of customer (Client internal
(i.e., Call Center), external web-based / PFM) executes all the various
transaction types through the system. This training will cover the
troubleshooting tools and methodologies that will be used to support the
Voyager components.
2
<PAGE>
7. ACCEPTANCE CRITERIA
7.1 The Parties contemplate that the installation of different
Components and custom engineering deliverables will be
completed at different times. The following are the conditions
that must be fulfilled prior to acceptance by Client of a
Component of the Products or a custom engineering deliverable:
7.1.1 Installation evidenced by host connectivity and
access to account data.
7.1.2 The Component or custom engineering deliverable
contains the features and successfully performs the
functions described in Exhibit 1; provided however
that any function not enabled due to the inability of
client to provide in a timely fashion support,
equipment, software, infrastructure or third-party
authorization necessary for Corillian to implement
such function shall be considered implemented for
purposes of acceptance hereunder. Notwithstanding any
such acceptance, Corillian agrees to complete the
implementation as provided in the Agreements, based
on a delivery schedule to be mutually agreed upon by
the parties, once Client provides the necessary
support, equipment, software, infrastructure or
third-party authorization.
7.1.3 Completion of User Acceptance Testing, the procedures
and time frames for which shall be as mutually agreed
by the parties.
7.1.4 Delivery of a clean installation program and a clean
installation.
7.1.5 Delivery of acceptable hardware configuration and
product support documentation sufficient to allow
Client to operate the Products on a day to day basis.
7.2 Acceptance of a Component or custom engineering deliverable
shall be evidenced by (a) Client executing a document
substantially in the form of Exhibit 2 attached hereto, or (b)
commercial release of any feature or function described in
Exhibit 1 for use by Client's customers, whichever is earlier.
7.3 In the event that all of the Phase 1 Core Components or custom
engineering deliverables are not accepted, Client may, upon
fifteen (15) days notice to Corillian terminate this
Agreement, the License Agreement and the Support Services
Schedule without payment of any exit fee thereunder and
receive a refund of all fees paid pursuant to Section 11
hereof, excluding expenses and fees for implementation and
custom engineering work incurred prior to such notice, and of
the Support Fees paid pursuant to Section 2 of the Support
Services Schedule.
7.4 In the event that all of the Phase 2 Components or Phase 2 or
Phase 3 custom engineering deliverables are not accepted,
Client may, at its option (i) regardless of whether Client
shall have previously received Source Code pursuant to the
Escrow Agreement, discontinue use of the Products, terminate
this Agreement and cancel all obligations with respect to
payment of custom engineering and implementation fees not
previously incurred prior to notice of termination, and
receive a refund of any license fees for applications not
previously accepted and terminate the Support Services
Schedule without payment of an exit fee and receive a pro-rata
refund of fees paid thereunder; (ii) Client may continue to
use the Products with reductions in the License Fee and
Support Services Fee as the parties may mutually agree shall
be fair and equitable, or (iii) continue to use the Products,
terminate the Support Services Schedule, receive a pro-rata
refund of the Support Fees paid thereunder, pay Corillian an
exit fee of $[ * ], or the
- -------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
3
<PAGE>
amount owing under Section 13.2 of the Support Services
Schedule, whichever is less, and shall receive the Source
Code pursuant to the Escrow Agreement, including the
knowledge transfer obligation specified in Section 11 of
the Support Services Schedule and thereunder. In the event
that Client has previously exercised its election to
receive the Source Code pursuant to the Escrow Agreement,
Client shall have the same three remedies available to it.
With respect to option (i), Client shall return to
Corillian all copies of the Source Code or certify the
destruction thereof within 30 days of notice of termination
and with regard to option (iii), Corillian shall complete
the knowledge transfer obligation specified in Section 11
of the Support Services Schedule and under the Escrow
Agreement, if it has not already done so, and until such
completion shall continue to provide problem resolution
services on a time and materials basis and Client shall pay
the exit fee upon completion of knowledge transfer.
8. DELAYS IN PROJECT DELIVERABLE SCHEDULE
8.1 In the event that Corillian shall solely cause any of the
following events to be delayed by more than thirty (30) days
from the date agreed to as set forth in Section 8.1.1 below,
Client may, upon fifteen (15) days notice to Corillian
terminate this Agreement, the License Agreement and the
Support Services Schedule without payment of any exit fee
thereunder and receive a refund of all fees paid pursuant to
Section 11 hereof, excluding expenses and fees for
implementation and custom engineering work incurred prior to
such notice , and the Support Fees paid pursuant to Section 2
of the Support Services Schedule:
(a) Completion of User Acceptance Testing for Phase 1
Core Components or custom engineering deliverables
(b) Commencement of Employee Pilot for Phase 1 Core
Components or custom engineering deliverables
(c) Production Release of the Phase 1 Core Components and
custom engineering deliverables for Use by
Client Customers
8.1.1 For purposes of determining the application of
remedies in paragraph 8.1, the parties will develop a
mutually agreed to Project Plan for Phase 1 Core
Component Deliverables and custom engineering
deliverables, which shall be made an addendum to the
Product Schedule. Any delay in the Project Plan for
Phase 1 Core Components and custom engineering
deliverables which is attributable to or results from
(i) changes to the Phase 1 Core Components or custom
engineering deliverables requirements made by Client
that the parties agree in advance will have the
effect of extending the project schedule, (ii) the
acts or omissions of Client, Client's customers,
employees, consultants, contractors, or other
third-party vendors, (iii) are mutually agreed to by
the parties, or (iv) are not otherwise within the
reasonable control of Corillian shall not be
considered to be solely caused by Corillian.
8.1.2 Specifically with respect to the OFX Component, the
application of remedies in Section 8,1 shall only
apply to a delay solely caused by Corillian in the
date for submission of the Component to Microsoft and
Intuit for OFX certification and testing, as provided
in the Project Plan.
8.2 Corillian agrees to use its best efforts to implement all Phase 2
Components and Phase 2 and Phase 3 custom engineering deliverables. In
the event that Corillian shall solely cause the production release of
the Phase 2 Components or Phase 2 or Phase 3 custom engineering
deliverables to be delayed for more than thirty (30) days beyond the
end of the
4
<PAGE>
[ * ], Corillian agrees to pay Client a penalty of $[ * ]
for every additional month of delay up to a maximum penalty of $[ * ].
In the event that Corillian is unable to implement all Phase 2
Components and Phase 2 and Phase 3 custom engineering deliverables by
the end of [ * ] despite its best efforts, then Client may,
at its option (i) regardless of whether Client shall have
previously received the Source Code pursuant to the
Escrow Agreement, discontinue use of the Products, terminate this
Agreement and receive a refund of all custom engineering and
implementation fees not previously incurred prior to notice of
termination, together with refund of any license fees for
applications not previously accepted and terminate the Support
Services Schedule without payment of an exit fee and receive a
pro-rata refund of fees paid thereunder; (ii) Client may continue to
use the Products with reductions in the License Fee and Support
Services Fee as the parties may mutually agree shall be fair and
equitable, or (iii) continue to use the Products, terminate the
Support Services Schedule, receive a pro-rata refund of the Support
Fees paid thereunder, pay Corillian an exit fee of $[ * ], or the
amount owing under Section 13.2 of the Support Services Schedule,
whichever is less and shall receive the Source Code pursuant to the
Escrow Agreement, including the knowledge transfer obligation
specified in Section 11 of the Support Services Schedule and
thereunder. In the event that Client has previously exercised its
election to receive the Source Code pursuant to the Escrow Agreement,
Client shall have the same three remedies available to it. With
respect to option (i), Client shall return to Corillian all copies of
the Source Code or certify the destruction thereof within 30 days of
notice of termination and with regard to option (iii), Corillian
shall complete the knowledge transfer obligation specified in Section
11 of the Support Services Schedule and under the Escrow Agreement,
if it has not already done so, and until such completion shall
continue to provide problem resolution services on a time and
materials basis and Client shall pay the exit fee upon completion of
knowledge transfer.
8.2.1 Any delay in the production release of Phase 2 or
Phase 3 Components which is attributable to or
results from (i) changes to the Phase 2 or Phase 3
requirements made by Client that the parties agree in
advance shall have the effect of extending the
project schedule, (ii) the acts or omissions of
Client, Client's customers, employees, consultants,
contractors, or other third-party vendors, (iii) are
mutually agreed to by the parties, or (iv) are not
otherwise within the reasonable control of Corillian
shall not be considered to be solely caused by
Corillian.
9. CANCELLATION OF PHASE 2 AND PHASE 3
Up to thirty (30) days after acceptance of all Phase 1 Components and custom
engineering deliverables, Client may cancel Phase 2 and/or Phase 3 without
cause. Cancellation relieves both Corillian and Client of their respective
obligations to one another for Phase 2 and Phase 3 deliverables but does not in
any way effect the parties' rights and continued obligations with respect to
Phase 1 deliverables as provided herein, in the Voyager License Agreement and
Support Services Schedule.
10. SOFTWARE MAINTENANCE AND SUPPORT SERVICES
Software maintenance and support services for the Products shall be provided in
accordance with the Voyager Support Services Schedule attached hereto which is
incorporated into, and subject to the terms, of the Agreement.
- -------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
5
<PAGE>
11. FEES AND EXPENSES
11.1 INITIAL LICENSE AND IMPLEMENTATION FEES AND EXPENSES. The
following are the license and implementation fees for the
products and services described herein:
<TABLE>
<C> <S> <C>
1. Voyager 2.4/Control Center License $[ * ]
2. OFX License $[ * ]
3. Implementation Services $[ * ]
4. Custom Engineering $[ * ]*
Total
</TABLE>
11.2 Phase 2 License, Custom Engineering and Implementation Fees
<TABLE>
<C> <S> <C>
1. V-Bill Presentment Application License $[ * ]
2. Small Business Application License $[ * ]
3. Direct Marketing Application License $[ * ]
4. Implementation Services $[ * ]
5. Custom Engineering $[ * ]*
Total
</TABLE>
11.3 Phase 3 Custom Engineering Fees
<TABLE>
<C> <S> <C>
1. Custom Engineering $[ * ]*
Total $[ * ]
</TABLE>
*The custom engineering items are an estimate only based on a time and
material basis at $1,500/day, but shall not exceed the quoted estimate
unless the provision of services covering such work as described within
Exhibit 1 shall change by mutual agreement of the parties.
In addition to the fees described above, Client shall pay
Corillian its reasonable out-of-pocket expenses incurred in connection with
implementation and training including, but not limited to, air travel, local
transportation, hotel rooms, meal expenses and communication costs, provided,
however, that all Corillian travel shall be first approved by a designated
Wachovia Project Manager and that all other expenses conform to mutually
acceptable guidelines to be developed by the parties.
Any amounts previously paid by Client pursuant to a Proof of Concept
Agreement or a Professional Services Agreement shall be credited toward the
Phase 1 payment set forth above.
11.4 PAYMENT OF LICENSE, CUSTOM ENGINEERING AND IMPLEMENTATION FEES
AND EXPENSES.
11.4.1 Phase 1: One-hundred percent (100%) of the license
fee associated with Voyager 2.4 l shall be paid upon
execution of this Agreement, one-hundred percent
(100%) of the OFX license fees shall be paid upon
acceptance by Client or commercial release for use by
Client's customers of the same. Fees associated with
custom engineering, implementation, as well as
Corillian's expenses, shall be paid on an as incurred
monthly basis.
11.4.2 Phase 2: , One-hundred percent (100%) of the V-Bill
Presentment, Small Business and Direct Marketing
application license fees shall be paid upon
- -------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
6
<PAGE>
acceptance by Client or commercial release for use by
Client's customers of the same. Phase 2 Product
Components Fees associated with custom engineering,
implementation, as well as Corillian's expenses,
shall be paid on an as incurred monthly basis.
11.4.3 Phase 3: Fees associated with custom engineering,
implementation, as well as Corillian's expenses,
shall be paid on an as incurred monthly basis.,
11.4.4 Client agrees to pay Corillian all fees due within 30
days of receipt of invoice.
11.5 RECURRING FEES. Client shall pay the following recurring fees: An annual
maintenance as set forth in the Voyager Support Services Schedule beginning
January 1, 2001, as more particularly set forth therein.
Each party represents that it has read this Product Schedule, understands its
provisions and that the Product Schedule is a part of the Agreement, and that
the person signing the Product Schedule on behalf of each party is authorized to
do so.
Wachovia Operational Services Corillian Corporation
Corporation
DATE: DATE:
12/22/99 12/23/99
- ------------------------------ -----------------------------------
BY: BY:
/s/ /s/ Kirk Wright
- ------------------------------ -----------------------------------
Kirk Wright, President
7
<PAGE>
Prism
Phase One Solution Overview
Version 1.8 12/2/1999
- -------------------------------------------------------------------------------
PHASE ONE - SOLUTION OVERVIEW
The Prism Phase One/"Day 1" release will essentially be core Voyager
retail/consumer banking, bill pay (via CheckFree) and OFX functionality with a
sign-on/authentication and enrollment solution based on Prism's Directory
Services infrastructure (design details yet to be determined by Prism; current
understanding is that Prism's single sign-on solution will redirect to our
server extension for Voyager sign-on and assumes Prism's solution for handling
ID of "customer" and "account" will seamlessly integrate with current Voyager
customer relationship/association design).
HTML SIGN-ON & ENROLLMENT
Corillian to deliver client layer/HTML to be integrated with Prism Directory
Services solution.
- Sign-On
- Enroll Existing
- Enroll New
- Manual Enroll
- Password Change
HTML BANKING
- -Designed for / supports browsers of version 4.0 or higher (IE, Netscape, AOL),
128 bit encryption.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CORE OR
FUNCTIONALITY/DELIVERABLE CUSTOM DEFINITION AND/OR NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. ACCOUNT BALANCES /SUMMARY Core - DDA (Checking, Savings, Money Market), TDA (CDs),
Brokerage, Line Of Credit, Installment Loans, Credit Cards
Custom - [*]
- -------------------------------------------------------------------------------------------------------------------
b. ACCOUNT DETAIL / HISTORY Core -For all Accounts listed within "Account Balances" except
Brokerage, Installment Loans and CDs
Custom - [*]
- -------------------------------------------------------------------------------------------------------------------
c. EDIT ACCOUNT NAME (NICKNAME) Custom [*]
- -------------------------------------------------------------------------------------------------------------------
d. FUNDS TRANSFER Core -Will provide ability for cust. to transfer funds within any
account within their profile within the same bank
(intra-profile); single, recurring, same day (assumes day is
bank processing day), future dated
Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
e. FUNDS TRANSFER CONSOLIDATED Custom -[*]
VIEW
- -------------------------------------------------------------------------------------------------------------------
f. FUNDS TRANSFER - MODIFY Core -View pending, modify "from," "to," "date", "amount,"
PENDING Custom - [*]
- -------------------------------------------------------------------------------------------------------------------
g. FUNDS TRANSFER - Custom -[*]
CONFIRMATION "CHILD WINDOWS"
- -------------------------------------------------------------------------------------------------------------------
h. FREQUENTLY ASKED QUESTIONS Core Prism DFS to provide content
(FAQS) PAGE
- -------------------------------------------------------------------------------------------------------------------
i. TERMS & CONDITIONS PAGE Core Prism Legal, Compliance & Marketing to provide content
- -------------------------------------------------------------------------------------------------------------------
j. SECURITY INFORMATION PAGE Core Prism DFS to provide content
- -------------------------------------------------------------------------------------------------------------------
[*] Portion has been omitted pursuant to a request for confidential treatment
and filed separately with the Commission.
- --------------------------------------------------------------------------------
1
<PAGE>
- -------------------------------------------------------------------------------------------------------------------
k. CUSTOMER SERVICE CENTER Core BROADCAST MESSAGING
Provide CSRs with broadcast message capability (same message
goes to all IB custs.)
SECURE MESSAGES (TO VOYAGER ONLY)
1. "change personal info."
2. "request a copy of a check"
3. "credit line increase"
4. "bill pay research inquiry"
5. "customer free form email"
6. "dispute transactions"
7. non-authenticated customer "open new account"
SECURE TRANSACTIONS (TO MAINFRAME)
Corillian to deliver client layer, which is dependent upon
Prism delivery of host/mainframe transactions
1. "change password"
2. "stop payment"
3. "reorder checks"
4. "change email address"
5. "update bill pay enroll"
ALERTS
1. "New Messages"
2. "NSF on Bill Payment"
3. "NSF on Recurring Transfer"
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
HTML BILL PAY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CORE OR
FUNCTIONALITY/DELIVERABLE CUSTOM DEFINITION AND/OR NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. PROVIDER = CHECKFREE Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
b. ENROLLMENT Custom [*]
- -------------------------------------------------------------------------------------------------------------------
c. PAYEE & PAYMENT MANAGEMENT Core -Add, delete, activate, archive payees
Custom - [*]
- -------------------------------------------------------------------------------------------------------------------
d. PAYEE & PAYMENT HISTORY With table sorting
- -------------------------------------------------------------------------------------------------------------------
e. "INSTANCES OF MULTIPLE Custom [*]
PAYEES" NOTIFICATION
- -------------------------------------------------------------------------------------------------------------------
f. CANCEL BILL PAY Core
- -------------------------------------------------------------------------------------------------------------------
g. CONFIRMATION "CHILD WINDOWS" Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
[*] Portion has been omitted pursuant to a request for confidential treatment
and filed separately with the Commission.
- --------------------------------------------------------------------------------
2
<PAGE>
OFX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CORE OR
FUNCTIONALITY/DELIVERABLE CUSTOM DEFINITION AND/OR NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. FINANCIAL INSTITUTION PROFILE Core
- -------------------------------------------------------------------------------------------------------------------
b. ACCOUNT INFO. REQUEST Core -Same as HTML Balances/Summary
- -------------------------------------------------------------------------------------------------------------------
c. STATEMENT REQUEST Core -Same as HTML Detail/History
Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
d. FUNDS TRANSFER Core Will provide ability for customer to transfer funds within
any account within their profile within the same bank
(intra-profile)
Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
e. BILL PAYEE & PAYMENT Core
MANAGEMENT
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTROL CENTER BACK-OFFICE TRACKING & REPORTING
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CORE OR
FUNCTIONALITY/DELIVERABLE CUSTOM DEFINITION AND/OR NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. REPORT CENTER Core i Bill Pay Reports
ii Unfunded Payments
iii Paid Payments
iv New Customers
v Total Customers
vi Total Sessions
vii New vs. Total
viii Session Statistics
ix Total Transactions
x Transactions by Group
xi Unsuccessful Transactions
xii Report Groups
xiii Summary Status
- -------------------------------------------------------------------------------------------------------------------
b. RELATIONSHIP CENTER Core i Customer Support Screens
ii Agent Support Cases
iii Agent Alert
iv Monitored Transactions
- -------------------------------------------------------------------------------------------------------------------
c. WORKFLOW Core i Agent Management
ii Case Management
iii Case Detail Report
iv Bill Pay Fees
v Message Types
vi Case Statuses
vii Case Dispositions
- -------------------------------------------------------------------------------------------------------------------
d. SYSTEM SET UP Core i PIN Change
ii Edit System Users
iii Add System User
iv Delete System Users
v View User Permissions
vi View Users by Permissions
vii Modify Permission Definitions
viii Add Permission Definition
ix User Monitor
x Audit Log
xi Scheduled Tasks
- -------------------------------------------------------------------------------------------------------------------
e. BROADCAST SECURE MESSAGING Custom -[*]
- -------------------------------------------------------------------------------------------------------------------
f. NON-AUTHENTICATED CUSTOMER Custom -[*]
SECURE MESSAGING
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
[*] Portion has been omitted pursuant to a request for confidential treatment
and filed separately with the Commission.
- --------------------------------------------------------------------------------
3
<PAGE>
[*] DATABASE CONVERSION/MIGRATION (CUSTOM)
To convert from Prism's current online banking and bill pay system [*] to
the Corillian Voyager Internet banking platform (SIS), Corillian will:
- [*]
- [*]
- [*]
VOYAGER PLATFORM
<TABLE>
<CAPTION>
PRISM VOYAGER GENERAL
VERSION AVAILABILITY KEY FEATURE ADDS
DATE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
DAY 1 2.4* [ * ] - Cluster support for the TRB
- TP & TRB counters
- SNMP support
- Scheduled transfers
- CheckFree SIS compatibility
- Batch payments
</TABLE>
*Release of SIS will be on the current database schema. An upgrade to the new
database schema will occur at a later date.
[*] Portion has been omitted pursuant to a request for confidential treatment
and filed separately with the Commission.
- --------------------------------------------------------------------------------
4
<PAGE>
PRISM
Phase Two - Future/Planned Enhancements
Version 1.9 12/13/1999
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------ -----------------------------------------------------------------------
PHASE TWO - FUTURE/PLANNED ENHANCEMENTS
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER EXPERIENCE
CUSTOM
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
[CUSTOMIZED FINANCIAL Custom Milind 3 person [ * ] 1. ad manager out to
PORTAL] Pandit months for portal
proto-type
in-house 2. from portal app
solution to ad manager
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
TARGETED MARKETING Core N/A N/A [ * ] [Bank's customer -
surveys,
Custom Milind 3 person questionnaires;
Pandit months of bank's marketing
custom work group: better
message cataloging,
integrated
presentation of
campaign
construction and
campaign
effectiveness/net
marketing
contribution;
enriched campaign
rules]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<CAPTION>
REQUIREMENT CORILLIAN DESIGN APPROACH & PRISM TECHNICAL IMPACT &
CONSIDERATIONS CONSIDERATIONS
- ------------------------ ---------------------------------- ----------------------------------
<S> <C> <C>
[CUSTOMIZED FINANCIAL [Current strategy is to partner [Server requirements for the
PORTAL] with either Vignette or personalization engine]
Broadvision; on a parallel
track, begin prototyping inhouse
solution in concert with Steve
Allaway.
1. We will establish a secure
interface using either COM or
sockets that will publish customer
indicator data upon query from a
portal application.
2. We will establish an interface that
will accept a COM or DNAss object
from a portal app to process as a
customer indicator within ad
manager.]
- ------------------------ ---------------------------------- ----------------------------------
TARGETED MARKETING [Creation of "events" to track [Larger demands on database
activity and profitability of server; training to use new tool
the entire marketing campaign; to add their own indicators (if
separation of Marketing Center desired); possible large effort
from Control Center; make/buy to upgrade this release.]
tool to ease bank's ability to
add new indicators without
calling on Professional
Services; more robust data
mining support.
"Events" could become a shared
technology with a
personalization solution.]
- ------------------------ ---------------------------------- ----------------------------------
1
<PAGE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER EXPERIENCE
CUSTOM
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C>
SMALL BUSINESS Core N/A N/A [-Security by
status/service/page/com
Custom Pete 50 pany/account
McEvoy -onUs stripping
-transaction approval -
workflow
-menu driven]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[SPECIAL `WELCOME' FOR Custom Mike 4 [User signs on. If
"PROSTRATEGY" Leach they meet the
CUSTOMERS.] criteria for being a
Milind If pro strategy
Pandit integrated customer, a special
w/ Marketing welcome HTML page is
Center, 2 displayed, possibly
weeks of with personalized
custom work offers or news.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[ABILITY TO NOTIFY Custom Mike 6 [When a "Pro
"PROSTRATEGY" PERSONAL Leach Strategy" user opens
BANKERS OF `OPEN NEW a new account or
ACCOUNT' AND `ADD A Milind If adds a service, a
SERVICE' CUSTOMER Pandit integrated secure message is
ACTIVITY]. w/ Marketing transparently sent
Center, 2 to the users
weeks of Personal Banker.
custom work Content of message
describes transaction
activity.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[ALERTS; ABILITY TO Either Milind 2 person [ * ] [Users receive
INTERFACE WITH AND Core Pandit weeks of alerts of critical
DISPLAY ALERTS COMING or Custom custom work events, either by
FROM LEGACY SYSTEMS e-mail,
AND PERSONALIZATION telephone/pager, or
ENGINE.] upon login]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<CAPTION>
REQUIREMENT CORILLIAN DESIGN APPROACH & PRISM TECHNICAL IMPACT &
CONSIDERATIONS CONSIDERATIONS
- ------------------------ ---------------------------------- ----------------------------------
<S> <C> <C>
SMALL BUSINESS -[Account aggregation through sql -[user training
profile -enrollment/authentication
-Authentication against host for -portal connections]
access and against db for profile
-transaction approval through
com object
-secure message where no
transactions are available
-realtime transactions to
loan/investment/credit card.
-workflow through sql database
w/ com interface]
- ---------------------- ---------------------------------- ----------------------------------
[SPECIAL `WELCOME' FOR [Modify Host Interface Profile [Modifying Profile transaction
"PROSTRATEGY" transaction to return strategy during day 1 development will
CUSTOMERS.] code. Client DHTML checks lessen long term development and
strategy code at signon for testing resource needs].
conditional branching.]
* Portion has been omitted pursuant to a request for confidential treatment
and filed separately with the Commission.
- ----------------------- ---------------------------------- ----------------------------------
[ABILITY TO NOTIFY [Can be via secure message or [Prism will have to make
"PROSTRATEGY" PERSONAL email (as long as no customer demographic determinations
BANKERS OF `OPEN NEW sensitive data is being passed). during enrollment for Voyager to
ACCOUNT' AND `ADD A Dependency on strategy code send messages to Personal
SERVICE' CUSTOMER defined above. Conditional Bankers re: enrollment activity.]
ACTIVITY]. branch sends secure message to
PB before displaying special
welcome.]
- ----------------------- ---------------------------------- ----------------------------------
[ALERTS; ABILITY TO [A general "event" construct [Need to aggregate information
INTERFACE WITH AND that once triggered, routes from diverse sources (for stock
DISPLAY ALERTS COMING messages, aggregates statistics, quotes, etc.) Larger demands on
FROM LEGACY SYSTEMS optionally captures cost database server; training to use
AND PERSONALIZATION drivers. Need to consider new tool to add their own
ENGINE.] "rules" UI for specifying indicators (if desired);
alerts.] possible large effort to upgrade
this release.]
- ----------------------- ---------------------------------- ----------------------------------
2
<PAGE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER EXPERIENCE
CUSTOM
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
[INTRAPROFILE/INTERSTATE Custom Mike 12 [Accounts from
TRANSFERS] Leach Wachovia banks in
other states are
made available as
transfer to and from
accounts.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[INTERBANK VIA ACH Custom Mike 30 [TBD. Best case:
WITH PRENOTE] Leach User enters outside
bank account
information. Has
transfer to and from
capability. Pre-note
authentication may
be necessary.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[PAY WACHOVIA BILLS Custom Mike 27 TBD
WITH A NON-WACHOVIA Leach
ACCOUNT, VIA ACH, WITH
PRENOTE]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[PAY WACHOVIA CREDIT Custom Mike 27 TBD
CARD WITH NON-WACHOVIA Leach
ACCOUNT, VIA ACH, WITH
PRENOTE]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[BILL PAY CALENDAR] Custom Mike 15 [User selects
Leach pending payments
link from menu. A
calendar displays
1-3 months of dates
with pending payment
data within relevant
cells. Cell info is
hyperlinked to
payment details.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<CAPTION>
REQUIREMENT CORILLIAN DESIGN APPROACH & PRISM TECHNICAL IMPACT &
CONSIDERATIONS CONSIDERATIONS
- ------------------------ ---------------------------------- ----------------------------------
<S> <C> <C>
[INTRAPROFILE/INTERSTATE [Dependency on receiving bank [Provide all info necessary from
TRANSFERS] routing numbers from host host to Voyager to execute
account transaction (already transaction.]
designed, needs to be
implemented).]
- ----------------------- ---------------------------------- ----------------------------------
[INTERBANK VIA ACH [Need pre-note authorization [TBD. If pre note required, then
WITH PRENOTE] before allowing ACH? Legal or Voyager would need host driven
liability issues? Minor change data to determine if an ACH has
to UI for FI routing #. Host been approved.]
needs holding account for ACH.
If no realtime capability from
host or Clearinghouse then batch
with executive trigger needs to
be implmented.]
- ----------------------- ---------------------------------- ----------------------------------
[PAY WACHOVIA BILLS TBD. Related to above. TBD
WITH A NON-WACHOVIA
ACCOUNT, VIA ACH, WITH
PRENOTE]
- ----------------------- ---------------------------------- ----------------------------------
[PAY WACHOVIA CREDIT Same as above. TBD
CARD WITH NON-WACHOVIA
ACCOUNT, VIA ACH, WITH
PRENOTE]
- ----------------------- ---------------------------------- ----------------------------------
[BILL PAY CALENDAR] [DHTML table matrix with dates. None
PendPmts transaction response
mapped to matrix Row/Cols. Use
3rd party tool for calendar?]
- ---------------------------------------------------------- ----------------------------------
3
<PAGE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER EXPERIENCE
CUSTOM
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
["ON US" BILL PAY WITH Core N/A 0-40 days: [When adding a
WACHOVIA MERCHANT PICK payee, user can
LIST (MPL); INTERNAL Custom Jeff Using either select from a
ACCOUNT TYPES AND Madison standard list of
CORPORATE matching Wachovia-defined
RELATIONSHIPS] algorithm and merchants or simply
existing file enter the payee
format =0 information from
their bill. If the
latter, Voyager will
Custom attempt to find
matching merchants on the
algorithm = list the appear to
10 match the typed
information.
Custom file Candidate matches
format = 15 are presented to the
user. If he picks
Additional one, it will be
requirement identified as an
for response on-us merchant, just
file processing as if they had
= 15 selected it from the
original pick list.
If no matches are
found or if the user
indicates none of
the candidates are a
match, the payee is
considered
non-standard, and
will not be paid
on-us.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<CAPTION>
REQUIREMENT CORILLIAN DESIGN APPROACH & PRISM TECHNICAL IMPACT &
CONSIDERATIONS CONSIDERATIONS
- ------------------------ ---------------------------------- ----------------------------------
<S> <C> <C>
["ON US" BILL PAY WITH [A database table stored a list [Wachovia has three options for
WACHOVIA MERCHANT PICK of standard merchants for each allowing the user to add on-us
LIST (MPL); INTERNAL supported bill payment merchants: 1) users always pick
ACCOUNT TYPES AND processor, one of which is the from list, 2) users can pick
CORPORATE on-us processor (i.e., from list or type information
RELATIONSHIPS] Wachovia). This table stored from bill, or 3) users always
information necessary to 1) type information from bill
present a list to the users and because list is never shown.
2) match against user-provided
information, such as region and The first is simple, but
account scheme(s). requires that the list be of
reasonable length, which is
Once a payee is determined to be likely the case if only Wachovia
standard, it is stamped with a merchants are included. The
processor ID. Bill pay runs for second two require that the
each processor ID are scheduled matching algorithms be defined,
and handled separately. Each potentially requiring custom
can have different file formats engineering. If the list is
(SIS, ACH, etc.). very large because corporate
customers are included, the
Payments to payees considered third option may be the only
non-standard are all handled by viable one.
the default payment processor,
which in this case would be If the list is large but
CheckFree SIS.] Wachovia still wants it
displayed, it can be a tiered
list: the user is first
presented with a list of
categories to choose from, then
a list of merchants for that
category.
A file format for the on-us
payments must be defined. Voyagerc
currently supports SIS, ACH, and
it's own format. A custom file
format can also be defined,
requiring custom engineering.
Another option is an online
transaction for each ]payment
rather than a batch file, but this
would also require custom
engineering.
- ------------------------ --------------------------------- ----------------------------------
4
<PAGE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER EXPERIENCE
CUSTOM
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[ABILITY TO Custom Mike 30 TBD
AUTHENTICATE Leach
NONWACHOVIA ACCOUNT
HOLDERS; TO ALLOW
PAYMENT FOR
NON-BANKING SERVICES
(I.E., WHITE PAPERS,
PLANNING TOOLS, ETC.)
VIA NONWACHOVIA
ACCOUNT OR CREDIT
CARD.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[ENHANCED TRANSACTION Custom Mike 12 [User enters string
SEARCH AND SORT; AS Leach into text input box;
MORE HISTORY IS MADE transaction table is
AVAILABLE - WHERE resorted to display
SHOULD SORTING OCCUR, only transactions
WHAT THE OPTIONS that contain the
(I.E., CLIENT VS. search string. Rules
VOYAGER, VS. MAINFRAME based interface
TIER?)] (similar to Target
Marketing) allow
user to select
transactions that
are greater/less
than a defined
amount AND contain
a user defined
search string in
the description.]
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
BILL PRESENTMENT Core N/A N/A
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
[INTEGRATION WITH Custom Terry ?
MARKETWAVE ] Ishida
- ------------------------ ------------ ---------- -------------- --------------- ----------------------
<CAPTION>
REQUIREMENT CORILLIAN DESIGN APPROACH & PRISM TECHNICAL IMPACT &
CONSIDERATIONS CONSIDERATIONS
- ------------------------ ---------------------------------- ----------------------------------
<S> <C> <C>
- ------------------------ ---------------------------------- ----------------------------------
[ABILITY TO [Assuming Non acct holder info [Expansion of current directory
AUTHENTICATE is stored in Frank Fragapane's server responsibilities? Per
NONWACHOVIA ACCOUNT directory server. Payment transaction fee for using 3rd
HOLDERS; TO ALLOW transaction can be hosted by 3rd party CC transaction service.]
PAYMENT FOR party vendor.]
NON-BANKING SERVICES
(I.E., WHITE PAPERS,
PLANNING TOOLS, ETC.)
VIA NONWACHOVIA
ACCOUNT OR CREDIT
CARD.]
- ------------------------ ---------------------------------- ----------------------------------
[ENHANCED TRANSACTION [Preference to do all sorting in [May have to provide more info
SEARCH AND SORT; AS JavaScript at client layer to from CICS to expand data member
MORE HISTORY IS MADE reduce TP and host usage. options.]
AVAILABLE - WHERE History transaction storage is
SHOULD SORTING OCCUR, object oriented... nearly any
WHAT THE OPTIONS method may be added for
(I.E., CLIENT VS. searching and sorting object
VOYAGER, VS. MAINFRAME data members.]
TIER?)]
- ------------------------ ---------------------------------- ----------------------------------
BILL PRESENTMENT To be negotiated, pending
Wachovia requirements.
- ------------------------ ---------------------------------- ----------------------------------
[INTEGRATION WITH To be negotiated, pending
MARKETWAVE ] Wachovia requirements.
- ------------------------ ---------------------------------- ----------------------------------
</TABLE>
5
<PAGE>
PHASE 3 CUSTOM ENGINEERING
FEATURE LIST The nature of the Phase 3 project is to co-design and develop a
new version of the Voyager transaction processor to support [*]. Such new
version is expected to be generally released by Corillian as its 3.0 version
of Voyager. At this stage, the detailed feature list is still under
development. Currently, the parties have agreed that the new version is
expected to have the same basic feature functionality as Voyager 2.4, as well
as the following high-level features. Corillian will use its best efforts to
implement all of the Priority 1 items listed below. Priority 2 and Priority 3
items will be implemented if or when appropriate, as agreed upon by both
Client and Corillian. Additional features will be mutually agreed to by the
parties. The feature set is also conditional upon technical feasibility,
which will be determined during the design phase.
Wachovia prioritization is based on:
1 = Highest priority requirement
2 = Dependency on industry availability
3 = Corillian directed feature enhancement
<TABLE>
<CAPTION>
- -------------------------- ----------------------------------------------------------------------------------
Wachovia Priority Feature
- -------------------------- ----------------------------------------------------------------------------------
<S> <C>
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
1 [*]
- -------------------------- ----------------------------------------------------------------------------------
2 [*]
- -------------------------- ----------------------------------------------------------------------------------
2 [*]
- -------------------------- ----------------------------------------------------------------------------------
2 [*]
- -------------------------- ----------------------------------------------------------------------------------
2 [*]
- -------------------------- ----------------------------------------------------------------------------------
2 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
3 [*]
- -------------------------- ----------------------------------------------------------------------------------
</TABLE>
- ---------------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
<PAGE>
CORILLIAN CORPORATION
VOYAGER SUPPORT SERVICES SCHEDULE
Effective Date: December 21, 1999
Wachovia Operational Services Corillian Corporation ("Corillian")
Corporation ("Client") 3601 SW Murray Blvd., Suite 300
809 W. 4-1/2 Street Beaverton, Oregon 97005
Winston-Salem, North Carolina 27150 (503) 627-0729
FAX (503) 641-5575
Corillian, an Oregon corporation, and Client agree that this Voyager Support
Services Schedule (the "Support Schedule") shall be incorporated into and
subject to the provisions of the Corillian Voyager License Agreement (the
"Agreement") as of the effective date identified above.
1. VOYAGER PRODUCT SUPPORT TERMS
This Support Schedule outlines the software support program provided for the
Voyager Products licensed to Client pursuant to the Agreement, as defined in
the Product Schedule (collectively the "Products"). Corillian provides
support to Client, and Client is responsible for first tier support to its
customers.
Support commences on the date that any function described in Exhibit 1 of the
Product Schedule is released for commercial use by Client's customers. The
support program provided herein is for an initial term commencing as above
and ending on December 31, 2003, and shall be automatically renewed for
successive one-year terms unless terminated as set forth in Section 12 or 13
hereof. In the event of termination of the Agreement, Corillian agrees to
provide Client with reasonable assistance in migration to a new system.
Client agrees to pay Corillian for its services in this regard on a time and
materials basis at Corillian's then prevailing rates.
Support is only available for the current release or the immediately previous
major release of the Products and only for those Products located in the
region for which Client has purchased software support. In the event
Corillian elects to terminate support for a release, Corillian agrees to
provide Client with one hundred eighty (180) days prior notice. Unless
specified otherwise by Corillian and agreed to by Client, the region is the
United States of America.
Client may reinstate lapsed support by paying all support fees in arrears, a
reinstatement fee of [*], and all costs invoiced by Corillian on a time
and materials basis for updating the Products to the current release.
Corillian retains the right to modify its support programs so long as such
modifications do not in any way decrease support provided to Client pursuant
to the Agreement.
Corillian shall have no obligation to support: Products altered or damaged by
Client; Products modified by Client without authorization by Corillian;
Products installed on any computer hardware or operating system not supported
by Corillian; Products that are not the most current release or the
immediately previous major release; Product problems caused by Client's
negligence or abuse; use of Products other than as specified in the Product
documentation; or other causes beyond the control of Corillian, provided
however that a Year 2000 compliance failure shall not constitute a cause
beyond the control of Corillian.
PAGE 1
- ---------------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
<PAGE>
2. FEES AND EXPENSES
The fees for support services provided pursuant to this Agreement ("Support
Fee") will be in accordance with the following schedule:
Commencement date through 15% of the license fees for Voyager and
December 31, 2001 all other applications, to be prorated as
to Components not delivered until after
January 1, 2001.
Thereafter, the annual base fee for support services shall be 15% of the
license fee for Voyager plus 15% of the fee for any Component (other than
custom engineering deliverables) delivered after January 1, 2001, plus 15% of
the fee for any additional product applications than those Products licensed
under the Agreement. In the event Client engages Corillian for additional
custom engineering services, and the Products so created are unique to
Client, Client shall pay an additional 15% of the fee for such additional
custom engineering services as an additional Support Fee. In the event Client
engages Corillian for additional custom engineering services, and Corillian
and Client anticipate that the Products so created will be incorporated into
future Updates or New Revisions of the Products, Client shall not pay any
such additional Support Fee. In addition to the base fee, Corillian reserves
the right to increase the support service fees on an annual basis by up to
ten percent (10%). In the event of any such increase, Corillian shall provide
Client with notice of such increase at least ninety days (90) prior to the
expiration of the then current term.
Support Fees shall be paid annually. The initial Support Fee shall be paid
effective January 1, 2001 within 30 days of receipt of invoice. Subsequent
annual payments shall be invoiced on or about January 1 and made within
thirty (30) days after receipt of invoice.
Corillian shall not provide on-site support services except to the extent
that on-site support services are required for resolution of a Priority 1
problem, which shall be provided at no additional cost to Client. If on-site
support services are provided for other than Priority 1 problems, they will
be provided on-site only with Client's prior consent and will be billed to
Client at Corillian's then-current published rate plus reasonable expenses,
including, but not limited to, air travel, local transportation, hotel rooms
and meal expenses.
3. DEFINITION OF PRIORITIES
When reporting a problem, Client shall indicate its priority according to the
following definitions:
PRIORITY 1: Critical: 1) The issue prevents an installed Product
from immediate production operation; or 2) The installed
Product repeatedly crashes or loses data; or 3) The installed
Product does not reliably complete transactions; or 4) The
Product cannot be installed at Client's site; 5) The Product
does not recover from errors properly; 6) The Product
performance is too slow to support the specific number of
transactions; or 7) The issue prevents a Product from
performing as needed by the Client or Client's customer.
- ---------------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
PAGE 2
<PAGE>
PRIORITY 2: Medium: 1) The Product does not behave as
documented; 2) The documentation is in error, is unclear, or
should be expanded; 3) The required documentation is missing;
or 4) The issue should be addressed, but does not have
significant impact on the Client or Client's customer.
PRIORITY 3: Low: 1) Cosmetic changes and subjective preferences;
2) A new feature will improve the Product's functionality,
usability, reliability, performance, or supportability; or 3)
Functionality not related to the intent of the Product.
Client is responsible for ensuring that the priority it assigns to a problem
adheres to the foregoing definitions. Corillian reserves the right to
re-prioritize a problem report that is not reasonably consistent with these
definitions. If Corillian does so, Corillian shall so advise Client in
writing and shall cooperate with Client to come to an agreement on level of
priority.
4. RESPONSE PROCEDURES AND SUPPORT LEVELS
Corillian's response is provided at multiple levels to best match the need of
the issues. Corillian will use the appropriate support level to focus
attention on the most critical issues first, and will cooperate with Client
in coming to agreement on which is the appropriate level of support for a
given issue. The following are the four levels of support:
LEVEL A: Onsite support for escalated issues that cannot be
resolved remotely.
LEVEL B: Seven (7) days a week, twenty four (24) hours per day
telephone support for Critical / Site Down issues.
Response time: 30 minutes.
LEVEL C: Standard telephone support hours 8:00 a.m. to
5:00 p.m. Eastern Time, Monday through Friday for
technical problems. Response time: 4 business hours.
LEVEL D: E-mail support for general questions. Response time:
1 business day, although development of new features
or functions will be in Corillian's sole discretion.
Priority 1 problems shall be assigned to Levels A or
B, Priority 2 problems shall be assigned to Levels C
or D, Priority 3 problems shall be assigned to Level
D.
5. REPORTING PROBLEMS AND SUPPORT CONTACTS
Corillian requires that Client designate a primary and secondary contact who
will be authorized to place support contacts.
To report a problem, the Client contact shall send a problem report via
electronic mail to the email address of [email protected] or, for
Priority 1 or 2 problems, place a call to Corillian Support Services at
503-646-9507. Client's report should contain Client's company name and the
phone number and email address of the person reporting the call; the priority
level (in accordance with the definitions provided above); the Product for
which Client is reporting a problem; and the platform on which the Product is
installed. In the event the Support Services telephone number is not manned
24 hours a day, seven days a week, Corillian will provide Client with a phone
number or pager number for reporting Priority 1 problems 24 hours a day,
seven days a week.
PAGE 3
<PAGE>
6. SUPPORT HOURS
Corillian's standard telephone support and other support services are
available Monday through Friday, 8:00 AM to 5:00 PM Eastern Time, exclusive
of Corillian holidays. Additionally, Corillian will provide 24x7 support for
Priority 1 and 2 level problems. Upon execution hereof, Corillian will
provide Client with a schedule of holidays and will notify Client in writing
of subsequent changes in such schedule, provided, however, that, at a
minimum, Corillian will provide such standard telephone support on all
weekdays except Client holidays. The standard telephone support, as well as
all other support provided hereunder, begins upon production release to
Client's customers of any of the product Components and entitles Client to
product support seven days a week, twenty four hours a day. Standard
telephone support and all other support to which Client is entitled shall
also be provided during the ninety (90) day warranty period described in
section 6.1.2 of the Agreement, and performance standards set forth in
Section 9.2 hereof shall also apply during such period, as well as
thereafter. Telephone support services are limited to Corillian products and
Third Party Software. Corillian reserves the right to assess a fee of two
hundred fifty dollars ($250) per hour (with a one hour minimum) for Client's
requests for support for non-Corillian products.
7. EVENING, WEEKEND AND HOLIDAY SUPPORT SERVICES
If Client contacts the Corillian support services personnel outside of the
standard support hours (Monday through Friday, 8:00 AM to 5:00 PM ET) for
other than a Priority 1 or Priority 2 problem condition, Client agrees to pay
Corillian two hundred and fifty dollars ($250) per hour (with a one hour
minimum.)
8. ACTION PLANNING AND COMMUNICATION
In reference to any Priority 1 problem reports, Corillian will immediately
use its best efforts to restore the system to proper operation (if necessary)
and, within five (5) days of escalation, provide an action plan for a long
term fix for the issue. The action plan will include details on the nature of
the fix and the time frame of resolution. Corillian and Client acknowledge
that under some circumstances it may be most expedient for Corillian's
support personnel to dial in and directly access Client's computer
facilities. Additionally, for problems other than Priority 1 problems, for
which such services are provided at no cost pursuant to Section 2 above,
Corillian may under some circumstances make support personnel available for
on-site work at Client's location (with Client's approval), at an additional
then-current cost as outlined in section 2 above. Daily review of status
throughout the entire process will be available to Client through Corillian's
normal technical support personnel.
9. CONTENT OF SUPPORT AND PRODUCT UPGRADES
9.1 In addition to the obligations set forth in Sections 1 through 8
hereof, in all situations involving a Priority 1 problem involving a
system outage, Corillian shall endeavor to restore the Product to
reliable production within four (4) hours after such problem is
reported to Corillian. Furthermore, in all situations involving
performance or non-performance of the Products, Corillian shall
endeavor to supply as soon as practicable code corrections as required
to enable the Products to perform the functions described in Exhibit 1
attached to the Product Schedule, including participation in the action
planning and communication activities set forth in Section 8 above. In
the event that Corillian is unable to make the Products operate as set
forth in Exhibit 1 within 60 days of notification of a problem, that
Client may exercise termination rights pursuant to Section 13.4 below,
provided, however, that the foregoing shall not apply to problems
attributable to or which Corillian is prevented from remedying as
required above because of (i) the acts or omissions of Client, Client's
customers, employees, consultants, contractors, or other third-party
vendors; (ii) interruption in data communication
<PAGE>
resulting from the acts or omissions of Client or a third party; (iii)
hardware or third-party software failures; or (iv) other causes beyond
the control of Corillian.
9.2 Corillian warrants that within 24 hours of notice of a Priority 1
problem that causes total systems unavailability of the Products,
Corillian shall restore systems availability of the Products. For the
first breach of this warranty during a support term, Corillian agrees
to provide Client with a rebate of $[ * ] to be applied against
prospective Support Fees. For any subsequent breach of this warranty
during a support term, Client may exercise termination rights pursuant
to Section 13.4 below. The foregoing warranty shall not apply to
Priority 1 problems attributable to or which Corillian is prevented
from restoring systems availability as required above because of (i)
the acts or omissions of Client, Client's customers, employees,
consultants, contractors, or other third-party vendors; (ii)
interruption in data communication resulting from the acts or omissions
of Client or a third party; (iii) hardware or third-party software
failures; or (iv) other causes beyond the control of Corillian.
9.3 During the term of this Agreement, Corillian shall provide Client
with any upgrades to any Product or custom engineering deliverable
licensed pursuant to the Agreements or any subsequent agreements
between the parties, at no additional charge excepting only
reasonable charges for media shipping, handling, and, if required,
installation services. Upgrades shall be furnished to the Client
within thirty (30) calendar days of their being made generally
available. Client shall not be required to install any upgrades
which Corillian deems unnecessary to Client's continued use of a
Product or which shall not perform their documented functionality.
The term "upgrades" shall mean any and all changes to a Product that
(a) improve the operating performance but do not materially alter
the functions of the Product; (b) incorporate all fixes or bypasses
of known system errors; (c) that are required to allow Client to
continue to implement Bill Payment Processing in accordance with
Checkfree SIS specification; (d) are required to support subsequent
versions of OFX, or versions of IFX or XML, which are required to
support banking and bill pay transactions in subsequent commercial
releases of Microsoft Money-Registered Trademark- and
Quicken-Registered Trademark-. The term "upgrades" does not include
improvements in a Product that are other than the items set forth in
subsections (a) through (d) above and (i) add to or materially alter
the basic functions of the Product; or (ii) that may be offered to
Corillian's other customers for payment of additional or higher
license fees because of improvements to the Product. In the event
Client has licensed any custom engineering deliverable which is
substantially similar to a product generally released to and
supported for Corillian's other customers, and Corillian has
provided an upgrade with regard to such product, a similar upgrade
will be provided to Client hereunder.
9.4 During the term of this Agreement, upon written notice from Client,
Corillian shall provide Client with modifications to any of the
Products that are required to maintain the compliance of the Products
with or to allow the Products to contain the functionality to permit
Client to comply with all federal, state and local laws and regulations
applicable to the functionality of and services to be performed by the
Products. In the event that Corillian is required to make such
modifications for any other customer and offers such modifications to
the customer for no additional fee, then Corillian will provide such
modifications to Client for no additional fee. In all other cases,
Corillian agrees to provide Client with such modifications on a time
and material basis. Corillian agrees to use its best efforts to provide
Client with such
- ---------------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
PAGE 5
<PAGE>
modifications in a timely manner so that Client may be in compliance in
accordance with the effective date of any new laws and regulations.
10. PRODUCT ADVISORY BOARD
Two representatives of Client will be invited to participate in quarterly
Product Advisory Board meetings at Corillian to discuss strategic product
development, upcoming product releases and co-marketing opportunities.
11. KNOWLEDGE TRANSFER AND TRAINING
In the event Client elects to receive Source Code pursuant to the Escrow
Agreement, Corillian will provide Client immediately upon release of the Source
Code from escrow in accordance with a mutually agreed to training program
knowledge transfer and training of the Source Code of the licensed Products to
include architecture overview, source code configuration review and major
component review. Client shall be entitled to the equivalent of four man weeks a
year of knowledge transfer and training for as long as Client receives support
services pursuant to this Support Schedule. In the event that Client terminates
this Support Services Schedule in connection with a request for release of the
Source Code from escrow, Corillian shall be obligated to provide only the
equivalent of four man weeks of knowledge transfer and training to be provided
immediately upon release of the Source Code from escrow. For any such on-site
training, Client agrees to pay Corillian's reasonable expenses, including, but
not limited to, air travel, local transportation, hotel rooms and meal expenses.
12. AVAILABILITY OF SUPPORT
12.1 Corillian agrees, either directly or through a subcontractor, to offer
support services hereunder, until at least December 31, 2006. Corillian
may assign or subcontract the services provided to Client pursuant to
this Support Schedule. Corillian shall provide Client with at least one
hundred eighty days notice of such proposed assignment or
subcontracting, so that Client may, in its sole discretion, determine
whether to exercise its right to receive Source Code and knowledge
transfer pursuant to Section 11 hereof and pursuant to the Escrow
Agreement. However, if Corillian, its successors or assignees fails,
for any reason whatsoever, to provide to Client, directly or through an
any third party contractor, the Product maintenance and support
services required to be provided by Corillian, or if such support
services are provided in such a manner that, by virtue of such failure,
Client is unable to make commercially reasonable beneficial use of the
Products, then Client may exercise termination rights pursuant to
Section 13.5 below.
12.2 Subject to its obligation to offer support services at least through
December 31, 2006, Corillian may terminate this Support Services
Schedule by providing Client with at least one hundred eighty (180)
days notice prior to the expiration of the then current term.
13. TERMINATION
13.1 In the event Client has not received Source Code pursuant to the terms
of the Escrow Agreement, Client may terminate this Support Services
Schedule by providing Corillian at least sixty (60) days notice prior
to the expiration of the then current term.
13.2 In the event Client has received Source Code pursuant to the terms of
the Escrow Agreement, and Client is not terminating pursuant to the
provisions of Section 13.3, 13.4 or 13.5 below, Client may terminate
this Support Services Schedule at any time by providing notice to
Corillian and paying an exit fee in accordance with the following
schedule:
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<PAGE>
13.2.1 From the effective date above and for 18 months thereafter:
(a) If Client no longer utilizes the Products in any way,
then the exit fee shall equal $[ * ]
(b) If Client continues to utilize the Products, then the
exit fee shall equal $[ * ].
13.2.2 19 months--3 years from the effective date:
The exit fee shall equal $[ * ]
13.2.3 4 years--6 years from the effective date:
The exit fee shall equal the unamortized portion of the $[ * ].
Amortization begins in year 4 and is calculated using a three-year
straight line depreciation method.
13.2.4 After 6 years from the effective date above, Client may
terminate the Support Schedule prior to the end of the then
current term, continue to utilize the Products and pay no exit
fee.
13.3 In addition, regardless of whether Client has received the Source Code
pursuant to the terms of the Escrow Agreement, Client may terminate
this Support Services Schedule in accordance with the terms of Section
7 or 8 of the Product Schedule or Section 6.2.1, 11.2 or 11.3 or 15 of
the Agreement.
13.4 In addition, regardless of whether Client has received the Source Code
pursuant to the terms of the Escrow Agreement, Client may terminate
this Support Services Schedule at any time pursuant to the provisions
of Section of 9.1 or 9.2 hereof. In such case, Client may at its option
(i) discontinue use of the Products, terminate the License Agreement,
and cancel all obligations with respect to payment of custom
engineering and implementation fees not previously incurred prior to
notice of termination, together with refund of any license fees for
applications not previously accepted, terminate the Support Services
Schedule without payment of an exit fee and receive a pro-rata refund
of the Support Fees paid hereunder; (ii) continue to use the Products
with a reduction in the License Fee or Support Services Fee as the
parties mutually agree shall be fair and equitable or (iii) continue to
use the Products, terminate the Support Services Schedule, receive a
pro-rata refund of the Support Fees paid hereunder and pay Corillian an
exit fee of $[ * ] or the amount owing under Section 13.2 of the
Support Services Schedule, whichever is less and shall receive the
Source Code pursuant to the Escrow Agreement, including the knowledge
transfer obligation specified in Section 11 hereunder and thereunder.
In the event that Client has previously exercised its election to
receive the Source Code pursuant to the Escrow Agreement, Client shall
have the same three remedies available to it. With respect to option
(i), Client shall return to Corillian or certify the destruction of all
copies of the Source Code thereof within 30 days of notice of
termination and with regard to option (iii), regardless of whether
Client shall have previously exercised its election to receive the
Source Code, Corillian shall complete the knowledge transfer obligation
specified in Section 11 hereof and under the Escrow Agreement, if it
has not already done so, and until such completion shall continue to
provide problem resolution
- ------------
* Portion has been omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
PAGE 7
<PAGE>
services on a time and materials basis, and Client shall pay the exit
fee upon completion of knowledge transfer.
13.5 In addition, regardless of whether Client has received the Source Code
pursuant to the terms of the Escrow Agreement, Client may terminate
this Support Services Schedule at any time pursuant to Section 13.1
hereof. In such case, Client may, at its option,(i) discontinue use of
the Products, terminate the License Agreement, and cancel all
obligations with respect to payment of custom engineering and
implementation fees not previously incurred prior to notice of
termination,, together with refund of any license fees for applications
not previously accepted, and terminate the Support Services Schedule
without payment of an exit fee and receive a pro-rata refund of fees
paid hereunder; (ii) continue to use the Products with reductions in
the License Fee and Support Services Fee as the parties mutually agree
shall be fair and equitable, or (iii) continue to use the Products,
terminate the Support Services Schedule receive a pro-rata refund of
the Support Fees paid hereunder, receive the Source Code pursuant to
the Escrow Agreement, including knowledge transfer specified in Section
11 hereunder and thereunder. In the event that Client has previously
exercised its election to receive the Source Code pursuant to the
Escrow Agreement, Client shall have the same three remedies available
to it. With respect to option (i), Client shall return to Corillian or
certify the destruction of all copies of the Source Code thereof within
30 days of notice of termination and option (iii), regardless of
whether Client shall have previously exercised its election to receive
the Source Code, Corillian shall complete the knowledge transfer
obligation specified in Section 11 hereof, if it has not already done
so, and shall continue to provide problem resolution services on a time
and materials basis.
13.6 Notwithstanding Client's election to terminate the Support Services
Schedule and obtain Source Code pursuant to the provisions of the
Support Services Schedule and Source Code Escrow Agreements, Client may
use the Source Code so provided solely to maintain and support the
Products, modify, enhance, and upgrade the Products for license it has
purchased from Corillian in accordance with the terms of such license
so as to enable Client to make the use of the Products intended by the
Agreement. Client may not, under any circumstances, sell, disclose,
assign, transfer or convey in any manner, or dispose of the Source Code
or any portion thereof, except as otherwise provided in the Agreements.
Termination of support pursuant to this Section 13 does not in any way
affect Client's license rights to the Products as provided in the
Agreement.
Each Party represents that it has read this Support Services Schedule and
understands its provisions and that the person signing this Support Services
Schedule on behalf of such Party is authorized to do so.
Wachovia Operational Services Corillian Corporation
Corporation
DATE: 12/22/99 DATE: 12/23/99
----------------------------- ------------------------------
BY: /s/ BY: /s/ Kirk Wright
----------------------------- ------------------------------
Kirk Wright, President
PAGE 8
<PAGE>
EXHIBIT A
CORILLIAN CORPORATION
VOYAGER SOURCE CODE ESCROW AGREEMENT
Effective Date: December ____, 1999 Corillian Corporation
Wachovia Operational Services Corillian Corporation ("Corillian")
Corporation ("Client") 3601 SW Murray Blvd., Suite 300
809 W. 4-1/2 Street Beaverton, Oregon 97005
Winston-Salem, North Carolina 27150 (503) 627-0729
FAX (503) 641-5575
Corillian, by its signature indicating acceptance hereof, grants to Client a
Voyager Source Code Escrow Account ("Account") with Datasafe, Inc. ("Escrow
Agent") as agreed to herein. Corillian and Client have entered into a Voyager
License Agreement (the "License Agreement") pursuant to which Corillian will
grant to Client during the term of said Agreement a non-exclusive,
non-transferable License to use a production copy of the products named on the
Voyager Product Schedule(s) as defined therein (such products collectively
referred to herein as the "Products.")
STANDARD TERMS AND CONDITIONS
1. ESCROW MATERIAL
The term "Escrow Material" as used in this Agreement means (i) the source
code of all of the Products, in such form that will allow Client to build and
compile usable object code, (ii) the similar source code version of any and
all updates, modifications, revisions, and enhancements to be delivered
pursuant to the Voyager License Agreement, as well as any other Products
provided pursuant to the Product Schedule of Support Services Schedule or
otherwise pursuant to an agreement with Client and (iii) any and all
documentation developed by Corillian or in its possession pertaining to the
applicable source code. Without limiting the generality of the foregoing, the
"Escrow Material" shall include any pertinent commentary or explanation that
may be necessary to render the source code understandable and useable by a
trained computer-programming professional who is generally familiar with
C++/COM systems, although not necessarily those incorporating the Products.
The Escrow Material shall include system documentation, statements of
principles of operation, and schematics, all as necessary or useful for the
effective understanding and use of the source code. Insofar as the
"development environment" employed by Corillian for the development,
maintenance, and implementation of the source code includes any device,
programming or documentation not commercially available to the Client on
reasonable terms through readily known sources other than Corillian, the
Escrow Materials shall include all such devices, programming, or
documentation. The foregoing reference to the "development environment" is
intended to apply to any programs, including compilers, "workbenches", tools
and higher-level (or "proprietary") languages, used by Corillian for the
development, maintenance and implementation of the source code.
2. ADDITIONS TO ESCROW MATERIAL
If Corillian develops updates, modifications, revisions or enhancements of the
Products which are to be delivered by Corillian to Client pursuant to the
Voyager License Agreement or otherwise pursuant to an agreement with Client,
then the related source code shall constitute additional Escrow Material. Within
ten (10) business days after the release of such additional Escrow Material,
Corillian shall give written notice thereof to Client, describing in detail such
additional Escrow Material. Such additional
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<PAGE>
Escrow Material shall be deposited with Escrow Agent as provided in Section 4
below. It is the intention of the parties that the Source Code deposited
hereunder shall correspond to the Products in use by Client.
3. INSPECTION
Client may appoint either (a) an independent firm of certified public
accountants of national reputation or (b) an independent, professional
computer-programming consultant mutually agreeable to Corillian and Client to
inspect, compile, test and review the source code (subject to appropriate
undertakings of confidentiality and restrictions on subsequent use and
disclosure) at any time, and Escrow Agent shall permit such inspections and
testing promptly upon request. Except as otherwise authorized by Corillian
(which authorization will not be unreasonably withheld), such inspections and
testing shall be conducted at the offices of the Escrow Agent designated in
Section 14..
4. DEPOSIT
Within ten (10) days after the release of any applicable Product, or whenever
an obligation shall arise under Section 2, Corillian shall deposit the
relevant Escrow Material with Escrow Agent. Escrow Agent shall issue to
Corillian (with a copy to Client) a receipt for the Escrow Material upon its
delivery to Escrow Agent.
5. STORAGE
Escrow Agent will accept the deposit of Escrow Material and will preserve and
protect the Escrow Material at Escrow Agent's offices designated in Section
14. Escrow Agent shall prohibit any person (including employees of Corillian)
from gaining access to the Escrow Material except (a) as provided by the
terms of this Agreement, or (b) as otherwise directed by court order.
6. RESPONSIBILITIES
In performing its duties under this Agreement, Escrow Agent is authorized to
conclusively rely upon any statement, consent, agreement, or other instrument
not only as to its due execution, its validity, and the effectiveness of its
provisions, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be
genuine or to have been presented or signed by a proper person or persons.
Escrow Agent shall not be responsible or liable for any promise,
representation, agreement, condition, or stipulation not set forth in this
Agreement; for the sufficiency, correctness, genuineness, or validity of any
instruments or documents deposited with Escrow Agent; for the form of
execution thereof or the identity, authority, or rights of any person
executing the same; for the performance of or compliance with the terms or
conditions of any such instruments; for the maintenance of any property
covered by this Agreement (other than to provide reasonable care to protect
and safeguard the Escrow Materials), including, but not limited to, payment
of taxes, assessments, upkeep charges, or repair bills; for the sufficiency
or priority of any security or the value or title of any property; for any
loss which may occur by reason of forgeries, false representations, or the
exercise of Escrow Agent's judgment in any particular manner; or for any
other reason except Escrow Agent's negligence or intentional misconduct.
7. USEABILITY OF SOURCE CODE
Corillian represents and warrants that the Escrow Materials are and shall be
understandable and useable by a trained computer-programming professional who is
generally familiar with C++/COM systems, though not necessarily those
incorporating the Products. Corillian further represents and warrants that the
Products do not involve any proprietary languages or programming components that
such a professional could not reasonably be expected to understand, except to
the extent the Escrow
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<PAGE>
Materials contains sufficient commentary to enable such professional to
understand and use such languages or components. Corillian further represents
and warrants that the Escrow Materials contain all of the devices,
programming, and documentation necessary for the maintenance of the Products
by the Client upon release of the Escrow Materials pursuant to this
Agreement, except for devices, programming and documentation commercially
available to the Client on reasonable terms through readily known sources
other than the Licensor.
8. RIGHT TO ESCROW MATERIAL; USE OF ESCROW MATERIAL
Client shall be entitled to receive the Escrow Material upon
Client providing Escrow Agent and Corillian with written notice of its
election to obtain Escrow Materials. Escrow Agent shall deliver the Escrow
Material to Client within ten (10) business days following the date of its
receipt of Client's request.
9. USE
Upon release of the Escrow Materials hereunder, Client is granted, without
any further action, authorization or instrument, a non-exclusive,
non-transferrable, perpetual license in the Escrow Materials. Client may use
the Escrow Material provided under this Agreement to maintain and support the
Products, and to modify, enhance, and upgrade the Products and otherwise in
accordance with the terms of the License Agreement so as to enable Client to
make the use of the Products intended by the License Agreement. Client will
not, under any circumstances, sell, disclose, assign, transfer or convey in
any manner, or dispose of the Escrow Material or any portion of the Escrow
Material, except as may be permitted in the License Agreement. The parties
intend and agree that this Agreement is an "agreement supplementary to" the
License Agreement as provided in Section 365(n) of Title 11 U.S.C. (the
"Bankruptcy Code") for all purposes. Upon release of the Escrow Materials,
the Escrow Materials shall be considered to be "Products" for all purposes of
the License Agreement.
10. KNOWLEDGE TRANSFER
Promptly upon any release of the Escrow Materials to Client by the Escrow
Agent for any reason hereunder, Corillian will provide Client with knowledge
transfer and training of the Escrow Materials of the Products, to include
architecture overview, source code configuration review and major component
review. Client shall be entitled to such knowledge transfer in accordance
with the terms set forth in the Support Services Schedule.
11. RELIANCE
Escrow Agent may conclusively rely upon and shall be protected, indemnified,
and held harmless by Client and Corillian, jointly and severally, in acting
upon the written (which shall include instructions given by telecopier or
other telecommunications device) instructions of any officer of either
Corillian or Client or of counsel to either of them with respect to any
matter relating to its actions as Escrow Agent under this Agreement,
provided, however, that in the event this Agreement requires instructions
from both of the parties, Escrow Agent shall be required to obtain such
instructions from both parties. The Escrow Agent shall comply with any such
instructions, notwithstanding any demand or notice to the contrary from any
person, and is relieved from liability for doing so.
12. INDEMNIFICATION
Client and Corillian, jointly and severally, covenant and agree to indemnify
Escrow Agent and hold it harmless (without prejudice to a determination between
Client and Corillian as to which party shall
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<PAGE>
bear the ultimate responsibility) against any loss, liability, or expense
arising out of or in connection with its performance of its duties under this
Agreement, including, but not limited to, legal and other fees and expenses
and including specifically, but without limitation, any legal or other
expenses with respect to any action for interpleader by Escrow Agent, except
that Escrow Agent shall not be indemnified against any such loss, liability,
or expense arising out of its negligence or intentional misconduct. Escrow
Agent shall be under no obligation to institute or defend any action, suit,
or legal proceeding in connection with this Agreement, unless first
indemnified and held harmless to its satisfaction in accordance with the
foregoing.
13. TERM OF AGREEMENT; TERMINATION
The term of this Agreement and the Account granted hereunder shall commence
upon acceptance of this Agreement by Corillian from the Effective Date above
and shall continue in effect until Corillian and Client shall both notify
Escrow Agent by notarized certificate, signed by an officer of both Corillian
and Client, that Corillian no longer has any obligations to Client requiring
the deposit of the Escrow Material in escrow, whereupon Escrow Agent shall
destroy the Escrow Material and provide acknowledgment thereof to Corillian.
14. NOTICES
All notices, reports, instructions, requests, and other communications given
under this Agreement shall be in writing and shall be deemed to have been
given or made (i) if by mail, when received by certified mail, postage
prepaid, return receipt requested; or (ii) if by facsimile, when sent by
facsimile to the facsimile number set forth below with evidence of receipt by
sender or (iii) if by courier, when received; provided, however, that either
party may change its address or facsimile number for notices by providing
notice to the other party or such change in the manner provided herein.
Notices shall be directed to the following addresses or facsimile numbers:
To Escrow Agent: Datasafe, Inc.
P.O. Box 23056
Tigard, OR 97281-3056
Telephone: (503) 620-3423
Facsimile: (503) 684-3332
To Corillian: Corillian Corporation
3601 S.W. Murray Blvd., Suite 300
Beaverton, OR 97005
Telephone: (503) 627-0729
Facsimile: (503) 641-5575
Attention: Daryn Chapman
To Client: Wachovia Operational Services Corporation
c/o Wachovia Bank, N.A.
101 N. Cherry Street
Winston-Salem, NC 27102
Attention: Digital Platform Manager
(Joanna Giacobbe)
15. DUTIES OF ESCROW AGENT
Escrow Agent shall have no duties or obligations except those expressly set
forth in this Agreement, and no implied duties or obligations shall be read into
this Agreement against Escrow Agent. Escrow Agent shall have no responsibilities
or liability to any of the parties or their successors for any action
PAGE 4
<PAGE>
taken by it in good faith upon receipt of any instrument or other writing
believed by it to be genuine and to be properly signed or presented. In case
any property deposited under this Agreement shall be attached, garnished, or
levied upon pursuant to an order of court or other authority having
jurisdiction, or the delivery thereof shall be stayed or enjoined by an order
of court, or any other order, judgment, or decree shall be made or entered by
any court affecting such property or any part thereof (unless such order,
judgment, or decree has been stayed, pending appeal), Escrow Agent shall obey
and comply with all final writs, orders, judgments, or decrees so entered or
issued by any court, without the necessity of inquiry whether such court had
jurisdiction. Upon receipt of notice of an order, writ, judgment, or decree,
Escrow Agent will transmit copies of said writ and other process or pleading
received to all parties, and shall not comply with any writ, order, judgment,
or decree until seven (7) days following delivery of such copies to all
parties if permitted under such document.
16. EXPENSES
Corillian and Client shall each pay one-half of the fees and expenses to
Escrow Agent directly in accordance with Escrow Agent's fee schedule. The
Escrow Agent's fees and expenses will be paid annually in advance. Any costs
incurred by the Escrow Agent will be billed at the end of the month in which
they are incurred.
17. TAXES
Corillian and Client shall each be responsible for one-half of any federal,
state, excise, and local government fees, assessments, charges, and taxes
connected with this Agreement.
18. WITHDRAWAL OF ESCROW AGENT
Escrow Agent may resign on sixty (60) days written notice to each of the
parties. Thereafter, upon payment of all fees and costs earned or incurred by
Escrow Agent in connection with this Agreement, Escrow Agent shall deliver
the Escrow Material to a successor escrow agent named by Corillian and Client
or, if none, to the party named in written instructions from Corillian and
Client. If a successor escrow agent has not been appointed and has not
accepted appointment by the end of such sixty (60) day period, Corillian or
Client may apply to a court of competent jurisdiction for the appointment of
a successor escrow agent and the reasonable costs, expenses, and attorneys'
fees of Escrow Agent that are incurred in connection with such a proceeding
shall be paid equally by Corillian and Client.
19. SEVERABILITY
If any of the terms, conditions, or provisions of this Agreement shall be
held invalid, illegal, or unenforceable, then, notwithstanding, this
Agreement shall remain in full force and effect and the legality, validity,
and enforceability of the remaining terms, conditions, or provisions shall
not be affected.
20. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of, and shall be binding upon, the
permitted successors and assigns of the parties.
21. HEADINGS
The headings of the sections and paragraphs of this Agreement are solely for
convenience of reference and are not part of and are not intended to define,
govern, limit, or aid in the construction of this Agreement.
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22. WAIVER
No failure or delay on the part of any party in exercising any right, power,
or remedy under this Agreement may be, or may be deemed to be, a waiver
thereof; nor may any single or partial exercise of any right, power, or
remedy preclude any other further exercise of any right, power or remedy.
23. ATTORNEYS' FEES
In the event of any dispute arising out of the subject matter of this
Agreement, the prevailing party shall recover, in addition to any other
damages assessed, its reasonable attorneys' fees and court costs incurred in
arbitrating, litigating, or otherwise settling or resolving such dispute.
24. GOVERNING LAW
The validity, construction and performance of this Agreement shall be
governed by the laws of the State of New York without reference to its choice
of law rules, except to the extent the same are preempted by the laws of the
United States of America.
25. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties on the subject
matter of this Agreement and no amendment, modification, or addition hereto
shall have effect or be binding unless in writing and executed by all of the
parties. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be one and the same instrument.
UNDERSTOOD AND ACCEPTED:
Client: Corillian:
Wachovia Operational Services CORILLIAN CORPORATION
Corporation
DATE: 12/22/99 DATE: 12/23/99
--------------------------- ----------------------------
BY: /s/ BY: /s/ Kirk Wright
----------------------------- ------------------------------
Kirk Wright, President
Escrow Agent:
DATASAFE, INC.
DATE:
---------------------------
BY:
- --------------------------------
Authorized Signature
- --------------------------------
Printed Name and Title
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<PAGE>
SECOND AMENDMENT TO OFFICE LEASE
THIS SECOND AMENDMENT TO OFFICE LEASE (this "Agreement") is made the 30
day of August, 1998, by and between MURRAY OREGON EQUITIES, L.L.C. , an Oregon
limited liability company (the "Lessor") and CORILLIAN CORPORATION, an Oregon
corporation (the "Lessee").
RECITALS.
A. Lessor entered that certain Office Lease dated March 20, 1996,
with CheckFree Corporation, an Ohio corporation (the "Initial Lease"), the
lessee's interest of which was assigned by Assignment of and Consent to
Assignment of Lease, dated May 15, 1997, to Lessee. The Initial Lease has been
amended by that certain First Amendment to Office Lease between Lessor and
Lessee of even date herewith (the "First Amendment"). As used in this
Agreement the term "Lease" means the Initial Lease as amended by the First
Amendment. The Lease pertains to office space in a project known as the Murray
Business Center (the "Project"), which space is more particularly described in
the Lease. Terms with initial capitals used in this Agreement, unless
otherwise defined, shall have the meanings given them in the Lease.
B. Lessee has advised Lessor that it desires to lease certain
expansion space in Building 3 of the Project consisting of approximately 8,801
useable square feet and 9,522 rentable square feet, as outlined in Exhibit A to
this Agreement (the "Expansion Space") provided that Lessee can occupy the
Expansion Space not later than February 1, 2000. Lessor is willing to lease
the Expansion Space to Lessee on the terms and subject to the conditions set
forth in the Lease, and on the further terms and subject to the further
conditions set forth in this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree:
1. TERM. Commencing on the date determined pursuant to this Section
1, and continuing for the remaining term of the Lease, Lessor shall lease to
Lessee and Lessee shall lease from Lessor the Expansion Space. The foregoing
lease of the Expansion Space shall commence, if at all, between the period of
July 1, 1999 and February 1, 2000, on the date (the "Expansion Space
Commencement Date") that is the thirtieth (30th) day following Lessor's written
notice (the "Expansion Space Notice") to Lessee stating that the Expansion
Space will be ready for occupancy by the thirtieth (30th) day following the
date of such notice (which notice shall not be given before June 1, 1999, or
after January 1, 2000); provided, that the Expansion Space Commencement Date
shall be extended, but not beyond February 1, 1999, one day for each day after
the thirtieth (30th) day following the Expansion Space Notice
PAGE 1
<PAGE>
that Nike, Inc., the existing tenant in the Expansion Space, actually vacates
the same. Lessor shall use commercially reasonable efforts to keep Lessee
advised, from time to time after execution of this Agreement, concerning the
date on which Lessor anticipates that the Expansion Space will be available.
If Lessor anticipates that the Expansion Space will be available for occupancy
before July 1, 1999, Lessor shall so advise Lessee, and upon the parties'
written agreement, the lease of the Expansion Space hereunder may commence
before July 1, 1999. If for any reason Lessor has not given Lessee the
Expansion Space Notice on or before January 1, 2000, or the Expansion Space
Commencement Date does not occur by February 1, 1999, then this Agreement shall
terminate automatically and be of no further force and effect.
2. RENT. Effective upon the Expansion Space Commencement Date,
Section 3 of the Lease shall be amended to substitute the following for the
corresponding portion of the table appearing therein:
<TABLE>
<CAPTION>
Months Additional Minimum Aggregate Monthly
------ ------------------ -----------------
Monthly Rent - Minimum
--------------- --------
Expansion Space Rent
--------------- ----
<S> <C> <C>
Month in which Expansion Space
Commencement Date occurs -48 $11,001.00 $25,345.00
49-60 $11,331.00 $26,105.00
61-72 $11,671.00 $26,889.00
73-84 $12,021.00 $27,695.00
85-96 $12,382.00 $28,526.00
97-108 $12,753.00 $29,381.00
</TABLE>
The minimum monthly rent due in respect of the Expansion Space for the month in
which the Expansion Space Commencement Date occurs shall be prorated (at the
rate of $366.70 per day) if the Expansion Space Commencement Date occurs other
than on the first day of such month.
3. PREPAID RENT AND SECURITY DEPOSIT. Within ten (10) days
following Lessee's receipt of the Expansion Space Notice, Lessee shall deliver
to Lessor the sum of $22,002.00, consisting of prepayment of the first month's
minimum rent for the Expansion Space, and a further security deposit of
$11,001.00. Upon delivery of such sum, the term "Security Deposit" used in the
Lease shall mean such $11,001.00 PLUS the $14,344.00 already held by Lessor as
a security deposit thereunder, and Lessee's obligation, if any, to replenish
the Security Deposit shall extend to the full $25,345.00 thereof.
4. PARKING. Effective upon the Expansion Space Commencement Date,
Section 4 of the First Amendment shall be amended to substitute the number
fifty-one (51) for the number thirty-four (34) each instance that it appears
therein.
PAGE 2
<PAGE>
5. WORK LETTER AGREEMENT. Not later than the Expansion Space
Commencement Date, Lessor shall complete certain improvements to the Expansion
Space consisting of the following:
A. Lessor shall construct a doorway on the ground floor of
the Project, giving access from the Expansion Space to the elevator lobby.
B. Lessor shall paint the stairwell giving access to the
Expansion Space in Lessee's choice of a standard color established for use in
the Project.
Except for the improvements described in this Section 5, the Expansion Space
shall be delivered to Lessee "As Is," in its condition existing on the date
that Nike, Inc., vacates the same.
6. PREMISES. Effective upon the Expansion Space Commencement Date,
the term "Premises" as used in the Lease shall mean the original "Premises" as
defined at Section 1 of the Lease, and the Expansion Space.
7. RATIFICATION. Except to the extent expressly amended hereby, the
Lease, and each of its terms and provisions, is hereby ratified and confirmed
in all respects and shall remain in full force and effect and unmodified.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
MURRAY OREGON EQUITIES, L.L.C.,
an Oregon limited liability company
By: /s/
---------------------------
Title: Member
Date: 8/31/98
CORILLIAN CORPORATION,
an Oregon corporation
By: /s/ Ted S. Spooner
---------------------------
Title: CEO
Date: 8/12/98
PAGE 3
<PAGE>
STATE OF OREGON )
) ss.
COUNTY OF WASHINGTON )
On Aug. 12th, 1998, before me, Kyle F. Duey, a Notary Public in and for
said state, personally appeared --------------- and Ted F. Spooner,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the persons, or the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Kyle F. Duey
---------------------------
Notary Public in and for said State
- ---------------------------------------
OFFICIAL SEAL
KYLE F. DUEY
NOTARY PUBLIC - OREGON
COMMISSION NO. 051372
MY COMMISSION EXPIRES FEB. 21, 2000
- ---------------------------------------
STATE OF )
) ss.
COUNTY OF )
On ____________________, 19__, before me, ____________________, a Notary
Public in and for said state, personally appeared ____________________ and
____________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities, and that by their signatures on the instrument the
persons, or the entity upon behalf of which the persons acted, executed the
instrument.
WITNESS my hand and official seal.
------------------------------------
Notary Public in and for said State
PAGE 4
<PAGE>
FIRST AMENDMENT TO OFFICE LEASE
THIS FIRST AMENDMENT TO OFFICE LEASE (this "Agreement") is made the 23
day of June, 1998, by and between MURRAY OREGON EQUITIES, L.L.C., an Oregon
limited liability company (the "Lessor") and CORILLIAN CORPORATION, an Oregon
corporation (thc "Lessee").
RECITALS.
A. Commercial Real Estate Company, LLC, a Washington limited
liability company and CheckFree Corporation, an Ohio corporation entered that
certain Office Lease dated March 20, 1996 (the "Lease"), the lessee's interest
of which was assigned by Assignment of and Consent to Assignment of Lease, dated
May 15, 1997, to Lessee, and the lessor's interest of which has been assigned
and transferred to Lessor. The Lease pertains to 11,350 square feet of useable,
and 12,280 square feet of rentable, office space, in a project known as the
Murray Business Center (the "Project"), which space is more particularly
described in the Lease. Terms with initial capitals used in this Agreement,
unless otherwise defined, shall have the meanings given them in the Lease.
B. Lessee has advised Lessor that it desires to extend the term of
the Lease, which currently expires February 28, 1999, for an additional period
of six years. Lessor is willing to grant such extension on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree:
1. TERM. Section 2 of the Lease is hereby amended to substitute the
date, February 28, 2005, for the date February 28, 1999, appearing therein.
2. MONTHLY MINIMUM RENT. Section 3 of the Lease is hereby amended to
add, to the table appearing therein, the following:
<TABLE>
<CAPTION>
Months Monthly Minimum Rent
------ --------------------
<S> <C>
37-48 $14,344.00
49-60 $14,774.00
61-72 $15,218.00
73-84 $15,674.00
85-96 $16,144.00
97-108 $16,628.00
</TABLE>
PAGE 1
<PAGE>
3. PREPAID RENT AND SECURITY DEPOSIT. Section 4 of the Lease is
hereby deleted in its entirety and the following is substituted therefor:
"Lessee has delivered to Lessor, and Lessor currently
holds, $14,344.00 which amount shall be held by Lessor under such
section shall no longer be applied in payment of the last month's
rent under this Lease but shall be held by Lessor as a security
deposit for Lessee's due and prompt performance of each of its
obligations under the Lease (the "Security Deposit"). If Lessee
fails to perform any of its obligations under this Lease, then
Lessor shall be entitled, without terminating this Lease and
without limiting any other right it may have under this Lease or
under applicable law, to apply all or any part of the Security
Deposit to cure such failure or to compensate Lessor for any loss
caused by Lessee's failure to perform. Following Lessor's
application of the Security Deposit in accordance with the
preceding sentence, Lessee shall be obligated, upon receipt of
Lessor's demand therefore, to restore the Security Deposit to
$14,344.00 unless such application has occurred following
expiration of the term of the Lease. Upon expiration of the term
of the Lease, after applying the Security Deposit in the manner
permitted by this Section 4, Lessor shall refund to Lessee the
Security Deposit net of such amounts that have been applied.
Lessor may, upon transfer of its interest in the Lease, transfer
the Security Deposit to its assignee and upon any such transfer
Lessor shall be released and discharged from any further
obligation or liability to Lessee with respect to the Security
Deposit."
4. PARKING. From and after the date of this Agreement, Lessee shall
have the right to use up to thirty-four (34) parking spaces in the outside
parking lot that forms a part of the Project, which use shall be subject to and
shall comply in all respects with rules and regulations from time to time
established by Lessor for the use of such lot. Lessee shall have no right in
any particular parking space but rather shall the right to use up to thirty-four
(34) spaces, on a first-come-first-served basis, with others who enjoy parking
privileges in the lot.
5. WORK LETTER AGREEMENT. The Lease is hereby amended to provide
that not later than commencement of the thirty-seventh (37th) month of the Lease
term, Lessor shall complete certain improvements to the Premises consisting of
the following:
A. Lessor shall install one or more light fixtures in the
Project stairwell that leads to the Premises, as and to the extent appropriate,
in the exercise of Lessor's discretion, to reasonably enhance the lighting of
such stairwell and entry.
B. Lessor shall install carpeting in the ground-floor entryway
to the Premises over the parquet flooring currently existing in that entryway.
C. Lessor shall supply and install in the Premises an
ice-maker and dishwasher, which appliances shall, upon installation, be and
remain Lessor's sole property but shall be available for use by Lessee during
the term of this Lease.
PAGE 2
<PAGE>
Lessor shall perform the work under this Section 5 during normal business hours
following reasonable advance notice to Lessee. Except as set forth in this
Section 5, the Premises shall be delivered to Lessee "As Is" at commencement of
the thirty-seventh month of the Lease term, in its condition existing at that
time.
6. ASSIGNMENT AND SUBLETTING. Section 13 of the Lease is hereby
amended as set forth in this Section 6. In connection with requesting Lessor's
consent to an assignment or subletting of all or any part of the Premises,
Lessee shall deliver to Lessor a statement setting forth the proposed terms of
the subletting or assignment, together with such background information
concerning the proposed assignee or subtenant as Lessor may reasonably request
(which information shall include, at a minimum, the name and state of
organization of the proposed subtenant or assignee, the name of the executive
officers or managers of the proposed subtenant or assignee, a description of the
business in which the proposed subtenant or assignee is engaged and will engage
in at the Premises, and financial statements for the proposed subtenant or
assignee for the prior two fiscal years consisting, at a minimum, of a balance
sheet and statements of profit and loss). Lessor's 20-day period under Section
13 of the Lease, to consent to such subletting or assignment, or to recapture
the portion of the Premises proposed to be sublet or assigned, shall commence
only when all of the foregoing information has been provided. If Lessor does
not elect to recapture the Premises (or applicable portion thereof) in
accordance with its rights under Section 13, as amended hereby, then Lessor
shall not unreasonably withhold its consent to the proposed subletting or
assignment. To the extent that any subletting or assignment permitted to be
made under Section 13, as amended hereby, results in the payment to Lessee of
any amount that exceeds Lessee's obligation of payment to Lessor under the
Lease, then Lessee shall pay one-half of such excess, upon receipt, to Lessor as
additional rent under the Lease. Notwithstanding any provision of Section 13
seemingly to the contrary, in no event shall Lessee (a) advertise the Premises
or any part thereof for subletting or assignment at a rental rate that is lower
than the rental rates then being charged in the Project for comparable space,
(b) assign the Lease or sublease the Premises, or any portion thereof, to
another tenant in the Project, or (c) assign the Lease or sublet the Premises,
or any portion thereof, to any third party with whom Lessor has, within the
twelve (12) months preceding such assignment or subletting, negotiated
concerning a lease in the Project. If Lessor exercises its right under Section
13, as amended hereby, to recapture the Premises, or the portion thereof that
Lessee proposes to sublease or assign, Lessee shall pay Lessor's managing agent,
at the effective date of such recapture by Lessor, a leasing commission for two
and one-half percent (2.5%) of the aggregate minimum annual rent payable in
respect of such space during the remaining Lease term.
7. RATIFICATION. Except to the extent expressly amended hereby, the
Lease, and each of its terms and provisions, is hereby ratified and confirmed in
all respects and shall remain in full force and effect and unmodified.
PAGE 3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
MURRAY OREGON EQUITIES, L.L.C.,
an Oregon limited liability company
By: /s/
---------------------------
Title: Member
------------------------
Date: June 23, 1998
------------------------
CORILLIAN CORPORATION,
an Oregon corporation
By: /s/ Ted F. Spooner
---------------------------
Title: Chairman
------------------------
Date: June 11, 1998
------------------------
STATE OF OREGON )
) ss.
COUNTY OF WASHINGTON)
On June 11, 1998, before me, Veasna Sea, a Notary Public in and for
said state, personally appeared Theodore Spooner and ________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
persons whose names are subscribed to the within instrument and acknowledged to
me that they executed the same in their authorized capacities, and that by their
signatures on the instrument the persons, or the entity upon behalf of which the
persons acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Veasna Sea
------------------------------------
Notary Public in and for said State
------------------------------------
OFFICIAL SEAL
VEASNA SEA
NOTARY PUBLIC - OREGON
COMMISSION NO. 309008
MY COMMISSION EXPIRES FEB. 1, 2002
------------------------------------
PAGE 4
<PAGE>
ASSIGNMENT OF AND CONSENT TO ASSIGNMENT OF LEASE
This Assignment of and Consent to Assignment of Lease is made on this 15 day
of May, 1997, between COMMERCIAL REAL ESTATE COMPANY, LLC, ("Lessor"), whose
address is 1001 Fourth Avenue, Suite 4700, Seattle, Washington 98154, and
CHECKFREE CORPORATION, whose address is 3601 SW Murray Boulevard, Suite 300,
Beaverton, OR 97005, ("Assignor") and CORILLIAN CORPORATION, whose address is
3601 SW Murray Boulevard, Suite 300, Beaverton, OR 97005 ("Assignee"), who
agree as follows:
1. RECITALS. This Assignment of Lease is made with reference to the
following facts and objectives:
a. Lessor and Assignor, as Lessee, entered into a written Lease dated
March 20, 1996, (the "Lease"), in which Lessor leased to Assignor
and Assignor leased from Lessor Premises located in the city of
Beaverton, County of Washington, Oregon, commonly known as 3601 SW
Murray Boulevard, Suite 300, Beaverton, OR 97005.
b. Assignor desires to assign all of its right, title and interest in
the Lease to Assignee ("Assignment").
c. Lessor shall consent to the proposed Assignment on the conditions
set forth in this Assignment.
2. EFFECTIVE DATE OF ASSIGNMENT. The Assignment in this Agreement shall
take effect on May 15, 1997, and Assignor shall give possession of
the Premises to Assignee on that date.
3. ASSIGNMENT AND ASSUMPTION. Assignor assigns and transfers to Assignee
all of its right, title and interest in the Lease, and Assignee accepts
the Assignment and assumes and agrees to perform, from the date the
Assignment becomes effective, as a direct obligation to Lessor, all of
the provisions of the Lease.
4. LESSOR'S CONSENT. Lessor consents to the Assignment without waiver of
the restrictions in the Lease concerning further assignment or
subleasing.
5. ASSIGNOR'S LIABILITY. Assignor shall remain primarily liable for the
performance of the provisions and obligations under the Lease, including
without limitation all obligations existing as of the date of this
Agreement. Anything in this agreement to the contrary notwithstanding,
Assignor's obligations under the Lease remain as a direct obligation of
Assignor to Lessor. Lessor's willingness to accept performance by
Assignee of Assignor's obligations does not affect the direct obligation
of Assignor
PAGE 1
<PAGE>
to Lessor. Upon a default by Lessee, Lessor may file suit directly
against Assignor whether or not Lessor is enforcing its remedies
against Assignee.
6. ASSIGNEE TO HOLD ASSIGNOR HARMLESS. If Assignee defaults under the
Lease, Assignee shall indemnify and hold Assignor harmless from all
damages, including reasonable attorney's fees and costs of suit, at trial
and on appeal, resulting from the default. If Assignee defaults in its
obligations under the Lease and Assignor pays rent to Lessor or fulfills
any of Assignee's other obligations in order to prevent Assignee from
being in default, Assignee immediately shall reimburse Assignor for the
amount of rent or costs incurred by Assignor in fulfilling Assignee's
obligations under the Assignment of Lease, together with interest on
those sums at the rate provided for in the Lease for interest on late
payments.
7. DEFAULT OF LEASE: NOTICE TO ASSIGNOR. Lessor will send any notice of
default to both Assignor and Assignee.
8. PREPAID RENT: SECURITY DEPOSIT AND LAST MONTH'S RENT. The parties
acknowledge that Lessor now holds the sum of $14,344.00, of which $0 is a
security deposit and $14,344.00 is to be applied to last month's rent,
subject to the provisions of the Lease. Assignor releases all claims to
that sum, and the sum shall be held by Lessor for the benefit of
Assignee, subject to the provisions of the Lease.
9. AMENDMENT OF LEASE. Lessor and Assignee shall not enter into any
agreement that amends the material items and obligations pursuant to the
Lease without notice to Assignor. If Lessor and Assignee amend the Lease
and Lessor fails to give notice to Assignor, such failure shall not
release Assignor from its obligation on any unamended portions of the
Lease. In such event Assignor will remain liable under the Lease and
this Agreement as if such amendment had not been made.
10. MISCELLANEOUS.
a. ATTORNEYS' FEES. If any party commences an action against any of
the other parties arising out of or in connection with this
Assignment of Lease, the prevailing party or parties shall be
entitled to recover from the losing party or parties reasonable
attorney's fees and costs of suit, at trial or on appeal.
b. NOTICE. Any notice, demand, request, consent, approval or
communication that any party desires or is required to give to any
other party or any other person shall be given in the manner
provided for notices in the Lease at the address set forth in the
introductory paragraph of this Assignment. Either party may
change its address by notifying the other party of the change of
address in writing.
PAGE 2
<PAGE>
c. SUCCESSORS. This Assignment shall be binding on and inure to the
benefit of the parties and their successors.
LESSOR:
/s/ Larry Benaroya 7/9/97
- ---------------------------------- -----------------------------------
By: Larry Benaroya Date
Its: Manager
ASSIGNOR:
CHECKFREE CORPORATION
/s/ Kenneth J. Benvenuto 6/21/97
- ---------------------------------- -----------------------------------
By: Kenneth J. Benvenuto Date
Its: Executive Vice President-Retail
Financial Services
ASSIGNEE:
CORILLIAN CORPORATION
/s/ Ted F. Spooner 6/11/97
- ---------------------------------- -----------------------------------
By: Ted F. Spooner Date
Its: President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Larry R.
Benaroya is the person who appeared before me, a Notary Public in and for the
State of Washington duly commissioned and sworn, and acknowledged that he is
the President of Commercial Real Estate Company, LLC, a Washington limited
liability company, who executed the within and foregoing instrument, and
acknowledged the instrument to be the free and voluntary act and deed of said
company for the uses and purposes therein mentioned, and on oath stated that
affiant is authorized to execute said instrument on behalf of said company.
PAGE 3
<PAGE>
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the
day and year first above written.
/s/ Joseph Alhadeff
[Notarial Seal] -----------------------------------
Notary Public in and for the
State of Washington
---------------------------
residing at Seattle
------------------------
Commission expires 3/1/99
-----------------
Print Name Joseph S. Alhadeff
-------------------------
STATE OF OHIO )
-------------------) ss.
COUNTY OF FRANKLIN )
------------------
I certify that I know or have satisfactory evidence that Kenneth J.
Benevenuto is the person who appeared before me, a Notary Public in and for the
State of Ohio duly commissioned and sworn, and acknowledged that he/she is the
Executive Vice President-Retail Financial Services of CheckFree Corporation, a
Delaware corporation, who executed the within and foregoing instrument, and
acknowledged the instrument to be the free and voluntary act and deed of said
company for the uses and purposes therein mentioned, and on oath stated that
affiant is authorized to execute said instrument on behalf of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the
day and year first above written.
/s/ Robert J. Tannous
-----------------------------------
Notary Public in and for the
State of Ohio
---------------------------
residing at
------------------------
Commission expires My commission
-----------------
has no expiration date
-----------------------------------
Print Name Robert J. Tannous.
-------------------------
Attorney at Law
-----------------------------------
[Notarial Seal]
PAGE 4
<PAGE>
STATE OF OREGON ) [Notarial Seal]
------------------) ss.
COUNTY OF WASHINGTON )
----------------
I certify that I know or have satisfactory evidence that Ted F. Spooner
is the person who appeared before me, a Notary Public in and for the State of
Oregon duly commissioned and sworn, and acknowledged that he/she is the
President of Corillian, a corporation, who executed the within and foregoing
instrument, and acknowledged the instrument to be the free and voluntary act
and deed of said corporation for the uses and purposes therein mentioned, and
on oath stated that affiant is authorized to execute said instrument on behalf
of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the
day and year first above written.
/s/ Judith D. Agee
-----------------------------------------
Notary Public in and for the
State of Oregon
---------------------------------
residing at 20824 NW Swire in Beaverton
------------------------------
Commission expires 6/19/98
-----------------------
Print Name Judith D. Agee
-------------------------------
PAGE 5
<PAGE>
OFFICE LEASE
THIS LEASE AGREEMENT made this 20 day of March, 1996, by and between Commercial
Real Estate Company, L.L.C., a Washington limited liability company (the
"Lessor") and CheckFree Corporation, an Ohio corporation, (the "Lessee").
1. PREMISES. Lessor does hereby lease to Lessee those certain premises, to
wit: approximately 11,350 square feet of office space in Building 3,
Third Floor, as outlined on Exhibit A attached hereto (hereinafter called
"Premises") being situated within the Project known as the Murray
Business Center. See Legal Description attached as Exhibit B.
2. TERM. This Lease shall be for a term of three (3) years and zero (0)
months commencing March 1, 1996 (the "Commencement Date") and terminating
February 28, 1999.
3. MONTHLY MINIMUM RENT. Lessee covenants and agrees to pay Lessor at 1001
Fourth Avenue, Suite 4700, Seattle, WA 98154, or to such other party or
at such other place as Lessor may hereafter designate, Monthly Minimum
Rent in the following amounts according to the schedule below and
Additional Rent, as provided in Section 10, in advance without offset or
deduction, on or before the first (1st) day of each month of the Lease
term:
<TABLE>
<CAPTION>
Months Monthly Minimum Rent
------ --------------------
<S> <C>
1-8 $ 7,458.00
9-12 $10,430.00
13-24 $12,117.00
25-36 $14,344.00
</TABLE>
4. PRE PAID RENT DEPOSIT. Lessee has deposited with Lessor on the date
hereof Nineteen Thousand Six Hundred Seventy and No/100 Dollars
($19,670.00) of which $6,412.00 is to be applied to Monthly Minimum Rent
for the first month of the Lease and $13,258.00 is to be applied to
Monthly Minimum Rent for the last month of the Lease Term.
5. EXHIBITS: The following exhibits or riders are made a part of this
Lease:
Exhibit A - Floor Plan of Premises
Exhibit B - Legal Description
Exhibit C - Rules and Regulations
Exhibit D - Standards for Utilities and Services
Exhibit E - Riders to Lease
Exhibit F - Floor Plan of Right of First Offer Space
Exhibit G - Work Letter Agreement
Exhibit H - Space Plan of Premises
6. USE. Lessee shall use the Premises for the purposes of general office
and for no other purposes, without the prior written consent of Lessor,
and shall comply with all governmental laws, ordinances, regulations,
orders and directives and insurance requirements applicable to Lessee's
use of the Premises. Lessee shall not occupy or use or permit any portion
of the Premises to be occupied or used in such a manner or for any
purpose which would increase the cost of insurance coverage's upon the
Premises, the building or the contents thereof.
Page 1
<PAGE>
7 RULES AND REGULATIONS. Lessee agrees to comply with the Rules and
Regulations attached hereto as Exhibit C, as well as such other
reasonable rules and regulations as may from time to time be adopted by
Lessor for the management, good order and safety of common areas, the
building and its Lessee(s). Lessee shall be responsible for the
compliance with such rules and regulations by its employees, agents and
invitees. Lessor's failure to enforce any of such rules and regulations
against Lessee or any other Lessee shall not be deemed to be a waiver of
same.
8. MAINTENANCE AND REPAIRS.
a. LESSEE OBLIGATIONS. By entry hereunder, Lessee accepts the
Premises as being in good and sanitary order, condition and repair.
Lessee shall, at its expense, keep, maintain and preserve the Premises in
first class condition and repair, and shall make all repairs to the
Premises and every part thereof. Lessee shall, upon the expiration or
sooner termination of the term hereof, surrender the Premises to Lessor
in the same condition as when received, usual and ordinary wear and tear
excepted. Lessee shall not alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof without first obtaining the prior
written permission of Lessor.
b. LESSOR OBLIGATIONS. Notwithstanding Section 8a, Lessor shall
repair and maintain the structural portions of the Building and the
plumbing, heating, ventilating, air conditioning, elevator and electrical
systems furnished by Lessor; the costs of the foregoing shall be
Operating Expenses, unless such maintenance and repairs are caused by the
act, neglect or omission of Lessee, its agents, servants, employees or
invitees, in which case Lessee shall pay to Lessor, as additional rent,
the cost of such maintenance and repairs. Lessor shall not be liable for
any failure to make any such repairs or to perform any maintenance unless
such failure shall persist for an unreasonable time after written notice
of the need of such repairs or maintenance is given to Lessor by Lessee.
There shall be no abatement of rent and no liability of Lessor by reason
of any injury to or interference with Lessee's business arising from the
making of any repairs, alterations or improvements in or to any portion
of the Building or the Premises or in or to fixtures, appurtenances and
equipment therein. Lessee waives the right, if any, to make repairs at
Lessor's expense under any law, statute or ordinance now or hereafter in
effect.
9. UTILITIES AND FEES. It is Lessor's policy that utilities and services be
furnished as set forth in Exhibit D hereto. Lessor's failure to furnish
any of such items shall not result in any liability to Lessor, Lessee
shall not be entitled to any abatement or reduction of rent by reason of
such failure, and no eviction of Lessee shall result from such failure.
If Lessee uses more water or electrical power than is considered
reasonable or normal by Lessor, Lessor may at its option require Lessee
to pay, as additional rent, the cost, as fairly determined by Lessor,
incurred by such extraordinary usage. In addition, Lessor may install
separate meter(s) for the Premises, at Lessee's sole expense, and Lessee
thereafter shall pay all charges so metered. Alternatively, Lessee may
utilize a portion of the Lessee Improvement Allowance to pay for the cost
of the installation of such separate meter(s).
10. ADDITIONAL RENT AND MONTHLY OPERATING EXPENSE ADJUSTMENTS. For each
calendar year during this Lease, or portion thereof, Lessee shall pay as
Additional Rent its pro rata share of the amount by which Operating
Expenses for each year exceed $4.30 per square foot. Lessor shall
estimate, from time to time, Lessee's payment amount. This estimated
amount shall be divided into equal monthly installments, one payable with
each installment of the Monthly Minimum Rent. As soon as practical
following each calendar year, Lessor shall prepare
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an accounting of actual Operating Expenses incurred during the prior
calendar year and such accounting shall reflect Lessee's Percentage. If
the Additional Rent paid by Lessee under this Section 10 during the
preceding calendar year was less than the actual amount of Lessee's
Percentage of Operating Expenses, Lessor shall notify Lessee and Lessee
shall pay such amount to Lessor within fifteen (15) days of receipt of
such notice. Lessee shall have fifteen (15) days from receipt of such
notice to contest the amount due; failure to so notify Lessor shall
represent final determination of Lessee's share of Operating Expenses.
If Lessee's payments were greater than the actual amount due, then such
overpayment shall be credited to Lessor to all present rent next due
under this Section 10.
For the purposes of this Paragraph 10, "Operating Expenses" shall
include, but not be limited to:
a) Real Estate taxes and assessments, all costs of management,
operation and maintenance of the Premises, the building and the
Land, including without limitation the following: wages and
salaries of employees; janitorial, cleaning, maintenance, and
other services; electricity, water, waste disposal and other
utilities; heating, ventilating and air conditioning; materials
and supplies; painting, repairs and other maintenance; insurance;
all real and personal property taxes, assessments, and charges
levied upon or with respect to the Land, the Building or Lessor's
interest in the same; and depreciation on personal property,
Management fees; expenses incurred to operate an on site
management office; association dues directly attributable to the
management of the property. Expenses shall not include
depreciation on the Building; costs of tenants' improvements; real
estate brokers' commissions; or capital items except that Expenses
shall include the cost of any capital improvements made after
completion of the Building as a labor-saving device or to effect
other economies in the operation or maintenance of the building or
made after the date of this Lease that are required under any
governmental law or regulation, such costs to be amortized over
such reasonable period as Lessor shall determine, together with
interest at a rate equal to the rate of interest publicly
announced from time to time by Seattle First National Bank of
Washington, Seattle, Washington, as its "prime interest rate" plus
two percent (2%) per annum or such higher rate as may be paid by
Lessor on funds borrowed for the purpose of constructing such
capital improvements.
Even after this Lease has expired or been terminated, when final
determination is made of Lessee's Percentage of Operating Expenses for
the year in which this Lease expires or terminates, Lessee shall
immediately pay any shortfall due. Conversely, any overpayment made
shall be rebated by Lessor to Lessee, unless Lessee at that time is
indebted to Lessor.
11. LESSOR'S RESERVATIONS. Lessor reserves the right without liability to
Lessee: (a) to inspect the Premises, to show them to prospective
Lessees, and if they are vacated, to prepare them for reoccupancy; (b) to
retain at all times and to use in appropriate instances keys to doors
within and into the Premises; (c) to make repairs, alterations, additions
or improvements, whether structural or otherwise, in or about the
building, and for such purposes to enter upon the Premises and during the
continuance of any work, to close common areas and to interrupt or
temporarily suspend building services and facilities, all without
affecting any of Lessee's obligations hereunder, so long as the Premises
are reasonably accessible; and (d) generally to perform any act relating
to the safety, protection and preservation of the Premises or building.
12. POSSESSION. If Lessor does not deliver possession of the Premises at the
Commencement Date of the term of this Lease, Lessee may give Lessor
written notice of its intention to cancel
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this Lease if possession is not delivered within ninety (90) days after
receipt of such notice by Lessor. Lessor shall not be liable for any
damages caused by failure to deliver possession of the Premises and
Lessee shall not be liable for any rent until such time as Lessor
delivers possession. A delay of possession shall not extend the
termination date. If Lessor offers possession of the Premises or any
portion thereof prior to the Commencement Date of the term of this
Lease, and if Lessee accepts such early possession, then both parties
shall be bound by all of the covenants and terms contained herein during
such period of early possession including the payment of rent which
shall be pro-rated accordingly and for the number of days of such early
possession.
13. ASSIGNMENT AND SUBLETTING. Lessee shall not either voluntarily or by
operation of law assign, transfer, convey or encumber this Lease or any
interest under it, or sublet to occupy or use the Premises without
Lessor's prior written consent. Lessor reserves the right to recapture
the Premises or applicable portion thereof in lieu of giving its consent
by notice given to Lessee within twenty (20) days after receipt of
Lessee's written request for assignment or subletting. Such recapture
shall terminate this Lease as to the applicable space effective on the
prospective date of assignment or subletting, which shall be the last day
of a calendar month and not earlier than sixty (60) days after receipt of
Lessee's request hereunder. In the event that Lessor shall not elect to
recapture and shall thereafter give its consent, Lessee shall pay Lessor
a reasonable fee, not to exceed One Thousand and No/100 Dollars
($1,000.00) to reimburse Lessor for processing costs incurred in
connection with such consent. Lessor's consent shall not release or
discharge Lessee from future liability under this Lease and shall not
waive Lessor's right to consent to any future assignment or sublease.
Any assignment or subletting without Lessor's consent shall be void and
shall, at Lessor's option, constitute a default under this Lease. A
transfer by the present majority shareholders of ownership or control of
a majority of the voting stock of a corporate Lessee shall be deemed an
assignment.
14. ALTERATIONS. After obtaining the prior written consent of Lessor, Lessee
may make minor alterations, additions and improvements in said Premises
(so long as such alterations, additions or improvements are not visible
from the exterior of the Premises) at its sole cost and expense. Lessee
agrees to save Lessor harmless from any damage, loss, or expense arising
therefrom and to comply with all laws, ordinances, rules and regulations.
Upon termination of this Lease, all alterations, additions and
improvements made in, to or on the Premises (including without limitation
all electrical, lighting, plumbing, heating, air conditioning, and
communications equipment and systems, doors, windows, partitions,
drapery, carpeting, shelving, counters, and physically attached fixtures
unless excluded by written agreement annexed hereto), shall remain upon
and be surrendered as a part of the Premises; provided however, upon
Lessor's request, Lessee shall promptly remove those additions,
alterations, or improvements as may be specified by Lessor, and repair
and restore the Premises to its original condition at Lessee's sole cost
and expense.
15. LIENS. Lessee shall keep the Premises free from any liens arising out of
any work performed, materials furnished, equipment supplied, or
obligations incurred by or on behalf of Lessee. No work performed,
material furnished, equipment supplied or obligations incurred by or on
behalf of Lessee shall be deemed to be for the immediate use and benefit
of Lessor so that no mechanic's lien or other lien shall be allowed
against Lessor's estate in the Premises. Lessee shall provide, at
Lessee's own cost, a waiver of lien signed by any party (including the
Lessee) who commences to perform work, furnish materials, or supply
equipment to the Premises. Lessor does not authorize or consent to the
performance of any work, furnishing of material or supply of equipment
incurred by or on behalf of Lessee prior to Lessee providing Lessor with
the signed
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waiver of lien referred to above. Lessor may require, at Lessee's sole
cost and expense, a lien release and completion bond in an amount equal
to either the actual contract price or one and one-half times the
estimated cost of any improvements, additions or alterations in the
Premises which Lessee desires to make, to insure Lessor against any
liability for lien and to insure completion of the work.
16. SIGNS. All signs or symbols placed by Lessee in the windows and doors of
the Premises, or upon any exterior part of the building, shall be subject
to Lessor's prior written approval. Prior to termination of this Lease,
Lessee will remove all signs placed by it upon the Premises, and will
repair any damages caused by such removal.
17. INSURANCE.
A. Lessee shall pay for and maintain, during the entire Lease Term,
the following policies of insurance:
(i) Commercial general liability insurance,
including products, completed operations coverage and auto
liability insurance covering Lessee's operations and the
Premises including but not limited to coverage for personal
injuries with limits of not less than $1,000,000 combined
single limit for death, personal injury, and property
damage, per occurrence, including Lessor as an additional
insured. Such policies shall be endorsed to provide
contractual liability insurance covering all liability
assumed by Lessee under the provisions of this Lease and a
copy of said endorsement will be delivered to Lessor prior
to commencement of the Term.
(ii) Special cause of loss or "all risk" perils
and sprinkler leakage property insurance upon all
alterations on the Premises and upon Lessee's property,
including but not limited to Fire and Extended Coverage,
Vandalism and Malicious Mischief, in the amount of one
hundred percent (100%) full replacement cost, including
Lessor as an additional insured, as its interests may
appear, with a loss payable clause in favor of Lessor to
the extent of Lessor's interest in property damaged, except
to the extent proceeds are required to be paid to holders
of mortgages or trust deeds.
B. Each policy provided by Lessee shall expressly provide that it
shall not be subject to cancellation or material change without at
least thirty (30) days prior written notice to Lessor. Lessee
shall furnish Lessor, prior to commencement of the Term, with
insurance certificates and, upon request, copies of such policies
required to be maintained hereunder.
18. INDEMNITY AGAINST LIABILITY FOR LOSS OR DAMAGE BY LESSEE.
A. Lessee assumes all liability for and shall indemnify, hold
harmless and defend Lessor from and against all loss, damage or
expense which the Lessor may sustain or incur, and against any and
all claims, demands, suits and actions whatsoever, including
expense of investigation and litigation, on account of injury to
or death of persons, including without limitation employees of
Lessor, employees of Lessee or its affiliated companies or on
account of damage to or destruction of property, including without
limitation property
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owned by and property in the care, custody or control of Lessor
during the Term, due to or arising in any manner from:
(i) The acts or negligence of Lessee or
any contractor, subcontractor, or agent of Lessee or
their respective employees;
(ii) The condition, use or operation of the
Premises and/or materials or substances used by
Lessee or any of its contractors, subcontractors or
agents of Lessee or by their respective employees,
regardless of whether or not furnished by Lessor
under this Lease or otherwise;
(iii) Any damage or injury to persons or
property arising out of Lessee's breach or this
Lease, including, but not limited to, obligations of
Lessee under Section 8, Maintenance and Repairs.
B. Lessor shall have no liability to Lessee as a result of loss or
damage to Lessee's property or for death or bodily injury caused
by the acts or omissions of other tenants in the project or by
third parties (including criminal acts).
C. It is mutually understood and agreed that the assumption of
liabilities and indemnification provided for in this Section 18
shall survive any termination of this Lease.
D. Notwithstanding the preceding provisions of this Section 18,
Lessor and Lessee each herewith and hereby release and relieve the
other and waive its entire right of recovery against the other for
loss or damage arising out of or incident to perils insured
against, whether due to the negligence of either party, their
agents, employees, contractors, invitees or otherwise.
19. DAMAGE OR DESTRUCTION. If the Premises or the building in which the
Premises are located shall be damaged or destroyed by fire or other
casualty, Lessor shall have the Option either (a) to repair or rebuild
within one hundred twenty (120) days, or (b) not to repair or rebuild,
and to cancel this Lease on thirty (30) days notice. If Lessor fails to
give Lessee written notice of its election within thirty (30) days from
the date of damage, or if the restoration of the Premises cannot be
completed within one hundred twenty (120) days from date of notice,
Lessee may cancel this Lease at its option on thirty (30) days notice.
During the period of untenantability, rent shall abate in the same ratio
as the portion of the Premises rendered untenantable bears to the whole
of the Premises; provided that if the damage is due to the fault or
neglect of Lessee, there shall be no abatement of rent.
20. EMINENT DOMAIN. If the whole of the Premises shall be taken by any public
authority under the power of eminent domain, or purchased by the
condemnor in lieu thereof, then the term of this Lease shall cease as of
the date possession is taken by such public authority. If only part of
the Premises shall be so taken, the Lease shall terminate only as to the
portion taken, and shall continue in full force and effect as to the
remainder of said Premises, and the monthly rent shall be reduced
proportionately; provided, however, if the remainder of the Premises
cannot be made tenantable for the purposes for which Lessee has been
using the Premises or if more than twenty-five percent (25%) of the
rentable square footage of the Premises shall be so taken, then
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either party, by written notice to the other, given at least thirty (30)
days prior to the date that possession must be surrendered to the public
authority, may terminate this Lease effective as of such surrender of
possession. If any part of the building other than the Premises shall be
so taken so as to render in Lessor's opinion the termination of this
Lease beneficial to the remaining portion of the building, Lessor shall
have the right within sixty (60) days of said taking to terminate this
Lease upon thirty (30) days written notice to Lessee. In the event of any
taking, whether whole or partial, Lessor shall be entitled to all awards,
settlements, or compensation which may be given for the land and
buildings. Lessee shall have no claim against Lessor for the value of any
unexpired term of this Lease.
21. INSOLVENCY. If Lessee shall be declared insolvent or bankrupt, or if
Lessee's leasehold interest herein shall be levied upon or seized under
writ of any court of law, or if a trustee, receiver or assignee be
appointed for the property of Lessee, whether under operation of State or
Federal statutes, then Lessor may, at its option, immediately, without
notice (notice being expressly waived), terminate this Lease and take
possession of said Premises, without, however, terminating Lessee's
obligations under this Lease.
22. DEFAULT AND RE-ENTRY. If Lessee fails to keep or perform any of the
covenants and agreements herein contained, then the same shall constitute
a breach hereof, and if Lessee has not remedied such breach within three
(3) days after written notice thereof from Lessor if the breach is
non-payment of rent or other charges, or within ten (10) days after
written notice thereof from Lessor in the event of the breach of any
other covenant, then Lessor may, at its option, without further notice or
demand:
(a) Cure such breach for the account and at the expense of Lessee and
such expense shall be deemed additional rent due on the first of
the following month; or
(b) Re-enter the Premises, remove all persons therefrom, take
possession of the Premises and remove all personal property
therein at Lessee's risk and expense and (1) terminate this Lease,
or (2) without terminating the Lease or in any way affecting the
rights and remedies of Lessor or the obligations of Lessee, re-let
the whole or any part of the Premises as agent for Lessee, upon
such terms and conditions as Lessor may deem advisable. In either
event, any moneys received from Lessee and any deposit or other
amounts held by Lessor may first be applied by Lessor to any
damages suffered by Lessor as a result of such default, including
without limitation, costs and expenses incurred on re-entry and
re-letting, any unamortized tenant improvements and commissions,
cleaning, necessary repairs, restoration and alteration, and any
commissions incurred on re-letting, and the balance of such
amounts may be applied toward payment of other sums due to Lessor
hereunder. In the event the Premises are re-let for Lessee's
account, Lessee shall pay to Lessor monthly any deficiency;
however, Lessor shall not be required to pay any excess to Lessee.
Upon termination of this Lease or of Lessee's right to possession,
Lessor has the right to recover from Lessee: (1) The worth of the
unpaid rent that had been earned at the time of such termination;
(2) The worth of the amount of the unpaid rent that would have
been earned after the date of such termination; and (3) Any other
amount, including court, attorney and collection costs, necessary
to compensate Lessor. "The Worth," as used in Section (1) of this
paragraph 22(b) is to be allowing interest at 18% per year. "The
Worth" as used for Section2) of this paragraph 22(b) is to be
computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of termination.
The above
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remedies of Lessor are cumulative and in addition to any other
remedies now or hereafter allowed by law or elsewhere provided
for in this Lease.
23. REMOVAL OF PROPERTY. Any property of Lessee removed by Lessor in
accordance with Section 22 above may be stored by Lessor or may be
deposited on any area adjacent to the building at the sole risk and
expense of Lessee and without any further responsibility of Lessor, and
Lessor may at its sole discretion without removing said property or after
removing said property, without obligation to do so and without notice to
Lessee, sell or dispose of the same at public or private sale for the
account of Lessee, in which event the proceeds therefrom may be applied
by Lessor upon any indebtedness due from Lessee to Lessor. Lessee waives
all claims for damages that may be caused by Lessor re-entering the
Premises and removing or disposing of said property as herein provided.
24. COSTS AND ATTORNEYS' FEES. In the event either party shall commence legal
action to enforce any provision of this Lease, the court shall award to
the prevailing party all reasonable attorneys' fees and all costs
incurred in connection therewith, including fees and costs on appeal. Any
action relating to this Lease shall be brought in the County in which the
Premises are located or, at Lessor's election, in King County,
Washington.
25. SUBROGATION WAIVER. Lessor and Lessee each herewith and hereby release
and relieve the other and waive its entire right of recovery against the
other for loss or damage arising out of or incident to the perils of
fire, explosion or any other perils described in the "all risk" insurance
endorsement approved for use in the state in which the Premises are
situated which occurs in, on or about the Premises, whether due to the
negligence of either party, their agents, employees or otherwise.
26. HOLDING OVER. If Lessee, with the express consent of Lessor, shall hold
over after the expiration of the term of this Lease, Lessee shall remain
bound by all the covenants and agreements herein, except that (a) the
tenancy shall be from month-to-month and (b) the monthly rent to be paid
by Lessee shall be determined by multiplying the monthly rent in effect
preceding such expiration times 150%.
27. SUBORDINATION AND ATTORNMENT; MORTGAGEE PROTECTION.
A. SUBORDINATION NOTICE TO MORTGAGEE. At the request of Lessor,
Lessee shall promptly execute, acknowledge and deliver, all
instruments which may be required to subordinate this Lease to any
existing or future mortgages, deeds of trust and/or other security
documents on or encumbering the Premises or on the leasehold
interest held by Lessor, and to any extensions, renewals, or
replacements thereof, provided that the mortgagee or beneficiary,
as the case may be, shall agree to recognize this Lease in the
event of foreclosure if Lessee is not in default at such time.
B. LESSEE'S CERTIFICATE. Lessee shall at any time and from time to
time upon not less than three (3) days prior written notice from
Lessor execute, acknowledge and deliver to Lessor a statement in
writing (a) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so modified is in
full force and effect), and the date to which the rental and other
charges are paid in advance, if any; and (b) acknowledging that
there are not, to Lessee's knowledge, any uncured defaults on the
part of the Lessor or Lessee hereunder,
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or specifying such defaults if any are claimed; and (c) setting
forth the date of commencement of rents and expiration of the
Lease Term hereof. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of
the Premises of which the Premises are a part.
C. MORTGAGEE PROTECTION CLAUSE. Lessee agrees to notify any mortgagee
and/or trust deed holders, by registered mail, with a copy of any
notice of default served upon the Lessor, provided that prior to
such notice Lessee has been notified in writing (by way of Notice
of Assignment of Rents and Lease, or otherwise) of the addresses
of such mortgagees and/or trust deed holders. Lessee further
agrees that if Lessor shall have failed to cure such default, then
the mortgagees and/or trust deed holders have thirty (30) days
within which to cure such default or if such default cannot be
cured within that time, then such additional times as may be
necessary if within such thirty (30) days any mortgagee and/or
trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings if necessary to affect
such cure), in which event this Lease shall not be terminated if
such remedies are being so diligently pursued.
28. SURRENDER OF POSSESSION. Lessee shall, prior to the termination of this
Lease or of Lessee's right to possession, remove from the Premises all
personal property which Lessee is entitled to remove and those
alterations, additions, improvements or signs which may be required by
Lessor to be removed, pursuant to Sections 12 and 14 above, and shall
repair or pay for all damage to the Premises caused by such removal. All
such property remaining and every interest of Lessee in the same shall be
conclusively presumed to have been conveyed by Lessee to Lessor under
this Lease as a bill of sale, without compensation, allowance or credit
to Lessee. Lessee shall upon termination of this Lease or of Lessee's
right of possession, deliver all keys to Lessor and peacefully quit and
surrender the Premises without notice, neat and clean, and in as good
condition as when Lessee took possession, except for reasonable wear and
tear as determined by Lessor.
29. LATE PAYMENT AND INTEREST. If any amount due from Lessee is not received
in the office of Lessor on or before the third (3rd) day following the
date upon which such amount is due and payable, a late charge of five
percent (5%) of said amount shall become immediately due and payable,
which late charge Lessor and Lessee agree represents a fair and
reasonable estimate of the processing and accounting costs that Lessor
will incur by reason of such late payment. All past due amounts owing to
Lessor under this Lease, including rent, shall be assessed interest at an
annual percentage rate of eighteen percent (18%) from the date due or
date of invoice, whichever is earlier, until paid.
30. NOTICE. Any notice required to be given by either party to the other
pursuant to the provisions of this Lease or any law, present or future,
shall be in writing, and shall be deemed to have been dully given or sent
if either delivered personally or deposited in the United States Mail,
postage prepaid, registered or certified, addressed to the Lessor at the
address specified for the payment of rent under paragraph 3 of this Lease
or to Lessee at the Premises or to such other address as either party may
designate to the other in writing from time to time:
<TABLE>
<S> <C>
CheckFree Corporation Commercial Real Estate Company, L.L.C.
8275 N. High St. 1001 4th Avenue, Suite 4700
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Columbus, OH 43235 Seattle, WA 98154
William C. Buckham, Gen. Counsel (206) 343-4750
</TABLE>
31. NO WAIVER OR COVENANTS. Time is of the essence of this Lease. Any waiver
by either party of any breach hereof by the other shall not be considered
a waiver of any future similar or other breach.
32. BINDING ON HEIRS, SUCCESSORS AND ASSIGNS. The covenants and agreements
of this Lease shall be binding upon the heirs, executors, administrators,
successors and assigns of both parties hereto, except as hereinabove
provided.
33. LESSOR'S ASSIGNMENT. Lessor shall have the full right to assign this
Lease, without any notice to Lessee, thereby relieving Lessor from all
and any liabilities; provided however, that the assignee assumes all
Lessor's responsibilities as set forth in this Lease.
34. ENVIRONMENTAL, EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE:
a. EMISSIONS. Lessee shall not (i) discharge, emit or permit to be
discharged or emitted, any liquid, solid or gaseous matter, or any
combination thereof, into the atmosphere, the ground or any body
of water, which does or may pollute or contaminate the same, or
does or may adversely affect the health or safety of persons, or
the use or enjoyment of the Premises; nor (ii) transmit, receive
or permit to be transmitted or received, any electromagnetic,
microwave or other radiation in, on or about the Premises.
b. STORAGE. If, with or without violation of this Lease, Lessee
possesses at the Premises any matter described in Section A above
or any Hazardous Substances (as defined below), Lessee shall store
the same in appropriate leak proof containers and/or areas which
comply with all laws and all prudent practices.
c. DISPOSAL OF WASTE. Lessee shall not keep any trash, garbage,
waste or other refuse on the Premises except in sanitary
containers and shall regularly and frequently remove same from the
Premises. Lessee shall keep all such containers in a clean and
sanitary condition. Lessee shall properly dispose of all sanitary
sewage and shall not use the sewage system for the disposal of
anything except sanitary sewage, nor in excess of capacity.
Lessee shall not cause any obstruction in the sewage disposal
system.
d. COMPLIANCE OF LAW. Notwithstanding any other provision in the
Lease to the contrary, Lessee shall comply with all Laws in
complying with its obligations under this Lease, and in
particular, laws relating to the storage, use and disposal of
Hazardous Substances (as defined below).
e. INDEMNIFICATION FOR BREACH. Lessee shall defend, indemnify and
hold Lessor, the Project and the holder of a trust deed or
mortgage on the Project harmless from any loss, claim, liability
or expense, including, without limitation, attorneys fees and
costs, at trial and/or on appeal and review, arising out of or in
connection with its failure to observe or comply with the
provisions of this Section. This indemnity shall survive the
expiration or earlier termination of the term of the Lease or the
termination of Lessee's right of possession and be fully
enforceable thereafter.
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f. INDEMNIFICATION REGARDING HAZARDOUS SUBSTANCES. In addition to the
indemnity obligations contained elsewhere herein, Lessee shall
indemnify, defend and hold harmless Lessor, the Premises, the
Project, and the holder of a trust deed or mortgage on the
Project, from and against all claims, losses, damages, monitoring
costs, response costs, liabilities, and other costs expenses
caused by, arising out of, or in connection with, the generation,
release, handling, storage, discharge, transportation, deposit or
disposal in, on, under or about the Premises by Lessee or any of
Lessee's agents of the following (collectively referred to as
"Hazardous Substances"): hazardous materials, hazardous
substances, toxic wastes, toxic substances, pollutants, petroleum
products, underground tanks, oils, pollution, asbestos, PCB's,
radioactive materials, or contaminants, as those terms are
commonly used or as defined by federal, state, and/or local law or
regulation related to protection of health or the environment as
any of same may be amended from time to time, and/or by any rules
and regulations promulgated thereunder. Such damages, costs,
liability and expenses shall include such as are claimed by any
regulating and/or administering agency, any ground lessor or
master lessor of the Project, the holder of any Mortgage or Deed
of Trust on the Project, and/or any successor of the Lessor named
herein. This indemnity shall include (i) claims of third parties,
including governmental agencies, for damages, fines, penalties,
response costs, monitoring costs, injunctive or other relief;
(ii) the costs, expenses or losses resulting from any injunctive
relief, including preliminary or temporary injunctive relief;
(iii) the expenses, including fees of attorneys and experts, of
reporting the existence of Hazardous Substances to an agency of
the State of which the Premises is located or of the United States
as required by applicable laws and regulations; and (iv) any and
all expenses or obligations, including attorney's fees, incurred
at, before and after any administrational proceeding, trial,
appeal and review. This indemnity shall survive the expiration or
earlier termination of the term of the Lease or the termination of
Lessee's right of possession and shall remain fully enforceable
thereafter.
g. INFORMATION. Lessee shall give prior written notice to Lessor of
any use, whether incidental or otherwise, of Hazardous Substances
on the Premises, and shall immediately deliver to Lessor a copy of
any notice of any violation of any Law with respect to such use.
Lessee shall also provide to Lessor, upon request, with any and
all information regarding Hazardous Substances in the Premises,
including contemporaneous copies of all filings and reports to
governmental entities, and any other information requested by
Lessor. In the event of any accident, spill or other incident
involving Hazardous Substances, Lessee shall immediately report
the same to Lessor and supply Lessor with all information and
reports with respect to the same. All information described herein
shall be provided to Lessor regardless of any claim by Lessee that
it is confidential or privileged.
35. ENTIRE AGREEMENT. It is expressly understood and agreed by Lessor
and Lessee that there are no promises, agreements, conditions,
understandings, inducements, warranties, or representations, oral
or written, express or implied, between them, other than as herein
set forth and that this Lease shall not be modified in any manner
except by an instrument in writing executed by the parties.
LESSOR:
COMMERCIAL REAL ESTATE COMPANY, L.L.C.
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By:__________________________
Larry R. Benaroya
Its: Manager
Date:________________________
LESSEE:
CHECKFREE CORPORATION
By: /s/ Robert E. Bowers
--------------------------
Its: CFO
Date: 3-20-96
Page 12
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Larry R.
Benaroya is the person who appeared before me, a Notary Public in and for the
State of Washington duly commissioned and sworn, and acknowledged that he is
the Manager of COMMERCIAL REAL ESTATE COMPANY, L.L.C., a Washington limited
liability company, who executed the within and foregoing instrument, and
acknowledged the instrument to be the free and voluntary act and deed of said
company for the uses and purposes therein mentioned, and on oath stated that
affiant is authorized to execute said instrument on behalf of said company.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the
day and year first above written.
______________________________________________
Notary Public in and for the
State of _____________________________________
residing at __________________________________
Commission expires ___________________________
Print Name ___________________________________
STATE OF GEORGIA )
) ss.
COUNTY OF GWINNETT )
I certify that I know or have satisfactory evidence that Robert E.
Bowers is the person who appeared before me, a Notary Public in and for the
State of Georgia duly commissioned and sworn, and acknowledged that he/she is
the Vice President of CHECKFREE CORPORATION, an Ohio corporation, who executed
the within and foregoing instrument, and acknowledged the instrument to be the
free and voluntary act and deed of said corporation for the uses and purposes
therein mentioned, and on oath stated that affiant is authorized to execute
said instrument on behalf of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the
day and year first above written.
[notarial seal]
/s/ Jeannine Flannigan
----------------------------------------------
Notary Public in and for the
State of Georgia
residing at 312 Nalley Dr. Stone Mtn. GA 30087
Commission expires May 25, 199[?]
Print Name Jeannine Flannigan
Page 13
<PAGE>
EXHIBIT A
FLOOR PLAN OF PREMISES
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation (the "Lessee").
The Premises of approximately 11,350 Square Feet as outlined below. Lessee and
Lessor acknowledge the approximate nature of this Square Foot Calculation.
[FLOOR PLAN GRAPHIC]
MURRAY BUSINESS CENTER - Third Floor Plan
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EXHIBIT B
LEGAL DESCRIPTION
Description of the Property
Murray Business Center, Beaverton Oregon 97005
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation, (the "Lessee").
LEGAL DESCRIPTION:
A portion of the Southeast one-quarter of Section 8, Township 1 South, Range 1
West of the Willamette Meridian, in the City of Beaverton, County of Washington
and State of Oregon, said portion being more particularly described as follows:
Beginning at a point in the South right of way line of S.W. Millikan Way
which point bears South 03DEG. 40'01" East 12.94 feet from the Washington
County Surveyor's Monument at the Southwest corner of the George W. Elliot
Donation Land Claim No. 42, and running thence South 69DEG. 42'36" East,
along said right of way line, 1055.83 feet to the intersection with the West
right of way line of S.W. Murray Blvd., (County road No. 2065); thence 34.19
feet along the arc of a 1864.86 foot radius non-tangent curve to the right
(the long chord of which bears South 08DEG. 13'43" East 34.19 feet): thence
continuing along said West right of way line along a 45.00 foot Westerly
offset to a 500.00 foot center line spiral curve to the right (center line
data - S = 7DEG. 30'00" o= 0.06) the offset chord bears South 02DEG. 42'30"
East 493.71 feet; thence South 00DEG. 12'12" East 132.15 feet; thence North
85DEG. 41'39" West 555.91 feet; thence North 04DEG. 12'38" East 56.73 feet;
thence North 68DEG. 45'17" West 241.94 feet; thence North 65DEG. 55'12" West
88.76 feet: thence North 68DEG. 45'30" West 13.88 feet; thence North 68DEG.
45'12" West 161.51 feet; thence North 73DEG. 25' 54" West 21.94 feet; thence
North 74DEG. 47'12" West 22.07 feet; thence South 89DEG. 41'24" West 129.96
feet; thence South 89DEG. 30'48" West 78.83 feet, more or less, to the most
Easterly Southeast corner of that tract conveyed to the Oregon Railway
Company by Deed recorded in Book 540, Page 617, Deed Records of said County;
thence North 19DEG. 03'26" East, along the East line of said railway tract,
782.94 feet to the point of beginning.
TOGETHER WITH an easement for sanitary sewer specifically set out on Page 909
and water lines specifically set out on Pages 907 and 908 in that certain
Memorandum of Lease recorded December 6, 1971 in Book 845, Pages 895 through
912, Deed Records of Washington County Oregon.
ALSO TOGETHER WITH an easement for sewer lines as set forth in that certain
easement recorded February 17, 1981 as Recorder's Fee No. 81005476, Deed Records
of Washington County.
Page 15
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EXHIBIT C
RULES AND REGULATIONS
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation, (the "Lessee").
1. Any directory provided by Lessor for the building will be for the display
of the name and location of tenants, and Lessor reserves the right to
exclude any other names.
2. Lessee shall not place any new or re-key any existing locks on any doors
of the Premises, or change any plumbing or wiring without the prior
written consent of Lessor. All keys shall be obtained from Lessor and
Lessee shall not, from any other source, duplicate keys. Lessee, upon
termination of the tenancy, shall deliver to Lessor all keys which have
been furnished, or shall pay Lessor the cost of changing the lock(s)
opened by any lost key(s) if Lessor deems it necessary to make such
change. Lessor, its employees and agents may retain a passkey to the
Premises.
3. The common area sidewalks, halls, passages, exits, entrances, elevators
and stairways shall not be obstructed by Lessee or used for any purpose,
including storage or placement of trash, other than for ingress to and
egress from the Premises. The halls, passages, exits, entrances,
elevators, stairways, balconies and roof are not for the use of the
general public and Lessor shall in all cases retain the right to control
and prevent access thereto by all persons whose presence, in the judgment
of Lessor, shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom
Lessee normally deals in the ordinary course of Lessee's business, unless
such persons are engaged in illegal activities, intoxicated or violate
any of these Rules and Regulations. Lessee, Lessee's employees or
invitees shall not go upon the roof of the Building.
4. Lessee shall not make or permit any use of the Premises which may emit
noise, odor or vibrations from the Premises which are objectionable to
Lessor or other occupants of the Building. Lessee shall not use or permit
any part of its Premises to be used for lodging or sleeping.
5. The toilet rooms, urinals, washbowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever shall be thrown therein and
the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Lessee who, or whose
employees or invitees, shall have caused it.
6. Lessee shall not use or keep in the Premises or the building, any
kerosene, gasoline or flammable or combustible fluid or materials, or use
any method of heating or air conditioning other than supplied by Lessor.
7. Lessee shall not do or permit to be done within the Premises anything
which would unreasonably annoy or disturb or interfere with the rights of
other tenants of the Building. Lessee shall not solicit or canvass any
occupant of the building.
Page 16
<PAGE>
8. Lessee shall not commit or permit to be committed any waste, damage or
injury to the Premises or other Premises within the Building, or common
areas within and adjoining the Building. Such waste, damage or injury
shall be repaired at Lessee's sole cost and expense.
9. Lessee shall not waste electricity or water and agrees to cooperate fully
with Lessor to assure the most effective and economical use of utility
services provided to the Building by Lessor.
10. Lessee shall keep Lessor advised of the current telephone numbers of
Lessee's employees who may be contacted in emergency, i.e., fire,
break-in, vandalism, etc. If Lessor shall deem it necessary to respond to
such emergency in Lessee's behalf, Lessee shall pay all costs incurred
for services ordered by Lessor to secure or otherwise protect the
Premises and the contents thereof, including a premium charge for any
time spent by Lessor's employees in responding to such emergency.
11. Lessee shall see that the doors of the Premises are closed and securely
locked before leaving the Building and must observe strict care and
caution that all water faucets or water apparatus are entirely shut off
before Lessee's employees leave the Premises, and that all electricity
shall be shut off, so as to prevent waste or damage, and for any default
or carelessness Lessee shall make good all injuries sustained by Lessor,
other tenants, or occupants of the Building.
12. Lessee shall not place upon or install on, or beside, the windows, walls
or exterior doors of the Premises or any part of the Premises visible
from the exterior of the Premises any object including without limitation
signs, symbols, canopies, awnings, window coverings or other advertising
or decorative material, without obtaining the prior written consent of
Lessor.
13. Lessee shall not overload the floor of the Premises or mark, drive nails,
screw, or drill into the partitions, woodwork or plaster, or in any way
deface the Premises or any part thereof. Lessee shall not bore holes, cut
or string wires, or lay floor tile, carpet or other floor covering in or
around the Premises in any manner except as approved in writing by
Lessor. The expense of repairing any damage resulting from a violation of
this rule or removal of any floor covering shall be borne by the Lessee
by whom, or by whose contractors, employees, or invitees, the damage
shall have been caused.
14. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of
Lessor.
15. Lessee agrees that is shall comply with all fire, life safety, security
and other regulatory policies and procedures that may be issued from time
to time by Lessor.
16. Without the written consent of Lessor, Lessee shall not use the name of
the building in connection with or in promoting or advertising the
business of Lessee, except as Lessee's address.
17. No furniture, freight, or equipment of any kind shall be brought into the
Building without the consent of Lessor and all moving of the same into or
out of the Building shall be done at such time and in such manner as
Lessor shall designate. Lessor shall have the right to prescribe the
right, size and position of all safes and other heavy equipment brought
into the Building. Flooring under safes or other heavy objects must be
reinforced or a means of proper weight distribution provided, at Lessee's
sole expense, if, in the opinion of the Lessor, such precautions are
necessary. Any damage done to the Building by moving or maintaining any
such safe or other
Page 17
<PAGE>
property shall be repaired at the sole expense of Lessee. There shall
not be used in any space, or in the public halls of the Building,
either by Lessee or others, any pallet jacks or hand trucks, except
those equipped with rubber tires and side guards.
18. Lessee shall not employ or permit access to any person(s) for the purpose
of cleaning the Premises unless otherwise agreed to by Lessor. Lessee
shall not cause any unnecessary labor by reason of Lessee's carelessness
or indifference in the preservation of good order and cleanliness. Lessor
shall in no way be responsible to Lessee for any loss of property on the
Premises, however occurring, or for any damage done to the effects of
Lessee by the janitor or any other employee or any other person.
19. Lessor reserves the right, by written notice to Lessee, to rescind,
substitute, alter or waive any rule or regulation at any time prescribed
for the building when, in Lessor's judgment, it is necessary, desirable
or proper for the best interest of the Building and its tenants.
Page 18
<PAGE>
EXHIBIT D
STANDARDS FOR UTILITIES AND SERVICES
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation, (the "Lessee").
The following Standards for Utilities and Services are in effect. Lessor
reserves the right to adopt nondiscriminatory modifications and additions
hereto.
1. Non-attended automatic elevator facilities.
2. Monday through Friday, except holidays, from 8 a.m. to 6 p.m (and other
times for the sum of $20.00 per hour), ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the reasonable judgment
of Lessor it may be required for the comfortable occupancy of the Premises.
Lessee agrees to cooperate fully at all times with Lessor, and to abide by all
reasonable regulations and requirements which Lessor may prescribe for the
proper function and protection of said air conditioning system. Lessee agrees
not to connect any apparatus, device, conduit or pipe to the building chilled
and hot water air conditioning supply lines. Lessee further agrees that neither
Lessee nor its, employees, agents, visitors, licensees or contractors shall at
any time enter mechanical installations or facilities of the Building or adjust,
tamper with, touch or otherwise in any manner affect said installations or
facilities. The cost of maintenance and service calls to adjust and regulate the
air conditioning system shall be charged to Lessee if the need for maintenance
work results from either Lessee's adjustment of room thermostats or Lessee's
failure to comply with its obligations under this section. Such work shall be
charged at hourly rates equal to then-current journeymen's wages to air
conditioning mechanics.
3. During the usual business hours on business days, electric current as
required by the building standard office lighting and fractional horsepower
office business machines in an amount not to exceed 3.5 watts per square foot.
Lessee agrees, should its electrical installation or electrical consumption be
in excess of the aforesaid quantity or extend beyond normal business hours, to
reimburse Lessor monthly for the measured consumption at the average cost per
kilowatt hour charged to the building during the period. If a separate meter is
not installed at Lessee's cost, such excess costs will be established by an
estimate agreed upon by Lessor and Lessee, and if the parties fail to agree, as
established by an independent licensed engineer. Lessee agrees not to use any
apparatus or device in, or upon, or about the Premises which may in any way
increase the amount of such services usually furnished or supplied to said
Premises, and Lessee further agrees not to connect any apparatus or devise with
wires, conduits or pipes, or the other means by which such services are
supplied, for the purpose of using additional or unusual amounts of such
services without the prior written consent of Lessor. Should Lessee use the same
to excess, the refusal on the part of Lessee to pay upon demand of Lessor the
amount established by Lessor for such excess charge shall constitute a breach of
the obligation to pay rent under this Lease and shall entitle Lessor to the
rights therein granted for such breach. At all times Lessee's use of electric
current shall never exceed the capacity of the feeders to the building or the
risers or wiring installation and Lessee shall not install or use or permit the
installation or use of any unusually high weight or high electrical consumption
computer or electronic data processing equipment in the Premises without the
prior written consent of Lessor.
4. Provide janitor service to the Premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Lessee, and if to be
kept clean by Lessee, no one other than persons approved
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<PAGE>
by Lessor shall be permitted to enter the Premises for such purposes. If the
Premises are not used exclusively as offices, they shall be kept clean and in
order by Lessee, at Lessee's expense, and to the satisfaction of Lessor, and
by persons approved by Lessor. Lessee shall pay to Lessor the cost of removal
of any of Lessee's refuse and rubbish to the extent that the same exceeds the
refuse and rubbish usually attendant upon the use of the Premises as offices.
Lessor reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Lessor desirable or necessary to be made, until said repairs,
alterations or improvements, shall have been completed, and shall further have
no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilation, air conditioning or electric service. It is expressly
understood and agreed that any covenants, express or implied, for Lessor to
furnish any service for the benefit of Lessee shall not be deemed breached if
Lessor is unable to furnish or perform the same by virtue of a strike or labor
trouble or any other cause whatsoever beyond Lessor's reasonable control.
5. Lessee shall not use or install in the Premises any hear generating
equipment, except as specifically authorized herein, or installed pursuant to
the Work Letter Agreement, without Lessor's prior written consent. The inclusion
of this restriction is to ensure that the HVAC system is adequate to service the
Building and the various uses of tenants that occupy the Building.
Page 20
<PAGE>
EXHIBIT E
RIDERS TO LEASE
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation, (the "Lessee").
1. RIGHT OF FIRST OFFER
Provided Lessee has not been in default of any term or condition of the
Lease, Lessee shall have the Right of First Offer to lease approximately
32,000 square feet of space located in Building 1, of Murray Business
Center, (outlined on Exhibit F, Floor Plan of Right of First Offer Space)
subject to any rights existing prior to the execution of this Lease.
Lessee shall have the Right of First Offer for the term of the Lease.
Prior to entering into negotiations on the space that Lessee has a Right
of First Offer, Lessor shall provide Lessee with written notification
specifying when the space shall be available for occupancy and the terms
and conditions under which Lessor will lease the space. Lessee shall
respond within five (5) business days of written notification by Lessor
if Lessee wishes to lease the space. If Lessee shall not respond within
five (5) business days, Lessee shall be deemed to have passed on the
offer to lease the space. Should Lessee accept such offer to lease,
Lessee shall enter into a Lease for the space.
2. LESSEE IMPROVEMENT ALLOWANCE
Lessor shall provide Lessee with a Lessee Improvement Allowance of up
to $5.00 per square foot ($56,750.00) to improve the Premises. This
Lessee Improvement Allowance shall be used by Lessee to recarpet,
repaint and/or remodel the Premises. Such Lessee Improvements will be
based upon a space plan mutually acceptable to Lessor and Lessee.
Lessee Improvement costs to the Premises in excess of this Lessee
Improvement Allowance will be at Lessee's sole cost and expense. All
improvements to the Premises shall conform to the provisions of
Exhibit G, Work Letter Agreement. In addition to this Lessee
Improvement Allowance, Lessor shall be responsible for the cost of
demolishing the Premises as provided in the Construction Drawings and
providing American with Disabilities Act improvements to the Premises
as reasonably required by the City of Beaverton, Oregon.
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EXHIBIT F
FLOOR PLAN OF RIGHT OF FIRST OFFER SPACE
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Oregon corporation, (the "Lessee").
The Premises of approximately 32,000 Square Feet as outlined below. Lessee and
Lessor acknowledge the approximate nature of this Square Foot Calculation.
[MURRAY BUSINESS CENTER - First Floor Plan Graphic]
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EXHIBIT G
WORK LETTER AGREEMENT
To Lease made on this 20 day of March , 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree Corporation, an Ohio corporation (the "Lessee").
1. Lessor shall, at its expense, at a total cost not to exceed Fifty-six
Thousand Seven Hundred Fifty and No/100 Dollars ($56,750.00), complete
the construction of the improvements to the Premises as described and
delineated in a space plan mutually acceptable to Lessor and Lessee, as
provided by Lessee. Lessee Improvement Costs to the Premises in excess
of this Lessee Improvement Allowance of $56,750.00 shall be Lessee's
responsibility. Lessor shall cause to be prepared final drawings
("Construction Drawings") for the Lessee Improvements that are consistent
with and are logical evolutions of the space plans. As soon as such
Construction Drawings are completed, Lessor shall deliver the same to
Lessee for approval. Lessee shall promptly review and approve the
Construction Drawings within two (2) days after the date of receipt
thereof and shall initial two (2) copies of the Construction Drawings as
indication of its approval thereof. Lessee's approval of the
Construction Drawings shall constitute Lessor's authorization to complete
the Lease Improvements in accordance with such Construction Drawings. If
Lessee shall request any change in the Construction Drawings, Lessor
shall promptly notify Lessee in writing of the additional costs of
construction of the Lessee Improvements required by such change, and
Lessee shall accompany its approval of the Construction Drawings with a
check made payable to Lessor in the amount of the authorized excess
costs. If Lessor does not receive written authorization, and Lessee's
check for any additional costs incurred as a result of Lessee's request
for changes in the Construction Drawings, within three (3) business days
after the date of receipt of notice from Lessor of the additional cost of
construction required by such change, then Lessor may, at its option,
terminate the Lease by giving written notice of such termination to
Lessee. If Lessor does not elect to terminate the Lease, Lessor shall
not be obligated to commence work on the Premises, and Lessee shall be
charged withany delay in completion of the Premises.
2. Lessee is responsible for the suitability of the design and function of
the Lessee Improvements for Lessee's needs and business. Lessee shall
also be responsible for procuring or installing in the Premises any trade
fixtures, equipment, furniture, furnishings, telephone equipment or other
personal property (collectively, "Personal Property") to be used in the
Premises by Lessee, and the cost of such Personal Property shall be paid
by Lessee. Lessee shall conform to the Building's wiring standards in
installing any telephone and computer equipment and shall be subject to
any and all rules of the site during construction of the Lessee
Improvements.
3. If Lessee shall request any change, addition or alteration in the plans,
the Building standards or the approved Construction Drawings, Lessor
shall promptly give Lessee a written estimate of (a) the cost of
engineering and design services to prepare a change order ("Change
Order") in accordance with such request, (b) the cost of the work to be
performed pursuant to such Change Order, and (c) the time delay expected
because of such requested Change Order. Within two (2) business days
following Lessee's receipt of the foregoing written estimate, Lessee
shall notify Lessor in writing whether it approves such written estimate.
If Lessee approves such written estimate, Lessee shall accompany such
approval with a good check made payable to Lessor in the
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amount of the estimated cost of preparing the Change Order and
performing the work thereof, and the foregoing shall constitute
Lessor's authorization to proceed. If such written authorization and
check are not received by Lessor within such two (2) business days
period, Lessor shall not be obligated to prepare the Change Order or
perform any work in connection therewith. Upon completion of the work
of the Change Order and submission of the final cost thereof by Lessor
to Lessee, Lessee shall promptly pay any such additional amounts due
Lessor.
4. If the completion of the Lessee Improvements in the Premises is delayed
(i) at the request of Lessee, (ii) by Lessee's failure to comply with the
foregoing provisions, (iii) by changes in the work requested (whether or
not Lessee authorizes Lessor to proceed therewith) or ordered by Lessee
or by extra work ordered by Lessee, or (iv) because Lessee chooses to
have additional work performed by Lessor (each, a "Lease Delay"), then
Lessee shall be responsible for all costs and expenses occasioned by such
delays, including, without limitation, any costs and expenses
attributable to increases in labor or materials, and there shall be no
delay in the commencement of Lessee's obligation to pay rent if the
completion of the Lessee Improvements is delayed as a result of the
foregoing.
5. Lessee may, with Lessor's written consent, enter the Premises prior to
the Commencement Date solely for the purpose of installing Lessee's
Personal Property and equipment as long as such entry does not interfere
with the orderly construction and completion of the Premises. Lessee
shall notify Lessor of its desired time(s) of entry and shall submit for
Lessor's approval the scope of the work to be performed and the name(s)
of the contractor(s) who will perform such work. Lessee hereby
indemnifies and agrees to protect, defend and hold Lessor, any mortgagee,
ground lessor or beneficiary of a mortgage, ground lease or deed of trust
related to the Premises or the Building harmless from and against any and
all suits, claims, actions, losses, costs or expenses (including claims
for worker's compensation) for any nature whatsoever, together with
reasonable attorney fees for counsel of Lessor's choice, arising out of
or in connection with the installation of Lessee's Personal Property or
equipment (including, but not limited to, claims for breach of warranty,
personal injury or property damage).
LESSOR: COMMERCIAL REAL ESTATE COMPANY, L.L.C.
- ---------------------------
Larry R. Benaroya
Manager
LESSEE: CHECKFREE CORPORATION
----------------------------------
/s/ Robert E. Bowers
- ----------------------------------
CFO
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EXHIBIT H
SPACE PLAN OF PREMISES
To Lease made on this 20 day of March, 1996, between Commercial Real Estate
Company, L.L.C., a Washington limited liability company (the "Lessor") and
CheckFree, Inc., an Oregon corporation (the "Lessee").
The Premises of approximately 11,350 Square Feet is planned as follows:
Page 25
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SUBLEASE
Dated Effective: August 15, 1999
Between: FIRST TECHNOLOGY CREDIT UNION, a
credit union chartered by the State of Oregon ("Sublessor")
And: CORILLIAN CORPORATION, an Oregon
corporation ("Sublessee")
RECITALS
A. Sublessor is the lessee under a Lease dated March 8, 1998
(the "Master Lease"), wherein Northwest Development Co., an Oregon general
partnership ("Northwest") leased to Sublessor the real property, including a
building and parking lot, located at 3855 SW 153rd Drive in the City of
Beaverton, County of Washington, State of Oregon (the "Premises").
B. Northwest and Sublessor amended the Master Lease by a First
Amendment to Lease dated March 15, 1988 (the "First Amendment"); a Second
Amendment to Lease dated May 1, 1988 (the "Second Amendment"); and a Third
Amendment to Lease dated March 1, 1989 (the "Third Amendment").
C. On or about August 14, 1990, Northwest sold the Premises,
and assigned its interest in the Master Lease, to Dr. Walter K. W. Young and
Kwai Sun Young ("Lessor).
D. Lessor and Sublessor amended the Master Lease by a Fourth
Amendment to Lease dated May 1, 1997 (the "Fourth Amendment"); a Sixth
Amendment to Lease dated November 10, 1997 (the "Sixth Amendment"); and a
Seventh Amendment to Lease dated February 11, 1998 (the "Seventh Amendment").
There was no "Fifth Amendment" to the Master Lease. Lessor and Sublessor also
amended the Master Lease by an Extension Agreement dated June 5, 1998 (the
"First Extension"); a Second Extension Agreement dated July 2, 1998 (the
"Second Extension"); and a Third Extension Agreement dated August 5, 1998
(the "Third Extension").
E. References herein to the Master Lease shall include the
First, Second, Third, Fourth, Sixth and Seventh Amendments, as well as the
First, Second and Third Extensions, where the context requires. The Master
Lease and the Second and Third Amendments are attached hereto as Exhibit A.
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AGREEMENT
Therefore, in consideration of the Premises, the parties agree as
follows:
1. RECITALS. The above Recitals are true and correct and
incorporated herein by this reference.
2. PREMISES. Sublessor hereby subleases the Premises to
Sublessee on the terms and conditions set forth in this Sublease. By taking
possession of the Premises, Sublessee acknowledges that it has inspected the
Premises and accepts them as being in the condition in which Sublessor is
obligated to deliver them and otherwise in good working order, condition and
repair, "AS IS" and WTH ALL FAULTS." Sublessor shall have no obligation to
alter, remove, improve, repair, decorate, or paint the Premises or any part
thereof. Sublessee acknowledges that Sublessor has not made and will not make
any warranties to Sublessee with respect to the quality of construction of
any leasehold improvements or tenant finish within the Premises or as to the
condition of the Premises, either express or implied, and that Sublessor
expressly disclaims any implied warranty that the Premises are or will be
suitable for Sublessee's intended commercial purposes. Except as otherwise
provided herein or in the Master Lease, Sublessee's obligation to pay rentals
under this Sublease is not dependent upon the condition of the
Premises or the performance by Lessor of its obligations under the
Master Lease, and Sublessee will continue to pay the rentals due hereunder
without abatement, setoff or deduction notwithstanding any breach by
Sublessor of its duties or obligations hereunder, or by Lessor of its duties
or obligations under the Master Lease, whether express or implied. Any
dispute between Sublessee and Sublessor as to whether the latter has breached
its obligations under this Sublease with respect to the condition of the
Premises shall be resolved by arbitration as set forth in Section 21.
3. WARRANTY BY SUBLESSOR. Sublessor warrants and represents to
Sublessee that the Master Lease has not been amended or modified except as
expressly set forth herein, that Sublessor is not now, and as of the
commencement of the Term hereof will not be, in default or breach of any of
the provisions of the Master Lease, and that Sublessor has no knowledge of
any claim by Lessor that Sublessor is in default or breach of any of the
provisions of the Master Lease.
4. TERM.
4.1 COMMENCEMENT AND EXPIRATION. The Term of this
Sublease shall commence on August _, 1999 ("Commencement Date"), or when
Lessor consents to this Sublease, whichever shall last occur, and end on
December 31, 2000
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("Expiration Date"), unless otherwise sooner terminated in accordance with
the provisions of this Sublease. In the event the Term commences on a date
other than the Commencement Date, Sublessor and Sublessee shall execute a
memorandum setting forth the actual date of commencement of the Term.
4.2 POSSESSION. Possession of the Premises
("Possession") shall be delivered to Sublessee on the commencement of the
Term. If for any reason Sublessor does not deliver Possession to Sublessee on
the commencement of the Term, Sublessor shall not be subject to any liability
for such failure, the Expiration Date shall not be extended by the delay, and
the validity of this Sublease shall not be impaired, but rent shall abate
until delivery of Possession. If, however, Sublessor has not delivered
Possession to Sublessee within thirty (30) days after the Commencement Date,
then at any time thereafter and before delivery of Possession, Sublessee may
give written notice to Sublessor of Sublessee's intention to cancel this
Sublease. Said notice shall set forth an effective date for such cancellation
which shall be at least ten (10) days after delivery of said notice to
Sublessor. If Sublessor delivers Possession to Sublessee on or before such
effective date, this Sublease shall remain in full force and effect. If
Sublessor fails to deliver Possession to Sublessee on or before such
effective date, this Sublease shall be canceled, in which case all
consideration previously paid by Sublessee to Sublessor on account of this
Sublease shall be returned to Sublessee, this Sublease shall thereafter be of
no further force or effect, and Sublessor shall have no further liability to
Sublessee on account of such delay or cancellation.
4.3 HOLDOVER. Any holding over after the expiration of
the term of this Sublease with the written consent of Sublessor shall be a
tenancy from month to month. The terms, covenants and conditions of such
tenancy shall be the same as provided herein. Acceptance by Sublessor of Rent
after such expiration shall not result in any other tenancy or any renewal of
the term of this Sublease, and the provisions of this Section are in addition
to and do not affect Sublessor's right of re-entry or other rights provided
under this Sublease or by applicable law. If Sublessee shall retain
possession of the Premises or any part thereof without Sublessor's consent
following the expiration or sooner termination of this Sublease for any
reason, then Sublessee shall pay to Sublessor for each day of such retention
one hundred fifty percent (150%) of the amount of the daily Rent for the last
period prior to the date of such expiration or termination. Sublessee shall
also indemnify and hold Sublessor harmless from Sublessor's actual damages
resulting from delay by Sublessee in surrendering the Premises, including,
without limitation, any claims made by any succeeding tenant founded on such
delay. Alternatively, if Sublessor gives notice to Sublessee of Sublessor's
election thereof, such holding over shall constitute renewal of this Sublease
for a period from month to month. Acceptance of Rent by Sublessor
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following expiration or termination shall not constitute a renewal of this
Sublease, and nothing contained in this Section shall waive Sublessor's right
of re-entry or any other right. Unless Sublessor exercises the option hereby
given to it, Sublessee shall be only a tenant at sufferance, whether or not
Sublessor accepts any Rent from Sublessee while Sublessee is holding over
without Sublessor's written consent.
5. RENT
5.1 MONTHLY RENT. Sublessee, shall pay to Sublessor as
"Rent," without deduction, setoff, notice, or demand, at 3555 SW 153rd Drive,
Beaverton, Oregon 97006 or at such other place as Sublessor shall designate
from time to time by notice to Sublessee, the sum of Twenty-Five Thousand and
No/1 00 Dollars ($25,000) per month, in advance on the first day of each
month of the Term; provided, however, that Sublessee shall not be obligated
to pay Sublessor any Rent from the Commencement Date through September 30,
1999. If the Term ends on a day other than the first or last day of a month,
the rent for the partial month shall be prorated on a per them basis.
5.2 OPERATING COSTS. Sublessee, at Sublessee's
expense, shall contract and pay for all janitorial service for the interior
of the Premises. Sublessor shall pay all other expenses of maintaining and
operating the Premises required under the Master Lease, including but not
limited to taxes, utilities, and insurance.
6. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor
upon execution of this Sublease the sum of Twenty-Five Thousand and No/1 00
Dollars ($25,000) as security for Sublessee's faithful performance of
Sublessee's obligations hereunder ("Security Deposit"). If Sublessee fails to
pay rent or other charges when due under this Sublease, or fails to perform
any of its other obligations hereunder, Sublessor may use or apply all or any
portion of the Security Deposit for the payment of any rent or other amount
then due hereunder and unpaid, for the payment of any other sum for which
Sublessor may become obligated by reason of Sublessee's default or breach, or
for any loss or damage sustained by Sublessor as a result of Sublessee's
default or breach. If Sublessor so uses any portion of the Security Deposit,
Sublessee shall, within ten (10) days after written demand by Sublessor,
restore the Security Deposit to the full amount originally deposited, and
Sublessee's failure to do so shall constitute a default under this Sublease.
Sublessor shall not be required to keep the Security Deposit separate from
its general accounts, and shall have no obligation or liability for payment
of interest on the Security Deposit. In the event Sublessor assigns its
interest in this Sublease, Sublessor shall deliver to its assignee so much of
the Security Deposit as is then held by Sublessor. Provided Sublessee is not
then in default of any of its obligations hereunder, the Security Deposit or
so much thereof as
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had not theretofore been applied by Sublessor as permitted herein, shall be
applied to Rent for the last month of the Term of this Sublease.
7. USE AND MAINTENANCE OF PREMISES. The Premises shall be used
and occupied only for general office purposes typical of Class A buildings
and telecommunications operations consistent therewith, and for no other use
or purpose. Sublessee shall not use or allow the Premises to be used for any
improper, immoral or unlawful purpose, nor shall Sublessee cause or maintain
or permit any nuisance in, on, or about the Premises. Sublessee shall, at all
times during the term hereof at Sublessee's sole cost and expense, keep the
following items in good order, condition and repair: (i) floor coverings,
(ii) wall coverings, (iii) paint, (iv) casework, (v) ceiling tiles, and (vi)
all of Sublessee's personal property. Sublessor shall maintain the
mechanical, HVAC, plumbing and electrical equipment serving the building, and
the structure itself, except for damage occasioned by the act of the
Sublessee, which damage shall be repaired by Sublessor at Sublessee's expense.
8. BUILDING SERVICES.
8.1 UTILITIES. Subject to the provisions elsewhere
herein contained, Sublessor agrees to furnish to the Premises (i) heat and
air-conditioning customarily furnished in comparable buildings in Beaverton,
Oregon, for the comfortable use and occupation of the Premises from 7:00 A.M.
to 6:00 P.M. on weekdays, and 8:00 A.M. to 1:00 P.M. on Saturdays exclusive
of legal holidays, (ii) continuous water and electricity service suitable for
the intended use of the Premises, and (iii) continuous elevator service which
shall mean service by unattended automatic elevators. Sublessor shall provide
additional or after-hours heating or air-conditioning at Sublessee's request,
and Sublessee shall pay to Sublessor a reasonable charge for such services as
determined by Sublessor, the initial rate for which shall be $50.00 per hour
per floor. Sublessee agrees to keep and cause to be kept closed all window
coverings when necessary because of the sun's position, and Sublessee also
agrees at all times to cooperate fully with Sublessor and to abide by all the
reasonable regulations and requirements which Sublessor may prescribe for the
proper functioning and protection of the heating, ventilating, and
air-conditioning system. Sublessor does not warrant that the current
air-conditioning system shall cool the Premises in the manner set forth
herein if Sublessee brings onto the Premises excess heat-generating machines,
lighting or equipment, and if the current air-conditioning system is
insufficient, Sublessee's sole remedy shall be to install, at Sublessee's
sole cost and expense, such supplementary air-conditioning units in the
Premises as may be required by Sublessee.
8.2 EXCESS USAGE. If Sublessee uses excessive amounts
of non-metered utilities or services of any kind because of operation outside
of normal
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Building hours, high demands from office machinery and equipment, nonstandard
lighting, or any other cause, Sublessor may impose a reasonable charge for
supplying such extra utilities services, which charge shall be payable
monthly by Sublessee in conjunction with Rent payments. In case of dispute
over any extra charge under this paragraph, Sublessor and Sublessee shall
select a qualified independent engineer whose decision shall be conclusive on
both parties. If the parties cannot agree on the engineer the same shall be
appointed by the presiding judge of the Multnomah County (Oregon) Circuit
Court. The party not prevailing in such dispute shall pay the cost of such
engineer's determination.
8.3 SERVICES DISCLAIMER. Sublessor shall not be in
default hereunder or be liable for any damages directly or indirectly
resulting from, or by reason of (i) failure to furnish or delay in furnishing
any such utilities or services when such failure or delay is caused by acts
of God or the elements, labor disturbances of any character, any other
accidents or other conditions beyond the reasonable control of Sublessor, or
by the making of repairs or improvements to the Premises or the Building, or
(ii) the limitation, curtailment, rationing or restriction on use of water or
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or the building. Furthermore, Sublessor shall
be entitled to cooperate voluntarily in a reasonable manner with the efforts
of national, state or local governmental agencies or utilities suppliers in
reducing energy or other resource consumption. Notwithstanding any other
provision contained herein, in the event that any utilities or services
essential to the conduct of business in the Premises are interrupted for a
period of five (5) days or more, Rent shall abate, but only to the extent of
Sublessor's insurance unless the interruption is due to the fault of
Sublessor.
9. SUBLESSEE IMPROVEMENTS.
9.1 CONSTRUCTION BY SUBLESSEE: Sublessee shall have
the right to install, at Sublessee's sole cost and expense, the improvements
described in this Section and such other improvements as may be approved by
Sublessor, which consent shall not be unreasonably withheld so long as
Sublessee obtains Lessor's consent. In connection therewith:
9.1.1 SUBLESSOR'S APPROVAL: Such work shall not
proceed until Sublessor's written approval of each of the following items,
which approval shall not be unreasonably withheld, conditioned or delayed:
(a) Sublessee's contractor; (b) public liability and property damage
insurance carried by Sublessee or its contractor; (c) schematic plans and
specifications for such work; and (d) detailed construction plans and
specifications. All such work shall be done in strict conformity with such
final plans and specifications subject to field change orders prepared and
approved by
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Sublessor. As-built plans shall be prepared by Sublessee after the work is
fully completed and a copy shall be delivered to Sublessor for its use.
9.1.2 PERMITS: All work shall be done in
conformity with a valid building permit (obtained at Sublessee's expense) when
required, a copy of which shall be furnished to Sublessor before such work is
commenced, and in any case, all such work shall be performed in accordance with
all applicable governmental regulations at Sublessee's sole expense.
Notwithstanding any failure by Sublessor to object to any such Work, Sublessor
shall have no responsibility for Sublessee's failure to meet all applicable
regulations.
9.1.3 COORDINATION: All work by Sublessee or
Sublessee's contractor shall be scheduled through Sublessor. Sublessee or
Sublessee's contractor shall arrange for necessary utility, hoisting and
elevator service with Sublessor.
9.14 MANNER OF ENTRY: Sublessee's entry to the
Premises for any purpose, including without limitation, inspection or
performance of Sublessee construction by Sublessee's agents, prior to the
Commencement Dates specified herein shall be at such times as are reasonably
approved by Sublessor and subject to all the terms and conditions of this
Sublease except the payment of Rent. Sublessee's entry shall mean entry by
Sublessee, its officers, contractors, licensees, agents, servants, employees,
guests, invitees, or visitors.
9.1.5 FAULTY WORK: Sublessee shall promptly
reimburse Sublessor upon demand for any extra expense incurred by the Sublessor
by reason of faulty work done by Sublessee or its contractors or by reason of
any delays caused by such work, or by reason of inadequate cleanup.
9.2 FIBER OPTICS. Sublessee may connect redundant fiber
optics to the building's systems, the plans and specifications for which shall
be subject to Sublessor's approval, which approval shall not be unreasonably
withheld, conditioned or delayed.
9.3 ROOF TOP ACCESS.
9.3.1 LICENSE: Sublessor hereby grants Sublessee a
license to use a portion of the Building roof top area to be agreed upon by
Sublessor and Sublessee (the "Equipment Area") for the installation, operation,
maintenance, repair and replacement of an antenna (the "Antenna"), satellite
dish (the "Dish") and ancillary facilities (collectively, the "Equipment"). The
Antenna shall be no greater than three (3) feet tall, and the Dish shall be no
greater than three (3) feet in diameter. The Equipment shall weigh no more than
200 pounds. This term of this license shall
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be the same as the term of this Sublease and expire upon the expiration or
earlier termination of this Sublease.
9.3.2 COSTS: Sublessee shall reimburse
Sublessor for all costs Sublessor may incur with regard to the Equipment,
including costs for maintenance, repairs, or improvements incurred from time
to time and any expenses incurred by Sublessor in reviewing specifications or
inspecting the installation of these facilities. Sublessee also shall pay all
taxes levied by any jurisdiction with respect to the Equipment and
appurtenant facilities.
9.3.3 ACCESS: Sublessee and its contractors,
agents and subcontractors shall have the right to enter or leave the
Equipment Area at reasonable times provided that Sublessee and such parties
comply any applicable rules and regulations of the building.
9.3.4 INTERFERENCE WITH OTHER EQUIPMENT:
Sublessor shall not be responsible for any interference that may occur with
respect to Sublessee's Equipment signal.
9.3.5 REPAIRS: Except in the event of an
emergency, Sublessor must give its written approval prior to the performance
of any repairs or replacement of the Equipment, such approval not to be
unreasonably withheld or delayed. All costs of installation, including the
cost of electrical equipment, mounting fixtures and engineering studies
required by Sublessee hereunder, or which are required to comply with
Sublessor's site engineering or aesthetic standards, will be paid by
Sublessee. At the end of the Term of this Sublease, Sublessee shall remove
all equipment or other properties attached to or otherwise brought into or
onto the Equipment Area, other than permanent modifications which Sublessor
elects to retain.
9.3.6 INDEMNIFICATION: Sublessee, assumes full
responsibility for the installation, engineering and maintenance of all
Equipment. Sublessee shall indemnify and hold Sublessor harmless from and
against all losses, costs (including reasonable attorneys' fees at trial and
on appeal), damages, expenses and liabilities (including statutory liability,
liability under workers compensation laws and mechanics liens), in connection
with the use, installation or operation of the Equipment or Equipment Area or
arising from any acts or negligence of Sublessee, Sublessee's agents,
employees, customers, invitees, contractor, and subcontractors, exclusive,
however, of any liability arising out of Sublessor's negligence.
9.3.7 PERMITS: Sublessee shall, at its expense,
obtain any and all applicable municipal, state and Federal or other permits
and/or licenses required for the installation, operation and maintenance of
the Equipment, and Sublessor shall not
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be responsible for any signal interference or signal straying that may result
from Sublessee's use of the Equipment. All costs and risks associated with
the installation, operation and maintenance of the Equipment shall be the
sole obligation of Sublessee, and Sublessee's inability to secure or retain
such permits and/or licenses shall not terminate this Sublease. A copy of
each of Sublessee' s permits and licenses shall be submitted to Sublessor.
9.3.8 SCREENING: Sublessor, at its option, may
require Sublessee to screen the Equipment from public view by erecting
architectural screens around the Equipment Area.
9.3.9 PLAN APPROVAL: Ali plans and specifications
pertaining to the installation of the Equipment must be approved by Sublessor
and all governmental authorities having jurisdiction thereof and shall comply
with any restrictive covenants pertaining to the Building.
9.3.10 APPLICATION OF OTHER PROVISIONS: All of the
provisions of this Sublease other than this Section shall be applicable to the
License created by this Section as if the area covered by the License were a
part of the Premises, except to the extent that such provisions are in conflict
with the provisions of this Section, in which latter event the provisions of
this Section shall be deemed to be controlling.
10. ASSIGNMENT AND SUBLETTING. Sublessee shall not assign this
Sublease or further sublet all or any part of the Premises without the prior
written consent of both Sublessor and Lessor.
11. INSURANCE. Sublessor shall fulfill the insurance obligations
of the Tenant under the Master Lease. Sublessee shall insure its own personal
property and trade fixtures, and shall maintain at all times during the term of
this Sublease comprehensive general liability insurance in respect of the
Premises and the conduct or operation of business therein, with Sublessor, its
property manager, if any, Lessor and any mortgagee whose name and address shall
previously have been furnished to Sublessee, as additional insureds to the
extent of the insurance coverage required hereunder, with Two Million and No/100
Dollars ($2,000,000.00) minimum combined single limit coverage, or its
equivalent. Sublessee shall deliver to Sublessor ACORD Form 27 certificates of
insurance issued by the insurance company or its authorized agent, within ten
(10) days of the Commencement Date. Sublessee shall procure and pay for renewals
of such insurance from time to time before the expiration thereof, and Sublessee
shall deliver to Sublessor such renewal certificate at least thirty (30) days
before the expiration of any existing policy. All insurance policies required to
be carried by Sublessee hereunder shall be issued by responsible insurance
companies authorized to issue insurance in the State of Oregon rated B VII
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or higher by Best's Insurance Rating Service. Anything to the contrary in
this Sublease notwithstanding, neither party, nor its officers, directors,
employees nor agents, shall be liable to the other party nor to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage to any building, structure or other tangible property normally
covered under an all risk policy of property insurance or under workers'
compensation laws and benefits even though such loss or damage might have
been occasioned by the negligence of such party, its agents or employees.
12. ACCESS TO PREMISES. Sublessor reserves, and shall at all
reasonable times have, the right to re-enter the Premises upon 24 hours'
prior notice to Sublessee (except in an emergency) to inspect the same, to
supply any service to be provided by Sublessor to Sublessee, to show or to
allow Lessor to show the Premises to prospective purchasers, mortgagees; or
tenants, to post notices of nonresponsibility, and to alter, improve or
repair the Premises. Any such work shall be without abatement of Rent
provided the work is necessary to comply with governmental requirements or is
reasonably necessary to keep the Premises in the condition required by this
Sublease and Sublessor complies with this Section. For such purpose,
Sublessor may erect, use and maintain scaffolding, pipes, conduits and other
necessary structures in and through the Premises where reasonably required by
the character of the work to be performed, provided that entrance to the
Premises shall not be blocked thereby, and further provided that the business
of Sublessee shall not be interfered with unreasonably. For each of the
purposes stated in this Section, Sublessor shall at all times have and retain
a key with which to unlock all of the doors in, upon and about the Premises,
excluding Sublessee's vaults and safes or special security areas (designated
in advance). Sublessor shall have the right to use any and all means which
Sublessor may deem necessary or proper to open all doors in an emergency in
order to obtain entry to any portion of the Premises, and any entry to any
portion of the Premises obtained by Sublessor by any such means, or otherwise
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual
or constructive, of Sublessee from all or part of the Premises.
13. NOTICE OF OCCURRENCES. Sublessee shall give prompt notice
to Sublessor of: (i) any occurrence in or about the Premises for which
Sublessor might be liable; (H) any fire or other casualty in the Premises;
(iii) any damage to or defect in the Premises including the fixtures,
equipment and appurtenances thereof, for the repair of which Sublessor might
be responsible; and (iv) damage to or defect in any part or appurtenances of
the building's sanitary, electrical, heating, ventilating, air-conditioning,
elevator or other systems located in or passing through the Premises or any
part thereof.
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14. RULES. Sublessee shall faithfully observe and comply with any
rules and regulations from time to time established by Sublessor by written
notice to Sublessee and all reasonable modifications thereof and additions
thereto.
15. FORCE MAJEURE. The obligations of the parties hereunder shall
be in no way affected, impaired or excused, nor shall a party have any liability
whatsoever to the other, because:
15.1 such party is unable to fulfill, or is delayed in
fulfilling, any of its obligations under this Sublease by reason of strike,
other labor trouble, governmental preemption of priorities or other controls in
connection with a national or other public emergency or shortages of fuel,
supplies or labor resulting therefrom, or any other cause, whether similar or
dissimilar, beyond Sublessor's reasonable control; or
15.2 of any failure or defect in the supply, quantity or
character of electricity, water or other utilities furnished to the Premises, by
reason of any requirement, act or omission of the public utility or others
serving the building with electric energy, steam, oil, gas or water, or for any
other reason whether similar or dissimilar, beyond Sublessor's reasonable
control.
In no event shall this provision excuse Sublessee's obligation to pay Rent.
16. OTHER PROVISIONS OF SUBLEASE. Except as expressly set forth
herein, all applicable terms and conditions of the Master Lease are incorporated
into and made a part of this Sublease as if Sublessor were the lessor thereunder
and Sublessee the lessee thereunder, except for the following: Sections 1, 2, 3,
5, 6 (a) and (b), 7, 9 (b), 10 (b), 12, 21 of the Master Lease, the First
Amendment, Section 3 of the Third Amendment, the Fourth Amendment, the Sixth
Amendment, the Seventh Amendment, the First Extension, the Second Extension and
the Third Extension shall not be applicable to this Sublease, and the rights and
obligations of the Tenant under Sections 10 and 11 of the Master Lease (except
for any allocation to Tenant of moving expenses in a condemnation proceeding)
shall be the rights and obligations of Sublessor. Sublessee assumes and agrees
to perform the lessee's obligations under the Master Lease during the Term to
the extent that such obligations are applicable to the Premises, except that the
obligation to pay rent to Lessor under the Master Lease shall be considered
performed by Sublessee to the extent and in the amount rent is paid to Sublessor
in accordance with Section 5 of this Sublease. Sublessee shall not commit or
suffer any act or omission that will violate any of the provisions of the Master
Lease. Sublessor shall exercise due diligence in attempting to cause Lessor to
perform its obligations under the Master Lease for the benefit of Sublessee. If
the Master Lease terminates, this Sublease shall terminate and the parties shall
be relieved of any further liability or obligation under this Sublease, provided
however, that if the Master
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Lease terminates as a result of a default or breach by Sublessor or Sublessee
under this Sublease and/or the Master Lease, then the defaulting party shall
be liable to the non-defaulting party for all damage suffered as a result of
such termination. Notwithstanding the foregoing, if the Master Lease gives
Sublessor any right to terminate the Master Lease in the event of the partial
or total damage, destruction, or condemnation of the Master Premises or the
building or project of which the Master Premises are a part, the exercise of
such right by Sublessor shall not constitute a default or breach hereunder.
17. ATTORNEYS' FEES. If Sublessor or Sublessee shall commence
an action against the other arising out of or in connection with this
Sublease, the prevailing party shall be entitled to recover its costs of suit
and reasonable attorneys' fees; on appeal or in arbitration.
18. NOTICES. All notices and demands which may or are to be
required or permitted to be given by either party on the other hereunder
shall be in writing. All notices and demands by the Sublessor to Sublessee
shall be sent by United States Mail, postage prepaid, addressed to the
Sublessee at the Premises, and to the address hereinbelow, or to such other
place as Sublessee may from time to time designate in a notice to the
Sublessor. All notices and demands by the Sublessee to Sublessor shall be
sent by United States Mail, postage prepaid, addressed to the Sublessor at
the address set forth herein, and to such other person or place as the
Sublessor may from time to time designate in a notice to the Sublessee.
To Sublessor at: First Technology Credit Union
3555 SW 153rd Drive
Beaverton, Oregon 97006
To Sublessee at: Corillian Corporation
3855 SW 153rd Drive
Beaverton, Oregon 97006
19. BROKER. Sublessor was represented by Thomas A. Remley, SIOR,
Vice President of Grubb & Ellis (the "Broker") in connection with this Sublease.
Sublessor shall pay a brokerage commission to the Broker pursuant to the terms
of a separate agreement between the Broker and Sublessor. The parties each
represent and warrant that they are not represented by a broker except for the
Broker and are not liable to pay any other real estate commissions in connection
with this Sublease. In the event of a claim by any other broker for a broker's,
agent's or finder's fee or commission in connection with the negotiation,
execution or consummation of this transaction, the party upon whose alleged
statement, representation or agreement such claim or liability arises shall
indemnify, hold harmless and defend the other party from and
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against such claim and liability, including, without limitation, reasonable
attorneys' fees and court costs.
20. CONSENT BY LESSOR. THIS SUBLEASE SHALL BE OF NO FORCE OR
EFFECT UNLESS CONSENTED TO BY LESSOR WITHIN 10 DAYS AFTER EXECUTION HEREOF.
21. ARBITRATION. Sublessor or Sublessee may at any time request
final and binding arbitration of any matter in dispute where arbitration is
expressly provided for in this Sublease.
21.1 GENERAL. The party requesting arbitration shall do
so by giving notice to that effect to the other party, and the dispute shall
be determined in the City of Portland, Oregon, by a single arbitrator if the
amount in dispute is less than $100,000.00, and by three arbitrators for any
dispute in excess of such amount, in accordance with the rules then
pertaining to the American Arbitration Association. All arbitrators shall be
licensed attorneys having at least 10 years experience with similar
transactions. Each party shall submit its position to the arbitrator(s) and
the arbitrator(s) shall only have jurisdiction to choose the entire position
of one (1) of the parties as the prevailing position. The determination in
such arbitration may be enforced on the application of either party by the
order of judgment of a court of competent jurisdiction. The fees and expenses
of any arbitration including attorneys' and experts' fees shall be borne by
the losing party.
21.2 GOVERNING RULES; PRESERVATION OF REMEDIES. The
arbitrator(s) shall determine the value in accordance with the substantive
law of the state of Oregon. The arbitrator(s) shall have no authority nor
jurisdiction to award any damages or any other remedies beyond those which
could have been awarded in a court of law if the parties had litigated the
claims instead of arbitrating them. The parties shall not assert any claim
for punitive damages except to the extent such awards are specifically
authorized by statute. If the Federal Arbitration Act, Title 9 of the United
States Code, is applicable to this transaction, it shall be controlling in
any judicial proceedings and in the arbitration itself as to issues of
arbitrability and procedure.
21.3 MISCELLANEOUS ARBITRATION PROVISIONS. The parties
shall use their best efforts to complete any arbitration within sixty (60) days
of the filing of the dispute. The arbitrator(s) shall be empowered to impose
sanctions for any party's failure to do so. The provisions of this arbitration
provision shall survive any termination, amendment, or expiration hereof unless
the parties otherwise expressly agree in writing. If any provision of this
arbitration program is declared invalid by any court,
PAGE 13
<PAGE>
the remaining provisions shall not be affected thereby and shall remain fully
enforceable.
SUBLESSOR: SUBLESSEE:
FIRST TECHNOLOGY CREDIT UNION, CORILLIAN CORPORATION, an
a credit union chartered Oregon corporation
by the State of Oregon
By: /s/ By: /s/ Ted F. Spooner
----------------------- ------------------------------
Name: Name:
--------------------- ----------------------------
Title: CFO Title:
-------------------- ---------------------------
Lessor consents to this Sublease and agrees that the term of the Master Lease
terminates on December 31, 2000.
LESSOR:
/s/ Walter Young /s/ Kwai Sun Young
- -------------------------- --------------------------------
Dr. Walter K. W. Young Kwai Sun Young
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EXHIBIT A
MASTER LEASE
PAGE 15
<PAGE>
LEASE
THIS LEASE is made and entered into as of the 7 day of March 1988,
by and between Northwest Development Co., 9460 S.E. Lawnfield Road,
Clackamas, Oregon 97015 ("Landlord") and First Technology Federal Credit
Union, Post Office Box 2100, Beaverton, Oregon 97075-2100 (hereinafter
referred to as "Tenant").
WITNESSETH:
In consideration of the covenants and agreements contained herein,
Landlord has agreed to acquire approximately 10 acres of land, located at the
northwest corner of the intersection of S.W. Tualatin Valley Highway and S.W.
153rd Street in the City of Beaverton, Oregon, and to construct a building
and certain tenant improvements (the "Building") on approximately 3 acres of
such land (the balance of such land, approximately 7 acres, to be given to
the Tualatin Valley Parks and Recreation District). The Building together
with the land (hereinafter referred to as the "Premises"), is outlined in
blue on Exhibit A attached hereto.
This Lease shall be for a term of 25 years commencing on the date when
the Premises are ready for Tenant's occupancy and use (the "Commencement Date").
Landlord shall give Tenant not less than 45 days
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prior written notice of the date that the Premises will be completed and
ready for Tenant's occupancy.
If such date shall be other than the first day of the month, rent
until the first of the month shall be prorated, and the Commencement Date
shall be the first day of the following month and the Lease shall continue
for a full 25 year term thereafter.
Tenant shall owe no rent until the Premises are ready for
possession. Landlord shall have no liability for delays in deliver of
possession due to strikes, acts of God, or similar causes beyond Landlord's
control, except that either party shall have the right to terminate this
Lease if Landlord is unable to deliver possession of the Premises by December
31, 1988. Either party may cancel this Lease upon written notice to the other
in the event that permission to construct, use, or furnish necessary
utilities to the Premises is denied or revoked by the applicable government
agency or public utility and necessary utilities can not otherwise be
provided by December 31, 1988.
TO HAVE AND TO HOLD the Premises unto Tenant for the term set forth
above on the terms and conditions hereinafter provided.
1. CONTINGENCIES.
The obligations of the parties pursuant to this Lease are subject to
satisfaction of the following contingencies:
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(a) Mutual agreement of Landlord and Tenant to a site plan,
with diagrammatic indications showing the relationship of all major
components of the project, and small scale line drawings of the floor plans
of the Building prior to April 29, 1988. Such plans and drawings shall be
sufficiently detailed to permit Tenant to fully evaluate the design and
layout of the interior space.
(b) Receipt of necessary governmental approvals (including a
building permit) for the building shell within 30 days from the date of
satisfaction of the condition set forth in Paragraph l(a).
(c) Receipt by Landlord of a binding commitment for financing
the construction cost of the Building on the terms and conditions
satisfactory to Landlord within 30 days from the date of satisfaction of the
condition set forth in Paragraph 1(a).
In the event that any of the foregoing contingencies are not
satisfied or waived within the time limit specified, either party may
terminate this Lease upon 10 days' written notice to the other party.
2. IMPROVEMENTS.
(a) The Building shall include an office and drive-up teller
facility, landscaping, and parking improvements constructed by Landlord in
accordance with the plans and specifications to be approved by the parties
pursuant to Paragraph l(a) and all governmental authorities having
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jurisdiction pursuant to Paragraph l(b). All plans for the Building and the
related tenant improvements are to be furnished by Landlord and approved by
Tenant. It is agreed that the exterior of the Building shall be constructed
of concrete or comparable materials, using a form of tilt wall construction
method or masonry construction, and shall consist of such other component
items listed under Building Shell on Exhibit B attached hereto. The interior
tenant improvements to be provided by Landlord shall include those items
listed under Tenant Improvements on Exhibit B attached hereto. All other
interior improvements are to be provided by Tenant, at Tenant's sole expense.
(b) Following the satisfaction of all conditions referred to in
Paragraph 1, Landlord shall, within 30 days, begin construction of the
Building. Tenant shall, with respect to any work it performs or causes to be
performed, keep the Premises free from any and all mechanic's or other liens.
Failure to do so shall constitute a default hereunder. Both parties agree to
cause the interior of the Building to be completed in a good and workmanlike
manner in accordance with the approved plans.
(c) Tenant and its contractor and subcontractors shall have the
right to use the Building prior to its completion for the purposes of
constructing and installing furnishings, cabinetry and certain custom fixtures
to the interior of the Building on the terms and conditions set forth
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<PAGE>
in this Lease, but only to the extent such work does not in any manner
whatsoever interfere with Landlord's construction of the Building.
(d) Each party shall defend, indemnify, and hold harmless the
other party from any costs, losses, or liabilities incurred or suffered in
whole or in part because of the other party's negligence in constructing the
Building or any interior improvements or fixtures. In the event that a third
party asserts any claim against Landlord based in whole or in part upon
Tenant's conduct, action, or inaction in connection with the installation of
interior fixtures, then Tenant shall defend such claim with legal counsel
acceptable to Landlord (but paid for by Tenant) and Landlord shall be
indemnified by Tenant from any cost, loss, damage, or liability arising from
such claim; provided, however, that Tenant shall not be responsible for
Landlord's defense, damages, or any indemnity obligations if Landlord is
responsible in whole or in part for the third-party claim. Landlord and
Tenant shall jointly share in the costs, losses, damages, or liabilities
arising from any claims asserted jointly against Landlord and Tenant, with
both parties sharing in the costs, losses, damages, and liabilities to the
extent of their comparative negligence, if any.
3. RENT.
Tenant shall pay rent for the Premises as follows;
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(a) MINIMUM RENT FOR YEARS 1-5. Tenant shall pay to Landlord, at
the Landlord's address listed herein or such other place as may be designated in
writing by Landlord, during the first 60 months of this lease, the sum of
$35,100 per month. (The monthly rental has been based upon the assumption that
the Building will contain 27,000 square feet of gross area, determined by actual
outside dimensions, at $1.30 per square foot per month. At the Commencement Date
of the Lease, the monthly rent shall be adjusted to reflect the actual outside
dimensions at $1.30 per square foot per month; provided, however, in no event
will the monthly rent be less than $32,500 or more than $37,700.) Such payment
shall be made in advance for each month on or before the first day of each
calendar month.
(b) MINIMUM RENT FOR YEARS 6-10. For months 61 through 120 of the
term of this Lease, the minimum rent shall be the initial monthly rent (as
adjusted to reflect actual gross area) plus a sum obtained by multiplying the
minimum rent by the aggregate increase (with the decimal point moved two spaces
to the left) in the Consumer Price Index for Urban Wage Earners-New Series for
Portland, Oregon, published by the Bureau of Labor Statistics (the "CPI Index"),
from the first month in which rent is payable hereunder through the 60th month
with a maximum increase of 15 percent; provided, however, the rent for months 61
through 120 shall not be less than the rent for the initial 60 months.
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<PAGE>
(c) MINIMUM RENT FOR YEARS 11-15. For months 121 through 180 of
the term of this Lease, the minimum rent shall be the rent payable in the 120th
month plus a sum obtained by multiplying said amount by the aggregate increase
(with the decimal point moved two spaces to the left) in the CPI Index from the
61st month of the lease term through the 120th month with a maximum increase of
15 percent; provided, however, the rent for months 121 through 180 shall not be
less than the rent for months 61 through 120.
(d) MINIMUM RENT FOR YEARS 16-20. For months 181 through 240 of
the term of the Lease, the minimum rent shall be the rent payable in the 180th
month plus a sum obtained by multiplying said amount by the aggregate increase
(with the decimal point moved two spaces to the left) in the CPI Index from the
121st month of the Lease term through the 180th month with a maximum increase of
15 percent; provided, however, the rent for the months 181 through 240 shall not
be less than the rent for months 121 through 180.
(e) MINIMUM RENT FOR YEARS 21-25. For months 241 through 300 of
the term of the Lease, the minimum rent shall be the rent payable in the 240th
month plus a sum obtained by multiplying said amount by the aggregate increase
(with the decimal point moved two spaces to the left) in the CPI Index from the
181st month of the Lease term through the 240th
7 - LEASE
<PAGE>
month with a maximum increase of 15 percent; provided, however, the rent for
months 241 through 300 shall not be less than the rent for months 181 through
240.
(f) CPI INDEX. In the event the CPI Index is not published for a
month required for a computation hereunder, index for the next preceding month
shall be used. If the CPI Index should no longer be published, Landlord shall
select a substitute index which is most comparable to the CPI Index.
(g) OPTION AND OPTION PERIOD RENT. Tenant shall have the option
to extend the term of this Lease for two additional periods of five years each.
Each option can be exercised only by Tenant giving Landlord written notice of
its election to exercise the option at least 180 days, but not more than 365
days, prior to the end of the Lease term. Upon the proper exercise of this
option, Landlord and Tenant shall negotiate in good faith to determine the fair
market rental for the Premises which shall then be the monthly rent for the
five-year option period. If they are unable to agree within 60 days after
Tenant notifies Landlord of the Tenant's exercise, the sole issue of the "fair
market rent" shall be submitted to arbitration, pursuant to the commercial
rules of arbitration of the American Arbitration Association, with a panel of
three arbitrators, one of whom shall be chosen by each party and the third
chosen by the two arbitrators so selected. Each
8 - LEASE
<PAGE>
arbitrator must be involved on a for-profit basis in commercial leasing
activity in Portland, Oregon at the date of selection.
(h) LATE PAYMENTS. Any sums paid or received after the tenth day
of the month during the term of this Lease, including any extension thereof,
shall bear a late fee of 5 percent of the amount of such late payment.
4. USE OF THE PREMISES.
(a) The Premises shall be used and occupied by Tenant, its
subsidiaries, and subtenants for general business purposes, including but not
limited to any activities which credit unions or their subsidiaries may be
authorized to engage in under applicable law.
(b) In connection with its use, Tenant shall at its expense
comply with all applicable laws, ordinances, and regulations of any public
authority, including those requiring alteration of the Premises because of
Tenant's specific use; shall create no nuisance nor allow any objectionable
liquid, odor, or noise to be emitted from the Premises; shall store no gasoline
or other highly combustible materials on the Premises which would violate any
applicable fire code or regulation.
(c) Tenant may erect signs stating its name and the names of its
subtenants, including a description of its business and/or the business of its
subtenants after first securing Landlord's written approval as to the size,
color, designs, wordings, locations and any necessary governmental
9 - LEASE
<PAGE>
approvals. All signs installed by Tenant shall be removed upon termination of
this Lease with the sign location restored to its original condition. Tenant
shall be responsible at its sole cost and expense to maintain the appearance of
all of its signs. If Tenant fails to maintain its sign and upon failure of
Tenant to repair or replace sign upon reasonable written notice, Landlord may
make such required repairs or replacements and Tenant shall promptly reimburse
Landlord upon receipt of Landlord's invoice for the expense of such repair and
replacement.
(d) All alterations, additions, or improvements to the Premises
including the change of the color of the exterior of the Building by Tenant
shall require Landlord's prior written consent. Upon termination of this Lease
any such alterations, additions, or improvements (including without limitation
all electrical, lighting, plumbing, heating and air conditioning equipment,
doors, windows, partitions, drapery, carpeting, shelving, counters, and
physically attached fixtures) shall at once become part of the real property
and shall belong to Landlord unless the terms of the applicable consent provide
otherwise.
5. SECURITY DEPOSIT.
Tenant has deposited with Landlord the sum of $35,100 (hereafter
referred to as "the Security Deposit") to secure the faithful performance by
Tenant of each term, covenant, and condition of this Lease.
10 - LEASE
<PAGE>
If Tenant shall at any time fail to make any payment or fail to keep or perform
any term, covenant, and condition on its part to be made or performed or kept
under this Lease, Landlord may, but shall not be obligated to, and without
waiving or releasing Tenant from any obligation under this Lease, use, apply or
retain the whole or any part of the Security Deposit:
(a) To the extent of any sum due to Landlord;
(b) To make any required payment on Tenant's behalf; or
(c) To compensate Landlord for any loss, damage, attorney's fees,
or expense sustained by Landlord due to Tenant's default.
In such event, Tenant shall, within five days after written
demand by Landlord, remit to Landlord sufficient funds to restore the Security
Deposit to its original sum; Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep the Security
Deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit. Should Tenant comply with all of the terms,
covenants, and conditions of this Lease and at the end of term of this Lease
leave the Premises in the condition required by this Lease, then the Security
Deposit, less any sums owing to Landlord, shall be returned to Tenant (or, at
Landlord's option, to last assignee of Tenant's interest
11 - LEASE
<PAGE>
hereunder) within 30 days after the termination of this Lease and vacancy of
the Premises by Tenant.
6. UTILITY CHARGES; MAINTENANCE.
It is the intent of the parties hereto that this Lease shall be pure
net to Landlord and that Tenant will pay all charges related to the Building,
parking areas, driveways and grounds, including but not limited to the
following:
(a) Tenant shall pay when due all charges for
electricity, natural gas, water, garbage collection, janitorial service, sewer,
grounds and landscaping maintenance and all other utilities of any kind
furnished to the Premises during the Lease term. Landlord shall have no
liability resulting from any interruption of utility services caused by fire or
other casualty, strike, riot, vandalism, the making of necessary repairs or
improvements, or any other cause beyond Landlord's reasonable control. Tenant
shall control the temperature in the Premises to prevent freezing of any
sprinkler system. Tenant agrees to promptly notify Landlord of any malfunction,
damage, or failure of the sprinkler system. Tenant shall be responsible to
promptly repair or replace, at its sole cost and expense, any parts of the
sprinkler system in the Premises damaged by freezing or any other event,
excluding other acts of God or negligence of Landlord.
12 - LEASE
<PAGE>
(b) Tenant shall, at its sole expense, repair and
maintain the roof, gutters, downspouts, exterior walls, building structure,
foundation, exterior paved areas, and curbs of the Premises in good condition.
Tenant shall keep the Premises neatly maintained and in good order and repair.
Tenant's responsibility shall include all maintenance and repair of the
building and grounds which include the electrical system, plumbing, drain pipes
for sewers, landscaping, air conditioning and heating systems, all doors, and
the replacement of all broken and cracked glass with glass of the same quality.
Tenant shall refrain from any discharge that would damage the sewers serving
the Premises.
(c) Tenant shall keep the sidewalks abutting the
Premises or the separate entrance free and clear of snow, ice, debris, and
obstructions of every kind. In this regard, Tenant shall refrain from using
materials, chemicals, or equipment which may be damaging to sidewalks and
entrances.
(d) Tenant shall not store any materials, supplies, or
equipment outside in any unapproved or unscreened area. Trash and garbage
receptacles shall be stored in designated areas and kept covered at all times.
7. TAXES AND ASSESSMENTS; OPERATING EXPENSES.
13 - LEASE
<PAGE>
(a) Tenant shall be responsible for all real property taxes and
general and special assessments relating to the Premises and shall pay them as
they become due and payable to the appropriate taxing authority.
(b) Real property taxes charged to Tenant hereunder shall include all
general real property taxes assessed against the Premises or payable during the
Lease term, installment payments on Bancrofted special assessments, and any
rent tax, tax on Landlord's interest under this Lease, or any tax in lieu of
the foregoing, whether or not any such tax is now in effect. Tenant shall not,
however, be obligated to pay any tax based upon Landlord's net income.
8. PARKING. Tenant, its employees, and customers shall have the exclusive
right to use all private parking located on the Premises. Tenant shall control
the use of such parking spaces so that there will be no unreasonable
interference with the normal traffic flow and shall permit no parking on any
landscaped or unpaved surface.
9. LIABILITY.
(a) Tenant shall not permit any liens to attach to the
Premises as a consequence of any of its activities. Tenant shall indemnify and
defend Landlord and Landlord's agent, if any, from any claim, liability,
damage, or loss directly or indirectly arising out of any activity on the
Premises by Tenant, its agents, or invitees or resulting from Tenant's failure
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<PAGE>
to comply with any term of this Lease; provided, however, that Tenant shall
have no obligation to indemnify Landlord for any acts or omissions by Landlord
or Landlord's agents, contractors, employees, or invitees.
(b) Tenant shall carry public liability and property damage
insurance with limits of not less than $500,000 for injury to one person in one
occurrence, $1,000,000 for injuries to more than one person in one occurrence,
and $200,000 for property damage. Such insurance shall be evidenced by a
certificate delivered to Landlord stating that the coverage will not be
canceled or materially altered without 30 days' advance written notice to
Landlord. Landlord shall be named as an additional insured on such policy.
10. CASUALTY DAMAGE.
(a) If fire or other casualty causes damage to the
Premises in an amount exceeding 75 percent of the full construction-replacement
cost of the Premises, Landlord may elect to terminate this Lease, as of the
date of the damage, by notice in writing to Tenant within 30 days after such
date. Otherwise, Tenant shall promptly repair the damage and restore the
Premises to its former condition as soon as practicable, unless the casualty
shall occur in the last two years of the Lease term, including any renewal
thereof, in which event Landlord may elect to terminate this Lease as of the
date of the damage by notice in writing to
15 - LEASE
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Tenant within 30 days after such date. Rent shall be abated during the period
and to the extent the Premises are not reasonably usable for the use permitted
by this Lease.
(b) Tenant shall be responsible for obtaining and keeping
adequate insurance covering the Premises against loss by fire and casualty,
including rent loss coverage in favor of Landlord of at least 6 months in order
to protect Landlord for loss of rental during any period of restoration when
rent will be abated pursuant to Paragraph 10(a). Tenant shall also be
responsible for insuring its personal property and trade fixtures located on
the Premises.
(c) Neither party shall be liable to the other for any loss or
damage to the Premises or Tenant's personal property thereon caused by any
occurrence and there shall be no subrogated claim by one party's insurance
carrier against the other party arising out of any such loss.
11. CONDEMNATION.
If a condemning authority takes the entire Premises or a
portion sufficient to render the remainder unsuitable for Tenant's use, then
either party may elect to terminate this Lease effective on the date that title
passes to the condemning authority. Otherwise, Tenant shall proceed as soon as
practicable to restore the remaining Premises to a condition comparable to that
existing at the time of the taking. Rent shall be abated
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during the period of restoration to the extent the Premises are not reasonably
usable by Tenant, and rent shall be reduced for the remainder of the term in an
amount equal to the reduction in rental value of the Premises caused by the
taking. All condemnation proceeds shall belong to Landlord. If moving expenses
are allocated to Tenant, Tenant shall receive those proceeds.
12. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign its interest under this Lease nor
mortgage or sublet (except as otherwise set forth below) the Premises without
first obtaining Landlord's consent in writing which will not be withheld
unreasonably. Tenant shall have the right to sublet portions of the Premises to
its subsidiaries, affiliates, and certain professionals for the purpose of
offering business and professional services to Tenant's customers and potential
customers. In the event that Tenant shall request Landlord's permission to
assign all or a portion of the Premises, Landlord may at his sole discretion
elect to terminate this Lease or a portion hereof, and enter into separate
leases or rental agreements with the proposed assignee. No consent in one
instance shall prevent this provision from applying to each subsequent
instance. No assignment or subletting shall relieve Tenant of its obligation to
pay rent or perform other obligations required by this Lease.
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13. DEFAULT.
Any of the following shall constitute a default by Tenant
under this Lease:
(a) Tenant's failure to pay rent or any other charge under this
Lease within 10 days after it is due and upon written notice by Landlord;
provided, however, if Tenant has failed to pay rent within such 10 day grace
period and Landlord has provided written notice to Tenant on two previous
occasions during a 12 month period, then Tenant shall be in default thereafter
if Tenant fails to make such payment within the 10 day grace period and no
written notice by Landlord shall be required to constitute Tenant's default.
(b) Failure by Tenant to comply with any other term or condition
within 30 days following written notice from Landlord specifying the
noncompliance; provided, however, if such noncompliance cannot be cured within
the 30 day period, this provision shall be satisfied if Tenant commences
correction within such period and thereafter proceeds in good faith and with
reasonable diligence to effect compliance as soon as possible.
(c) Tenant's insolvency; assignment for the benefit of its
creditors; Tenant's voluntary petition in bankruptcy or adjudication as
bankrupt, or the appointment of a receiver for Tenant's properties.
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14. REMEDIES FOR DEFAULT
In case of default as described in Paragraph 13, above, Landlord
shall have the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under applicable
law:
(a) Retake possession of the Premises by summary proceedings and relet
the Premises upon any reasonable terms. No such reletting shall be
construed as an acceptance of a surrender of Tenant's leasehold interest.
(b) Recover damages caused by Tenant's default which shall include
reasonable attorney fees at trial and on any appeal therefrom.
Landlord may sue periodically to recover damages as they occur
throughout the Lease term, and no action for accrued damages shall bar a later
action for damages subsequently accruing.
(c) Make any payment or perform any obligation required of Tenant so as
to cure Tenant's default, in which case Landlord shall be entitled to
recover all amounts so expended from Tenant, plus interest from the date of
the expenditure at the rate of 12 percent per annum from the date of the
expenditure.
15. SURRENDER ON TERMINATION.
(a) On expiration or early termination of this Lease, Tenant shall
deliver all keys to Landlord, have final utility readings made
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on the date of move out, and surrender the Premises clean and free of debris
inside and out, with all mechanical, electrical, and plumbing systems in good
operating condition, all signing removed and defacement corrected, and all
repairs called for under this Lease completed. The Premises shall be
delivered in the same condition as at the commencement of the term, subject
only to depreciation and wear from ordinary use. Tenant shall remove all of
its furnishings and trade fixtures that remain its property and restore all
damage resulting from such removal. Failure to remove shall be an abandonment
of the property, and Landlord may dispose of it in any manner without
liability.
(b) If Tenant fails to vacate the Premises when required, Landlord may
elect either to treat Tenant as a tenant from month to month, subject to all
provisions of this Lease except the provision for term, or to eject Tenant
from the Premises and recover damages caused by wrongful holdover.
16. LANDLORD'S LIABILITY.
(a) Landlord warrants that so long as Tenant complies with all terms of
this Lease it shall be entitled to peaceable and undisturbed possession of
the Premises free from any eviction or disturbance by Landlord or persons
claiming through Landlord, except as described in Paragraph 18.
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(b) The Term "Landlord" as used herein shall mean only the owner of the
fee title to the premises and the land on which it is situated. In the event
of any transfer of such title to interest, Landlord herein named (and in case
of any subsequent transfers, the then Landlord) shall be relieved from and
after the date of such transfer of all liability as respects Landlord's
obligations thereafter to be performed, provided that any funds in the hands
of Landlord or the then Landlord at the time of such transfer, in which
Tenant has an interest, shall be delivered to the succeeding Landlord.
17. GENERAL PROVISIONS.
(a) Waiver by either party of strict performance of any provision of
this Lease shall not be a waiver of nor prejudice the party's right otherwise
to require performance of the same provision or any other provision.
(b) Subject to the limitations on transfer of Tenant's interest, this
Lease shall bind and inure to the benefit of the parties, their respective
heirs, successors, and assigns.
(c) Landlord shall have the right to enter upon the Premises at any
time to determine Tenant's compliance with this Lease, to make necessary
repairs to the Building or the Premises, or to show the Premises to any
prospective tenant or purchasers. During the last two months of the
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term, Landlord may place and maintain upon the Premises notices for leasing
or sale of the Premises.
(d) If this Lease commences or terminates at a time other than the
beginning of the month, then the rent (including Tenant's share of real
property taxes, if any) shall be prorated as of such date and, in the event
of termination for reasons other than default, all prepaid rent shall be
refunded to Tenant or paid on its account.
(e) Notices between the parties relating to this Lease shall be in
writing, effective when delivered or, if mailed, effective on the second day
following mailing, postage prepaid, certified mail, return receipt requested,
to the address for the party stated in this Lease or to such other address as
either party may specify by notice to the other. Rent shall be payable to
Landlord at the same address.
(f) Time is of the essence with respect to the performance of each and
every provision of this Lease. This Lease shall be governed by the laws of
the state of Oregon.
18. SUBORDINATION.
This Lease may, at Landlord's sole option, be made subordinate to
any mortgage or deed of trust, which may hereafter affect the real property
of which the Building and Premises form a part, subject to Tenant's right to
peaceable and undisturbed possession. Within 10 days of
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receipt of written request from Landlord, Tenant shall execute and deliver
any necessary documents required to effectuate such subordination to any
mortgage or deed of trust.
19. ESTOPPEL CERTIFICATE.
(a) Within 10 days of receipt of written request from Landlord, Tenant
shall execute, acknowledge, and deliver to Landlord a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent and other charges are paid in advance if any, and acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of the
Landlord hereunder, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or of the entire Premises.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord that there are no
uncured defaults in Landlord's performance, and that not more than one
month's base rent has been paid in advance.
23-LEASE
<PAGE>
20. INDEMNITY.
Tenant shall indemnify, defend, and hold Landlord harmless from any and
all claims arising from Tenant's use of the Premises, or from the conduct of
its business or from any activity, work, or things which may be permitted or
suffered by Tenant in or about the Premises 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 the provisions of this Lease or arising
from any negligence of Tenant or any of its agents, contractors, employees or
invitees and from any and all costs, attorney fees, expenses, and liabilities
incurred in the defense of any such claim or any action of proceeding
thereon. Tenant shall have no obligation to indemnify Landlord for negligent
or intentional acts or omissions by Landlord or Landlord's agents,
contractors, employees, or invitees.
21. ADJACENT PROPERTY. In acquiring the land upon which the Building
will be constructed, Landlord will also acquire the adjacent parcel outlined
in red on Exhibit A attached hereto (the "Adjacent Property"). If, at any
time during the term of this Lease, Landlord elects to sell, lease or develop
the Adjacent Property, Landlord shall first give Tenant a notice (the
"Offering Notice") specifying the terms and conditions of which Landlord is
willing to sell or lease the Adjacent Property. For a
24-LEASE
<PAGE>
period of 30 days following receipt by Tenant of the Offering Notice, Tenant
shall have the exclusive right to purchase or lease the Adjacent Property on
the same terms and conditions as set forth in the Offering Notice. If Tenant
should fail, within said 30-day period, to deliver written notice to Landlord
exercising such right to purchase or Lease, Landlord shall have the right to
sell or lease the Adjacent Property for a period of 180 days after the
expiration of the 30-day period to any other party; provided, however, that
Landlord shall not sell or lease the Adjacent Property for a price which is
less than the price stated in the Offering Notice, unless Landlord first
reoffers the Adjacent Property to Tenant at such reduced price (in which
event Tenant shall have a period of 30 days following receipt of notice of
the reduced price to elect, by written notice delivered to Landlord, to
purchase or lease the Adjacent Property at the reduced price and otherwise on
the terms and conditions specified by Landlord).
IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this lease as of the day and year first written above.
LANDLORD:
NORTHWEST DEVELOPMENT CO.
Date: March 8, 1988 By /s/
--------- --------------------------------
Title Partner
-----------------------------
25-LEASE
<PAGE>
TENANT:
FIRST TECHNOLOGY FEDERAL CREDIT UNION
Date: March 8, 1988 By /s/
--------- --------------------------------
Title President
-----------------------------
Unless a different address is indicated
above, notices to Tenant will be
addressed to the Premises.
P.O. Box 2100
Beaverton, Oregon 97075
26-LEASE
<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE dated for reference purposes only May 1,
1988, is by and between NORTHWEST DEVELOPMENT CO. ("Landlord") and FIRST
TECHNOLOGY FEDERAL CREDIT UNION ("Tenant").
R E C I T A L S:
A. Pursuant to a lease dated March 8, 1988 (the "Lease"), Landlord
leased to Tenant certain real property located at the northeast corner of the
intersection of S.W. Tualatin Valley Highway and S.W. 153rd Street,
Beaverton, Oregon. The Lease was amended by a First Amendment to Lease dated
March 15, 1988 (the "First Amendment").
B. The parties desire to further amend the Lease upon the terms and
conditions set forth below.
NOW, THEREFORE, for valuable consideration, the parties agree as
follows:
1. The first sentence of Paragraph 4(d) shall be amended to read
as follows:
"All alterations, additions, or improvements to the Premises,
including the change of the color of the exterior of the Building
by Tenant, shall be at Tenant's sole cost and expense, and shall
require Landlord's prior written consent which shall not be
withheld unreasonably."
1 - SECOND AMENDMENT TO LEASE
<PAGE>
2. Paragraph 10(c) shall be amended to read as follows:
"Neither party shall be liable to the other for any loss or damage
to the Premises or Tenant's personal property thereon caused by any
occurrence and there shall be no subrogated claim by one party's
insurance carrier against the other party arising out of any such
loss, PROVIDED, HOWEVER, that this waiver of liability and
subrogation shall only be effective if the parties can obtain, at
no additional expense, a waiver of subrogation from their
respective insurance carriers."
3. The following language shall be added after the first sentence
of Paragraph 11:
"Provided, however, that so long as SeattleFirst National Bank, its
successors or assigns ("Seafirst"), is the holder of a mortgage or
deed of trust on the Premises, a taking by condemnation shall not
be grounds for terminating this Lease unless 25 percent or more of
(i) the premises, or (ii) the parking area for the Building, is
condemned."
4. The following language shall be added after the first sentence
of Paragraph 17(e):
"Copies of all notices required to be given or actually given under
this Lease shall be sent simultaneously to the holder of any
mortgage or deed of trust on the Premises, to such address as the
holder of the mortgage or deed of trust may designate to Landlord
and Tenant in writing. So long as Seafirst is the holder of a
mortgage or deed of trust on the Premises, such notice shall be
sent to Seafirst at Post Office Box C34103, Seattle, Washington
98124-1103, or to such other address as Seafirst may specify."
2 - SECOND AMENDMENT TO LEASE
<PAGE>
5. The following language shall be added as a new Paragraph 22 to
the Lease, as follows:
"22. TENANT'S OPTION TO PURCHASE. Tenant shall have the right to
purchase the Premises at the end of each five-year rental period
herein by providing Landlord with not less that 180 days' advance
written notice of an intent to exercise this purchase option. The
purchase price for the Premises shall be determined by appraisal in
the following manner: Not later than 10 days after the 180-day
notice is delivered to Landlord, both parties shall select an MAI
appraiser to appraise the Premises. Each appraiser shall be
instructed to assume that the minimum value of the Premises shall
be not less than an amount based upon the rental rate then
specified by Paragraph 3 of this Lease and assuming further that
the Lease term shall expire five years after the closing of the
option to Purchase. If the two appraisals vary by 10 percent or
less, the purchase price shall be the average of the two
appraisals. If the two appraisals vary by more than 10 percent,
then the two MAI appraisers shall select a third MAI appraiser who
shall then select between the two appraisals as to which appraisal
better establishes the fair market value and the appraisal so
selected shall constitute the purchase price for the Premises. The
appraisal costs shall be borne equally by the parties."
6. Except as amended by the First Amendment and this Second
Amendment, the Lease shall remain in full force and effect.
3 - SECOND AMENDMENT TO LEASE
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment
to Lease as of the date first written above.
NORTHWEST DEVELOPMENT CO.
By: /s/
------------------------------------
Title: Partner
------------------------------
By: /s/
------------------------------------
Title: Partner
------------------------------
FIRST TECHNOLOGY FEDERAL CREDIT UNION
By:
------------------------------------
Title: President
------------------------------
4 - SECOND AMENDMENT TO LEASE
<PAGE>
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE dated for reference purposes only March 1, 1989
is by and between NORTHWEST DEVELOPMENT CO. ("Landlord") and FIRST TECHNOLOGY
FEDERAL CREDIT UNION, ("Tenant").
R E C I T A L S:
A. Pursuant to a lease dated March 8, 1988 (the "Lease"), Landlord leased
to Tenant certain real property located at the northeast corner of the
intersection of S.W. Tualatin Valley Highway and S.W. 153rd Drive,
Beaverton, Oregon. This lease was amended by the first amendment to the
Lease dated March 15, 1988 ("First Amendment"), and subsequently amended
by the second amendment to the lease dated May 1, 1988 (the "Second
Amendment").
B. The parties desire to further amend the lease upon the terms and
conditions set forth below.
NOW THEREFORE for valuable consideration, the parties agree as follows:
1. Item 5 of the Second Amendment to Lease which refers to a new paragraph
22 to the Lease ("Tenant's Option to Purchase"), is hereby waived by the
Tenant in its entirety. Tenant shall no longer have the right to
purchase the premises at the end of each five-year rental period.
2. LEASE TERM: Page 1 of the original Lease document dated March 8, 1988,
refers to the original lease being for a term of twenty-five years and
is now herein modified to reflect the following lease terms: The
initial lease period will be for a term of twelve years, retroactive to
the date of possession, December 5, 1988. The rental rate will be
calculated as provided for in the original lease document as if the
original twenty-five year lease was in effect.
3. Tenant's Option to Renew: Paragraph 3(g) ("Option and Option Period
Rent"), of the original lease document is herein modified as follows:
Tenant shall have an option to extend the lease for one additional
period of thirteen years. The rental rate for the additional option
period will be calculated as provided for in the original lease document
as if the original twenty-five year lease was in effect.
1 - THIRD AMENDMENT TO LEASE
<PAGE>
Tenant shall be required to give Landlord written notice of Tenant's
intent to exercise the renewal option within six months prior to the end
of the tenth year of the original term. In the event that Tenant elects
not to extend the original lease for an additional thirteen years,
Tenant agrees to pay a two-year rental premium in an amount equal to the
prevailing rental rate as if the original lease term would extend
through years thirteen and fourteen. Said rental prepayment premium
will be due and payable upon Tenant's written notice not to extend.
Tenant, in addition to the original option to renew for thirteen
years, shall have an option to extend this lease beyond the original
thirteen year option period and the existing terms and conditions of
Paragraph 3(g). ("Option and Option Period Rent") shall prevail.
4. Rent Schedule: As a matter of clarification, the rent schedule for the
initial term of twelve years and the option period of thirteen years
will be the same as if the original term of the lease was twenty-five
years and will be calculated as provided for in Paragraph 3 ("Rent") of
the original lease document.
5. Except as expressly modified herein, the "Lease" as amended by "First
Amendment" and "Second Amendment" shall remain in full force and effect.
NORTHWEST DEVELOPMENT CO. FIRST TECHNOLOGY FEDERAL CREDIT UNION
By: /s/ By: /s/
------------------------------- ----------------------------------
Title: Partner Title: President
------------------------- ----------------------------
By: /s/
-------------------------------
Title: Partner
-------------------------
2 - THIRD AMENDMENT TO LEASE
<PAGE>
AGREED TO by United of Omaha Life Insurance Company, as assignee pursuant to
an Assignment of Loan Documents and Assignment of Assignment of Leases and
Rents executed on December 27, 1988, of the interest and rights of Harding
Fletcher Company, as "Lender," pursuant to Attornment, Nondisturbance and
Estoppel Agreement dated as of December 27, 1988.
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: /s/
-----------------------------------
Title: Asst. V.P.
-----------------------------
3 - THIRD AMENDMENT TO LEASE
<PAGE>
Customer No. 1369
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of January 28, 2000, is made by Corillian
Corporation (the "Borrower"), an Oregon corporation having its principal
place of business and chief executive office at 3601 SW Murray Boulevard, Suite
300, Beaverton, Oregon 97005, in favor of Transamerica Business Credit
Corporation, a Delaware corporation (the "Lender"), having its principal office
at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018.
WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
AGREEMENT shall mean this Master Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
APPLICABLE LAW shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
BUSINESS DAY shall mean any day other than a Saturday, Sunday, or public holiday
or the equivalent for banks in New York City.
CODE shall have the meaning specified in Section 8(d).
COLLATERAL shall have the meaning specified in Section 2.
COLLATERAL ACCESS AGREEMENT shall mean any landlord waiver, mortgagee waiver,
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of
Exhibit A.
EFFECTIVE DATE shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
EQUIPMENT shall have the meaning specified in Section 2.
EVENT OF DEFAULT shall mean any event specified in Section 7.
FINANCIAL STATEMENTS shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.
1
<PAGE>
LOANS shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Agreement and the Notes.
LOAN DOCUMENTS shall mean, collectively, this Agreement, the Notes, and all
other present and future documents, agreements, certificates, instruments, and
opinions delivered by the Borrower under, in connection with or relating to this
Agreement, or any other present or future instrument or agreement between Lender
and Borrower, as each of the same may be amended, modified, extended, restated
or supplemented from time to time.
MATERIAL ADVERSE CHANGE shall mean, with respect to any Person, a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
MATERIAL ADVERSE EFFECT shall mean, with respect to any Person, a material
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
NOTE shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
OBLIGATIONS shall mean and include all loans (including the Loans), advances,
debts, liabilities, obligations, covenants and duties owing by Borrower to
Lender of any kind or nature, present or future, whether or not evidenced by the
Note or any note, guaranty or other instrument, whether or not arising under or
in connection with, this Agreement, any other Loan Document or any other present
or future instrument or agreement, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guaranteeing or
confirming of a letter of credit, loan, guaranty, indemnification or in any
other manner, whether direct or indirect (including those acquired by
assignment, purchase, discount or otherwise), whether absolute or contingent,
due or to become due, now due or hereafter arising and however acquired
(including without limitation all loans previously made by Lender to Borrower).
The term includes, without limitation, all interest (including interest accruing
on or after a bankruptcy, whether or not an allowed claim), charges, expenses,
commitment, facility, closing and collateral management fees, letter of credit
fees, reasonable attorneys' fees, taxes and any other sum properly chargeable to
Borrower under this Agreement, the other Loan Documents or any other present or
future agreement between Lender and Borrower.
PERMITTED LIENS shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; and (d) attachment or judgment liens that do not constitute an Event
of Default.
PERSON shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.
SCHEDULE shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.
SOLVENT means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
2
<PAGE>
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
TAXES shall have the meaning specified in Section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The
Borrower hereby assigns and grants to the Lender a continuing general, first
priority lien on, and security interest in, all the Borrower's right, title, and
interest in and to the collateral described in the next sentence (the
"Collateral") to secure the payment and performance of all the Obligations. The
Collateral consists of all equipment set forth on all the Schedules delivered
from time to time under the terms of this Agreement (the "Equipment"), together
with all present and future additions, parts, accessories, attachments,
substitutions, repairs, improvements, and replacements thereof or thereto, and
any and all proceeds thereof, including, without limitation, proceeds of
insurance and all manuals, blueprints, know-how, warranties, and records in
connection therewith, all rights against suppliers, warrantors, manufacturers,
sellers, or others in connection therewith, and together with all substitutes
for any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not
less than $50,000, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in effect
from time to time. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the initial Loan and each other Loan only after the
Lender, in its sole discretion, determines that the applicable conditions for
borrowing contained in Sections 3.3 and 3.4 are satisfied. The timing and
financial scope of Lender's obligation to make Loans hereunder are limited as
set forth in a commitment letter executed by Lender and Borrower, dated as of
October 19, 1999 and attached hereto as EXHIBIT A (the "Commitment Letter").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer,
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation, or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation, or
upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing
all effective Uniform Commercial Code financing statements naming the
Borrower as debtor and all tax lien, judgment, and litigation searches
for the Borrower as the Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form UCC-1)
duly executed by the Borrower (naming the Lender as secured party and
the Borrower as debtor and in form acceptable for filing in all
jurisdictions that the Lender deems necessary or desirable to perfect
the security interests granted to it hereunder) and, if applicable,
termination statements or other releases duly filed in all
jurisdictions that the Lender deems necessary or desirable to perfect
and protect the priority of the security interests granted to it
hereunder in the Equipment related to such initial Loan;
3
<PAGE>
(iii) a Note duly executed by the Borrower evidencing the amount
of such Loan;
(iv) a Collateral Access Agreement duly executed by the lessor
or mortgagee, as the case may be, of each premises where the Equipment
is located;
(v) certificates of insurance required under Section 5.4 of
this Agreement together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and as an additional
insured;
(vi) a certificate of the Secretary or an Assistant Secretary
of the Borrower ("Secretary's Certificate") certifying (A) that
attached to the Secretary's Certificate is a true, complete, and
accurate copy of the resolutions of the Board of Directors of the
Borrower (or a unanimous consent of directors in lieu thereof)
authorizing the execution, delivery, and performance of this
Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, and that such resolutions have not been amended
or modified since the date of such certification and are in full force
and effect; (B) the incumbency, names, and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to
which it is a party; (C) that attached to the Secretary's Certificate
is a true and correct copy of the Articles or Certificate of
Incorporation of the Company, as amended, which Articles or
Certificate of Incorporation have not been further modified, repealed
or rescinded and are in full force and effect; (D) that attached to
the Secretary's Certificate of the Borrower is a true and correct copy
of the Bylaws, as amended, which Bylaws of the Company have not been
further modified, repealed or rescinded and are in full force and
effect; and (E) that attached to the Secretary's Certificate is a
valid Certificate of Good Standing issued by the Secretary of the
State of the Borrower's state of incorporation;
(vii) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this Agreement as
the Lender may reasonably require; and
(viii) such other agreements and instruments as the Lender deems
necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry, or other action
(i) seeking an injunction or other restraining order, damages, or other relief
with respect to the transactions contemplated by this Agreement or the other
Loan Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required to be
paid by it to the Lender as of such date.
(d) The security interests in the Equipment related to the initial
Loan granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens, subject only to Permitted
Liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The obligation
of the Lender to make each Loan is subject to the satisfaction of the following
conditions precedent:
(a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance satisfactory to the Lender and its counsel and each
dated the date of such Loan or as of an earlier date acceptable to the Lender;
4
<PAGE>
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance satisfactory to the Lender and its
counsel, and the security interests in such Equipment related to such Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens;
(c) all representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date of
such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority,
(b) conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage, or deed of trust or any material lease, agreement,
or other instrument binding on the Borrower or any of its properties, or
(c) require the consent, authorization by, or approval of or notice to or filing
or registration with any governmental authority or other Person. This Agreement
is, and each of the other Loan Documents to which the Borrower is or will be a
party, when delivered hereunder or thereunder, will be, the legal, valid, and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted
Liens; and the Borrower is, or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer, and create a security interest therein, free and clear
of any and all claims or liens in favor of any other Person other than Permitted
Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except
judgments and pending or threatened litigation, contested claims, and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or
has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound.
5
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The Borrower knows of no dispute regarding any contract, lease, or commitment
which could have a Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or dispose
of the Collateral or any part thereof after the occurrence of an Event of
Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority security interest in the
Collateral, securing the payment of all the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth
the true and correct model number and serial number of each item of Equipment
that constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
misleading at such time. There are no facts now known to the Borrower which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect and which have not been specified herein, in the Financial
Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The cost of each item of
Equipment does not exceed the fair and usual price for such type of equipment
purchased in like quantity and reflects all discounts, rebates and allowances
for the Equipment (including, without limitation, discounts for advertising,
prompt payment, testing, or other services) given to the Borrower by the
manufacturer, supplier, or any other person.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain
its existence and its current yearly accounting cycle, (b) maintain in full
force and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it, and (d) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in
any event within five days after the Borrower learns of the following, the
Borrower will give written notice to the Lender of (a) any proceeding instituted
or threatened to be instituted by or against the Borrower in any federal, state,
local, or foreign court or before any commission or other regulatory body
(federal, state, local, or foreign) involving a sum, together with the sum
involved in all other similar proceedings, in excess of $50,000 in the
aggregate, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the Borrower,
and (d) the occurrence
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of any Event of Default or event or condition which, with notice or lapse of
time or both, would constitute an Event of Default, together with a statement of
the action which the Borrower has taken or proposes to take with respect
thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower
will maintain books and records pertaining to the Collateral in such detail,
form, and scope as the Lender shall require in its commercially reasonable
judgment. The Borrower agrees that the Lender or its agents may enter upon the
Borrower's premises at any time and from time to time during normal business
hours, and at any time upon the occurrence and continuance of an Event of
Default, for the purpose of inspecting the Collateral and any and all records
pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance
on the Collateral under such policies of insurance, with such insurance
companies, in such amounts, and covering such risks as are at all times
reasonably satisfactory to the Lender. All such policies shall be made payable
to the Lender, in case of loss, under a standard non-contributory "lender" or
"secured party" clause and are to contain such other provisions as the Lender
may reasonably require to protect the Lender's interests in the Collateral and
to any payments to be made under such policies. Certificates of insurance
policies are to be delivered to the Lender, premium prepaid, with the loss
payable endorsement in the Lender's favor, and shall provide for not less than
thirty days' prior written notice to the Lender, of any alteration or
cancellation of coverage. If the Borrower fails to maintain such insurance, the
Lender may arrange for (at the Borrower's expense and without any responsibility
on the Lender's part for) obtaining the insurance. Unless the Lender shall
otherwise agree with the Borrower in writing, the Lender shall have the sole
right, in the name of the Lender or the Borrower, to file claims under any
insurance policies, to receive and give acquittance for any payments that may be
payable thereunder, and to execute any endorsements, receipts, releases,
assignments, reassignments, or other documents that may be necessary to effect
the collection, compromise, or settlement of any claims under any such insurance
policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof and such date is final and nonappealable, or if
any lien shall be claimed therefor, then, without notice to the Borrower, but on
the Borrower's behalf, the Lender may pay such Taxes, and the amount thereof
shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES
ON COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY.
The Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move or
permit the movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any
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location in the United States provided that the Lender's security interest in
any such Collateral is conspicuously marked on the certificate of title thereof
and the Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the Collateral
was designed and in accordance with applicable operating instructions, laws, and
government regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the
Collateral. The Borrower shall keep all of the Equipment in a satisfactory
state of repair and satisfactory operating condition in accordance with industry
standards, and will make all repairs and replacements when and where necessary
and practical. The Borrower will not waste or destroy the Equipment or any part
thereof, and will not be negligent in the care or use thereof. The Equipment
shall not be annexed or affixed to or become part of any realty without the
Lender's prior written consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its best efforts to
obtain any document reasonably required by the Lender (including, without
limitation, warehouseman or processor disclaimers, mortgagee waivers, landlord
disclaimers, or subordination agreements with respect to the Obligations and the
Collateral), give any notices, execute and file any financing statements,
mortgages, or other documents (all in form and substance reasonably satisfactory
to the Lender), mark any chattel paper, deliver any chattel paper or instruments
to the Lender, and take any other actions that are necessary or, in the opinion
of the Lender, desirable to perfect or continue the perfection and the first
priority of the Lender's security interest in the Collateral, to protect the
Collateral against the rights, claims, or interests of any Persons, or to effect
the purposes of this Agreement. The Borrower hereby authorizes the Lender to
file one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of the
Borrower where permitted by law. A carbon, photographic, or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law. To
the extent required under this Agreement, the Borrower will pay all costs
incurred in connection with any of the foregoing.
Section 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens,
and the Borrower will not sell, transfer, assign, pledge, collaterally assign,
exchange, or otherwise dispose of any of the Collateral. In the event the
Collateral, or any part thereof, is sold, transferred, assigned, exchanged, or
otherwise disposed of in violation of these provisions, the security interest of
the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, the Borrower will not enter into any contractual obligations
which may restrict or inhibit the Lender's rights or ability to sell or
otherwise dispose of the Collateral or any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien other than a Permitted Lien which, in the reasonable judgment of the
Lender, appears to be prior to or superior to the security interests granted
hereunder, and appear in, and defend any action or proceeding purporting to
affect its security interests in, or the value of, any of the Collateral. The
Borrower hereby agrees to reimburse the Lender for all payments made and
expenses reasonably incurred under this Agreement including reasonable fees,
expenses, and disbursements of attorneys and paralegals (including the
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allocated costs of in-house counsel) acting for the Lender, including any of the
foregoing payments under, or acts taken to protect its security interests in,
any of the Collateral, which amounts shall be secured under this Agreement, and
agrees it shall be bound by any payment made or act taken by the Lender
hereunder absent the Lender's gross negligence or willful misconduct. The Lender
shall have no obligation to make any of the foregoing payments or perform any of
the foregoing acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly
(but in no event later than one Business Day) after its receipt thereof, deliver
to the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not
(a) amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall take
all such further actions and execute all such further documents and instruments
as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of when
due any amount required to be paid by the Borrower under or in connection with
any Note and this Agreement;
(b) any representation or warranty made or deemed made by the
Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any of
the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14,
or 5.15 hereof or (ii) any other term, covenant, or agreement contained in any
Loan Document (other than the other Events of Default specified in this Section
7) and such failure
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remains unremedied for the earlier of fifteen days from (A) the date on which
the Lender has given the Borrower written notice of such failure and (B) the
date on which the Borrower knew or should have known of such failure;
(d) any provision of any Loan Document to which the Borrower
is a party shall for any reason cease to be valid and binding on the Borrower,
or the Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
sixty days following the commencement thereof, or any action by the Borrower is
taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of principal
or interest on any indebtedness in excess of $50,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such indebtedness
to become due prior to its stated maturity;
(i) the Borrower suffers or sustains a Material Adverse
Change;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within five Business
Days;
(k) any judgment which has had or could reasonably be expected
to have a Material Adverse Effect on the Borrower and such judgment shall not be
stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement; or
(m) there is a change in more than 35% of the ownership of any
equity interests of the Borrower on the date hereof or more than 35% of such
interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and
be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of
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payment, or protest, which are hereby expressly waived.
(b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after the full and final payment of all the Obligations
shall be paid over to the Borrower or to such other Person to which the Lender
may be required under applicable law, or directed by a court of competent
jurisdiction, to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department, and if to the Borrower, then to Corillian
Corporation, 3601 SW Murray Boulevard, Suite 300, Beaverton, Oregon 97005,, or
such other address as shall be designated by the Borrower or the Lender to the
other party in accordance herewith. All such notices and correspondence shall
be effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment
or waiver
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of any provision of this Agreement and any consent to any departure by the
Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement
shall create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until the indefeasible payment in full of
the Obligations, (ii) be binding upon the Borrower and its successors and
assigns and (iii) inure, together with the rights and remedies of the Lender
hereunder, to the benefit of the Lender and its successors, transferees, and
assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to indemnify
and hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents
and any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof,
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or preclude any other right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letter are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letter and this Agreement, the terms of this
Agreement shall prevail.
Section 9.14. SETOFF. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and whether
or not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
Section 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
Section 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY
OTHER JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH
RESPECT TO RIGHTS AND REMEDIES.
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IN WITNESS WHEREOF, the undersigned Borrower has caused this
Agreement to be duly executed and delivered by its proper and duly authorized
officer as of the date first set forth above.
CORILLIAN CORPORATION
By:
----------------------------------------
Name:
Title:
Federal Tax ID No.:
Accepted as of the
____ day of January, 2000
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
----------------------------------------
Name:
Title:
Form16
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SCHEDULE A
TO
LOAN AND SECURITY AGREEMENT
Other Places of Business and Locations of Collateral (Section 4.16):
Prior Names of Obligor (Section 4.7):
Prior Trade Names of Obligor (Section 4.7):
Existing Trade Names of Obligor (Section 4.7):
Federal Tax ID (Section 4.7):
15
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EXHIBIT A
[LETTERHEAD OF TRANSAMERICA BUSINESS CREDIT]
October 19, 1999
Ms. Ann Muir
Controller
Corillian Corporation
3601 SW Murray Boulevard, Suite 300
Beaverton, OR 97005
Dear Ann:
Transamerica Business Credit Corporation - Technology Finance Division
("Lender") is pleased to offer financing for the Equipment described in this
letter (this "Commitment") to Corillian Corporation ("Borrower"). This
Commitment supersedes all prior correspondence, proposals, and oral or other
communications relating to financing arrangements between Borrower and Lender.
The outline of this offer is as follows:
<TABLE>
<S> <C>
LENDER: Transamerica Business Credit Corporation - Technology Finance Division
and/or its affiliates, successors or assigns.
BORROWER: Corillian Corporation
AMOUNT OF LOANS: Not to exceed $3,000,000 in the aggregate. The first $1,000,000 will be made
available upon closing of the transaction described in this Commitment. The
remaining availability will be made available upon completion of the current
equity round (Series C) with net proceeds to the Borrower of not less than
$17,500,000.
USE OF PROCEEDS: Various computer equipment, office equipment, software and leasehold
improvements (the "Equipment"). Up to 20% of this financing may be used
for software, leasehold improvements or other soft costs such as sales
tax, freight and installation expenses. Equipment purchased prior to May 1,
1999 will not be financed.
COLLATERAL: Lender will require a perfected first priority security interest in all Equipment
financed with the Loans, including but not limited to all additions, accessions,
improvements, replacements and attachments thereto and proceeds (including insurance
proceeds) thereof (the "Collateral").
LOCATION OF COLLATERAL: Beaverton, OR
EXPECTED DRAW-DOWN A minimum of $100,000 will be drawn on or before October 31, 1999 and the
SCHEDULE: remaining availability will be drawn on or before September 30, 2000.
DRAW-DOWN EXPIRATION: No Loans will be funded after September 30, 2000.
<PAGE>
<S> <C>
LOAN TERM: Each Loan Term will commence upon delivery of the equipment or upon each delivery
of items of equipment having an aggregate cost of not less than $50,000, and will
continue through 36 months from the first day of the month next following or coincident
with commencement of that Loan Term.
PAYMENT TERMS: Monthly Payments equal to 3.2128% of original principal amount of each Loan will be
payable monthly in advance. The first and last Monthly Payments will be due and payable
on or before commencement of each Loan Term.
Lender reserves the right to increase the rate set forth above as of the date
each Loan Term commences commensurate to the changes in the weekly average of the
interest rates of 3-year U.S. Treasury Securities (as published in the WALL STREET
JOURNAL) from the week ending September 10, 1999 (5.78%) to the week preceding the
commencement of that Loan Term. As of the date each Loan Term commences, the Monthly
Payment will be fixed for that entire Loan Term. A schedule of the actual Monthly Payments
will be provided by the Lender following commencement of each Loan Term.
BALLOON PAYMENT: At the end of each Loan Term, the Borrower will be obligated to make one final Balloon
Payment equal to 10% of the original principal amount of each Loan, plus any other
amounts then due and owing to Lender.
INTERIM PAYMENT: An Interim Payment will accrue from the date each Loan Term commences until the next
following first day of a month (unless the Loan Term commences on the first day of a
month). The Interim Payment will be calculated at the daily equivalent of the currently
adjusted Monthly Payment.
INSURANCE: Prior to any delivery of Equipment, the Borrower will furnish confirmation of insurance
acceptable to the Lender covering the Collateral including primary, all risk, physical
damage, property damage and bodily injury with appropriate loss payee and additional
insured endorsements in favor of the Lender.
CONDITIONS PRECEDENT Each Loan will be subject to the following:
TO LENDING: 1. No material adverse change in the financial condition, operations or prospects
of the Borrower prior to funding. The Lender reserves the right to rescind any
unused portion of its commitment in the event of a material adverse change in the
financial condition, operation or prospects of the Borrower.
2. Completion of the documentation and final terms of the proposed financing satisfactory
to Lender and Lender's counsel.
3. Results of all due diligence, including lien, judgment and tax search and other matters
Lender may request shall be satisfactory to Lender and Lender's counsel.
4. Receipt by Lender of duly executed loan documentation in form and substance satisfactory
to Lender and its counsel
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5. Lender shall receive a valid and perfected first priority lien and security
interest in the Collateral and Lender shall have received satisfactory
evidence that there are no liens on the Collateral except as expressly permitted
herein.
ADDITIONAL There will be no actual or threatened conflict with, or violation of, any regulatory
COVENANTS: statute, standard or rule relating to the Borrower, its present or future operations,
or the Collateral.
Borrower will be required to provide quarterly financial information. All information
supplied by the Borrower will be correct and will not omit any statement necessary to
make the information supplied not be misleading. There will be no material breach of the
representations and warranties of the Borrower in the loan.
EXPENSES: All costs and expenses incurred by the Lender in connection with the underwriting and
closing of the Loans will be paid by the Borrower whether or not any Loans are
consummated and funds are advanced by the Lender.
LAW: This letter and the proposed Loan are intended to be governed by and construed in
accordance with Illinois law without regard to its conflict of law provisions.
INDEMNITY: Borrower agrees to indemnify and to hold harmless Lender, and its officers, directors
and employees against all claims, damages, liabilities and expenses which may be
incurred by or asserted against any such person in connection with or arising out of
this letter and the transactions contemplated hereby, other than claims, damages,
liability, and expense resulting from such person's gross negligence or willful misconduct.
CONFIDENTIALITY: This letter is delivered to you with the understanding that neither it nor its
substance shall be disclosed publicly or privately to any third person except those who are
in a confidential relationship to you (such as your legal counsel and accountants), or where
the same is required by law and then only on the basis that it not be further disclosed, which
conditions Borrower and its agents agree to be bound by upon acceptance of this letter.
Without limiting the generality of the foregoing, none of such persons shall use or
refer to Lender or to any affiliate name in any disclosures made in connection with any
of the transactions without Lender's prior written consent.
Upon completion of the initial takedown by Borrower, the Borrower will no longer be
required to obtain Lender's prior written consent to disclose the transaction
contemplated hereby. In addition, the Borrower agrees to provide camera ready artwork of
typestyles and logos of the Borrower for use in promotional material by the Lender.
CONDITIONS OF ACCEPTANCE: This Commitment Letter is intended to be a summary of the most important
3
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<S> <C>
elements of the agreement to enter into a loan transaction with Borrower, and it is
subject to all requirements and conditions contained in Loan documentation proposed
by Lender or its counsel in the course of closing the Loans described herein. Not every
provision that imposes duties, obligations, burdens, or limitations on Borrower is contained
herein, but shall be contained in the final Loan documentation satisfactory to Lender and
its counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS
LETTER OR THE TRANSACTION DESCRIBED IN THIS LETTER.
APPLICATION FEE: The $30,000 Application Fee previously paid by the Borrower will be first applied to the
reasonable costs and expenses of the Lender in connection with the transaction, and any
remainder shall be applied pro rata (based on the amount of each funding to the total
amount of this Commitment) to the second month's payment due under the Loan.
COMMITMENT EXPIRATION: This Commitment shall expire on October 26, 1999 unless prior thereto either extended
in writing by the Lender or accepted as provided below by the Borrower.
</TABLE>
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed
duplicate copy of this letter to me by October 26, 1999.
Yours truly,
TRANSAMERICA BUSINESS CREDIT
CORP - TECHNOLOGY FINANCE
DIVISION
By /s/ Gerald A. Michaud
---------------------------
Gerald A. Michaud
Senior Vice President - Marketing
Accepted this ___ day of October, 1999.
CORILLIAN CORPORATION
By /s/ Ted Spooner
----------------------------
Name: Ted Spooner
Title: Chairman and CEO
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CORILLIAN CORPORATION
RESELLER AGREEMENT
This Reseller Agreement ("Agreement") is entered into as of
January 22, 2000 (the "Effective Date"), by and between CORILLIAN CORPORATION
("Corillian"), an Oregon corporation whose principal place of business is 3855
SW 153rd , Beaverton, Oregon 97005, and PARKERS' EDGE LTD ("Partner"), or
Trustee Company (nominee) a New Zealand Company under the laws of New Zealand
whose Australian place of business is at Level 2, 79 Albert Street, Auckland,
NZ.
RECITALS
A. Corillian develops, markets and implements software systems
which facilitate the electronic transfer of financial data and funds.
B. Partner distributes and implements software systems in
certain territories outside of the United States.
C. Corillian and Partner desire to set forth the terms and
conditions under which Partner will license Corillian software for purposes of
sublicensing and implementing the same to end users in the Territory as defined
herein.
THEREFORE, the parties have entered into this Agreement on the
terms and conditions set forth below.
TERMS AND CONDITIONS
1. SUBJECT OF LICENSE.
1.1 The following Corillian software (each separately a
"Product") is the subject of this Agreement:
Voyager Transaction Platform
HTML Banking Application
HTML EBPP Application
OFX Application
Small Business Application
AD Manager Application
Control Center Application
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1.2 Corillian further agrees to offer to Partner, subject
to the same terms and conditions of this Agreement, software it develops and
markets generally for commercial purposes subsequent to the execution of this
Agreement.
The foregoing, together with any applications, scripts,
templates or other software created by Corillian in the course of performing
professional servicesfor Partner or any of its sublicensees and all related
documentation, are collectively referred to as the "Products." Each of the
foregoing is separately referred to as a "System." The features and functions of
each System are described in the Product Schedule attached hereto as Exhibit 1.
1.3 Software which Corillian licenses from other parties
and is incorporated into, or used with, the Products ("Third-Party Software") is
also the subject of this Agreement.
2. GRANT OF LICENSE; LIMITATIONS.
2.1 Subject to the terms and conditions of this Agreement
and effective only during the term of this Agreement, Corillian grants to
Partner an exclusive and non-transferable license to sublicense and modify the
Products, in object code form only, as such Products may be modified from time
to time by Corillian, in the territory of the Australia and New Zealand(the
"Exclusive Territory"). For purposes of defining the Exclusive Territory, any
sublicense to a company headquartered in Australia or New Zealand but with
Affiliates outside of Australia and New Zealand shall be considered a sublicense
within the Exclusive Territory. The license granted herein includes the right to
sublicense the Third-Party Software.
2.1.1 The license granted to Partner herein includes
the right to sublicense the Products under a Corillian Utility Pricing model.
"Utility Pricing" shall mean an agreement in which the Products are leased for a
set term, with payment made on a monthly basis.
2.1.2 The license granted to Partner herein includes
the right to sublicense the Products under a bureau services transaction fee
pricing model. "Bureau Transaction Fee Pricing" shall mean an agreement in which
the Products are hosted by the Partner or sublicenced by the Partner and charged
on a per transaction basis for a set term, with payment made on a monthly basis.
The Parties agree to negotiate in good faith to complete a bureau transaction
fee based pricing model with thirty (30) days from execution of this Agreement.
2.2 Corillian agrees to negotiate in good faith with
other Reseller's to secure Partner's rights to sublicense the Products outside
the Exclusive Territory. Partner may only sublicense the Products outside the
Exclusive Territory herein defined with the written consent of Corillian.
2.3 Subject to Section 2.3.1, Corillian agrees not to
compete directly or indirectly with Partner in the Exclusive Territory.
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2.3.1 Corillian has previously granted and may grant
in the future certain license rights to the Products to companies headquartered
outside the Exclusive Territory and which provides for the right of their
Affiliates to use the software , under an enterprise-wide licence. It shall not
be considered a breach of Partners' Section 2.1 rights of exclusivity or
Corillian's Section 2.3 non-compete obligations if any such Affiliate is located
within the Exclusive Territory. "Exclusive-wide license" shall mean a license
which grants the license use of the Products to the contracting entity and all
its affiliates, either for one license fee or for separate usage fees by each
affiliate.
2.3.1.1 For purposes of this Agreement, a
company shall be considered to be "headquartered" in the principal corporate
office of the controlling entity. '"Affiliate" shall mean an entity directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with an entity. "Control" shall mean the right to vote or
direct the voting of at least fifty percent (50%) of the common stock or other
ownership interest in the entity.
2.4 Partner's right to sublicense the Products is subject
to the requirement of identifying the Products as Corillian Products under the
appropriate Corillian tradename, with inclusion of any copyright, trademark or
patent notice, as Corillian shall require.
2.5 Except as specifically permitted in this Agreement,
Partner will not sublicense, sell, rent, lease, give, transfer, assign, convey
or otherwise dispose of, any portion of the Products or any Third-Party
Software.
2.6 Except as permitted in this Agreement, Partner shall
not reproduce, modify, enhance, print, display or copy the Products, or any
Third-Party Software, in any form without the prior written consent of
Corillian.
2.7 Except as permitted under the Copyright Act 1968,
Partner will not attempt to reverse engineer, disassemble or decompile the
Products or any Third-Party Software, or otherwise attempt to discover any
source code or trade secret.
2.8 Partner may integrate other software or applications
with a Product only with the prior written consent of Corillian, which shall not
be unreasonably withheld.
2.9 Partner will not sublicense or offer to sublicense
any software which competes with any of the Products without the prior written
consent of Corillian, which shall not be unreasonably withheld. For purposes of
this paragraph, software shall be considered to "compete" with a Product if it
a) is substantially similar in functionality or purpose and b) is sold, licensed
or leased to the same or similar customers. 2.9.1 Partner may continue to
support current installations of software which may be competitive with the
Products.
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3. RIGHTS TO RESELL ONESOURCE-TM- DATA ACQUISITION SERVICES
3.1 Subject to the terms and conditions of this Agreement
and effective only during the term of this Agreement, Corillian further grants
to Partner the exclusive and non-transferable right to resell in the Exclusive
Territory OneSource Data Acquisition Services (the "Services"), more
specifically defined in Section 3.0 of the Product Schedule, attached hereto as
Exhibit 1, and the nonexclusive and non-transferable right to resell the
Services in the territory of Asia (the "Non-Exclusive Territory").3.2 Partner
may license the OneSource software, in conjunction with the Voyager Transaction
Processor, from Corillian for purposes of hosting the Services and reselling the
same to customers within the Exclusive or Non-Exclusive Territory. In the event
of such license, the parties will work in good faith to develop the operational
and service requirements of each party. Partner may sublicense the OneSource
software, in conjunction with the Voyager Transaction Processor, to a
third-party vendor or joint venture partner for hosting of the Services in the
Exclusive or Non-Exclusive Territory with the prior written consent of Corillian
which will not be unreasonably withheld. Partner may integrate other software to
the Voyager Transaction Processor in conjunction with the hosting of the
OneSource software for purposes of reselling the same in the Exclusive or
Non-Exclusive Territory with Corillian's prior written consent, which shall not
be unreasonably withheld.
4. TERM OF AGREEMENT.
4.1 This Agreement shall commence on the Effective Date,
and shall continue for an initial term of three (3) years, unless sooner
terminated as provided herein (the "Initial Term"). Subject to the Partner
meeting the Annual Revenue Commitments described in Section 5.3, upon expiration
of the Initial Term the Agreement shall renew for another two (2) year term but
with Partner's license rights amended to a nonexclusive basis (the "Renewal
Term"). Upon expiration of the Renewal Term, the parties shall negotiate in good
faith the terms and conditions for a new Reseller Agreement.
4.2 During the term of this Agreement, Partner may enter
into Utility and Bureau Services pricing agreements for the Products and
Services with customers that extend beyond the term of this Agreement.
4.3 Upon termination or expiration of the term of this
Agreement, Corillian will continue to support the Products sublicensed by
Partner or leased under a Utility Pricing or Bureau Services model provided that
the Sublicensee continue under - support agreements for the Products and Partner
continues to pay the support fees owed pursuant to this Agreement, however,
Corillian reserves the right to discontinue support for any Product upon twelve
(12) months notice to Partner.
5. LICENSE AND SERVICE FEES.
5.1 Partner shall pay Corillian a percentage of the list
price described in the Product Schedule, or such other price mutually agreed to
by the parties, for each license purchased of the Product or Products or for
Services sold, according to the following schedule:
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Annual Aggregate License or Services Revenues % fee owed to Corillian
$0-$999,999 [ * ]
$1,000,000-$1,999,999 [ * ]
$2,000,000-$3,999,999 [ * ]
$4,000,000- [ * ]
5.2 Partner agrees to commit to producing annual
aggregate revenues to Corillian according to the following schedule (the "Annual
Revenue Commitments"):
Year 1 [ * ] USD
Year 2 [ * ] USD
Year 3 [ * ] USD
The Annual Revenue Commitments shall equal the fees
paid by Partner to Corillian in a given year pursuant to Section 5.1 and
Section 11.3, provided, however, that for contracts entered into by Partner
under any mutually agreed to Utility or Bureau Service Pricing Model, Partner
shall be given credit toward the Annual Revenue Commitment for the present value
of the full contract commitment.
5.2.1 By 31 August 2000, Partner agrees to reach
fifty percent (50%) of the Year 1 Annual Revenue Commitment. In the event
that Partner fails to reach this goal, Partner agrees to pay Corillian within
twenty (20) business days and upon receipt of invoice from Corillian, the
difference between the fees it has paid Corillian pursuant to Section 5.1 and
Section 11.3 and the 31 August 2000 goal.
5.2.2 In the event that Partner fails to reach any of
the Annual Revenue Commitments, Partner agrees to pay Corillian the
difference between the fees it has paid Corillian pursuant to Section 5.1 and
Section 11.3 for that year and that year's Annual Revenue Commitment within
twenty (20) business days of receipt of final invoice from Corillian.
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*Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
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6. ORDERING LICENSES OF PRODUCTS OR SERVICES; PAYMENT TERMS.
6.1 For each licensed purchased of a Product or Service,
Partner shall send Corillian an Order listing the Product or Products to be
licensed or Service sold, the number of user blocks requested, the pricing
model (e.g. Purchase or Utility Pricing), the customer to whom Partner will
sublicense the Product or resell the Service, and the customer's address.
6.2 Partner shall pay Corillian the Section 5 fees (i)
for any licenses purchased within thirty (30) days of receipt of invoice from
Corillian and (ii) for any utility priced licenses or Services on a prospective
quarterly basis within thirty (30) days of the commencement of service for that
quarter and (iii) for any transaction based fees on a arrears quarterly basis
within thirty (30) days after conclusion of each quarter..
6.3 Any Section 5 fees for Product pricing or Services
that includes Transaction Fees shall be payable within fifteen (15) business
days of the end of the month of service. "Transaction Fees" shall mean fees
assessed a customer of Partner pursuant to a Utility or Bureau Service pricing
model for each instance of a transaction supported by the Product or Services.
7. TAXES.
7.1 Subject to Clause 7.3, Partner will pay all sales,
use and excise taxes, any export or import taxes or tariffs and any other
assessments in the nature of taxes however designated, on the Products or their
license or use, on or resulting from this Agreement or on any amount payable for
any services furnished in connection with this Agreement, other than taxes based
on Corillian's net income.
7.2 Partner shall be responsible for collecting and
remitting any taxes on sales to Partner's customers.
7.3 Partner may withhold any taxes from the fees it owes
to Corillian pursuant to Section 4 if required by international treaty between
Australia and the United States.
8. REPORTS; RIGHT TO AUDIT.
8.1 Corillian shall have the right to audit, at its
expense, Partner's books and records concerning Partner's obligations to pay the
Section 5 fees and to include the required contract provisions (discussed in
section 17 below) in its sublicenses. Corillian may conduct such audits from
time to time, but no more frequently than once every six (6) months, during
normal working hours and with reasonable advance written notice to Partner.
Corillian may exercise its audit right through an agent. If any audit determines
that Partner has underpaid Corillian by an amount greater than five percent (5%)
of the payments due Corillian during the period being audited, then Partner will
bear the reasonable cost of such audit, in addition to its
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obligations to make immediate full payment of the underpaid amount, together
with interest of one and one-half percent (1.5%) per month.
9. TRAINING.
9.1 At Corillian's expense, Corillian shall provide
staff designated by Partner one-week of product implementation, sales and
product support training at Corillian's headquarters. Partner shall be
responsible for its own out-of-pocket expenses incurred in training.
9.2 Partner may request additional training, and
Corillian agrees to provide Partner with such additional training at the rate of
$1500 per day. Partner agrees to reimburse Corillian for reasonable
out-of-pocket expenses for any such additional training, including but not
limited to travel, lodging, meals, telecommunications, shipping, materials, and
other related costs, payable within fifteen (15) days of receipt of invoice.
10. INSTALLATION AND IMPLEMENTATION.
10.1 Partner shall, at its cost and expense, install and
implement the System or Systems for all its sublicensees.
10.2 Partner shall have no obligation to Corillian for
fees derived from implementation or other professional services provided to its
sublicensees.
11. MAINTENANCE AND SUPPORT.
11.1 Corillian will provide to Partner alone maintenance
and support for the then-current version of the Products pursuant to the
Maintenance Terms found in Exhibit 2 attached hereto.
11.2 Partner shall provide maintenance and support to all
Sublicensees.
11.3 Partner shall pay Corillian an annual maintenance
fee of [ * ] percent ([ * ]%) of the aggregate license fees (less goods and
services taxes) paid by Partner's Sublicensees For each Sublicensee, the first
such maintenance fee shall be paid upon initial acceptance of the Product or
Products by such Sublicensee and the subsequent annual maintenance fee shall be
paid 1.25 years from the initial acceptance and on each subsequent anniversary
of that date, provided such Sublicensee has renewed its maintenance contract
with Partner.
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*Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
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12. PROPRIETARY RIGHTS.
12.1 Corillian retains and reserves title and all
ownership rights to the Products. Subject to the terms of this Clause, all
general modifications, enhancements and releases as well as modifications and
enhancements made by Corillian to Products specifically for Partner shall be
considered as part of the Products and owned by Corillian. Any scripts or
interfaces developed by Corillian in the course of performing professional
services- for Partner shall be jointly owned by the parties, and both parties
shall have the right to transfer interests in the same without recourse to the
other party for payment of any fees. Modifications and enhancements, as well as
specifications, designs and code, made by Partner to Products shall be owned by
Partner, but such ownership in the code shall only encompass the specific code
modification or enhancement and does not include any of the underlying code to
the Products. All physical documents and media (if any) containing Products sent
to Partner shall be deemed to be leased and not sold and their use licensed.
Partner acknowledges that this Agreement conveys a limited license, as expressed
in this Agreement, and does not convey title or any ownership rights to the
Products.
12.2 In the event that the parties jointly develop custom
software or applications, then the Intellectual Property rights of the software
or applications shall be mutually agreed to under a separate written agreement.
12.3 Partner will not delete or in any manner alter the
notices of intellectual property rights of Corillian (or of the vendor of any
Third-Party Software licensed through Corillian) appearing on or resulting from
use of the Products delivered to Partner. As a condition of the license rights
granted to Partner in this Agreement, Partner will reproduce and display such
notices on each copy it makes of any Product.
13. CORILLIAN'S WARRANTIES; PARTNER'S REMEDIES; LIMITATION OF
LIABILITY.
13.1 Corillian represents and warrants to Partner as
follows:
13.1.1 That Corillian has the authority to grant the
license provided herein, and that the grant of such license does not
violate any other agreement to which Corillian is a party.
13.1.2 That the Products, when properly installed and
when properly used, will perform the functions described in the Product
Schedule attached as Exhibit 1 for a period of ninety (90) days after initial
installation at each Sublicensee. However, Corillian does not warrant that the
Products will operate uninterrupted or error-free.
13.1.3 That the Products provided pursuant to this
Agreement and used by Partner and its Sublicensees prior to, during or after
the calendar year 2000 include or shall include, at no additional cost to
Partner, design and performance capabilities so that Partner and Sublicensees
shall not experience abnormally ending and/or invalid and/or incorrect results
from their use. Furthermore, Corillian represents and warrants that the Products
will under normal use
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and service, record, store, process and present calendar dates falling on or
after January 1, 2000, in the same manner, and with the same functionality, data
integrity and performance, as the Products record, store, process and present
calendar dates on or before December 31, 1999. Corillian warrants that the
Products will lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000.
13.1.4 Corillian warrants that the Products do
not contain any programs, routine, device or other undisclosed feature,
including, without limitation, a time bomb, "time-out" feature, virus, software
lock, drop dead device, malicious logic, worm, Trojan horse, or trap door, which
is designed to delete, disable, deactivate, interfere with or otherwise harm the
Products or hardware on which the Products reside, data or other programs, or
which is intended to provide unauthorized access or produce unauthorized
modifications (collectively, "disabling procedures"). Notwithstanding any other
limitations in this Agreement, Corillian agrees to notify Partner immediately
upon discovery of any disabling procedures which are or may be included in the
Products. If disabling procedures are discovered or reasonably suspected to be
present in any of the Products, Corillian agrees to take action immediately, at
its own expense, to identify and eradicate such disabling procedures.
13.1.5 The warranties provided in sections 13.1.1,
13.1.2, 13.1.3 and 13.1.4 shall not apply if (i) the Products are used other
than in accordance with Corillian's instructions, (ii) the Products are altered,
modified or converted by Partner or Sublicensee without the written approval of
Corillian which shall not be unreasonably withheld and shall be deemed to have
occurred if Corillian does not respond to a notification with 14 days, (iii) the
Products do not perform because data communication is interrupted by the action
or inaction of Partner, Sublicensees or a third party; or (iv) any other cause
within the control of Partner or Sublicensees shall cause the alleged breach.
13.2 OTHER THAN AS EXPRESSLY STATED IN THIS AGREEMENT,
CORILLIAN MAKES NO OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PRODUCTS OR ANY SERVICES PROVIDED IN CONNECTION WITH THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
13.3 The vendors of Third-Party Software make no
representations or warranties, express or implied, to Partner (or to
Sublicensees).
13.4 Corillian makes no representations or warranties to
Sublicensees.
13.5 Partner's remedies for breach of warranty are as
follows:
13.5.1 In all situations involving performance or
non-performance of the Products, Corillian's liability and Partner's remedy
shall be limited to having Corillian promptly and in accordance with the Voyager
Products Maintenance Terms, attached hereto as Exhibit 2,
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replacement Products or code corrections or other services (including a
workaround) as required to enable the Products to perform the functions
described in the Product Schedule. If after 30 days Corillian is unable to make
the Products operate as warranted, Partner may terminate this Agreement and the
license granted hereunder and receive a refund of the license fees paid by
Partner for the Product or Products or may seek any other form of non-monetary
relief otherwise available to it under law.
13.6 UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN
CONNECTION WITH THE USE OF THE PRODUCTS OR ANY OTHER ASPECT OF THIS AGREEMENT,
INCLUDING LOST REVENUES OR PROFITS, LOSS OF BUSINESS, OR LOSS OF DATA,
REGARDLESS OF WHETHER A CLAIM IS BASED ON CONTRACT, TORT, OR OTHERWISE, EVEN IF
THE PARTY WAS ADVISED OR HAD REASON TO KNOW OF THE POSSIBILITY THEREOF.
13.6.1 THE FOREGOING LIMITATION SHALL NOT APPLY TO
DAMAGES INCLUDED IN AN AWARD AGAINST EITHER PARTY RESULTING FROM (i) ANY CLAIMS
FOR PERSONAL INJURY OR DEATH; (ii) ANY CLAIMS BASED ON VIOLATION OF EITHER
PARTY'S INTELLECTUAL PROPERTY RIGHTS.
13.7 EXCEPT AS PROVIDED IN SECTION 13.6.1, PARTNER'S
LIABILITY TO CORILLIAN SHALL BE LIMITED TO THE ANNUAL REVENUE COMMITMENT FOR THE
YEAR IN WHICH A CAUSE OF ACTION FOR BREACH OF THIS AGREEMENT SHALL HAVE
OCCURRED.
13.8 THE PARTIES HAVE AGREED THAT THE LIMITATIONS
SPECIFIED IN THIS SECTION THIRTEEN WILL SURVIVE AND APPLY EVEN IF ANY LIMITED
REMEDY SPECIFIED IN THIS AGREEMENT IS FOUND TO HAVE FAILED OF ITS ESSENTIAL
PURPOSE.
14. INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS; INDEMNIFICATION.
14.1 Corillian agrees to defend, indemnify and hold
harmless Partner against any claims, liabilities, losses, damages, costs and
expenses (including reasonable attorneys' fees) arising from any claim that the
Products, as used within the scope of this Agreement, infringe copyright, patent
or other intellectual property rights of a third party.
14.2 In the case of any claim arising under this section
13, (i) Partner shall notify Corillian in writing within thirty (30) days of
receipt of written notice of any such claim, (ii) Corillian shall have control
of the defense and all related negotiations, including settlement negotiations,
and (iii) Partner shall provide Corillian with reasonable assistance,
information and authority necessary to perform the above obligations. Reasonable
out-of-pocket expenses incurred by Partner in providing such assistance will be
reimbursed as promptly as practicable by Corillian.
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14.3 If Partner's use or sublicense of any Products under
the terms of this Agreement is, or in Corillian's opinion is likely to be,
enjoined due to infringement or misappropriation claims, then Corillian may, at
its sole option and expense, either: (i) procure for Partner the right to
continue using or sublicensing such Products under the terms of this Agreement;
(ii) replace or modify such Products so that they are non-infringing and
substantially equivalent in function; or (iii) if options (i) or (ii) above
cannot be accomplished despite the reasonable efforts of Corillian, then
Corillian may both:
14.3.1 Terminate Partner's rights and Corillian's
obligations under this Agreement with respect to such Products, and
14.3.2 Refund to Partner the license fees paid by
Partner to Corillian.
14.4 Corillian shall have no obligations under this
section 14 with respect to infringement or misappropriation arising from (i)
modifications to the Products that were not authorized by Corillian, (ii)
Product specifications requested by Partner, unless approved by Corillian, (iii)
the use of the Products in combination with products not provided by Corillian,
unless Corillian has been given prior written notice of such use and has
approved it, which shall not be unreasonably withheld in accordance with Clause
2.8,, or (iv) the negligence or willful misconduct of Partner.
15. EXPORT RESTRICTIONS.
This Agreement is expressly made subject to all laws,
regulations, and orders relating to, or other restrictions on, the export of the
Products from the United States of America, which may be imposed from time to
time. Except within the Exclusive Territory and with the prior written consent
pursuant to paragraph 3.2 in the Non-Exclusive Territory, Partner may not export
or re-export the Products, including Third-Party Software, or Corillian's
Confidential Information.
16. CONFIDENTIAL INFORMATION.
16.1 Corillian and Partner agree that the Products,
including but not limited to computer programs, user manuals, technical
reference manuals, other documentation, generated output, enhancements,
modifications and further releases, together with related research and
technoPartnerl information, business strategies and business information
(collectively "Corillian's Confidential Information"), constitute valuable
proprietary products and trade secrets which require protection against
unauthorized use, reproduction, distribution or disclosure. To protect
Corillian's Confidential Information, Partner agrees to take the measures listed
below.
16.1.1 Partner agrees to protect and preserve
Corillian's Confidential Information.
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16.1.2 Partner agrees to take all reasonable
precautions to prevent any portion of Corillian's Confidential Information, in
any form or medium, from being disclosed or made available by Partner or by any
of Partner's employees or agents to any other person, firm, or corporation
except as is expressly permitted herein. In no event shall Partner take
precautions any less stringent than those employed to protect its own trade
secrets and proprietary information.
16.1.3 Partner shall limit access to Corillian's
Confidential Information to employees of Partner and consultants who have
entered into a binding written agreement with Partner to maintain the
confidentiality of Corillian's Confidential Information and who must have access
in order for Partner to utilize the Products in the manner intended by this
Agreement.
16.1.4 Partner agrees to ensure that the consultants
and others who are given access to Corillian's Confidential Information
comply with the terms of this Agreement and do not remove, copy or otherwise
misappropriate Corillian's Confidential Information or any portion thereof.
16.1.5 Partner shall promptly notify Corillian of any
instance of unauthorized use or disclosure of any portion of Corillian's
Confidential Information and shall cooperate with Corillian in any action
relating thereto.
16,1.6 Partner acknowledges that (i) the restrictions
contained in this Agreement are reasonable and necessary to protect
Corillian's proprietary interest in Corillian's Confidential Information, (ii)
remedies at law will be inadequate and any violation of these restrictions will
cause irreparable damage to Corillian not compensable in monetary damages and
(iii) Corillian will be entitled to injunctive relief against each violation.
16.1.7 Upon Corillian's request or upon termination
of this Agreement, Partner shall return Corillian's Confidential Information
in Partner's possession or control.
16.1.8 Notwithstanding the above, Partner shall
cooperate with governmental regulatory agencies as required by law. Immediately
upon becoming aware that any of Corillian's Confidential Information is being
sought by governmental agencies, Partner shall, prior to making any disclosure,
notify Corillian in writing. Conditioned upon such prior written notice, Partner
may allow such agencies full and complete access to Corillian's Confidential
Information within Partner's possession or control. Partner shall bear no
responsibility for such disclosure to such governmental agencies, but Partner
shall in any event give written notice to Corillian prior to making any such
disclosure.
16.1.9 The obligations of Partner set forth in this
section 16.1 shall survive the termination of this Agreement.
16.2 Corillian and Partner agree that certain data
relating to Partner's business, including but not limited to proprietary
information of Partner such as customer lists, customer financial data, trade
secrets and intellectual property (collectively "Partner's Confidential
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Information") constitute valuable proprietary information and trade secrets
which require protection against unauthorized use, reproduction, distribution or
disclosure. To protect Partner's Confidential Information, Corillian agrees to
take the measures listed below.
16.2.1 Corillian agrees to protect and preserve
Partner's Confidential Information.
16.2.2 Corillian agrees to take all reasonable
precautions to prevent any portion of Partner's Confidential Information, in any
form or medium, from being disclosed or made available by Corillian or by any of
Corillian's employees or agents to any other person, firm, or corporation except
as is expressly permitted in this Agreement. In no event shall Corillian take
precautions any less stringent than those employed to protect its own trade
secrets and proprietary information.
16.2.3 Corillian shall limit access to Partner's
Confidential Information to employees of Corillian and consultants who have
entered into a binding written agreement with Corillian to maintain the
confidentiality of Partner's Confidential Information and who must have access
in order for Corillian to utilize Partner's Confidential Information in the
manner intended by this Agreement.
16.2.4 Corillian agrees to ensure that the
consultants and others who are given access to the Confidential Information
comply with the terms of this Agreement and do not remove, copy or otherwise
misappropriate Partner's Confidential Information or any portion thereof.
16.2.5 Corillian shall promptly notify Partner of any
instance of unauthorized use or disclosure of any portion of Partner's
Confidential Information and shall cooperate with Partner in any action relating
thereto.
16.2.6 Corillian acknowledges that (i) the
restrictions contained in this Agreement are reasonable and necessary to protect
Partner's proprietary interest in Partner's Confidential Information, (ii)
remedies at law will be inadequate and any violation of these restrictions will
cause irreparable damages and (iii) Partner will be entitled to injunctive
relief against each violation.
16.2.7 Upon request of Partner or upon termination of
this Agreement, Corillian shall return Partners Confidential Information
in its possession or control to Partner unless such return would interfere with
Corillian's otherwise authorized use of Partner's Confidential Information.
16.2.8 Notwithstanding the above, Corillian shall
cooperate with governmental regulatory agencies as required by law.
Immediately upon becoming aware that any of Partner's Confidential Information
is being sought by governmental agencies, Corillian shall, prior to making any
disclosure, notify Partner in writing. Conditioned upon such prior written
notice, Corillian may allow such agencies full and complete access to Partner's
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Confidential Information within Corillian's possession or control. Corillian
shall bear no responsibility for such disclosure to such governmental agencies,
but Corillian shall in any event give written notice to Partner prior to making
any such disclosure.
16.2.9 The obligations of Corillian set forth in
this section 16.2 shall survive the termination of this Agreement.
17. SUBLICENSE TERMS.
17.1 Partner and its Sublicensees shall use a written
sublicense agreement for the sublicense of all Products. The sublicense
agreement shall include, at a minimum, the following terms:
17.1.1 Sublicensee will receive a nontransferable,
nonexclusive sublicense to use and modify the Products.
17.1.2 Sublicensee may copy the Products only for
archival or backup purposes.
17.1.3 Sublicensee will not disclose or make
available the Products to any person or entity other than employees, contractors
or affiliates who are obligated to keep it confidential.
17.1.4 Except as provided under the Copyright Act of
1968, Sublicensee will not reverse engineer, disassemble or decompile the
Products, or otherwise attempt to discover any source code or trade secret
related to the Products.
17.1.5 Sublicensee will not further sublicense, sell,
rent, lease, give, transfer, convey, assign or otherwise dispose of any
portion of the Products.
17.1.6 Except as authorized within the Exclusive
Territory, Sublicensee will not export the Products.
17.1.7 Sublicensee will acknowledge that it obtains
rights under a sublicense agreement only, and that no title to the Products
or related proprietary rights is transferred to Sublicensee.
17.1.8 Terms substantially similar to those set
forth in section 16.1 above which require Sublicensee to maintain the
confidentiality of Corillian's Confidential Information.
17.1.9 The Sublicensee Agreement shall not contain
any terms that impose any warranty or performance obligations on Corillian
other than the limited warranties and representations made by Corillian in this
Agreement.
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18. TERMINATION.
18.1 Corillian may, in its sole discretion, terminate
this Agreement and the license granted hereunder at any time (a) immediately if
Partner fails to meet its obligations under Section 5.2.1 or 5.2.2, (b)
immediately if Partner is more than 60 days past due on any other payment of
fees under Section 5, (c) immediately if Partner fails to achieve seventy
percent (70%) of any of the Annual Revenue Commitments required under Section
5.2 or (d) thirty (30) days after Corillian notifies Partner in writing of any
other material breach by Partner, provided such breach remains uncorrected
thirty (30) days following receipt by Partner of written notification thereof.
In the event of termination, Partner shall receive no refund of any licensee fee
or other charges paid hereunder.
18.2 Partner may terminate this Agreement upon thirty
(30) days' prior written notice if Corillian (a) is the subject of an order for
relief under Chapter VII of the Bankruptcy Code, (b) is operated by a receiver,
custodian, trustee or liquidator, (c) is liquidated or (d) thirty (30) days
after Partner notifies Corillian in writing of any other material breach by
Corillian, provided such breach remains uncorrected thirty (30) days following
receipt by Corillian of written notification thereof.. In the event of a
termination pursuant to this section 18.2, Partner may retain and continue to
sublicense the use of all Products to existing customers or or, in the
alternative, may return to Corillian all un-deployed Product licenses for full
refund.
18.3 That Partner may, in its sole discretion, at the
expiration of each year a) terminate the Agreement after ninety days (90) days
notice, or b) terminate the exclusive arrangement after ninety (90) days notice,
however continue to sell, support and distribute Corillian Products on a
non-exclusive basis for the term of the Agreement. In the event that Partner
shall exercise its rights pursuant to this paragraph, then Partner shall be
relieved of any obligation with respect to any Annual Revenue Commitments for
subsequent years.
19. ARBITRATION.
All disputes and controversies arising out of or in any way
related to this Agreement, including the exhibits, shall be submitted to
arbitration proceedings to be conducted under the Commercial Rules then
prevailing of the American Arbitration Association by a panel of three
arbitrators. Corillian and Partner shall modify the time schedules provided
under such rules and shall use their best efforts to meet deadlines such that
the arbitration is concluded within ninety (90) days following its initiation.
The decisions of the arbitrators shall be final and binding for all purposes on
Corillian and Partner and may be entered and enforced in any court of competent
jurisdiction.
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20. AUTHORITY; COMPLIANCE WITH LAW.
Corillian and Partner each represent and warrant that (i) it
has the power and authority to enter into this Agreement and has taken all
necessary corporate action to authorize its performance under this Agreement,
(ii) this Agreement, when executed and delivered, will constitute a legal, valid
and binding obligation of it, enforceable in accordance with this Agreement's
terms, (iii) no consent or authorization of, filing with, or notice to any
governmental authority is required in connection with its performance under this
Agreement, and (iv) its entering into this Agreement or performance by it
hereunder will not violate any federal, state or local licensing or other
statute, rule or regulation, or any contractual obligation of it. Corillian and
Partner each agree to comply with all applicable laws, rules and regulations in
connection with its activities under this Agreement.
21. FORCE MAJEURE.
Neither Corillian nor Partner shall be held liable for failure to
fulfill its obligations hereunder if such failure is due to a natural calamity,
act of government, or similar cause beyond the control of either Corillian or
Partner. Notwithstanding the foregoing, unless agreed to in writing by the
non-defaulting party, any delay exceeding ninety (90) days shall be grounds for
termination by the non-defaulting party if such delay is not cured within thirty
(30) days of written notice of the non-defaulting party's intent to terminate.
22. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, that provision will be enforced to
the maximum extent permissible and the remaining provisions of this Agreement
will remain in full force and effect.
23. NOTICES.
All notices, reports, instructions, requests, and other
communications given under this Agreement shall be in writing and shall be
deemed to have been given or made (i) if by mail, when received by certified
mail, postage prepaid, return receipt requested; or (ii) if by facsimile, when
sent by facsimile to the facsimile number set forth below with evidence of
receipt by sender or (iii) if by courier, when received; provided, however, that
either party may change its address or facsimile number for notices by providing
notice to the other party of such change in the manner provided herein. Notices
shall be directed to the following addresses or facsimile numbers:
TO CORILLIAN: Corillian Corporation
3855 S.W. 153rd
Beaverton, OR 97006
Telephone: (503) 627-0729
Facsimile: (503) 469-6459
Attention: Thomas Brooke
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TO PARTNER: Parkers' Edge LTD
Level 4, 55 Sussex St.,
Sydney, NSW 2000.
Telephone: +61-2-9249-8900
Facsimile: +61-2-9279-0933
Attention: Janet Parker
24. GENERAL GOVERNING LAW; JURISDICTION.
This Agreement shall be interpreted, construed and enforced
under the laws of the State of Oregon without reference to its choice of law
rules. Corillian and Partner each consent to having Multnomah County, Oregon
USA, and the courts of Sydney, Australia as venues for resolution of any
disputes and controversies. .
25. GENERAL.
25.1 The failure at any time by either Corillian or
Partner to enforce, or to exercise any election under, any provision of this
Agreement will not be construed as a waiver of such provision or election, or in
any way as affecting the validity of this Agreement or any part thereof, or the
right of either Corillian or Partner thereafter to enforce, or to exercise any
election under, each and every provision of this Agreement.
25.2 The parties may not assign this Agreement, or their
rights under this Agreement, whether voluntarily, involuntarily or by operation
of law, to any other person or entity without the other party's prior written
consent, which shall not be unreasonably withheld.
25.3 Subject to paragraph 25.2, this Agreement shall be
binding in all respects on each party's successors and assigns.
25.4 A finance charge of one and one-half percent (1.5%)
per month will be assessed on all payments owed by Partner to Corillian that are
past due. All payments shall be made by wire transfer to Corillian's bank
account:
US Bank
ABA # 123000220
Corillian Corporation
Account #153691165606
25.5 No amendment of this Agreement shall be binding
unless it is in writing and signed by both Corillian and Partner.
25.6 This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall together constitute
one and the same Agreement.
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25.7 This Agreement does not create, and shall not be
construed to create, any joint venture or partnership between Corillian or
Partner. No officer, employee, agent, servant or independent contractor of
either Corillian or Partner shall be at any time be deemed to be an employee,
servant, agent or contractor of the other for any purpose. Corillian and Partner
are independent contractors, not employees, agents or representatives of each
other. Neither Corillian nor Partner has the right to bind the other to any
agreement except as may be specifically provided herein.
25.8 In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its reasonable attorneys' fees,
arbitration and court costs incurred in arbitrating, litigating, or otherwise
settling or resolving such dispute.
25.9 This Agreement, including the exhibits, constitutes
the entire agreement between Corillian and Partner with respect to the subject
matter hereof and supersedes all prior discussions, negotiations, communications
and agreements, oral or written, relating to the subject matter hereof. Each
Exhibit is incorporated by reference. If there exists any inconsistency with
this Agreement and the Exhibits, then the terms of this Agreement shall prevail
for purposes of resolving the inconsistency.
25.10 Each party represents that it has read this
Agreement, understands its terms and conditions and agrees to be bound by
this Agreement, and that the person signing on behalf of each such party is
duly authorized to sign this Agreement on behalf of the party for which s/he
signs and to bind that party to the terms and conditions of this Agreement.
PARKERS' EDGE LTD. CORILLIAN CORPORATION
By By
--------------------------------------- -----------------------------
Janet Parker, Managing Director Ted Spooner, CEO
Date Date
------------------------------------- ---------------------------
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EXHIBIT 1
CORILLIAN CORPORATION
VOYAGER PRODUCT SCHEDULE
1. PRODUCTS
The following products, as modified for Partner's use, have been licensed to
Partner pursuant to the Agreement:
Voyager Transaction Platform
HTML Banking Application
HTML EBPP Application
OFX Application
Small Business Application
AD Manager Application
Control Center Application
Each of the foregoing is referred to as a "Component". The foregoing Components
together with any applications, scripts, templates or other software created by
Corillian in the course of performing implementation or other professional
services for Client as well as all product documentation, if any, in electronic
or hard copy formats, all related technical information, and all updates and
enhancements thereto are collectively referred to as the "Products."
2. FEATURES AND FUNCTIONS
2.1 The Voyager Transaction Processing System will have the features
and perform the functions described below:
Core transaction processing of all Application data requests
Host Mainframe Connectivity Protocol:
TCP/IP
Host Data Interface Specification:
Connection to host
2.2 The HTML Banking Application will have the features and perform
the functions described below:
User Interface Front-end:
HTML
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Banking Transactions, including:
PIN authentication
Customer account balances
Customer account history
Intrabank funds transfer
E-Mail (secure messaging)
Administration and support tools
Transaction history download
2.3 The HTML EBPP Application will have the features and perform the
functions described below:
Bill payment acquisition
Payee and payment management
Payment history
Bill presentment
2.4 The OFX Application will have the features and perform the
functions described below:
User Interface Front-end:
OFX Compliant PFM Applications
OFX Banking and Bill PayTransactions, including:
Sign On
Account balances
Bank inquiry
Intrabank funds transfer
Account information
Enrollment request
Financial institution profile
Services change
Bill payment acquisition
2.5 The Small Business Application will have the features and perform
the functions described below:
Voyager Transaction Processing System
Voyager OFX Server
Voyager Administration Tool
Voyager Support Center
Bill Pay Support
Online Enrollment
Account Balance & History
History Search by Check Number or Transaction Amount
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Online Transfer between accounts
PIN Change
Password Change
Quicken & Money Download
Request Stop Payment
Access Control
2.6 The Ad Manager Application will have the features and perform the
functions described below:
Campaign targeting in real time
Setup advance campaigns
Weight campaign messages
Run simultaneous campaigns
Support for data mining
Support for multiple marketing indicators
Presentation of messaging across multiple delivery
channels
2.7 The Control Center Application will have the features and perform
the functions described below:
Report Center
Bill Pay Reports
Unfunded Payments
Paid Payments
New Customers
Total Customers
Total Sessions
New vs. Total
Session Statistics
Total Transactions
Transactions by Group
Unsuccessful Transactions
Report Groups
Summary Status
Relationship Center
Customer Support Screens
Agent Support Cases
Agent Alert
Monitored Transactions
System Setup
Edit System Users
Add System User
Delete System Users
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View User Permissions
View Users by Permissions
Modify Permission Definitions
Add Permission Definition
User Monitor
Audit Log
Scheduled Tasks
Workflow
Agent Management
Case Management
Case Detail Report
Bill Pay Fees
Message Types
Case Statuses
Case Dispositions
3. ONESOURCE DATA ACQUISTION SERVICES
3.1 Corillian shall develop and maintain a data processing network of
Internet server(s) (the "Corillian Network") that offers Data Acquisition
Services (the "Services") defined by the following features and functions:
Host user sign-up process
Store username/pin
Perform real-time refresh of data at user's initiation
Acquire customer account data at select financial institutions
Store account data
Verify username/pin for user accounts at designated FI
Send requested user account data to customer
3.2 Subject to the terms and conditions of the Agreement, Partner may
resell the Services to its customers.
3.3 Corillian will offer the Services for Financial Institutions it
shall designate in its sole discretion.
3.4 In the event that a financial institution makes a written request
that Corillian cease acquiring its customers' account data, then Corillian
reserves the right to discontinue support for acquiring that financial
institution's customers' account data.
3.5 The provision of the Services shall be in accordance with the
specifications attached as Exhibit 3 to this Agreement.
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4. BILL PAYMENT PROCESSING
The Voyager system will acquire bill payment instructions and forward the
electronic payment instructions to Partner's customers bill pay system for
processing and payment. Partner shall be responsible for implementing all
necessary interfaces to the their customer's designated bill payment processor.
Partner or its customers shall provide all appropriate infrastructure and
support agreements for bill payment.
5. BILL PRESENTMENT PROCESSING
The Voyage system will consolidate bill summary information. Partner shall be
responsible for implementing all necessary interfaces to the their customer's
designated bill payment processor. Partner or its customers shall provide all
appropriate infrastructure and support agreements for bill presentment.
6. OFX SPECIFICATION AND CERTIFICATION
Corillian's Voyager OFX product has been designed to meet OFX specification
version 1.02 as distributed by the Open Financial Exchange committee. Corillian
is not responsible for any changes to the OFX specification and transaction set.
However, Corillian will make its best effort to accommodate changes to the OFX
specifications that are distributed by the OFX standards committee. Corillian
shall not be held responsible for any delays caused by any change to the OFX
specifications unless Corillian does not exercise due diligence to accommodate
such changes.
Certification testing will be conducted by Microsoft with respect to OFX support
of Money and by Intuit for support of Quicken. Corillian shall not be held
responsible for any delays or missed delivery dates by a third party unless and
to the extent Corillian has contributed to such delays or missed delivery dates.
7. PRODUCT LICENSE AND SERVICES PRICING
Unless otherwise mutually agreed to by the Parties, the pricing for the Products
and Services shall be determined in accordance with the Pricing Calculator,
attached hereto as Exhibit 5.
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EXHIBIT 2
VOYAGER PRODUCTS MAINTENANCE TERMS
1. VOYAGER PRODUCT SUPPORT TERMS
Corillian provides support only to Partner and only for the
Products. Partner is responsible for first tier support of the Products for all
its Sublicensees and is alone responsible for supporting any scripts,
modifications or enhancements to the Products made by Partner for its
Sublicensees.
Support commences on the date Partner has accepted all of the
Products, and the anniversary of this date will be the support renewal date. If
Partner enters into additional Product Schedules, the support for the additional
products will begin on the date that these Products are accepted, and the
support fees for these products may be prorated to the support renewal date for
the initial Products.
Except for pro-rated terms, a support term is one year and
will be subject to renewal at the end of the one-year term. Support is only
available for the current release or the immediately previous major release of
the Products and only for those Products located in the Territory for which
Partner has purchased software support.
Corillian retains the right to modify its support programs so
long as such modifications do not in any way decrease support provided to
Partner pursuant to the Agreement.
Corillian shall have no obligation to support: altered,
damaged, or modified Products; Products that are not the most current release or
the immediately previous major release; Product problems caused by Partner's
negligence, abuse, or misapplication, use of Products other than as specified in
the Product documentation, or other causes beyond the control of Corillian; or
Products installed on any computer hardware or operating system not supported by
Corillian.
Corillian may cease to provide the support services described
herein upon twelve months' prior written notice to Partner if Corillian
generally ceases to support the Products licensed pursuant to the Agreement.
2. REPORTING PROBLEMS AND SUPPORT CONTACTS
If Partner believes it has discovered a software malfunction
in any supported Product, Partner shall send a problem report via electronic
mail to the email address of [email protected]. Partner's report should
contain Partner's company name and the phone number and email address of the
person reporting the call; the priority level (in accordance with the
definitions provided below); the Product for which Partner is reporting a
problem; and the platform on which the Product is installed. If Partner has a
problem which it believes is too
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urgent for a response by electronic mail, or a question which would be best
answered via person-to-person conversation, Partner may call Corillian Support
Services at (503) 646-9507. If Partner is calling outside of support hours for
Partner's Product, Partner may leave voice mail for the support personnel.
Whenever possible, Partner shall report software malfunctions
via electronic mail in preference to a telephone call. To support Partner
better, Corillian requests that Partner's problem reports contain any
transcripts and logs that can easily be included in an email message. For
Priority 1 problems (as defined below), Partner may call and send an email to
ensure the fastest possible response. Corillian also requires that Partner
designate a primary and secondary contact who will be authorized support
contacts.
3. SOFTWARE SUPPORT
3.1 Corillian will promptly report to Partner all known Faults,
undocumented features, or peculiarities of a Product, either alone or in
conjunction with other Products, together with complete details of action being
taken by Corillian in respect of them.
3.2 Corillian will deliver within 7 days to Partner all changes to the
Products made to correct Faults. Each change shall be accompanied by a detailed
statement describing how the change may vary the Product functionality or
performance.
3. SUPPORT HOURS
Corillian's telephone support and other support services are
available seven days a week, twenty four hours a day. Telephone support services
are limited to Corillian Products and Third Party Software.
4. DEFINITION OF PRIORITIES
When reporting a problem, Partner shall indicate its priority
according to the following definitions:
PRIORITY 1: Critical: 1) The issue prevents an installation from
immediate production operation; or 2) The installed Product
repeatedly crashes or loses data; or 3) The installed Product
does not reliably complete transactions; or 4) The Product
cannot be installed at a current Sublicensee's site.
PRIORITY 2: High: 1) The issue prevents the Product from being
used in a production environment; or 2) The Product crashes or
loses data; or 3) The Product does not reliably complete
transactions; or 4) The Product does not recover from errors
properly; 5) The Product performance is too slow to support
the specific number of transactions.
PRIORITY 3: Medium: 1) The Product does not behave as documented;
2) The documentation is in error, is unclear, or should be
expanded; 3) The required
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documentation is missing; or 4) The issue prevents a Product
from performing as needed by the Partner or Partner's
customer.
PRIORITY 4: Low: 1) Cosmetic changes and subjective preferences;
2) A new feature is required to allow production operation; 3)
A new feature will improve the Product's functionality,
usability, reliability, performance, or supportability; or 4)
Functionality not related to the intent of the Product; or 5)
The issue should be addressed, but does not have significant
impact on the Partner or Partner's customer.
Partner is responsible for ensuring that the priority it
assigns to a problem adheres to the foregoing definitions. Corillian reserves
the right to re-prioritize a problem report that is not reasonably consistent
with these definitions. If Corillian does so, Corillian shall so advise Partner
in writing and shall cooperate with Partner to come to an agreement on level of
priority.
5. RESPONSE PROCEDURES AND SUPPORT LEVELS
Corillian's response is provided at multiple levels to best
match the need of the issues. Corillian will use the appropriate support level
to focus attention on the most critical issues first, and will cooperate with
Partner in coming to agreement on which is the appropriate level of support for
a given issue. The following are the four levels of support:
LEVEL A: Onsite support for escalated issues that cannot be
resolved remotely.
LEVEL B: Critical / Site Down issues. Response time:
30 minutes.
LEVEL C: Response time: 6 hours.
LEVEL D: E-mail support for general questions. Response time:
1 business day.
Priority 1 and Priority 2 problems shall be
assigned to Levels A or B, Priority 3 problems shall
be assigned to Levels C or D, Priority 4 problems
shall be assigned to Level D.
6. ACTION PLANNING AND COMMUNICATION
In reference to any Priority 1 and 2 problem reports,
Corillian will immediately use its best efforts to restore the system to proper
operation (if necessary) and, within five (5) days of escalation, provide an
action plan for a long term fix for the issue. The action plan will include
details on the nature of the fix and the time frame of resolution. Corillian and
Partner acknowledge that under some circumstances it may be most expedient for
Corillian's support personnel to dial in and directly access Partner's computer
facilities. Additionally, Corillian may under some circumstances make support
personnel available for on-site work at Partner's location (with Partner's
approval), at an additional then-current cost as outlined in section 2 above.
Daily review of status throughout the entire process will be available to
Partner through Corillian's normal technical support personnel.
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7. SOFTWARE UPDATES AND UPGRADES
7.1 Corillian shall provide Partner with any Updates to the Products at
no additional charge. Updates shall be furnished to Partner within thirty
(30) days of their being made generally available to any of Corillian's other
customers. Corillian will fully test each Update to ensure it complies in all
respects with the Product specifications. Updates shall mean any
modifications or revisions, other than Upgrades, to the Products or related
documentation that corrects errors, provide patches, support new releases of
the operating systems with which the software is designed to operate, improve
existing functions and performance, or provide other incidental updates and
corrections, or are identified by Corillian as mandatory change to the
Products.
7.2 Corillian shall offer Upgrades to Partner at the lowest prices
offered to any of its customers. Partner shall not be required to purchase any
Upgrade offered by Corillian. Upgrades shall mean changes or additions, other
than Updates to the Products or related documentation, including all new
releases that add new functionality, or significantly improve performance by
changes in system design or coding such as, by way of illustration and not
limitation, changes or additions to the Products and related documentation that
(1) have a value and utility separate from the use of the Products or
documentation; (2) as a practical matter, could be priced and offered separately
from the Products or documentation; and (3) are not made available to any of
Corillian's customers without separate charge.
7.3 Partner shall not be obliged to adopt any new version of a Product,
however Corillian shall only be obligated to support and maintain the most
current and one (1) previous version of the Poftware unless otherwise agreed by
Corillian.
7. ADDITIONAL SUPPORT
Corillian reserves the right to assess a fee of two hundred dollars ($200) per
hour (with a one-hour minimum) for Client's requests for support for
non-Corillian Products or for support that it is determined results from
scripts, modifications or enhancements to the Products made by Partner for a
Sublicesee.
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EXHIBIT 3
DATA ACQUISITION SPECIFICATIONS
1. ACQUISITION AND DATA EXCHANGE
Corillian must acquire financial data nightly for all users.
Balances and transactions that appear on a financial institution's Web site
before 5:00pm in time zone of most western states served by Web site must be
included in that night's data (example: Wells Fargo's Web site serves states in
Pacific, Mountain, and Central time zones. Balances and transactions appearing
on Wells' Web site until 5:00pm PST are included).
The total time taken to acquire all data combined with the time taken to
transmit that data to Customers must fit within the time window of 5pm - 4am
PST. All acquired data shall be transferred to Customers by 4:00am PST.
Corillian is not responsible for data acquisition delays or failures caused by
the unavailability of a target Web site, incorrect pin or user names provided to
Corillian, accounts that have been disabled by the financial institution or any
other cause not within the reasonable control of Corillian. Corillian is
responsible for all other "Acquisition Failures" (defined below) such as target
Web site changes or unique user characteristics. An "Acquisition Failure" is
defined for purposes of this Agreement as the inability to obtain either
balances or recent transactions for a given user. The metrics for Acquisition
Failure and recovery are divided into two groups:
LEVEL 1 (TOP 20 FI'S ACCORDING TO NUMBER OF USERS SIGNED UP)
Acquisition occurs for every user's account that is signed up with no
more than 0.5% failure rate per day. Failure recovery rate must adhere
to the following chart:
- IF BETWEEN 100% AND 40% FAILURE - must get to < =40% failure in
24hrs, < =10% in 48hrs, < =0.5% in 72hrs
- IF < =40% FAILURE - < =10% failure in 24hrs, < =0.5% in 48hrs
- IF < =10% FAILURE - < =0.5% failure in 24hrs
LEVEL 2 (FI'S NOT IN TOP 20 ACCORDING TO NUMBER OF USERS SIGNED UP)
Acquisition occurs for every user's account that is signed up with no
more than 2% failure rate per day. Failure recovery rate must adhere to
the following chart:
- IF BETWEEN 100% AND 60% FAILURE - must get to < =60% failure in
24hrs, < =25% in 48hrs, < =10% in 72hrs, < =2% in 96hrs
- IF < =60% FAILURE - < =25% failure in 24hrs, < =10% in 48hrs, < =2%
in 72hrs
- IF < =25% FAILURE - < =10% failure in 48hrs, < =2% in 48hrs
- IF < =10% FAILURE - < =2% failure in 24hrs
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2. SCHEDULED MAINTENANCE
Corillian shall notify Partner in advance of any scheduled service (network,
server, content, data) maintenance. As a general rule, Corillian shall notify
client of weekly/monthly windows it keeps open for periodic maintenance work.
If the maintenance goes beyond the ETA, Corillian shall send periodic updates
with new ETAs. Corillian shall also notify Partner when such maintenance has
been completed.
3. UNSCHEDULED MAINTENANCE
For emergency situations, Corillian shall make all commercially practicable
efforts to notify Partner prior to commencing service-impacting maintenance, but
Partner acknowledges that this is not always realistic or efficient.
For unscheduled maintenance less than 5 minutes in duration that does not make
the entire service inaccessible, Corillian shall notify Partner of such as part
of its monthly reporting.
For unscheduled maintenance greater than 5 minutes, Corillian shall notify (PM
or the alias) within 60 minutes after the fact. Client needs a simple
description of the problem and the steps taken to correct.
Additionally, if Corillian has more than three 5-minute outages or one 30-minute
outage within a 24-hour period, they shall make every effort notify Partner
during that same 24-hour period for the purpose of explaining such outages.
4. OVERALL UPTIME/DOWNTIME
Downtime will be measured as two aspects:
- Service degradation - some portions of the service are inaccessible,
or access to the service is sporadic.
- Service outage - the entire service is inaccessible.
Corillian will strive for zero service degradation each month outside of
published maintenance windows and zero service outages at all times.
Corillian will undertake all commercially reasonable steps to meet the following
service level performance each month:
- Less than 1 hour total in the "service outage" state.
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- Less than 3 hours total in the "service degradation" state
(exclusive of service outages) outside of the published maintenance
window.
- Less than 10 hours total in the "service degradation" state
irrespective of the maintenance window.
- Less than 30 consecutive minutes in the "service degradation" state
during our defined peak times.
- 100% notification of all maintenance as defined above.
5. ESCALATION
Corillian will provide a method of 24x7x365 notification that includes; Email
alias/name and/or suitable web-based problem notification resource, phone and/or
pager number of appropriate operations resources.
Partner will wait 30 minutes for "service degradation" level issues to be
resolved before Client utilizes this notification path so that Corillian can
efficiently utilize the maintenance notification process defined above. For
service outages, Partner may contact Corillian after 5 minutes.
Partner will utilize email or its alternative as the primary means for
notification of service-impacting issues. However, if Partner perceives a
service outage situation or if Partner doesn't get a suitable response to its
email inquiry, Partner may call or page.
Corillian shall contact the Partner "Alias" provided to Corillian from time to
time for communication of scheduled and unscheduled maintenance, and the
assigned Partner Program Manager for monthly Corillian reporting and other
issues.
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EXHIBIT 4
CORILLIAN CORPORATION
Voyager Source Code Escrow Agreement
Effective Date: January 22, 2000 CORILLIAN CORPORATION
Parkers' Edge Ltd. ("Client") Corillian Corporation ("Corillian")
Level 2 3601 SW Murray Blvd., Suite 300
79 Albert Street Beaverton, Oregon 97005
Auckland, NZ (503) 627-0729
FAX (503) 641-5575
Corillian, by its signature indicating acceptance hereof,
grants to Client a Voyager Source Code Escrow Account ("Account") with Datasafe,
Inc. ("Escrow Agent") as agreed to herein. Corillian and Client have entered
into a Voyager License Agreement pursuant to which Corillian will grant to
Client during the term of said Agreement a non-exclusive, non-transferable
License to use a production copy of the Voyager Products named on the Voyager
Product Schedule(s) (such products collectively referred to herein as the
"Products.")
STANDARD TERMS AND CONDITIONS
1. Escrow Material
The term "Escrow Material" as used in this Agreement means (i)
the source code of all of the Products, in such form that will allow Client to
build and compile usable object code, (ii) any and all updates, modifications,
revisions, and enhancements to be delivered pursuant to the Voyager License
Agreement, and (iii) any and all documentation developed by Corillian or in its
possession pertaining to the applicable source code.
2. Additions to Escrow Material
If Corillian develops updates, modifications, revisions or
enhancements of the Products which are to be delivered by Corillian to Client
pursuant to the Voyager License Agreement, then the related source code shall
constitute additional Escrow Material. Within ten (10) business days after the
release of such additional Escrow Material, Corillian shall give written notice
thereof to Client, describing in detail such additional Escrow Material.
Such additional Escrow Material shall be deposited with Escrow Agent as provided
in Section 4 below.
3. Inspection
Corillian shall permit Client to inspect and to determine the
completeness of the Escrow Material before it is deposited into escrow. Client's
inspection of the Escrow Material shall take place at Corillian's main office
located in Beaverton, Oregon. Such inspection shall
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include a "build" of the object code of the Product software. After such
inspection, Corillian shall seal the Escrow Material in a labeled container and
deliver it for deposit into escrow as provided in Section 4.
4. Deposit
Within ten (10) days after the release of any applicable
Product, Corillian shall deposit the relevant Escrow Material with Escrow Agent.
Escrow Agent shall issue to Corillian a receipt for the Escrow Material upon its
delivery to Escrow Agent.
5. Storage
Escrow Agent will accept the deposit of Escrow Material and
will preserve and protect the Escrow Material at Escrow Agent's offices
designated in Section 13. Escrow Agent shall prohibit any person (including
employees of Corillian) from gaining access to the Escrow Material except (a) as
provided by the terms of this Agreement, or (b) as otherwise directed by court
order.
6. Responsibilities
In performing its duties under this Agreement, Escrow Agent is
authorized to conclusively rely upon any statement, consent, agreement, or other
instrument not only as to its due execution, its validity, and the effectiveness
of its provisions, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine
or to have been presented or signed by a proper person or persons. Escrow Agent
shall not be responsible or liable for any promise, representation, agreement,
condition, or stipulation not set forth in this Agreement; for the sufficiency,
correctness, genuineness, or validity of any instruments or documents deposited
with Escrow Agent; for the form of execution thereof or the identity, authority,
or rights of any person executing the same; for the performance of or compliance
with the terms or conditions of any such instruments; for the maintenance of any
property covered by this Agreement, including, but not limited to, payment of
taxes, assessments, upkeep charges, or repair bills; for the sufficiency or
priority of any security or the value or title of any property; for any loss
which may occur by reason of forgeries, false representations, or the exercise
of Escrow Agent's judgment in any particular manner; or for any other reason
except negligence or intentional misconduct.
7. Right to Escrow Material; Use of Escrow Material
Client shall be entitled to receive the Escrow Material upon
or after the occurrence of any of the following events ("Events of Default"):
7.1 The making of an assignment for the benefit of creditors by
Corillian (i.e., the transfer of all or substantially all of Corillian's
property to another person in trust to collect any money owing to Corillian, to
sell property, to distribute the proceeds to Corillian's creditors, and to
return the surplus, if any, to Corillian);
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7.2 The determination by a court of competent jurisdiction or an
arbitrator that Corillian is bankrupt, or (i) an admission by Corillian that it
is bankrupt, or (ii) Corillian applying for or consenting to the appointment of,
or the taking of possession by a receiver, custodian, trustee, or liquidator of
itself or all or the substantial part of its property, or (iii) an order for
relief is entered adjudicating Corillian as a bankrupt under Chapter 7 of the
Federal Bankruptcy Code;
7.3 The sale of Corillian or a merger in which Corillian is not the
surviving party if the acquiring or surviving party in such sale or merger does
not assume Corillian's rights and duties under the Voyager License Agreement;
7.4 The liquidation of Corillian or Corillian's failure to continue in
its current business; or
7.5 Corillian's failure to correct defects in the Voyager Product
software or to otherwise support or enhance the software pursuant to the
obligations imposed on it pursuant to the Voyager Product Maintenance Terms..
8. Procedure
8.1 DEMAND. Subject to paragraph 8.2, Escrow Agent shall hold the
Escrow Material until such time as it shall receive an affidavit signed by an
officer of Client under penalty of perjury ("Client's Affidavit") stating that:
(i) one of the events described in Section 7 has occurred entitling Client to
receive the Escrow Material; and (ii) Client has delivered a copy of Client's
Affidavit and any accompanying documents to Corillian in accordance with Section
13. Upon receipt of Client's Affidavit, Escrow Agent shall, within three
business (3) days of such receipt, provide Corillian with a copy of Client's
Affidavit.
8.2 OBJECTION. Escrow Agent shall deliver the Escrow Material to Client
or as otherwise directed in Client's Affidavit ten (10) business days following
the date on which Client delivers Client's Affidavit under paragraph 8.1, unless
within such time period Escrow Agent receives a reasonable written objection
from Corillian in the form of an affidavit signed by an officer of Corillian
under penalty of perjury ("Corillian's Affidavit") that: (i) specifically denies
the statements made by Client in Client's Affidavit and describes the basis for
such denial; (ii) is accompanied by proof that a copy of Corillian's Affidavit
was delivered to Client in accordance with Section 13; and (iii) states that
Corillian will submit to arbitration in accordance with paragraph 8.3 and will
abide by any final order or decision rendered by the arbitrators in such
arbitration. If Corillian's Affidavit is timely and in appropriate form when
received, then Escrow Agent shall not deliver the Escrow Material until it
receives (a) a written, notarized agreement between Corillian and Client
authorizing such delivery, (b) any court order determining that Client is
entitled to delivery of the Escrow Material under this Agreement, or (c) a final
order or decision by the arbitrators under paragraph 8.3. Escrow Agent shall
deliver the Escrow Material in accordance with the directions in the written
agreement, court order, or arbitrators' order or decision described in (a)
through (c) above.
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8.3 ARBITRATION. Upon receipt of Corillian's Affidavit, Corillian and
Client shall submit the issue to arbitration proceedings in Portland, Oregon,
which proceedings shall be conducted under the commercial rules then prevailing
of the American Arbitration Association by a panel of three (3) arbitrators.
Corillian and Client shall modify the time schedules provided under such rules
and shall use their best efforts to meet deadlines such that the arbitration is
concluded within ninety (90) days following its initiation. The sole issues for
arbitration shall be whether Client is entitled to receive the Escrow Material
under Section 7 including, without limitation, issues related to the Voyager
License Agreement necessary to determine whether Client is entitled to the
Escrow Material under Section 7.5, and the award of costs and fees described
below. If the arbitrators determine that the Client is entitled to receive the
Escrow Material under Section 7, the arbitrators shall order Escrow Agent to
release the Escrow Material to Client. The prevailing party in the arbitration
proceedings shall be awarded reasonable attorneys' fees, expert and non-expert
witness costs and expenses, and all other costs and expenses incurred directly
or indirectly in connection with the proceedings, including, but not limited to,
any fees and expenses incurred by Escrow Agent, notwithstanding any other
provision of this Agreement. The decisions of the arbitrators shall be final and
binding for all purposes on Corillian, Client, and Escrow Agent and may be
entered and enforced in any court of competent jurisdiction.
8.4 EQUITABLE RELIEF. Both Corillian and Client acknowledge that
important issues are at stake related to Corillian and Client's rights to the
Escrow Material under Section 7. Therefore, both Corillian and Client shall be
entitled, at their discretion, to seek court relief, including, but not limited
to, preliminary injunctive, emergency, specific performance, and other equitable
relief without proof of monetary damages. Corillian and Client's agreement to
submit to arbitration under paragraph 8.3 shall not preclude Corillian or Client
from seeking such relief pending the outcome of arbitration. Client shall not
disclose any Escrow Material obtained through judicial relief under this
paragraph to any person other than employees, agents, contractors, and
affiliates of Client who need to know and are obligated to keep the Escrow
Material confidential, and shall use the Escrow Material only as authorized
under Section 9 or under the Voyager License Agreement. Client shall return the
Escrow Material and all copies of the Escrow Material to Escrow Agent if so
directed by the final order or decision of the arbitrators under paragraph 8.3.
9. Use
Client may use the Escrow Material provided under this
Agreement solely to maintain and support the Products, modify, enhance, and
upgrade the Products for license it has purchased from Corillian. Client will
not, under any circumstances, sell, disclose, assign, transfer or convey in any
manner, or dispose of the Escrow Material or any portion of the Escrow Material.
10. Reliance
Escrow Agent may conclusively rely upon and shall be
protected, indemnified, and held harmless by Client and Corillian, jointly and
severally, in acting upon the written
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(which shall include instructions given by telecopier or other
telecommunications device) instructions of any officer of either Corillian or
Client or of counsel to either of them with respect to any matter relating to
its actions as Escrow Agent under this Agreement. The Escrow Agent shall comply
with any such instructions, notwithstanding any demand or notice to the contrary
from any person, and is relieved from liability for doing so.
11. Indemnification
Client and Corillian, jointly and severally, covenant and
agree to indemnify Escrow Agent and hold it harmless (without prejudice to a
determination between Client and Corillian as to which party shall bear the
ultimate responsiblity) against any loss, liability, or expense arising out of
or in connection with its performance of its duties under this Agreement,
including, but not limited to, legal and other fees and expenses and including
specifically, but without limitation, any legal or other expenses with respect
to any action for interpleader by Escrow Agent, except that Escrow Agent shall
not be indemnified against any such loss, liability, or expense arising out of
its negligence or intentional misconduct. Escrow Agent shall be under no
obligation to institute or defend any action, suit, or legal proceeding in
connection with this Agreement, unless first indemnified and held harmless to
its satisfaction in accordance with the foregoing.
12. Term of Agreement; Termination
The term of this Agreement and the Account granted hereunder
shall commence upon acceptance of this Agreement by Corillian from the Effective
Date above and shall continue in effect until Corillian and Client shall both
notify Escrow Agent by notarized certificate, signed by an officer of both
Corillian and Client, that Corillian no longer has any obligations to Client
requiring the deposit of the Escrow Material in escrow, whereupon Escrow Agent
shall destroy the Escrow Material and provide acknowledgment thereof to
Corillian.
13. Notices
All notices, reports, instructions, requests, and other
communications given under this Agreement shall be in writing and shall be
deemed to have been given or made (i) if by mail, when received by certified
mail, postage prepaid, return receipt requested; or (ii) if by facsimile, when
sent by facsimile to the facsimile number set forth below with evidence of
receipt by sender or (iii) if by courier, when received; provided, however, that
either party may change its address or facsimile number for notices by providing
notice to the other party or such change in the manner provided herein. Notices
shall be directed to the following addresses or facsimile numbers:
TO ESCROW AGENT: Datasafe, Inc.
P.O. Box 23056
Tigard, OR 97281-3056
Telephone: (503) 620-3423
Facsimile: (503) 684-3332
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TO CORILLIAN: Corillian Corporation
3601 S.W. Murray Blvd., Suite 300
Beaverton, OR 97005
Telephone: (503) 627-0729
Facsimile: (503) 641-5575
Attention: Thomas Brooke
TO CLIENT: Parkers' Edge LTD
Level 4, 55 Sussex St.,
Sydney, NSW 2000.
Telephone: +61-2-9249-8900
Facsimile: +61-2-9279-0933
Attention: Janet Parker
14. Duties of Escrow Agent
Escrow Agent shall have no duties or obligations except those
expressly set forth in this Agreement, and no implied duties or obligations
shall be read into this Agreement against Escrow Agent. Escrow Agent shall have
no responsibilities or liability to any of the parties or their successors for
any action taken by it in good faith upon receipt of any instrument or other
writing believed by it to be genuine and to be properly signed or presented. In
case any property deposited under this Agreement shall be attached, garnished,
or levied upon pursuant to an order of court or other authority having
jurisdiction, or the delivery thereof shall be stayed or enjoined by an order of
court, or any other order, judgment, or decree shall be made or entered by any
court affecting such property or any part thereof (unless such order, judgment,
or decree has been stayed, pending appeal), Escrow Agent shall obey and comply
with all final writs, orders, judgments, or decrees so entered or issued by any
court, without the necessity of inquiry whether such court had jurisdiction;
and, in case such Escrow Agent obeys or complies with any such writ, order,
judgment, or decree, it shall be held harmless and indemnified by Client by
reason of such compliance. Upon receipt of notice of an order, writ, judgment,
or decree, Escrow Agent will transmit copies of said writ and other process or
pleading received to all parties, and shall not comply with any writ, order,
judgment, or decree until seven (7) days following delivery of such copies to
all parties if permitted under such document.
15. Expenses
Corillian and Client shall each pay one-half of the fees and
expenses to Escrow Agent directly in accordance with Escrow Agent's fee
schedule. The Escrow Agent's fees and expenses will be paid annually in advance.
Any costs incurred by the Escrow Agent will be billed at the end of the month in
which they are incurred.
16. Taxes
Corillian and Client shall each be responsible for one-half of
any federal, state, excise, and local government fees, assessments, charges, and
taxes connected with this Agreement.
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17. Withdrawal of Escrow Agent
Escrow Agent may resign on sixty (60) days written notice to
each of the parties. Thereafter, upon payment of all fees and costs earned or
incurred by Escrow Agent in connection with this Agreement, Escrow Agent shall
deliver the Escrow Material to a successor escrow agent named by Corillian and
Client or, if none, to the party named in written instructions from Corillian
and Client. If a successor escrow agent has not been appointed and has not
accepted appointment by the end of such sixty (60) day period, Corillian or
Client may apply to a court of competent jurisdiction for the appointment of a
successor escrow agent and the reasonable costs, expenses, and attorneys' fees
of Escrow Agent that are incurred in connection with such a proceeding shall be
paid equally by Corillian and Client.
18. Severability
If any of the terms, conditions, or provisions of this
Agreement shall be held invalid, illegal, or unenforceable, then,
notwithstanding, this Agreement shall remain in full force and effect and the
legality, validity, and enforceability of the remaining terms, conditions, or
provisions shall not be affected.
19. Successors and Assigns
This Agreement shall inure to the benefit of, and shall be
binding upon, the permitted successors and assigns of the parties.
20. Headings
The headings of the sections and paragraphs of this Agreement
are solely for convenience of reference and are not part of and are not intended
to define, govern, limit, or aid in the construction of this Agreement.
21. Waiver
No failure or delay on the part of any party in exercising any
right, power, or remedy under this Agreement may be, or may be deemed to be, a
waiver thereof; nor may any single or partial exercise of any right, power, or
remedy preclude any other further exercise of any right, power or remedy.
22. Implementation
Each of the parties shall, at the request of the other party,
deliver to the requesting party all further documents or other assurances as may
reasonably be necessary or desirable in connection with this Agreement.
23. Attorneys' Fees
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In the event of any dispute arising out of the subject matter
of this Agreement, the prevailing party shall recover, in addition to any other
damages assessed, its reasonable attorneys' fees and court costs incurred in
arbitrating, litigating, or otherwise settling or resolving such dispute.
24. Governing Law
The validity, construction and performance of this Agreement
shall be governed by the laws of the State of Oregon and the exclusive venue for
the resolution of any dispute arising with respect to this Agreement shall be
the state or federal courts in Oregon. This Agreement shall be interpreted,
construed, and enforced in all respects in accordance with the laws of the State
of Oregon without reference to its choice of law rules, except to the extent the
same are preempted by the laws of the United States of America.
25. Entire Agreement
This Agreement constitutes the entire agreement of the parties
on the subject matter of this Agreement and no amendment, modification, or
addition hereto shall have effect or be binding unless in writing and executed
by all of the parties. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be one and the same instrument.
UNDERSTOOD AND ACCEPTED:
CLIENT: CORILLIAN:
PARKERS' EDGE CORILLIAN CORPORATION
DATE: DATE:
-------------------------------- ----------------------------
BY: BY:
---------------------------------- -----------------------------
Janet Parker, Managing Director Kirk Wright, President
ESCROW AGENT:
DATASAFE, INC.
DATE:
--------------------------------
BY:
----------------------------------
-38-
<PAGE>
EXHIBIT 5
VOYAGER PRODUCTS PRICING SCHEDULE
- ---------------------
VOYAGER QUOTE CALCULATOR
<TABLE>
<CAPTION>
PER ACCT OUTRIGHT
--------------------------------------------------------
<S> <C> <C> <C>
ON-LINE ACCTS 100,000 [*] [*]
-------------------
VOYAGER (INC FIRST 15,000 ACCTS AND CONTROL CENTER) 1 [*] [*]
-------------------
BACKUP SERVERS (SEPARATE LOCATION) 1 [*] [*]
-------------------
RETAIL BANKING 1 [*] [*]
-------------------
OFX PUBLISHING 1 [*] [*]
-------------------
BUSINESS BANKING 1 [*] [*]
-------------------
RETAIL MARKETING 1 [*] [*]
-------------------
EBPP 1 [*] [*]
- ------------------------------------------------------------------------------------------------------------
OUTRIGHT SALE TOTAL [*] [*]
OR 2 YEAR LEASE (PM) [*] [*]
OR 3 YEAR LEASE (PM) [*] [*]
OR 5 YEAR LEASE (PM) [*] [*]
MAINTENANCE @ [*] PA [*] [*]
-------------------
HOSTING @ [*] PA 1 [*] [*]
-------------------
IMPLEMENTATION @ [*] [*] [*]
============================================================================================================
GRAND TOTAL (YEAR ONE) [*] [*]
-------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
PRICE BANDS
15,001- 25,001- 50,001- 100,001- 200,001- 500,001- 1,000,001-
25,000 50,000 100,000 200,000 500,000 1,000,000 5,000,000
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ON-LINE ACCTS [*] [*] [*] [*] [*] [*] [*]
VOYAGER (INC FIRST 15,000 ACCTS AND CONTROL CENTER) [*]
BACKUP SERVERS (SEPARATE LOCATION) [*]
RETAIL BANKING [*]
OFX PUBLISHING [*]
BUSINESS BANKING [*]
RETAIL MARKETING [*]
EBPP [*]
- ----------------------------------------------------
OUTRIGHT SALE TOTAL ACCTS REVENUE
OR 2 YEAR LEASE (PM) [*] [*]
OR 3 YEAR LEASE (PM) [*] [*]
OR 5 YEAR LEASE (PM) [*] [*]
MAINTENANCE @ [*] PA [*] [*]
HOSTING @ [*] PA
IMPLEMENTATION @ [*] [*] [*]
====================================================
GRAND TOTAL (YEAR ONE) [*] [*]
[*] [*]
</TABLE>
* Portion has been omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
ONESOURCE QUOTE CALCULATOR
<TABLE>
<CAPTION>
REGISTERED USERS PER ACCT FEE (PM) TOTAL REVENUE
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
2 YEAR TERM [*] [*] [*] [*]
OR 3 YEAR TERM (@ [*] DISCOUNT) [*] [*] [*]
OR 5 YEAR TERM (@ [*] DISCOUNT) [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------------
SETUP (ONE-TIME, [*] OF YEAR ONE FEES) [*] [*]
========================================= ------------------------------
<CAPTION>
PRICE BANDS
25,001- 50,001- 100,001- 200,001- 500,001- 1,000,001-
1-25,000 50,000 100,000 200,000 500,000 1,000,000 5,000,000
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 YEAR TERM [*] [*] [*] [*] [*] [*] [*]
OR 3 YEAR TERM (@ [*] DISCOUNT)
OR 5 YEAR TERM (@ [*] DISCOUNT)
- -----------------------------------------
SETUP (ONE-TIME, [*] OF YEAR ONE FEES)
=========================================
</TABLE>
Notes
1. Minimum setup fee = [*]
2. Use Voyager calculator if that software is required
*Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Comission.
-39-
<PAGE>
ONESOURCE QUOTE CALCULATOR
<TABLE>
<CAPTION>
PLEASE INSERT VARIABLE IN YELLOW CELL ONLY
REGISTERED USERS PER ACCT FEE (PM) TOTAL REVENUE
-----------------------------------------------------------
<S> <C> <C> <C> <C>
2 YEAR TERM [*] [*] [*] [*]
-------------------
OR 3 YEAR TERM (@ [*]% DISCOUNT) [*] [*] [*]
OR 5 YEAR TERM (@ [*]% DISCOUNT) [*] [*] [*]
- -----------------------------------------------------------------------------------------------------------------------
SETUP (ONE-TIME, [*] OF YEAR ONE FEES) [*] [*]
========================================================== ----------------------
<CAPTION>
-----------------------------------------------------------------------
PRICE BANDS
25,001- 50,001- 100,001- 200,001- 500,001- 1,000,001-
1-25,000 50,000 100,000 200,000 500,000 1,000,000 5,000,000
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 YEAR TERM [*] [*] [*] [*] [*] [*] [*]
---------------------------------------------------------------------
OR 3 YEAR TERM (@ [*]% DISCOUNT)
OR 5 YEAR TERM (@ [*]% DISCOUNT)
- ----------------------------------------------------------
SETUP (ONE-TIME, [*] OF YEAR ONE FEES)
==========================================================
</TABLE>
Notes
1. Minimum setup fee = [*]
2. Use Voyager calculator if that software is required
*Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Comission.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Corillian Corporation:
We consent to the use of our Independent Auditors' Report dated January 21,
2000, relating to the balance sheets of Corillian Corporation as of
December 31, 1998 and 1999, and the related statements of operations, redeemable
convertible preferred stock and shareholders' equity (deficit) and cash flows
for the period from April 7, 1997 (date of inception) to December 31, 1997 and
for each of the years in the two-year period ended December 31, 1999 which
report is included in the Registration Statement and Prospectus of Corillian
Corporation, and to the reference to our firm under the headings "Selected
Financial Data" and "Experts" in the Prospectus.
/s/ KPMG LLP
Portland, Oregon
January 26, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS CONTAINED IN CORILLIAN CORPORATION'S
REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE COMMISSION ON
JANUARY 27, 2000
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-09-1997
<PERIOD-END> DEC-31-1999
<CASH> 8,502,000
<SECURITIES> 10,357,000
<RECEIVABLES> 2,849,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,906,000
<PP&E> 3,252,000<F17>
<DEPRECIATION> (325,000)
<TOTAL-ASSETS> 25,902,000
<CURRENT-LIABILITIES> 5,930,000
<BONDS> 0
31,501,000
910,000
<COMMON> 3,482,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,902,000
<SALES> 7,736,000
<TOTAL-REVENUES> 7,736,000
<CGS> 6,651,000
<TOTAL-COSTS> 6,651,000
<OTHER-EXPENSES> 11,478,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,994,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,994,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,994,000)
<EPS-BASIC> (0.91)
<EPS-DILUTED> (0.91)
<FN>
<F17>See Note 3(a) to Financial Statements.
</FN>
</TABLE>
