<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 2000.
REGISTRATION NO. 333-95513
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
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(a) 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."
724 Solutions Inc. has agreed to purchase directly from us in a private
placement that will occur concurrently with the closing of this offering, shares
of our common stock having an aggregate purchase price of approximately
$7 million. All of these shares will be unregistered shares purchased at the per
share price to the public set forth below.
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....... 58
UNDERWRITING.......................... 60
NOTICE TO CANADIAN RESIDENTS.......... 63
LEGAL MATTERS......................... 64
EXPERTS............................... 64
WHERE YOU CAN FIND MORE INFORMATION
ABOUT US............................ 64
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. 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 solutions that enable banks, brokers, financial
portals and other financial service providers to rapidly deploy Internet-based
financial services. Our solutions allow consumers to conduct financial
transactions, view personal and market financial information, pay bills and
access other financial services on the Internet.
The Internet is being used increasingly to deliver Internet-based financial
services that provide consumers significant benefits, such as twenty-four hour,
real-time access to information, a convenient means to pay bills and personal
finance management tools. These benefits have made Internet-based financial
services extremely popular among consumers, and personal finance 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.
Our Voyager eFinance Suite is a software platform combined with a set of
applications for Internet banking, electronic bill presentment and payment,
targeted marketing and online customer relationship management. Voyager
integrates into our customers' existing database applications and systems and
enables them 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 and
delivers this content to our subscribers. By subscribing to OneSource, financial
institutions and financial portals can offer their customers a service that
quickly consolidates all of their customers' financial information in one
comprehensive location. As a result, a subscriber's customer can see financial
information from all of his or her accounts in one place.
Our software, which scales to accommodate millions of users, and our
professional and content services enable our customers to rapidly deploy new or
enhanced Internet-based financial services 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 different components from multiple
vendors.
Our objective is to be the leading provider of Internet 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 Internet finance 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 we have established with such companies as Intuit, Microsoft,
Parkers' Edge and Yahoo! to establish Voyager and OneSource as the solutions of
choice for Internet finance.
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.
2
<PAGE>
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:
- 5,428,836 shares of common stock issuable upon the exercise of stock
options outstanding under our 1997 stock option plan;
- 6,000,000 additional shares of common stock available for issuance under
our 2000 stock incentive compensation plan; and
- 500,000 shares of common stock available for issuance under our 2000
employee stock purchase plan.
The share amounts in this table include shares to be sold by us in the
private placement that will occur concurrently with the closing of this
offering. See "Private Placement."
------------------------
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, and the sale of shares of our common stock in the private
placement that will occur concurrently with the closing of this offering at an
estimated per share price of $ , after deducting the estimated placement
agent compensation 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
functional enhancements to OneSource, such as the ability to integrate financial
information with personal financial management software, 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.
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. 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.
6
<PAGE>
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.
FINANCIAL INSTITUTIONS MAY NOT MARKET INTERNET-BASED FINANCIAL SERVICES
SUCCESSFULLY OR RAPIDLY DEPLOY INTERNET-BASED FINANCIAL SERVICES.
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. 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 investment and financial
institution acceptance.
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, Wachovia and Intuit
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.
CONSOLIDATION IN THE FINANCIAL SERVICES INDUSTRY COULD REDUCE THE NUMBER OF OUR
CUSTOMERS AND POTENTIAL CUSTOMERS.
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;
- entering markets in which we have no or limited prior experience; and
9
<PAGE>
- 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 AND SERVICES MUST INTERACT WITH OTHER VENDORS' PRODUCTS, WHICH MAY
NOT FUNCTION PROPERLY.
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.
10
<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.
12
<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
13
<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.
WITHIN 180 DAYS OF THE DATE OF THIS OFFERING, A SUBSTANTIAL NUMBER OF SHARES OF
OUR COMMON STOCK WILL BECOME ELIGIBLE FOR SALE.
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 do not 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
We estimate our net proceeds from the sale of the shares of our common
stock offered in this offering will be approximately $ million, or
approximately $ million if the underwriters exercise their over-allotment
option in full, based on the initial public offering price of $ per share and
after deducting the underwriting discount and estimated offering expenses. We
estimate that the net proceeds from the sale of shares of our common stock
in the private placement that will occur concurrently with the closing of this
offering will be approximately $ million, based on an estimated per share
price of $ and after deducting the estimated placement agent compensation
payable by us.
At this time, the principal purposes of this offering are to obtain
additional capital to increase our financial flexibility and to create a public
market for our common stock. We intend to use the net proceeds from this
offering and the private placement that will occur concurrently with this
offering as follows:
- an estimated $8 million to $10 million for research and development;
- an estimated $5 million to $10 million for capital expenditures;
- an estimated $15 million to $35 million in connection with sales,
marketing and administrative expenses, which will include the expansion of
our sales and marketing organization; and
- the remainder for working capital and general corporate purposes.
These estimates, however, may not be accurate, and our actual use of
proceeds may vary from these estimates. Our management will have broad
discretion in the application of the net proceeds of this offering and the
private placement that will occur concurrently with this offering.
Pending any use, we intend to invest the net proceeds in short-term,
investment-grade, interest-bearing securities. We intend to invest in only the
highest rated or quality of securities that have at least one of the following
ratings as rated by either Standard & Poor's, Moody's, Fitch, or another
nationally recognized statistical rating organization:
- Long-term--Aa3/AA- or better; and
- Short-term--A1/P1 or better for taxable securities and VMIG1/SP1 for
municipal securities.
Split ratings are not acceptable.
From time to time, we may evaluate opportunities to acquire or invest in
complementary businesses, technologies or products and may use a portion of the
net proceeds from this offering and the private placement that will occur
concurrently with this offering to enter into these type of transactions. We do
not have any understandings, commitments or agreements with respect to any
material acquisitions.
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.
PRIVATE PLACEMENT
724 Solutions Inc. has agreed to purchase directly from us, in the private
placement that will occur concurrently with the closing of this offering, shares
of our common stock having an aggregate purchase price of approximately
$7 million. All of these shares will be unregistered shares purchased at the per
share price to the public set forth on the cover page of this prospectus. This
investor has agreed with us and the underwriters for this offering that it will
not sell or otherwise dispose of any shares of common stock acquired in the
private placement until at least 180 days after this offering.
15
<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, and
the sale of shares of our common stock in the private placement that
will occur concurrently with the closing of this offering at an estimated
per share price of $ , less estimated placement agent compensation.
The table below excludes the following shares:
- 5,428,836 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 $0.56 per share;
- 6,000,000 additional shares of common stock available for issuance under
our 2000 stock incentive compensation plan; and
- 500,000 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, 150,000,000 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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<PAGE>
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 and the private placement. 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, and the sale of shares of our common
stock in the private placement that will occur concurrently with the closing of
this offering at an estimated per share price of $ , and after deducting the
estimated placement agent compensation payable by us for this private placement,
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 and the private placement........................
-------
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 in this offering and in the private placement 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 VARIOUS 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 Internet-based financial 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 service that
quickly consolidates all of their customers' financial information in one
comprehensive location. 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.
Revenues derived from our OneSource service generally involve three elements,
which consist of 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. We
recognized $27,000 of revenues from implementation fees in 1999. Revenues earned
from OneSource monthly service fees are based on a monthly fee for each
financial institution interface we have completed. Revenues earned from client
user fees are based on a monthly fee for each user of the OneSource service.
Both the OneSource monthly service fee and the client user fees are recognized
as services are performed. We did not recognize any revenue in 1999 from monthly
service fees or client user fees. We anticipate recognizing more revenues from
our OneSource service in 2000.
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 custom software engineering
services. Revenues derived from software licenses, therefore, are combined with
revenues derived from the associated implementation and 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
custom software engineering services that are not required for our solutions to
perform basic functions and from maintenance, training and hosting are not
essential to the functionality of the software license or any other service and,
therefore, are each treated as separate revenue elements. For the reported
periods, the revenues derived from these services represented 7.9% and 8.9% of
revenues for 1998 and 1999, respectively. Accordingly, these revenue streams are
not reported separately from the revenues associated with software sales and
implementation services. Maintenance revenues are recognized
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ratably over the term of the associated maintenance contract. Revenues derived
from training, hosting and non-essential 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 the implementation and associated custom
software engineering service elements of our contracts on a fixed fee basis. The
fees charged for these service elements did not adequately price the time and
materials required to complete implementation and associated custom software
engineering services on some of our more complex projects. Because the licenses
are functionally dependent on implementation and 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 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.
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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
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<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.
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<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>
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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 five 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 and in
the concurrent private placement 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
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<PAGE>
in the exchange rates of the international currencies in those markets in
relation to the U.S. dollar and could be harmed.
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, as amended by Statement of Financial Accounting Standards No. 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 133 and SFAS No. 137
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 and SFAS No. 137 for the quarter
ending March 31, 2001. Corillian does not expect the adoption of SFAS No. 133
and SFAS No. 137 to have a significant impact on our results of operations,
financial position or cash flows.
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<PAGE>
BUSINESS
OVERVIEW
We are a leading provider of solutions that enable banks, brokers, financial
portals and other financial service providers to rapidly deploy Internet-based
financial services. Our solutions allow consumers to conduct financial
transactions, view personal and market financial information, pay bills and
access other financial services on the Internet. Our Voyager eFinance Suite is a
software platform combined with a set of 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 and delivers this
content to our subscribers. By subscribing to OneSource, financial service
providers can offer their customers a service that quickly consolidates all of
their customers' financial information in one comprehensive location. Our
software integrates into existing database applications and systems and enables
them to monitor transactions across all systems in real time. Our solutions 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 Internet-based financial
services 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, personal finance 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
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<PAGE>
service industry will need to enhance and expand their Internet-based financial
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 Internet-based
financial 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 Internet-based financial
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 Internet-based financial products and
services on their Internet sites, we believe these competitors will need to
deploy sophisticated and comprehensive Internet finance solutions.
Significant challenges are involved in deploying Internet finance solutions.
Most notably, multiple heterogeneous computing environments, including existing
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 Internet
finance 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
Internet finance solutions can be extremely expensive. As a result, many of
these financial service providers are realizing that rapidly deploying a
differentiated, low-cost Internet-based financial product or service requires a
comprehensive, outsourced packaged software and service solution.
THE CORILLIAN SOLUTION
We are a leading provider of solutions that enable financial service
providers to quickly and easily deploy Internet-based financial services. Our
solutions include a comprehensive suite of software and a content service, both
of which are combined with our professional services to form a complete
outsourced solution for offering Internet-based financial services.
Our Voyager eFinance Suite consists of a software platform and a menu of
applications built upon that platform, all of which we can provide on a hosted
basis or which can run on our customers' premises. Voyager integrates with our
customers' existing databases and systems and enables them to monitor
transactions 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 of these applications.
Our recently introduced OneSource service aggregates financial information
from banks, brokerages and other financial service providers and delivers this
content to our subscribers. By
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subscribing to OneSource, financial service providers can offer their customers
a service that quickly consolidates all of their customers' financial
information in one comprehensive location. As a result, a subscriber's customer
can see financial information from all of his or her accounts in one place.
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 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 software 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 universal 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
Internet finance 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 Internet finance solutions to
both traditional and emerging Internet financial service providers. To that end,
we seek to establish Voyager and OneSource
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as the platform of choice for Internet finance. 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 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 Internet finance solutions 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 Internet finance 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 universal 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 Internet finance 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 solutions 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
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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 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.
This application 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 customer 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
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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 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 different banks, brokerages and other financial
service providers and delivers this content to our subscribers. As a result, a
subscriber's customer can see all of his or her financial information from
different accounts in one place and only needs to remember one login
identification name and password to access all of this financial information.
OneSource simply gathers the requested financial information from all of the
customer's accounts and delivers this content back to the customer through the
OneSource subscriber's website.
We intend to establish OneSource as a comprehensive network of financial
information that we can offer to our subscribers. Some of the key advantages and
features of OneSource include:
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 Internet finance solutions and
only want to retrieve consumer data that can be easily displayed and processed
by their existing systems. 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 eFinance Suite for deploying OneSource.
EXPANDED SERVICES WITHOUT LOSING BRAND IDENTITY. OneSource is a content
service, and our subscribers can control how this content is displayed to their
customers. This allows our subscribers to quickly deploy a new Internet-based
financial service while maintaining the look, feel and branding of their
existing websites.
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
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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 existing 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 Internet-based financial 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 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.
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INTUIT
Intuit is a financial software and Internet-based services company that
develops and markets Quicken-Registered Trademark-,
TurboTax-Registered Trademark-, QuickBooks-Registered Trademark- and the
Quicken.com Internet site-Registered Trademark-. 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 Internet-based financial 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. Intuit offers bill payment and presentment services under a license
agreement with a joint venture in which Intuit is a participant.
Solution: Voyager Electronic Bill Payment technology was incorporated into
the bill payment and presentment services offered by Intuit. The Voyager
technology enables consumers to pay all their household bills over the Internet.
This allowed Intuit to save significant time in getting to market with these
services and enabled an easy connection to its preferred bill payment processor,
CheckFree.
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 that enable them to offer Internet-based financial services. We have
provided our solutions primarily to two major industry groups--large financial
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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 existing host systems of
financial institutions. Voyager routes and validates requests, formats
transaction responses and stores and forwards bill payment instructions.
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 existing
host system, then analyzes and returns the data fields from the response.
Optional applications provide incremental services, such as batch processing of
bill payment transactions or collection of electronic bills.
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 universal Internet data standards 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 applications used to offer Internet-based financial
services. 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
existing host system, providing a means for financial service providers to
easily bring existing applications to the Internet. Our host server
technology allows multiple simultaneous access to different existing 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 quickly 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
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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.
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, Internet-based
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 Internet-based initiatives
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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 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 solutions to the Internet financial services
industry 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.
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.
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We also face competition from our customers and potential customers who
develop their own Internet finance solutions. Rather than purchasing Internet
finance 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 Internet finance 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.
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.
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
39
<PAGE>
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 the
governments of significant foreign countries 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 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.
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.
40
<PAGE>
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.
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
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<PAGE>
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 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. Wright, Barrett and Huret, who will serve
until the annual meeting of shareholders to be held in 2001;
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<PAGE>
- Class II consists of Messrs. Mohan and Jensen, who will serve until the
annual meeting of shareholders to be held in 2002; and
- Class III consists of Messrs. Spooner and Whipple, who will serve until
the annual meeting of shareholders to be held in 2003.
At each annual meeting of shareholders beginning with the 2001 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 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
43
<PAGE>
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 has served as President and Chief Executive Officer of
Internet Payment Exchange, a provider of electronic bill payment, clearing
services. Before forming Internet Payment Exchange, Mr. Braun served as
the chief technology officer of InteliData Technologies Corporation, which
developed the Interpose Financial Engine.
- Richard W. Comandich is a former Senior Vice President, Convenience
Banking at U.S. Bancorp where he worked for 19 years. Mr. Comandich was a
director of Corillian from June 1997 to November 1999.
- Richard Field is a director of Lending Tree, Inc., Integra Information and
Epigen, Inc. From 1978 to 1997, Mr. Field was the Senior Executive Vice
President and a Policy Committee Member at The Bank of New York.
- David M. Williams was a director of Corillian from May 1997 to November
1999. Before joining Corillian, Mr. Williams was Director of Consumer
Software Lab and New Media at Intel Corporation.
- Michael Zucchini retired as the Vice Chairman of Fleet Boston Financial in
December 1999, a position he held for 12 years. Mr. Zucchini is a director
of Technology Solutions Company and its eLoyalty division.
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<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.
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 were originally reserved for issuance upon the exercise of options granted
under the 1997 stock option plan. On March 2, 2000, the board of directors
approved an amendment that caps the 1997 stock option plan at 5,152,789 shares,
which were the number of shares subject to options at that time. 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. Some option agreements may call for accelerated vesting in the
event of these corporate transactions.
2000 STOCK INCENTIVE COMPENSATION PLAN
Our 2000 stock incentive compensation plan enhances 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:
- 6,000,000 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 600,000 shares or 1% of the
adjusted 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 serves as the plan
administrator of the 2000 stock incentive compensation plan. The plan
administrator selects individuals to receive options and specifies 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.
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;
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<PAGE>
- 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 terminates, but the optionee
has the right to exercise the vested portion of the option immediately before
the corporate transaction. Some option agreements may call for accelerated
vesting in the event of a corporate transaction. In addition, the plan
administrator has discretion to accelerate the vesting of options in the event
of a 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 15% 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
5,000 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, 2002.
Subsequent offering periods will commence on February 1 and August 1 each year
and will have a 24 month duration. Each offering period consists of four
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 have reserved the following shares of common stock for
the 2000 employee stock purchase plan:
- 500,000 shares; plus
- an annual increase to be added on the first day of our fiscal year
beginning in 2002 equal to the least of:
- 500,000 shares;
- 2% of the adjusted 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 and sold in
the private placement.
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 150 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 and the concurrent private placement,
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,
55
<PAGE>
including the right of the underwriters of an offering to limit the number of
shares included in the registration.
The investor in the private placement that will occur concurrently with this
offering is entitled to rights with respect to the registration of the shares
acquired in the private placement under the Securities Act. Under the terms of
an agreement with us, if we or the other holders of registration rights
discussed above propose to register any securities under the Securities Act,
this investor is entitled to notice of registration and is entitled to include
its shares of common stock in the registration. 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.
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;
- prohibiting the removal of directors without cause;
- preventing shareholders from filling vacancies on the board of directors;
- requiring supermajority approval of the shareholders to effect amendments
to the bylaws and amendments to the provisions of our articles
establishing a classified board; 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
56
<PAGE>
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
- 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.
OREGON CONSTITUENCY PROVISION
Oregon law provides that our board of directors may consider the following
factors in determining whether a proposed acquisition is in the best interests
of Corillian:
- the social, legal and economic effects of the proposed transaction on our
employees, customers and suppliers and on the communities and geographical
areas in which we operate;
- the economy of the state of the nation;
- the long-term as well as short-term interests of Corillian and its
shareholders, including the possibility that these interests may be best
served by the continued independence of Corillian; and
- other relevant factors.
This provision allows our board of directors to consider other interests
other than those of the majority of independent shareholders in determining
whether an acquisition is in our best interests.
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."
57
<PAGE>
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 and the concurrent private placement, 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. The shares to be acquired in the private placement that
will occur concurrently with the closing of this offering will be 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 and the investor in the
private placement that will occur concurrently with the closing of this offering
have agreed not to transfer or dispose of, directly or indirectly, any shares 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. The underwriters have no present intent to release affiliates from
the lockup agreements.
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
58
<PAGE>
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, and the investor in
the private placement that will occur concurrently with this offering is
entitled to rights with respect to the registration of the shares acquired in
the private placement 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.
59
<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.
A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations. FBR Investment Services, Inc. is an on-line
broker/dealer that may receive an allocation of shares of common stock through
its affiliate Friedman, Billings, Ramsey & Co., Inc., one of the
representatives.
60
<PAGE>
Other than the prospectus in electronic format, the information contained on
any underwriter's web site and any information contained on any other web site
maintained by an underwriter is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved or
endorsed by us or any underwriter in its capacity as an underwriter and should
not be relied upon by investors.
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. The underwriters have no present intent to release affiliates from
the lockup agreements.
These restrictions do not prohibit us from issuing stock options and common
stock issuable upon the exercise of currently outstanding options.
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 for its services. 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.
Concurrently with this offering, we have agreed to sell shares of our
common stock in a private placement at the per share price to the public set
forth on the cover page of this prospectus. Credit Suisse First Boston
Corporation acted as placement agent in connection with the private placement
and was paid customary compensation for its services.
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;
61
<PAGE>
- 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.
- 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.
62
<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.
63
<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 in this prospectus and registration statement 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.
64
<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; 150,000,000 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, 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, training services and
hosting services, is allocated to the elements using the residual method under
SOP No. 98-9. Corillian has determined that post-contractual customer support,
training and hosting services can be separated from software licenses,
implementation and custom software engineering services because
(a) post-contractual customer support, 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 post-contractual customer support 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
post-contractual customer support, 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 post-contractual customer support
F-7
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
services is allocated to software license, implementation and custom software
engineering services and recognized using contract accounting.
Corillian's software licenses are functionally dependent on implementation
and custom software engineering services; therefore, software licenses and
implementation services, together with custom software engineering services that
are essential to the functionality of the software, are combined and 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.
Revenues from our recently introduced OneSource service include
implementation fees, monthly service fees and client user fees. Revenues
associated with implementation are recognized ratably over the term of the
service agreement. Costs incurred relating to implementation are recorded as
cost of revenues. Corillian receives a monthly service fee for each financial
institution interface completed. Corillian receives a monthly client user fee
for each user of the OneSource service. The monthly service and client user fees
are recognized as these services are performed.
(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.
F-8
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 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.
F-9
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 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 the
ability of its engineers and professional service providers 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
these 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.
F-10
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 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.
F-11
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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>
(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
F-12
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, as amended by Statement of Financial Accounting Standards No. 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 133 and SFAS No. 137
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 and SFAS No. 137 for the quarter
ending March 31, 2001. Corillian does not expect the adoption of SFAS No. 133
and SFAS No. 137 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 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.
(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.
F-13
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) BALANCE SHEET COMPONENTS (CONTINUED)
(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>
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>
F-14
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES (CONTINUED)
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.
(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 mandatory redemption features following the affirmative
vote of at least 75% of the outstanding shares of Series B and Series C after
October 25, 2003. 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
F-15
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) SHAREHOLDER'S EQUITY (CONTINUED)
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 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.
F-16
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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.
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.......................................... -- --
---------
Balance December 31, 1997.......................... 775,000 0.10
Granted............................................ 1,195,000 0.31
Exercised.......................................... -- --
Cancelled.......................................... (575,000) (0.26)
---------
Balance December 31, 1998.......................... 1,395,000 0.21
Granted............................................ 4,370,500 0.66
Exercised.......................................... (199,000) (0.35)
Cancelled.......................................... (137,664) (0.43)
---------
Balance December 31, 1999.......................... 5,428,836 0.56
=========
</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>
$ 0.10 797,167 3.01 $0.10 595,508 $0.10
0.37 1,103,669 3.93 0.37 369,351 0.37
0.40 1,510,000 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 5,428,836 4.74 0.56 1,423,609 0.38
========= =========
</TABLE>
F-17
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 1997 STOCK OPTION PLAN (CONTINUED)
At December 31, 1999, 737,856 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
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. These options will be remeasured each
balance sheet date until fully vested.
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 amortization of deferred stock-based compensation relates to the
following items in the accompanying statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1997 1998 1999
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of revenues........................................... -- -- 55
Sales and marketing........................................ -- -- 432
Research and development................................... -- -- 39
General and administrative................................. -- -- 441
--------- --------- ---
-- -- 967
</TABLE>
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
F-18
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 1997 STOCK OPTION PLAN (CONTINUED)
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>
(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. Corillian has not prepaid any
royalties through December 31, 1999. 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.
F-19
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
(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.
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.
F-20
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(9) SEGMENT INFORMATION (CONTINUED)
(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>
(C) REVENUES AND COST OF REVENUES
Corillian's chief decision-maker monitors the revenue streams of licenses
and various services. There are many shared expenses generated by the various
revenue streams; because management believes that any allocation of the expenses
to multiple revenue streams would be impractical and arbitrary, management has
not historically made such allocations internally. The chief decision-maker
does, however, monitor revenue streams at a more detailed level than those
depicted in the accompanying financial statements.
Revenues derived from the Company's licenses and services are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
License and implementation and custom engineering
services........................................ 366 3,242 7,131
Post-contractual support.......................... 16 19 191
Hosting........................................... 17 132 387
OneSource services................................ -- -- 27
--- ----- -----
399 3,393 7,736
=== ===== =====
</TABLE>
(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
F-21
<PAGE>
CORILLIAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(10) RELATED PARTY TRANSACTIONS (CONTINUED)
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. Corillian recognized
$1,147,000 in revenues for the year ended December 31, 1999 in connection with
this arrangement. At December 31, 1999, accounts receivable from this customer
was $1,659,000 and deferred revenue was $512,000. The arrangement was negotiated
at arms-length in a manner consistent with arrangements with other customers of
Corillian.
F-22
<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.
On May 21, 1997, the Registrant issued a total of 7,187,511 shares of common
stock to 15 investors, 13 of whom were non-officer employees and two of whom
were directors and officers of the Registrant. The sales were made at a price of
$0.10 per share, for a total purchase price of $718,751. The Registrant relied
on Rule 701 for these sales because they were made pursuant to written
compensatory agreements. All offers and sales were made in compliance with the
limitations of Rule 701, as in effect when such offers and sales were made.
In September 1997, the Registrant issued a total of 3,953,814 shares of
common stock to 28 investors, 26 of whom were employees, directors or officers
of the Registrant, one of whom acted as a legal advisor to the corporation, and
one of whom provided marketing services to the corporation (both unrelated to
any offer or sale of securities). The sales were made at a per share price of
$0.10, for a total purchase price of $395,381. The Registrant relied on
Rule 701 for the sales to these employees, directors, officers, consultant and
advisor, because the sales were made pursuant to written compensatory
agreements. All offers and sales were made in compliance with the limitations of
Rule 701, as in effect when such offers and sales were made.
On December 31, 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. The Registrant relied on Section 4(2) for this
transaction because the offers and sales were confined to a single accredited
investor.
In April 1999, the Registrant issued a total of 11,276,724 shares of
Series B preferred stock to an affiliated group of four investors at a price of
$0.60 per share, for a total purchase price of $6,766,034. The Registrant relied
on Section 4(2) for these sales because the sales were confined to a small group
of institutional accredited investors.
In October 1999, the Registrant issued a total of 10,358,561 shares of
Series C preferred stock to 15 investors, four of whom were entities that
previously purchased shares of Registrant's Series B preferred stock, at a price
of $2.51 per share, for a total purchase price of $25,999,988. The Registrant
relied on Rule 506 for these sales because the offers and sales were confined to
15 accredited investors. A Form D was filed with the Commission for these sales.
With respect to the shares granted and exercised under the Registrant's 1997
stock option plan, the Registrant relied on Rule 701 for the option grants and
related option exercises, because they were made in connection with a written
compensatory benefit plan established for the benefit of employees, directors
and officers. All option grants were made in compliance with the limitations of
Rule 701, as in effect when such option grants were made.
As of December 31, 1999, a total of 199,000 shares of common stock had been
issued upon exercise of options under the Registrant's 1997 stock option plan.
II-2
<PAGE>
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>
In January 2000, the Registrant agreed to issue 25,000 shares of its common
stock to Heidrick & Struggles, Inc. to compensate it for recruiting services
rendered to the Registrant in late 1999. The Registrant relied on Section 4(2)
for this transaction because Heidrick & Struggles, Inc. was an institutional
accredited investor.
On March 9, 2000, one institutional accredited investor agreed to purchase
directly from the Registrant in a private placement that will occur concurrently
with the closing of this offering, shares of the Registrant's common stock
having an aggregate purchase price of approximately $7 million. The Registrant
relied on Section 4(2) for this transaction because the sale will be confined to
one institutional accredited investor.
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<C> <S>
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 Form of Common Stock Certificate
4.2* Amended and Restated Investor Rights Agreement, dated
October 20, 1999
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)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<C> <S>
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* previously filed
** 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 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 Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Portland, State of Oregon, on March 9, 2000.
<TABLE>
<S> <C> <C>
CORILLIAN CORPORATION
By: /s/ STEVEN SIPOWICZ
-----------------------------------------
Steven Sipowicz
CHIEF FINANCIAL OFFICER,
IN HIS CAPACITY AS PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to 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
------------------------------------------- Chief Executive Officer March 9, 2000
Ted F. Spooner PRINCIPAL EXECUTIVE OFFICER
/s/ STEVEN SIPOWICZ Chief Financial Officer
------------------------------------------- PRINCIPAL FINANCIAL AND March 9, 2000
Steven Sipowicz ACCOUNTING OFFICER
*
------------------------------------------- President and Director March 9, 2000
Kirk H. Wright
*
------------------------------------------- Director March 9, 2000
Robert G. Barrett
*
------------------------------------------- Director March 9, 2000
Robert Huret
*
------------------------------------------- Director March 9, 2000
Edmund P. Jensen
*
------------------------------------------- Director March 9, 2000
Ravi Mohan
*
------------------------------------------- Director March 9, 2000
Jay N. Whipple III
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement pursuant to the Power of Attorney
executed by the above named officers and directors and filed with the
Securities and Exchange Commission on behalf of such officers and directors.
<TABLE>
<S> <C> <C>
*By: /s/ STEVEN SIPOWICZ
---------------------------------
Steven Sipowicz
ATTORNEY-IN-FACT
</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 Form of Common Stock Certificate
4.2* Amended and Restated Investor Rights Agreement, dated
October 20, 1999
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>
- ------------------------
* previously filed
** 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>
RESTATED ARTICLES OF INCORPORATION
OF
CORILLIAN CORPORATION
------------------------------------------------
Pursuant to Section 60.451 of the Oregon Revised Statutes, the
undersigned corporation adopts the following Restated Articles of Incorporation,
which shall supersede the existing Restated Articles of Incorporation of
Corillian Corporation.
ARTICLE 1. NAME
The name of the corporation is Corillian Corporation (the
"Corporation").
ARTICLE 2. DURATION
The period of the Corporation's duration shall be perpetual.
ARTICLE 3. PURPOSES AND POWERS
The purpose for which the Corporation is organized is to engage in
any business, trade or activity which may lawfully be conducted by a
corporation organized under the Oregon Business Corporation Act.
The Corporation shall have the authority to engage in any and all
such activities as are incidental or conducive to the attainment of the
purposes of the Corporation and to exercise any and all powers authorized or
permitted under any laws that may be now or hereafter applicable or available
to the Corporation.
ARTICLE 4. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation
shall have authority to issue shall be 190,000,000, consisting of (i)
150,000,000 shares of Common Stock, no par value per share (the "Common
Stock"), and (ii) 40,000,000 shares of Preferred Stock, no par value per
share (the "Preferred Stock").
Set forth below is a statement of the preferences, limitation and
relative rights of each class of stock of the Corporation.
4.1. PREFERRED STOCK
Except as otherwise expressly prohibited by the provisions of these
Articles of Incorporation of the Corporation, shares of Preferred Stock may
be issued from time
-1-
<PAGE>
to time in one or more series in any manner permitted by law as determined
from time to time by the Board of Directors and stated in the resolution or
resolutions providing for the issuance thereof, prior to the issuance of any
shares thereof. The Board of Directors shall have the authority to fix and
determine, subject to the provisions hereof, the rights and preferences of
the shares of any series so established.
4.2. COMMON STOCK.
Subject to any preferential or other rights granted to any series of
Preferred Stock, the holders of shares of the Common Stock shall be entitled
to receive dividends out of funds of the Corporation legally available
therefor, at the rate and at the time or times as may be provided by the
Board of Directors and shall be entitled to receive distributions legally
payable to shareholders on the liquidation of the Corporation. The holders of
shares of Common Stock, on the basis of one vote per share, shall have the
right to vote in shareholder elections for members of the Board of Directors
of the Corporation and the right to vote on all other shareholder matters,
except where a separate class or series of the Corporation's shareholders
vote by class or series.
ARTICLE 5. CLASSIFIED BOARD OF DIRECTORS
5.1 CLASSIFIED BOARD
Whenever there are more than six Directors on the Board of
Directors, the Board of Directors shall be divided into three classes, with
such classes to be as equal in number as may be possible. Subject to the
foregoing, the Board of Directors may assign the Directors to the classes of
the Board of Directors in any manner. At the first election of Directors to
such classified Board of Directors, each Class 1 Director shall be elected to
serve until the next ensuing annual meeting of shareholders, each Class 2
Director shall be elected to serve until the second ensuing annual meeting of
shareholders and each Class 3 Director shall be elected to serve until the
third ensuing annual meeting of shareholders. At each annual meeting of
shareholders following the meeting at which the Board of Directors is
initially classified, the number of Directors equal to the number of
Directors in the class whose term expires at the time of such meeting shall
be elected to serve until the third ensuing annual meeting of shareholders.
Notwithstanding any of the foregoing provisions of this Article 5, Directors
shall serve until their successors are elected and qualified or until their
earlier death, resignation or removal from office.
-2-
<PAGE>
5.2 VACANCIES
Any vacancy occurring on the Board of Directors, including a vacancy
resulting from an increase in the number of Directors, may be filled only by
the Board of Directors, by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors, or
by a sole remaining Director. The shareholders of the Corporation may not
fill vacancies on the Board of Directors, including vacancies resulting from
an increase in the number of Directors. A Director elected to fill a vacancy
shall be elected for the unexpired term of his or her predecessor in office
or, in the event of an increase in the number of Directors, for a term of
office continuing only until the next election of Directors by the
shareholders. A vacancy that will occur at a specific later date by reason of
a resignation effective at such later date or otherwise may be filled before
the vacancy occurs, but the new Director may not take office until the
vacancy occurs. A Director elected to fill a vacancy becomes a member of the
same class as his predecessor. If required due to an increase in the number
of Directors or otherwise, the Board of Directors shall take appropriate
steps, by designation of short terms or otherwise, to return the rotation of
election of directors for each class to the original, staggered, three-year
terms established by this Article 5.
5.3 AMENDMENT TO ARTICLE 5
This Article may only be amended by the affirmative vote of at least
two-thirds of the shares held by the members of each voting group entitled to
vote on any such amendment.
ARTICLE 6. LIMITATION OF DIRECTOR LIABILITY
To the fullest extent that the Oregon Business Corporation Act, as
it exists on the date hereof or may hereafter be amended, permits the
limitation or elimination of the liability of directors, a director of the
Corporation shall not be liable to the Corporation or its shareholders for
any monetary damages for conduct as a director. Any amendment to or repeal of
this Article or amendment to the Oregon Business Corporation Act shall not
adversely affect any right or protection of a director of the Corporation for
or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
ARTICLE 7. INDEMNIFICATION
To the fullest extent not prohibited by law, the corporation: (i)
shall indemnify any person who is made, or threatened to be made, a party to
an action, suit or
-3-
<PAGE>
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 of
the corporation, and (ii) may indemnify 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 an 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 or officer of, or as a fiduciary (as defined above) of an employee
benefit plan of, another corporation, partnership, joint venture, trust or
other enterprise. This Article shall not be deemed exclusive of any other
provisions for the indemnification of directors, officers, employees, or
agents that may be included in any statute, bylaw, agreement, resolution of
shareholders or directors or otherwise, both as to action in any official
capacity and action in any other capacity while holding office, or while an
employee or agent of the corporation. For purposes of this Article,
"corporation" shall mean the corporation incorporated hereunder and any
successor corporation thereof.
ARTICLE 8. REMOVAL OF DIRECTORS
The Directors of this Corporation may be removed only for cause.
ARTICLE 9. VOTING
The shareholders are authorized to adopt or amend one or more bylaws
that fix a greater quorum or voting requirement for shareholders, or voting
groups of shareholders, than is required by the Oregon Business Corporation
Act.
ARTICLE 10. EFFECTIVE DATE
These Restated Articles were adopted by the Board of Directors
effective as of March __, 2000, and approved by the Shareholders effective as
of ________, 2000.
___________________________________
Steven Sipowicz, Secretary
The name and telephone number of the person to contact about this
filing are:
-4-
<PAGE>
Susan Kipper
(503) 727-2000
-5-
<PAGE>
RESTATED BYLAWS
OF
CORILLIAN CORPORATION
Adopted on: March 2, 2000
Amendments are listed on page i
<PAGE>
AMENDMENTS
<TABLE>
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Section Effect of Amendment Date of Amendment
<S> <C> <C>
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TABLE OF AMENDMENTS Page i
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CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. OFFICES..............................................................................1
SECTION 2. SHAREHOLDERS.........................................................................1
2.1 Annual Meeting; Procedures...........................................................1
2.1.1 Annual Meeting...........................................................1
2.1.2 Business To Be Conducted At Annual Meeting...............................1
2.2 Special Meetings.....................................................................2
2.3 Place of Meeting.....................................................................3
2.4 Conduct of Meeting...................................................................3
2.5 Notice of Meeting....................................................................3
2.6 Waiver of Notice.....................................................................3
2.7 Fixing of Record Date for Determining Shareholders...................................4
2.8 Shareholders' List...................................................................4
2.9 Quorum...............................................................................5
2.10 Manner of Acting.....................................................................5
2.11 Proxies..............................................................................5
2.12 Voting of Shares.....................................................................6
2.13 Voting for Directors.................................................................6
2.14 Action by Shareholders Without a Meeting.............................................6
2.15 Voting of Shares by Corporations.....................................................6
2.15.1 Shares Held by Another Corporation.......................................6
2.15.2 Shares Held by the Corporation...........................................6
2.16 Acceptance or Rejection of Shareholder Votes, Consents, Waivers and
Proxy Appointments...................................................................7
2.16.1 Documents Bearing Name of Shareholders...................................7
2.16.2 Documents Bearing Name of Third Parties..................................7
2.16.3 Rejection of Documents...................................................7
SECTION 3. BOARD OF DIRECTORS...................................................................8
3.1 General Powers.......................................................................8
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3.2 Number; Procedure for Nomination.....................................................8
3.2.1 Number of Directors......................................................8
3.2.2 Procedure for Nomination.................................................8
3.3 Annual and Regular Meetings..........................................................9
3.4 Special Meetings.....................................................................9
3.5 Meetings by Telecommunications.......................................................9
3.6 Notice of Special Meetings..........................................................10
3.6.1 Personal Delivery.......................................................10
3.6.2 Delivery by Mail........................................................10
3.6.3 Delivery by Telegraph...................................................10
3.6.4 Oral Notice.............................................................10
3.6.5 Notice by Facsimile Transmission........................................10
3.6.6 Notice by Private Courier...............................................10
3.7 Waiver of Notice....................................................................11
3.7.1 Written Waiver..........................................................11
3.7.2 Waiver by Attendance....................................................11
3.8 Quorum..............................................................................11
3.9 Manner of Acting....................................................................11
3.10 Presumption of Assent...............................................................11
3.11 Action by Board or Committees Without a Meeting.....................................12
3.12 Resignation.........................................................................12
3.13 Removal.............................................................................12
3.14 Minutes.............................................................................12
3.15 Executive and Other Committees......................................................12
3.15.1 Creation of Committees..................................................12
3.15.2 Audit Committee.........................................................13
3.15.3 Compensation Committee..................................................13
3.15.4 Authority of Committees.................................................13
3.15.5 Minutes of Meetings.....................................................14
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3.15.6 Resignation.............................................................14
3.15.7 Removal.................................................................14
3.16 Compensation........................................................................14
SECTION 4. OFFICERS............................................................................14
4.1 Number..............................................................................14
4.2 Appointment and Term of Office......................................................15
4.3 Resignation.........................................................................15
4.4 Removal.............................................................................15
4.5 Vacancies...........................................................................15
4.6 Chair of the Board..................................................................16
4.7 President...........................................................................16
4.8 Vice President......................................................................16
4.9 Secretary...........................................................................16
4.10 Treasurer...........................................................................17
4.11 Salaries............................................................................17
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS...............................................17
5.1 Contracts...........................................................................17
5.2 Loans to the Corporation............................................................17
5.3 Loans to Directors..................................................................17
5.4 Checks, Drafts, Etc.................................................................18
5.5 Deposits............................................................................18
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER..........................................18
6.1 Issuance of Shares..................................................................18
6.2 Escrow for Shares...................................................................18
6.3 Certificates for Shares.............................................................19
6.4 Stock Records.......................................................................19
6.5 Restriction on Transfer.............................................................19
6.5.1 Securities Laws.........................................................19
6.5.2 Other Restrictions......................................................19
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6.6 Transfer of Shares..................................................................19
6.7 Lost or Destroyed Certificates......................................................20
6.8 Transfer Agent and Registrar........................................................20
6.9 Officer Ceasing to Act..............................................................20
6.10 Fractional Shares...................................................................20
SECTION 7. BOOKS AND RECORDS...................................................................20
SECTION 8. FISCAL YEAR.........................................................................20
SECTION 9. SEAL................................................................................21
SECTION 10. INDEMNIFICATION.....................................................................21
10.1 Directors...........................................................................21
10.2 Officers, Employees and Other Agents................................................21
10.3 No Presumption of Bad Faith.........................................................21
10.4 Advances of Expenses................................................................21
10.5 Enforcement.........................................................................21
10.6 Nonexclusivity of Rights............................................................22
10.7 Survival of Rights..................................................................22
10.8 Insurance...........................................................................23
10.9 Amendments to Law...................................................................23
10.10 Savings Clause......................................................................23
10.11 Certain Definitions.................................................................23
SECTION 11. AMENDMENTS..........................................................................24
</TABLE>
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SECOND RESTATED BYLAWS
OF
CORILLIAN CORPORATION
SECTION 1. OFFICES
The principal office of the Corporation shall be located at the
principal place of business or such other place as the Board of Directors
(the "Board") may designate. The Corporation may have such other offices,
either within or without the State of Oregon, as the Board may designate or
as the business of the Corporation may require from time to time.
SECTION 2. SHAREHOLDERS
2.1 ANNUAL MEETING; PROCEDURES
2.1.1 ANNUAL MEETING
The annual meeting of the shareholders shall be held on such date as
shall be fixed by resolution of the Board, at the principal office of the
Corporation or such other place as fixed by the Board, for the purpose of
electing Directors and transacting such other business as may properly come
before the meeting. If the day fixed for the annual meeting is a legal
holiday at the place of the meeting, the meeting shall be held on the next
succeeding business day. At any time prior to the commencement of the annual
meeting, the Board may postpone the annual meeting for a period of up to 120
days from the date fixed for such meeting in accordance with this section.
2.1.2 BUSINESS TO BE CONDUCTED AT ANNUAL MEETING
Only such business shall be conducted at an annual meeting of
shareholders as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the
direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board, or (c) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal office of
the corporation not less than 60 days nor more than 90 days prior to the
meeting; provided, that in the event that less than 70 days' notice of the
date of the meeting is given to the shareholders, notice by the shareholder
to be timely must be so received not later than
BYLAWS PAGE 1
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the close of business on the seventh day following the day on which such
notice of the date of the meeting was mailed. A shareholder's notice to the
Secretary shall set forth (a) as to each matter the shareholder proposes to
bring before the annual meeting, a brief description of the business proposed
to be brought before the annual meeting, the language of the proposal, if
appropriate, and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's books,
of the shareholder proposing such business, (c) a representation that the
shareholder is entitled to vote at such meeting and a statement of the class
and number of shares of the corporation which are beneficially owned by the
shareholder, (d) any material interest of the shareholder in such business,
and (e) a representation that the shareholder intends to appear in person or
by proxy at the meeting to present the business specified in the notice.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures
set forth in this Section 2.1.2. The Board or the Chair of the meeting shall,
if the facts warrant, determine (i) that a proposal does not constitute
proper business to be transacted at the meeting, or (ii) that business was
not properly brought before the meeting in accordance with the provisions of
this Section 2.1.2, and, if it is so determined, in either case, any such
business shall not be transacted. The procedures set forth in this Subsection
2.1 for business to be properly brought before an annual meeting by a
shareholder are in addition to, and not in lieu of, the requirements set
forth in Rule 14a-8 under Section 14 of the Securities Exchange Act of 1934,
as amended, or any successor provision.
2.2 SPECIAL MEETINGS
The Board, the President or the Chair of the Board may call special
meetings of the shareholders for any purpose. At any special meeting of the
shareholders, only such business as is specified in the notice of such
special meeting given by or at the direction of the Board, the President or
the Chair of the Board, in accordance with Section 2.5 hereof, shall come
before such meeting. The holders of not less than one-tenth of all the
outstanding shares of the Corporation entitled to vote on any issue proposed
to be considered at a proposed special meeting may request that a special
meeting of the shareholders be called, if they date, sign and deliver to the
Corporation's Secretary a written demand for a special meeting setting forth
(a) as to each matter the shareholder proposes to bring before the meeting, a
brief description of the business proposed to be brought before the meeting,
the language of the proposal, if appropriate, and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business, (c) a
representation that the shareholder is entitled to vote at such meeting and a
statement of the class and number of shares of the corporation which are
beneficially owned by the shareholder, (d) any material
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interest of the shareholder in such business, and (e) a representation that
the shareholder intends to appear in person or by proxy at the meeting to
present the business specified in the notice.
2.3 PLACE OF MEETING
All meetings shall be held at the principal office of the
Corporation or at such other place as designated by the Board.
2.4 CONDUCT OF MEETING
The Chair of the meeting shall have the authority to adopt such
rules for the conduct of any annual or special meeting of shareholders as he
or she may deem necessary or appropriate to facilitate orderly meetings.
2.5 NOTICE OF MEETING
(a) The Corporation shall cause to be delivered to each
shareholder entitled to notice of or to vote at an annual or special meeting
of shareholders, either personally or by mail, not less than ten (10) nor
more than sixty (60) days before the meeting, written notice stating the
date, time and place of the meeting and, in the case of a special meeting,
the purpose(s) for which the meeting is called.
(b) Notice to a shareholder of an annual or special shareholder
meeting shall be in writing. Such notice is effective (i) when mailed, if it
is mailed postpaid and is correctly addressed to the shareholder's address
shown in the Corporation's then-current record of shareholders, or (ii) when
received by the shareholder, if it is delivered by telegraph, facsimile
transmission or private courier.
(c) If an annual or special shareholders' meeting 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, unless a new record date for the adjourned
meeting is or must be fixed under Section 2.7(a) of these Bylaws or the
Oregon Business Corporation Act.
2.6 WAIVER OF NOTICE
(a) Whenever any notice is required to be given to any
shareholder under the provisions of these Bylaws, the Articles of
Incorporation or the Oregon Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, and delivered to the Corporation for
inclusion in the minutes for filing with the corporate records, shall be
deemed equivalent to the giving of such notice.
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(b) The attendance of a shareholder at a meeting waives
objection to lack of, or defect in, notice of such meeting or of
consideration of a particular matter at the meeting, unless the shareholder,
at the beginning of the meeting or prior to consideration of such matter,
objects to holding the meeting, transacting business at the meeting, or
considering the matter when presented at the meeting.
2.7 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS
(a) For the purpose of determining shareholders entitled to
notice of, or to vote at, any meeting of shareholders or any adjournment
thereof, or shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose, the
Board may fix in advance a date as the record date for any such
determination. Such record date shall be not more than seventy (70) days, and
in case of a meeting of shareholders, not less than ten (10) days, prior to
the date on which the particular action requiring such determination is to be
taken. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting, or to receive payment of a
dividend, the date on which the notice of meeting is mailed or on which the
resolution of the Board declaring such dividend is adopted, as the case may
be, shall be the record date for such determination. Such determination shall
apply to any adjournment of the meeting, provided such adjournment is not set
for a date more than 120 days after the date fixed for the original meeting.
(b) The record date for the determination of shareholders
entitled to demand a special shareholder meeting shall be the date the first
shareholder signs the demand.
2.8 SHAREHOLDERS' LIST
(a) Beginning two (2) business days after notice of a meeting
of shareholders is given, a complete alphabetical list of the shareholders
entitled to notice of such meeting shall be made, arranged by voting group,
and within each voting group by class or series, with the address of and
number of shares held by each shareholder. This record shall be kept on file
at the Corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held. On written demand, this
record shall be subject to inspection by any shareholder at any time during
normal business hours. Such record shall also be kept open at such meeting
for inspection by any shareholder.
(b) A shareholder may, on written demand, copy the
shareholders' list at such shareholder's expense during regular business
hours, provided that:
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(i) Such shareholder's demand is made in good
faith and for a proper purpose;
(ii) Such shareholder has described with reasonable
particularity such shareholder's purpose in the written demand; and
(iii) The shareholders' list is directly connected with
such shareholder's purpose.
2.9 QUORUM
A majority of the votes entitled to be cast on a matter at a meeting
by a voting group, represented in person or by proxy, shall constitute a
quorum of that voting group for action on that matter at a meeting of the
shareholders. If a quorum is not present for a matter to be acted upon, a
majority of the shares represented at the meeting may adjourn the meeting
from time to time without further notice. If the necessary quorum is present
or represented at a reconvened meeting following such an adjournment, any
business may be transacted that might have been transacted at the meeting as
originally called. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
2.10 MANNER OF ACTING
(a) 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 action exceed the votes cast opposing the action,
unless the affirmative vote of a greater number is required by these Bylaws,
the Articles of Incorporation or the Oregon Business Corporation Act.
(b) If a matter is to be voted on by a single group, action on that
matter is taken when voted upon by that voting group. If a matter is to be
voted on by two or more voting groups, 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 such matter.
2.11 PROXIES
A shareholder may vote by proxy executed in writing by the
shareholder or by his or her attorney-in-fact. Such proxy shall be effective
when received by the Secretary or other officer or agent authorized to
tabulate votes at the meeting. A proxy shall become invalid eleven (11)
months after the date of its execution, unless
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otherwise expressly provided in the proxy. A proxy for a specified meeting
shall entitle the holder thereof to vote at any adjournment of such meeting
but shall not be valid after the final adjournment thereof.
2.12 VOTING OF SHARES
Each outstanding share entitled to vote shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders.
2.13 VOTING FOR DIRECTORS
Each shareholder may vote, in person or by proxy, the number of
shares owned by such shareholder that are entitled to vote at an election of
Directors, for as many persons as there are Directors to be elected and for
whose election such shares have a right to vote. Unless otherwise provided in
the Articles of Incorporation, Directors are elected by a plurality of the
votes cast by shares entitled to vote in the election at a meeting at which a
quorum is present.
2.14 ACTION BY SHAREHOLDERS WITHOUT A MEETING
Any action which could be taken at a meeting of the shareholders may
be taken without a meeting if a written consent setting forth the action so
taken is signed by all shareholders entitled to vote with respect to the
subject matter thereof. The action shall be effective on the date on which
the last signature is placed on the consent, or at such earlier or later time
as is set forth therein. Such written consent, which shall have the same
force and effect as a unanimous vote of the shareholders, shall be inserted
in the minute book as if it were the minutes of a meeting of the shareholders.
2.15 VOTING OF SHARES BY CORPORATIONS
2.15.1 SHARES HELD BY ANOTHER CORPORATION
Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such other corporation may
prescribe, or, in the absence of such provision, as the board of directors of
such corporation may determine; provided, however, such shares are not
entitled to vote if the Corporation owns, directly or indirectly, a majority
of the shares entitled to vote for directors of such other corporation.
2.15.2 SHARES HELD BY THE CORPORATION
Authorized but unissued shares shall not be voted or counted for
determining whether a quorum exists at any meeting or counted in determining
the total number of
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outstanding shares at any given time. Notwithstanding the foregoing,
shares of its own stock held by the Corporation in a fiduciary capacity may
be counted for purposes of determining whether a quorum exists, and may be
voted by the Corporation.
2.16 ACCEPTANCE OR REJECTION OF SHAREHOLDER VOTES, CONSENTS,
WAIVERS AND PROXY APPOINTMENTS
2.16.1 DOCUMENTS BEARING NAME OF SHAREHOLDERS
If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the Secretary or other agent
authorized to tabulate votes at the meeting may, if acting in good faith,
accept such vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder.
2.16.2 DOCUMENTS BEARING NAME OF THIRD PARTIES
If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of its shareholder, the Secretary or other
agent authorized to tabulate votes at the meeting may nevertheless, if acting
in good faith, accept such vote, consent, waiver or proxy appointment and
give it effect as the act of the shareholder if:
(a) The shareholder is an entity and the name signed purports to be
that of an officer or an agent of the entity;
(b) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Secretary or other agent requests, acceptable evidence of fiduciary status
has been presented;
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder, and, if the Secretary or other agent requests,
acceptable evidence of this status has been presented;
(d) The name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the Secretary or other
agent requests, acceptable evidence of the signatory's authority to sign has
been presented; or
(e) Two or more persons are the shareholder as cotenants 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.
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2.16.3 REJECTION OF DOCUMENTS
The Secretary or other agent authorized to tabulate votes at the
meeting is entitled to reject a vote, consent, waiver or proxy appointment if
such agent, 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.
SECTION 3. BOARD OF DIRECTORS
3.1 GENERAL POWERS
The business and affairs of the Corporation shall be managed by the
Board, except as may otherwise be provided in these Bylaws, the Articles of
Incorporation or the Oregon Business Corporation Act.
3.2 NUMBER; PROCEDURE FOR NOMINATION
3.2.1 NUMBER OF DIRECTORS
The Board shall be composed of not less than three (3) nor more than
nine (9) Directors, the specific number to be set by resolution of the Board.
No decrease in the number of Directors shall have the effect of shortening
the term of any incumbent Director. All of the Directors of the Corporation
shall hold office until death or removal from office and until their
successors are elected and qualified. Directors need not be shareholders of
the Corporation or residents of the State of Oregon.
3.2.2 PROCEDURE FOR NOMINATION
Only persons who are nominated in accordance with the procedures set
forth in this Section 3.2.2 shall be eligible for election as Directors by
the shareholders. Nominations of persons for election to the Board may be
made at a meeting of shareholders by or at the direction of the Board or by
any shareholder of the corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedure set forth in
this Section 3.2.2. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal executive office of the corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, that
in the event that less than 70 days' notice of the date of the meeting is
given to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the seventh day following
the day on which such notice of the date of the meeting was mailed. Such
shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election as a Director, (i) the name,
age,
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business and residence address of such person, (ii) the principal occupation
or employment of such person, (iii) the class and number of shares of the
corporation that are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a
Director if elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the corporation's books, of such
shareholder, (ii) a representation that the shareholder is entitled to vote
at such meeting and statement of the class and number of shares of the
corporation that are beneficially owned by such shareholder and (iii) a
representation that the shareholder intends to appear in person or by proxy
at the meeting to make the nomination specified in the notice. At the request
of the Board, any person nominated by the Board for election as a Director
shall furnish to the Secretary that information required to be set forth in a
shareholder's notice of nomination. The Board or the Chair of the meeting
shall, if the facts warrant, determine that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and, if it is so
determined, the defective nomination shall be disregarded. The procedures set
forth in this Subsection 3.2.2 for nomination for the election of Directors
by shareholders are in addition to, and not in limitation of, any procedures
now in effect or hereafter adopted by or at the direction of the Board or any
committee thereof.
3.3 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without further notice
immediately after and at the same place as the annual meeting of shareholders.
By resolution the Board, or any committee thereof, may specify the
time and place for holding regular meetings thereof without other notice than
such resolution.
3.4 SPECIAL MEETINGS
Special meetings of the Board or any committee designated by the
Board may be called by or at the request of the Chair of the Board, the Chief
Executive Officer or the President, or by one-third of the Directors then in
office and, in the case of any special meeting of any committee designated by
the Board, by the Chair thereof. The person or persons authorized to call
special meetings may fix any place either within or outside of the State of
Oregon as the place for holding any special Board or committee meeting called
by them.
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3.5 MEETINGS BY TELECOMMUNICATIONS
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by use of any means of
communication by which all persons participating may simultaneously hear each
other during the meeting. Participation by such means shall be deemed
presence in person at the meeting.
3.6 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the date,
time and place of the meeting shall be given to a Director in writing or
orally by telephone or in person as set forth below. Neither the business to
be transacted at, nor the purpose of, any special meeting need be specified
in the notice of such meeting.
3.6.1 PERSONAL DELIVERY
If delivery is by personal service, the notice shall be effective if
delivered at such address at least one day before the meeting.
3.6.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective
if deposited in the official government mail at least two days before the
meeting properly addressed to a Director at his or her address shown on the
records of the Corporation with postage prepaid.
3.6.3 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company by
such time that the telegraph company guarantees delivery at least one day
before the meeting.
3.6.4 ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice
shall be effective if personally given to a Director at least one day before
the meeting.
3.6.5 NOTICE BY FACSIMILE TRANSMISSION
If notice is delivered by facsimile transmission, the notice shall
be deemed effective if the content thereof is transmitted to the office of a
Director, at the facsimile number shown on the records of the Corporation, at
least one day before the
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meeting, and receipt is either confirmed by confirming transmission equipment
or acknowledged by the receiving office.
3.6.6 NOTICE BY PRIVATE COURIER
If notice is delivered by private courier, the notice shall be
deemed effective if delivered to the courier, properly addressed and prepaid,
by such time that the courier guarantees delivery at least one day before the
meeting.
3.7 WAIVER OF NOTICE
3.7.1 WRITTEN WAIVER
Whenever any notice is required to be given to any Director under
the provisions of these Bylaws, the Articles of Incorporation or the Oregon
Business Corporation Act, a waiver thereof in writing, executed at any time,
specifying the meeting for which notice is waived, signed by the person or
persons entitled to such notice, and filed with the minutes or corporate
records, shall be deemed equivalent to the giving of such notice.
3.7.2 WAIVER BY ATTENDANCE
The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, unless the Director, at the
beginning of the meeting, or promptly upon such Director's arrival, objects
to holding the meeting or transacting any business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
3.8 QUORUM
A majority of the number of Directors fixed by or in the manner
provided by these Bylaws shall constitute a quorum for the transaction of
business at any Board meeting.
3.9 MANNER OF ACTING
The act of the majority of the Directors present at a Board or
committee meeting at which there is a quorum shall be the act of the Board or
committee, unless the vote of a greater number is required by these Bylaws,
the Articles of Incorporation or the Oregon Business Corporation Act.
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3.10 PRESUMPTION OF ASSENT
A Director of the Corporation present at a Board or committee
meeting at which action on any corporate matter is taken shall be deemed to
have assented to the action taken unless such Director objects at the
beginning of the meeting, or promptly upon such Director's arrival, to
holding the meeting or transacting business at the meeting; or such
Director's dissent is entered in the minutes of the meeting; or such Director
delivers a written notice of dissent or abstention to such action with the
presiding officer of the meeting before the adjournment thereof; or such
Director forwards such notice by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. A Director who
voted in favor of such action may not thereafter dissent or abstain.
3.11 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action which could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each Director or by
each committee member. The action shall be effective when the last signature
is placed on the consent, unless the consent specifies an earlier or later
date. Such written consent, which shall have the same effect as a unanimous
vote of the Directors or such committee, shall be inserted in the minute book
as if it were the minutes of a Board or committee meeting.
3.12 RESIGNATION
Any Director may resign at any time by delivering written notice to
the Chair of the Board, the Board, or to the registered office of the
Corporation. Such resignation shall take effect at the time specified in the
notice, or if no time is specified, upon delivery. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board.
3.13 REMOVAL
One or more members of the Board (including the entire Board) may be
removed at a meeting of shareholders called expressly for that purpose,
provided that the notice of such meeting states that the purpose, or one of
the purposes, of the meeting is such removal. A member of the Board may be
removed with or without cause, unless the Articles of Incorporation permit
removal for cause only, by a vote of the holders of a majority of the shares
then entitled to vote on the election of the Director(s). A Director may be
removed only if the number of votes cast to remove the Director exceeds the
number of votes cast to not remove the Director. If a
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Director is elected by a voting group of shareholders, only the shareholders
of that voting group may participate in the vote to remove such Director.
3.14 MINUTES
The Board shall keep minutes of its meetings and shall cause them to
be recorded in books kept for that purpose.
3.15 EXECUTIVE AND OTHER COMMITTEES
3.15.1 CREATION OF COMMITTEES
The Board, by resolution, may appoint standing or temporary
committees, including an Executive Committee, from its own number and
consisting of no less than two (2) Directors. The Board may invest such
committee(s) with such powers as it may see fit, subject to such conditions
as may be prescribed by the Board, these Bylaws, the Articles of
Incorporation and the Oregon Business Corporation Act.
3.15.2 AUDIT COMMITTEE
In addition to any other committees appointed pursuant to this
Section 3.16, there shall be an Audit Committee, appointed annually by the
Board, consisting of at least three (3) Directors who are independent
directors, each of whom is able to read and understand fundamental financial
statements and at least one (1) Director who has had past employment
experience in finance or accounting, requisite professional experience in
accounting, or any other comparable experience or background which results in
the individual's sophistication. It shall be the responsibility of the Audit
Committee to (a) recommend the selection, retention or replacement of the
Corporation's independent auditor, and ensure the independence of such
auditor through an analysis of written statements delineating all
relationships between such auditor and the Corporation and by engaging in
dialogue with such auditor regarding any such relationships that may impact
the objectivity and independence of such auditor; (b) review the scope and
results of the annual independent audit of the books and records of the
Corporation; (c) review the adequacy of internal accounting, financial and
operating controls; (d) review procedures to ensure compliance with
applicable financial reporting requirements of government agencies; and (e)
perform such other duties as shall be assigned to the Audit Committee by the
Board of Directors. The Corporation's independent auditor shall be ultimately
accountable to the Board of Directors and the Audit Committee, as
representatives of the shareholders of the Corporation. The Audit Committee
shall meet at such times and places as the members deem advisable, and shall
make such recommendations to the Board as its members consider appropriate.
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3.15.3 COMPENSATION COMMITTEE
The Board may, in its discretion, designate a Compensation Committee
having at least two (2) Directors, a majority of whom are not members of
management. The duties of the Compensation Committee shall consist of the
following: (a) to establish and review periodically, but not less than
annually, the compensation of the officers of the corporation and to make
recommendations concerning such compensation to the Board; (b) to consider
incentive compensation plans for the employees of the corporation; (c) to
carry out the duties assigned to the Compensation Committee under any stock
option plan or other plan approved by the corporation; (d) to consult with
the Chief Executive Officer or the President concerning any compensation
matters deemed appropriate by the Chief Executive Officer, the President or
the Compensation Committee; and (e) to perform such other duties as shall be
assigned to the Compensation Committee by the Board. The Compensation
Committee shall meet at such times and places as its members deem advisable
and shall make such recommendations to the Board as its members consider
appropriate.
3.15.4 AUTHORITY OF COMMITTEES
Except as otherwise provided by these Bylaws or by law, each
committee shall have and may exercise all of the authority of the Board to
the extent provided in the resolution of the Board designating the committee
and any subsequent resolutions pertaining thereto and adopted in like manner.
3.15.5 MINUTES OF MEETINGS
All committees so appointed shall keep regular minutes of their
meetings and shall cause them to be recorded in books kept for that purpose.
3.15.6 RESIGNATION
Any member of any committee may resign at any time by delivering
written notice thereof to the Board, the Chair of the Board or the
Corporation. Any such resignation shall take effect at the time specified in
the notice, or if no time is specified, upon delivery. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective. Once delivered, a notice of resignation is irrevocable
unless revocation is permitted by the Board.
3.15.7 REMOVAL
The Board may remove from office any member of any committee elected
or appointed by it, but only by the affirmative vote of not less than a
majority of the number of Directors fixed by or in the manner provided by
these Bylaws.
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3.16 COMPENSATION
By Board resolution, Directors and committee members may be paid
their expenses, if any, of attendance at each Board or committee meeting, or
a fixed sum for attendance at each Board or committee meeting, or a stated
salary as Director or a committee member, or a combination of the foregoing.
No such payment shall preclude any Director or committee member from serving
the Corporation in any other capacity and receiving compensation therefor.
SECTION 4. OFFICERS
4.1 NUMBER
The Officers of the Corporation shall include a President and a
Secretary, each of whom shall be appointed by the Board. A Chair of the Board
and a Chief Executive Officer may be appointed by the Board. The Board may
appoint, or may delegate to the Chair of the Board, Chief Executive Officer
or President the power to appoint, one or more Vice Presidents, a Treasurer
and other Officers and assistant Officers. Such Vice Presidents, Treasurer,
other Officers and assistant Officers shall hold office for such period, and
shall have such authority and perform such duties as are provided in these
Bylaws or as may be provided by resolution of the Board, or the Board may
delegate the power to prescribe their respective terms of office, authority
and duties to the Chair of the Board, Chief Executive Officer or President.
Any two or more offices may be held by the same person.
4.2 APPOINTMENT AND TERM OF OFFICE
The President and Secretary of the Corporation shall be appointed
annually by the Board at the Board meeting held after the annual meeting of
the shareholders. The Chair of the Board and Chief Executive Officer of the
Corporation, if any, shall be appointed annually by the Board at the same
meeting. If the appointment of such Officers is not made at such meeting,
such appointment shall be made as soon thereafter as a Board meeting
conveniently may be held. Unless an Officer dies, resigns, or is removed from
office, he or she shall hold office until the next annual meeting of the
Board or until his or her successor is appointed.
4.3 RESIGNATION
Any Officer may resign at any time by delivering written notice to
the Corporation. Any such resignation shall take effect at the time specified
in the notice, or if no time is specified, upon delivery. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective. Once
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delivered, a notice of resignation is irrevocable unless revocation is
permitted by the Board.
4.4 REMOVAL
Any Officer or agent appointed by the Board may be removed by the
Board, with or without cause, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Any Officer or agent
appointed by the Chair of the Board, Chief Executive Officer or President may
be removed by any such appointing Officer, with or without cause, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Appointment of an Officer or agent shall not of itself
create contract rights.
4.5 VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled
by the Board for the unexpired portion of the term, or for a new term
established by the Board. If a resignation is made effective at a later date,
and the Corporation accepts such future effective date, the Board may fill
the pending vacancy before the effective date, if the Board provides that the
successor does not take office until the effective date.
4.6 CHAIR OF THE BOARD
If appointed, the Chair of the Board shall perform such duties as
shall be assigned to him or her by the Board from time to time and shall
preside over meetings of the Board and shareholders unless another Officer is
appointed or designated by the Board as Chair of such meeting.
4.7 PRESIDENT
The President shall be the chief executive Officer of the
Corporation unless some other Officer is so designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of a Chair
of the Board and, subject to the Board's control, shall supervise and control
all of the assets, business and affairs of the Corporation. The President
shall have authority to sign deeds, mortgages, bonds, contracts, or other
instruments, except when the signing and execution thereof have been
expressly delegated by the Board or by these Bylaws to some other Officer or
agent of the Corporation, or are required by law to be otherwise signed or
executed by some other Officer or in some other manner. In general, the
President shall perform all duties incident to the office of President and
such other duties as are prescribed by the Board from time to time.
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4.8 VICE PRESIDENT
In the event of the death of the President or his or her inability
to act, the Vice President (or if there is more than one Vice President, the
Vice President who was designated by the Board as the successor to the
President, or if no Vice President is so designated, the Vice President first
appointed to such office) shall perform the duties of the President, except
as may be limited by resolution of the Board, with all the powers of and
subject to all the restrictions upon the President. Vice Presidents shall
have, to the extent authorized by the President or the Board, the same powers
as the President to sign deeds, mortgages, bonds, contracts or other
instruments. Vice Presidents shall perform such other duties as from time to
time may be assigned to them by the President or by the Board.
4.9 SECRETARY
The Secretary shall (a) prepare and keep the minutes of meetings of
the shareholders and the Board in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be responsible for
custody of the corporate records and seal of the corporation; (d) keep
registers of the post office address of each shareholder and Director; (e)
have general charge of the stock transfer books of the Corporation; and (f)
in general perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him or her by the
President or by the Board. In the absence of the Secretary, an Assistant
Secretary may perform the duties of the Secretary.
4.10 TREASURER
If required by the Board, the Treasurer shall give a bond for the
faithful discharge of his or her duties in such amount and with such surety
or sureties as the Board shall determine. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the
name of the Corporation in banks, trust companies or other depositories
selected in accordance with the provisions of these Bylaws; and in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him or her by the President or
by the Board. In the absence of the Treasurer, an Assistant Treasurer may
perform the duties of the Treasurer.
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4.11 SALARIES
The salaries of the Officers shall be fixed from time to time by the
Board or by any person or persons to whom the Board has delegated such
authority. No Officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a Director of the Corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS
The Board may authorize any Officer or Officers, or agent or agents,
to enter into any contract or execute and deliver any instrument in the name
of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
5.2 LOANS TO THE CORPORATION
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board. Such authority may be general or confined to
specific instances.
5.3 LOANS TO DIRECTORS
The Corporation shall not lend money to or guarantee the obligation
of a Director unless (a) the particular loan or guarantee 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 the shares
owned by or voted under the control of the benefited Director; or (b) the
Board determines that the loan or guarantee benefits the Corporation and
either approves the specific loan or guarantee or a general plan authorizing
the loans and guarantees. The fact that a loan or guarantee is made in
violation of this provision shall not affect the borrower's liability on the
loan.
5.4 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes
or other evidences of indebtedness issued in the name of the Corporation
shall be signed by such Officer or Officers, or agent or agents, of the
Corporation and in such manner as is from time to time determined by
resolution of the Board.
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5.5 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 may select.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES
No shares of the Corporation shall be issued unless authorized by
the Board, which authorization shall include the maximum number of shares to
be issued and the consideration to be received for each share. Before the
Corporation issues shares, the Board shall determine that the consideration
received or to be received for such shares is adequate. Such determination by
the Board shall be conclusive insofar as the adequacy of consideration for
the issuance of shares relates to whether the shares are validly issued,
fully paid and nonassessable.
6.2 ESCROW FOR SHARES
The Board may authorize the placement in escrow of shares issued for
a contract for future services or benefits or a promissory note, or may
authorize other arrangements to restrict the transfer of shares, and may
authorize the crediting of distributions in respect of such shares against
their purchase price, until the services are performed, the note is paid or
the benefits received. If the services are not performed, the note is not
paid, or the benefits are not received, the Board may cancel, in whole or in
part, such shares placed in escrow or restricted and such distributions
credited.
6.3 CERTIFICATES FOR SHARES
Certificates representing shares of the Corporation shall be in such
form as shall be determined by the Board. Such certificates shall be signed
by any two of the following officers: the Chair of the Board, the President,
any Vice President, the Treasurer, the Secretary or any Assistant Secretary.
Any or all of the signatures on a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the Corporation itself or an employee of the Corporation. All
certificates shall be consecutively numbered or otherwise identified.
6.4 STOCK RECORDS
The stock transfer books shall be kept at the registered office or
principal place of business of the Corporation or at the office of the
Corporation's transfer agent or
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registrar. The name and address of each person to whom certificates for
shares are issued, together with the class and number of shares represented
by each such certificate and the date of issue thereof, shall be entered on
the stock transfer books 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.
6.5 RESTRICTION ON TRANSFER
6.5.1 SECURITIES LAWS
Except to the extent that the Corporation has obtained an opinion of
counsel acceptable to the Corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates
representing shares of the Corporation shall bear conspicuously on the front
or back of the certificate a legend or legends describing the restriction or
restrictions.
6.5.2 OTHER RESTRICTIONS
In addition, the front or back of all certificates shall include
conspicuous written notice of any further restrictions which may be imposed
on the transferability of such shares.
6.6 TRANSFER OF SHARES
Transfer of shares of the Corporation shall be made only on the
stock transfer books of the Corporation pursuant to authorization or document
of transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer,
or by his or her attorney-in-fact authorized by power of attorney duly
executed and filed with the Secretary of the Corporation. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificates for a like number
of shares shall have been surrendered and canceled.
6.7 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
Corporation as the Board may prescribe.
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6.8 TRANSFER AGENT AND REGISTRAR
The Board may from time to time appoint one or more Transfer Agents
and one or more Registrars for the shares of the Corporation, with such
powers and duties as the Board shall determine by resolution.
6.9 OFFICER CEASING TO ACT
In case any officer who has signed or whose facsimile signature has
been placed upon a stock certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with
the same effect as if the signer were such officer at the date of its
issuance.
6.10 FRACTIONAL SHARES
The Corporation shall not issue certificates for fractional shares.
SECTION 7. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its shareholders
and Board and such other records as may be necessary or advisable.
SECTION 8. FISCAL YEAR
The fiscal year of the Corporation shall be the twelve-month period
ending on December 31 of each year, provided that if a different fiscal year
is at any time selected for purposes of federal income taxes, the fiscal year
shall be the year so selected.
SECTION 9. SEAL
The seal of the Corporation, if any, shall consist of the name of
the Corporation and the state of its incorporation.
SECTION 10. INDEMNIFICATION
10.1 DIRECTORS
The Corporation shall indemnify its directors to the fullest extent
not prohibited by law.
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10.2 OFFICERS, EMPLOYEES AND OTHER AGENTS
The Corporation shall have the power to indemnify its officers,
employees and other agents to the fullest extent not prohibited by law.
10.3 NO PRESUMPTION OF BAD FAITH
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which the person reasonably believed to be in or not opposed to the
best interests of this Corporation, or, with respect to any criminal
proceeding, that the person had reasonable cause to believe that the conduct
was unlawful.
10.4 ADVANCES OF EXPENSES
The expenses incurred by a director in any proceeding shall be paid
by the Corporation in advance at the written request of the director, if the
director:
(a) Furnishes the Corporation a written affirmation of such person's
good faith belief that such person is entitled to be indemnified by the
Corporation; and
(b) Furnishes the Corporation a written undertaking to repay such
advance to the extent that it is ultimately determined by a court that such
person is not entitled to be indemnified by the Corporation. Such advances
shall be made without regard to the person's ability to repay such expenses
and without regard to the person's ultimate entitlement to indemnification
under this Bylaw or otherwise.
10.5 ENFORCEMENT
Without the necessity of entering into an express contract, all
rights to indemnification and advances under this Bylaw shall be deemed to be
contractual rights and be effective to the same extent and as if provided for
in a contract between the Corporation and the director who serves in such
capacity at any time while this Bylaw and any other applicable law, if any,
are in effect. Any right to indemnification or advances granted by this Bylaw
to a director shall be enforceable by or on behalf of the person holding such
right in any court of competent jurisdiction if (a) the claim for
indemnification or advances is denied, in whole or in part, or (b) no
disposition of such claim is made within ninety (90) days of request thereof.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be also paid the expense of prosecuting the claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition when the required affirmation and
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undertaking have been tendered to the Corporation) that the claimant has not
met the standards of conduct which makes it permissible under the law for the
Corporation to indemnify the claimant, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel or its shareholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
10.6 NONEXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Bylaw shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of articles of incorporation, bylaws, agreement,
vote of shareholders or disinterested directors or otherwise, both as to
action in the person's official capacity and as to action in another capacity
while holding office. The Corporation is specifically authorized to enter
into individual contracts with any or all of its directors, officers,
employees or agents respecting indemnification and advances to the fullest
extent not prohibited by law.
10.7 SURVIVAL OF RIGHTS
The rights conferred on any person by this Bylaw shall continue as
to a person who has ceased to be a director, officer, employee or other agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
10.8 INSURANCE
To the fullest extent not prohibited by law, the Corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
10.9 AMENDMENTS TO LAW
For purposes of this Bylaw, the meaning of "law" within the phrase
"to the fullest extent not prohibited by law" shall include, but not be
limited to, the Oregon Business Corporation Act, as the same exists on the
date hereof or as it may be amended; provided, however, that in the case of
any such amendment, such amendment shall apply only to the extent that it
permits the Corporation to provide
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broader indemnification rights than the Act permitted the Corporation to
provide prior to such amendment.
10.10 SAVINGS CLAUSE
If this Bylaw or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, the Corporation shall
indemnify each director to the fullest extent permitted by any applicable
portion of this Bylaw that shall not have been invalidated, or by any other
applicable law.
10.11 CERTAIN DEFINITIONS
For the purposes of this Section, the following definitions shall
apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed
action, suit or proceeding, whether brought in the right of the Corporation
or otherwise and whether civil, criminal, administrative or investigative, in
which the director may be or may have been involved as a party or otherwise
by reason of the fact that the director is or was a director of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise.
(b) The term "expenses" shall be broadly construed and shall
include, without limitation, all costs, charges and expenses (including fees
and disbursements of attorneys, accountants and other experts) actually and
reasonably incurred by a director in connection with any proceeding, all
expenses of investigations, judicial or administrative proceedings or
appeals, and any expenses of establishing a right to indemnification under
these Bylaws, but shall not include amounts paid in settlement, judgments or
fines.
(c) "Corporation" shall mean Corillian Corporation and any successor
corporation thereof.
(d) Reference to a "director," "officer," "employee" or "agent" of
the Corporation shall include, without limitation, situations where such
person is serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans. References to "fines" shall include any excise taxes assessed on a
person with respect to any employee benefit plan. References to "serving at
the request of the
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Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries. A person who acted in good faith
and in a manner the person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Bylaw.
SECTION 11. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may
be adopted by the Board at any regular or special meeting of the Board. The
shareholders may also make, alter, amend and repeal the Bylaws of the
Corporation by the affirmative vote of at least two-thirds of the shares held
by the members of each voting group entitled to vote on any such amendment.
The shareholders, in amending or repealing a particular Bylaw, may provide
expressly that the Board may not amend or repeal that Bylaw. All Bylaws made
by the Board may be amended, repealed, altered or modified by the
shareholders in the manner set forth above.
The foregoing Restated Bylaws were adopted by the Board of Directors
of the Corporation on March __, 2000.
____________________________________
Steven Sipowicz, Secretary
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INCORPORATED UNDER THE LAWS
OF THE STATE OF OREGON
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 218725 10 9
THIS CERTIFIES THAT
is the registered holder of
FULLY PAID SHARES OF THE COMMON STOCK, NO PAR VALUE PER SHARE, OF
CORILLIAN CORPORATION
transferable on the books of the Bank by the holder hereof in person or by duly
authorized attorney on surrender of this certificate properly endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Bank and the facsimile signatures of its duly
authorized officers.
Dated:
SECRETARY AND
CHIEF FINANCIAL OFFICER
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
CORILLIAN CORPORATION
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -
TEN ENT -
JT TEN -
as tenants in common
as tenants by the entireties
as joint tenants with right of
survivorship and not as tenants
in common
(Oregon Custodians use the following)
(Name) CUST UL OREG (Name) MIN-D as
Custodian under
the laws of Oregon, for
a minor
(Name) CUST (Name) (State) UNIF GIFT MIN ACT-D Custodian
(Cust) (Minor)
Under
Uniform Gifts to Minors Act
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
X
X
NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
COR
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CORILLIAN CORPORATION
2000 STOCK INCENTIVE COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Corillian Corporation 2000 Stock Incentive
Compensation Plan (the "Plan") is to enhance the long-term shareholder value of
Corillian Corporation, an Oregon corporation (the "Company"), by offering
opportunities to selected persons to participate in the Company's growth and
success, and to encourage them to remain in the service of the Company and its
Related Corporations (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
"AWARD" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Stock Awards and Options, or any
combination of the foregoing.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor violations), in each case
as determined by the Plan Administrator, and its determination shall be
conclusive and binding.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMON STOCK" means the common stock, no par value, of the Company.
"CORPORATE TRANSACTION" has the meaning set forth in Section 12.3.
"DISABILITY," unless otherwise defined by the Plan Administrator, means
a mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to be unable, in the opinion of
the Company, to perform his or her duties for the Company or a Related
Corporation and to be engaged in any substantial gainful activity.
EFFECTIVE DATE" has the meaning set forth in Section 16.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"FAIR MARKET VALUE" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing sales price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing sales
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
"GRANT DATE" means the date on which the Plan Administrator completes
the corporate action relating to the grant of an Award and all conditions
precedent to the grant have been satisfied, provided that conditions to the
exercisability or vesting of Awards shall not defer the Grant Date.
"INCENTIVE STOCK OPTION" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.
"NONQUALIFIED STOCK OPTION" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
"OPTION" means the right to purchase Common Stock granted under
Section 7.
"OPTION TERM" has the meaning set forth in Section 7.3.
"PARENT," except as otherwise provided in Section 8.3 in connection
with Incentive Stock Options, means any entity, whether now or hereafter
existing, that directly or indirectly controls the Company.
"PARTICIPANT" means (a) the person to whom an Award is granted; (b) for
a Participant who has died, the personal representative of the Participant's
estate, the person(s) to whom the Participant's rights under the Award have
passed by will or by the applicable laws of descent and distribution, or the
beneficiary designated in accordance with Section 11; or (c) the person(s) to
whom an Award has been transferred in accordance with Section 11.
"PLAN ADMINISTRATOR" means the Board or any committee or committees
designated by the Board.
"RELATED PARTY TRANSACTION" has the meaning set forth in Section 12.2.
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"RETIREMENT" means retirement as of the individual's normal retirement
date under the Company's 401(k) plan or other similar successor plan applicable
to salaried employees, unless otherwise defined by the Plan Administrator from
time to time for purposes of the Plan.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK AWARD" means shares of Common Stock or units denominated in
Common Stock granted under Section 9, the rights of ownership of which may be
subject to restrictions prescribed by the Plan Administrator.
"SUBSIDIARY," except as otherwise provided in Section 8.3 in connection
with Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company.
"SUCCESSOR CORPORATION" has the meaning set forth in Section 12.3.
"TERMINATION DATE" has the meaning set forth in Section 7.6.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board (a "Plan Administrator"). If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
the Board shall consider in selecting the members of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. Notwithstanding
the foregoing, the Board may delegate the responsibility for administering the
Plan with respect to designated classes of eligible persons to different
committees consisting of two or more members of the Board, subject to such
limitations as the Board deems appropriate. Committee members shall serve for
such term as the Board may determine, subject to removal by the Board at any
time.
3.2 ADMINISTRATION AND INTERPRETATION BY PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing
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the Award and may from time to time adopt and change rules and regulations of
general application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 12.1,
the number of shares of Common Stock that shall be available for issuance under
the Plan shall be:
(a) 6,000,000 shares plus;
(b) an annual increase to be added on the first day of the Company's
fiscal year beginning in 2002 equal to the lesser of (i) 600,000 shares and (ii)
1% of the adjusted average common shares outstanding of the Company used to
calculate fully diluted earnings per share as reported in the Annual Report to
shareholders for the preceding year; provided that any shares from any such
increases in previous years that are not actually issued shall be added to the
aggregate number of shares available for issuance under the Plan; plus
(c) any authorized shares subject to outstanding awards under the
Company's 1997 Stock Option Plan (as amended and restated April 15, 1999) (the
"Prior Plan") on the Effective Date that cease to be subject to such awards
(other than by reason of exercise or payment of the awards to the extent they
are exercised for or settled in shares), which shares shall cease, as of the
date of shareholder approval of the Plan, to be available be available for grant
and issuance under the Prior Plans, but shall be available for issuance under
the Plan.
Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the Company
4.2 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in vested and
nonforfeitable shares) shall again be available for issuance in connection with
future grants of Awards under the Plan.
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SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Related Corporations as the Plan Administrator
from time to time selects. Awards may also be made to consultants, agents,
advisors and independent contractors who provide services to the Company and its
Related Corporations; provided, however, that such Participants render bona fide
services that are not in connection with the offer and sale of the Company's
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made under the Plan.
Such Awards may include, but are not limited to, Incentive Stock Options,
Nonqualified Stock Options and Stock Awards. Awards may be granted singly or in
combination.
6.2 SETTLEMENT OF AWARDS
The Company may settle Awards through the delivery of shares of Common
Stock, cash payments, the granting of replacement Awards or any combination
thereof as the Plan Administrator shall determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Plan Administrator shall determine. The Plan Administrator
may permit or require the deferral of any Award payment, subject to such rules
and procedures as it may establish, which may include provisions for the payment
or crediting of interest, or dividend equivalents, including converting such
credits into deferred stock equivalents. The Plan Administrator may at any time
offer to buy out, for a payment in cash or Common Stock, an Award previously
granted based on such terms and conditions as the Plan Administrator shall
establish and communicate to the Participant at the time such offer is made.
6.3 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets
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forth the terms and conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and conditions shall be
deemed to be the action of the Plan Administrator without any further action by
the Plan Administrator, except as may be required for compliance with Rule 16b-3
under the Exchange Act, and the persons holding such awards shall be deemed to
be Participants.
SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options. For
Incentive Stock Options granted to a more than 10% shareholder, the Option
exercise price shall be as specified in Section 8.2.
7.3 TERM OF OPTIONS
The term of each Option (the "Option Term") shall be as established by
the Plan Administrator or, if not so established, shall be ten years from the
Grant Date. For Incentive Stock Options, the maximum Option Term shall be as
specified in Sections 8.2 and 8.4.
7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
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PERIOD OF PARTICIPANT'S CONTINUOUS
EMPLOYMENT OR SERVICE WITH THE
COMPANY OR ITS RELATED CORPORATIONS PERCENT OF TOTAL OPTION
FROM THE OPTION GRANT DATE THAT IS VESTED AND EXERCISABLE
After 1 year 1/4
Each additional three-month period of An additional 1/16
continuous service completed thereafter
After 4 years 100%
The Plan Administrator may adjust the vesting schedule of an Option
held by a Participant who works less than "full-time" as that term is defined by
the Plan Administrator.
To the extent that an Option has vested and become exercisable, the
Option may be exercised from time to time by delivery to the Company of a
written stock option exercise agreement or notice, in a form and in accordance
with procedures established by the Plan Administrator, setting forth the number
of shares with respect to which the Option is being exercised, the restrictions
imposed on the shares purchased under such exercise agreement, if any, and such
representations and agreements as may be required by the Plan Administrator,
accompanied by payment in full as described in Section 7.5. An Option may not be
exercised for less than a reasonable number of shares at any one time, as
determined by the Plan Administrator.
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock
is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Participant for at least six months
(or any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
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(c) if and so long as the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise
notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Participant (including a Participant who is an
officer or a director of the Company) in acquiring shares of Common Stock
pursuant to an Award granted under the Plan, the Plan Administrator, in its sole
discretion, may authorize, either at the Grant Date or at any time before the
acquisition of Common Stock pursuant to the Award, (i) the payment by a
Participant of a full-recourse promissory note, (ii) the payment by the
Participant of the purchase price, if any, of the Common Stock in installments,
or (iii) the guarantee by the Company of a full-recourse loan obtained by the
Participant from a third party. Subject to the foregoing, the Plan Administrator
shall in its sole discretion specify the terms of any loans, installment
payments or loan guarantees, including the interest rate and terms of and
security for repayment.
7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable,
and the terms and conditions of such exercise, if a Participant ceases to be
employed by, or to provide services to, the Company or its Related Corporations,
which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the
date of termination of the Participant's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
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(ii) if the Participant's Termination Date occurs for
reasons other than Cause, death, Disability, or Retirement, the three-month
anniversary of such Termination Date; and
(iii) if the Participant's Termination Date occurs by reason of
death, Disability or Retirement, the one-year anniversary of such Termination
Date.
Notwithstanding the foregoing, if the Participant dies after the
Termination Date while the Option is otherwise exercisable, the portion of the
Option that is vested and exercisable on such Termination Date shall expire upon
the earlier to occur of (y) the last day of the Option Term and (z) the first
anniversary of the date of death, unless the Plan Administrator determines
otherwise.
Also notwithstanding the foregoing, in case of termination of the
Participant's employment or service relationship for Cause, the Option shall
automatically expire upon first notification to the Participant of such
termination, unless the Plan Administrator determines otherwise. If a
Participant's employment or service relationship with the Company is suspended
pending an investigation of whether the Participant shall be terminated for
Cause, all the Participant's rights under any Option likewise shall be suspended
during the period of investigation.
A Participant's transfer of employment or service relationship between
or among the Company and its Related Corporations, or a change in status from an
employee to a consultant, agent, advisor or independent contractor, shall not be
considered a termination of employment or service relationship for purposes of
this Section 7. The effect of a Company-approved leave of absence on the terms
and conditions of an Option shall be determined by the Plan Administrator, in
its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant holds two or more such Options that become exercisable for the
first time in the same calendar year, such limitation shall be applied on the
basis of the order in which such Options are granted.
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8.2 MORE THAN 10% SHAREHOLDERS
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option Term shall not exceed five
years. The determination of more than 10% ownership shall be made in accordance
with Section 422 of the Code.
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
Subject to Section 8.2, the Option Term shall not exceed ten years.
8.5 EXERCISABILITY
An Option designated as an Incentive Stock Option shall cease to
qualify for favorable tax treatment as an Incentive Stock Option to the extent
it is exercised (if permitted by the terms of the Option) (a) more than three
months after the Termination Date for reasons other than death or Disability,
(b) more than one year after the Termination Date by reason of Disability, or
(c) after the Participant has been on leave of absence for more than 90 days,
unless the Participant's reemployment rights are guaranteed by statute or
contract.
For purposes of this Section 8.5, Disability shall mean "disability" as
that term is defined for purposes of Section 422 of the Code.
8.6 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold the shares
issued upon the exercise of an Incentive Stock Option for two years after the
Grant Date and one year from the date of exercise. A Participant may be subject
to the alternative minimum tax at the time of exercise of an Incentive Stock
Option. The Participant shall give the Company prompt notice of any disposition
of shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
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8.7 PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK AWARDS
9.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make Awards of Common Stock or
Awards denominated in units of Common Stock on such terms and conditions and
subject to such restrictions, if any (which may be based on continuous service
with the Company or the achievement of performance goals), as the Plan
Administrator shall determine, in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture of the Stock Award
shall occur by reason of termination of the Participant's employment or service
relationship.
9.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Participant's release from
any terms, conditions and restrictions of a Stock Award, as determined by the
Plan Administrator, the Company shall release, as soon as practicable, to the
Participant or, in the case of the Participant's death, to the personal
representative of the Participant's estate or as the appropriate court directs,
the appropriate number of shares of Common Stock.
9.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan
Administrator may, in its sole discretion, waive the forfeiture period and any
other terms, conditions or restrictions on any Stock Award under such
circumstances and subject to such terms and conditions as the Plan Administrator
shall deem appropriate.
SECTION 10. WITHHOLDING
The Company may require the Participant to pay to the Company the
amount of any withholding taxes that the Company is required to withhold with
respect to the grant,
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vesting or exercise of any Award. Subject to the Plan and applicable law, the
Plan Administrator may, in its sole discretion, permit the Participant to
satisfy withholding obligations, in whole or in part, (a) by paying cash, (b) by
electing to have the Company withhold shares of Common Stock (up to the minimum
required federal tax withholding rate) or (c) by transferring to the Company
shares of Common Stock (already owned by the Participant for the period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes), in such amounts as are equivalent to the Fair Market Value of the
withholding obligation. The Company shall have the right to withhold from any
Award or any shares of Common Stock issuable pursuant to an Award or from any
cash amounts otherwise due or to become due from the Company to the Participant
an amount equal to such taxes. The Company may also deduct from any Award any
other amounts due from the Participant to the Company or a Related Corporation.
SECTION 11. ASSIGNABILITY
Awards granted under the Plan and any interest therein may not be
assigned, pledged or transferred by the Participant and may not be made subject
to attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, and, during the Participant's lifetime, such
Awards may be exercised only by the Participant. Notwithstanding the foregoing,
and to the extent permitted by Section 422 of the Code, the Plan Administrator,
in its sole discretion, may permit such assignment, transfer and exercisability
and may permit a Participant to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Participant's death;
provided, however, that any Award so assigned or transferred shall be subject to
all the same terms and conditions contained in the instrument evidencing the
Award.
SECTION 12. ADJUSTMENTS
12.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company being received by the holders of shares of
Common Stock of the Company, then the Plan Administrator shall make proportional
adjustments in (i) the maximum number and kind of securities subject to the Plan
as set forth in Section 4.1 and (ii) the number and kind of securities that are
subject to any outstanding Award and the per share price of such securities,
without any change in the aggregate price to be paid therefor. The determination
by the Plan Administrator as to the
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terms of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a dissolution or liquidation of the Company or a
Corporate Transaction shall not be governed by this Section 12.1 but shall be
governed by Section 12.2 and 12.3, respectively.
12.2 DISSOLUTION, LIQUIDATION OR CORPORATE TRANSACTION
In the event of the proposed dissolution or liquidation of the
Company, the Plan Administrator shall notify each Participant as soon as
practicable prior to the effective date of such proposed transaction. The
Plan Administrator in its discretion may permit a Participant to exercise an
Option until ten days prior to such transaction with respect to all vested
and exercisable shares of Common Stock covered thereby and with respect to
such number of unvested shares as the Plan Administrator shall determine. In
addition, the Plan Administrator may provide that any forfeiture provision or
Company repurchase option applicable to any Award shall lapse as to such
number of shares as the Plan Administrator shall determine, contingent upon
the occurrence of the proposed dissolution or liquidation at the time and in
the manner contemplated. To the extent an Option has not been previously
exercised, the Option shall terminate automatically immediately prior to the
consummation of the proposed action. To the extent a forfeiture provision
applicable to a Stock Award has not been waived by the Plan Administrator,
the Stock Award shall be forfeited automatically immediately prior to the
consummation of the proposed action.
12.3 CORPORATE TRANSACTION
In the event of a Corporate Transaction, except as otherwise
provided in the instrument evidencing the Award, each outstanding Option
shall be assumed or an equivalent option or right substituted by the
successor corporation or its parent corporation (the "Successor
Corporation"). In the event that the Successor Corporation refuses to assume
or substitute for the Option, the Option shall terminate, but the Participant
shall have the right immediately prior to the Corporate Transaction to
exercise the participant's Option to the extent the vesting requirements
applicable to the Option have been satisfied.
"CORPORATE TRANSACTION" means any of the following events:
(a) Consummation of any merger or consolidation of the Company with
or into another corporation; or
(b) Consummation of any sale, lease, exchange or other transfer in
one transaction or a series of related transactions of all or substantially all
the Company's outstanding securities or substantially all the Company's assets
other than a transfer of the Company's assets to a majority-owned subsidiary
corporation (as defined in Section 8.3) of the Company; or
(c) Acquisition by a person, within the meaning of Section 3(a)(9) or
of Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the
Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
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12.4 FURTHER ADJUSTMENT OF AWARDS
Subject to Section 12.2 and 12.3, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to the Participants, with respect
to Awards. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise, lifting restrictions and other modifications, and
the Plan Administrator may take such actions with respect to all Participants,
to certain categories of Participants or only to individual Participants. The
Plan Administrator may take such action before or after granting Awards to which
the action relates and before or after any public announcement with respect to
such sale, merger, consolidation, reorganization, liquidation or change in
control that is the reason for such action.
12.5 LIMITATIONS
The grant of Awards shall in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
12.6 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
Award, each such Award shall cover only the number of full shares resulting from
such adjustment.
SECTION 13. MARKET STANDOFF
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
person shall not sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose of or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to
any shares issued pursuant to an Award granted under the Plan without the prior
written consent of the Company or its underwriters. Such
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limitations shall be in effect for such period of time as may be requested by
the Company or such underwriters and agreed to by the Company's officers and
directors with respect to their shares; provided, however, that in no event
shall such period exceed 180 days. The limitations of this paragraph shall in
all events terminate two years after the effective date of the Company's initial
public offering. Holders of shares issued pursuant to an Award granted under the
Plan shall be subject to the market standoff provisions of this paragraph only
if the officers and directors of the Company are also subject to similar
arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 13, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 13, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 14. AMENDMENT AND TERMINATION OF PLAN
14.1 AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall
deem advisable; provided, however, that to the extent required for compliance
with Section 422 of the Code or any applicable law or regulation, shareholder
approval shall be required for any amendment that would (a) increase the total
number of shares available for issuance under the Plan, (b) modify the class of
persons eligible to receive Options, or (c) otherwise require shareholder
approval under any applicable law or regulation. Any amendment made to the Plan
that would constitute a "modification" to Incentive Stock Options outstanding on
the date of such amendment shall not, without the consent of the Participant, be
applicable to such outstanding Incentive Stock Options but shall have
prospective effect only.
14.2 TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated as provided herein, the Plan shall terminate ten years after the
earlier of the Plan's adoption by the Board and approval by the shareholders.
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14.3 CONSENT OF PARTICIPANT
The amendment or termination of the Plan or the amendment of an
outstanding Award shall not, without the Participant's consent, impair or
diminish any rights or obligations under any Award theretofore granted to the
Participant under the Plan. Any change or adjustment to an outstanding Incentive
Stock Option shall not, without the consent of the Participant, be made in a
manner so as to constitute a "modification" that would cause such Incentive
Stock Option to fail to continue to qualify as an Incentive Stock Option.
Notwithstanding the foregoing, any adjustments made pursuant to Section 12 shall
not be subject to these restrictions.
SECTION 15. GENERAL
15.1 EVIDENCE OF AWARDS
Awards granted under the Plan shall be evidenced by a written
instrument that shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with the Plan.
15.2 NO INDIVIDUAL RIGHTS
Nothing in the Plan or any Award granted under the Plan shall be deemed
to constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Corporation or limit in any way
the right of the Company or any Related Corporation to terminate a Participant's
employment or other relationship at any time, with or without Cause.
15.3 REGISTRATION
Notwithstanding any other provision of the Plan, the Company shall have
no obligation to issue or deliver any shares of Common Stock under the Plan or
make any other distribution of benefits under the Plan unless such issuance,
delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer
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instructions as counsel for the Company deems necessary or desirable for
compliance by the Company with federal and state securities laws.
To the extent that the Plan or any instrument evidencing an Award
provides for issuance of stock certificates to reflect the issuance of shares of
Common Stock, the issuance may be effected on a noncertificated basis, to the
extent not prohibited by applicable law or the applicable rules of any stock
exchange.
15.4 NO RIGHTS AS A SHAREHOLDER
No Option or Stock Award denominated in units shall entitle the
Participant to any cash dividend, voting or other right of a shareholder unless
and until the date of issuance under the Plan of the shares that are the subject
of such Award.
15.5 COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants who are
officers or directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
Participants. Additionally, in interpreting and applying the provisions of the
Plan, any Option granted as an Incentive Stock Option pursuant to the Plan
shall, to the extent permitted by law, be construed as an "incentive stock
option" within the meaning of Section 422 of the Code.
15.6 PARTICIPANTS IN FOREIGN COUNTRIES
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or
its Related Corporations may operate to assure the viability of the benefits
from Awards granted to Participants employed in such countries and to meet the
objectives of the Plan.
15.7 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or other
property, or shares of Common Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.
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15.8 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
15.9 CHOICE OF LAW
The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Oregon without giving effect to principles
of conflicts of laws.
SECTION 16. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the
Board, so long as it is approved by the Company's shareholders at any time
within 12 months of such adoption.
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY PAGE
SECTION/EFFECT OF DATE OF
DATE OF BOARD ACTION AMENDMENT SHAREHOLDER
ACTION APPROVAL
March 2, 2000 Initial Plan
Adoption ____________, 200
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CORILLIAN CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the Corillian Corporation 2000 Employee Stock
Purchase Plan (the "Plan") are (a) to assist employees of Corillian
Corporation, an Oregon corporation (the "Company"), and its designated
subsidiaries in acquiring a stock ownership interest in the Company pursuant
to a plan that is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended, and (b)
to encourage employees to remain in the employ of the Company and its
subsidiaries.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as
set forth below:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Company's Compensation Committee or any other
committee appointed by the Board to administer the Plan.
"COMMON STOCK" means the common stock, no par value, of the Company.
"COMPANY" means Corillian Corporation, an Oregon corporation.
"CORPORATE TRANSACTION" means either of the following events:
(a) Consummation of any merger or consolidation of the Company
with or into another corporation or
(b) Consummation of any sale, lease, exchange or other
transfer in one transaction or a series of related transactions of all
or substantially all the Company's outstanding securities or all or
substantially all the Company's assets other than a transfer of the
Company's securities or assets to a majority-owned Subsidiary
Corporation of the Company.
"DESIGNATED SUBSIDIARY" has the meaning set forth under the
definition of "Eligible Employee" in this Section 2.
"ELIGIBLE COMPENSATION" means all salary and wages, including
overtime, cash bonuses and commissions. Regular cash compensation does not
include severance pay, hiring and relocation bonuses, pay in lieu of
vacations, sick leave, gain from stock option exercises or any other special
payments.
<PAGE>
"ELIGIBLE EMPLOYEE" means any employee of the Company, a domestic
Subsidiary Corporation or any other Subsidiary Corporation designated by the
Board or the Committee (each, a "Designated Subsidiary"), who is in the
employ of the Company (or any Designated Subsidiary) on one or more Offering
Dates and who meets the following criteria:
(a) the employee does not, immediately after the Option is
granted, own stock (as defined by the Code) possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company or of a Parent Corporation or Subsidiary Corporation of the
Company;
(b) the employee's customary employment is for 20 hours or
more per week; provided, however, that the Plan Administrator may
decrease this minimum hours requirement for a future Offering;
(c) if specified by the Plan Administrator for a future
Offering, the employee customarily works a minimum of five months per
year or any lesser number of months established by the Plan
Administrator; and
(d) if specified by the Plan Administrator for a future
Offering, the employee has been employed for a certain minimum period
of time as of an Offering Date; provided, however, that any such
minimum employment period may not exceed two years.
If the Company permits any employee of a Designated Subsidiary to participate
in the Plan, then all employees of that Designated Subsidiary who meet the
requirements of this paragraph shall also be considered Eligible Employees.
"ENROLLMENT PERIOD" has the meaning set forth in Section 7.1.
"ESPP BROKER" has the meaning set forth in Section 10.1.
"FAIR MARKET VALUE" shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the Nasdaq
National Market, the closing sales price for the Common Stock as reported by
the Nasdaq National Market on the Offering Date or the Purchase Date, as
applicable, unless the Plan Administrator determines otherwise for a future
Offering or (b) if the Common Stock is listed on the New York Stock Exchange
or the American Stock Exchange, the closing sales price for the Common Stock
as such price is officially quoted in the composite tape of transactions on
such exchange on the Offering Date or the Purchase Date, as applicable,
unless the Plan Administrator determines otherwise for a future Offering;
provided, however, that for the first Offering Date under the Plan that
occurs on the date shares of Common Stock are first offered to the public in
an underwritten initial public offering filed with and declared effective by
the Securities and Exchange Commission, Fair Market Value shall be the Common
Stock's initial public offering price as set forth in Section 6(a). If there
is no such reported price for the Common Stock for the date in question, then
such price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
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"OFFERING" has the meaning set forth in Section 5.1.
"OFFERING DATE" means the first day of an Offering.
"OPTION" means an option granted under the Plan to an Eligible
Employee to purchase shares of Common Stock.
"PARENT CORPORATION" means any corporation, other than the Company,
in an unbroken chain of corporations ending with the Company, if, at the time
of the granting of the Option, each of the corporations, other than the
Company, owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means any Eligible Employee who has elected to
participate in an Offering in accordance with the procedures set forth in
Section 7.1 and who has not withdrawn from the Plan or whose participation in
the Plan is not otherwise terminated.
"PLAN" means the Corillian Corporation 2000 Employee Stock Purchase
Plan.
"PURCHASE DATE" means the last day of each Purchase Period.
"PURCHASE PERIOD" has the meaning set forth in Section 5.2.
"PURCHASE PRICE" has the meaning set forth in Section 6.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSCRIPTION" has the meaning set forth in Section 7.1.
"SUBSIDIARY CORPORATION" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company, if,
at the time of the granting of the Option, each of the corporations, other
than the last corporation in the unbroken chain, owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board and/or the Committee or,
if and to the extent the Board or the Committee designates an executive
officer of the Company to administer the Plan, by such executive officer
(each, the "Plan Administrator"). Any decisions made by the Plan
Administrator shall be applicable equally to all Eligible Employees.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Subject to the provisions of the Plan, the Plan Administrator shall
have the authority, in its sole discretion, to determine all matters relating
to Options granted under the Plan, including all terms, conditions,
restrictions and limitations of Options; provided, however, that all
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Participants granted Options pursuant to the Plan shall have the same rights
and privileges within the meaning of Code Section 423. The Plan Administrator
shall also have exclusive authority to interpret the Plan and may from time
to time adopt, and change, rules and regulations of general application for
the Plan's administration. The Plan Administrator's interpretation of the
Plan and its rules and regulations, and all actions taken and determinations
made by the Plan Administrator pursuant to the Plan, unless reserved to the
Board or the Committee, shall be conclusive and binding on all parties
involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company's other officers or employees as the Plan
Administrator so determines.
SECTION 4. STOCK SUBJECT TO PLAN
Subject to adjustment from time to time as provided in Section 21.1,
the maximum number of shares of Common Stock that shall be available for
issuance under the Plan shall be:
(a) 500,000 shares, plus
(b) an annual increase to be added on the first day of the
Company's fiscal year beginning in 2002 equal to the least of (i) 500,000
shares of Common Stock; (ii) 2% of the adjusted average common shares
outstanding of the Company used to calculate fully diluted earnings per share
as reported in the annual report to shareholders for the preceding year; and
(iii) a lesser amount determined by the Board; provided, however, that any
shares from any increases in previous years that are not actually issued
shall be added to the aggregate number of shares available for issuance under
the Plan. Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares subsequently acquired by the Company.
SECTION 5. OFFERING DATES
5.1 OFFERINGS
(a) Except as otherwise set forth below, the Plan shall be
implemented by a series of Offerings of 24 months' duration (each, an
"Offering"). Offerings shall commence on February 1 and August 1 of each year
and end on the next January 31 and July 31, respectively, occurring
thereafter; provided, however, that the first Offering shall begin on the day
(the "IPO Date") on which shares of Common Stock are first offered to the
public in an underwritten initial public offering of such Common Stock
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission (such day being the first trading day for
the Common Stock on the Nasdaq National Market, the New York Stock Exchange
or other applicable trading market), and shall end on January 31, 2002.
(b) Notwithstanding the foregoing, the Plan Administrator may
establish (i) a different term for one or more future Offerings and (ii)
different commencing and ending dates for such future Offerings; provided,
however, that an Offering may not exceed five years; and provided, further,
that if the Purchase Price may be less than 85% of the Fair Market Value of
the Common Stock on the Purchase Date, the Offering may not exceed 27 months.
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(c) In the event the first or the last day of an Offering is not a
regular business day, then the first day of the Offering shall be deemed to
be the next regular business day and the last day of the Offering shall be
deemed to be the last preceding regular business day.
5.2 PURCHASE PERIODS
(a) Each Offering shall consist of four consecutive purchase periods
of six months' duration (each, a "Purchase Period"). The last day of each
Purchase Period shall be the Purchase Date for such Purchase Period. Except
as otherwise set forth below, a Purchase Period shall commence on February 1
and August 1 of each year and end on the next July 31 and January 31,
respectively, occurring thereafter; provided, however, that the Purchase
Period for the first Offering shall commence on the IPO Date and shall end on
July 31, 2000.
(b) Notwithstanding the foregoing, the Plan Administrator may
establish for a future Offering (i) a different term for one or more future
Purchase Periods and (ii) different commencing and ending dates for any such
Purchase Period.
(c) In the event the first or last day of a Purchase Period is not a
regular business day, then the first day of the Purchase Period shall be
deemed to be the next regular business day and the last day of the Purchase
Period shall be deemed to be the last preceding regular business day.
5.3 GOVERNMENTAL APPROVAL; SHAREHOLDER APPROVAL
Notwithstanding any other provision of the Plan to the contrary, an
Option granted pursuant to the Plan shall be subject to (a) obtaining all
necessary governmental approvals and qualifications for the Plan, the
issuance of Options and the sale of Common Stock pursuant to the Plan and (b)
obtaining shareholder approval of the Plan.
SECTION 6. PURCHASE PRICE
(a) The purchase price (the "Purchase Price") at which Common Stock
may be acquired in an Offering pursuant to the exercise of all or any portion
of an Option shall be 85% of the lesser of (i) the Fair Market Value of the
Common Stock on the Offering Date of such Offering and (ii) the Fair Market
Value of the Common Stock on the Purchase Date; provided, however, that the
Purchase Price for the first Offering that begins on the IPO Date shall be
the lesser of (A) 100% of the initial public offering price per share of
Common Stock, before underwriters' discounts or concessions, set forth in
that certain Underwriting Agreement between the Company and the
representatives of the underwriters and executed in connection with the
Company's initial public offering of the Common Stock and (B) 85% of the Fair
Market Value of the Common Stock on the Purchase Date.
(b) Notwithstanding the foregoing, if an increase in the number of
shares authorized for issuance under the Plan (other than an annual increase
pursuant to Section 4) is approved and all or a portion of such additional
shares are to be issued during one or more Offerings that are underway at the
time of shareholder approval of such increase (the "Additional Shares"),
then, if as of the date of such shareholder approval, the Fair Market Value
of a share of Common Stock
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is higher than the Fair Market Value on the Offering Date for any such
Offering, the Purchase Price for the Additional Shares shall be 85% of the
lesser of (i) the Common Stock's Fair Market Value on the date of such
shareholder approval and (ii) the Fair Market Value of the Common Stock on
the Purchase Date.
SECTION 7. PARTICIPATION IN THE PLAN
7.1 INITIAL PARTICIPATION
An Eligible Employee shall become a Participant on the first
Offering Date after satisfying the eligibility requirements and delivering to
the Company during the enrollment period established by the Plan
Administrator (the "Enrollment Period") a subscription (the "Subscription"):
(a) indicating the Eligible Employee's election to participate in
the Plan;
(b) authorizing payroll deductions and stating the amount to be
deducted regularly from the Participant's pay; and
(c) authorizing the purchase of Common Stock for the Participant in
each Purchase Period.
An Eligible Employee who does not deliver a Subscription as provided
above during the Enrollment Period shall not participate in the Plan for that
Offering or for any subsequent Offering unless such Eligible Employee
subsequently enrolls in the Plan by filing a Subscription with the Company
during the Enrollment Period for such subsequent Offering. The Company may,
from time to time, change the Enrollment Period for a future Offering as
deemed advisable by the Plan Administrator, in its sole discretion, for the
proper administration of the Plan.
Except as provided in Section 7.2, an employee who becomes eligible
to participate in the Plan after an Offering has commenced shall not be
eligible to participate in such Offering but may participate in any
subsequent Offering, provided that such employee is still an Eligible
Employee as of the commencement of any such subsequent Offering. Eligible
Employees may not participate in more than one Offering at a time.
7.2 ALTERNATIVE INITIAL PARTICIPATION
Notwithstanding any other provision of the Plan, the Board or the
Committee may provide for a future Offering that any employee of the Company
or any Designated Subsidiary who first meets the requirements of
subparagraphs (b) through (d) of the paragraph "Eligible Employee" in Section
2 during the course of an Offering shall, on a date or dates specified in the
Offering that coincide with the day on which such person first meets such
requirements or that occurs on a specified date thereafter, receive an Option
under that Offering which Option shall thereafter be deemed to be a part of
that Offering. Such Option shall have the same characteristics as any Options
originally granted under that Offering, except that
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(a) the date on which such Option is granted shall be the "Offering
Date" of such Option for all purposes, including determining the Purchase
Price of such Option; provided, however, that if the Fair Market Value of the
Common Stock on the date on which such Option is granted is less than the
Fair Market Value of Common Stock on the first day of the Offering, then,
solely for the purpose of determining the Purchase Price of such Option, the
first day of the Offering shall be the "Offering Date" for such Option;
(b) the Purchase Period(s) for such Option shall begin on its
Offering Date and end coincident with the remaining Purchase Date(s) for such
Offering; and
(c) the Board or the Committee may provide that if such person first
meets such requirements within a specified period of time before the end of a
Purchase Period for such Offering, he or she will not receive an Option for
that Purchase Period.
7.3 CONTINUED PARTICIPATION
A Participant shall automatically participate in the next Offering
until such time as such Participant ceases payroll contributions to the Plan,
withdraws from the Plan pursuant to Section 11.2 or terminates employment as
provided in Section 13.
SECTION 8. LIMITATIONS ON RIGHT TO PURCHASE SHARES
8.1 NUMBER OF SHARES PURCHASED
(a) No Participant shall be entitled to purchase Common Stock under
the Plan (or any other employee stock purchase plan that is intended to meet
the requirements of Code Section 423 sponsored by the Company, a Parent
Corporation or a Subsidiary Corporation) with a Fair Market Value exceeding
$25,000 (such value determined as of the Offering Date for each Offering or
such other limit as may be imposed by the Code) in any calendar year in which
a Participant participates in the Plan (or other employee stock purchase plan
described in this Section 8.1).
(b) No Participant shall be entitled to purchase more than 5,000
shares of Common Stock (or such other number as the Board or the Committee
shall specify for a future Offering) under the Plan in any single Purchase
Period.
(c) For a future Offering, the Board or the Committee may specify a
maximum number of shares that may be purchased by any Participant, as well as
a maximum aggregate number of shares that may be purchased by all
Participants, pursuant to such Offering. In addition, for a future Offering
with more than one Purchase Date, the Board or the Committee may specify a
maximum aggregate number of shares that may be purchased by all Participants
on any given Purchase Date under the Offering.
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8.2 PRO RATA ALLOCATION
In the event the number of shares of Common Stock that might be
purchased by all Participants exceeds the number of shares of Common Stock
available in the Plan, the Plan Administrator shall make a pro rata
allocation of the remaining shares of Common Stock in as uniform a manner as
shall be practicable and as the Plan Administrator shall determine to be
equitable. Fractional shares may not be issued under the Plan unless the Plan
Administrator determines otherwise for a future Offering.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 GENERAL RULES
Subject to Section 9.11, Common Stock that is acquired pursuant to
the exercise of all or any portion of an Option may be paid for only by means
of payroll deductions from the Participant's Eligible Compensation. Except as
set forth in this Section 9, the amount of compensation to be withheld from a
Participant's Eligible Compensation during each pay period shall be
determined by the Participant's Subscription.
9.2 PERCENT WITHHELD
The amount of payroll withholding for each Participant for purchases
pursuant to the Plan during any pay period shall be at least 1% but shall not
exceed 15% of the Participant's Eligible Compensation for such pay period (or
such other higher percentage as the Plan Administrator may establish from
time to time for a future Offering). Amounts shall be withheld in whole
percentages only.
9.3 PAYROLL DEDUCTIONS
Payroll deductions shall commence on the first payday following the
Offering Date and shall continue through the last payday of the Offering
unless sooner altered or terminated as provided in the Plan.
9.4 MEMORANDUM ACCOUNTS
Individual accounts shall be maintained for each Participant for
memorandum purposes only. All payroll deductions from a Participant's
compensation shall be credited to such account but shall be deposited with
the general funds of the Company. All payroll deductions received or held by
the Company may be used by the Company for any corporate purpose.
9.5 NO INTEREST
No interest shall be paid on payroll deductions received or held by
the Company.
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9.6 ACQUISITION OF COMMON STOCK
On each Purchase Date of an Offering, each Participant shall
automatically acquire, pursuant to the exercise of the Participant's Option,
the number of shares of Common Stock arrived at by dividing the total amount
of the Participant's accumulated payroll deductions for the Purchase Period
by the Purchase Price; provided, however, that the number of shares of Common
Stock purchased by the Participant shall not exceed the number of whole
shares of Common Stock so determined, unless the Plan Administrator has
determined for a future Offering that fractional shares may be issued under
the Plan; and provided, further, that the number of shares of Common Stock
purchased by the Participant shall not exceed the number of shares for which
Options have been granted to the Participant pursuant to Section 8.1.
9.7 REFUND OF EXCESS AMOUNTS
Any cash balance remaining in the Participant's account at the
termination of each Purchase Period shall be refunded to the Participant as
soon as practical after the Purchase Date without the payment of any
interest; provided, however, that if the Participant participates in the next
Purchase Period, any cash balance remaining in the Participant's account
shall be applied to the purchase of Common Stock in the new Purchase Period,
provided such purchase complies with Section 8.1.
9.8 WITHHOLDING OBLIGATIONS
At the time the Option is exercised, in whole or in part, or at the
time some or all the Common Stock is disposed of, the Participant shall make
adequate provision for federal and state withholding obligations of the
Company, if any, that arise upon exercise of the Option or upon disposition
of the Common Stock. The Company may withhold from the Participant's
compensation the amount necessary to meet such withholding obligations.
9.9 TERMINATION OF PARTICIPATION
No Common Stock shall be purchased on behalf of a Participant on a
Purchase Date if his or her participation in the Plan has terminated on or
before such Purchase Date.
9.10 PROCEDURAL MATTERS
The Company may, from time to time, establish (a) limitations on the
frequency and/or number of any permitted changes in the amount withheld
during an Offering, as set forth in Section 11.1, (b) an exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, (c)
payroll withholding in excess of the amount designated by a Participant in
order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, and (d) such other limitations or
procedures as deemed advisable by the Company in the Company's sole
discretion that are consistent with the Plan and in accordance with the
requirements of Code Section 423.
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9.11 LEAVES OF ABSENCE
During leaves of absence approved by the Company and meeting the
requirements of the applicable Treasury Regulations promulgated under the
Code, a Participant may elect to continue participation in the Plan by
delivering cash payments to the Company on the Participant's normal paydays
equal to the amount of his or her payroll deduction under the Plan had the
Participant not taken a leave of absence. Currently, the Treasury Regulations
provide that a Participant may continue participation in the Plan only during
the first 90 days of a leave of absence unless the Participant's reemployment
rights are guaranteed by statute or contract.
SECTION 10. COMMON STOCK PURCHASED UNDER THE PLAN
10.1 ESPP BROKER
If the Plan Administrator designates or approves a stock brokerage
or other financial services firm (the "ESPP Broker") to hold shares purchased
under the Plan for the accounts of Participants, the following procedures
shall apply. Promptly following each Purchase Date, the number of shares of
Common Stock purchased by each Participant shall be deposited into an account
established in the Participant's name with the ESPP Broker. Each Participant
shall be the beneficial owner of the Common Stock purchased under the Plan
and shall have all rights of beneficial ownership in such Common Stock. A
Participant shall be free to undertake a disposition of the shares of Common
Stock in his or her account at any time, but, in the absence of such a
disposition, the shares of Common Stock must remain in the Participant's
account at the ESPP Broker until the holding period set forth in Code Section
423 has been satisfied. With respect to shares of Common Stock for which the
holding period set forth above has been satisfied, the Participant may move
those shares of Common Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued and
delivered to him or her. Dividends paid in the form of shares of Common Stock
with respect to Common Stock in a Participant's account shall be credited to
such account. A Participant who is not subject to payment of U.S. income
taxes may move his or her shares of Common Stock to another brokerage account
of his or her choosing or request that a stock certificate be delivered to
him or her at any time, without regard to the Code Section 423 holding period.
10.2 NOTICE OF DISPOSITION
By entering the Plan, each Participant agrees to promptly give the
Company notice of any Common Stock disposed of within the later of one year
from the Purchase Date and two years from the Offering Date for such Common
Stock, showing the number of such shares disposed of and the Purchase Date
and Offering Date for such Common Stock. This notice shall not be required if
and so long as the Company has a designated ESPP Broker.
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SECTION 11. CHANGES IN WITHHOLDING AMOUNTS AND
VOLUNTARY WITHDRAWAL
11.1 CHANGES IN WITHHOLDING AMOUNTS
(a) Unless the Plan Administrator establishes otherwise for a future
Offering, during a Purchase Period, a Participant may elect to reduce payroll
contributions to 0% by completing and filing with the Company an amended
Subscription authorizing cessation of payroll deductions. The change in rate
shall be effective as of the beginning of the next calendar month following
the date of filing the amended Subscription if the amended Subscription is
filed at least ten days prior to such date (the "Change Notice Date") and, if
not, as of the beginning of the next succeeding calendar month. All payroll
deductions accrued by a Participant as of a Change Notice Date shall continue
to be applied toward the purchase of Common Stock on the Purchase Date,
unless a Participant withdraws from the Plan, pursuant to Section 11.2. An
amended Subscription shall remain in effect until the Participant changes
such Subscription in accordance with the terms of the Plan.
(b) Unless the Plan Administrator determines otherwise for a future
Offering, a Participant may elect to increase or decrease the amount to be
withheld from his or her compensation for future Purchase Periods by filing
with the Company an amended Subscription; provided, however, that notice of
such election must be delivered to the Company at least ten days prior to
such Purchase Period in such form and in accordance with such terms as the
Plan Administrator may establish for an Offering. An amended Subscription
shall remain in effect until the Participant changes such Subscription in
accordance with the terms of the Plan.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Code Section 423 and Section 8.1, a Participant's payroll deductions may
be decreased to 0% during any Purchase Period if the aggregate of all payroll
deductions accumulated with respect to one or more Purchase Periods ending
within the same calendar year exceeds $25,000 based on the Fair Market Value
of the Common Stock determined as of the first day of an Offering ($21,250 if
the Purchase Price is 85% of the Fair Market Value of the Common Stock on the
Offering Date of the Offering). Payroll deductions shall re-commence at the
rate provided in such Participant's Subscription at the beginning of the
first Purchase Period that is scheduled to end in the following calendar
year, unless the Participant terminates participation in the Plan or
indicates otherwise in an amended Subscription..
11.2 WITHDRAWAL FROM THE PLAN
A Participant may withdraw from the Plan by completing and
delivering to the Company a written notice of withdrawal on a form provided
by the Company for such purpose. Such notice must be delivered prior to the
end of the Purchase Period for which such withdrawal is to be effective. If a
Participant withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Common Stock acquired by the
Participant in that Purchase Period or any earlier Purchase Periods. A
Participant may not resume participation in the same Offering at any time
upon withdrawal from the Plan, but may participate in any subsequent Offering
under the Plan by again satisfying the definition of Eligible Employee and
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re-enrolling in the Plan in accordance with Section 7. The Company may, from
time to time, impose a requirement that the notice of withdrawal be on file
with the Company for a reasonable period prior to the effectiveness of the
Participant's withdrawal.
11.3 RETURN OF PAYROLL DEDUCTIONS
Upon withdrawal from the Plan pursuant to Section 11.2, the
withdrawing Participant's accumulated payroll deductions that have not been
applied to the purchase of Common Stock shall be returned as soon as
practical after the withdrawal, without the payment of any interest, to the
Participant and the Participant's interest in the Offering shall terminate.
Such accumulated payroll deductions may not be applied to any other Offering
under the Plan.
SECTION 12. AUTOMATIC WITHDRAWAL
If the Fair Market Value of the Common Stock on any Purchase Date of
an Offering is less than the Fair Market Value of the Common Stock on the
Offering Date for such Offering, then every Participant shall automatically
(a) be withdrawn from such Offering at the close of such Purchase Date and
after the acquisition of the shares of Common Stock for such Purchase Period
and (b) be enrolled in the Offering commencing on the first business date
subsequent to such Purchase Period, provided the Participant is eligible to
participate in the Plan and has not elected to terminate participation in the
Plan pursuant to Section 11.2.
SECTION 13. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the Company for any
reason, including retirement, death or the failure of a Participant to remain
an Eligible Employee, shall immediately terminate the Participant's
participation in the Plan. The payroll deductions credited to the
Participant's account since the last Purchase Date shall, as soon as
practical, be returned to the Participant or, in the case of a Participant's
death, to the Participant's legal representative or designated beneficiary as
provided in Section 14.2, and all the Participant's rights under the Plan
shall terminate. Interest shall not be paid on sums returned to a Participant
pursuant to this Section 13.
SECTION 14. RESTRICTIONS ON ASSIGNMENT
14.1 TRANSFERABILITY
An Option granted under the Plan shall not be transferable and such
Option shall be exercisable during the Participant's lifetime only by the
Participant. The Company will not recognize, and shall be under no duty to
recognize, any assignment or purported assignment by a Participant of the
Participant's interest in the Plan, of his or her Option or of any rights
under his or her Option.
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14.2 BENEFICIARY DESIGNATION
The Plan Administrator may permit a Participant to designate a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event the Participant dies after
the Purchase Date for an Offering but prior to delivery to such Participant
of such shares and cash. In addition, the Plan Administrator may permit a
Participant to designate a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event that the Participant dies
before the Purchase Date for an Offering. Such designation may be changed by
the Participant at any time by written notice to the Company.
SECTION 15. MARKET STANDOFF
In connection with the underwritten initial public offering by the
Company of its Common Stock, neither a Participant nor any beneficiary
designated pursuant to Section 14.2 shall sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose of or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to any Common Stock issued under the Plan
for a period of 180 days after the IPO Date, except that the foregoing
provision shall not apply in the event of the Participant's death or
"disability" as that term is defined in Code Section 22(e)(3).
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Common Stock effected as a class without the Company's receipt of
consideration, any new, substituted or additional securities distributed with
respect to the purchased Common Stock shall be immediately subject to the
provisions of this Section 15.
In order to enforce the limitations of this Section 15, the Company
may issue stop-transfer instructions to the ESPP Broker and/or the Company's
transfer agent until the end of the period ending 180 days after the IPO Date.
SECTION 16. NO RIGHTS AS SHAREHOLDER UNTIL SHARES ISSUED
With respect to shares of Common Stock subject to an Option, a
Participant shall not be deemed to be a shareholder of the Company, and he or
she shall not have any of the rights or privileges of a shareholder. A
Participant shall have the rights and privileges of a shareholder of the
Company when, but not until, a certificate or its equivalent has been issued
to the Participant for the shares following exercise of the Participant's
Option.
SECTION 17. LIMITATIONS ON SALE OF COMMON STOCK PURCHASED UNDER THE PLAN
The Plan is intended to provide Common Stock for investment and not
for resale. The Company does not, however, intend to restrict or influence
any Participant in the conduct of his or her own affairs. A Participant,
therefore, may sell Common Stock purchased under the Plan at any time he or
she chooses, subject to compliance with Section 15, Company policies and any
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applicable federal and state securities laws. A Participant assumes the risk
of any market fluctuations in the price of the Common Stock.
SECTION 18. AMENDMENT OR TERMINATION OF THE PLAN
(a) The Board may amend the Plan in such respects as it shall deem
advisable; provided, however, that, to the extent required for compliance
with Code Section 423 or any applicable law or regulation, shareholder
approval will be required for any amendment that will (i) increase the total
number of shares as to which Options may be granted under the Plan, (ii)
modify the class of employees eligible to receive Options, or (iii) otherwise
require shareholder approval under any applicable law or regulation; and
provided further, that except as provided in Section 21 and this Section 18,
no amendment to the Plan shall make any change in any Option previously
granted that adversely affects the rights of any Participant.
(b) The Plan shall continue in effect for ten years after the date
of its adoption by the Board. Notwithstanding the foregoing, the Board may at
any time and for any reason terminate or suspend the Plan. During any period
of suspension or upon termination of the Plan, no Options shall be granted.
(c) Except as provided in Section 21, no such termination of the
Plan may affect Options previously granted, except that the Plan or an
Offering may be terminated by the Board on a Purchase Date or by the Board's
setting a new Purchase Date with respect to an Offering and a Purchase Period
then in progress if the Board determines that termination of the Plan and/or
the Offering is in the best interests of the Company and the shareholders or
if continuation of the Plan and/or the Offering would cause the Company to
incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan.
SECTION 19. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including
any Eligible Employee or Participant) the right to remain in the employ of
the Company or a Parent Corporation or Subsidiary Corporation or to affect
the right of the Company or a Parent Corporation or Subsidiary Corporation to
terminate the employment of any person (including any Eligible Employee or
Participant) at any time with or without cause.
SECTION 20. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Parent Corporation or
Subsidiary Corporation. Nothing in the Plan shall be construed to limit the
right of the Company, any Parent Corporation or Subsidiary Corporation to (a)
establish any other forms of incentives or compensation for employees of the
Company, a Parent Corporation or Subsidiary Corporation or (b) grant or
assume options otherwise than under the Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition,
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by purchase, lease, merger, consolidation or otherwise, of the business,
stock or assets of any corporation, firm or association.
SECTION 21. ADJUSTMENTS
21.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock
dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to shareholders other
than a normal cash dividend, or other change in the Company's corporate or
capital structure results in (a) the outstanding shares, or any securities
exchanged therefor or received in their place, being exchanged for a
different number or kind of securities of the Company or of any other
corporation or (b) new, different or additional securities of the Company or
of any other corporation being received by the holders of shares of Common
Stock, then (subject to any required action by the Company's shareholders),
the Board or the Committee, in its sole discretion, shall make such equitable
adjustments as it shall deem appropriate in the circumstances in (i) the
maximum number and kind of shares of Common Stock subject to the Plan as set
forth in Section 4, (ii) the number and kind of securities that are subject
to any outstanding Option and the per share price of such securities and
(iii) the maximum number of shares of Common Stock that may be purchased by a
Participant in a Purchase Period. The determination by the Board or the
Committee as to the terms of any of the foregoing adjustments shall be
conclusive and binding. Notwithstanding the foregoing, a merger, asset sale,
dissolution or liquidation of the Company shall not be governed by this
Section 21.1 but shall be governed by Sections 21.2 and 21.3, respectively.
21.2 CORPORATE TRANSACTION
In the event of a proposed Corporate Transaction, each outstanding
Option shall be assumed or an equivalent option substituted by the successor
corporation or parent thereof (the "Successor Corporation"). In the event
that the Successor Corporation refuses to assume or substitute for the
Option, the Offering then in progress shall be shortened by setting a new
Purchase Date. The new Purchase Date shall be a specified date before the
date of the proposed Corporate Transaction. The Board shall notify each
Participant in writing prior to the new Purchase Date that the Purchase Date
for the Participant's Option has been changed to the new Purchase Date and
that the Participant's Option shall be exercised automatically on the new
Purchase Date, unless prior to such date the Participant has withdrawn from
the Plan as provided in Section 11.
21.3 DISSOLUTION OR LIQUIDATION OF THE COMPANY
In the event of the proposed dissolution or liquidation of the
Company, the Offering then in progress shall be shortened by setting a new
Purchase Date and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise by the
Board. The new Purchase Date shall be a specified date before the date of the
Company's proposed dissolution or liquidation. The Board shall notify each
Participant in writing, at least ten business days prior to the new Purchase
Date, that the Purchase Date for the Participant's
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Option has been changed to the new Purchase Date and that the Participant's
Option shall be exercised automatically on the new Purchase Date, unless
prior to such date the Participant has withdrawn from the Offering or the
Plan as provided in Section 11.
21.4 LIMITATIONS
The grant of Options shall in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer
all or any part of its business or assets.
SECTION 22. REGISTRATION; CERTIFICATES FOR SHARES
Notwithstanding any other provision of the Plan, the Company shall
have no obligation to issue or deliver any shares of Common Stock under the
Plan or make any other distribution of benefits under the Plan unless such
issuance, delivery or distribution would comply with all applicable laws
(including, without limitation, the requirements of the Securities Act), and
the applicable requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to
register for offering or resale or to qualify for exemption under the
Securities Act, or to register or qualify under state securities laws, any
shares of Common Stock, security or interest in a security paid or issued
under, or created by, the Plan, or to continue in effect any such
registrations or qualifications if made. The Company may issue certificates
for shares with such legends and subject to such restrictions on transfer and
stop-transfer instructions as counsel for the Company deems necessary or
desirable for compliance by the Company with federal and state securities
laws.
To the extent that the Plan or any instrument evidencing shares of
Common Stock provides for issuance of stock certificates to reflect the
issuance of such shares, the issuance may be effected on a noncertificated
basis, to the extent not prohibited by applicable law or the applicable rules
of any stock exchange.
SECTION 23. EFFECTIVE DATE
The Plan's effective date is the date on which it is approved by the
Company's shareholders, which was _______________, _______.
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CORILLIAN CORPORATION
VOYAGER LICENSE AGREEMENT
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
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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<PAGE>
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 $[ * ], 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
- -----------------------
* Portion has been omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
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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.
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:
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7.3.1 Terminate Client's rights and Corillian's obligations under
this Agreement with respect to such Products, and
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
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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) 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
- ---------------------
* Portion has been omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
PAGE 9
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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.
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
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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, 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.
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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.
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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
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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. 41/2 Street. 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.
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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-Registered Trademark- and Quicken-Registered Trademark-.
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 [ * ],
Corillian agrees to pay Client a penalty of $[ * ] for every
additional month of delay up to a maximum
4
<PAGE>
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 the [ * ] 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>
<S> <C> <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>
<S> <C> <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>
<S> <C> <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 2.01 12/13/1999
- --------------------------------------------------------------------------------
PHASE ONE - SOLUTION OVERVIEW
The Prism Phase One/"Day 1" release will consist of RETAIL/CONSUMER BANKING,
BILL PAY (via CheckFree) and OFX/PFM DOWNLOAD functionality.
SIGN-ON/AUTHENTICATION and ENROLLMENT will be based on Prism's chosen 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 "bank" will seamlessly integrate with current Voyager
customer relationship/association design).
Prism's INET SERVICES team is developing an in-house solution for MAINFRAME
CONNECTIVITY.
HTML SIGN-ON & ENROLLMENT
- - Corillian to deliver client layer/HTML to be integrated with Prism Directory
Services solution.
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
HTML SIGN-ON & ENROLLMENT CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
A. [ * ] Custom Mike Leach 7 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
B. [ * ] Custom Mike Leach 6 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
C. [ * ] Custom Mike Leach 6 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
D. [ * ] Custom Mike Leach 6 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
E. [ * ] Custom Mike Leach 7 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
HTML BANKING
- -Designed for / supports browsers of version 4.0 or higher (IE, Netscape, AOL),
128 bit encryption with scripting enabled.
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
HTML BANKING CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
A. [ * ] Custom Mike Leach 7 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
- -----------------------------
*Portion has been omitted pursuant to a request for confidential treatment and
fled separately with the Commission.
- --------------------------------------------------------------------------------
1
-copyright- 1999 Corillian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase One Solution Overview
Version 2.01 12/13/1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
HTML BANKING CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
B. ACCOUNT BALANCES /SUMMARY Core N/A - DDA (Checking, Savings, Money Market), TDA
(CDs), Brokerage, Line Of Credit, Installment
Loans, Credit Cards
Custom Mike Leach 11 -[ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
C. ACCOUNT DETAIL / HISTORY Core N/A N/A -For all Accounts listed within "Account
Balances" except Brokerage, Installment Loans
and CDs
Custom Mike Leach 11 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
D. [ * ] Custom Mike Leach 5 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
E. [ * ] Custom Mike Leach 7 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
F. FUNDS TRANSFER Core N/A -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 Mike Leach 7 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
G. [ * ] Custom Mike Leach 10 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
H. FUNDS TRANSFER - MODIFY Core Mike Leach 9 -View pending, modify "from," "to," "date",
PENDING "amount,"
Custom [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
I. FREQUENTLY ASKED QUESTIONS Core N/A N/A Prism DFS to provide content
(FAQS) PAGE
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
J. TERMS & CONDITIONS PAGE Core N/A N/A Prism Legal, Compliance & Marketing to provide
content
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
K. SECURITY INFORMATION PAGE Core N/A N/A Prism DFS to provide content
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
L. CUSTOMER SERVICE CENTER Core N/A N/A [ * ]
Custom Mike Leach
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
HTML BILL PAY
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
HTML BILL PAY CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
A. [ * ] Custom Jeff 250 -[ * ]
Madison
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
B. [ * ] Custom Mike Leach 8 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
- ------------------------
*Portion has been omitted pursuant to a request for confidentail treatment and
filed separately with the Cimmission.
- --------------------------------------------------------------------------------
2
-copyright- 1999 Corillian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase One Solution Overview
Version 2.01 12/13/1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
C. PAYEE & PAYMENT MANAGEMENT Core N/A N/A -Add, delete, activate, archive payees
[ * ]
Custom Jeff 15
Madison
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
D. PAYEE & PAYMENT HISTORY Core N/A N/A With table sorting
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
E. [ * ] Custom Mike Leach 4 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
F. CANCEL BILL PAY Core N/A N/A
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
G. [ * ] Custom Jeff 21 [ * ]
Madison &
Milind
Pandit
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
H. [ * ] Custom Jeff 25 [ * ]
Madison
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OFX
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
OFX CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
A. [ * ] Custom Mike Leach 11 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
B. FINANCIAL INSTITUTION PROFILE Core N/A N/A
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
C. ACCOUNT INFO. REQUEST Core N/A N/A -Same as HTML Balances/Summary
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
D. STATEMENT REQUEST Core N/A -Same as HTML Detail/History
[ * ]
Custom Mike Leach 11
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
E. FUNDS TRANSFER Core N/A Will provide ability for customer to transfer
funds within any account within their profile
within the same bank (intra-profile)
Custom Mike Leach 11 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
F. BILL PAYEE & PAYMENT Core N/A N/A
MANAGEMENT
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
- ---------------------------
*Portion has been ommitted to a request for confidential treatment and filed
separately with the Commission.
- --------------------------------------------------------------------------------
3
-copyright- 1999 Corillian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase One Solution Overview
Version 2.01 12/13/1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTROL CENTER BACK-OFFICE TRACKING & REPORTING
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
CONTROL CENTER CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
A. REPORT CENTER Core N/A N/A 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 N/A N/A i Customer Support Screens
ii Agent Support Cases
iii Agent Alert
iv Monitored Transactions
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
C. WORKFLOW Core N/A N/A 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 Custom Pete McEvoy I [ * ]
N/A ii Edit System Users
Core 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. [ * ] Custom Pete McEvoy 20 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
- -----------------
*Portion has been ommitted pursuant to a request for confidential treatment and
filed separately with the Commission.
- --------------------------------------------------------------------------------
4
-copyright- 1999 Corillian Corporation Prisim Project Confidential
<PAGE>
PRISM
Phase One Solution Overview
Version 2.01 12/13/1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
CONTROL CENTER CORE OR CUSTOM CUSTOM ENG
FUNCTIONALITY/DELIVERABLE CUSTOM OWNER DAYS DEFINITION AND/OR NOTES
<S> <C> <C> <C> <C>
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
F. [ * ] Custom Pete McEvoy 20 [ * ]
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
G. [ * ] Custom Pete McEvoy
--------------------------------------- ------------- ------------ -------------- ------------------------------------------------
</TABLE>
[ * ] DATABASE CONVERSION/MIGRATION (CUSTOM) PAUL MURPHY; XXX ENG. DAYS
To convert from Prism's current online banking and bill pay system [ * ] to the
Corillian Voyager Internet banking platform (SIS), Corillian will:
|X| [ * ]
|X| [ * ]
|X| [ * ]
- -------------------
*Portion has been ommitted pursuant to a request for confidential treatment and
filed separately with the Commission.
- --------------------------------------------------------------------------------
5
-copyright- 1999 Corillian Corporation Prisim Project Confidential
<PAGE>
PRISM
Phase One Solution Overview
Version 2.01 12/13/1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VOYAGER PLATFORM
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 ommitted to a request for confidential treatmnt and filed
sepatately with the Commission.
- --------------------------------------------------------------------------------
6
-copyright- 1999 Corilllian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase Two - Future/Planned Enhancements
Version 1.9 12/13/1999
- --------------------------------------------------------------------------------
PHASE TWO - FUTURE/PLANNED ENHANCEMENTS
<TABLE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER CORILLIAN DESIGN APPROACH PRISM TECHNICAL IMPACT &
CUSTOM EXPERIENCE & CONSIDERATIONS CONSIDERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
[ * ] Custom Milind 3 person months [ * ] [ * ] [ * ] [ * ]
Pandit for proto-type
in-house
solution
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
TARGETED Core N/A N/A [ * ] [ * ] [ * ] [ * ]
MARKETING
Custom Milind 3 person
Pandit months of
custom work
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
SMALL BUSINESS Core N/A N/A [ * ] [ * ] [ * ]
Custom Pete 50
McEvoy
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
[ * ] Custom Mike 4 [ * ] [ * ] [ * ]
Leach
Milind If integrated
Pandit w/ Marketing
Center, 2
weeks of
custom work
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
[ * ] Custom Mike 6 [ * ] [ * ] [ * ]
Leach
Milind If integrated
Pandit w/ Marketing
Center, 2
weeks of
custom work
---------------- --------- --------- --------------- ----------- ------------ -------------------------- -------------------------
</TABLE>
- --------------------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
- --------------------------------------------------------------------------------
1
-copyright- 1999 Corillian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase Two - Future/Planned Enhancements
Version 1.9 12/13/1999
- --------------------------------------------------------------------------------
PHASE TWO - FUTURE/PLANNED ENCHACEMENTS
<TABLE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER CORILLIAN DESIGN APPROACH PRISM TECHNICAL IMPACT &
CUSTOM EXPERIENCE & CONSIDERATIONS CONSIDERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Either Milind 2 person [ * ] [ * ] [ * ] [ * ]
Core Pandit weeks of
or custom work
Custom
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 12 [ * ] [ * ] [ * ]
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 30 [ * ] [ * ] [ * ]
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 27 TBD TBD, Related to above. TBD
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 27 TBD Same as above. TBD
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 15 [ * ] [ * ] None
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
</TABLE>
- --------------------------
* Portion has been omitted to a request for confidential treatment and filed
separately with the Commission.
- --------------------------------------------------------------------------------
2
-copyright- 1999 Corillian Corporation Prism Project Confidential
<PAGE>
PRISM
Phase Two - Future/Planned Enhancements
Version 1.9 12/13/1999
- --------------------------------------------------------------------------------
PHASE TWO - FUTURE/PLANNED ENCHACEMENTS
<TABLE>
<CAPTION>
REQUIREMENT CORE OR OWNER ENG DAYS TIMEFRAME CUSTOMER CORILLIAN DESIGN APPROACH PRISM TECHNICAL IMPACT &
CUSTOM EXPERIENCE & CONSIDERATIONS CONSIDERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Core N/A 0-40 days: [ * ] [ * ] [ * ]
Custom Jeff Using
Madison standard
matching
algorithm
and existing
file format
= 0
Custom
matching
algorithm =
10
Custom file
format = 15
Additional
requirement
for response
file
processing =
15
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 30 TBD [ * ] [ * ]
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Mike 12 [ * ] [ * ] [ * ]
Leach
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
BILL Core N/A N/A To be negotiated, pending
PRESENTMENT Wachovia requirements.
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
[ * ] Custom Terry ? To be negotiated, pending
Ishida Wachovia requirements.
------------ --------- --------- -------------- ----------- ------------ -------------------------- ------------------------------
</TABLE>
- --------------------------
* Portion has been omitted to a request for confidential treatment and filed
separately with the Commission.
- --------------------------------------------------------------------------------
3
-copyright- 1999 Corillian Corporation Prism Project Confidential
<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 basis
features 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>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
Wachovia Priority Feature
- -------------------------- ----------------------------------------------------------------------------------
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
- ---------------------
* Portion has been omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
PAGE 1
<PAGE>
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.
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 all
December 31, 2001 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.
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
PAGE 2
<PAGE>
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 4
<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
- ----------------------
* 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:
PAGE 6
<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 Corporation Corillian 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
PAGE 1
<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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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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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
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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 Corporation CORILLIAN 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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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 9, 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
March 9, 2000
