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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONCUR TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 91-1608052
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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6222 185TH AVENUE NE
REDMOND, WASHINGTON 98052
(425) 702-8808
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
S. STEVEN SINGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
6222 185TH AVENUE NE
REDMOND, WASHINGTON 98052
(425) 702-8808
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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MATTHEW P. QUILTER, ESQ. THOMAS A. BEVILACQUA, ESQ.
HORACE L. NASH, ESQ. CURTIS L. MO, ESQ.
KRISTINA R. WILKEN, ESQ. PATRICIA MONTALVO TIMM, ESQ.
KEVIN S. CHOU, ESQ. BROBECK, PHLEGER & HARRISON LLP
FENWICK & WEST LLP TWO EMBARCADERO PLACE
TWO PALO ALTO SQUARE 2200 GENG ROAD
PALO ALTO, CALIFORNIA 94306 PALO ALTO, CALIFORNIA 94303
(650) 494-0600 (650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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Common Stock,
par value $.001 per share............... $37,000,000 $10,915
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(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 26, 1998
LOGO
SHARES
COMMON STOCK
Of the shares of Common Stock offered hereby, shares
are being sold by Concur Technologies, Inc. ("Concur" or the "Company") and
shares are being sold by the Selling Stockholders. See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. Prior to the Offering, there has
been no public market for the Common Stock of the Company. See "Underwriting"
for information relating to the method of determining the initial public
offering price. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market under the symbol "CNQR."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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UNDERWRITING
DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS COMPANY(1) SELLING STOCKHOLDERS
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Per Share.................... $ $ $ $
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Total(2)..................... $ $ $ $
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(1) Before deducting expenses payable by the Company, estimated at $ .
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ , and $ ,
respectively.
------------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that the delivery of such shares will be
made through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST
PIPER JAFFRAY INC.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
No dealer, sales representative or other person has been authorized to give
any information or to make any representations in connection with the Offering
other than those contained in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company, by any Selling Stockholder or by any Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any securities other than the registered securities to which it relates,
or an offer to, or the solicitation of, any person in any jurisdiction where
such an offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date hereof.
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER
OR NOT PARTICIPATING IN THE OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 6
Use of Proceeds............................................. 22
Dividend Policy............................................. 22
Capitalization.............................................. 23
Dilution.................................................... 24
Selected Consolidated Financial Data........................ 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 27
Business.................................................... 37
Management.................................................. 52
Certain Transactions........................................ 62
Principal and Selling Stockholders.......................... 64
Description of Capital Stock................................ 67
Shares Eligible for Future Sale............................. 70
Underwriting................................................ 72
Legal Matters............................................... 73
Experts..................................................... 73
Additional Information...................................... 74
Index to Consolidated Financial Statements.................. F-1
</TABLE>
The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements examined by its independent
auditors. Quarterly reports containing unaudited consolidated financial
statements for the first three quarters of each fiscal year will be available
upon request.
Concur, Concur Technologies, Xpense Management Solution, XMS, CompanyStore,
Employee Desktop, and the Company's logo are trademarks of the Company.
QuickXpense(R) is a registered trademark of the Company. Trade names, service
marks or trademarks of other companies appearing in this Prospectus are the
property of their respective holders. Information contained on the Company's Web
site does not constitute a prospectus or part of this Prospectus.
The Company was incorporated in Washington in August 1993 under the name
Moorea Software Corporation and commenced operations in 1994. The Company
changed its name to Portable Software Corporation in 1994 and to Concur
Technologies, Inc. in 1998, and is expected to be reincorporated in Delaware in
September 1998. Unless the context otherwise requires, references in this
Prospectus to "Concur," "Concur Technologies" and the "Company" refer to Concur
Technologies, Inc., a Delaware corporation, its predecessors, 7Software, Inc.,
its wholly-owned California subsidiary, and XMS (UK) Ltd., its wholly-owned
subsidiary located in the United Kingdom, collectively. The Company's principal
executive offices are located at 6222 185th Avenue NE, Redmond, Washington 98052
and its telephone number is (425) 702-8808.
3
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed in the
forward-looking statements. Factors that might cause a difference include, but
are not limited to, those discussed in "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
Concur is a leading provider of Intranet-based employee-facing applications
that extend automation to employees throughout the enterprise and to partners,
vendors and service providers in the extended enterprise. The Company's Xpense
Management Solution ("XMS") and CompanyStore products automate the preparation,
approval, processing and data analysis of travel and entertainment ("T&E")
expense reports and front-office procurement requisitions. Concur believes it is
the leading provider of T&E expense management solutions and, since the
introduction of XMS in 1996, the Company has licensed its products to over 125
enterprise customers with over 450,000 end users. Through its June 1998
acquisition of 7Software, Inc., the Company added the CompanyStore front-office
procurement application to its product suite. By automating manual, paper-based
processes, the Company's products reduce processing costs and enable customers
to consolidate purchases with preferred vendors and negotiate vendor discounts.
In response to increasingly competitive conditions worldwide, businesses
are seeking cost savings and productivity gains by using enterprise applications
to automate business processes. While these applications have traditionally
targeted discrete functional or department level business processes involving
relatively few employees, businesses are now seeking similar applications for
"employee-facing" business processes including T&E expense management,
front-office procurement, human resources self-service, time and billing, and
facilities management. The emergence of the Internet and corporate Intranets has
made it possible to deploy applications that reach all employees in the
enterprise and connect the enterprise to corporate partners, vendors and service
providers. In addition, in contrast to traditional client-server applications,
Intranet-based applications can be deployed rapidly throughout the enterprise
and on a cost-effective basis.
Customers employing the Company's products can realize significant
operating cost savings through reduced processing costs, consolidated purchases
with preferred vendors and negotiated vendor discounts. Based on the results of
the 1997 American Express T&E Management Process Study, businesses using
best-in-class automation that process 1,000 to 5,000 T&E expense reports per
month can achieve savings from $300,000 to $1.5 million per year in processing
costs alone. The Company believes its customers can achieve these cost savings
rapidly because the products are designed to minimize burdens on IT
professionals and to maximize employees' ease of use. Because the Company's
Intranet-based products are designed to deploy rapidly, scale enterprise-wide
and integrate easily with an organization's existing IT infrastructure, a
customer's IT personnel can deliver and support solutions quickly and
cost-effectively. For example, one Concur customer recently deployed XMS to over
25,000 employees within 90 days after the customer began its rollout. Employees
readily adopt the Company's solutions because they are easy to use, reduce time
spent preparing expense reports and supply requisitions, and accelerate
reimbursement and fulfillment process cycles. The Company believes that as a
result of the substantial potential savings from processing cost reductions and
vendor management, coupled with the emergence of Intranet technologies, strong
demand exists for employee-facing applications.
Concur's objective is to be the leading provider of Intranet-based
employee-facing applications. In order to meet this goal, the Company's strategy
is to extend and leverage its leadership in T&E expense management and
front-office procurement applications, expand and integrate its product suite,
enhance the functionality of its products, increase its international presence,
develop new relationships with strategic third-parties, and offer its solutions
as an outsourced enterprise service provider.
The Company sells its products primarily through its direct sales
organization and has developed a number of strategic referral relationships. In
particular, American Express refers its corporate charge card customers that
seek a T&E expense management solution to Concur. American Express also recently
completed an equity investment in the Company. In addition to its Intranet-based
product lines in T&E expense management and front-office procurement, the
Company offers a client-server based T&E expense management solution for those
clients who lack an Intranet infrastructure. Given the broad applicability of
its products, Concur has licensed its applications to numerous customers in a
wide range of industries. The Company's customers include American Airlines,
Anheuser-Busch, Case Corporation, Computer Sciences Corporation, DuPont, Exxon,
Gillette, Guardian Industries, Hewlett-Packard, J.C. Penney, Lehman Brothers,
Levi Strauss, Monsanto, The New York Times, Northrop Grumman, Pharmacia &
Upjohn, Seagate Technology, Solutia, Sprint, Texaco, Texas Instruments and
Visio.
4
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THE OFFERING
Common Stock offered by the Company......... shares
Common Stock offered by the Selling
Stockholders................................ shares
Common Stock to be outstanding after the
Offering(1)................................. shares
Use of Proceeds............................. For general corporate purposes,
including working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market Symbol...... CNQR
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------- -----------------------
1994 1995 1996 1997 1997 1998
----------- ------- ------- ------- ----------- --------
(UNAUDITED) (UNAUDITED)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues...................................... $ -- $ 2,128 $ 1,959 $ 8,270 $ 5,205 $ 11,715
Operating loss(2)............................. (602) (2,895) (4,958) (5,505) (3,695) (12,781)
Net loss...................................... (602) (2,890) (4,953) (5,524) (3,681) (13,095)
Pro forma basic and diluted net loss per
share(3).................................... $ (0.23) $ (0.48)
Shares used to compute pro forma basic and
diluted net loss per share(3)............... 24,408 27,509
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JUNE 30, 1998
------------------------------------------
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
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(UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 9,469 $ 9,469 $
Total assets.............................................. 23,319 23,319
Long-term obligations, net of current portion............. 8,652 8,652 8,652
Redeemable convertible preferred stock and warrants....... 25,113 -- --
Total stockholders' equity (deficit)...................... (21,360) 3,753
</TABLE>
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(1) Based on shares outstanding as of August 15, 1998. Does not include: (i)
3,520,113 shares of Common Stock issuable upon the exercise of outstanding
options granted under the Company's 1994 Stock Option Plan (the "1994 Plan")
with a weighted average per share exercise price of $0.32; (ii) 951,645
shares of Common Stock available for future grant as of August 15, 1998
under the 1994 Plan; (iii) 275,764 shares of Common Stock issuable upon
exercise of outstanding options granted under the 1997 Stock Option Plan
(the "7Software Plan") of 7Software, Inc. ("7Software") and 34,045 shares of
Common Stock issuable upon exercise of outstanding options granted by
7Software outside the 7Software Plan, in each case assumed by the Company in
connection with the Company's June 1998 acquisition of 7Software, with a
weighted average per share exercise price of $0.01; and (iv) 5,823,949
shares of Common Stock issuable upon the exercise of warrants to purchase
shares of preferred stock. See "Management--Employee Benefit Plans" and
Notes 3, 9 and 11 of Notes to Consolidated Financial Statements.
(2) In June 1998, the Company acquired 7Software, resulting in a charge for
acquired in-process technology. See Note 3 of Notes to Consolidated
Financial Statements. The Financial Statements of 7Software are included
elsewhere herein.
(3) See Note 13 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing pro forma net
loss per share.
(4) Pro forma to give effect to (i) the conversion of all outstanding shares of
preferred stock into 23,921,023 shares of Common Stock and (ii) the
conversion of all outstanding warrants to purchase preferred stock into
warrants to purchase 448,949 shares of Common Stock. Excludes 1,612,903
shares of preferred stock and a warrant held by an affiliate of American
Express Company to purchase 5,375,000 shares of preferred stock (the "TRS
Warrant") issued by the Company after June 30, 1998. See "Certain
Transactions."
(5) Pro forma amounts as adjusted to reflect: (i) the sale of the shares
of Common Stock offered by the Company hereby at an assumed initial public
offering price per share of $ and the application of the net proceeds
therefrom, after deducting the underwriting discount and estimated offering
expenses; (ii) the issuance of 1,612,903 shares of redeemable convertible
preferred stock in August 1998 for $4,999,999 and the conversion of all such
shares of redeemable convertible preferred stock into 1,612,903 shares of
Common Stock; (iii) the exercise of warrants to purchase 448,949 shares of
Common Stock with an average exercise price of $1.99 per share; and (iv) the
exercise of a warrant to purchase 562,500 shares of Common Stock
(representing a portion of the TRS Warrant) at an assumed exercise price of
$ per share. See "Capitalization," "Use of Proceeds" and "Certain
Transactions."
------------------------
Unless otherwise indicated or the context otherwise requires, all
information in this Prospectus (i) reflects the conversion of all outstanding
shares of preferred stock of the Company into shares of Common Stock upon the
consummation of the Offering, (ii) assumes that the Underwriters' over-allotment
option will not be exercised and (iii) gives effect to the Company's
reincorporation in Delaware, which will occur prior to the completion of the
Offering. The Company anticipates that it will effect a reverse split of its
Common Stock of an undetermined magnitude prior to the Offering; the numbers
included in this Prospectus do not reflect such reverse split of the Company's
Common Stock.
5
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RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. In addition to the other information in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Common Stock offered by this Prospectus.
LIMITED OPERATING HISTORY; FUTURE OPERATING RESULTS UNCERTAIN; HISTORY OF LOSSES
An investment in the Company should be viewed in light of the risks and
uncertainties inherent to a software company in the early stages of development,
particularly in light of the evolving and highly competitive market in which the
Company competes. Concur was incorporated in 1993 and has incurred net losses in
each quarter since its incorporation. The Company shipped its first product in
fiscal 1995, and since fiscal 1997 has derived substantially all of its revenues
from licenses of XMS and related services. To compete effectively, the Company
believes that it will be necessary to devote substantial resources to expanding
its sales and marketing, professional services and research and development
organizations and that it will make significant investments in these areas
without assurance of any related income. The Company incurred net losses of $2.9
million, $5.0 million and $5.5 million for fiscal 1995, 1996 and 1997,
respectively, and $13.1 million for the nine months ended June 30, 1998. As of
June 30, 1998, the Company had an accumulated deficit of $27.1 million. The
Company anticipates that it will incur net losses for the foreseeable future. In
particular, the Company's professional services organization is newly
established and has been unprofitable since it was organized. There can be no
assurance that the professional services organization will ever become
profitable. Although the Company's revenues have increased in recent years,
there can be no assurance that any of the Company's business strategies will be
successful or that the Company's revenues will increase in future periods, that
they will grow at rates similar to those in the past, or that the Company will
become profitable, if at all, on a quarterly or annual basis in the future or
that any such profitability can be sustained.
As of June 30, 1998, the Company had deferred tax assets totaling
approximately $7.3 million, which included the after-tax amount of approximately
$15.7 million of net operating loss carryforwards and $262,000 of tax credit
carryforwards and which expire at various dates through 2013. The Internal
Revenue Code of 1986, as amended (the "Code"), contains provisions that may
limit the use in any future period of net operating loss and credit
carryforwards upon the occurrence of certain events, including a significant
change in ownership interests. A valuation allowance has been recorded for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset balance. See "--Potential Fluctuations in Quarterly Results;
Seasonality," "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY
The Company's quarterly operating results have fluctuated significantly in
the past, and will continue to fluctuate in the future, as a result of a number
of factors, many of which are outside the Company's control. These factors
include: demand for the Company's products and services; size and timing of
specific sales; level of product and price competition; timing and market
acceptance of new product introductions and product enhancements by the Company
and its competitors; changes in pricing policies by the Company or its
competitors; the Company's ability to hire, train and retain sales and
consulting personnel to meet the demand, if any, for XMS and CompanyStore; the
length of sales cycles; the Company's ability to establish and maintain
relationships with third-party implementation services providers and strategic
partners; delay of customer purchases caused by announcement of new hardware or
enterprise resource planning ("ERP") platforms or otherwise; mix of products and
services sold, including an anticipated shift to providing services as an
enterprise service provider ("ESP"); mix of distribution channels through which
products are sold; mix of international and domestic revenues; changes in the
Company's sales force incentives; software defects and other product quality
problems; personnel changes; changes in the Company's strategy, including the
planned
6
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development of an ESP strategy; general domestic and international economic and
political conditions; and budgeting cycles of the Company's customers. The
Company has in the past experienced delays in the release dates of new software
products or upgrades, and has discovered software defects in new products after
their introduction. There can be no assurance that new products or upgrades will
be released according to schedule, or that when released they will not contain
defects. Either of these situations could result in adverse publicity, loss of
revenues, delay in market acceptance or claims by customers brought against the
Company, any of which could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, the timing
of individual sales has been difficult for the Company to predict, and large
individual sales have, in some cases, occurred in quarters subsequent to those
anticipated by the Company. There can be no assurance that the loss or deferral
of one or more significant sales will not have a material adverse effect on the
Company's quarterly operating results.
The Company's software products are typically shipped when orders are
received, and consequently, license backlog at the beginning of any quarter has
in the past represented only a small portion of that quarter's expected license
revenues. As a result, license revenues in any quarter are difficult to forecast
because they are substantially dependent on orders booked and shipped in that
quarter. Moreover, the Company typically recognizes a substantial amount of its
revenues in the last month of the quarter, frequently in the last week or even
days of the quarter. Since the Company's expenses are generally relatively fixed
in the near term, any shortfall from anticipated revenues or any delay in the
recognition of revenues could result in significant variations in operating
results from quarter to quarter. Quarterly license revenues are also difficult
to forecast because the Company's sales cycle, from initial evaluation to
delivery of software, are generally lengthy and vary substantially from customer
to customer. If revenues fall below the Company's expectations in a particular
quarter, the Company's business, results of operations and financial condition
would be materially adversely affected. See "--Lengthy Sales Cycle."
The Company has experienced, and expects to continue to experience, a high
degree of seasonality, with a disproportionately greater amount of the Company's
license revenues for any fiscal year being recognized in its fourth fiscal
quarter. For example, in fiscal 1997, 37% of total revenues, 36% of license
revenues and 42% of service revenues were recognized in the fourth fiscal
quarter. The Company believes that such seasonality is primarily the result of
the efforts of the Company's direct sales force to meet or exceed fiscal
year-end sales quotas. In addition, the Company's license revenues in its first
fiscal quarter have historically been lower than those of the immediately
preceding fourth quarter. For example, license revenues in the first quarter of
fiscal 1998 decreased 10% from the fourth quarter of fiscal 1997. In future
periods, the Company expects these seasonal trends may cause first quarter
revenues to be significantly lower than the level achieved in the preceding
fourth quarter.
Concur's products involve relatively large expenditures by enterprise
customers, and XMS tends to be more expensive than competing applications. In
addition, the purchase of the Company's products is typically a discretionary
matter for such customers and from time to time customers' priorities may shift
to other investments, such as correcting Year 2000 problems associated with
their other systems. Accordingly, demand for the Company's products may be
particularly volatile and unpredictable.
Based on the foregoing and the other risk factors identified herein, the
Company believes that future revenues, expenses and operating results are likely
to vary significantly from quarter to quarter. In particular, as the Company
expands its sales force, professional services and research and development
staff, operating expenses will continue to rise. As a result, quarter-to-quarter
comparisons of operating results are not necessarily meaningful or indicative of
future performance. Further, the Company believes it is likely that in some
future quarter the Company's operating results will not meet or exceed the
expectations of public market analysts or investors. In such event, or in the
event that adverse conditions prevail, or are perceived to prevail, with respect
to the Company's business or generally, the market price of the Company's Common
Stock would be materially adversely affected. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
7
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EMERGING MARKET FOR EMPLOYEE-FACING APPLICATIONS; MARKET ACCEPTANCE
The market for employee-facing applications is newly emerging. Enterprises
have historically performed the processes addressed by employee-facing
applications themselves, whether through manual processes or internal
development of applications. Accordingly, the Company's future success will
depend upon, among other factors, the extent to which companies adopt
third-party employee-facing applications, particularly T&E expense management
and front-office procurement solutions, and the extent to which companies
purchase products or utilize the services of third-party providers, such as the
Company, for such solutions. In addition, companies that have already invested
substantial resources in other methods of automating enterprise processes may be
reluctant to adopt a new strategy that may limit or compete with their existing
investments. Even if companies implement employee-facing applications, they may
still choose to design, develop or manage all or part of their process
automation internally. There can be no assurance that the use of employee-
facing applications will increase significantly in the future or that the
Company's products or services will achieve commercial success. Any failure of
employee-facing applications, and in particular T&E expense management and
front-office procurement applications, to gain market acceptance would have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Industry Background."
PRODUCT CONCENTRATION
To date, the Company has generated substantially all of its revenues from
licenses and services related to XMS. Although the Company is now also selling
CompanyStore, the Company's recently acquired front-office procurement
application, the Company believes that licenses of XMS, together with related
services, will continue to account for a substantial majority of its revenues
for the foreseeable future. The Company's future financial performance is
dependent, in significant part, upon the successful development, introduction
and customer acceptance of new and enhanced versions of XMS, CompanyStore and
any new products or services that the Company may develop or acquire. There can
be no assurance that the Company will be successful in upgrading and continuing
to market XMS or CompanyStore, or that any new products or services the Company
may develop or acquire will achieve market acceptance. Consequently, factors
affecting the pricing of and demand for XMS or CompanyStore, such as
competition, technological changes, failure of the market for T&E expense
management or front-office procurement software to develop as the Company
anticipates, or lack of customer acceptance of XMS or CompanyStore, could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RISKS ASSOCIATED WITH EXPANSION INTO NEW MARKETS
The Company recently added the CompanyStore front-office procurement
application to its product line. This initial version of CompanyStore has been
licensed to only two customers. The Company's future revenue growth is
substantially dependent upon current development efforts to integrate this
recently acquired technology with the Company's technology platform, market
acceptance of CompanyStore, and the ability of the Company to license
CompanyStore to new customers and its existing base of XMS customers. Potential
and existing customers may not purchase CompanyStore for a number of reasons,
including: an absence of required or desired functionality; the cost and length
of implementation; the failure of CompanyStore to be competitive with other
front-office procurement applications; possible software defects; a customer's
lack of the necessary hardware, software or Intranet infrastructure; and any
failure by the Company or its products to meet customer expectations for other
reasons. In addition, the Company plans to target its existing and potential XMS
customers as potential customers for the enhanced version of CompanyStore that
is currently under development, but there can be no assurance that such
customers will purchase CompanyStore. Further, the Company must overcome certain
significant obstacles in its expansion into the front-office procurement
automation market, including: new competitors that have more experience and
better name recognition than the Company; the limited experience of the
Company's sales and consulting personnel in the front-office procurement
automation market; and the Company's limited existing reference accounts in the
front-office procurement automation market. If, for any reason, the Company is
unable to complete the development
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efforts necessary to integrate the recently acquired CompanyStore technology
with its technology platform and to market CompanyStore successfully, such
failure would have a material adverse effect on the Company's business, results
of operations and financial condition. Moreover, if the Company fails to meet
the expectations of market analysts or investors with regard to sales of
CompanyStore to new and existing customers, the market price of its Common Stock
would be materially adversely affected. See "--Risks Associated with Internet
Strategy and Enterprise Service Provider Model."
RISKS ASSOCIATED WITH NEW VERSIONS AND NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE
The market for the Company's products is characterized by rapid
technological change, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable, and in the markets in which the Company
competes, it is often necessary for its products to be compatible with new
technologies as soon as such technologies are available. As a result, the
Company's future success will depend, in significant part, upon its ability to
continue to enhance existing products and to develop and introduce in a timely
manner new products that keep pace with technological developments, satisfy
customer requirements and achieve market acceptance. There can be no assurance
that the Company will successfully identify new product opportunities, develop
and bring to market new products or adopt or incorporate new technology in a
timely and cost-effective manner. Nor can there be any assurance that products,
capabilities or technologies developed by others will not render the Company's
products or technologies obsolete or noncompetitive or shorten the life cycles
of the Company's products.
The Company expects to develop or acquire new employee-facing applications.
Its product development efforts also include plans to add functionality to XMS
such as localized versions for foreign countries and integration of XMS with
on-line travel booking applications, and to enhance CompanyStore by adding
features, support for additional databases and ERP platforms, and enhanced
catalog support. The Company has in the past experienced delays in the planned
release dates of new software products or upgrades, and has discovered software
defects in new products after their introduction. There can be no assurance that
new products or upgrades will be released according to schedule, or that when
released they will not contain defects. Either of these situations could result
in adverse publicity, loss of revenues, delay in market acceptance or claims by
customers brought against the Company, all of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Although the Company has addressed the need to develop new products
and enhancements primarily through its internal development efforts, the Company
has also addressed this need through the licensing of third-party technology and
the acquisition of 7Software. If the Company is unable to develop or acquire new
software products or enhancements to existing products on a timely and
cost-effective basis, or if such new products or enhancements do not achieve
market acceptance, the Company's business, results of operations and financial
condition will be materially adversely affected. See "--Limited Protection of
Proprietary Technology; Risks of Infringement," "--Competition" and "--Risks
Associated with Acquisitions."
RISKS ASSOCIATED WITH INTERNET STRATEGY AND ENTERPRISE SERVICE PROVIDER MODEL
In addition to licensing its software, the Company plans to offer its
solutions as an Internet-based ESP on a per-transaction pricing basis to
companies seeking to outsource their employee-facing business applications. This
business model is unproven and represents a significant departure from the
strategies traditionally employed by enterprise software vendors and
historically employed by the Company. The Company has no experience selling
products or services as an ESP and any such ESP business may significantly
divert Company revenues and management time and attention from its existing
business. The Company may at any time discontinue its plans to provide products
or services as an enterprise service provider. In connection with its planned
ESP business model, the Company will engage, for an indeterminate period,
third-party service providers to perform many of the services related to such
business as independent contractors, and will be responsible for monitoring the
performance of such service providers. The Company has not outsourced any of its
services or other important business functions in the past, and there can be no
assurance that such
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independent contractors will perform those services adequately. In the event
that any service provider provides inadequate support or service to the
Company's customers, the Company's reputation could be seriously damaged or the
Company could suffer a material adverse effect on the Company's business,
results of operations and financial condition. There can be no assurance that
the Company's ESP strategy will be effective, or even if it is implemented
effectively, that it will not have a materially adverse effect on the Company's
business, results of operations and financial condition. If customers determine
that the Company's products are not scalable, do not provide adequate security
for the dissemination of information over the Internet, or are otherwise
inadequate for Internet-based use, or if for any other reason customers fail to
accept the Company's products for use on the Internet or on a per-transaction
basis, the Company's business, results of operations and financial condition
will be materially adversely affected. In particular, as an outsourced ESP
provider, the Company will regularly receive large amounts of confidential
information (including credit card, travel booking, and other financial and
accounting data) and in light of the lack of the Company's experience
administering this information under its planned ESP model, there can be no
assurance that this information will not be subject to computer break-ins and
other disruptions that jeopardize the security of information for which the
Company is responsible. Even if the Company's strategy of offering its products
to customers over the Internet is successful, certain customers or potential
customers that would otherwise acquire software and services through the
Company's licensing arrangements may elect to utilize the Company's applications
through the Internet-based ESP. Any such shift in potential license revenues to
the ESP, which is an unproven and potentially less profitable or unprofitable
business model, could have a material adverse effect on the Company's business,
results of operations and financial condition.
In addition, the success of the Company's products will depend, in large
part, on the continued broad acceptance of the Internet itself as a viable
commercial marketplace. It is difficult to predict with any assurance whether
the Internet will continue to be considered a viable commercial marketplace or
whether the demand for Internet-related products and services will increase or
decrease in the future. The Internet may cease to be considered a viable
commercial marketplace for several reasons, including potentially inadequate
development of necessary infrastructure as use of the Internet grows, such as a
reliable network backbone with the necessary speed, data capability and
security, or failure of enabling technologies to be developed in a timely
manner. There can be no assurance that the Internet infrastructure will continue
to be able to support the demands placed on it by continued growth in use and
bandwidth requirements of users. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased levels of Internet activity or due to increased
governmental regulation. Moreover, critical issues concerning the commercial use
of the Internet (including security, reliability, data corruption, cost, ease of
use, accessibility and quality of service) remain unresolved and may negatively
affect commerce and communication on the Internet. Changes in, or insufficient
availability of, telecommunications services to support the Internet could also
result in slower response times and could adversely affect the use of the
Internet generally. If critical issues concerning the commercial use of the
Internet are not favorably resolved, if the necessary infrastructure and
complementary products are not developed on a timely basis, or if use of the
Internet experiences a significant decline, the Company's business, results of
operations and financial condition would be materially and adversely affected.
The increased commercial use of the Internet could require substantial
modification and customization of the Company's products and services and the
introduction of new products and services, and there can be no assurance that
the Company would be able to modify its products as the Internet might require.
See "--Risks of Software Defects or Security Breaches; Possible Product
Liability Issues" and "Business--Products and Technology."
LIMITED EXPERIENCE WITH LARGE-SCALE DEPLOYMENT
Although the Company believes that XMS and CompanyStore can accommodate
thousands of users, to date the Company has had only a limited number of
customers that have deployed XMS in such environments, and no customer that has
deployed CompanyStore on such a large scale. If the Company's customers cannot
successfully implement large-scale deployments or determine for any other reason
that the Company's products cannot accommodate large-scale deployments, or that
such products are not appropriate for such widespread use, the Company's
business, results of operations and financial condition would be materially
adversely affected.
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MANAGEMENT OF GROWTH
The Company is currently in the midst of a period of significant expansion.
The Company's historical growth has placed, and any further growth is likely to
continue to place, a significant strain on the Company's managerial,
operational, financial and other resources. The Company has grown from 43
employees as of September 30, 1995 to 179 employees as of June 30, 1998, and the
Company recently expanded its operations through the acquisition of 7Software.
The Company's future success will depend, in part, upon the ability of its
senior management to manage growth effectively. This will require the Company to
implement additional management information systems, to develop further its
operating, administrative, financial and accounting systems and controls, to
hire additional personnel, to develop additional levels of management within the
Company, to locate additional office space in the United States and
internationally, and to maintain close coordination among its development,
accounting, finance, marketing, sales, customer support and professional
services organizations. In particular, the Company expects to need additional
office space as soon as the first half of calendar 1999. The real estate market
in the Seattle area, where the Company's headquarters is located, is extremely
competitive, and the Company may find it difficult to locate suitable space on
terms acceptable to the Company. In addition, each customer for the Company's
products generally purchases consulting and implementation services in
connection with licenses of those products. The Company believes that it is
currently the only provider of such services for its products. It is difficult
and expensive to recruit, train and retain qualified personnel to perform such
services, and the Company may from time to time have inadequate levels of
staffing to perform required services. As a result, the Company's growth could
be limited due to its lack of capacity to provide such services, or the Company
could experience deterioration in service levels or decreased customer
satisfaction, any of which would have a material adverse effect on the Company's
business, results of operations and financial condition. The failure of the
Company to manage its historic and future growth successfully would have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Risks Associated with Acquisitions," "--Need to
Attract and Retain Qualified Personnel" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's primary source of
direct competition comes from independent software vendors in both the T&E
expense management and front-office procurement applications. The Company also
faces indirect competition from potential customers' internal development
efforts and from potential customers' reluctance to move away from existing
paper-based systems.
The Company's major competitors in the T&E expense management field include
Captura Software, Inc., Extensity, Inc., International Business Machines
Corporation and Necho Systems Corporation. In addition, several major ERP
vendors such as SAP AG ("SAP"), Oracle Corporation ("Oracle"), and PeopleSoft,
Inc. ("PeopleSoft") have already developed T&E expense management products and
have begun to sell these products along with their application suites. The
Company's major competitors in the front-office procurement field include Ariba
Technologies, Inc., Commerce One, Inc., ELEKOM Corporation, Harbinger
Corporation, Netscape Communications Corporation and TRADE'ex Electronic
Commerce Systems, Inc. In addition to its current competitors, the Company
expects to face competition from new entrants including those ERP providers that
do not already market a T&E expense management product. Most of the major ERP
providers have a significant installed customer base and have the opportunity to
offer additional products to those customers as additional components of their
respective application suites.
The Company believes that the principal competitive factors considered in
selecting T&E expense management and front-office procurement applications are
functionality, interoperability with existing IT infrastructure, price and an
installed referenceable base of customers. Many of the Company's competitors in
both the T&E expense management and front-office procurement markets have longer
operating histories, significantly greater financial, technical, marketing and
other resources, significantly greater name recognition and a larger installed
base of customers than the Company. Moreover, a number of the Company's
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competitors, particularly major ERP vendors, have well-established relationships
with current and potential customers of the Company as well as with systems
integrators and other vendors and service providers. In addition, these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products, than can the Company.
It is also possible that new competitors or alliances among competitors or
third parties may emerge and rapidly acquire significant market share. The
Company expects that competition in its markets will increase as a result of
consolidation and the formation of alliances in the industry. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures faced by the Company will
not materially and adversely affect its business, results of operations and
financial condition.
NEED TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS; DEPENDENCE ON KEY
BUSINESS RELATIONSHIPS
An important business strategy of the Company is to enter into strategic
relationships to offer products and services to a larger customer base than can
be reached through direct sales, telesales and internal marketing efforts. The
Company has established a significant strategic marketing relationship with
American Express Company ("American Express") under which American Express
refers to the Company its corporate charge card customers that seek a T&E
expense management solution and will market a co-branded ESP version of XMS
containing special features. Since entering into this relationship, a
significant number of the Company's new sales have come through referrals from
American Express. In August 1998, American Express Travel Related Services
Company, Inc. ("TRS"), a subsidiary of American Express, purchased 1,612,903
shares of the Company's Series E Preferred Stock for $4,999,999, and a warrant
to purchase up to 6,000,000 shares of Series E Preferred Stock at prices ranging
from the price to public in the Offering less 7% to $34.00, and expiring in four
tranches through January 2002. The Company has also established strategic
relationships with a number of other partners, including Citibank, N.A.,
Citicorp Diners Club Inc. and Geac Computer Corporation Ltd. There can be no
assurance that the Company will be able to enter into additional strategic
relationships or to maintain its existing strategic relationships on
commercially reasonable terms, if at all. If the Company were unable to maintain
its existing strategic relationships or enter into additional strategic
relationships, it would be required to devote substantially more resources to
the distribution, sale and marketing of its products and services than it plans
to do and would not receive the customer introductions and co-marketing benefits
from strategic relationships that it expects. As a result of the Company's
emphasis on strategic relationships, the Company's success will depend both on
the ultimate success of the other parties to such relationships, and on the
ability of these parties to market the Company's products and services
successfully. Failure of one or more of the entities with which the Company has
a strategic relationship to promote the Company's products or services could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Certain Transactions."
The Company's existing strategic relationships do not, and any future
strategic relationships may not, afford the Company any exclusive marketing or
distribution rights. Many of the Company's strategic partners have multiple
strategic relationships, and there can be no assurance that the Company's
strategic partners regard their relationships with the Company as significant
for their own businesses or that they will not reduce their commitment to the
Company at any time in the future. In addition, there can be no assurance that
such parties will not pursue other partnerships or relationships, or attempt to
develop or acquire products or services that compete with the Company's products
or services either on their own or in collaboration with others, including the
Company's competitors. Further, the Company's existing strategic relationships
may interfere with its ability to enter into other desirable strategic
relationships. Any future inability of the Company to maintain its strategic
relationships or to enter into additional strategic relationships will have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Competition," "Business--Strategy," "--Sales" and
"--Marketing."
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RISKS ASSOCIATED WITH ACQUISITIONS
In June 1998, the Company acquired 7Software, a privately-held front-office
procurement software development company and the developer of CompanyStore. The
Company is currently in the process of integrating the 7Software business with
the Company's business, including product development efforts focused on
integrating CompanyStore with XMS in a suite of employee-facing applications.
Such integration is subject to risks commonly encountered in making such
acquisitions, including, among others, loss of key personnel of the acquired
company, difficulties associated with assimilating the personnel and operations
of the acquired company, potential disruption of the Company's ongoing business,
and the ability of the Company's sales force, consultants and development staff
to adapt to the new product line. There can be no assurance that the Company
will be successful in overcoming these risks or any other problems encountered
in connection with its acquisition of 7Software.
While the Company has no current agreements or negotiations underway with
respect to any acquisition, in order to remain competitive in the future, the
Company may find it necessary to acquire additional businesses, products or
technologies that could complement or expand the Company's business. In the
event that the Company identifies an appropriate acquisition candidate, there
can be no assurance that the Company would be able to negotiate the terms of any
such acquisition successfully, finance such acquisition, or integrate such
acquired business, products or technologies into the Company's existing business
and operations. The Company has completed only one acquisition to date, the
acquisition of 7Software. There can be no assurance that the Company will be
able to successfully manage or absorb any other acquisitions, particularly any
future acquisitions of a larger or publicly held company, or multiple
simultaneous acquisitions. Further, the negotiation of potential acquisitions,
as well as the integration of an acquired business, would cause significant
diversions of management time and resources. There can be no assurance that a
given acquisition, whether or not consummated, would not materially adversely
affect the Company's business, results of operations and financial condition. If
the Company were to proceed with one or more significant acquisitions in which
the consideration included cash, the Company could be required to use a
substantial portion of the Company's available cash (including proceeds of the
Offering) to consummate any such acquisition. If the Company consummates one or
more significant acquisitions in which the consideration consists of stock or
other securities, stockholders of the Company could suffer significant dilution
of their interests in the Company. See "--Management of Growth," "Broad
Discretion over Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
LENGTHY SALES CYCLE
Sales of the Company's software products generally require the Company to
engage in a lengthy sales effort. Because of the costs involved, customers for
enterprise products such as the Company's typically commit significant resources
to an evaluation of available software applications and require the Company to
expend substantial time, effort and money educating them about the value of the
Company's products and services. The Company's sales cycle typically ranges
between six and nine months. Sales of the Company's products require an
extensive sales effort throughout a customer's organization because decisions to
license and deploy such software generally involve the evaluation of the
software by a significant number of customer personnel in various functional
areas, each often having specific and conflicting requirements. A variety of
factors, including many over which the Company has little or no control, such as
customers' investments in Year 2000 systems compliance, may cause potential
customers to favor competing products or to delay or forego a purchase. As a
result of the length of its sales cycle, the Company has a limited ability to
forecast the timing and amount of specific sales. The delay or failure to
complete one or more sales in a particular quarter or fiscal year could have a
material adverse effect on the Company's business, results of operations and
financial condition and could cause the Company's operating results to vary
significantly from quarter to quarter. See "--Potential Fluctuations in
Quarterly Results; Seasonality" and "--Year 2000 Compliance."
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends on the performance of the Company's senior
management, particularly S. Steven Singh, who is not bound by an employment
agreement. The loss of the services of Mr. Singh would
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have a material adverse effect on the Company's business, results of operations
and financial condition. If one or more members of the Company's senior
management or any of the Company's key employees were to resign from the
Company, particularly to join a competitor or to form a competitor of the
Company, the loss of such personnel and any resulting loss of existing or
potential customers to any such competitor would have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, there can be no assurance that, in such an event, the Company would be
able to recruit personnel to replace such senior management on terms that are
acceptable to the Company. In the event of the loss of any key personnel, there
can be no assurance that the Company would be able to prevent the unauthorized
disclosure or use of its technical knowledge, practices, procedures or customer
lists by a former employee or that such disclosure or use would not have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Employees" and "Management."
NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
The Company's success depends to a significant degree on its ability to
attract and retain qualified, experienced employees. There is currently, and the
Company expects there will continue to be, substantial competition for
experienced engineering, sales and consulting personnel, particularly in the
market segments in which the Company competes. Many of the companies with which
the Company competes for experienced personnel have greater financial and other
resources than the Company. In particular, the Company competes for product
development personnel with Microsoft Corporation, which is located in the same
geographic area as the Company's headquarters and which hires significant
numbers of software engineers each year. The Company also competes for personnel
with major ERP and other independent software vendors which hire substantial
numbers of sales and consulting personnel, and with consulting and professional
services companies (such as Andersen Consulting and other systems integration
and consulting divisions of major accounting firms), which recruit a significant
portion of the pool of available and qualified consulting personnel. The Company
may in the future experience difficulty in recruiting and retaining sufficient
numbers of qualified personnel to meet its needs, and the costs associated with
such hirings, such as bonuses and recruiting expenses, may have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business--Employees."
DEPENDENCE ON DIRECT SALES MODEL
The Company has sold, and intends to continue to sell, its products
primarily through its direct sales force. The Company's financial success will
depend in large part on the ability of the Company's direct sales force to
increase sales to levels necessary to attain and sustain profitability. As a
consequence of this strategy, the Company's ability to achieve significant
revenue growth in the future will depend in large part on its success in
recruiting, training and retaining additional direct sales personnel and on the
continued success of the direct sales force. The Company believes that there is
a shortage of, and significant competition for, direct sales personnel with the
advanced sales skills and technical knowledge necessary to sell the Company's
products. The Company's inability to hire competent sales personnel, or its
failure to retain them, would have a material adverse effect on the Company's
business, results of operations and financial condition. See "--Need to Attract
and Retain Qualified Personnel" and "--Dependence on Key Employees."
In addition, by relying primarily on a direct sales model, the Company may
miss sales opportunities that might be available through other sales
distribution channels, such as domestic and international resellers and
value-added resellers. In the future, the Company intends to develop indirect
distribution channels through third-party distribution arrangements, but there
can be no assurance that the Company will be successful in establishing such
arrangements, or that any such expansion of the Company's indirect distribution
channels will result in increased revenues. The failure to develop such indirect
channels may place the Company at a significant competitive disadvantage. See
"--Competition" and "Business--Sales."
DEPENDENCE ON SERVICE REVENUES
The Company licenses software and provides related consulting, maintenance
and training services. Total license and service revenues have increased from
year to year, and service revenues have increased each year
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as a percentage of total revenues. Service revenues represented 1.1%, 12.4% and
23.3% of total revenues for fiscal 1995, 1996 and 1997, respectively, and 21.5%
and 31.4% for the nine months ended June 30, 1997 and 1998, respectively.
Maintenance constitutes a significant proportion of service revenues. The
Company anticipates that service revenues will continue to represent a
significant percentage of total revenues. To a large extent, the level of
service revenues is dependent upon the ongoing renewals of maintenance contracts
by the Company's growing installed customer base, and there can be no assurance
that such maintenance contracts will be renewed. In addition, if third-party
organizations such as systems integrators become proficient in installing or
servicing the Company's products, consulting revenues as a percentage of total
revenues could decline. If service revenues are lower than anticipated, the
Company's business, results of operations and financial condition could be
materially adversely affected. The Company's ability to increase its service
revenues will depend in large part on its ability to increase the scale of its
services organization, including its ability to successfully recruit and train a
sufficient number of qualified services personnel. There can be no assurance
that the Company will be able to successfully expand its professional services
organization in this way. See "--Management of Growth," "--Need to Attract and
Retain Qualified Personnel," "--Dependence on Key Employees" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
INTERNATIONAL OPERATIONS
Revenues from XMS licenses and services to customers outside the United
States, primarily in the United Kingdom, Canada and Europe, were insignificant
prior to fiscal 1997, and represented approximately $1.3 million and $455,000 in
fiscal 1997 and for the nine months ended June 30, 1998, respectively. As a key
component of its business strategy, the Company intends to expand its sales and
support operations internationally. The Company operates sales offices in
Toronto and London. In order to increase international sales, the Company must
establish additional international sales offices, expand the management, sales
and support organizations, and enter into relationships with additional
international remarketers where appropriate. The Company is in the early stages
of developing its indirect distribution channels in certain markets outside the
United States. There can be no assurance that the Company will be able to
attract remarketers that will be able to market the Company's products
effectively or will be qualified to provide timely and cost-effective customer
support and service.
The Company must also customize its products for local markets. For
example, the Company's ability to expand into the European market will depend on
the Company's ability to develop a T&E expense management solution that
incorporates the tax laws and accounting practices followed in Germany and other
European countries, and to develop employee-facing applications that support the
Euro, the new currency expected to be introduced for certain members of the
European Community in January 1999. Further, the differing employment policies
of countries outside the United States potentially reduce the Company's
flexibility in managing staffing levels and, in turn, managing personnel-related
expenses. To the extent that the Company is unable to address the risks
associated with these international sales in a timely and cost-effective manner,
the Company's sales growth internationally, if any, will be limited, operating
margins could be reduced by increases in personnel-related expenses without
corresponding increases in revenues, and the Company's business, results of
operations and financial condition could be materially adversely affected. Even
if the Company is able to expand its international operations successfully,
there can be no assurance that the Company will be able to maintain or increase
international market demand for its products. See "Business--Sales."
The Company's international operations are generally subject to a number of
risks, including costs of customizing products for foreign countries,
protectionist laws and business practices favoring local competition, dependence
on local vendors, compliance with multiple, conflicting and changing
governmental laws and regulations, longer sales cycles, greater difficulty or
delay in accounts receivable collection, import and export restrictions and
tariffs, difficulties in staffing and managing foreign operations, foreign
currency exchange rate fluctuations, multiple and conflicting tax laws and
regulations and political and economic instability. While the Company invoices
its customers in local currency, to date a significant majority of the Company's
revenues have been denominated in U.S. dollars. However, the Company believes
that in the future, an increasing
15
<PAGE> 17
portion of the Company's revenues will be denominated in foreign currencies. In
particular, the Company expects that following the introduction of the Euro in
1999, an increasing portion of the Company's international sales may be
Euro-denominated. The Euro is an untested currency and may be subject to
economic risks that are not currently contemplated. There can be no assurance
that fluctuations in the value of the Euro or other foreign currencies will not
have a material adverse effect on the Company's business, results of operations
and financial condition. The Company currently does not engage in foreign
exchange hedging activities and international revenues are currently subject to
the risks of foreign currency fluctuations. In addition, the Company expects
that some of its products will not support Euro-denominated transactions until
at least the second half of 1999, which could materially adversely affect demand
for such products and, as a result, the Company's business, results of
operations and financial condition. See "--Potential Fluctuations in Quarterly
Results; Seasonality" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
LIMITED INTEROPERABILITY
The Company's products are designed to operate on a variety of hardware and
software platforms employed by its customers. The Company must continually
modify and enhance its products to keep pace with changes in hardware and
software platforms and database technology. As a result, uncertainties related
to the timing and nature of new product announcements, introductions or
modifications by vendors of operating systems (particularly Microsoft), by
vendors of back-office applications (particularly SAP, Oracle and PeopleSoft)
and by vendors of browsers and other Internet-related applications (particularly
Netscape and Microsoft) could materially adversely affect the Company's
business, results of operations and financial condition. In addition, the
Company's products are not currently based upon the Java programming language
("Java"), an increasingly widely-used language for developing Internet
applications. The Company has made a strategic decision not to develop a fully
Java-based product at this time. There can be no assurance that future versions
of the Company's products will be developed in Java. Accordingly, certain
features available to products written in Java may not be available in the
Company's products. The failure of the Company's products to operate effectively
across the various existing and evolving versions of hardware and software
platforms, programming languages, database environments, and ERP and accounting
systems employed by customers would have a material adverse effect on the
Company's business, results of operations and financial condition.
RELIANCE ON THIRD-PARTY SOFTWARE
The Company relies upon the licensing of certain software from third
parties, including security technologies from RSA Data Security, Inc. (a
subsidiary of Security Dynamics), ODBC drivers from Intersolv, Inc., and
Internet translation applications from Chili!Soft, Inc. There can be no
assurance that the Company's third-party technology licenses will continue to be
available to the Company on commercially reasonable terms, if at all. The loss
or inability to maintain any of these technology licenses could result in delays
in the sale of the Company's products and services until equivalent technology,
if available, is identified, licensed and integrated, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
RISKS OF SOFTWARE DEFECTS OR SECURITY BREACHES; POSSIBLE PRODUCT LIABILITY
ISSUES
Products as complex as those offered by the Company frequently contain
defects or failures that may be detected at any point in the product's life.
There can be no assurance that defects or errors will not occur in existing or
new products, despite testing by the Company and potential customers. Further,
the Company often renders implementation, consulting and other technical
services in connection with licensing of the Company's products. The performance
of these services typically involves working with sophisticated software,
computing and networking systems, and the Company could fail to meet project
milestones in a timely manner or meet customer expectations for services as a
result of any such defects. Although the Company's products contain security
features, the Company's software products may be vulnerable to break-ins and
similar disruptive problems. Such computer break-ins and other disruptions may
jeopardize the security of information stored in and transmitted through the
computer systems of the Company's customers. Break-ins often
16
<PAGE> 18
involve hackers bypassing fire walls and misappropriating confidential
information. Problems caused by failure to meet project milestones for services,
product defects or security breaches could result in loss of or delay in
revenues, loss of market share, failure to achieve market acceptance, diversion
of development resources, harm to the Company's reputation, increased insurance
costs or increased service and warranty costs. Addressing these problems may
require significant expenditures of capital and resources by the Company, which
would have a material adverse effect on the Company's business, results of
operations and financial condition.
Because customers rely on the Company's products for certain
business-critical processes, any significant defects or errors in the Company's
products or services, or in the products of third parties that are embedded in
or bundled with the Company's products, might discourage such third parties or
other customers from utilizing the Company's products and services or result in
tort or warranty claims against the Company, which could have a material adverse
effect on the Company's business, results of operations and financial condition.
Although the Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential liability for
damages arising out of use of or defects in the Company's products, it is
possible that such limitation of liability provisions may not be effective as a
result of existing or future federal, state or local laws or ordinances or
unfavorable judicial decisions. Although the Company has not experienced any
such product liability claims to date, there can be no assurance that the
Company will not be subject to such claims in the future. Further, although the
Company maintains errors and omissions insurance, there can be no assurance that
such insurance coverage will adequately cover the Company for such claims or
that such other measures will be effective in limiting the Company's liability.
A successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, results of operations and
financial condition. Moreover, defending such a suit, regardless of its merits,
could entail substantial expense and require the time and attention of key
management personnel, either of which could have a material adverse effect on
the Company's business, results of operations and financial condition.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary technology. For example, the Company licenses rather
than sells its software to customers and requires licensees to enter into
license agreements that impose certain restrictions on licensees' ability to
utilize the software. Although the Company has taken steps to avoid disclosure
of its trade secrets, including adopting a corporate policy on confidentiality
that applies to all employees, requiring non-employees with access to
proprietary information to enter into written confidentiality agreements with
the Company, and contractually restricting customer access to the Company's
source code, the Company believes that this policy has not been strictly
followed. The Company presently has no patents or patent applications pending.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary. Policing unauthorized
use of the Company's products is difficult, particularly because the global
nature of the Internet makes it difficult to control the ultimate destination
and security of software or other data transmitted and, while the Company is
unable to determine the extent to which unauthorized use of its software
products exists, such unauthorized use can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to as great an extent as do the laws of the United
States, and the Company expects that it will become more difficult to monitor
use of the Company's products as the Company increases its international
presence. For example, in certain foreign countries where the Company has
licensed XMS, software is commonly copied and distributed on an unauthorized
basis. There can be no assurance that the Company's means of protecting its
proprietary rights, even if followed, will be adequate, nor that the Company's
competitors will not independently develop similar technology.
The Company has not been notified that the Company's products infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to current
or future products. Further, the Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. From time to
17
<PAGE> 19
time, the Company hires or retains employees or consultants (including through
acquisition) who have worked for independent software vendors or other companies
developing products similar to those offered by the Company. There can be no
assurance that such prior employers will not claim that the Company's products
are based on their products and that the Company has misappropriated their
intellectual property. Any such claims, with or without merit, could cause a
significant diversion of management attention, result in costly and prolonged
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which would have a material adverse effect upon the Company's business, results
of operations and financial condition.
RISK RELATED TO REVENUE RECOGNITION POLICY
The Company recognizes revenues in accordance with the American Institute
of Certified Public Accountants ("AICPA") Statement of Position 91-1 ("SOP
91-1"). Software license revenues are recognized when a non-cancelable license
agreement has been signed with a customer, the software is shipped, no
significant post delivery vendor obligations remain and collection is deemed
probable. Maintenance revenues are recognized ratably over the contract term,
typically one year. Revenues for consulting services are recognized as such
services are performed. Statement of Position 97-2 ("SOP 97-2"), "Software
Revenue Recognition" was issued in October 1997 by the American Institute of
Certified Public Accountants and amended by Statement of Position 98-4 ("SOP
98-4"). The Company will adopt SOP 97-2 beginning in fiscal 1999. Based upon its
interpretation of SOP 97-2 and SOP 98-4, the Company believes its current
revenue recognition policies and practices are materially consistent with SOP
97-2 and SOP 98-4. However, full implementation guidelines for this standard
have not yet been issued. Once available, such implementation guidance could
lead to unanticipated changes in the Company's current revenue accounting
practices, and such changes could materially adversely affect the Company's
future revenues and earnings. Such implementation guidance may necessitate
significant changes in the Company's business practices in order for the Company
to continue to recognize license revenues upon delivery of its software
products. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Overview."
YEAR 2000 COMPLIANCE
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, in less than two years,
computer systems and software used by many companies and organizations in a wide
variety of industries (including technology, transportation, utilities, finance,
telecommunications, among others) will experience operating difficulties unless
they are modified or upgraded to process information related to the century
change adequately. Significant uncertainty exists in the software and other
industries concerning the scope and magnitude of problems associated with the
century change. The Company recognizes the need to ensure its operations will
not be adversely affected by Year 2000 software failures. The Company is
assessing the potential overall impact of the impending century change on the
Company's business, results of operations and financial condition.
Based on the Company's assessment to date, the Company believes the current
versions of its software products and services are "Year 2000 compliant"-- that
is, they are capable of adequately distinguishing 21st century dates from 20th
century dates. However, the Company's products are generally integrated into
enterprise systems involving sophisticated hardware and complex software
products, which may not be Year 2000 compliant. The Company may in the future be
subject to claims based on Year 2000 problems in others' products, or issues
arising from the integration of multiple products within an overall system.
Although the Company has not been a party to any litigation or arbitration
proceeding to date involving its products or services and related to Year 2000
compliance issues, there can be no assurance that the Company will not in the
future be required to defend its products or services in such 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
such disputes, and any liability of the Company for Year 2000-related damages,
including consequential damages, could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the Company believes that purchasing patterns of customers and potential
18
<PAGE> 20
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or upgrade their current software systems for Year 2000
compliance. These expenditures may result in reduced funds available to purchase
software products such as those offered by the Company. To the extent Year 2000
issues cause significant delay in, or cancellation of, decisions to purchase the
Company's products or services, the Company's business, results of operations
and financial condition would be materially adversely affected.
The Company is reviewing its internal management information and other
systems in order to identify and modify any products, services or systems that
are not Year 2000 compliant. To date, the Company has not encountered any
material Year 2000 problems with its computer systems or any other equipment
which might be subject to such problems. The Company's plan for the Year 2000
calls for compliance verification of external vendors supplying software and
information systems to the Company and communication with significant suppliers
to determine the readiness of third parties' remediation of their own Year 2000
issues. As part of its assessment, the Company is evaluating the level of
validation it will require of third parties to ensure their Year 2000 readiness.
In the event that any such third parties cannot timely provide the Company with
products, services or systems that meet the Year 2000 requirements on a timely
basis, the Company's business, results of operations and financial condition
could be materially adversely affected. The total cost of these Year 2000
compliance activities has not been, and is not anticipated to be, material to
the Company's business, results of operations and financial condition. These
costs and the timing in which the Company plans to complete its Year 2000
modification and testing processes are based on management's estimates. However,
there can be no assurance that the Company will timely identify and remediate
all significant Year 2000 problems, that remediation efforts will not involve
significant time and expense, or that such problems will not have a material
adverse effect on the Company's business, results of operations and financial
condition.
RISKS ASSOCIATED WITH NAME CHANGE
In July 1998, the Company changed its name from Portable Software
Corporation to Concur Technologies, Inc. The Company believes that developing
and strengthening the Concur brand is important to its marketing efforts,
particularly to convey the fact that the Company's business strategy involves
products beyond its original T&E expense management applications. Concur
believes that it had developed significant market identification between its T&E
expense management applications and its former name. There can be no assurance
that the change of name will not have a material adverse effect on the Company's
name recognition within its existing target market. Moreover, while the Company
has expended substantial resources in establishing brand recognition of its
name, there can be no assurance that such efforts will be successful or that the
Company will be able to enforce rights related to the Concur name, that it will
be free to use that name in all jurisdictions, or that it will not be required
to expend significant resources in defending the use of that name.
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering there has been no public market for the Common Stock,
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after the Offering. The initial public offering
price will be determined by negotiation among the Company and the
representatives of the underwriters based upon several factors and may not be
indicative of the market price of the Common Stock following the Offering. The
market price of the Company's Common Stock is likely to be highly volatile and
could be subject to wide fluctuations in response to quarterly variations in
operating results, announcements of technological innovations or new products by
the Company or its competitors, market conditions in the enterprise software
industry, changes in financial estimates by securities analysts, failure of the
Company to meet or exceed analyst estimates, and other events or factors, many
of which are beyond the Company's control. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many software companies and
that often have been unrelated to the operating performance of such companies. A
number of publicly-traded software companies trade below their initial public
offering price. These broad market fluctuations may adversely affect the market
price of the Company's Common Stock. In the past, following periods of
volatility in the marketplace for a company's securities, securities class
action litigation often has been instituted. Any such
19
<PAGE> 21
litigation against the Company could result in substantial costs and a diversion
of management attention and resources, which would have a material adverse
effect on the Company's business, results of operations and financial condition.
CONTROL BY EXISTING STOCKHOLDERS
Immediately after the closing of the Offering (based on shares outstanding
as of August 15, 1998), % of the outstanding Common Stock ( % if the
underwriters' over-allotment option is exercised in full) will be beneficially
owned by the directors and executive officers of the Company, together with
certain entities affiliated with them, assuming no exercise of outstanding stock
options. If all options owned by the directors and executive officers of the
Company as of August 15, 1998 were to be exercised, the directors and executive
officers of the Company, together with certain entities affiliated with them,
would own 26,477,659 shares of Common Stock, or % of the outstanding Common
Stock of the Company following the Offering. As a result, these stockholders, if
acting together, would be able to control substantially all matters requiring
approval by the stockholders of the Company, including the election of all
directors and approval of significant corporate transactions. In addition, upon
completion of the Offering, TRS will hold a warrant to purchase up to 5,375,000
shares of the Company's Common Stock at prices ranging from the price to public
in the Offering less 7% to $34.00, and expiring in four tranches through January
2002. See "Principal and Selling Stockholders" and "Certain Transactions."
ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Certain provisions of the Company's Certificate of Incorporation and Bylaws
and certain provisions of Delaware law could delay or make difficult a merger,
tender offer or proxy contest involving the Company. The authorized but unissued
capital stock of the Company immediately following the Offering will include
5,000,000 shares of preferred stock. The Board of Directors is authorized to
provide for the issuance of such preferred stock in one or more series and to
fix the designations, preferences, powers and relative, participating, optional
or other rights and restrictions thereof. Accordingly, the Company may in the
future issue a series of preferred stock, without further stockholder approval,
that will have preference over the Common Stock with respect to the payment of
dividends and upon liquidation, dissolution or winding-up of the Company.
Certain other provisions of the Company's Certification of Incorporation and
Bylaws, including provisions that divide the Board of Directors into three
classes to serve staggered three-year terms, prohibit the stockholders from
taking action by written consent and restrict the ability of stockholders to
call special meetings, may also make it more difficult for a third party to
acquire a majority of the Company's voting stock or effect a change in control
of the Company. In addition, Section 203 of the General Corporation Law of the
State of Delaware, which is applicable to the Company, prohibits certain
business combinations with certain stockholders for a period of three years
after they acquire 15% or more of the outstanding voting stock of a corporation.
Any of the foregoing could adversely affect holders of the Common Stock or
discourage or make difficult any attempt to obtain control of the Company. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE OF THE COMMON STOCK
Sales of a substantial number of shares of Common Stock after the Offering
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. Upon
completion of the Offering, the Company will have outstanding shares
of Common Stock ( shares if the underwriters' over-allotment option is
exercised in full), assuming no exercise of options after August 15, 1998. Of
these shares, the shares offered hereby ( shares if the
underwriters' over-allotment option is exercised in full) will be freely
tradable without restriction or further registration under the Securities Act of
1933, as amended (the "Securities Act"), unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act ("Rule
144"). The remaining 32,806,470 shares of Common Stock outstanding upon
completion of the Offering are "restricted securities" as that term is defined
in Rule 144.
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<PAGE> 22
Upon the expiration of lock-up agreements between certain of the Company's
stockholders and the underwriters (the "Lock-Up Agreements") beginning 180 days
after the date of this Prospectus, 478,172 shares will become eligible for sale
pursuant to Rule 701 under the Securities Act ("Rule 701") and 26,434,320 shares
held by certain affiliates of the Company will become eligible for sale pursuant
to the volume, manner of sale and notice requirements of Rule 144. The remaining
5,893,978 shares outstanding will become eligible for sale from time to time
more than 180 days after the date of this Prospectus. In addition to the
foregoing, as of August 15, 1998, there were outstanding options to purchase an
aggregate of 3,829,922 shares of Common Stock which will be eligible for sale in
the public market from time to time, subject to vesting and the expiration of
Lock-Up Agreements. The representatives of the underwriters have informed the
Company that the underwriters have no current intention to release shares from
the Lock-Up Agreements, prior to expiration of the 180-day term of such
agreements. Any request for release would be evaluated by the representatives of
the underwriters, and the decision whether or not to permit early release of
shares would be made dependent upon the facts and circumstances existing at the
time of the request. See "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience an immediate
dilution of $ per share in the pro forma net tangible book value of their
Common Stock from the initial public offering price of $ per share. To the
extent outstanding warrants or options are exercised, there will be further
dilution. See "Dilution."
BROAD DISCRETION OVER USE OF PROCEEDS
The net proceeds to the Company from the Offering will be used for working
capital and general corporate purposes, as well as for possible acquisitions of
additional businesses and technologies or the establishment of joint ventures
that are complementary to the current or future business of the Company, as
determined by management in its sole discretion. The Company has not determined
the specific allocation of net proceeds among the various uses described above.
Accordingly, investors in the Offering will rely upon the judgment of the
Company's management with respect to the use of proceeds, with only limited
information concerning management's specific intentions. See "Use of Proceeds."
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<PAGE> 23
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be approximately
$ ($ million if the Underwriters' over-allotment option is exercised
in full), after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders. The primary
purposes of the Offering are to increase the Company's equity capital, to create
a public market for the Company's Common Stock and to facilitate future access
by the Company to public equity markets.
The Company intends to use the net proceeds of the Offering for working
capital and general corporate purposes, including capital expenditures made in
the ordinary course of business, as well as for possible acquisitions of
businesses, products and technologies that are complementary to those of the
Company. Although the Company has not identified any specific businesses,
products or technologies that it may acquire, and there are no current
agreements or negotiations with respect to any such transactions, the Company
does from time to time evaluate such opportunities. Pending such uses, the net
proceeds of the Offering will be invested in short-term, investment-grade,
interest-bearing instruments.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not expect to do so in the foreseeable future. The Company
anticipates that all future earnings, if any, generated from operations will be
retained by the Company to develop and expand its business. Any future
determination with respect to the payment of dividends will be at the discretion
of the Board of Directors and will depend upon, among other things, the
Company's operating results, financial condition and capital requirements, the
terms of then-existing indebtedness, general business conditions and such other
factors as the Board of Directors deems relevant. In addition, the terms of
certain of the Company's credit facilities prohibit the payment of cash
dividends without the lender's consent. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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<PAGE> 24
CAPITALIZATION
The following table sets forth, as of June 30, 1998, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the conversion of all outstanding shares of redeemable
convertible preferred stock into Common Stock and the conversion of all
preferred stock warrants into warrants to purchase common stock, and (iii) such
pro forma capitalization as adjusted to give effect to (a) the sale of the
shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share (after deducting estimated underwriting
discounts and commissions and offering expenses) and the application of the
estimated net proceeds therefrom, (b) the exercise of warrants to purchase
448,949 shares of Common Stock with an average exercise price of $1.99 per
share, (c) the exercise of a portion of the TRS Warrant to purchase 562,500
shares of Common Stock at an assumed exercise price of $ per share, and (d)
the sale of redeemable convertible preferred stock in August 1998 for $4,999,999
and related conversion of such preferred stock into 1,612,903 shares of Common
Stock.
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, net of current portion............... $ 8,652 $ 8,652 $ 8,652
Redeemable convertible preferred stock, 23,921,023 shares
authorized, issued and outstanding, actual; no shares
authorized, issued or outstanding, pro forma or as
adjusted.................................................. 25,041 -- --
Redeemable convertible preferred stock warrants............. 72 -- --
Stockholders' equity (deficit):
Preferred Stock, $.001 par value, no shares authorized,
issued and outstanding, actual or pro forma; 5,000,000
shares authorized, no shares issued or outstanding, as
adjusted............................................... -- -- --
Common Stock, $.001 par value; 60,000,000 shares
authorized; 7,601,251 shares issued and outstanding,
actual; 31,522,274 shares issued and outstanding, pro
forma; and shares issued and outstanding, as
adjusted(1)............................................ 6,268 31,381
Deferred stock compensation............................... (564) (564) (564)
Accumulated deficit....................................... (27,064) (27,064) (27,064)
-------- -------- --------
Total stockholders' equity (deficit)................... (21,360) 3,753
-------- -------- --------
Total capitalization.............................. $ 12,405 $ 12,405 $
======== ======== ========
</TABLE>
- ---------------
(1) Excludes: (i) 3,597,714 shares of Common Stock issuable upon the exercise of
stock options outstanding (of which options to purchase 1,175,599 shares
were exercisable) under the Company's 1994 Stock Option Plan at a weighted
average exercise price of $0.30 per share; (ii) 9,500,000 shares of Common
Stock reserved for future grant or issuance immediately after the Offering
under the Company's 1998 Equity Incentive Plan (the "1998 Plan"), the 1998
Directors Stock Option Plan (the "Directors Plan") and the 1998 Employee
Stock Purchase Plan (the "Purchase Plan"); (iii) 973,337 shares of Common
Stock available for future grant under the 1994 Plan; (iv) 275,764 shares of
Common Stock issuable upon exercise of outstanding options (of which options
to purchase 65,432 shares were exercisable) granted under the 7Software Plan
and 34,045 shares of Common Stock issuable upon exercise of outstanding
options granted by 7Software outside the 7Software Plan, in each case
assumed by the Company in connection with the acquisition of 7Software, at a
weighted average exercise price of $0.01 per share; and (v) 4,812,500 shares
of Common Stock issuable upon the exercise of the TRS Warrant at prices
ranging from $13.50 to $34.00, expiring in three tranches through January
2002. No further options will be granted under the 7Software Plan. Upon
effectiveness of the Offering, no further options will be granted under the
1994 Plan. See "Management--Director Compensation," "--Employee Benefit
Plans" and "Certain Transactions" and Note 9 of Notes to Consolidated
Financial Statements.
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<PAGE> 25
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1998,
giving effect to the conversion of all outstanding shares of preferred stock
into Common Stock, the conversion of outstanding warrants to purchase preferred
stock into warrants to purchase Common Stock with an average exercise price of
$1.99 per share and the exercise of such warrants to purchase 448,949 shares of
Common Stock upon or prior to the completion of the Offering, the conversion of
the TRS Warrant to purchase preferred stock into a warrant to purchase 5,375,000
shares of Common Stock and the exercise of a portion of such warrant to purchase
562,500 shares of Common Stock at an assumed exercise price of $ per share
upon or prior to the completion of the Offering, and the sale of redeemable
convertible preferred stock in August 1998 for $4,999,999 and the related
conversion of such preferred stock into 1,612,903 shares of Common Stock was
$ , or approximately $ per share. Pro forma net tangible book
value per share represents the amount of total tangible assets of the Company
less total liabilities, divided by the number of shares of Common Stock
outstanding on an as-if-converted basis as adjusted for the proceeds and
incremental shares from the exercise of warrants referred to above and the sale
of redeemable convertible preferred stock in August 1998. Dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Common Stock in the Offering made hereby and the pro forma net
tangible book value per share of Common Stock immediately after the Offering.
After giving effect to the sale of shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $ per
share (after deducting the underwriting discount and estimated offering expenses
payable by the Company) and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of June 30,
1998 would have been $ , or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to purchasers
of Common Stock in the Offering. The following table illustrates the per share
dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
1998................................................... $
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after the
Offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of June
30, 1998, the difference between the number of shares of Common Stock purchased
from the Company, the total consideration paid and the average price per share
paid by existing stockholders, including, on a pro forma basis, shares issued
pursuant to the conversion and exercise of outstanding warrants to purchase
preferred stock for 1,011,449 shares of Common Stock and shares issued pursuant
to the conversion of 1,612,903 shares of preferred stock, as compared to the
number of shares purchased, the total consideration paid and the average price
paid by the new investors pursuant to this Offering, before deducting the
estimated underwriting discounts and commissions and estimated offering expenses
payable by the Company at an assumed initial public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)....................... % $ % $
New investors(1)(2)............................
------ ----- ----- ------
Total................................ 100.0% $ 100.0%
====== ===== ===== ======
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this Offering will reduce the number of
shares held by existing stockholders to , or % ( %)
if the Underwriters' over-allotment option is exercised in full), and will
increase the number of shares held by new investors to , or %
( %) if the Underwriters' over-allotment option is exercised in
full), of the total number of shares of Common Stock outstanding after the
Offering. See "Principal and Selling Stockholders."
24
<PAGE> 26
(2) Excludes (i) 3,907,523 shares subject to outstanding options as of June 30,
1998 at a weighted average exercise price of $0.27 per share and (ii)
973,337 shares reserved for issuance under the 1994 Plan. Also excludes (i)
9,500,000 shares reserved for issuance under the 1998 Plan, the Directors
Plan and the Purchase Plan and (ii) 4,812,500 shares issuable upon exercise
of the TRS Warrant at prices ranging from $13.50 to $34.00, expiring in
three tranches through January 2002. To the extent outstanding options or
warrants are exercised, there will be further dilution to new investors. See
"Management--1994 Stock Option Plan," "--1997 Stock Option Plan of
7Software," "--1998 Equity Incentive Plan," "--1998 Employee Stock Purchase
Plan," "--Director Compensation" and "Certain Transactions."
25
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by
reference to and should be read in conjunction with the Company's Consolidated
Financial Statements and related Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The consolidated statement of operations data for the years
ended September 30, 1995, 1996 and 1997, and for the nine months ended June 30,
1998, and the consolidated balance sheet data as of September 30, 1996 and 1997,
and June 30, 1998, are derived from consolidated financial statements of the
Company that have been audited by Ernst & Young LLP, independent auditors, which
are included elsewhere in this Prospectus. The consolidated balance sheet data
as of September 30, 1995 is derived from audited consolidated financial
statements which are not included in this Prospectus. The consolidated statement
of operations data for the year ended September 30, 1994, and the consolidated
balance sheet data as of September 30, 1994 are derived from unaudited
consolidated financial statements not included in this Prospectus. The
consolidated statement of operations data for the nine months ended June 30,
1997 is derived from unaudited consolidated financial statements included in
this Prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of its financial position and
results of operations for these periods. Operating results for the nine months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year. The historical results are not necessarily
indicative of future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------------------- -----------------------
1994 1995 1996 1997 1997 1998
------- ------- ------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues:
Licenses................................................. $ -- $ 2,104 $ 1,717 $ 6,347 $ 4,087 $ 8,039
Services................................................. -- 24 242 1,923 1,118 3,676
------- ------- ------- -------- -------- --------
Total revenues..................................... -- 2,128 1,959 8,270 5,205 11,715
------- ------- ------- -------- -------- --------
Cost of revenues:
Licenses................................................. -- 728 386 394 219 318
Services................................................. -- 673 839 2,269 1,370 3,702
------- ------- ------- -------- -------- --------
Total cost of revenues............................. -- 1,401 1,225 2,663 1,589 4,020
------- ------- ------- -------- -------- --------
Gross profit............................................... -- 727 734 5,607 3,616 7,695
------- ------- ------- -------- -------- --------
Operating expenses:
Sales and marketing...................................... 111 2,363 2,936 5,896 3,873 7,886
Research and development................................. 425 744 1,793 3,401 2,226 4,162
General and administrative............................... 66 515 963 1,815 1,212 3,225
Acquired in-process technology(1)........................ -- -- -- -- -- 5,203
------- ------- ------- -------- -------- --------
Total operating expenses........................... 602 3,622 5,692 11,112 7,311 20,476
------- ------- ------- -------- -------- --------
Operating loss............................................. (602) (2,895) (4,958) (5,505) (3,695) (12,781)
Other income (expense), net................................ -- 5 5 (19) 14 (314)
------- ------- ------- -------- -------- --------
Net loss................................................... $ (602) $(2,890) $(4,953) $ (5,524) $ (3,681) $(13,095)
======= ======= ======= ======== ======== ========
Pro forma basic and diluted net loss per share(2).......... $ (0.23) $ (0.48)
======== ========
Shares used in pro forma basic and diluted per share
computations(2).......................................... 24,408 27,509
======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, 1998
-------------------------------------- -----------------------
1994 1995 1996 1997 ACTUAL PRO FORMA(3)
------- ------- ------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents.................................. $ 277 $ 2,541 $ 5,685 $ 6,695 $ 15,604 $ 15,604
Working capital (deficit).................................. (175) 1,839 4,073 6,183 9,469 9,469
Total assets............................................... 345 3,058 6,759 13,330 23,319 23,319
Long-term obligations, net of current portion.............. 233 125 215 3,687 8,652 8,652
Redeemable convertible preferred stock and warrants........ -- 4,903 12,386 17,322 25,113 --
Total stockholders' equity (deficit)....................... (353) (3,234) (8,186) (13,710) (21,360) 3,753
</TABLE>
- ---------------
(1) In June 1998, the Company acquired 7Software, resulting in a charge for
acquired in-process technology. See Note 3 of Notes to Consolidated
Financial Statements. The Financial Statements of 7Software are included
elsewhere herein.
(2) See Note 13 of Notes to Consolidated Financial Statements for information
concerning the calculation of pro forma basic and diluted net loss per
share.
(3) Reflects the assumed conversion of all outstanding shares of redeemable
convertible preferred stock into Common Stock, and the conversion of all
outstanding warrants to purchase redeemable convertible preferred stock into
warrants to purchase Common Stock, upon completion of the Offering.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus.
OVERVIEW
Concur is a leading provider of Intranet-based employee-facing applications
that extend automation to employees throughout the enterprise and to partners,
vendors and service providers in the extended enterprise. The Company's Xpense
Management Solution ("XMS") and CompanyStore products automate the preparation,
approval, processing and data analysis of travel and entertainment ("T&E")
expense reports and front-office procurement requisitions. Concur believes it is
the leading provider of T&E expense management solutions and, since the
introduction of XMS in 1996, the Company has licensed its products to over 125
enterprise customers with over 450,000 end users. Through its June 1998
acquisition of 7Software, Inc., the Company added the CompanyStore front-office
procurement application to its product suite. By automating manual, paper-based
processes, the Company's products reduce processing costs and enable customers
to consolidate purchases with preferred vendors and negotiate vendor discounts.
Concur was founded in 1993 and commenced operations in fiscal 1994,
initially developing QuickXpense, a retail, shrink-wrapped application that
automated T&E expense reporting for the individual. Concur first shipped
QuickXpense in fiscal 1995 and sold QuickXpense through a combination of retail
channels and direct marketing, utilizing a small sales force and no consulting
or implementation staff. In response to inquiries from businesses seeking to
automate the entire T&E expense reporting process, including back-office
processing and integration to financial systems, the Company significantly
expanded its product development efforts and released XMS, a client-server based
enterprise T&E expense management solution in July 1996. In connection with that
transition, the Company also replaced its retail and direct marketing programs
with a direct sales force including sales representatives and sales engineers,
built consulting services and customer training staffs, and redirected its
marketing efforts to focus on enterprise sales. In March 1998, the Company
shipped an intranet-based version of XMS. While the Company continues to sell
the client-server version of XMS, the Company believes that the Intranet-based
version currently accounts for a majority of XMS license revenues and the
Company expects to continue to focus its product development efforts on the
Intranet-based versions of its products.
On June 30, 1998, the Company acquired 7Software, a privately-held software
company and the developer of CompanyStore. 7Software was founded in 1996 and
commenced operations in 1997. 7Software was selling the initial version of its
product through a single sales representative at the time Concur acquired it.
Concur believes that the underlying product architecture and technology of
CompanyStore are highly compatible with that of XMS. Concur's existing sales
force and consulting services group sells and services both XMS and
CompanyStore, and the Company's research and development activities will be
expanded to develop a common technology platform for XMS and CompanyStore. In
connection with the acquisition, the Company issued 1,772,302 shares of its
Common Stock in exchange for all the outstanding shares of 7Software, converted
all of 7Software's outstanding options into options to purchase up to 309,809
shares of the Company's Common Stock, and agreed to pay certain shareholders of
7Software $500,000, resulting in a total purchase price valued at $6.2 million,
including acquisition expenses. The Company also entered into employment and
bonus agreements with certain officers of 7Software. The acquisition was
recorded under the purchase method of accounting and the results of operations
of 7Software and the fair value of the assets acquired and liabilities assumed
were included in Concur's consolidated financial statements beginning on the
acquisition date. In connection with this acquisition, the Company recorded $5.2
million for in-process technology as an expense in the quarter ended June 30,
1998. In addition, the Company recorded capitalized technology and other
intangible assets of $960,000 that will be amortized on a straight-line basis
over the five years following the acquisition. The Company expects that for the
foreseeable future the significant majority of
27
<PAGE> 29
its revenues will be derived from its XMS product line and related services. See
"Risk Factors--Product Concentration," "--Risks Associated With Expansion into
New Markets" and "--Risks Associated with Acquisitions."
The Company's revenues, which consist of software license revenues and
service revenues, totaled $2.1 million, $2.0 million and $8.3 million in fiscal
1995, 1996 and 1997, respectively, and were $5.2 million and $11.7 million for
the nine months ended June 30, 1997 and 1998, respectively. In fiscal 1995 and
the first nine months of fiscal 1996, the Company's revenues were derived from
licenses of QuickXpense and related services. In July 1996, the Company released
XMS, and substantially all of the Company's revenues in the fourth quarter of
fiscal 1996 as well as in fiscal 1997 and the nine months ended June 30, 1998
were derived from licenses of XMS and related services. The Company's pricing is
based on the number of users or employees of the purchasing enterprise. Service
revenues consist of consulting, maintenance (including customer support and
upgrades) and training. See "Risk Factors--Limited Operating History; Future
Operating Results Uncertain; History of Losses" and "--Potential Fluctuations in
Quarterly Results; Seasonality."
Concur markets its software and services primarily through its direct sales
organization in the United States, Canada and the United Kingdom. Revenues from
XMS licenses and services to customers outside the United States were
insignificant prior to fiscal 1997, and represented approximately $1.3 million
and $455,000 in fiscal 1997 and for the nine months ended June 30, 1998,
respectively. Historically, as a result of the relatively small amount of
international sales, fluctuations in foreign currency exchange rates have not
had a material effect on the Company's business, results of operations and
financial condition. See "Risk Factors--International Operations."
The Company recognizes revenues in accordance with the American Institute
of Certified Public Accountants ("AICPA") Statement of Position 91-1 ("SOP
91-1"). Software license revenues are recognized when a non-cancelable license
agreement has been signed with a customer, the software is shipped, no
significant post delivery vendor obligations remain and collection is deemed
probable. Maintenance revenues are recognized ratably over the contract term,
typically one year. Revenues for consulting services are recognized as such
services are performed. Statement of Position 97-2 ("SOP 97-2"), "Software
Revenue Recognition" was issued in October 1997 by the American Institute of
Certified Public Accountants and amended by Statement of Position 98-4 ("SOP
98-4"). The Company will adopt SOP 97-2 beginning in fiscal 1999. Based upon its
interpretation of SOP 97-2 and SOP 98-4, the Company believes its current
revenue recognition policies and practices are materially consistent with SOP
97-2 and SOP 98-4. It is not anticipated that there will be a material change to
the Company's accounting for revenues as a result of the adoption of SOP 97-2.
However, full implementation guidelines for this standard have not yet been
issued. Once available, such implementation guidance could lead to unanticipated
changes in the Company's current revenue accounting practices, and such changes
could materially adversely affect the Company's future revenues and earnings.
Such implementation guidance may necessitate significant changes in the
Company's business practices in order for the Company to continue to recognize
license revenues upon delivery of its software products.
Since its inception, the Company has incurred substantial research and
development costs and has invested heavily in the expansion of its sales,
marketing and professional services organizations to build an infrastructure to
support its long-term growth strategy. The number of the Company's employees
increased from 43 as of September 30, 1995 to 65 as of September 30, 1996 and
133 as of September 30, 1997, representing increases of 51% and 105%,
respectively. The number of employees increased from 108 as of June 30, 1997 to
179 as of June 30, 1998, an increase of 66%. As a result of investments in the
Company's infrastructure, the Company has incurred net losses in each fiscal
quarter since inception, and as of June 30, 1998, had an accumulated deficit of
$27.1 million. The Company anticipates that its operating expenses will increase
substantially for the foreseeable future as it expands its product development,
sales and marketing, and professional services staff. Accordingly, the Company
expects to incur additional losses for the foreseeable future.
The Company has recorded aggregate deferred stock compensation of $861,000,
of which $297,000 was recognized in the nine months ended June 30, 1998.
Deferred stock compensation is amortized over the life of the options, generally
four years.
28
<PAGE> 30
The Company believes that period-to-period comparisons of its operating
results are not meaningful and should not be relied upon as indicative of future
performance. The Company's prospects must be considered in light of risks,
expenses and difficulties frequently encountered by companies in early stages of
development, particularly companies in new and rapidly evolving markets. There
can be no assurance the Company will be successful in addressing such risks and
difficulties. In addition, although Concur has experienced significant revenue
growth recently, there can be no assurance that such revenue growth will
continue or that the Company will achieve or maintain profitability in the
future. See "Risk Factors --Limited Operating History; Future Operating Results
Uncertain; History of Losses" and "--Potential Fluctuations in Quarterly
Results; Seasonality."
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
-------------------------- ----------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses.................................... 98.9% 87.6% 76.7% 78.5% 68.6%
Services.................................... 1.1 12.4 23.3 21.5 31.4
------ ------ ------ ------ ------
Total revenues...................... 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------
Cost of revenues:
Licenses.................................... 34.2 19.7 4.8 4.2 2.7
Services.................................... 31.6 42.8 27.4 26.3 31.6
------ ------ ------ ------ ------
Total cost of revenues.............. 65.8 62.5 32.2 30.5 34.3
------ ------ ------ ------ ------
Gross margin.................................. 34.2 37.5 67.8 69.5 65.7
------ ------ ------ ------ ------
Operating expenses:
Sales and marketing......................... 111.0 149.9 71.3 74.4 67.3
Research and development.................... 35.0 91.5 41.1 42.8 35.5
General and administrative.................. 24.2 49.2 21.9 23.3 27.5
Acquired in-process technology.............. -- -- -- -- 44.4
------ ------ ------ ------ ------
Total operating expenses............ 170.2 290.6 134.3 140.5 174.7
------ ------ ------ ------ ------
Operating loss................................ (136.0) (253.1) (66.5) (71.0) (109.0)
Other income (expense), net................... 0.2 0.3 (0.2) 0.3 (2.7)
------ ------ ------ ------ ------
Net loss...................................... (135.8)% (252.8)% (66.7)% (70.7)% (111.7)%
====== ====== ====== ====== ======
</TABLE>
Revenues
The Company's revenues are derived from software licenses and related
services. The Company's revenues were $2.1 million, $2.0 million and $8.3
million in fiscal 1995, 1996 and 1997, respectively, representing a decrease of
$169,000, or 8%, from fiscal 1995 to fiscal 1996 and an increase of $6.3
million, or 322%, from fiscal 1996 to fiscal 1997. The Company's revenues were
$5.2 million and $11.7 million for the nine months ended June 30, 1997 and 1998,
respectively, representing an increase of $6.5 million, or 125%. The Company had
no customer that accounted for more than 10% of its revenues in fiscal 1995,
1996 or 1997.
The Company's license revenues were $2.1 million, $1.7 million and $6.3
million in fiscal 1995, 1996 and 1997, respectively, representing a decrease of
$387,000, or 18%, from fiscal 1995 to fiscal 1996 and an increase of $4.6
million, or 271%, from fiscal 1996 to fiscal 1997. The Company's license
revenues were $4.1 million and $8.0 million for the nine months ended June 30,
1997 and 1998, respectively, representing an increase of $4.0 million, or 97%.
The increase in the Company's license revenues from fiscal 1996 to fiscal 1997
was due to increased market acceptance of the client-server version of XMS and
increases in both the size and
29
<PAGE> 31
productivity of the sales force. The increase in license revenues for the nine
months ended June 30, 1998 compared to the nine months ended June 30, 1997 was a
result of the continued impact of those same factors, as well as the release of
the intranet version of XMS and the strategic alliance agreement signed with
American Express in December 1997. The decrease in the license revenues from
fiscal 1995 to fiscal 1996 resulted from the Company's redirection of its sales
efforts from QuickXpense to XMS.
The Company's service revenues were $24,000, $242,000 and $1.9 million in
fiscal 1995, 1996 and 1997, respectively, representing increases of $218,000
from fiscal 1995 to fiscal 1996 and $1.7 million from fiscal 1996 to fiscal
1997. The Company's service revenues were $1.1 million and $3.7 million for the
nine months ended June 30, 1997 and 1998, respectively, representing an increase
of $2.6 million, or 229%. Prior to fiscal 1997, service revenues consisted
primarily of customizing electronic versions of expense report forms in
connection with sales of QuickXpense. From fiscal 1997 through June 30, 1998,
service revenues consisted primarily of consulting and implementation service
fees, maintenance and, to a lesser extent, training services, associated with
the increasing license revenues during this period. Service revenues represented
1.1%, 12.4% and 23.3% of the Company's total revenues in fiscal 1995, 1996 and
1997, respectively, and 21.5% and 31.4% of total revenues for the nine months
ended June 30, 1997 and 1998, respectively. The increase in service revenues
from the nine months ended June 30, 1997 to the nine months ended June 30, 1998,
reflects increasing sales of XMS as well as service revenues recognized with
respect to licenses entered into in prior periods. The Company believes that the
percentage of total revenues represented by service revenues in prior fiscal
years is not indicative of levels to be expected in future periods. Due to its
limited experience selling CompanyStore, the Company is uncertain how
recognition of service revenues associated with such sales will affect its
results of operations in the future. In addition, the Company expects that its
proportion of service revenues to total revenues will fluctuate in the future,
depending in part on the Company's use of third-party consulting and
implementation service providers as well as on the market reception to the
Company's outsourced ESP solution.
Cost of Revenues
Cost of License Revenues. Cost of license revenues includes license fees
for third-party software, product media, product duplication and manuals. The
cost of license revenues were $728,000, $386,000 and $394,000, in fiscal 1995,
1996 and 1997, respectively, representing a decrease of $342,000, or 47%, from
fiscal 1995 to fiscal 1996 and an increase of $8,000, or 2%, from fiscal 1996 to
fiscal 1997. The cost of license revenues were $219,000 and $318,000 for the
nine months ended June 30, 1997 and 1998, respectively, representing an increase
of $99,000, or 45%. The decrease from fiscal 1995 to fiscal 1996 was expected as
QuickXpense, a shrink-wrapped application, carried a higher cost of sales than
XMS. In fiscal 1995, all license revenues were attributable to QuickXpense
whereas in fiscal 1996, the Company sold a mix of XMS and QuickXpense. Cost of
license revenues remained relatively constant from fiscal 1996 to fiscal 1997 as
a result of the shift of the mix of revenues from QuickXpense to XMS. The
increase for the nine months ended June 30, 1997, to the nine months ended June
30, 1998, was a result of increased expenses associated with sub-licensing of
third party software due to increased sales of XMS and the costs of production,
manuals and other media associated with the release of the Intranet version of
XMS in March 1998. Cost of licenses as a percentage of license revenues were
34.6%, 22.5% and 6.2% for fiscal 1995, 1996 and 1997, respectively, and 5.4% and
4.0% for the nine months ended June 30, 1997 and 1998, respectively. A portion
of the capitalized technology and other intangible assets recorded in connection
with the acquisition of 7Software will be amortized on a straight-line basis
over five years as cost of license revenues. The Company expects that the cost
of license revenues as a percentage of total revenues and license revenues may
increase significantly upon the introduction of the Company's outsourced ESP
solution and will fluctuate in the future depending in part on the demand for
the Company's current products and its outsourced ESP solution.
Cost of Service Revenues. Cost of service revenues includes personnel and
other costs related to consulting services, technical support, expense report
forms development and training. The cost of service revenues were $673,000,
$839,000 and $2.3 million, in fiscal 1995, 1996 and 1997, respectively,
representing an increase of $166,000, or 24.7%, from fiscal 1995 to fiscal 1996
and an increase of $1.4 million, or 170%, from fiscal 1996 to fiscal 1997. Cost
of service revenues were $1.4 million and $3.7 million for the nine months
30
<PAGE> 32
ended June 30, 1997 and 1998, respectively, representing an increase of $2.3
million, or 170%. The increase from fiscal 1995 to fiscal 1997 was a result of
hiring and training a consulting organization to implement XMS and retraining
existing personnel, in connection with the shift in the Company's product line
from QuickXpense to XMS. The increase from the nine months ended June 30, 1997,
to the nine months ended June 30, 1998, was primarily due to the increase in
professional services personnel to support the Company's growing XMS customer
base. Cost of service revenues as a percentage of service revenues was 2,804.0%,
346.7% and 118.0% for fiscal 1995, 1996 and 1997, respectively, and 122.5% and
100.7% for the nine months ended June 30, 1997 and 1998, respectively. The
decrease in cost of service revenues as a percentage of service revenues from
fiscal 1995 through the nine months ended June 30, 1998, was primarily due to
economies of scale realized as a result of a higher level of consulting services
activity and increased experience of the professional services personnel. The
cost of service revenues as a percentage of service revenues may vary between
periods due to the mix of services provided by the Company and the resources
used to provide such services.
Costs and Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, lead
referral fees, travel and entertainment and promotional expenses. Sales and
marketing expenses were $2.4 million, $2.9 million and $5.9 million in fiscal
1995, 1996 and 1997, respectively, representing an increase of $573,000, or 24%,
from fiscal 1995 to fiscal 1996 and $3.0 million, or 101%, from fiscal 1996 to
fiscal 1997. Sales and marketing expenses were $3.9 million and $7.9 million for
the nine months ended June 30, 1997 and 1998, respectively, representing an
increase of $4.0 million, or 104%. The increases from fiscal 1995 through the
nine months ended June 30, 1998, primarily reflect the Company's investment in
its sales and marketing infrastructure, which included significant
personnel-related expenses such as salaries, benefits and commissions,
recruiting fees, travel and entertainment expenses, and related costs of hiring
sales management, sales representatives, sales engineers and marketing
personnel. Sales and marketing employees totaled 11, 21 and 42 as of September
30, 1995, 1996 and 1997, respectively, representing increases of 91% and 100%,
respectively, and totaled 36 and 54 employees as of June 30, 1997 and 1998,
respectively, representing an increase of 50%. The increase in sales and
marketing costs from the nine months ended June 30, 1997 to the nine months
ended June 30, 1998, also reflects increased hiring rates to replace and support
promoted regional sales managers, public relations and trade show expenses, and
sales referral fees made under the Company's agreement with its referral
partners, principally American Express. Sales and marketing expenses represented
111.0%, 149.9% and 71.3% of the Company's total revenues for fiscal 1995, 1996
and 1997, respectively, and 74.4% and 67.3% of total revenues for the nine
months ended June 30, 1997 and 1998, respectively. The decrease in sales and
marketing expenses as a percentage of total revenues from fiscal 1996 to date
primarily reflects the more rapid growth of revenues compared to the growth of
sales and marketing expenses in this period. The Company believes that a
significant increase in its sales and marketing efforts is essential for it to
maintain its market position and further increase acceptance of its products.
Accordingly, the Company anticipates it will continue to invest heavily in sales
and marketing for the foreseeable future, and sales and marketing expenses are
likely to increase in future periods.
Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, product management
and quality assurance personnel and payments to outside contractors. Research
and development expenses were $744,000, $1.8 million and $3.4 million in fiscal
1995, 1996 and 1997, respectively, representing increases of $1.0 million, or
141%, from fiscal 1995 to fiscal 1996 and $1.6 million, or 90%, from fiscal 1996
to fiscal 1997. Research and development expenses were $2.2 million and $4.2
million for the nine months ended June 30, 1997 and 1998, respectively,
representing an increase of $2.0 million, or 87%. The increases from fiscal 1995
through the nine months ended June 30, 1998, were primarily related to the
increase in the number of development and quality assurance personnel and
outside contractors to support the Company's product development and testing
activities related to the development and release of both the client-server and
Intranet versions of XMS. The Company's research and development employees
totaled 12, 22 and 38 as of September 30, 1995, 1996 and 1997, respectively,
representing increases of 83% and 73%, respectively, and totaled 34 and 51
employees as of June 30, 1997 and
31
<PAGE> 33
1998, respectively, representing an increase of 50%. Research and development
costs represented 35.0%, 91.5% and 41.1% of the Company's total revenues in
fiscal 1995, 1996 and 1997, respectively, and 42.8% and 35.5% of total revenues
for the nine months ended June 30, 1997 and 1998, respectively. The Company
believes that a significant increase in its research and development investment
is essential for it to maintain its market position, to continue to expand its
product line and to develop a common technology platform for its suite of
products. Accordingly, the Company anticipates it will continue to invest
heavily in product research and development for the foreseeable future, and
research and development expenses are likely to increase in future periods. In
the development of the Company's new products and enhancements of existing
products, the technological feasibility of the software is not established until
substantially all product development is complete. Accordingly, software
development costs that were eligible for capitalization were insignificant, and
all costs related to internal research and development have been expensed as
incurred.
General and Administrative. General and administrative expenses consist
primarily of salaries, benefits and related costs for the Company's executive,
finance, administrative and information services personnel. General and
administrative expenses were $515,000, $963,000 and $1.8 million in fiscal 1995,
1996 and 1997, respectively, representing increases of $448,000, or 87%, from
fiscal 1995 to fiscal 1996 and an increase of $852,000, or 88%, from fiscal 1996
to 1997. General and administrative expenses were $1.2 million and $3.2 million
for the nine months ended June 30, 1997 and 1998, respectively, representing an
increase of $2.0 million, or 166%. The increases from fiscal 1995 through the
nine months ended June 30, 1998, were primarily the result of additional
finance, executive management and administration personnel to support the growth
of the Company's business during these periods. In addition to increased
compensation and related expenses, the increase in general and administrative
expenses from the nine months ended June 30, 1997 to the nine months ended June
30, 1998, reflects an increase in the provision for bad debt reserve related to
the Company's increase in revenues, and stock compensation expense, during the
period. During the nine months ended June 30, 1998, the Company recorded
deferred stock compensation for the differences between the exercise price and
the deemed fair value of the Company's Common Stock with respect to certain
options, and recorded stock compensation expense of $297,000. General and
administrative costs represented 24.2%, 49.2% and 21.9% of the Company's total
revenues in fiscal 1995, 1996 and 1997, respectively, and 23.3% and 27.5% of
total revenues for the nine months ended June 30, 1997 and 1998, respectively.
The Company believes that its general and administrative expenses will continue
to increase as a result of the continued expansion of the Company's
administrative staff and facilities to support growing operations and the
expenses associated with becoming a public company, including but not limited to
annual and other public reporting costs, directors' and officers' liability
insurance, investor relations programs and professional services fees.
Income Taxes. As of June 30, 1998, the Company had net operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $15.7 million which expire at various dates through 2013. In
addition, as of June 30, 1998, the Company had tax credit carryforwards of
approximately $262,000 which expire at various dates through 2013. The Code
contains provisions that may limit the use in any future period of net operating
loss and credit carryforwards upon the occurrence of certain events, including a
significant change in ownership interests. The Company had deferred tax assets,
including its net operating loss carryforwards and tax credits, totaling
approximately $7.3 million as of June 30, 1998. A valuation allowance has been
recorded for the entire deferred tax asset as a result of uncertainties
regarding the realization of the asset balance. See Note 8 of Notes to
Consolidated Financial Statements.
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<PAGE> 34
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated statement of
operations data for the seven quarters ended June 30, 1998, as well as such data
expressed as a percentage of the Company's total revenues for the respective
periods indicated. This data has been derived from unaudited Consolidated
Financial Statements that have been prepared on the same basis as the audited
Consolidated Financial Statements and, in the opinion of management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the information when read in conjunction with the Consolidated
Financial Statements and Notes thereto. The Company's quarterly results have
been in the past and may in the future be subject to significant fluctuations.
As a result, the Company believes that results of operations for interim periods
should not be relied upon as any indication of the results to be expected in any
future period. See "Risk Factors--Potential Fluctuations in Quarterly Results;
Seasonality."
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1997 1997 1997 1997 1998 1998
------------ --------- -------- ------------- ------------ --------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues:
Licenses......................... $ 923 $ 1,335 $ 1,829 $ 2,260 $ 2,036 $ 2,818 $ 3,185
Services......................... 218 336 564 805 1,079 1,141 1,456
------- ------- ------- ------- ------- ------- -------
Total revenues............. 1,141 1,671 2,393 3,065 3,115 3,959 4,641
Cost of revenues:
Licenses......................... 40 80 99 175 82 90 146
Services......................... 317 468 585 899 1,097 1,115 1,490
------- ------- ------- ------- ------- ------- -------
Total cost of revenues..... 357 548 684 1,074 1,179 1,205 1,636
------- ------- ------- ------- ------- ------- -------
Gross profit....................... 784 1,123 1,709 1,991 1,936 2,754 3,005
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.............. 1,061 1,378 1,434 2,023 2,206 2,400 3,280
Research and development......... 603 787 836 1,175 1,083 1,195 1,884
General and administrative....... 322 450 440 603 837 836 1,552
Acquired in-process technology... -- -- -- -- -- -- 5,203
------- ------- ------- ------- ------- ------- -------
Total operating expenses... 1,986 2,615 2,710 3,801 4,126 4,431 11,919
------- ------- ------- ------- ------- ------- -------
Operating loss..................... (1,202) (1,492) (1,001) (1,810) (2,190) (1,677) (8,914)
Other income (expense), net........ 17 11 (14) (33) (93) (103) (118)
------- ------- ------- ------- ------- ------- -------
Net loss........................... $(1,185) $(1,481) $(1,015) $(1,843) $(2,283) $(1,780) $(9,032)
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUES
Revenues:
Licenses......................... 80.9% 79.9% 76.4% 73.7% 65.4% 71.2% 68.6%
Services......................... 19.1 20.1 23.6 26.3 34.6 28.8 31.4
------- ------- ------- ------- ------- ------- -------
Total revenues............. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Licenses......................... 3.5 4.8 4.1 5.7 2.6 2.3 3.1
Services......................... 27.8 28.0 24.4 29.3 35.3 28.2 32.1
------- ------- ------- ------- ------- ------- -------
Total cost of revenues..... 31.3 32.8 28.5 35.0 37.9 30.5 35.2
------- ------- ------- ------- ------- ------- -------
Gross margin....................... 68.7 67.2 71.5 65.0 62.1 69.5 64.8
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.............. 93.0 82.4 59.9 66.0 70.8 60.6 70.6
Research and development......... 52.8 47.1 34.9 38.3 34.8 30.2 40.6
General and administrative....... 28.2 26.9 18.4 19.7 26.9 21.1 33.4
Acquired in-process technology... -- -- -- -- -- -- 112.1
------- ------- ------- ------- ------- ------- -------
Total operating expenses... 174.0 156.4 113.2 124.0 132.5 111.9 256.7
------- ------- ------- ------- ------- ------- -------
Operating loss..................... (105.3) (89.2) (41.7) (59.0) (70.4) (42.4) (191.9)
Other income (expense), net........ 1.4 0.7 (0.6) (1.1) (2.9) (2.6) (2.5)
------- ------- ------- ------- ------- ------- -------
Net loss........................... (103.9)% (88.5)% (42.3)% (60.1)% (73.3)% (45.0)% (194.4)%
======= ======= ======= ======= ======= ======= =======
</TABLE>
The trends discussed in the annual comparisons of operating results from
fiscal 1995 through fiscal 1997, and the nine months ended June 30, 1997 to the
nine months ended June 30, 1998, are generally applicable to the comparison of
results of operations for the seven quarterly periods ended June 30, 1998,
adjusted for the
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<PAGE> 35
seasonality the Company has experienced as referred to below. In addition, the
Company's operating expenses for the three months ended June 30, 1998, exceeded
levels the Company has historically experienced, due to acquired in-process
technology recorded in connection with the acquisition of 7Software, and
increased (i) T&E expenses associated with larger personnel levels, (ii) use of
independent contractors and other outside services for continued development of
XMS and localization of XMS, (iii) recruiting and related hiring expenses for
additional senior management in the professional services, research and
development, administrative, marketing and sales organizations, (iv) provision
for bad debt reserves due to the Company's revenue growth in fiscal 1998 and (v)
stock compensation expense.
The Company's quarterly operating results have fluctuated significantly in
the past, and will continue to fluctuate in the future, as a result of a number
of factors, many of which are outside the Company's control. These factors
include: demand for the Company's products and services; size and timing of
specific sales; level of product and price competition; timing and market
acceptance of new product introductions and product enhancements by Concur and
its competitors; changes in pricing policies by Concur or its competitors;
Concur's ability to hire, train and retain sales and consulting personnel to
meet the demand, if any, for XMS and CompanyStore; the length of sales cycles;
Concur's ability to establish and maintain relationships with third-party
implementation services providers and strategic partners; delay of customer
purchases caused by announcement of new hardware or ERP platforms or otherwise;
the mix of products and services sold, including an anticipated shift to
providing its solutions as an ESP; mix of distribution channels through which
products are sold; mix of international and domestic revenues; changes in the
Company's sales force incentives; software defects and other product quality
problems; personnel changes; changes in the Company's strategy, including the
anticipated development of an ESP strategy; general domestic and international
economic and political conditions; and budgeting cycles of the Company's
customers. The Company has in the past experienced delays in the planned release
dates of new software products or upgrades, and has discovered software defects
in new products after their introduction. There can be no assurance that new
products or upgrades will be released according to schedule, or that when
released they will not contain defects. Either of these situations could result
in adverse publicity, loss of revenues, delay in market acceptance or claims by
customers brought against the Company, any of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, the timing of individual sales has been difficult for
the Company to predict, and large individual sales have, in some cases, occurred
in quarters subsequent to those anticipated by the Company. There can be no
assurance that the loss or deferral of one or more significant sales will not
have a material adverse effect on the Company's quarterly operating results.
The Company has experienced, and expects to continue to experience, a high
degree of seasonality, with a disproportionately greater amount of the Company's
license revenues for any fiscal year being recognized in its fourth fiscal
quarter. For example, in fiscal 1997, 37% of total revenues, 36% of license
revenues and 42% of service revenues were recognized in the fourth fiscal
quarter. The Company believes that such seasonality is primarily the result of
the efforts of the Company's direct sales force to meet or exceed fiscal year
end sales quotas. In addition, the Company's license revenues in its first
fiscal quarter have historically been lower than those of the immediately
preceding fourth quarter. For example, license revenues in the first quarter of
fiscal 1998 decreased 10% from the fourth quarter of fiscal 1997. The Company
expects this trend to continue in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has funded its operations primarily through
private sales of equity securities and the use of long-term debt and equipment
leases. As of June 30, 1998, the Company had raised approximately $25.0 million,
net of offering costs from the issuance of preferred stock, approximately $8.0
million from the issuance of long-term debt, and has financed equipment
purchases totaling approximately $3.1 million. The Company's sources of
liquidity as of June 30, 1998 consisted principally of cash and cash equivalents
of $15.6 million, and approximately $1.5 million of available borrowings under a
line of credit.
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<PAGE> 36
Net cash used in operating activities was $2.3 million, $4.1 million and
$6.6 million in fiscal 1995, 1996 and 1997, respectively, and $4.0 million for
the nine months ended June 30, 1998. For such periods, net cash used by
operating activities was primarily a result of funding ongoing operations.
Since 1995 the Company's investing activities have consisted primarily of
purchases of property and equipment. Capital expenditures, including those under
capital leases, totaled $220,000, $420,000 and $1.0 million in 1995, 1996, and
1997, respectively, and $1.1 million for the nine months ended June 30, 1998.
Capital leases are used to finance the acquisition of property and equipment,
primarily computer hardware and software, for the Company's increasing employee
base, as well as for the Company's management information systems. Management
anticipates that it will experience an increase in its capital expenditures and
lease commitments consistent with its anticipated growth in operations,
infrastructure and personnel. As of June 30, 1998, the Company had commitments
for capital expenditures totaling approximately $333,000 that will be financed
through leasing arrangements not to exceed five years. The Company does not
expect to incur significant costs to make its products or internal information
systems Year 2000 compliant because it believes such products and information
systems are designed to properly function through and beyond the year 2000. See
"Risk Factors--Year 2000 Compliance."
The Company's financing activities provided $4.8 million, $7.7 million and
$8.6 million in fiscal 1995, 1996 and 1997, respectively, and $12.9 million for
the nine months ended June 30, 1998. In 1995, cash provided by financing
activities was comprised primarily of $4.9 million received in connection with
the sale of Series A and Series B redeemable convertible preferred stock and
$187,000 in proceeds from line of credit borrowings partially offset by
principal payments totaling $300,000. In fiscal 1996, cash provided by financing
activities was comprised primarily of $7.5 million received in connection with
the sale of Series C redeemable convertible preferred stock and $563,000 in
proceeds from long-term debt borrowings partially offset by principal payments
on long-term debt totaling $380,000. In fiscal 1997, the cash provided by
financing activities was comprised primarily of $4.6 million received in
connection with the sale of Series D redeemable convertible preferred stock,
$3.1 million in proceeds from long-term debt, and $1.9 million in proceeds from
sales leaseback transactions and capital lease financing offset by principal
payments on long-term debt of $925,000. For the nine months ended June 30, 1998,
cash provided by financing activities consisted primarily of $7.8 million
received in connection with the sale of Series E redeemable convertible
preferred stock and $5.5 million in proceeds from long-term borrowings offset by
principal payments on long term debt of $248,000 and $308,000 in payments on
capital lease obligations.
The Company has a line of credit with a bank for $2.0 million, which bears
interest at the lending bank's prime rate plus 1.5%. Borrowings are limited to
the lesser of 80% of eligible accounts receivable or $2.0 million and are
secured by substantially all of the Company's non-leased assets. As of June 30,
1998, the Company has not borrowed under the line of credit, however, there were
$455,000 in standby letters of credit outstanding. Total borrowings available
under this line were approximately $1.5 million as of June 30, 1998. This credit
facility contains certain restrictions and covenants, including a restriction on
dividend payments. This credit facility expires in September 1998 and the
Company expects to extend or replace such credit facility under substantially
similar terms.
In September 1997, the Company entered into a $1.0 million senior term loan
facility with a bank pursuant to the terms of a Security and Loan Agreement (the
"Loan Agreement"). In April 1998, the Loan Agreement was amended to allow for
additional borrowings up to a total of $3.0 million. The facility, which bears
interest at the lending bank's prime rate less 1.0%, matures on February 15,
2001. Payments are interest only through February 1999, at which time the
facility will be termed out with 24 equal monthly principal payments plus
interest. The Company's Loan Agreement contains certain financial restrictions
and covenants that include a minimum liquidity ratio, minimum quarterly net
sales, and restrictions on dividend payments. The Company is currently in
compliance with such covenants and restrictions. The Company has granted a
perfected senior security interest in all non-leased assets of the Company as
security for its obligations under the Loan Agreement. As of June 30, 1998, the
outstanding indebtedness under the Loan Agreement was $3.0 million.
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<PAGE> 37
In July 1997, the Company entered into a Subordinated Loan and Security
Agreement with an equipment lessor in the principal amount of $1.5 million which
bears interest at an annual rate of 8.5% (the "Subordinated Loan Agreement"). In
May 1998, the Subordinated Loan Agreement was amended to allow for additional
borrowings of $5.0 million bearing interest at an annual rate of 11% on the
first $3.5 million and 12.5% on the remaining $1.5 million. The notes are due in
varying monthly installments through April 2002. The Subordinated Loan Agreement
contains certain restrictions and covenants, including restrictions on dividend
payments. As of June 30, 1998, the outstanding indebtedness under the
Subordinated Loan Agreement was $4.8 million.
On August 11, 1998 the Company issued a warrant to TRS and its assignees to
purchase an additional 6,000,000 shares of Series E Preferred Stock (the "TRS
Warrant"). If all of the shares of Series E Preferred Stock are converted into
shares of Common Stock in connection with a registration of the Company's Common
Stock under the Securities Act, then this warrant shall automatically become
exercisable for 6,000,000 shares of the Company's Common Stock. The warrant is
exercisable in four tranches as follows: 750,000 shares may be acquired at the
time of the Offering at a cash purchase price equal to the price to the public
in the Offering less 7%; 1,750,000 shares may be acquired at any time on or
before October 15, 1999 at a cash purchase price of $13.50 per share; 1,750,000
shares may be acquired at any time on or before January 15, 2001 at a cash
purchase price of $20.25 per share; and the remaining 1,750,000 shares may be
acquired at any time on or before January 15, 2002 at a cash purchase price of
$34.00 per share. Pursuant to this warrant, if determined to be appropriate by
the Board of Directors within 60 days of the date of the warrant, 25% of the
shares that may be acquired under the warrant at the time of the Offering or on
or before October 15, 1999 may be cancelled. The Board of Directors has made
such a determination; thus, 562,500 shares may be acquired at the time of the
Offering, and 1,312,500 shares may be acquired on or before October 15, 1999.
The Company currently intends to use the net proceeds of the Offering for
working capital and general corporate purposes, including capital expenditures
made in the ordinary course of business, as well as for possible acquisitions of
businesses, products and technologies that are complementary to those of the
Company. Although the Company has not identified any specific businesses,
products or technologies that it may acquire, and there are no current
agreements or negotiations with respect to any such transactions, the Company
does from time to time evaluate such opportunities. Pending such uses, the net
proceeds of the Offering will be invested in short-term, investment-grade,
interest-bearing instruments.
The Company currently anticipates that it will continue to experience
significant growth in its operating expenses for the foreseeable future related
to entering new markets for the Company's products and services, increasing
research and development spending, increasing its sales and marketing
operations, developing new distribution channels, improving its operational and
financial systems and broadening its professional service capabilities. Such
operating expenses will be a material use of the Company's cash resources,
including a portion of the net proceeds of the Offering. The Company believes
that the net proceeds of the Offering, together with its existing cash and cash
equivalents and available bank borrowings, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. Thereafter, the Company may require additional funds to
support its working capital requirements or for other purposes and may seek to
raise such additional funds through public or private equity financing or from
other sources. There can be no assurance that such sources will be adequate,
will be obtainable on terms favorable to the Company or will not be dilutive.
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<PAGE> 38
BUSINESS
The following description contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that may
cause such results to differ include but are not limited to those discussed in
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
OVERVIEW
Concur is a leading provider of Intranet-based employee-facing applications
that extend automation to employees throughout the enterprise and to partners,
vendors and service providers in the extended enterprise. The Company's Xpense
Management Solution ("XMS") and CompanyStore products automate the preparation,
approval, processing and data analysis of travel and entertainment ("T&E")
expense reports and front-office procurement requisitions. Concur believes it is
the leading provider of T&E expense management solutions and, since the
introduction of XMS in 1996, the Company has licensed its products to over 125
enterprise customers with over 450,000 end users. Through its June 1998
acquisition of 7Software, Inc., the Company added the CompanyStore front-office
procurement application to its product suite. By automating manual, paper-based
processes, the Company's products reduce processing costs and enable customers
to consolidate purchases with preferred vendors and negotiate vendor discounts.
INDUSTRY BACKGROUND
In response to increasingly competitive conditions worldwide, businesses
are seeking cost savings and productivity gains through business process
automation. Rather than internally developing applications to automate business
processes, companies are increasingly turning to independent software vendors
for solutions in areas such as finance and accounting, manufacturing, human
resources, supply chain management, customer support and sales force automation.
These solutions have traditionally targeted discrete functional or department
level business processes involving relatively few employees.
Businesses are now seeking similar applications for manual, paper-based
processes involving the vast majority of employees throughout the enterprise.
Such "employee-facing" business processes include T&E expense management,
front-office procurement, human resources self-service, time and billing, and
facilities management. Typically, these processes are characterized by extensive
corporate policies, detailed forms, manual data entry, multiple approvals,
manual review and audit, manual financial system posting and cumbersome
interactions with third-party suppliers and service providers.
The emergence of the Internet and corporate Intranets has made it possible
to deploy applications that reach all employees in the enterprise and to connect
the enterprise to corporate partners, vendors and service providers. In
addition, in contrast to traditional client-server applications, Intranet-based
applications can be deployed rapidly throughout the enterprise and on a
cost-effective basis. The Internet also allows a software vendor to act as an
outsourced enterprise service provider ("ESP"), delivering employee-facing
applications through the Internet to reduce customers' up-front costs and IT
infrastructure commitments.
Companies automating employee-facing business processes can realize
significant operating cost savings through reduced processing costs,
consolidated purchases with preferred vendors and negotiated vendor discounts.
For example, according to the 1997 American Express T&E Management Process Study
(the "American Express Study"), corporations spend on average $36 per T&E
expense report processed, but can reduce such costs on average to as little as
$8 through best-in-class automation. Savings of this magnitude on a per
transaction basis are significant for enterprises with large numbers of such
transactions. For example, based on the savings suggested by the American
Express Study, businesses that process from 1,000 to 5,000 T&E expense reports
per month might achieve savings ranging from $300,000 to $1.5 million per year.
Similar savings can be achieved by automating front-office procurement.
According to industry estimates, companies typically spend in excess of $100 to
process each requisition, which the Company believes can be reduced to
approximately $25 using best-in-class automation. Not only can automation lower
the cost of processing expense reports and procurement requisitions, it can also
provide information that can be used to negotiate discounts from vendors and
service providers. Based on the amounts spent on T&E and front-office
procurement, even a small percentage improvement in vendor rates can result in
significant savings. For
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<PAGE> 39
example, the American Express Study reported that U.S. businesses spent $156
billion in 1996 on direct T&E expenses such as airfare, hotel stays and car
rentals.
The Company believes that as a result of the substantial potential savings
from processing cost reductions and vendor discounts, coupled with the emergence
of Intranet technologies, strong demand exists for employee-facing applications.
The Company further believes that the most successful applications will improve
the efficiency of T&E expense management, front-office procurement and other
similar business processes and will be (i) based on Internet technologies, (ii)
rapidly deployable and highly scalable, (iii) offered as part of an integrated
suite of related applications, (iv) integrated with enterprises' existing IT
infrastructures and (v) capable of linking businesses with their corporate
partners, vendors and service providers through the Internet. Successful
providers of such employee-facing applications will be able to deliver cost
savings and other tangible benefits to corporate management, meet the needs of
enterprise IT professionals and reduce burdens on employees.
THE CONCUR SOLUTION
Concur is a leading provider of Intranet-based employee-facing applications
that extend automation to employees throughout the enterprise and to partners,
vendors and service providers in the extended enterprise. The Company's XMS and
CompanyStore products automate the preparation, approval, processing and data
analysis of T&E expense reports and front-office procurement requisitions.
Concur believes it is the leading provider of T&E expense management solutions
and, since the introduction of XMS in 1996, the Company has licensed its
products to over 125 enterprise customers with over 450,000 end users. Through
its June 1998 acquisition of 7Software, the Company added the CompanyStore
front-office procurement application to its product suite. The Company's
products benefit a number of constituencies within the enterprise, including
corporate management, IT professionals and employees, in the following ways.
Benefits for Corporate Management
Reduced Processing Costs. XMS and CompanyStore can significantly reduce the
amount of labor associated with manual, paper-based T&E expense management and
front-office procurement systems, by automating the process of preparation,
approval, processing and data analysis. Concur believes that companies using its
solutions as part of best-in-class processes can achieve significant cost
savings. According to the American Express Study, corporations spend on average
$36 per T&E expense report processed, but can reduce such costs on average to as
little as $8 through best-in-class automation. Similarly, industry estimates
indicate that companies typically spend in excess of $100 to process each
requisition for front-office goods and services, and the Company believes that
enterprises using best-in-class automation for such processes can reduce that
cost to approximately $25.
Improved Supplier Management. Concur's products enable customers to collect
and analyze data on T&E expense and front-office procurement. As a result,
customers can use this data to help consolidate purchases with preferred
vendors, negotiate vendor discounts and monitor compliance with pre-negotiated
rates. The Company believes that the savings from improved supplier management
can be substantial. For example, one XMS customer informed the Company that
after implementing XMS, it was able to reduce its annual spending on air travel
by 5% to 10%.
Improved Cash Management. Concur's products enable customers to improve
their cash management positions by controlling the timing of payments to T&E and
front-office suppliers and vendors, and to improve their cash forecasting
abilities.
Improved Policy-Making and Monitoring. Concur's products facilitate
improved budgeting, policy-making and trend analysis, and better monitoring of
compliance with corporate policy.
Benefits for IT Professionals
Rapid Deployment. Concur's Intranet-based products are designed to be
rapidly deployed within today's existing corporate IT infrastructures without
requiring modification of customer systems. Concur offers applications
configured to customer requirements rather than solutions customized on a
customer-by-customer basis. Once installed on a customer's Intranet servers,
Concur's products can reach employees
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enterprise-wide. For example, one Concur customer recently deployed XMS to over
25,000 employees within 90 days after the customer began its rollout, and
another customer deployed CompanyStore within five weeks.
Enterprise-Wide Scalability. Concur's Intranet-based products are designed
to reach employee desktops throughout the enterprise, regardless of the
organization's size. The Company has licensed its products to customers seeking
to deploy to as few as 100 employees and as many as 80,000 employees, with the
largest current installation to date being a site with over 25,000 employees.
Leverage of Existing IT Infrastructure. Because most businesses operate in
a heterogeneous computing environment, XMS is designed to interact and
interoperate with a broad range of software platforms and products, including
multiple operating systems, browsers, databases, accounting packages and major
ERP programs such as SAP, PeopleSoft, and Oracle. CompanyStore currently
supports SAP R/3 and Microsoft SQL server, and the Company intends to enhance
CompanyStore to support other major platforms.
Connectivity to Third Parties. The Company's Intranet-based products are
designed to enable enterprises to link their systems with those of their
corporate partners, vendors and service providers, including corporate charge
card providers such as American Express, travel booking applications, and
suppliers such as Corporate Express, Inc.
Benefits for Employees
Faster Reimbursement and Order Fulfillment. Concur's solutions enable
businesses to reduce the time required to reimburse employees for incurred T&E
expenses and to fulfill front-office requisitions. Features that expedite the
process include automated electronic approval routing, links to automatic
deposit systems, links with approved vendors, on-line status updates and
automatic posting to ERP and financial programs. The American Express Study
reported that the time from submission of an expense report to reimbursement
could be reduced from an average of 22 days to as little as three days using
best-in-class automation processes.
Ease of Use. Concur's products contain easy-to-use features and functions
that reduce the time users spend preparing T&E expense reports and front-office
requisitions. XMS uses corporate credit card transactions to "prepopulate" a
user's expense report automatically. Both XMS and CompanyStore also
"prepopulate" expense reports and requisition forms based on past experience and
preferences. In addition, corporate policies and preferred vendors can be
integrated into the applications, and detailed explanations of corporate
policies are available on-line. These features reduce errors, save user time and
effort, and improve expense reconciliation.
STRATEGY
Concur's objective is to be the leading provider of Intranet-based
employee-facing applications that extend automation to employees throughout the
enterprise and to partners, vendors and service providers in the extended
enterprise. Key elements of the Company's strategy include:
Extend Leadership Position. Concur intends to extend its leadership
position in T&E expense management solutions and to leverage that position to
sell CompanyStore. In order to accommodate anticipated future demand for its
products, the Company intends to increase the size of its direct sales and
telesales organizations significantly. Concur believes this expanded sales and
marketing organization will enhance its ability to sell its products to new
customers globally. The Company also believes this expanded sales force will
allow it to sell CompanyStore and future applications to its current customers.
Expand Product Functionality. Concur plans to continue its innovation and
development of advanced features and functionality for its T&E expense
management and front-office procurement solutions. The Company plans to add
functionality to XMS, including features such as localized versions for
additional foreign countries and enhanced integration with on-line travel
booking applications such as American Express Interactive. Concur also plans to
enhance CompanyStore by expanding its features and functionality, adding support
for additional databases and ERP platforms, enhancing catalog support and
integrating CompanyStore into its product suite through the Concur Common
Platform, the Company's common technology platform for its application suite.
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Extend and Integrate Product Suite. The Company plans to extend its
employee-facing application suite by acquisition and internal development.
Concur expects to target additional employee-facing applications that can offer
compelling benefits to the enterprise such as human resources self-service, time
and billing, and facilities management applications. To create an integrated
suite of applications, the Company is pursuing development of a common user
interface and a common technology platform. The common user interface, known as
Employee Desktop, is a personalized Web page on the corporate Intranet that
provides a centralized location for all employee-facing applications. The
technology platform, known as the Concur Common Platform, will standardize the
software architecture underlying all applications in the suite. The Company
believes that the benefits of an integrated suite include ease of use and
reduced IT burden as a result of common technology.
Expand International Presence. Concur believes that considerable untapped
demand exists for its products outside of the United States. For the nine months
ended June 30, 1998, international revenues accounted for less than five percent
of total revenues. The Company intends to accelerate its investment in
international sales and marketing to increase sales of its employee-facing
applications worldwide. It also plans to add new features and functionality to
XMS and CompanyStore to accommodate accounting, customs, currency and tax
requirements of foreign jurisdictions.
Extend Relationships With Strategic Third Parties. Concur intends to expand
its relationships with strategic referral partners and to develop additional
relationships with providers of complementary third-party applications and
products. The Company has developed strong lead generation relationships with
leading corporate charge card providers such as American Express, Diners Club,
and Citibank, N.A., and intends to establish similar relationships with
purchasing card providers and systems integration and consulting firms. The
Company intends to integrate XMS with automated travel booking applications to
provide its customers with an end-to-end travel booking solution that
encompasses booking, reporting and analysis, and to integrate CompanyStore with
leading front-office supply vendors to provide its customers with greater access
to those vendors.
Offer Enterprise Service Provider Solutions. In addition to licensing its
software, Concur plans to offer its solutions as an Internet-based ESP on a
per-transaction pricing basis to companies seeking to outsource their
employee-facing business applications. The Company expects that this opportunity
will be particularly attractive to middle-market customers (100-750 licensed end
users), which typically have limited IT staffing and budgets. Concur's ESP
services are currently expected to be available in the second half of calendar
1999.
The Company's strategy involves substantial risk. There can be no assurance
that the Company will be successful in implementing its strategy or that it will
lead to achievement of the Company's objectives. If the Company is unable to
implement its strategy effectively, the Company's business, results of
operations and financial condition would be materially adversely affected.
PRODUCTS AND TECHNOLOGY
The Company's current product line consists of XMS, its market-leading T&E
expense management application, and CompanyStore, its newly-acquired
front-office procurement application. The Company shipped an enterprise-wide,
client-server based version of XMS in July 1996, and shipped the Intranet-based
version of XMS in March 1998. For customers without corporate Intranets or for
users not connected to the Internet, the Company provides a disconnected
Windows-based version of XMS, which is interoperable with the Intranet version
of XMS. Concur has licensed XMS to over 450,000 end users at over 125 companies.
Through its June 1998 acquisition of 7Software, the Company added CompanyStore
to its product suite. The Company generally offers licenses for its software
based on the number of users or employees at a given enterprise. The typical
order size for the Company's products and services ranges from $50,000 to
$500,000, with certain transactions that have been greater than $1 million.
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Xpense Management Solution
XMS automates the T&E expense management process, including preparation,
approval, processing and data analysis.
Report Preparation. XMS includes a number of features that facilitate
report preparation for the end-user. The application uses corporate credit card
information to prepopulate a user's expense report with transaction data
covering a variety of the information required for the expense report, including
transaction date, type of expense, vendor, location, method of payment, currency
amount and foreign currency conversion. Using a graphical user interface, the
employee supplies additional expense-related information by means of pull-down
menus or filling in blanks. To eliminate the task of sorting receipts, XMS
allows the user to enter data in any order. The HotelXpert feature of the
program automates the complicated process of itemizing hotel receipts. With each
use of XMS, the application retains commonly incurred expense information and
uses this information to help complete the next expense report. Other ease of
use features include simple "checkbook" style input screens, ability to create
"attendees" lists, mileage reimbursement tracking, and automatic flagging of
non-compliant and incomplete entries.
Report Approval. XMS allows the enterprise to determine how expense reports
should be processed, whether by submission to a manager for approval before
processing or submission to the accounting department for immediate review and
payment. Once the report is submitted, the approver receives an e-mail message
containing an Intranet link to XMS, where all reports awaiting approval are
listed. XMS can be configured to route the report for approval based on cost
center, dollar limit or other criteria. Items that do not comply with corporate
policy can be automatically flagged for review, allowing approvers to focus on
problematic items. Approvers can reject individual line items, while allowing
the rest of the report to continue in the approval process. Once approved, the
report is automatically forwarded to the next phase in the process or to the
enterprise's accounting department, and the user is notified of the action.
Report Processing. XMS streamlines back-office processing of expense
reports in a number of ways. Because all expense reports are prepared
electronically, the processing department no longer has to check the arithmetic
of each report manually. Moreover, businesses can greatly reduce the time spent
auditing reports by choosing to audit only those reports flagged by XMS as not
compliant with corporate T&E expense policies. In addition, XMS reduces the
number of status inquiries between employees and processing departments by
automatically updating the status of reports in the database, and alerting
employees via e-mail to the status of their reports. XMS allows significant time
savings by automatically posting expense report information to the enterprise's
ERP or accounting package, eliminating the manual re-entry of this data. XMS
further simplifies processing by producing bar-coded receipt submission cover
pages to validate delivery of receipts associated with expense reports. XMS also
helps companies claim reimbursement of tax credits by tracking VAT, GST and
other international taxes.
Data Analysis. XMS utilizes business intelligence software to analyze
expense data. This information can be presented graphically in various display
formats and allows travel managers to determine total spending according to
vendor, location or other user-defined criteria. Informed by this data, managers
can analyze trends and determine methods for controlling costs or negotiating
more favorable terms with vendors. Managers can also analyze the data to monitor
compliance with vendor commitments corporate travel policies and determine if
policy modifications are appropriate.
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The following table describes significant features and potential benefits
of XMS:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
REPORT PREPARATION
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Prepopulates report with corporate credit Speeds report preparation time
card transactions
Reduces input mistakes
Retains commonly incurred expense
information Reduces queries and dependence on accounting
department
Simplifies receipt entry
Ensures submission of all applicable expenses
Itemizes hotel receipts automatically
Increases employee use of corporate credit
Prevents submission of incomplete reports card
Built-in attendee lists, mileage
reimbursement tracking, foreign currency
translation
- --------------------------------------------------------------------------------------------
REPORT APPROVAL
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Automatic routing of reports Speeds approval time
Flags non-compliant expenses Increases compliance with corporate policies
Line-item approval of reimbursement data More efficient use of management resources
Approver notification
- --------------------------------------------------------------------------------------------
REPORT PROCESSING
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Integrates travel expense data with More efficient use of processing resources
back-office systems
Speeds report processing and employee
Flags non-compliant expenses reimbursement
Provides automatic status updates Reduces human error
Bar-codes receipt submissions Reduces queries and dependence on accounting
department
Tracks VAT, GST and other foreign taxes
Identifies tax credits
Verifies arithmetic
- --------------------------------------------------------------------------------------------
DATA ANALYSIS
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Presents travel expense data graphically Supplies data needed for vendor rate
negotiation
Allows customer to sort data by employee,
vendor and type of expense Facilitates vendor consolidation
Drill-down capability Identifies trends and problem areas
Allows monitoring of compliance with vendor
commitments and corporate travel policies
- --------------------------------------------------------------------------------------------
</TABLE>
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CompanyStore
CompanyStore automates the front-office procurement process, including
preparation, approval, processing and data analysis.
Order Preparation. CompanyStore utilizes a customer-specific electronic
catalog of preferred vendors and commonly requested goods and services such as
office supplies, computers and other equipment. Using a graphical user
interface, requisitioners browse the catalog to select and order items and place
them in an electronic "shopping basket." Catalog materials can be updated by
either the enterprise or the vendor. CompanyStore contains links to vendor Web
sites, allowing the requisitioner to obtain detailed product information. To
make the ordering process easier, CompanyStore retains information about the
user, including name, employee identification, shipping address, accounting
information and frequently ordered products. To reduce delays and unnecessary
processing iterations, CompanyStore prevents submission of incomplete orders.
Order Approval. CompanyStore allows the enterprise to determine how
requisitions should be processed, whether by submission to a manager for
approval before processing or submission to the purchasing department for
immediate processing. Once the order is submitted, an e-mail notification of the
order is automatically sent to the specified approver. The e-mail contains a
link to a personalized "approval" Web page, which lists all purchase
requisitions that are awaiting approval by the particular approver. Using the
Web page, the approver specifies which requisitions to approve in each order.
CompanyStore enables the customer to configure approval rules based on cost
center, dollar limit, material type or other criteria. CompanyStore enables
authorization of orders based on digital signatures and prohibits the release of
orders without required approval.
Order Processing. CompanyStore streamlines processing of front-office
requisitions in a number of ways. The customer's purchasing department selects
the items and vendors to be included in the CompanyStore electronic catalog.
After approval, orders are sent to the purchasing department to be processed and
progress reports are delivered to the requisitioner automatically, reducing the
number of status inquiries between the requisitioner and the purchasing
department. CompanyStore can be integrated into the customer's accounting
package so that the order can be entered into the purchasing system
automatically, allowing significant time savings. CompanyStore allows approved
requisitions to be sent directly to vendors via fax, e-mail or electronic data
interchange.
Data Analysis. CompanyStore consolidates purchasing data, allowing managers
to determine spending according to cost center, time period, employee and
supplier. This data allows managers to determine how best to control costs,
negotiate more favorable supplier arrangements, and consolidate vendors.
Managers can analyze the data to monitor compliance with corporate purchasing
policies and vendor commitments.
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The following table describes significant features and potential benefits
of CompanyStore:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
ORDER PREPARATION
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Simple point-and-click ordering Speeds order time
Customer-specific electronic catalog stores Directs orders to preferred vendors
preferred vendors and commonly requested
goods and services Reduces errors
Retains user information, including shipping Detailed product descriptions available
information, frequently ordered products and
purchasing card information Reduces queries and dependence on purchasing
department
Prevents submission of incomplete orders
Internet links to vendor Web sites
- --------------------------------------------------------------------------------------------
ORDER APPROVAL
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Automatically e-mails order to designated Speeds approval time
approver
Reduces errors
Digital signatures for order authorization
Decreases maverick purchasing
Automated approval controls based on user
signing authority More efficient use of management resources
Increases compliance with corporate policies
- --------------------------------------------------------------------------------------------
ORDER PROCESSING
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Integrates purchasing data with back-office Speeds fulfillment time
systems
Reduces lost orders
Sends approved requisitions directly to
vendor or to enterprise's purchasing system More efficient use of processing resources
Updates requisitioner on order progress Greater consistency of items ordered
Purchasing department determines items Vendor consolidation
available in catalog
Prohibits release of orders without required
approval
- --------------------------------------------------------------------------------------------
DATA ANALYSIS
- --------------------------------------------------------------------------------------------
FEATURES BENEFITS
Allows customers to track spending by Identifies trends and problem areas
multiple factors, including cost center,
time period, employee and supplier Supplies data needed for vendor rate
negotiation
Allows monitoring of compliance with vendor
commitments
Facilitates vendor consolidation
- --------------------------------------------------------------------------------------------
</TABLE>
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Product Architecture
The following diagram illustrates the key features of the Company's product
architecture:
PRODARCH CHART
The Company's applications operate on advanced IT platforms and are fully
scalable and configurable. XMS and CompanyStore are built on a multi-tiered
architecture. XMS has a separate client, application server and database server
built using a COM-based architecture. CompanyStore currently has separate client
and server layers and is migrating to the COM model. In addition, a common
application server model is being built for both applications which contains all
common business logic, including workflow, user management, security, business
rules, business intelligence and messaging.
The XMS application server layer contains all of the business logic and is
COM based, and built using Microsoft Visual C++. The CompanyStore application
server and the common business logic layer are being built using the same
technologies. The application server layer can be extended using off-the-shelf
tools such as Microsoft Visual Basic. The application server operates on Windows
NT 4.0 and, for the browser-based clients, supports both the Microsoft Internet
Information Server and the Netscape Enterprise Server.
The XMS application server supports Oracle, Sybase or Microsoft SQL server
databases and integrates with multiple ERP systems, including SAP, PeopleSoft,
Oracle, or existing legacy systems. The CompanyStore application server supports
the Microsoft SQL server database and integrates with SAP R/3, and the Company
intends to integrate the CompanyStore application server with other database and
ERP systems in the future.
The browser-based clients run on versions of Microsoft Internet Explorer
3.02 and above and Netscape Navigator 3.0 and above, utilizing primarily HTML
and JavaScript via Microsoft's Active Server Pages technology. Operating systems
supported include Microsoft Windows 3.11, Windows 95, Windows 98 and Windows NT
4.0. The Windows-based XMS client is written utilizing Microsoft Visual C++, and
is fully functional in a disconnected environment.
SERVICES
The Company's professional services organization was formed in 1996 to
offer consulting, customer support and training in connection with licenses of
XMS. The Company believes that services are an important part of its success and
its professional services organization has expanded to offer similar services in
connection with licenses of CompanyStore.
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Consulting. The Company offers a variety of consulting services in
connection with licenses of XMS and CompanyStore. Concur's consulting staff
meets with customers prior to product implementation to review the customer's
existing business processes and IT infrastructure, and to provide advice on ways
to improve these processes using industry best practices. Thereafter, Concur's
consultants install, configure and test the application and integrate it with
the customer's existing ERP and employee reimbursement systems. Concur's
consultants also help customers implement bar-coding processes and develop a
strategy for the customer's enterprise-wide deployment of the application.
Customer Support. The Company provides product upgrades and customer
support through its "CustomerOne" maintenance program. Customers generally
purchase the first year of the CustomerOne program at the time they license an
application; thereafter, support is available on an annual renewal basis.
Customer support staff are available 24 hours a day, seven days a week. The
Company also offers Internet-based support that features an on-line knowledge
base.
Training. The Company offers a variety of training programs for XMS and
CompanyStore. These classes are tailored to particular user groups, such as end
users, help desk personnel and trainers. Training classes are typically offered
at customer sites and also at the Company's headquarters in Redmond, Washington.
The Company plans to begin providing training classes for third-party service
providers, such as systems integrators, as it expands its relationships with
such parties.
CUSTOMERS
Given the broad applicability of its products, the Company has licensed its
applications to over 125 enterprise customers in a wide range of industries. The
following table lists certain of the Company's significant customers in fiscal
1996, 1997 and the nine months ended June 30, 1998:
<TABLE>
<S> <C>
CONSUMER PHARMACEUTICAL/HEALTH CARE
Anheuser-Busch Companies Inc. Columbia/HCA Healthcare Corporation
Avon Products, Inc. Merck, Sharpe & Dohme Limited
The Gillette Company Pharmacia & Upjohn & Co.
J.C. Penney Company, Inc. Tenet Healthcare Corporation
Levi Strauss & Co. TECHNOLOGY/TELECOMMUNICATIONS/MEDIA
Maytag Corporation American Management Systems, Inc.
FINANCIAL SERVICES Computer Sciences Corporation
Bear Stearns & Co. Inc. Hewlett-Packard Company
Dresdner Kleinwort Benson The New York Times Company
J & H Marsh & McLennan, Inc. Seagate Technology, Inc.
Lehman Brothers Inc. Sprint Corporation
Royal Insurance Texas Instruments Incorporated
INDUSTRIAL/MANUFACTURING The Times Mirror Company
Case Corporation Tivoli Systems, Inc.
E.I. du Pont de Nemours and Company Visio Corporation
Guardian Industries Corporation OTHER
Northrop Grumman Corporation American Airlines, Inc.
Monsanto Company J. Walter Thompson
Solutia, Inc. Harvard College
Ontario Ministry of Labour
Exxon Corporation
Texaco Inc.
</TABLE>
In fiscal 1995, 1996 and 1997, no customer accounted for 10% or more of the
Company's total revenues.
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The following case studies, which are based solely on information supplied
by the respective subject companies, illustrate how selected companies have used
Concur products and services to address their T&E expense management and
front-office procurement needs:
Guardian Industries Corp. ("Guardian"). A leading manufacturer and
fabricator of architectural and automotive glass and plastics. Guardian operates
over 40 production facilities around the world and has approximately 1,000
business travelers in transit at any one time. Historically, business travelers
filed expense reports manually after each business trip. This paper-based
process led to processing delays, significant employee time invested in filling
out expense reports, and a lack of visibility into enterprise-wide T&E spending.
Guardian implemented Concur's XMS application to address these issues, and
realized significant advantages and cost savings as a result. For example, XMS
saves employee time by decreasing time spent filling out reports and allows
management to analyze enterprise-wide T&E spending to formulate more effective
travel policies, evaluate the performance of travel vendors and negotiate
reduced costs with vendors. In fact, Guardian reduced its annual spending on air
travel by 5% to 10% after implementing XMS.
Case Corporation ("Case"). A leading designer, manufacturer and distributor
of agricultural and construction equipment and provider of a broad array of
financial services, Case has over 13,000 employees worldwide with 4,000 business
travelers. Before implementing XMS, Case received as many as 5,000 T&E expense
reports per month in a variety of formats, from handwritten reports to
spreadsheets. This practice resulted in costly delivery methods (such as
overnight delivery or facsimile), high processing costs, delays in
reimbursement, and reports not in compliance with corporate policies. To address
these problems, Case automated its T&E expense reporting process with XMS.
Within nine months after deploying XMS on an enterprise-wide basis, the vast
majority of Case's travelers were using XMS and receiving reimbursements through
their regular paychecks. As a result, Case has significantly reduced travel
expense reimbursement related costs. In addition, Case now reimburses employees
and analyzes spending more effectively.
Solutia, Inc. ("Solutia"). Solutia is a global company that applies its
expertise in chemistry to the consumer, household, automotive and industrial
products industries through 24 manufacturing sites worldwide. Solutia's nearly
9,000 employees include approximately 3,000 who are business travelers. At the
time Solutia decided to reengineer its T&E expense management processes, it had
15 processing centers handling approximately 25,000 expense reports per year.
Using XMS as the cornerstone of its reengineering effort, Solutia streamlined
the preparation, approval and processing of expense reports, consolidated its 15
processing centers into one shared services center, and cut processing costs by
over 50%.
Visio Corporation ("Visio"). Through a worldwide network of offices, Visio
develops, markets and sells drawing and diagramming software for PCs. After
implementing SAP R/3, Visio sought an Intranet front-office procurement system
to eliminate inefficiencies in its paper-based ordering and manual routing of
front-office procurement requisitions. Visio required a system that was easy to
use and would seamlessly integrate with SAP. After selecting CompanyStore, Visio
implemented the application in only five weeks and immediately realized
efficiencies in purchase order processing and product delivery. CompanyStore
allows purchasing and procurement personnel to spend less time processing
transactions and more time on vendor evaluations and pricing strategies. Visio
estimates it will achieve approximately $1 million in savings in the first year
of implementation, from such improvements as decreased requisition processing
costs, decreased non-compliant spending, decreased time needed to process
payables, and decreased time spent by budget managers gathering financial data.
SALES
The Company sells its software primarily through its direct sales
organization, with sales professionals located in Atlanta, Boston, Chicago,
Columbus, Dallas, Detroit, Los Angeles, Minneapolis, New York, Newark,
Philadelphia, Redmond, San Francisco and Washington, D.C. The Company also has
offices in Toronto and London. The field sales force is complemented by direct
telesales and telemarketing representatives based at the Company's headquarters
in Redmond, Washington. Technical sales support is provided by sales engineers
located in several of the field offices. The Company currently intends to add a
significant number of sales representatives and sales engineers in other
domestic and international locations. The
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<PAGE> 49
Company uses a remarketer in New Zealand and plans to expand its remarketer
channel to other international markets. The remarketer receives a referral fee
from the Company for marketing the Company's products, and provides post-sale
implementation and support of the Company's products.
The Company's direct sales force sells both XMS and CompanyStore. Since
Concur's products affect employees throughout the enterprise, the sales effort
involves multiple decision makers and frequently includes the chief financial
officer, vice president of finance, controller and vice president of purchasing.
While the average sales cycle varies substantially from customer to customer,
for initial sales it has generally ranged from six to nine months.
Strategic Alliances
The Company has developed a number of referral relationships with strategic
partners. Under an arrangement with American Express, the largest corporate
charge card issuer in the United States, American Express refers its corporate
charge card customers that seek a T&E expense management software solution to
Concur. In addition, American Express recently agreed to be a strategic
remarketer for the ESP version of XMS. In connection with this relationship,
Edward Gilligan, President, Corporate Services of American Express, has agreed
to serve on the Company's Board of Directors following completion of the
Offering. The Company believes that this relationship helps American Express to
differentiate its corporate charge card, and, prospectively, to realize
incremental revenue through referral and remarketing fees for XMS. In August
1998, American Express, through its subsidiary TRS, completed a $5 million
equity investment in the Company and the Company granted TRS a warrant to
purchase up to 5,375,000 shares of the Company's Series E Preferred Stock, at
prices ranging from the price to public in the Offering less 7% to $34.00,
expiring in four tranches through January 2002. Other key relationships include
Citibank, N.A., Citicorp Diners Club Inc., and Geac Computer Corporation Ltd.
The Company's existing strategic relationships do not, and any future
strategic relationships may not, afford the Company any exclusive marketing or
distribution rights. Many of the Company's strategic partners have multiple
strategic relationships, and there can be no assurance that the Company's
strategic partners view their relationships with the Company as significant for
their own businesses or that they will not reduce their commitment to the
Company at any time in the future. In addition, there can be no assurance that
such parties will not pursue other partnerships or relationships or attempt to
develop or acquire products or services that compete with the Company's products
or services either on their own or in collaboration with others, including the
Company's competitors. Further, the Company's existing strategic relationships
may interfere with its ability to enter into other desirable strategic
relationships. Any future inability of the Company to maintain its strategic
relationships or to enter into additional strategic relationships will have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Risk Factors--Need to Establish and Maintain Strategic
Relationships; Dependence on Key Business Relationships" and "Certain
Transactions."
MARKETING
The Company's marketing efforts are directed at extending the Company's
leadership position in T&E expense management applications and increasing its
market share for other employee-facing applications. Targeted at accounting,
finance, purchasing and travel executives, the Company's marketing programs are
focused on creating awareness of, and generating interest in, the Company's
products.
Concur engages in a variety of marketing activities, including developing
and executing co-advertising and co-marketing strategies designed to leverage
its existing strategic relationships, targeting additional strategic
relationships, managing and maintaining the Company's Web site, issuing
newsletters and direct mailings, creating and placing advertisements, conducting
public relations campaigns, and establishing and maintaining close relationships
with recognized industry analysts. The Company is an active participant in
technology-related conferences and demonstrates its products at trade shows
targeted at accounting, finance, purchasing and travel executives.
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<PAGE> 50
The Company believes that demand is increasing, and will continue to
increase, for employee-facing applications such as those sold by the Company.
There can be no assurance that the Company will be able to expand its sales and
marketing staff, either domestically or internationally, to take advantage of
any increase in demand for employee-facing applications. The failure of the
Company to expand its sales and marketing organization or other distribution
channels could materially and adversely affect the Company's business, results
of operations and financial condition. See "Risk Factors--Management of Growth,"
"--Need to Attract and Retain Qualified Personnel" and "--Dependence on Key
Employees."
PRODUCT DEVELOPMENT
The Company has been an innovator and leader in the development of
employee-facing enterprise applications. The Company believes that it was one of
the first to introduce a commercially successful T&E expense reporting
application and that it pioneered a number of features that are now common
throughout the T&E expense reporting field, such as prepopulation with corporate
credit card transactions and automatic itemization of hotel bills. Concur's
software development staff is responsible for enhancing the Company's existing
products and expanding its product line. The Company believes that a technically
skilled, quality oriented and highly productive software development
organization will be a key component to the continued success of new product
offerings. The Company expects that it will increase its product development
expenditures substantially in the future.
Concur's current product development activities focus on product
enhancements to XMS and CompanyStore, development of the Concur Common Platform
technology that will standardize the software architecture underlying all
applications in the suite, and development of Employee Desktop, a personalized
Web page on the corporate Intranet that will provide a centralized location for
all employee-facing applications. Concur expects XMS enhancements to include
features such as localized versions of XMS for foreign countries, and enhanced
integration of XMS with on-line travel booking applications. Concur plans to
enhance CompanyStore by expanding its features and functionality, adding support
for additional databases and ERP platforms and enhancing catalog support. The
Company plans to offer its applications through the Internet as an outsourced
ESP starting with XMS in the second half of calendar 1999 and to provide
CompanyStore as an ESP offering in fiscal 2000.
There can be no assurance that these development efforts will be completed
within the Company's anticipated schedules or that, if completed, they will have
the features necessary to make them successful in the marketplace. Future delays
or problems in the development or marketing of product enhancements or new
products could result in a material adverse effect on the Company's business,
results of operations and financial condition. See "Risk Factors--Risks
Associated with New Versions and New Products; Rapid Technological Change."
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's primary source of
direct competition comes from independent software vendors in both the T&E
expense management and front-office procurement applications. The Company also
faces indirect competition from potential customers' internal development
efforts and from potential customers' reluctance to move away from existing
paper-based systems.
The Company's major competitors in the T&E expense management field include
Captura Software, Inc., Extensity, Inc., IBM and Necho Systems Corporation. In
addition, several major ERP vendors such as SAP, Oracle, and PeopleSoft have
already developed T&E expense management products and have begun to sell these
products along with their application suites. The Company's major competitors in
the front-office procurement field include Ariba Technologies, Inc., Commerce
One, Inc., ELEKOM Corporation, Harbinger Corporation, Netscape Communications
Corporation and TRADE'ex Electronic Commerce Systems, Inc. In addition to its
current competitors, the Company expects to face competition from new entrants
including those ERP providers that do not already market a T&E expense
management product. Most of the major ERP
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providers have a significant installed customer base and have the opportunity to
offer additional products to those customers as additional components of their
respective application suites.
The Company believes that the principal competitive factors considered in
selecting T&E expense management and front-office procurement applications are
functionality, interoperability with existing IT infrastructure, price and an
installed referenceable base of customers. Many of the Company's competitors in
both the T&E expense management and front-office procurement markets have longer
operating histories, significantly greater financial, technical, marketing and
other resources, significantly greater name recognition and a larger installed
base of customers than the Company. Moreover, a number of the Company's
competitors, particularly major ERP vendors, have well-established relationships
with current and potential customers of the Company as well as with systems
integrators and other vendors and service providers. In addition, these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products, than can the Company.
It is also possible that new competitors or alliances among competitors or
third parties may emerge and rapidly acquire significant market share. The
Company expects that competition in its markets will increase as a result of
consolidation and the formation of alliances in the industry. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures faced by the Company will
not materially and adversely affect its business, results of operations and
financial condition. See "Risk Factors--Competition."
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success is heavily dependent upon its proprietary technology.
The Company relies primarily on a combination of copyright, trade secret and
trademark laws, confidentiality procedures, contractual provisions and other
similar measures to protect its proprietary information. The Company currently
holds no patents and does not have any patent applications pending. There can be
no assurance that any copyrights or trademarks held by the Company will not be
challenged and invalidated. In addition, existing copyright and trademark laws
afford only limited protection. Further, the Company believes that factors such
as the technical and creative skills of its personnel, new product development,
product enhancements, and reliable product maintenance are more essential to
developing and maintaining its technology leadership position than the legal
protection of its technology.
As part of its confidentiality procedures, the Company enters into
non-disclosure agreements with certain of its employees, consultants, corporate
partners, customers and prospective customers. The Company also enters into
license agreements with respect to its technology, documentation and other
proprietary information. Such licenses are generally non-transferable and have a
perpetual term. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use the
Company's products or technology that the Company considers proprietary and
third parties may attempt to develop similar technology independently. In
particular, the Company provides its licensees with access to object code
versions of its software, and to other proprietary information underlying the
Company's licensed software. Policing unauthorized use of the Company's products
is difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software or other
data transmitted and, while the Company is unable to determine the extent to
which piracy of its software products exists, software piracy can be expected to
be a persistent problem. In addition, effective protection of intellectual
property rights may be unavailable or limited in certain countries. The laws of
some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States. There can be no assurance that
the Company's protection of its proprietary rights will be adequate or that the
Company's competitors will not independently develop similar technology.
The Company is not aware that its products, trademarks, copyrights or other
proprietary rights infringe the proprietary rights of third parties. There can
be no assurance that third parties will not assert infringement
50
<PAGE> 52
claims against the Company in the future with respect to current or future
products or that any such assertion will not require the Company to enter into
royalty arrangements or result in costly litigation. Any such infringement
claims, with or without merit, could be time consuming and expensive to defend.
See "Risk Factors--Limited Protection of Proprietary Technology; Risks of
Infringement."
EMPLOYEES
As of June 30, 1998, the Company had approximately 179 full-time employees,
five of whom were based in the United Kingdom. These included 51 engaged in
research and development, 54 in sales and marketing, 49 in consulting, training
and technical support and 25 in administration and finance. No employees are
known by the Company to be represented by a collective bargaining agreement and
the Company has never experienced a strike or similar work stoppage. The Company
considers its relations with its employees to be good. The Company's ability to
achieve its financial and operational objectives depends in large part upon its
continuing ability to attract, integrate, retain and motivate highly qualified
sales, technical and managerial personnel. Competition for such qualified
personnel in the Company's industry is intense, particularly in the Seattle area
in which the Company's headquarters is located and particularly with respect to
software development and management personnel. In addition, competitors may
attempt to recruit the Company's key employees. There can be no assurance that
the Company will be able to attract or retain employees in the future. The
Company is a party to employment agreements with certain of its employees. See
"Risk Factors--Need to Attract and Retain Qualified Personnel" and "--Dependence
on Key Employees."
FACILITIES
The Company's principal administrative, sales, marketing and research and
development facility is located in Redmond, Washington, consisting of
approximately 43,000 square feet of office space held under a lease that expires
in January 2003. As of June 30, 1998, the Company also leased sales offices in
Chicago, Dallas, Los Angeles, New York and in London. For a discussion of
certain risks associated with the Company's anticipated need for additional
office space, see "Risk Factors--Management of Growth."
LEGAL PROCEEDINGS
There are no material legal proceedings currently pending to which the
Company is a party.
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<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. Steven Singh............... 37 President, Chief Executive Officer and
Director
Michael W. Hilton............. 34 Chairman of the Board of Directors and
Chief
Technical Officer
Jon T. Matsuo................. 38 Executive Vice President of Worldwide Sales
Sterling R. Wilson............ 40 Chief Financial Officer and Vice President
of
Operations
Rajeev Singh.................. 30 Vice President of Products
Frederick L. Ingham........... 31 Vice President of Business Development
John P. Russo, Jr............. 38 Vice President of Internet Application
Services
Michael Watson................ 51 Vice President of Professional Services
John A. Prumatico............. 50 Vice President of Human Resources
Jeffrey D. Brody(1)........... 38 Director
Norman A. Fogelsong(1)........ 47 Director
Michael J. Levinthal(2)....... 43 Director
James D. Robinson III(2)...... 62 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
S. Steven Singh has served as the Company's President and Chief Executive
Officer since February 1996. Mr. Singh served as the Chairman of the Board of
Directors from the Company's inception until 1996. Prior to joining the Company
as an officer, Mr. Singh was General Manager of the Contact Management Division
at Symantec Corporation ("Symantec") from June 1993 to February 1996. From
February 1992 to June 1993, Mr. Singh was Vice President of Development for
Contact Software International ("CSI"), a personal computer software publisher,
before it was acquired by Symantec in June 1993. Prior to joining CSI, Mr. Singh
co-founded Eshani Corporation ("Eshani"), where he was President and Chief
Executive Officer. Mr. Singh holds a B.S. in Electrical Engineering from the
University of Michigan.
Michael W. Hilton co-founded the Company in August 1993 and has served as
the Company's Chief Technical Officer since 1996. Mr. Hilton has served as a
member of the Company's Board of Directors since its founding, and as Chairman
of the Board since 1996. Before co-founding the Company, Mr. Hilton served as
Senior Development Manager at Symantec during 1993. Prior to his employment at
Symantec, Mr. Hilton served as Director of Product Development for CSI's
California office. Mr. Hilton also was a co-founder of Eshani, where he was Vice
President of Product Development. Mr. Hilton holds a B.A. in Computer and
Information Sciences and a B.S. in Mathematics from the University of California
at Santa Cruz.
Jon T. Matsuo joined the Company in July 1994 and currently serves as the
Company's Executive Vice President of Worldwide Sales. Prior to joining the
Company, Mr. Matsuo served as General Manager, Consumer Software Division of
Delrina Corporation from June 1993 to July 1994. Mr. Matsuo's experience also
includes senior marketing positions with CSI and Bluebird Systems, as well as
eight years of experience with Deloitte Haskins & Sells in auditing, consulting
and product management. Mr. Matsuo graduated with a B.B.A. in Accounting from
the University of San Diego and is a Certified Public Accountant.
Sterling R. Wilson joined the Company in May 1994 and currently serves as
the Company's Chief Financial Officer and Vice President of Operations. Prior to
joining the Company, Mr. Wilson served as Vice President of Operations and Chief
Financial Officer at IntelliQuest, Inc., a leading provider of market research
information from July 1993 to May 1994. Mr. Wilson also served as Chief
Financial Officer at CSI from 1992
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<PAGE> 54
to 1993. Mr. Wilson graduated with a B.B.A. in Accounting from California State
University at Bakersfield (formerly California State College at Bakersfield) and
is a Certified Public Accountant.
Rajeev Singh co-founded the Company in August 1993 and currently serves as
the Company's Vice President of Products. Previously, Mr. Singh acted as
Director of Product Management of the Company. Prior to co-founding the Company,
Mr. Singh served as a Software and Manufacturing Engineer at General Motors
Corporation from July 1986 to January 1990, and from January 1991 to March 1993
he served as a Software Project Manager for the development of complex computer
simulations at Ford Motor Company. Mr. Singh holds a B.S. in Mechanical
Engineering from Kettering University (formerly GMI Engineering and Management
Institute). Mr. Singh is the brother of S. Steven Singh, the Company's President
and Chief Executive Officer.
Frederick L. Ingham joined the Company in January 1997 and currently serves
as the Company's Vice President of Business Development. Prior to joining the
Company, Mr. Ingham was Director of Business Development at Symantec from
January 1995 to December 1996. From September 1992 to December 1994, Mr. Ingham
worked as a Product Manager and Product Planner at Xerox Corporation. Mr. Ingham
holds a B.A. in Economics from Yale University and an M.B.A. from the Wharton
School of the University of Pennsylvania.
John P. Russo, Jr. joined the Company in April 1996 and currently serves as
the Company's Vice President of Internet Application Services. From September
1988 to April 1996, Mr. Russo was employed by Symantec, including as Director of
Product Management from September 1994 to April 1996, and assisted with the
integration of company acquisitions for Symantec's Productivity Applications
Group. Mr. Russo holds a B.S. in Marketing from San Jose State University.
Michael Watson joined the Company in August 1998 and currently serves as
the Company's Vice President of Professional Services. Prior to joining the
Company, Mr. Watson was Vice President of Consulting Services from June 1995 to
August 1998 at Hyperion Software, where he also held various roles in the sales
organization from October 1990 to June 1995. Mr. Watson also served as the
National Director of Price Waterhouse's Applied Technology Center from 1986 to
1990. Mr. Watson holds a B.A. in Business Studies from Lanchester University
(U.K.) and an M.B.A. from the Babcock Graduate School of Management at Wake
Forest University.
John A. Prumatico joined the Company in July 1998 and currently serves as
the Company's Vice President of Human Resources. Prior to joining the Company,
Mr. Prumatico was managing principal for John Prumatico & Associates, a
consulting firm specializing in human resources leadership and organization
development, which he founded in 1992. From April 1987 to October 1992, Mr.
Prumatico was employed by Microsoft Corporation as the Director of Human
Resources Development and Administration. Mr. Prumatico holds a B.S. in
Management and Organization Development from the University of West Florida.
Jeffrey D. Brody has served as a member of the Company's Board of Directors
since October 1994. Since April 1994, Mr. Brody has been employed by Brentwood
Venture Capital ("Brentwood"), a venture capital firm, and has been a General
Partner of Brentwood since October 1995. From 1988 to April 1994, Mr. Brody was
Senior Vice President of Comdisco Ventures, a venture leasing company. Mr. Brody
holds a B.S. in Engineering from the University of California at Berkeley and an
M.B.A. from the Graduate School of Business at Stanford University. Mr. Brody is
a member of the boards of directors of several private technology companies.
Norman A. Fogelsong has served as a member of the Company's Board of
Directors since July 1996. Since March 1989, Mr. Fogelsong has been a General
Partner of Institutional Venture Partners, a venture capital firm. Between March
1980 and February 1989, Mr. Fogelsong was a General Partner of Mayfield Fund, a
venture capital firm. Mr. Fogelsong holds a B.S. in Industrial Engineering from
Stanford University, an M.B.A. from Harvard Business School and a J.D. from
Harvard Law School. Mr. Fogelsong is a member of the boards of directors of
Aspect Telecommunications Corporation as well as several private technology
companies.
53
<PAGE> 55
Michael J. Levinthal has served as a member of the Company's Board of
Directors since April 1998. Since 1984, Mr. Levinthal has been a General Partner
or managing director of various entities associated with Mayfield Fund, a
venture capital firm. Mr. Levinthal holds a B.S. in Engineering, an M.S. in
Industrial Engineering and an M.B.A. from the Graduate School of Business at
Stanford University. Mr. Levinthal is a member of the boards of directors of
Focal, Inc., InControl, Inc. and Symphonix Devices, Inc., as well as several
private technology companies.
James D. Robinson III has served as a member of the Company's Board of
Directors since July 1998. Since 1994, Mr. Robinson has been the Chairman and
Chief Executive Officer of RRE Investors, LLC, a private information technology
venture investment firm. From 1977 to 1993, Mr. Robinson served as Chairman and
Chief Executive Officer of American Express Company. Mr. Robinson holds a B.S.
in Industrial Management from the Georgia Institute of Technology and an M.B.A.
from Harvard Business School. Mr. Robinson is a member of the boards of
directors of The Coca-Cola Company, Bristol-Myers Squibb Company, Cambridge
Technology Partners and First Data Corporation as well as several private
companies.
The Company's Bylaws, which will be in effect upon the completion of the
Offering, will provide for the division of the Board into three classes as
nearly equal in size as possible with staggered three-year terms. The
classification of the Board could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
control of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors consists of Mr. Brody
and Mr. Fogelsong. The Compensation Committee makes decisions regarding all
forms of salary and bonus and stock compensation provided to executive officers
of the Company, the long-term strategy of employee compensation and the types of
stock and other compensation plans to be used by the Company and the shares and
amounts reserved thereunder, and any other compensation matters as from time to
time directed by the Board.
The Audit Committee of the Board of Directors consists of Mr. Levinthal and
Mr. Robinson. The Audit Committee meets with the Company's independent auditors
to review the adequacy of the Company's internal control systems and financial
reporting procedures, reviews the general scope of annual audit and the fees
charged by the independent accountants, as well as the performance of non-audit
services by the Company's auditors, and reviews and makes recommendations to the
Board regarding the fairness of any proposed transaction between the Company and
any officer, director or other affiliate of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board of Directors
was at any time since the formation of the Company an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on the Board of Directors of the Company or the Compensation
Committee of the Board of Directors.
DIRECTOR COMPENSATION
Directors of the Company do not receive any cash compensation for their
services as directors but are reimbursed for their reasonable travel expenses in
attending meetings of the Board of Directors.
The Company adopted the 1998 Directors Stock Option Plan (the "Directors
Plan") on August 21, 1998 and reserved a total of 600,000 shares of the
Company's Common Stock for issuance thereunder to be effective upon the
effective date of the Registration Statement for this Offering (the "Effective
Date"). The Directors Plan requires that the Company's stockholders approve the
Directors Plan within 12 months following its adoption by the Board of
Directors. Such approval is anticipated prior to effectiveness of the Offering.
Members of the Board of Directors who are not employees of the Company or any
parent, subsidiary or affiliate of the Company are eligible to participate in
the Directors Plan. The option grants under the
54
<PAGE> 56
Directors Plan are automatic and nondiscretionary, and the exercise price of the
options must be 100% of the fair market value of the Common Stock on the date of
grant. Each eligible director who is or becomes a member of the Board of
Directors on or after the effective date of the Directors Plan will
automatically be granted an option for 50,000 shares of the Company's Common
Stock on the later of the Effective Date and the date such director first
becomes a member of the Board of Directors (an "Initial Grant"). On the date of
each Annual Meeting of Stockholders following the Effective Date, each eligible
director who has served continuously as a member of the Board of Directors since
the date of such director's Initial Grant will automatically be granted an
option for 20,000 shares of the Company's Common Stock (a "Succeeding Grant").
Options granted under the Directors Plan generally become exercisable as they
vest, although the Compensation Committee may provide that options are
exercisable immediately subject to repurchase. Initial Grants and Succeeding
Grants vest as to 25% of the shares on the first anniversary of the date of
grant and as to an additional 2.0833% of the shares each monthly anniversary of
the date of grant thereafter. Options cease to vest once the individual ceases
to provide services to the Company, or any parent or subsidiary of the Company,
as a director or a consultant. Once the individual ceases providing such
services, he or she will have seven months in which to exercise his or her
vested options, or 12 months if the cessation of services resulted from the
individual's death or disability. In the event of a merger or consolidation in
which the Company is not the surviving corporation, the sale of all or
substantially all of the Company's assets, or other corporate transaction as set
forth in the Directors Plan, the vesting of all options granted under the
Directors Plan will accelerate and the options will become exercisable in full.
Any options not exercised within seven months of the corporate transaction will
expire. Options may be granted pursuant to the Directors Plan from time to time
within a period of ten years from the Effective Date. The Board may at any time
terminate or amend the Directors Plan or any outstanding option, provided that
the Board may not terminate or amend the terms of any outstanding option without
the consent of the optionee. In any case, no amendment of the Directors Plan may
adversely affect any then outstanding options or any unexercised portions
thereof without the written consent of the optionee. The Directors Plan is
administered by the full Board of Directors or by the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
awarded to, earned by, or paid for services rendered to, the Company in all
capacities during the year ended September 30, 1997 and as estimated for the
year ended September 30, 1998 by (i) the Company's Chief Executive Officer and
(ii) the Company's four other most highly compensated executive officers who
were serving as executive officers as of September 30, 1997 and whose
compensation was in excess of $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ------------------
FISCAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
--------------------------- ------ -------- ------- ------------------
<S> <C> <C> <C> <C>
S. Steven Singh............................... 1997 $200,000 $66,950 --
President and Chief Executive Officer 1998* 200,000 75,000 500,000
Sterling R. Wilson............................ 1997 140,874 52,354 26,000
Chief Financial Officer and Vice President 1998* 150,000 50,000 130,000
of Operations
Jon T. Matsuo................................. 1997 131,566 91,700 26,000
Executive Vice President of Worldwide Sales 1998* 150,000 100,000 130,000
Michael W. Hilton............................. 1997 133,000 49,700 -
Chairman of the Board of Directors and Chief 1998* 132,000 40,000 130,000
Technical Officer
Rajeev Singh.................................. 1997 92,282 44,169 25,000
Vice President of Products 1998* 115,000 60,000 130,000
</TABLE>
- ---------------
* Amounts for fiscal 1998 are estimated.
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<PAGE> 57
OPTION GRANTS IN FISCAL 1997 AND FISCAL 1998
The following table sets forth information regarding the stock option
grants during fiscal 1997 and as estimated during fiscal 1998 to each of the
Named Executive Officers. No stock appreciation rights were granted to these
individuals during such years.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENTAGE OF APPRECIATION FOR OPTION
UNDERLYING TOTAL OPTIONS TERM(4)
FISCAL OPTIONS GRANTED TO EXERCISE PRICE EXPIRATION -----------------------
NAME YEAR GRANTED(1) EMPLOYEES(2) PER SHARE(3) DATE 5% 10%
---- ------ ---------- -------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
S. Steven Singh......... 1997 -- --% $ -- -- $ -- $ --
1998* 500,000 27.2 0.15 10/22/07 47,167 119,531
Sterling R. Wilson...... 1997 26,000 5.3 0.08 10/23/06 1,308 3,315
1998* 130,000 7.1 0.15 10/22/07 12,263 31,078
Jon T. Matsuo........... 1997 26,000 5.3 0.08 10/23/06 1,308 3,315
1998* 130,000 7.1 0.15 10/22/07 12,263 31,078
Michael W. Hilton....... 1997 -- -- -- -- -- --
1998* 130,000 7.1 0.15 10/22/07 12,263 31,078
Rajeev Singh............ 1997 25,000 5.1 0.08 10/23/06 1,258 3,187
1998* 130,000 7.1 0.15 10/22/07 12,263 31,078
</TABLE>
- ---------------
* Amounts for fiscal 1998 are estimated.
(1) Unless otherwise indicated below, all options granted in fiscal 1997 and
fiscal 1998 were granted pursuant to the 1994 Plan and become exercisable
with respect to 25% of the shares covered by the option on the first
anniversary date of grant and with respect to an additional 2.0833% of these
shares each month thereafter, subject to acceleration upon certain changes
in control of the Company. See "--Employee Benefit Plans."
(2) Based on a total of 491,450 options granted to all employees during fiscal
1997 and an estimated 1,840,000 options granted to all employees during
fiscal 1998.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock at the time of grant.
(4) The potential realizable value is calculated based upon the term of the
option at its time of grant and is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated price.
The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimates or projection of future Common Stock
prices. There can be no assurance that the Common Stock will appreciate at
any particular rate or at all in future years.
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<PAGE> 58
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END VALUES
The following table sets forth information concerning unexercised options
held at September 30, 1997 and estimated to be held at September 30, 1998 with
respect to each of the Named Executive Officers. No options or SARs were
exercised by the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
FISCAL ---------------------------- ----------------------------
NAME YEAR EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
S. Steven Singh.................... 1997 178,125 271,875 $15,319 $23,381
1998* 290,625 659,375 n.a. n.a.
Sterling R. Wilson................. 1997 -- 26,000 -- 1,820
1998* 12,458 143,542 n.a. n.a.
Jon T. Matsuo...................... 1997 450,000 26,000 49,500 2,860
1998* 442,458 143,542 n.a. n.a.
Michael W. Hilton.................. 1997 -- -- -- --
1998* -- 130,000 n.a. n.a.
Rajeev Singh....................... 1997 -- 25,000 -- 1,750
1998* 11,979 143,021 n.a. n.a.
</TABLE>
- ---------------
* Amounts for fiscal 1998 are estimated.
(1) Based on the fair market value of the option shares at September 30, 1997
($0.15 as determined by the Board of Directors) less the exercise price.
EMPLOYMENT AGREEMENTS
The Company and Mr. Matsuo are parties to a letter agreement dated June 20,
1994 governing his employment with the Company. The agreement sets forth Mr.
Matsuo's compensation level and eligibility for salary increases, bonuses and
option grants under the Company's 1994 Plan. Mr. Matsuo's employment is
voluntary and may be terminated by the Company or Mr. Matsuo at any time with or
without cause or notice.
The Company and Mr. Wilson are parties to a letter agreement dated April
21, 1994 governing his employment with the Company. The agreement sets forth Mr.
Wilson's compensation level and eligibility for salary increases, bonuses,
benefits and option grants under the 1994 Plan. In addition, the Company agreed
to pay Mr. Wilson's reasonable costs to relocate to Seattle. Mr. Wilson's
employment is voluntary and may be terminated by the Company or Mr. Wilson at
any time with or without cause or notice.
The Company and Mr. Ingham are parties to a letter agreement dated December
5, 1996 governing his employment with the Company. The agreement sets forth Mr.
Ingham's compensation level and eligibility for salary increases, bonuses,
benefits and option grants under the 1994 Plan. In addition, the Company agreed
to provide for certain specified relocation expenses. Mr. Ingham's employment is
voluntary and may be terminated by the Company or Mr. Ingham at any time with or
without notice.
The Company and Mr. Russo are parties to a letter agreement dated April 1,
1996 governing his employment with the Company. The agreement sets forth Mr.
Russo's compensation level and eligibility for benefits and option grants under
the 1994 Plan. In addition, the Company agreed to pay Mr. Russo's reasonable
costs to relocate to Seattle. Mr. Russo's employment is voluntary and may be
terminated by the Company or Mr. Russo at any time with or without notice.
EMPLOYEE BENEFIT PLANS
1994 Stock Option Plan
The Company's 1994 Stock Option Plan (the "1994 Plan"), was adopted by the
Board in January 1994 and approved by the Company's stockholders in January
1994. As originally adopted, 375,000 shares of
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<PAGE> 59
Common Stock were reserved for issuance under the 1994 Plan. This reserve has
been increased several times, and there are currently 6,900,000 shares reserved
for issuance under the 1994 Plan. The 1994 Plan provides for the grant of both
incentive stock options ("ISOs") that may qualify under Section 422 of the Code
and non-qualified stock options ("NQSOs") on terms determined by the Board,
subject to certain statutory and other limitations in the 1994 Plan (including
limitations on the vesting schedule thereof and the exercise price, which for
ISOs to comply with Section 422 of the Code may not be less than 100% of the
fair market value of the Company's Common Stock on the date of grant and for
NQSOs may not be less than 85% of the fair market value of the Company's Common
Stock on the date of grant). The 1994 Plan will terminate upon the effective
date of the Registration Statement for the Offering, when the 1998 Equity
Incentive Plan will become effective. As a result, no further options may be
granted under the 1994 Plan following the effective date of the Offering.
However, termination will not affect any options outstanding as of such date,
which options will remain effective until exercised or until they terminate or
expire in accordance with their terms. As of August 15, 1998, options to
purchase 3,520,113 shares of Common Stock were outstanding under the 1994 Plan
and 951,645 shares were available for future option grants.
1997 Stock Option Plan of 7Software
In connection with the Company's June 1998 acquisition of 7Software, the
Company assumed 7Software's 1997 Stock Option Plan (the "7Software Plan") and
all options outstanding under the 7Software Plan at the closing of the Company's
acquisition of 7Software, which options will remain effective until exercised
for the Company's Common Stock or until they terminate or expire in accordance
with their terms. The 7Software Plan provides for the grant of both ISOs that
may qualify under Section 422 of the Code and NQSOs on terms determined by the
board of directors, subject to certain statutory and other limitations in the
7Software Plan (including limitations on the vesting schedule thereof and the
exercise price, which for ISOs to comply with Section 422 of the Code may not be
less than 100% of the fair market value of the Company's Common Stock on the
date of grant and for NQSOs may not be less than 85% of the fair market value of
the company's common stock on the date of grant). No options will be granted in
the future under the 7Software Plan. As of August 15, 1998, options to purchase
275,764 shares of Common Stock were outstanding under the 7Software Plan. In
addition to assuming the 7Software Plan in connection with its acquisition of
7Software, the Company also assumed the option granted by 7Software to one
employee outside of the 7Software Plan, which became an option to purchase
34,045 shares of the Company's Common Stock.
1998 Equity Incentive Plan
On August 21, 1998, the Board adopted the 1998 Equity Incentive Plan (the
"1998 Plan") and reserved 8,100,000 shares of the Company's Common Stock for
issuance thereunder. The Company's stockholders are expected to approve the 1998
Plan in September 1998. The 1998 Plan will become effective on the Effective
Date and will serve as the successor to the 1994 Plan. Options granted under the
1994 Plan before their termination will remain outstanding according to their
terms, but no further options will be granted under the 1994 Plan after the
Effective Date. Shares that (a) are subject to issuance upon exercise of an
option granted under the 1998 Plan that cease to be subject to such option for
any reason other than exercise of such option, (b) have been issued pursuant to
the exercise of an option granted under the 1998 Plan that are subsequently
forfeited or repurchased by the Company at the original purchase price, (c) are
subject to an award granted pursuant to restricted stock purchase agreement
under the 1998 Plan that are subsequently forfeited or repurchased by the
Company at the original issue price, or (d) are subject to stock bonuses granted
under the 1998 Plan that otherwise terminate without shares being issued, will
again be available for grant and issuance under the 1998 Plan. In addition, any
authorized shares not issued or subject to outstanding grants under the 1994
Plan on the Effective Date and any shares issued under the 1994 Plan that are
forfeited or repurchased by the Company or that are issuable upon exercise of
options granted pursuant to the 1994 Plan that expire or become unexercisable
for any reason without having been exercised in full, will no longer be
available for grant and issuance under the 1994 Plan but will be available for
grant and issuance under the 1998 Plan. The 1998 Plan will terminate in August
2008, unless sooner terminated in accordance with the terms of the 1998 Plan.
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<PAGE> 60
The 1998 Plan authorizes the award of options, restricted stock awards and
stock bonuses (each an "Award"). No person will be eligible to receive more than
2,400,000 shares in any calendar year pursuant to Awards under the 1998 Plan
other than a new employee of the Company who will be eligible to receive no more
than 3,000,000 shares in the calendar year in which such employee commences
employment. Over the term of the 1998 Plan, no more than 25,000,000 shares may
be issued under the 1998 Plan upon exercise of incentive stock options. The 1998
Plan is administered by the Compensation Committee, which currently consists of
Mr. Brody and Mr. Fogelsong, both of whom are "non-employee directors" under
applicable federal securities laws and "outside directors" as defined under
applicable federal tax laws. The Compensation Committee has the authority to
construe and interpret the 1998 Plan and any agreement made thereunder, grant
Awards and make all other determinations necessary or advisable for the
administration of the 1998 Plan.
The 1998 Plan provides for the grant of both ISOs that qualify under
Section 422 of the Code and NQSOs. ISOs may be granted only to employees of the
Company or of a parent or subsidiary of the Company. NQSOs (and all other Awards
other than ISOs) may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any parent or subsidiary
of the Company, provided such consultants, independent contractors and advisors
render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. The exercise price of ISOs must be
at least equal to the fair market value of the Company's Common Stock on the
date of grant. (The exercise price of ISOs granted to 10% stockholders must be
at least equal to 110% of that value.) The exercise price of NQSOs must be at
least equal to 85% of the fair market value of the Company's Common Stock on the
date of grant. The maximum term of options granted under the 1998 Plan is ten
years. In addition to, or in tandem with, awards of stock options, the
Compensation Committee may grant participants restricted stock awards to
purchase the Company's Common Stock for not less than 85% of its fair market
value at the time of grant. The other terms of such restricted stock awards may
be determined by the Compensation Committee. The Compensation Committee may also
grant stock bonus awards of the Company's Common Stock either in addition to, or
in tandem with, other awards under the 1998 Plan under such terms, conditions
and restrictions as the Compensation Committee may determine. Under the 1998
Plan, stock bonuses may be awarded for the satisfaction of performance goals
established in advance. At the discretion of the Compensation Committee, payment
for Awards may be made: in cash; by cancellation of indebtedness of the Company
to the participant; by surrender of shares that either have been owned by the
participant for more than six months and have been paid for within the meaning
of SEC Rule 144 or were obtained by the participant in the public market; by
tender of a full recourse promissory note; by waiver of compensation due or
accrued to the participant for services rendered; or, with respect only to
purchases upon exercise of an option, through a "same day sale" or a "margin"
commitment. Awards granted under the 1998 Plan may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the optionee only by the optionee (unless
otherwise determined by the Compensation Committee and set forth in the Award
agreement with respect to Awards that are not ISOs). Options granted under the
1998 Plan generally expire three months after the termination of the optionee's
service to the Company or a parent or subsidiary of the Company, except in the
case of death or disability, in which case the options generally may be
exercised up to 12 months following the date of death or termination of service.
Options will generally terminate ten days after termination for cause. In the
event of the Company's dissolution or liquidation or a "change in control"
transaction, outstanding Awards may be assumed or substituted by the successor
corporation (if any). In the discretion of the Compensation Committee, the
vesting of such Awards may accelerate upon such transaction.
1998 Employee Stock Purchase Plan
On August 21, 1998, the Board adopted the Purchase Plan and reserved a
total of 800,000 shares of the Company's Common Stock for issuance thereunder.
In addition, on each January 1, the aggregate number of shares reserved for
issuance under the Purchase Plan shall be increased automatically by a number of
shares equal to 1% of the total outstanding shares of the Company as of the
immediately preceding December 31. Such annual increase shall not exceed 800,000
shares per year. The stockholders of the Company are expected to approve the
Purchase Plan in September 1998. The Purchase Plan will be administered by the
Compensation Committee. The Compensation Committee will have the authority to
construe and interpret
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<PAGE> 61
the Purchase Plan and its decision in such capacity will be final and binding.
The Purchase Plan will become effective on the first business day on which price
quotations for the Company's Common Stock are available on the Nasdaq National
Market. Employees generally will be eligible to participate in the Purchase Plan
if they are customarily employed by the Company (or its parent or any
subsidiaries that the Company designates) for more than 20 hours per week and
more than five months in a calendar year and are not (and would not become as a
result of being granted an option under the Purchase Plan) 5% stockholders of
the Company (or its designated parent or subsidiaries).
Under the Purchase Plan, eligible employees will be permitted to acquire
shares of the Company's Common Stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 2% and 15% of their W-2
cash compensation and are subject to certain maximum purchase limitations
described in the Purchase Plan. A participant may change the rate of payroll
deductions or withdraw from an Offering Period by notifying the Company in
writing. Participation in the Purchase Plan will end automatically upon
termination of employment for any reason.
Except for the First Offering Period, each Offering Period under the
Purchase Plan will be for two years and consist of four six-month Purchase
Periods. The first Offering Period is expected to begin on the first business
day on which price quotations for the Company's Common Stock are available on
the Nasdaq National Market. The First Offering Period shall consist of no more
than five and no fewer than three Purchase Periods, any of which may be greater
or less than six months as determined by the Compensation Committee. Offering
Periods and Purchase Periods thereafter will begin on May 1 and November 1. The
purchase price for the Company's Common Stock purchased under the Purchase Plan
is 85% of the lesser of the fair market value of the Company's Common Stock on
the first day of the applicable Offering Period or the last day of each Purchase
Period. The Compensation Committee will have the power to change the duration of
Offering Periods without stockholder approval, if such change is announced at
least 15 days prior to the beginning of the Offering Period to be affected. The
Purchase Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. Rights granted under the Purchase Plan will not be
transferable by a participant other than by will or the laws of descent and
distribution. The Purchase Plan provides that in the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the proposed action, unless otherwise provided by the
Compensation Committee. The Compensation Committee may, in the exercise of its
sole discretion in such instances, declare that the Purchase Plan shall
terminate as of a date fixed by the Compensation Committee and give each
participant the right to purchase shares prior to such termination. In the event
of a "change in control" transaction, the Purchase Plan will continue for the
duration of each Offering Period that commenced prior to the closing of such
proposed transaction and stock will be purchased on the purchase dates based on
the fair market value of the surviving corporation's stock; unless otherwise
provided by the Compensation Committee consistent with pooling of interests
accounting treatment.
The Purchase Plan will terminate in August 2008 unless earlier terminated
pursuant to its terms. The Board will have the authority to amend, terminate or
extend the term of the Purchase Plan, except that no such action may adversely
affect any outstanding options previously granted under the Purchase Plan and
stockholder approval is required to increase the number of shares that may be
issued or to change the terms of eligibility under the Purchase Plan.
Notwithstanding the foregoing, the Board may make such amendments to the
Purchase Plan as the Board determines to be advisable if the financial
accounting treatment for the Purchase Plan is different than the financial
accounting treatment in effect on the date the Purchase Plan was adopted by the
Board.
401(k) Plan
The Company maintains the Concur Technologies, Inc. 401(k) Profit Sharing
and Trust Plan (the "401(k) Plan"), a defined contribution plan intended to
qualify under Section 401 of the Code. All employees are eligible to participate
in the 401(k) Plan. An eligible employee of the Company may begin to participate
in the 401(k) Plan on the first day of January, April, July or October of the
plan year following the date on which such employee meets the eligibility
requirements. A participating employee may make pre-tax contributions of a
percentage of his or her eligible compensation, subject to limitations under the
federal tax
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<PAGE> 62
laws. Employee contributions and the investment earnings thereon are fully
vested at all times. The Company does not make matching or profit-sharing
contributions.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), the Bylaws of the Company provide that (i) the Company is required to
indemnify its directors and executive officers to the fullest extent permitted
by the DGCL, (ii) the Company may indemnify its other officers, employees and
agents as set forth in the DGCL, (iii) to the fullest extent permitted by the
DGCL, the Company is required to advance expenses, as incurred, to its directors
and executive officers in connection with a legal proceeding (subject to certain
exceptions), (iv) the rights conferred in the Bylaws are not exclusive and (v)
the Company is authorized to enter into indemnification agreements with its
directors, officers, employees and agents.
The Company intends to enter into Indemnity Agreements with each of its
current directors and executive officers to give such directors and officers
additional contractual assurances regarding the scope of the indemnification set
forth in the Company's Bylaws and to provide additional procedural protections.
At present, there is no pending litigation or proceeding involving a director,
officer or employee of the Company regarding which indemnification is sought,
nor is the Company aware of any threatened litigation that may result in claims
for indemnification.
As permitted by the DGCL, the Company's Certificate of Incorporation
includes a provision that eliminates the personal liability of its directors for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
As authorized by the Company's Bylaws, the Company, with approval of the
Board of Directors, has applied for, and expects to obtain, directors and
officers liability insurance with a per claim and annual aggregate coverage
limit of $5 million.
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CERTAIN TRANSACTIONS
Since October 1, 1994, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company or any of
its subsidiaries was or is to be a party in which the amount involved exceeded
or will exceed $60,000 and in which any director, executive officer, holder of
more than 5% of the Common Stock of the Company or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest other than (i) compensation agreements and other arrangements,
which are described where required in "Management" and (ii) the transactions
described below.
Loan Repayment. On September 21, 1994, the Company entered into a Repayment
Agreement with S. Steven Singh, the Company's President, Chief Executive Officer
and a director, and Michael W. Hilton, the Company's Chairman of the Board and
Chief Technical Officer. Pursuant to the Repayment Agreement, the Company agreed
to repay loans previously made to the Company by Mr. Singh and Mr. Hilton in the
amounts of $111,500 and $121,500, respectively. Under the terms of the Repayment
Agreement, the Company agreed to repay the loans on the date two years following
the Commencement Date (as defined in the Repayment Agreement) at an interest
rate of 7% per annum. On March 22, 1997, in consideration for the cancellation
of indebtedness under the Repayment Agreement, the Company issued 161,326 shares
of its Series C Preferred Stock to Mr. Singh and 175,975 shares of its Series C
Preferred Stock to Mr. Hilton, at a purchase price of $0.80 per share.
Preferred Stock Financings. From October 1, 1994 through August 15, 1998,
the Company sold 3,824,092 shares of its Series A Preferred Stock at a price of
$0.523 per share, 4,687,500 shares of its Series B Preferred Stock at a price of
$0.64 per share, 9,712,301 shares of its Series C Preferred Stock at a price of
$0.80 per share, 3,188,357 shares of its Series D Preferred Stock at a price of
$1.46 per share, and 4,121,676 shares of its Series E Preferred Stock at a price
of $3.10 per share, in a series of private financings. The Company sold these
securities pursuant to preferred stock purchase agreements and an investors'
rights agreement on substantially similar terms (except for terms relating to
date and price), under which the Company made standard representations,
warranties and covenants, and which provided the purchasers thereunder with
registration rights, information rights, and rights of first refusal, among
other provisions standard in venture capital financings. Each share of preferred
stock will convert into one share of Common Stock upon the completion of the
Offering. The purchasers of the preferred stock included, among others, the
following holders of 5% or more of the Company's Common Stock, directors and
entities associated with directors:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK PURCHASED
---------------------------------------------------------
INVESTOR SERIES A SERIES B SERIES C SERIES D SERIES E
-------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
American Express Travel Related Services
Company, Inc............................ -- -- -- -- 1,612,903
Brentwood Associates VI, L.P. and
affiliates(1)........................... 3,824,092 781,250 625,000 338,447 186,762
Institutional Venture Partners VII, L.P.
and affiliates(2)....................... -- -- 5,000,000 325,486 180,228
Mayfield VIII and affiliates(3)........... -- -- 3,125,000 2,018,273 174,683
RRE Investors, L.P. and affiliates(4)..... -- -- -- -- 1,612,903
US Venture Partners IV L.P. and
affiliates(5)........................... -- 3,906,250 625,000 399,986 --
Michael W. Hilton(6)...................... -- -- 175,975 -- 9,678
S. Steven Singh(7)........................ -- -- 161,326 -- 9,678
</TABLE>
- ---------------
(1) Jeffrey D. Brody, a director of the Company, is the Managing Member of
Brentwood VIII Ventures LLC, the General Partner of Brentwood Associates VI,
L.P. and Brentwood Affiliates Fund II, L.P.
(2) Norman A. Fogelsong, a director of the Company, is a General Partner of
Institutional Venture Management VII, L.P., the General Partner of
Institutional Venture Partners VII, L.P. and IVP Founders Fund I, L.P.
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<PAGE> 64
(3) Michael J. Levinthal, a director of the Company, is a Managing Member of
Mayfield VIII Management, L.L.C., the General Partner of Mayfield VIII and
Mayfield Associates Fund III.
(4) James D. Robinson III, a director of the Company, is a member of RRE
Investors II, LLC, which indirectly exercises exclusive control over RRE
Investors, L.P. and RRE Investors Fund, L.P.
(5) US Venture Partners IV L.P.'s affiliates who are holders of the Company's
Preferred Stock are USVP Entrepreneur Partners II, L.P. and Second Ventures
II, L.P.
(6) Michael W. Hilton is Chairman of the Board of Directors and Chief Technical
Officer of the Company.
(7) S. Steven Singh is the President, Chief Executive Officer and a director of
the Company.
Transactions with American Express. In August 1998, the Company sold an
aggregate of 1,612,903 shares of its Series E Preferred Stock to TRS, an
affiliate of American Express, at a cash purchase price of $3.10 per share, and
issued a warrant to TRS exercisable for an aggregate of 6,000,000 shares of the
Company's Series E Preferred Stock (the "TRS Warrant"). If all of the shares of
the Company's Series E Preferred Stock are converted into shares of Common Stock
in connection with a registration of the Company's Common Stock under the
Securities Act, then the TRS Warrant shall automatically become exercisable for
6,000,000 shares of the Company's Common Stock (such shares underlying the TRS
Warrant are referred to as the "Warrant Shares"). 750,000 of the Warrant Shares
may be acquired at the time of the Offering at a cash purchase price equal to
the Offering price less 7%; 1,750,000 of the Warrant Shares may be acquired at
any time on or before October 15, 1999 at a cash purchase price of $13.50 per
share; 1,750,000 of the Warrant Shares may be acquired at any time on or before
January 15, 2001 at a cash purchase price of $20.25 per share; and the remaining
1,750,000 of the Warrant Shares may be acquired at any time on or before January
15, 2002 at a cash purchase price of $34.00 per share. Pursuant to the TRS
Warrant, if determined to be appropriate by the Company's Board of Directors
within 60 days of the date of the TRS Warrant, 25% of the shares that may be
acquired under the TRS Warrant at the time of the Offering or on or before
October 15, 1999 may be cancelled. The Company's Board of Directors has made
such a determination; thus, 562,500 of the Warrant Shares may be acquired at the
time of the Offering, and 1,312,500 additional Warrant Shares may be acquired on
or before October 15, 1999. In connection with the purchase of Series E
Preferred Stock by TRS, the Company and the other holders of its Series E
Preferred Stock entered into an amended Voting Agreement, pursuant to which TRS
was given the right to designate Edward Gilligan, or some other person
reasonably acceptable to the Company's Board of Directors, as a member of the
Company's Board of Directors. The Voting Agreement, as amended, will terminate
upon the completion of the Offering.
The Company's agreements with TRS prohibit TRS, together with its
majority-owned subsidiaries, from purchasing additional shares of the Company's
capital stock if such purchase would result in TRS owning more than 17% of the
Company's capital stock (including Warrant Shares issuable upon exercise of the
TRS Warrant).
Employment Agreements. The Company has entered into employment agreements
with Messrs. Wilson, Matsuo, Russo and Ingham. See "Management--Employment
Agreements."
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<PAGE> 65
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of August
15, 1998 and as adjusted to reflect the sale of the shares offered hereby, by
(i) each stockholder known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers and (iv) all current executive officers and
directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
------------------------- SHARES BEING -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
- --------------------------------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
American Express Company(3)............ 6,987,903 18.10% -- 6,987,903 %
Brentwood Associates VI, L.P. and
affiliates(4)........................ 5,755,551 17.32% -- 5,755,551
Institutional Venture Partners VII,
L.P. and affiliates(5)............... 5,505,714 16.57 -- 5,505,714
Mayfield VIII and affiliates(6)........ 5,317,956 16.00 -- 5,317,956
US Venture Partners IV, L.P. and
affiliates(7)........................ 4,931,236 14.84 -- 4,931,236
RRE Investors, L.P. and
affiliates(8)........................ 1,612,903 4.85 -- 1,612,903
Jeffrey D. Brody(4).................... 5,755,551 17.32 -- 5,755,551
Norman A. Fogelsong(5)................. 5,505,714 16.57 -- 5,505,714
Michael W. Hilton(9)................... 2,468,153 7.42 100,000 2,368,153
Michael J. Levinthal(6)................ 5,317,956 16.00 -- 5,317,956
James D. Robinson III(8)............... 1,612,903 4.85 -- 1,612,903
S. Steven Singh(10).................... 2,596,004 7.71 160,000 2,436,004
Frederick L. Ingham(11)................ 42,285 * -- 42,285 *
Jon T. Matsuo(12)...................... 701,410 2.08 66,000 635,410
John A. Prumatico(13).................. -- -- -- -- --
John P. Russo, Jr.(14)................. 48,583 * -- 48,583 *
Rajeev Singh(15)....................... 500,931 1.51 46,000 454,931
Michael Watson(16)..................... -- -- -- -- --
Sterling R. Wilson(17)................. 601,480 1.81 56,000 545,480
Imperial Bank(18)...................... 138,281 * -- --
All current executive officers and
directors as a group(19)............. 6,968,524 20.29% 428,000 6,540,524 %
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Unless otherwise indicated, the address for each listed stockholder is c/o
Concur Technologies, Inc., 6222 185th Avenue NE, Redmond, Washington 98052.
(2) Percentage ownership is based on 33,234,470 shares outstanding as of August
15, 1998 and shares outstanding after the Offering. Unless
otherwise indicated below, the persons and entities named in the table have
sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days of August 15, 1998 are deemed to
be outstanding and to be beneficially owned by the person holding such
options or warrants for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Represents (i) 1,612,903 shares held of record by TRS, a subsidiary of
American Express, and (ii) 5,375,000 shares subject to a warrant
exercisable within 60 days of August 15, 1998 held by TRS at cash purchase
prices ranging from the price to public in the Offering less 7% to $34.00,
expiring in four tranches through January 2002. The address for American
Express and TRS is American Express Tower, World Financial Center, New
York, New York 10285. See "Certain Transactions."
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<PAGE> 66
(4) Represents (i) 5,537,539 shares held of record by Brentwood Associates VI,
L.P., (ii) 170,632 shares held of record by Brentwood Affiliates Fund II,
L.P., (iii) 9,678 shares held of record by Jeffrey D. Brody, (iv) 31,250
shares held of record by The Schuster Revocable Trust dated February 10,
1995, (v) 3,226 shares held of record by Eric Chiu and (vi) 3,226 shares
held of record by James Mongiello. Mr. Brody, a director of the Company, is
the Managing Member of Brentwood VIII Ventures, LLC, the General Partner of
Brentwood Associates VI, L.P. and Brentwood Affiliates Fund II, L.P. Mr.
Brody disclaims beneficial ownership of the shares held by Brentwood
Associates VI, L.P. and Brentwood Affiliates Fund II, L.P. The address for
Mr. Brody, Brentwood Associates VI, L.P., Brentwood Affiliates Fund II,
L.P., The Schuster Revocable Trust dated February 10, 1995, Mr. Chiu and
Mr. Mongiello is c/o Brentwood Venture Capital, 3000 Sand Hill Road,
Building 1, Suite 260, Menlo Park, California 94025.
(5) Represents (i) 5,232,405 shares held of record by Institutional Venture
Partners VII, L.P., (ii) 188,194 shares held of record by IVP Founders Fund
I, L.P. and (iii) 85,115 shares held of record by Institutional Venture
Management VII, L.P. Norman A. Fogelsong, a director of the Company, is the
General Partner of Institutional Venture Management VII, L.P., the General
Partner of Institutional Venture Partners VII, L.P. and IVP Founders Fund
I, L.P. Mr. Fogelsong disclaims beneficial ownership of the shares held by
Institutional Venture Partners VII, L.P., IVP Founders Fund I, L.P. and
Institutional Venture Management VII, L.P. The address for Mr. Fogelsong,
Institutional Venture Partners VII, L.P., IVP Founders Fund I, L.P. and
Institutional Venture Management VII, L.P. is c/o Institutional Venture
Management VII, L.P., 3000 Sand Hill Road, Building 2, Suite 290, Menlo
Park, California 94025.
(6) Represents (i) 5,052,058 shares held of record by Mayfield VIII and (ii)
265,898 shares held of record by Mayfield Associates Fund III. Michael J.
Levinthal, a director of the Company, is the Managing Member of Mayfield
VIII Management, L.L.C., the General Partner of Mayfield VIII and Mayfield
Associates Fund III. Mr. Levinthal disclaims beneficial ownership of the
shares held by Mayfield VIII and Mayfield Associates Fund III. The address
for Mr. Levinthal, Mayfield VIII and Mayfield Associates Fund III is c/o
Mayfield Fund, 2800 Sand Hill Road, Suite 250, Menlo Park, California
94025.
(7) Represents (i) 4,265,518 shares held of record by U.S. Venture Partners IV,
L.P., (ii) 147,938 shares held of record by USVP Entrepreneur Partners II,
L.P. and (iii) 517,780 shares held of record by Second Ventures II, L.P.
The address for U.S. Venture Partners IV, L.P., USVP Entrepreneur Partners
II, L.P. and Second Ventures II, L.P. is c/o Presidio Management Group IV,
L.P., 2180 Sand Hill Road, Suite 300, Menlo Park, California 94025.
(8) Represents (i) 1,040,218 shares held of record by RRE Investors, L.P. and
(ii) 572,685 shares held of record by RRE Investors Fund, L.P. James D.
Robinson III, a director of the Company, is a member of RRE Investors II,
LLC, which indirectly exercises exclusive control over RRE Investors, L.P.
and RRE Investors Fund, L.P. Mr. Robinson disclaims beneficial ownership of
the shares held by RRE Investors, L.P. and RRE Investors Fund, L.P. The
address for Mr. Robinson, RRE Investors, L.P. and RRE Investors Fund, L.P.
is 126 East 56th Street, 22nd Floor, New York, New York 10022.
(9) Represents (i) 2,435,653 shares held of record by Michael W. Hilton and
(ii) 32,500 shares subject to options exercisable within 60 days of August
15, 1998 held by Mr. Hilton. Mr. Hilton is the Chairman of the Board of
Directors and Chief Technical Officer of the Company.
(10) Represents (i) 2,171,004 shares held of record by S. Steven Singh and (ii)
425,000 shares subject to options exercisable within 60 days of August 15,
1998 held by Mr. Singh. Mr. Singh is the President, Chief Executive Officer
and a director of the Company.
(11) Represents (i) 6,452 shares held of record by Frederick L. Ingham and (ii)
35,833 shares subject to options exercisable within 60 days of August 15,
1998 held by Mr. Ingham. Mr. Ingham is the Vice President of Business
Development of the Company.
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<PAGE> 67
(12) Represents (i) 226,452 shares held of record by Jon T. Matsuo and (ii)
474,958 shares subject to options exercisable within 60 days of August 15,
1998 held by Mr. Matsuo. Mr. Matsuo is the Executive Vice President of
Worldwide Sales of the Company.
(13) John A. Prumatico does not own any shares of the Company's capital stock or
any options exercisable within 60 days of August 15, 1998. Mr. Prumatico is
the Vice President of Human Resources of the Company.
(14) Represents 48,583 shares subject to options exercisable within 60 days of
August 15, 1998 held by John P. Russo, Jr. Mr. Russo is the Vice President
of Internet Application Services of the Company.
(15) Represents (i) 456,452 shares held of record by Rajeev Singh and (ii)
44,479 shares subject to options exercisable within 60 days of August 15,
1998 held by Mr. Singh. Mr. Singh is the Vice President of Products of the
Company.
(16) Michael Watson does not own any shares of the Company's capital stock or
any options exercisable within 60 days of August 15, 1998. Mr. Watson is
the Vice President of Professional Services of the Company.
(17) Represents (i) 556,522 shares held of record by Sterling R. Wilson and (ii)
44,958 shares subject to options exercisable within 60 days of August 15,
1998 held by Mr. Wilson. Mr. Wilson is the Chief Financial Officer of the
Company.
(18) Represents 138,281 shares subject to warrants exercisable within 60 days of
August 15, 1998 held by Imperial Bank. Imperial Bank has notified the
Company that it will exercise such warrants and acquire shares
on a net exercise basis at an assumed exercise price of $ per share,
all of which will be offered in the Offering. The address for Imperial Bank
is Emerging Growth Industries Group -- Menlo Park, 226 Airport Parkway, San
Jose, California 95110-1024.
(19) Represents (i) 5,862,213 shares held of record by current executive
officers and directors as a group and (ii) 1,106,311 shares subject to
options exercisable within 60 days of August 15, 1998 held by current
executive officers and directors as a group.
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<PAGE> 68
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offering, the authorized capital stock of the
Company will consist of 60,000,000 shares of Common Stock, $0.001 par value per
share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share.
COMMON STOCK
As of August 15, 1998, assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock, there were 33,234,470 shares of Common Stock
outstanding, held of record by 71 stockholders. Subject to preferences that may
be applicable to any Preferred Stock outstanding at the time, the holders of
outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine. Each stockholder is entitled to
one vote for each share of Common Stock held on all matters submitted to a vote
of stockholders. See "Dividend Policy." Cumulative voting for the election of
directors is not provided for in the Company's Certificate of Incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election. The Common Stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon
liquidation, dissolution or winding-up of the Company, the assets legally
available for distribution to stockholders are distributable ratably among the
holders of the Common Stock and any participating Preferred Stock outstanding at
that time after payment of liquidation preferences, if any, on any outstanding
Preferred Stock and payment of other claims of creditors. Each outstanding share
of Common Stock is, and all shares of Common Stock to be outstanding upon
completion of the Offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of the Offering, 5,000,000 shares of Preferred Stock will
be authorized and no shares will be outstanding. The Board of Directors is
authorized, subject to any limitations prescribed by Delaware law, to issue the
5,000,000 shares of Preferred Stock in one or more series, to establish from
time to time the number of shares to be included in each such series, to fix the
rights, preferences and privileges of the shares of each wholly unissued series
and to designate any qualifications, limitations or restrictions thereon, and to
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding), without any further vote or action by
the stockholders. The Board of Directors may authorize the issuance of Preferred
Stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of Common Stock. Thus, the issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no current plan to issue any
shares of Preferred Stock.
WARRANTS
As of August 15, 1998, the Company had outstanding warrants to purchase an
aggregate of 70,313 shares of Series C Preferred Stock, 204,539 shares of Series
D Preferred Stock, and 5,549,097 shares of Series E Preferred Stock. Imperial
Bank, the holder of outstanding warrants to purchase 138,281 shares of preferred
stock, has indicated that it will exercise its warrants in full to purchase
shares, assuming the net exercise of its warrants at an assumed
exercise price of $ per share, immediately prior to the Offering. Any
warrants to purchase shares of Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock that are not exercised prior to the closing of
the Offering will automatically be converted into warrants to purchase a like
number of shares of Common Stock. Warrants to purchase 5,685,668 shares of
Common Stock are expected to be outstanding following the closing of the
Offering.
ANTI-TAKEOVER PROVISIONS
Section 203 ("Section 203") of the DGCL is applicable to corporate
takeovers of Delaware corporations. Subject to certain exceptions set forth
therein, Section 203 provides that a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the date that such
67
<PAGE> 69
stockholder becomes an interested stockholder unless (a) prior to such date, the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (i) persons who are directors and also
officers and (ii) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (c) on or subsequent to
such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, and by the affirmative votes of at least two-thirds of the outstanding
voting stock which is not owned by the interested stockholder. Except as
specified in Section 203, an interested stockholder is generally defined to
include any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the corporation,
or is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation any time within three
years immediately prior to the relevant date, and the affiliates and associates
of such person. Under certain circumstances, Section 203 makes it more difficult
for an interested stockholder to effect various business combinations with a
corporation for a three-year period, although the stockholders may, by adopting
an amendment to the corporation's certificate of incorporation or bylaws, elect
not to be governed by this section, effective 12 months after adoption. The
Company's Certificate of Incorporation and Bylaws do not exclude the Company
from the restrictions imposed under Section 203. It is anticipated that the
provisions of Section 203 may encourage companies interested in acquiring the
Company to negotiate in advance with the Board of Directors of the Company since
the stockholder approval requirement would be avoided if a majority of the
directors then in office approve either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder. These provisions may have the effect of deterring hostile takeovers
or delaying changes in control of the Company, which could depress the market
price of the Common Stock and which could deprive the stockholders of
opportunities to realize a premium on shares of the Common Stock held by them.
The Company's Bylaws, which will be in effect upon the completion of the
Offering, will provide for the division of the Board into three classes as
nearly equal in size as possible with staggered three-year terms. The
classification of the Board could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
control of the Company.
REGISTRATION RIGHTS
Beginning one year after the date of the Offering, the holders of
30,791,594 shares of Common Stock (assuming the exercise of warrants to purchase
5,823,949 shares of Common Stock held by holders of registration rights) (the
"Registrable Securities") will have certain rights with respect to the
registration of such shares under the Securities Act. If requested by holders of
40% or more of the Registrable Securities, the Company must file a registration
statement under the Securities Act on a form other than Form S-3 covering all
Registrable Securities requested to be included by all holders of such
Registrable Securities, provided that at least 25% of the then outstanding
Registrable Securities (or any lesser percent if the reasonably anticipated
aggregate proceeds of such offering exceeds $10,000,000) will be offered in such
offering. In addition, if requested by a holder or holders of outstanding
Registrable Securities, the Company must file a registration statement under the
Securities Act on Form S-3 covering such Registrable Securities, provided that
the reasonably anticipated aggregate proceeds of such offering, net of
underwriting discounts and commissions, exceeds $2,000,000. The Company may be
required to effect two such registrations. In addition to the foregoing, if the
Company proposes to register any of its Common Stock, the holders of the
Registrable Securities may include all or a portion of their shares in such
registration, subject to certain rights of the underwriter's representatives in
an underwritten offering to limit the number of shares in any such offering. All
expenses incurred in connection with such registrations (including underwriting
discounts and commissions) will be borne by the Company. Such registration
rights terminate following the expiration of five years
68
<PAGE> 70
following the closing of the Offering or in the event that the Registrable
Securities held by the relevant rights holder is less than 1% of the outstanding
Registrable Securities.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Norwest
Bank Minnesota, National Association.
69
<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have shares of
Common Stock outstanding. Of this amount, the shares offered hereby
will be available for immediate sale in the public market as of the date of this
Prospectus. An additional 458,172 shares are not subject to an 180-day lockup
and will be available for sale in the public market 90 days following the date
of this Prospectus pursuant to Rule 701. Approximately 26,454,320 additional
shares will be available for sale in the public market following the expiration
of 180-day lockup agreements with the Representatives of the Underwriters or the
Company, subject in some cases to compliance with the volume and other
limitations of Rule 144.
<TABLE>
<CAPTION>
DAYS AFTER THE DATE OF APPROXIMATE SHARES
THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
---------------------- ------------------------ -----------------------------------
<S> <C> <C>
Upon Effectiveness................. Freely tradable shares sold in
Offering and shares salable under
Rule 144(k) that are not subject
to 180-day lockup
90 days............................ 458,172 Shares salable under Rule 144,
144(k) or 701 that are not subject
to 180-day lockup.
180 days........................... 26,454,320 Lockup released; shares salable
under Rule 144, 144(k) or 701
Over 180 days...................... 5,893,978 Restricted securities held for one
year or less
</TABLE>
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year is entitled to sell within any three-month period commencing 90 days after
the date of this Prospectus a number of shares that does not exceed the greater
of (i) 1% of the then outstanding shares of Common Stock (approximately
shares immediately after the Offering) or (ii) the average weekly
trading volume during the four calendar weeks preceding such sale, subject to
the filing of a Form 144 with respect to such sale. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale who has
beneficially owned his or her shares for at least two years is entitled to sell
such shares pursuant to Rule 144(k) without regard to the limitations described
above. Persons deemed to be affiliates must always sell pursuant to Rule 144,
even after the applicable holding periods have been satisfied.
The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
Prior to the Offering, there has been no public market for the Common Stock, and
there can be no assurance that a significant public market for the Common Stock
will develop or be sustained after the Offering. Any future sale of substantial
amounts of the Common Stock in the open market may adversely affect the market
price of the Common Stock offered hereby.
The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders and optionholders have agreed
pursuant to the Underwriting Agreement and other agreements that they will not
sell any Common Stock without the prior written consent of BancAmerica Robertson
Stephens for a period of 180 days from the date of this Prospectus (the "180-day
Lockup Period") except that the Company may, without such consent, grant options
and sell shares pursuant to the Company's stock plans.
Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
Prospectus. As of August 15, 1998, the holders of options to purchase
approximately 1,864,991 shares of Common Stock will be eligible to sell their
shares upon the expiration of the 180-day Lockup Period, subject in certain
cases to vesting of such options.
70
<PAGE> 72
The Company intends to file a registration statement on Form S-8 under the
Securities Act within 180 days after the completion of the Offering to register
14,781,567 shares of Common Stock subject to outstanding stock options or
reserved for issuance under the 1998 Plan, the Directors Plan and the Purchase
Plan, thus permitting the resale of such shares by nonaffiliates in the public
market without restriction under the Securities Act.
In addition, after the Offering, the holders of approximately 30,791,594
shares of Common Stock (assuming the exercise of warrants to purchase 5,823,949
shares of Common Stock held by holders of registration rights) will have certain
rights with respect to registration of such shares under the Securities Act.
Registration of such shares under the Securities Act would result in such shares
becoming freely tradable without restriction under the Securities Act (except
for shares purchased by affiliates of the Company) immediately upon the
effectiveness of such registration. See "Description of Capital
Stock--Registration Rights."
71
<PAGE> 73
UNDERWRITING
The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, Hambrecht & Quist LLC and Piper Jaffray Inc.
(the "Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting Agreement,
to purchase the number of shares of Common Stock set forth opposite their
respective names below. The underwriters are committed to purchase and pay for
all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
BancAmerica Robertson Stephens..............................
Hambrecht & Quist LLC.......................................
Piper Jaffray Inc...........................................
---------
Total.............................................
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession of not in excess of $
per share, of which $ may be reallowed to other dealers. After the
Offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount of
proceeds to be received by the Company and the Selling Stockholders as set forth
on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus for the Offering, to
purchase up to additional shares of Common Stock at the same price per
share as the Company and the Selling Stockholders will receive for the
shares that the Underwriters have agreed to purchase. To the extent
that the Underwriters exercise such option, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of such additional shares that the number of shares of Common
Stock to be purchased by it shown in the above table represents as a percentage
of the shares offered hereby. If purchased, such additional shares
will be sold by the Underwriters on the same terms as those on which the
shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representation and warranties contained in the
Underwriting Agreement.
Each officer and director and certain security holders of the Company have
agreed with the Representatives for a period of 180 days after the effective
date of this Prospectus that they will not, subject to certain exceptions,
directly or indirectly offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to, any shares of
Common Stock, or any securities convertible into or exchangeable for shares of
Common Stock, now owned or hereafter acquired directly by such holders or with
respect to which they have the power of disposition, without the prior written
consent of BancAmerica Robertson Stephens, which may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements. In addition, the Company has agreed that during the 180
days following the effective date of this Prospectus, the Company will not,
without the prior written consent of BancAmerica Robertson Stephens, subject to
certain exceptions, offer, issue, sell, contract to sell, or otherwise dispose
of any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock , or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the Company's sales of shares
in the Offering, the issuance of Common Stock upon the exercise of outstanding
options and the Company's issuance of options under existing employee stock
option and stock purchase plans. See "Shares Eligible for Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
72
<PAGE> 74
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined through negotiations among the Company
and the Representatives. Among the factors considered in such negotiations were
prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential of
the Company and the industry in which it competes, an assessment of the
Company's management, its past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development and other factors deemed relevant.
Certain persons and entities affiliated with Hambrecht & Quist LLC own an
aggregate of 63,066 shares of the Company's Series E Preferred Stock. Such
affiliates are subject to the 180-day lock-up that applies to other stockholders
as described above. Hambrecht & Quist LLC and its affiliates (other than such
holders described above) will be permitted to engage in stabilization, brokerage
and ordinary course of business transactions. See "Shares Eligible for Future
Sale."
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The Representatives have advised the Company that such transitions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the Common Stock offered hereby for certain individuals
designated by the Company who have expressed an interest in purchasing such
shares of Common Stock in the Offering. The number of shares available for sale
to the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as other shares offered
hereby.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Palo Alto,
California. Certain legal matters in connection with the Offering will be passed
upon for the underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto,
California. Matthew P. Quilter, a member of Fenwick & West LLP, owns an
aggregate of 3,226 shares of Series E Preferred Stock of the Company and is the
Secretary of the Company.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Concur as of September 30, 1996 and 1997, and June 30, 1998 and for
each of the three years in the period ended September 30, 1997 and for the nine
months ended June 30, 1998 and the financial statements of 7Software as of
December 31, 1997 and for the period then ended appearing in this Prospectus and
the Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports
73
<PAGE> 75
thereon appearing elsewhere herein, and are included in reliance upon such
reports, given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement and the exhibits and schedules thereto may be inspected without charge
at the public reference facilities maintained by the Commission located at Room
1024, 450 Fifth Street, Washington, D.C. 20549 and at the Commission's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048, and copies of all or any part of the Registration
Statement may be obtained from such offices upon the payment of the fees
prescribed by the Commission. The Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission. Information concerning the registrant is
also available for inspection at the offices of the Nasdaq National Market,
Reports Section, 1735 K Street, N.W., Washington, D.C.
74
<PAGE> 76
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONCUR TECHNOLOGIES, INC. (FORMERLY PORTABLE SOFTWARE CORPORATION)
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of September 30, 1996,
September 30, 1997, and June 30, 1998..................... F-3
Consolidated Statements of Operations for the Years Ended
September 30, 1995, 1996, and 1997 and the Nine Months
Ended June 30, 1997 and 1998.............................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended September 30, 1995, 1996, and 1997 and
the Nine Months Ended June 30, 1998....................... F-5
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1996, and 1997 and the Nine Months
Ended June 30, 1997 and 1998.............................. F-6
Notes to Consolidated Financial Statements.................. F-7
7SOFTWARE, INC. (A DEVELOPMENT STAGE COMPANY)
Report of Ernst & Young LLP, Independent Auditors........... F-23
Balance Sheet as of December 31, 1997....................... F-24
Statement of Income for the Period May 30, 1997 (Date of
Incorporation) to December 31, 1997....................... F-25
Statement of Shareholders' Equity for the Period May 30,
1997 (Date of Incorporation) to December 31, 1997......... F-26
Statement of Cash Flows for the Period May 30, 1997 (Date of
Incorporation) to December 31, 1997....................... F-27
Notes to Financial Statements............................... F-28
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Consolidated Financial Statements (Unaudited)..... F-31
Pro Forma Consolidated Statements of Operations for the Nine
Months ended June 30, 1998 (Unaudited).................... F-32
Pro Forma Consolidated Statements of Operations for the Year
Ended September 30, 1997 (Unaudited)...................... F-33
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)............................................... F-34
</TABLE>
F-1
<PAGE> 77
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Concur Technologies, Inc.
(Formerly Portable Software Corporation)
We have audited the accompanying consolidated balance sheets of Concur
Technologies, Inc. (the Company) as of September 30, 1996 and 1997, and June 30,
1998 and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
September 30, 1997 and the nine months ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Concur
Technologies, Inc. at September 30, 1996 and 1997 and June 30, 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997 and the nine months ended
June 30, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Seattle, Washington
August 14, 1998, except for Note 17, as to which the date is August 21, 1998
F-2
<PAGE> 78
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
SEPTEMBER 30, EQUITY
------------------- JUNE 30, JUNE 30,
1996 1997 1998 1998
------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 5,685 $ 6,695 $ 15,604
Accounts receivable, net of allowance for
doubtful accounts of $125, $170, and $473 in
1996, 1997, and 1998, respectively............. 509 4,365 3,572
Prepaid expenses and other current assets........ 90 165 398
------- -------- --------
Total current assets...................... 6,284 11,225 19,574
Equipment and furniture, net....................... 455 2,077 2,652
Deposits........................................... 20 28 133
Capitalized technology and other intangible
assets........................................... -- -- 960
------- -------- --------
Total assets.............................. $ 6,759 $ 13,330 $ 23,319
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................. $ 628 $ 1,082 $ 705
Accrued liabilities.............................. 777 1,294 3,500
Accrued commissions.............................. 99 509 750
Current portion of accrued payment to
stockholders................................... 167
Current portion of long-term debt................ 123 329 1,427
Current portion of capital lease obligations..... -- 351 819
Current portion of notes payable to
stockholders................................... 133 -- --
Deferred revenues................................ 451 1,477 2,737
------- -------- --------
Total current liabilities................. 2,211 5,042 10,105
Accrued payment to stockholders, net of current
portion.......................................... 333
Long-term debt, net of current portion............. 215 2,171 6,325
Capital lease obligations, net of current
portion.......................................... -- 1,516 1,994
Notes payable to stockholders, net of current
portion.......................................... 133 -- --
Deferred gain on leased equipment.................. -- 989 809
Redeemable convertible preferred stock:
Authorized shares--23,921,023
Issued and outstanding shares --
17,886,592, 21,412,250, and 23,921,023 in 1996,
1997, and 1998, respectively, liquidation
value of $25,202 (Note 11).................. 12,381 17,264 25,041
Redeemable convertible preferred stock warrants.... 5 58 72
Commitments
Stockholders' equity (deficit):
Common stock, no par value:
Authorized shares -- 60,000,000
Issued and outstanding shares -- 5,720,617,
5,723,741, and 7,601,251 in 1996, 1997, and
1998, respectively; 31,522,274 shares pro
forma....................................... 259 259 6,268 $ 31,381
Deferred stock compensation...................... -- -- (564) (564)
Accumulated deficit.............................. (8,445) (13,969) (27,064) (27,064)
------- -------- -------- --------
Total stockholders' equity (deficit)...... (8,186) (13,710) (21,360) $ 3,753
------- -------- -------- ========
Total liabilities and stockholders' equity
(deficit)............................... $ 6,759 $ 13,330 $ 23,319
======= ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 79
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1995 1996 1997 1997 1998
------- ------- ------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues, net:
Licenses................................. $ 2,104 $ 1,717 $ 6,347 $ 4,087 $ 8,039
Services................................. 24 242 1,923 1,118 3,676
------- ------- ------- ------- --------
2,128 1,959 8,270 5,205 11,715
Cost of revenues:
Licenses................................. 728 386 394 219 318
Services................................. 673 839 2,269 1,370 3,702
------- ------- ------- ------- --------
1,401 1,225 2,663 1,589 4,020
Gross profit............................... 727 734 5,607 3,616 7,695
Operating expenses:
Sales and marketing...................... 2,363 2,936 5,896 3,873 7,886
Research and development................. 744 1,793 3,401 2,226 4,162
General and administrative............... 515 963 1,815 1,212 3,225
Acquired in-process technology (Note
3).................................... -- -- -- -- 5,203
------- ------- ------- ------- --------
Total operating expenses................... 3,622 5,692 11,112 7,311 20,476
------- ------- ------- ------- --------
Loss from operations....................... (2,895) (4,958) (5,505) (3,695) (12,781)
Interest income............................ 68 92 130 92 134
Interest expense........................... (34) (43) (88) (44) (327)
Other expense, net......................... (29) (44) (61) (34) (121)
------- ------- ------- ------- --------
Net loss................................... $(2,890) $(4,953) $(5,524) $(3,681) $(13,095)
======= ======= ======= ======= ========
Pro forma basic and diluted net loss per
share (unaudited)........................ $ (0.23) $ (0.48)
======= ========
Shares used in calculation of pro forma
basic and diluted net loss per share
(unaudited).............................. 24,408 27,509
======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 80
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DEFERRED
STOCK
COMPENSATION TOTAL
COMMON STOCK RELATED TO STOCKHOLDERS'
-------------------- GRANT OF ACCUMULATED EQUITY
SHARES AMOUNT STOCK OPTIONS DEFICIT (DEFICIT)
---------- ------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1995......... 5,700,070 $ 258 $ -- $ (3,492) $ (3,234)
Issuance of common stock from
exercise of stock options..... 20,547 1 -- -- 1
Net loss......................... -- -- -- (4,953) (4,953)
---------- ------- ----- -------- --------
Balance at September 30, 1996...... 5,720,617 259 -- (8,445) (8,186)
Issuance of common stock from
exercise of stock options..... 3,124 -- -- -- --
Net loss......................... -- -- -- (5,524) (5,524)
---------- ------- ----- -------- --------
Balance at September 30, 1997...... 5,723,741 259 -- (13,969) (13,710)
Issuance of common stock from
exercise of stock options..... 105,208 5 -- -- 5
Deferred stock compensation...... -- 861 (861) -- --
Amortization of stock
compensation.................. -- -- 297 -- 297
Issuance of common stock in
connection with acquisition
(Note 3)...................... 1,772,302 4,378 -- -- 4,378
Assumption of stock options in
connection with acquisition
(Note 3)...................... -- 765 -- -- 765
Net loss......................... -- -- -- (13,095) (13,095)
---------- ------- ----- -------- --------
Balance at June 30, 1998........... 7,601,251 $ 6,268 $(564) $(27,064) $(21,360)
========== ======= ===== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 81
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
----------------------------- --------------------------
1995 1996 1997 1997 1998
------- ------- ------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................... $(2,890) $(4,953) $(5,524) $(3,681) $(13,095)
Adjustments to reconcile net loss to net cash
used in operating activities:
Acquired in-process technology............ -- -- -- -- 5,203
Amortization of deferred stock
compensation............................ -- -- -- -- 297
Warrant expense........................... -- 5 53 -- 14
Depreciation and amortization............. 71 144 393 275 341
Other..................................... -- 17 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable..................... (149) (360) (3,856) (1,381) 699
Prepaid expenses and other assets....... (150) 63 (84) (73) (361)
Accounts payable........................ 553 (24) 454 (151) (377)
Accrued liabilities..................... 214 597 927 569 2,033
Deferred revenues....................... 37 412 1,026 156 1,260
------- ------- ------- ------- --------
Net cash used in operating activities......... (2,314) (4,099) (6,611) (4,286) (3,986)
------- ------- ------- ------- --------
INVESTING ACTIVITIES
Purchases of equipment and furniture.......... (220) (420) (1,020) (737) (23)
------- ------- ------- ------- --------
FINANCING ACTIVITIES
Proceeds from sales leaseback transaction..... -- -- 1,800 -- 192
Proceeds from capital lease financing......... -- -- 67 -- --
Proceeds from borrowings...................... 187 563 3,087 587 5,500
Payments on borrowings........................ (300) (380) (925) (87) (248)
Payment on capital leases..................... -- -- -- -- (308)
Issuance of common stock...................... 8 1 -- -- 5
Issuance of redeemable convertible preferred
stock....................................... 4,903 7,479 4,612 -- 7,777
------- ------- ------- ------- --------
Net cash provided by financing activities..... 4,798 7,663 8,641 500 12,918
------- ------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................. 2,264 3,144 1,010 (4,523) 8,909
Cash and cash equivalents at beginning of
year........................................ 277 2,541 5,685 5,685 6,695
------- ------- ------- ------- --------
Cash and cash equivalents at end of year...... $ 2,541 $ 5,685 $ 6,695 $ 1,162 $ 15,604
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest........................ $ -- $ 27 $ 76 $ 40 $ 258
======= ======= ======= ======= ========
Issuance of redeemable convertible preferred
stock in exchange for cancellation of notes
payable..................................... -- -- $ 267 $ 267 $ --
Issuance of common stock and assumption of
stock options in connection with acquisition
of 7Software (Note 3)....................... -- -- -- -- 5,143
Liabilities (net of assets) assumed and
incurred in acquisition of 7Software (Note
3).......................................... -- -- -- -- 60
Equipment and furniture obtained through
capital leases.............................. -- -- -- -- 1,062
</TABLE>
See accompanying notes.
F-6
<PAGE> 82
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Company
Concur Technologies, Inc. (the "Company", formerly Portable Software
Corporation) is a leading provider of Intranet-based employee-facing
applications that extend automation to employees throughout the enterprise and
to partners, vendors and service providers in the extended enterprise. The
Company's Xpense Management Solution ("XMS") and CompanyStore products automate
the preparation, approval, processing and data analysis of travel and
entertainment ("T&E") expense reports and front-office procurement requisitions.
The Company was originally incorporated in the State of Washington on August 19,
1993. Operations commenced during 1994.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, XMS (UK) Ltd. and 7Software, Inc.
("7Software"). All significant intercompany accounts and transactions are
eliminated in consolidation.
Unaudited Interim Financial Information
The financial information for the nine months ended June 30, 1997 is
unaudited but includes all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
that period. Operating results for the nine months ended June 30, 1998 are not
necessarily indicative of results that may be expected for the entire year.
Revenue Recognition Policy
The Company generates revenues from licensing the rights to use its
software products directly to end users. The Company also generates revenues
from sales of maintenance contracts and integration services performed for
customers who license the software.
The Company recognizes revenue in accordance with Statement of Position No.
91-1, "Software Revenue Recognition." Software license revenues are recognized
when a non-cancelable license agreement has been signed with a customer, the
software is shipped, no significant post-delivery vendor obligations remain, and
collection is deemed probable. Maintenance revenues are recognized ratably over
the term of the maintenance contract, typically one year. Revenues for
consulting services and other post-sales revenues are recognized when the
services are performed.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2").
The Company will adopt SOP 97-2 beginning in fiscal 1999. SOP 97-2 generally
requires revenues earned on software arrangements involving multiple elements
such as software products, upgrades, enhancements, postcontract customer
support, installation and training to be allocated to each element based on the
relative fair values of the elements. The fair value of an element must be based
on evidence which is specific to the vendor. Evidence of the fair value of each
element is based on the price charged when the element is sold separately, or if
the element is not being sold separately, the price for each element established
by management having relevant authority. The revenues allocated to software
products, including specified upgrades or enhancements, generally are recognized
upon delivery of the products. The revenues allocated to unspecified upgrades,
updates and other postcontract customer support generally are recognized ratably
over the term of the contract. If evidence of the fair value for all
F-7
<PAGE> 83
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
elements of the arrangement does not exist, all revenues from the arrangement
are deferred until such evidence exists or until all elements are delivered. It
is not anticipated that there will be a material change to the Company's
accounting for revenues as a result of the adoption of SOP 97-2. However, full
implementation guidelines for this standard have not yet been issued. Once
available, such implementation guidance could lead to unanticipated changes in
the Company's current revenue accounting practices, and such changes could
materially adversely affect the Company's future revenues and earnings. Such
implementation guidance may necessitate significant changes in the Company's
business practices in order for the Company to continue to recognize license
revenues upon delivery of its software products.
Cash and Cash Equivalents
All highly liquid financial instruments purchased with an original maturity
of three months or less are reported as cash equivalents.
Fair Values of Financial Instruments
At June 30, 1998, the Company has the following financial instruments: cash
and cash equivalents, accounts receivable, accounts payable, long-term debt and
capital lease obligations, bank line of credit ("LOC"), and standby letters of
credit. The carrying value of cash and cash equivalents, accounts receivable,
and accounts payable approximates fair value based on the liquidity of these
financial instruments or based on their short-term nature. The carrying value of
long-term debt, LOC, standby letters of credit, and capital lease obligations
approximates carrying value based on the market interest rates available to the
Company for debt of similar risk and maturities.
Research and Development
Research and development costs are expensed as incurred and consist
primarily of software development costs. Financial accounting standards require
the capitalization of certain software development costs after technological
feasibility of the software is established. In the development of the Company's
new products and enhancements to existing products, the technological
feasibility of the software is not established until substantially all product
development is complete, including the development of a working model. Internal
software development costs that were eligible for capitalization were
insignificant and were charged to research and development expense in the
accompanying statement of operations.
Advertising and Marketing Costs
Costs of marketing materials and advertising expenditures are charged to
operations when the materials are used or the advertisement is first released.
Advertising costs were $1,400,000, $711,000, and $569,000 in fiscal 1995, 1996,
and 1997, respectively and $491,000 and $894,000 for the nine months ended June
30, 1997 and 1998, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
utilizes the liability method of accounting for income taxes. A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting. Valuation allowances are established when necessary to reduce
deferred tax assets to amounts expected to be realized.
F-8
<PAGE> 84
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Stock-Based Compensation
In fiscal 1997, the Company implemented the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). In accordance with the provisions of SFAS 123, the
Company has elected to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the market price of the Company's common stock at the date of grant over
the stock option exercise price.
Equipment and Furniture
Equipment and furniture are carried at cost. The Company provides for
depreciation and amortization using the straight-line method for financial
reporting purposes over estimated useful lives ranging from two to five years.
Depreciation expense includes amounts amortized for assets recorded under
capital leases.
Pro Forma Net Loss per Share (unaudited)
Upon the completion of the Company's proposed initial public offering, all
redeemable convertible preferred stock will automatically convert to common
stock. Accordingly, pro forma net loss per share is computed using the weighted
average number of shares of common stock outstanding and the weighted average
redeemable convertible preferred stock outstanding as if such shares were
converted to common stock at the time of issuance. Other common stock
equivalents, including stock options and warrants, are excluded from the
computation as their effect is antidilutive. See Note 13.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from these estimates.
Concentrations of Credit Risk
The Company's customer base is dispersed across many different geographic
areas throughout the world in a variety of industries. No single customer
accounted for more than 10% of the Company's sales in any of the periods
presented. The Company does not require collateral or other security to support
credit sales, but provides an allowance for bad debts based on historical
experience and specific identification.
The Company is subject to concentrations of credit risk from its cash and
cash equivalents. Under terms of certain of its debt agreements, the Company is
required to maintain its cash and cash equivalents primarily at one financial
institution.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
Recently Issued Accounting Standards
In 1997, the following accounting standards were issued: SFAS No. 129,
"Disclosure of Information About Capital Structure," requiring supplemental
disclosure of capital structure, SFAS No. 130, "Reporting
F-9
<PAGE> 85
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Comprehensive Income," (this statement establishes standards for reporting and
disclosure of comprehensive income and its components, including revenues,
expenses, gains, and losses, in a full set of general-purpose financial
statements), SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," and SOP 97-2, "Software Revenue Recognition." Each of
these standards will become effective for the Company on October 1, 1998. The
adoption of these standards is not expected to have a significant impact upon
the Company's financial statements or disclosures.
2. EQUIPMENT AND FURNITURE
Equipment and furniture consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- JUNE 30,
1996 1997 1998
----- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Computer hardware and software................... $ 587 $ 319 $ 51
Furniture and equipment.......................... 88 33 61
Leased equipment................................. -- 1,800 3,122
----- ------ ------
675 2,152 3,234
Less accumulated depreciation and amortization... (220) (75) (582)
----- ------ ------
$ 455 $2,077 $2,652
===== ====== ======
</TABLE>
In July 1997, the Company entered into a Master Lease Agreement with
Comdisco, Inc. ("Comdisco"), a preferred stockholder, under which Comdisco
agreed to provide the Company lease financing, up to an aggregate purchase price
of $2.5 million. In February 1998, the Company entered into a second Master
Lease Agreement, whereby the total financing commitment extended by Comdisco was
increased by an additional $1.0 million, to a total of $3.5 million. As of June
30, 1998, approximately $380,000 was available under this agreement. The Company
accounts for its obligations under these Master Lease Agreements as capital
leases.
In connection with the Master Lease Agreements, the Company entered into
sale leaseback transactions with Comdisco totaling $1.8 million and $237,000 in
September and October of 1997, respectively. The equipment that was sold and
subsequently leased back had a net book value of $970,000. The resulting
deferred gain of $1,067,000 is amortized over the four-year life of the leases.
The gain recognized on the sale leaseback transactions during the nine months
ended June 30, 1998 was $192,000. The gain was recorded against depreciation
expense in the accompanying financial statements. The leased equipment is
amortized over the lease term.
3. ACQUISITION
On June 30, 1998, the Company acquired 7Software, a privately-held software
company and the developer of CompanyStore. The Company issued 1,772,302 shares
of its common stock in exchange for all outstanding shares of 7Software. The
Company also assumed all outstanding 7Software options, which were converted to
options to purchase approximately 309,809 shares of the Company's common stock,
and agreed to pay certain shareholders of 7Software $500,000, resulting in a
total purchase price of $6.2 million (including direct costs of the
acquisition). This amount is payable to such shareholders in the amount of
$167,000 per year for three years. The acquisition was accounted for as a
purchase. Therefore, the results of operations of 7Software and the fair value
of the assets acquired and liabilities assumed were included in the Company's
financial statements beginning on the acquisition date.
F-10
<PAGE> 86
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
3. ACQUISITION (CONTINUED)
In connection with the purchase of 7Software, the Company assumed
7Software's 1997 stock option plan. All outstanding options to purchase the
stock of 7Software on the acquisition date were converted into options to
purchase 309,809 shares of common stock of the Company. The outstanding options
can be exercised at a price of approximately $0.01 per share, vest over 4 years,
and are exercisable for a period not to exceed 10 years.
The allocation of the purchase price resulted in intangible assets
(primarily developed software and the value of an acquired workforce) of
$960,000 which has been capitalized and is being amortized on a straight line
basis over 5 years. Acquired in-process technology has been valued using the
income approach, resulting in a charge of $5,203,000.
Values assigned to acquired in-process research and development, developed
technology, and trademarks and the acquired workforce were determined by
independent appraisals using discounted cash flow analysis. To determine the
value of the in-process research and development, the Company considered, among
other factors, the state of development of each project, the time and cost
needed to complete each project, expected income, and associated risks which
included the inherent difficulties and uncertainties in completing the project
and thereby achieving technological feasibility and risks related to the
viability of and potential changes to future target markets. This analysis
results in amounts assigned to in-process research and development projects that
had not yet reached technological feasibility or do not have alternative future
uses. To determine the value of the developed technology, the expected future
cash flows of the existing technology product were discounted taking into
account risks related to the characteristics and applications of each product,
existing and future markets, and assessments of the life cycle stage of each
product. Based on this analysis, the existing technology that had reached
technological feasibility was capitalized.
The unaudited pro forma combined historical results, as if 7Software had
been acquired at the beginning of each respective fiscal period excluding the
non-recurring one-time charge for acquired in-process technology:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
SEPTEMBER 30, 1997 ENDED JUNE 30, 1998
----------------------- ------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------- ------------- -------- ------------
(IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total revenues, net.............. $ 8,270 $ 8,336 $ 11,715 $ 11,885
Net loss......................... (5,524) (5,713) (13,095) (8,195)
Pro forma net loss per share..... (0.23) (0.22) (0.48) (0.28)
</TABLE>
The pro forma information does not purport to be indicative of the results
that would have been obtained had these events occurred at the beginning of the
periods presented and is not necessarily indicative of future results.
In connection with the purchase of 7Software, the Company also entered into
separate employment agreements with certain former 7Software officers and
shareholders. Under the terms of these arrangements, the Company is committed to
loan $500,000 to these officers and shareholders. The notes receivable will be
payable in aggregate annual installments of $167,000 plus interest at variable
rates and will be secured by second mortgages on real property.
Approximately 310,000 shares of the Company's common stock issued in
connection with the purchase of 7Software will be held in escrow until June 30,
1999 subject to resolution of any unresolved claims by the Company. The value of
these shares was included in the 7Software purchase price. In addition, as of
June 30,
F-11
<PAGE> 87
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
3. ACQUISITION (CONTINUED)
1998, 851,131 shares of Common Stock issued to the founders in connection with
the acquisition include restrictions entitling the Company to repurchase such
shares in the event of termination. These restrictions lapse at various rates
through June 2000.
4. LINE OF CREDIT
The Company has a $2.0 million line of credit for operating needs that
expires September 2, 1998. Borrowings under the credit line bear interest at the
lending bank's prime interest rate plus 1.5%, which can be reduced to the bank's
prime rate plus 1.0% following the achievement and maintenance of after-tax
operating profitability for two consecutive quarters. The line is limited to
$500,000 for the issuance of standby and commercial letters of credit. The
borrowing base for the line is to be monitored on a monthly basis and is to
consist of the sum of up to 80% of eligible domestic accounts receivable and any
letter of credit backed or insured by foreign accounts receivable; and up to 80%
of approved eligible foreign accounts receivable with a limit of the aggregate
funds advanced against such accounts, not to exceed $300,000. Interest is due
monthly and principal is due upon maturity.
There were no outstanding borrowings under this line at June 30, 1998. The
bank has issued standby letters of credit on behalf of the Company at June 30,
1998 in the amount of $455,000 and the amount available on the unused line of
credit on that date is $1,545,000. The line is secured by all non-leased assets
of the Company, including intellectual property. The line of credit agreement
requires the Company to meet certain financial covenants, including limitations
on the Company's ability to pay dividends. See Notes 11 and 17 for discussion of
warrants issued in conjunction with the line of credit and other debt.
5. LONG-TERM DEBT
Long-term debt at June 30, 1998 consisted of: (i) a $3.0 million senior
term loan facility; (ii) a $1.5 million subordinated promissory note; and (iii)
a $3.5 million subordinated promissory note. The subordinated promissory notes
are held by Comdisco. The proceeds from these obligations may be used for
equipment purchases and general corporate purposes.
The senior term loan facility bears interest at the lending bank's prime
rate less 1.0% and matures on February 15, 2001 (7.5% at June 30, 1998).
Payments are interest only through February 15, 1999. At February 15, 1999, the
outstanding balance under the facility may be termed out with 24 equal monthly
principal payments, plus applicable interest. The loan is secured by a perfected
senior security interest in all non-leased assets of the Company with specific
filings for intellectual property (both the line of credit and senior term loan
were issued by the same lender and include the same financial covenants and
restrictions discussed above).
The subordinated promissory notes (subordinated to both the line of credit
and senior term loan) are secured by the Company's receivables, equipment,
general intangibles, inventory, and all other goods and personal property of the
Company. The $1.5 million note bears interest at 8.5%, has principal and
interest payments of approximately $38,000 due monthly, and matures August 2001.
The $3.5 million note bears interest at 11.0%, has monthly principal and
interest payments of approximately $101,000 beginning November 1998, and matures
April 2002. The underlying debt agreement allows the Company to obtain
additional long-term borrowings of up to $1.5 million, at an interest rate of
12.5%. This commitment by the lending institution expires December 31, 1998.
F-12
<PAGE> 88
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Three months ended September 30, 1998.......... $ 87
Fiscal year ending September 30:
1999......................................... 1,658
2000......................................... 3,232
2001......................................... 2,094
2002......................................... 681
------
$7,752
======
</TABLE>
6. NOTES PAYABLE TO STOCKHOLDERS
In February 1997, the Company exchanged two notes payable to stockholders
totaling $233,000, plus accrued interest, for 337,301 shares of Series C
Preferred Stock. At the time of the conversion to Series C Preferred Stock, the
outstanding balance of the notes plus accrued interest was $267,000.
7. COMMITMENTS
The Company leases office space and equipment under noncancelable operating
leases and capital leases. In October 1997, the Company signed a five-year lease
for new corporate headquarters in Redmond, Washington which commenced February
1998. The Company has the option to extend the lease for one additional
five-year term. The Company is required to provide a $450,000 letter of credit
as security for the lease. The letter of credit may be reduced by specified
amounts in the lease agreement after 36 months or upon the Company achieving
certain economic goals. In January and February 1998, the Company signed
two-year subleases for its former corporate headquarters.
Future minimum rental payments under noncancelable leases, adjusted to
include the new lease dated August 1998 and net of the future minimum rentals of
$325,000 to be received under the subleases are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Three months ended September 30, 1998.................... $ 248 $ 223
Fiscal year ending September 30:
1999................................................... 1,033 761
2000................................................... 1,033 684
2001................................................... 861 732
2002................................................... 31 754
2003................................................... -- 277
------ ------
3,206 $3,431
======
Less amount representing interest........................ (393)
------
Present value of net minimum capital lease obligations... 2,813
Less current portion..................................... (819)
------
Capital lease obligations, less current portion.......... $1,994
======
</TABLE>
F-13
<PAGE> 89
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
7. COMMITMENTS (CONTINUED)
Total rent expense for the years ended September 30, 1995, 1996, and 1997
was $105,000, $162,000, and $254,000, respectively and $170,000 and $558,000 for
the nine months ended June 30, 1997 and 1998, respectively.
8. INCOME TAXES
The Company did not provide an income tax benefit for any period presented
because it has experienced operating losses since inception. At June 30, 1998,
the Company has net operating loss carryforwards of $15,739,000 and tax credit
carryforwards of $262,000 respectively, all of which expire between 2009 and
2013.
As a result of prior equity financings the Company has incurred and will
incur "ownership changes" pursuant to applicable regulations in effect under the
Internal Revenue Code of 1986, as amended. Accordingly, the Company's use of net
operating loss carryforwards incurred through the date of these ownership
changes will be limited during the carryforward period. To the extent that any
single year loss is not utilized to the full amount of the limitation, such
unused loss is carried over to subsequent years until the earlier of its
utilization or the expiration of the relevant carryforward period.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------ JUNE 30,
1996 1997 1998
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................... $ 2,315 $ 3,410 $ 5,351
Tax credit carryforwards............................ 23 152 262
Deferred revenues................................... 219 502 930
Expenses not currently deductible and other......... 131 630 786
------- ------- -------
Total deferred tax assets................... 2,688 4,694 7,329
Valuation allowance................................... (2,688) (4,694) (7,329)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
Since the Company's utilization of these deferred tax assets is dependent
on future profits, which are not assured, a valuation allowance equal to the net
deferred tax assets has been provided. The valuation allowance for deferred tax
assets increased approximately $1,673,000, $2,006,000, and $2,635,000 during the
years ended September 30, 1996 and 1997, and for the nine months ended June 30,
1998.
9. STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN
The Company's 1994 Stock Option Plan (the "1994 Plan") provides for the
issuance of options to acquire 6,900,000 shares of common stock. The 1994 Plan
provides for the granting of incentive stock options to employees and
nonqualified stock options to employees, directors and other eligible
participants. Options granted under the 1994 Plan vest at variable rates,
typically four years, determined by the Board of Directors, and remain
exercisable for a period not to exceed 10 years. At June 30, 1998, 973,337
shares were available for future grant.
F-14
<PAGE> 90
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
9. STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN (CONTINUED)
A summary of the Company's stock option activity and related weighted
average exercise prices are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 JUNE 30, 1998
---------------------- --------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- -------- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period... 2,854,070 $0.04 810,250 $ 0.04 1,557,500 $ 0.06 1,986,443 $0.06
Granted...................... 157,750 0.04 901,000 0.08 490,450 0.09 1,771,335 0.54
Exercised.................... (2,200,070) 0.04 (20,547) 0.05 (3,124) 0.07 (105,208) 0.05
Canceled..................... (1,500) 0.05 (133,203) 0.06 (58,383) 0.15 (54,856) 0.09
----------- ---------- ---------- ----------
Balance at end of year........... 810,250 0.04 1,557,500 0.06 1,986,443 0.06 3,597,714 0.30
=========== ========== ========== ==========
Exercisable at end of period..... 147,639 $0.04 497,886 $ 0.04 980,242 $ 0.05 1,175,599 $0.05
=========== ========== ========== ==========
Weighted average fair value of
options granted during the
period
Granted at fair value........ $ 0.04 $ 0.08 $ 0.09 $ --
Granted at below fair
value...................... -- -- -- 1.03
</TABLE>
Information regarding the weighted average remaining contractual life and
weighted average exercise price of options outstanding and options exercisable
at June 30, 1998 for selected exercise price ranges is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE
EXERCISE PRICES LIFE (IN YEARS) SHARES SHARES PRICE
--------------- --------------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.04 - 0.08 7.22 1,782,879 1,175,599 $0.05
0.15 9.32 1,466,735 -- --
0.16 - 2.25 9.97 348,100 -- --
------------ ---- --------- --------- -----
$0.04 - 2.25 8.34 3,597,714 1,175,599 $0.05
========= =========
</TABLE>
The Company uses the intrinsic value-based method to account for all its
employee stock-based compensation arrangements. Accordingly, no compensation
cost has been recognized for its stock options in the accompanying consolidated
financial statements because the fair value of the underlying common stock
equals or exceeds the exercise price of the stock options at the date of grant,
except with respect to certain options granted during the nine months ended June
30, 1998. The Company has recorded deferred stock compensation expense of
$861,000 relating to options granted in the nine months ended June 30, 1998.
These amounts represent the difference between the exercise price and the fair
value of the Company's common stock during the periods in which such options
were granted. Amortization of deferred compensation of $297,000 was recognized
during the nine months ended June 30, 1998.
The following pro forma information regarding stock-based compensation has
been determined as if the Company had accounted for its employee stock options
under the fair market value method of SFAS 123. The fair value of these options
was estimated at the date of grant using a minimum value option pricing model
with the following weighted average assumptions: risk-free interest rates range
from 5.5% to 6.5% in 1996, 1997, and 1998; a dividend yield rate of 0% for all
periods; and assuming that the options will be exercised one year after they
vest.
F-15
<PAGE> 91
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
9. STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
------------------------ JUNE 30,
1996 1997 1998
--------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net loss as reported.................................... $(4,953) $(5,524) $(13,095)
Incremental pro forma compensation expense under SFAS
123................................................... (2) (7) (2)
------- ------- --------
Pro forma net loss...................................... $(4,955) $(5,531) $(13,097)
======= ======= ========
Pro forma loss per share................................ $ (0.87) $ (0.97) $ (2.26)
======= ======= ========
</TABLE>
Under SFAS 123, compensation expense representing the fair value of the
option grant is recognized over the vesting period. The initial impact on pro
forma net loss may not be representative of compensation expense in future
years, when the effect of amortization of multiple awards would be reflected in
pro forma earnings.
10. STOCKHOLDER NOTES RECEIVABLE
In October 1994, certain stockholders exercised options to purchase shares
of common stock. In connection with the issuance, the Company accepted
promissory notes totaling $80,000. These notes, which have been charged to
common stock for financial statement presentation, are due in October 1999 and
bear interest at 5%, payable annually. These notes are full recourse and are
secured by common stock purchased with the proceeds thereof.
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS
Redeemable Convertible Preferred Stock
In October 1994, the Company designated and issued 3,824,092 shares of
Series A redeemable convertible preferred stock ("Series A Preferred Stock")
through a private offering. Net proceeds from the financing amounted to
$1,963,000.
In July 1995, the Company designated and issued 4,687,500 shares of Series
B redeemable convertible preferred stock ("Series B Preferred Stock") through a
private offering. Net proceeds from the financing amounted to $2,939,000.
In July 1996, the Company designated 9,774,801 shares and issued 9,375,000
shares of Series C redeemable convertible preferred stock ("Series C Preferred
Stock") through a private offering. Net proceeds from the financing amounted to
$7,478,000. An additional 337,301 shares of Series C were issued in February
1997 in exchange for the cancellation of notes payable totaling $267,000.
In July 1997, the Company designated 3,357,897 shares and issued 3,188,357
shares of Series D redeemable convertible preferred stock ("Series D Preferred
Stock") through a private offering. Net proceeds from the offering amounted to
$4,615,000.
In June 1998, the Company designated 4,500,000 shares and issued 2,508,773
shares of Series E redeemable convertible preferred stock ("Series E Preferred
Stock") through a private offering. Net proceeds from the financing amounted to
$7,777,000.
F-16
<PAGE> 92
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS (CONTINUED)
Redeemable convertible preferred stock is convertible into common stock, at
the option of the holder, currently at the rate of one-to-one, subject to
antidilution provisions. An equivalent number of unissued shares of common stock
are reserved for issuance in the event of full conversion of all redeemable
convertible preferred stock. Each share of redeemable convertible preferred
stock has voting rights equivalent to the number of common stock shares issuable
if converted. Stockholders of each series of preferred stock have the right to
elect one member to the Board of Directors while common stockholders may elect
two members to the Board of Directors.
Subject to certain conditions, redeemable convertible preferred stock has
mandatory conversion requirements in the event of a qualified initial public
offering of the Company's common stock, or if 80% of the preferred stockholders,
voting in a single class elects to convert to common stock. Each series of
redeemable convertible preferred stock has dividend rights payable at various
rates per share when and if declared. In the event of any distribution of assets
upon liquidation of the Company, the order of preference to those assets will be
provided to holders of Series E, Series D, Series C, Series B, and Series A
Preferred Stock at the original offering price per share, plus any declared but
unpaid dividends. Any remaining assets will be distributed ratably to all
stockholders up to various maximum rates for the preferred stockholders.
Redeemable convertible preferred stock will be redeemed in four equal
annual installments beginning in October 2001 unless waived in writing by more
than 60% of the holders of such stock. Redemption amounts are based on the
original offering price of the stock plus any declared but unpaid dividends. The
order of preference in any such redemption effected shall be as follows: Series
E, Series D, Series C, Series B and Series A Preferred Stock.
Following is a summary of terms and conditions for each series of
redeemable convertible preferred stock as of June 30, 1998:
<TABLE>
<CAPTION>
ANNUAL
AGGREGATE DIVIDEND
SHARES STATED LIQUIDATION RATE --
OUTSTANDING VALUE VALUE NONCUMULATIVE
----------- ------ ----------- -------------
<S> <C> <C> <C> <C>
Issues and outstanding:
Series A......................... 3,824,092 $ 0.52 $ 2,000,000 $ 0.0366
Series B......................... 4,687,500 0.64 3,000,000 0.0448
Series C......................... 9,712,301 0.80 7,770,000 0.0560
Series D......................... 3,188,357 1.46 4,655,000 0.1020
Series E......................... 2,508,773 3.10 7,777,000 0.2170
---------- -----------
23,921,023 $25,202,000
========== ===========
</TABLE>
Warrants to Purchase Preferred Stock
In May 1996, the Company issued warrants to purchase 70,313 shares of
Series C Preferred Stock in conjunction with a renewal and increase in the bank
line of credit (see Note 4). The warrants are immediately exercisable at a price
of $0.80 per share, expiring May 2001. The estimated fair value of these
warrants of $5,000 has been recorded as debt issuance costs.
In July 1997, the Company issued warrants to Comdisco to purchase 112,068
and 57,471 shares of Series D Preferred Stock in conjunction with its receipt of
financing commitments relating to the promissory note and lease agreement,
respectively. Each has a purchase price of $1.46 per share. The warrants become
immediately exercisable on the effective date of the agreements and are
exercisable for a period of five years;
F-17
<PAGE> 93
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS (CONTINUED)
or two years from the effective date of the Company's initial public offering,
whichever is longer, provided the offering is less than $15.0 million. Should
the offering exceed $15.0 million, the right to purchase preferred stock as
granted shall expire, if not previously exercised, immediately upon the closing
of the issuance and sale of shares of common stock of the Company. The estimated
fair value of these warrants of $30,000 and $16,000, respectively, has been
recorded as debt issuance costs.
In September 1997, the Company issued warrants to purchase 35,000 shares of
Series D Preferred Stock in conjunction with a new loan facility and an
increase/renewal in the bank line of credit (see Note 4). The warrants have an
initial exercise price of $1.46 per share, a five-year maturity inclusive of
certain provisions to include, but not limited by, a net exercise provision,
antidilution protection and a $30,000 put option. The right to exercise the put
option expires two years from the issue date of the warrants. The estimated fair
value of these warrants of $7,000 has been expensed as debt issuance costs.
In April 1998, the Company issued warrants to purchase 32,968 shares of
Series E Preferred Stock in conjunction with the increase to the senior loan
facility. The warrants have an initial exercise price of $3.10 per share. The
warrants become immediately exercisable on the effective date of the agreements
and are exercisable for a period of five years. Additionally, the agreement
provides for a $75,000 put option which expires in April 2000. The estimated
fair value of these warrants of $3,000 has been expensed as debt issuance costs.
In May 1998, the Company issued warrants to Comdisco to purchase 141,129
shares of Series E Preferred Stock in conjunction with the new subordinated
promissory note. The warrants are immediately exercisable at a price of $3.10
per share and are exercisable for a period of five years; or two years from
effective date of the Company's initial public offering, whichever is longer,
provided the offering is less than $15.0 million. Should the offering exceed
$15.0 million, the right to purchase preferred stock as granted shall expire, if
not previously exercised, immediately upon the closing of the issuance and sale
of shares of common stock of the Company. The estimated fair value of these
warrants of $11,000 has been recorded as debt issuance costs. Under the terms of
this subordinated debt agreement, the Company has an outstanding commitment to
issue additional warrants to purchase as many as 67,742 shares of Series E
Preferred Stock at an exercise price of $3.10 per share if it utilizes the $1.5
million additional financing available under the agreement.
All preferred stock warrants automatically convert to common stock warrants
upon the closing of a qualified initial public offering of the Company's common
stock.
F-18
<PAGE> 94
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
12. STOCKHOLDERS' EQUITY
The Company has reserved shares of common stock for future issuance as
follows:
<TABLE>
<CAPTION>
JUNE 30,
1998
----------
<S> <C>
1994 Employee Stock Option Plan............................. 6,900,000
1997 Stock Option Plan assumed in connection with
acquisition of 7Software.................................. 309,809
Conversion of redeemable convertible preferred stock:
Series A............................................... 3,824,092
Series B............................................... 4,687,500
Series C............................................... 9,774,801
Series D............................................... 3,357,897
Series E............................................... 4,500,000
Warrants to purchase Series C Preferred Stock that are
convertible to common stock............................... 70,313
Warrants to purchase Series D Preferred Stock that are
convertible to common stock............................... 204,539
Warrants to purchase Series E Preferred Stock that are
convertible to common stock............................... 174,097
----------
Total............................................. 33,803,048
==========
</TABLE>
13. NET LOSS PER SHARE
Basic and diluted loss per common share is calculated by dividing net loss
by the weighted average number of common shares outstanding. Pro forma net loss
per share is computed using the weighted average number of shares used for basic
and diluted per share amounts and the weighted average convertible redeemable
preferred stock outstanding as if such shares were converted to common stock at
the time of issuance.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
------------------------------------- --------------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- ----------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net loss........................... $ (2,890) $ (4,953) $ (5,524) $ (3,681) $ (13,095)
========== ========== =========== ========== ===========
Basic and diluted net loss per
common share..................... $ (0.52) $ (0.87) $ (0.97) $ (0.64) $ (2.26)
========== ========== =========== ========== ===========
Weighted average number of common
shares used for basic and diluted
per share amounts................ 5,585,546 5,705,956 5,720,948 5,720,763 5,802,492
========== ========== ==========
Weighted average common shares
issuable upon pro forma
conversion of preferred stock.... 18,686,768 21,706,049
----------- -----------
Weighted average number of shares
used for pro forma per share
amounts.......................... 24,407,716 27,508,541
=========== ===========
Pro forma net loss per share
(unaudited)...................... $ (0.23) $ (0.48)
=========== ===========
</TABLE>
F-19
<PAGE> 95
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
14. RETIREMENT 401(k) PLAN
The Company sponsors a 401(k) Profit Sharing and Trust Plan which is
available to substantially all employees. Each employee may elect to contribute
up to 20% of his or her pre-tax gross earnings, subject to annual limits. The
Company reserves the right to amend the Plan at any time. Employee contributions
to the Plan are subject to statutory limitations regarding maximum
contributions. There are no Company matching contributions.
15. INTERNATIONAL REVENUES
The Company licenses and markets its products primarily in the United
States, and operates in a single industry segment. Information regarding
revenues in different geographic regions is as follows:
<TABLE>
<CAPTION>
REVENUES
------------------------------------------------------
NINE NINE
MONTHS MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
COUNTRY 1995 1996 1997 1997 1998
------- ------ ------ ------ ----------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
United States..................... $2,128 $1,959 $6,981 $4,369 $11,260
United Kingdom.................... -- -- 612 512 312
Canada............................ -- -- 677 324 31
Australia......................... -- -- -- -- 112
------ ------ ------ ------ -------
Total................... $2,128 $1,959 $8,270 $5,205 $11,715
====== ====== ====== ====== =======
</TABLE>
From the inception of the Company to September 30, 1996, there were no
significant export sales or operations in countries outside of the United
States.
16. SIGNIFICANT AGREEMENTS
Strategic Marketing Alliance Agreement with American Express
In December 1997, the Company entered into a strategic alliance agreement
with American Express Company ("American Express") under which American Express
refers to the Company its corporate charge card customers that seek a T&E
expense management software solution. Under the terms of the agreement, the
Company will pay a fee for certain sales referred by American Express.
License Agreements
The Company has entered into various agreements that allow the Company to
incorporate licensed technology into its products or which allow the Company the
right to sell separately the licensed technology. The Company incurs royalty
fees under these agreements which are determined based on a predetermined fee
per license sold. Royalty costs incurred under these agreements are recognized
as product is sold and are included in cost of product sales. These amounts
totaled $203,000 for the year ended September 30, 1997, and $151,000 and $82,000
for the nine months ended June 30, 1998 and 1997, respectively. Amounts
recognized in 1996 and 1995 were insignificant.
F-20
<PAGE> 96
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
17. SUBSEQUENT EVENTS
In July 1998, the Company entered into a third Master Lease Agreement with
Comdisco, Inc., whereby the total financing commitment extended by Comdisco was
increased by an additional $1.5 million to a total of $5.0 million.
Purchase of Additional Series E Preferred Stock
On August 11, 1998, the Series E Preferred Stock Purchase Agreement (the
"Purchase Agreement") was amended for the additional sale of 1,612,903 shares of
the Company's Series E Preferred Stock for $4,999,999 to American Express Travel
Related Services Company, Inc. ("TRS"). The additional shares of Series E
Preferred Stock were purchased on the same terms and conditions set forth in the
Purchase Agreement. The total number of shares of Series E Preferred Stock
issued through August 11, 1998 was 4,121,676.
Co-Branded XMS Service Marketing Agreement
On August 11, 1998, the Company and American Express entered into a
Co-Branded XMS Service Marketing Agreement, pursuant to which American Express
agreed to be a strategic remarketer of an outsource version of XMS.
Warrants to Purchase Shares of Series E Preferred Stock
On August 11, 1998 the Company issued a warrant to TRS and its assignees to
purchase an additional 6,000,000 shares of Series E Preferred Stock. If all of
the shares of Series E Preferred Stock are converted into shares of common stock
in connection with a registration of the Company's common stock under the
Securities Act, then this warrant shall automatically become exercisable for
6,000,000 shares of the Company's common stock. The warrant is exercisable in
four tranches as follows: 750,000 shares may be acquired at the time of the
Company's initial public offering at a cash purchase price equal to the initial
public offering price less 7%; 1,750,000 shares may be acquired at any time on
or before October 15, 1999 at a cash purchase price of $13.50 per share;
1,750,000 shares may be acquired at any time on or before January 15, 2001 at a
cash purchase price of $20.25 per share; and the remaining 1,750,000 shares may
be acquired at any time on or before January 15, 2002 at a cash purchase price
of $34.00 per share. Pursuant to this warrant, if determined to be appropriate
by the Board of Directors within 60 days of the date of the warrant, 25% of the
shares that may be acquired under the warrant at the time of the Company's
initial public offering or on or before October 15, 1999 may be cancelled. The
Board of Directors has made such a determination; thus, 562,500 shares may be
acquired at the time of the Company's initial public offering, and 1,312,500
shares may be acquired on or before October 15, 1999.
On August 21, 1998, the Board of Directors authorized management to file a
registration statement with the Securities and Exchange Commission to permit the
Company to offer its common stock to the public. If the offering is consummated
under terms presently anticipated each outstanding share of redeemable
convertible preferred stock will convert into one share of common stock.
Unaudited pro forma stockholders' equity reflects the assumed conversion of the
redeemable convertible preferred stock into common stock and the assumed
conversion of redeemable convertible preferred stock warrants into common stock
warrants as of June 30, 1998.
F-21
<PAGE> 97
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 1997 IS UNAUDITED)
17. SUBSEQUENT EVENTS (CONTINUED)
On August 21, 1998, the Board adopted the 1998 Equity Incentive Plan, the
Director Stock Option Plan and the Employee Stock Purchase Plan, subject to
approval by the Company's stockholders. The Equity Incentive Plan authorized
issuance of 8,100,000 shares of common stock upon the exercise of stock options
or otherwise pursuant to the plan. The Director Stock Option Plan authorized the
issuance of 600,000 shares of common stock upon the exercise of stock options
that may be granted pursuant to the plan. The Employee Stock Option Plan
authorized the issuance of 800,000 shares of Common Stock.
F-22
<PAGE> 98
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
7Software, Inc.
We have audited the accompanying balance sheet of 7Software, Inc. (a
development stage company) as of December 31, 1997 and the related statements of
income, shareholders' equity, and cash flows for the period May 30, 1997 (date
of incorporation) to December 31, 1997. 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 audit.
We conducted our audit 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 audit provides 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 7Software, Inc. at December
31, 1997 and the results of its operations and its cash flows for the period May
30, 1997 (date of incorporation) to December 31, 1997 in conformity with
generally accepted accounting principles.
Seattle, Washington ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
August 14, 1998
F-23
<PAGE> 99
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $25
Accounts receivable....................................... 12
---
Total current assets.............................. 37
Furniture and equipment, net................................ 21
---
Total assets...................................... $58
===
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6
Accrued payroll liabilities............................... 4
---
Total current liabilities......................... 10
Convertible note payable.................................... 25
Commitments
Shareholders' equity:
Preferred stock, no par value:
Authorized shares: 5,000,000
No shares issued and outstanding....................... --
Common stock, no par value:
Authorized shares: 10,000,000
2,000,000 shares issued and outstanding................ 20
Retained earnings......................................... 3
---
Total shareholders' equity........................ 23
---
Total liabilities and shareholders' equity........ $58
===
</TABLE>
See accompanying notes.
F-24
<PAGE> 100
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenues.................................................... $66
Cost of revenues............................................ 5
---
Gross profit................................................ 61
Operating expenses:
Research & development.................................... 30
Selling, general, and administration...................... 27
---
Total operating expenses.......................... 57
---
Income before taxes......................................... 4
Provision for taxes......................................... 1
---
Net income........................................ $ 3
===
</TABLE>
See accompanying notes.
F-25
<PAGE> 101
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
Sale of common stock at $0.01 per share for cash
on June 6, 1997................................ 630,000 $ 6 $-- $ 6
Issuance of common stock at $0.01 per share for
furniture and equipment at cost on June 6,
1997........................................ 630,000 6 -- 6
Issuance of common stock at $0.01 per share for
employee services on June 6, 1997........... 740,000 8 -- 8
Net income..................................... 3 3
--------- --- --- ---
Balance at December 31, 1997..................... 2,000,000 $20 $ 3 $23
========= === === ===
</TABLE>
See accompanying notes.
F-26
<PAGE> 102
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 3
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation.............................................. 1
Stock compensation........................................ 8
Changes in assets and liabilities:
Accounts receivable.................................... (12)
Accounts payable and accrued payroll liabilities....... 10
----
Net cash provided by operating activities................... 10
----
INVESTING ACTIVITIES
Purchases of furniture and equipment........................ (16)
----
FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... 6
Proceeds from convertible note payable...................... 25
----
Net cash provided by financing activities................... 31
----
Net increase in cash and cash equivalents................... 25
Cash and cash equivalents at beginning of period............ --
----
Cash and cash equivalents at end of period.................. $ 25
====
NONCASH TRANSACTIONS AND SUPPLEMENTAL DISCLOSURES
Furniture and equipment contributed for common stock........ $ 6
====
</TABLE>
See accompanying notes.
F-27
<PAGE> 103
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ACTIVITIES
7Software, Inc. (the "Company") was incorporated in California on May 30,
1997. The Company performs consulting services for product development and
developed a product called CompanyStore that automates the purchasing of
nonproduction goods. CompanyStore runs on corporate intranets, providing access
to company-specific information and making that information available on
employee desktops throughout the enterprise. The Company is in the development
stage.
REVENUE RECOGNITION
The Company generates revenues from performing computer programming
consulting. Revenue is recognized by the Company based upon hours of consulting
performed and billable, in accordance with the related consulting agreement.
CASH EQUIVALENTS
All short-term investments with maturities of three months or less at date
of purchase are considered to be cash equivalents.
DEVELOPMENT COSTS
All software development costs are expensed until technological feasibility
has been established. No software development costs were capitalized during the
period ended December 31, 1997.
ADVERTISING AND MARKETING COSTS
Costs of marketing materials and advertising expenditures are charged to
operations when the materials are used or the advertisement is first released.
Advertising costs were $5,000 for the period ended December 31, 1997.
FEDERAL INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under
Statement No. 109, deferred tax assets and liabilities are recorded using the
liability method, which recognizes the effect of temporary differences between
the reporting of revenues and expenses for financial statement and income tax
return purposes. Temporary differences for the period were insignificant.
Therefore, no deferred taxes have been provided.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25, no
compensation expense is recorded when the exercise price of employee stock
options equals the market price of the underlying stock on the date of grant.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
F-28
<PAGE> 104
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of 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 contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could materially differ from these estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated on the
straight-line method over the estimated useful lives of the assets, ranging from
two to four years.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following: (in thousands)
<TABLE>
<S> <C>
Computer equipment..................................... $20
Furniture, fixtures, and equipment..................... 2
---
22
Accumulated depreciation............................... (1)
---
$21
===
</TABLE>
3. CONVERTIBLE NOTES
On November 30, 1997 the Company entered into an agreement to receive
$75,000 in consideration of a non-interest bearing convertible note. The terms
of this agreement were such that the entire balance of the note was convertible
into securities sold in the Company's first stock financing with outside
investors after the date thereof. The Company received $25,000 of the $75,000
note in December 1997 and the remaining balance during the first quarter of
1998. Subsequent to December 31, 1997, but prior to the closing of the merger
agreement between Concur Technologies, Inc. and the Company on June 30, 1998
(see Note 8), the Company entered into a new warrant agreement which entitled
the note holder to purchase shares of the Company at the price per share agreed
upon under the aforementioned merger agreement. For the ability to purchase
these shares, the note holder forgave the $75,000 note.
4. SHAREHOLDERS' EQUITY
On June 6, 1997, the Company issued 2,000,000 shares of common stock to the
founders of the Company. The shares were issued for $20,000 of consideration
which included cash, furniture and equipment, and services rendered since the
incorporation of the Company.
5. STOCK OPTION PLAN
The Company's 1997 Stock Option Plan has authorized the grant of options to
employees, directors, and eligible participants for up to 500,000 shares of the
Company's common stock. The term of options granted to certain significant
stockholders cannot exceed five years while the term of all other options cannot
exceed ten years. The options vest over periods defined in each option agreement
as determined at the discretion of the Company's Board of Directors. Stock
options that qualify as incentive stock options are exercisable at not less
F-29
<PAGE> 105
7SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
5. STOCK OPTION PLAN (CONTINUED)
than the fair market value of the stock at the date of grant, and nonqualified
stock options are exercisable at prices determined at the discretion of the
Board of Directors, which shall not be less than 85% of the fair market value of
the stock at the date of grant. No options had been granted under the plan as of
December 31, 1997.
6. COMMITMENTS
The Company leased its facility under an operating lease that expired on
June 30, 1998. Total rental expense for the period ended December 31, 1997 was
$4,000.
7. SALES TO MAJOR CUSTOMERS
All revenues recognized by the Company for the period presented were made
to SAP Technology for computer programming consulting.
8. SUBSEQUENT EVENT
On June 30, 1998, the Company merged with Concur Technologies, Inc.
("Concur"). The merger resulted in all shares of the Company's outstanding
capital stock and stock options being converted into Concur common stock and
stock options.
F-30
<PAGE> 106
CONCUR TECHNOLOGIES, INC.
(FORMERLY PORTABLE SOFTWARE CORPORATION)
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following financial statements present the Concur Technologies, Inc.
("Concur," formerly Portable Software Corporation) Pro Forma Consolidated
Statements of Operations for the year ended September 30, 1997 and nine months
ended June 30, 1998.
The Company's acquisition of 7Software, Inc. ("7Software") has been
accounted for under the "purchase" method of accounting which requires the
purchase price to be allocated to the acquired assets and liabilities of
7Software on the basis of their estimated fair values as of the date of
acquisition. The following pro forma consolidated statements of operations for
the year ended September 30, 1997 and the nine months ended June 30, 1998 give
effect to the acquisition of 7Software as if it occurred on October 1, 1996 and
October 1, 1997, respectively, and include adjustments directly attributable to
the acquisition of 7Software and expected to have a continuing impact on the
combined company (collectively, the "Pro Forma Financial Statements"). As the
Pro Forma Financial Statements have been prepared based on estimated fair
values, amounts actually recorded may change upon determination of the total
purchase price (which may change based on future performance) and additional
analysis of individual assets and liabilities assumed.
The pro forma information is based on historical financial statements. The
assumptions give effect to the business combination with 7Software under the
purchase method of accounting. The information has been prepared in accordance
with the rules and regulations of the Commission and is provided for comparative
purposes only. The pro forma information does not purport to be indicative of
the results that actually would have occurred had the combination been effected
at the beginning of the periods presented.
F-31
<PAGE> 107
CONCUR TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
CONCUR 7SOFTWARE ADJUSTMENTS CONSOLIDATED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenues, net..................... $ 11,715 $ 170 $ -- $ 11,885
Cost of revenues........................ 4,020 30 105 4,155
----------- ---------- ------- -----------
Gross profit............................ 7,695 140 (105) 7,730
Sales and marketing..................... 7,886 -- -- 7,886
Research and development................ 4,162 239 20 4,421
General and administrative.............. 3,225 60 19 3,304
Acquired in-process technology.......... 5,203 -- (5,203) --
----------- ---------- ------- -----------
Total operating expense....... 20,476 299 (5,164) 15,611
----------- ---------- ------- -----------
Loss from operations.................... (12,781) (159) 5,059 (7,881)
Other expense........................... 314 -- -- 314
----------- ---------- ------- -----------
Net loss...................... $ (13,095) $ (159) $ 5,059 $ (8,195)
=========== ========== ======= ===========
Pro forma net loss per share............ $ (0.48) $ (0.28)
=========== ===========
Weighted average shares used in
computation of basic and diluted net
loss per share........................ 27,509 29,231
=========== ===========
</TABLE>
See accompanying notes.
F-32
<PAGE> 108
CONCUR TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
CONCUR 7SOFTWARE ADJUSTMENTS CONSOLIDATED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenues, net........................ $ 8,270 $ 66 -- $ 8,336
Cost of revenues........................... 2,663 5 140 2,808
----------- ---------- ----- -----------
Gross profit............................... 5,607 61 (140) 5,528
Sales and marketing........................ 5,896 -- -- 5,896
Research and development................... 3,401 30 26 3,457
General and administrative................. 1,815 27 26 1,868
----------- ---------- ----- -----------
Total operating expense.......... 11,112 57 52 11,221
----------- ---------- ----- -----------
Income (loss) from operations.............. (5,505) 4 (192) (5,693)
Other expense.............................. 19 -- -- 19
----------- ---------- ----- -----------
Income (loss) before income taxes.......... (5,524) 4 (192) (5,712)
Income taxes............................... -- 1 -- 1
----------- ---------- ----- -----------
Net income (loss)................ $ (5,524) $ 3 $(192) $ (5,713)
=========== ========== ===== ===========
Pro forma basic and diluted net loss per
share.................................... $ (0.23) $ (0.22)
=========== ===========
Weighted average shares used in computation
of basic and diluted net loss per
share.................................... 24,408 26,055
=========== ===========
</TABLE>
See accompanying notes.
F-33
<PAGE> 109
CONCUR TECHNOLOGIES, INC.
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On June 30, 1998, the Company acquired 7Software, Inc. ("7Software").
7Software was incorporated in May 1997 and focused on the development and
licensing of Internet-based procurement solutions that bring purchasing to the
desktops of employees of large corporations. Concurrent with this transaction,
7Software was merged into the Company.
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of Concur or the consolidated
results of operations which would have resulted had the acquisition taken place
during the periods presented. The unaudited pro forma consolidated statements of
operations for the year ended September 30, 1997 and the nine months ended June
30, 1998 reflect the effects of the acquisition, assuming the related events
occurred as of October 1, 1996 and October 1, 1997, respectively, for the
purposes of the unaudited pro forma consolidated statement of operations.
2. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of 7Software common stock into
approximately 1,772,302 shares and stock options to purchase 309,809 shares of
Concur common stock pursuant to the acquisition. This consideration resulted in
a total purchase price of $6.2 million (including acquisition expenses).
The allocation of the purchase price resulted in intangible assets,
primarily capitalized technology and the value of an acquired workforce, of
$960,000 which are being amortized on a straight line basis over five years.
In-process research and development acquired and valued using the income
approach in the amount of $5,203,000 was charged to expense. In-process research
and development charges have not been reflected in the pro forma consolidated
financial statements of operations for the year ended September 30, 1997, or the
nine months ended June 30, 1998 as they are considered a nonrecurring charge.
In connection with the purchase of 7Software, the Company entered into
employment agreements with certain former 7Software officers and shareholders.
Under the terms of these arrangements, the Company agreed to pay a total of
$500,000 to these officers and shareholders.
3. UNAUDITED PRO FORMA CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended September 30, 1997 and the nine months ended June 30, 1998
are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance, as of October 1, 1996 and October 1, 1997 of
approximately 1,772,302 shares and stock options to purchase 309,809 shares of
Concur common stock as described in Note 2 to these Notes to Unaudited Pro Forma
Consolidated Financial Statements. Options to purchase approximately 364,000
shares of 7Software common stock were assumed by Concur pursuant to the
acquisition and converted into options to purchase approximately 309,809 shares
of Concur common stock. The Concur common stock issuable upon the exercise of
the stock options have been excluded as the effect would be antidilutive. In
addition to the shares used in computing the net income (loss) per share above,
pro forma basic and diluted net loss per share is calculated using the weighted
average convertible and redeemable preferred stock outstanding as if such shares
were converted to common stock at the time of issuance.
4. PURCHASE ADJUSTMENTS
Pro forma adjustments have been prepared to reflect the elimination of the
non-recurring one-time charge for acquired in-process technology and to reflect
the amortization of capitalized technology and other intangible assets.
F-34
<PAGE> 110
DESCRIPTION OF GRAPHICS
INSIDE FRONT COVER
Graphic:
Concur logo. A large Concur logo without the words "Concur-TM TECHNOLOGIES" and
without the box in the center of the circle, which is replaced by the text
below.
Text:
Concur Technologies is a leading provider of Web-based Employee-Facing
Applications.
Envision a workplace where manual, paper-based processes are not only automated
but also extend throughout the enterprise, to partners, vendors and to service
providers. Concur Technologies provides travel and entertainment expense
management and front-office procurement solutions that enable organizations to
work more efficiently and increase employee productivity. The Company leverages
Intranet technology to deploy such applications quickly and on an
enterprise-wide basis. The Company also leverages the public Internet
infrastructure to offer its solutions to a broad range of businesses.
Concur Technologies' mission is to be the dominant Web-based integrated
solution provider of employee-facing business applications throughout the
extended enterprise.
GATEFOLD
Graphic:
Box divided into 5 vertical sections. The top of the first is the Concur logo.
The next four are headed by "Preparation," "Approval," "Processing" and "Data
Analysis and Reporting," respectively. There are pictures of eight screen shots
showing various stages of the software. The top four screen shots deal with XMS
and the bottom four deal with CompanyStore.
Text:
Under Concur logo:
Concur products automate the preparation, approval, processing and data analysis
of T & E expense reports and front-office procurement requisitions. By
automating manual paper-based processes, costs are reduced and customers are
enabled to collect and analyze data to consolidate purchases with preferred
vendors.
Under "Preparation":
[XMS logo]
Expense Reports are easily prepared using a checkbook-style user interface and
prepopulated with corporate charge card data.
[CompanyStore logo]
Using CompanyStore's simple user interface, orders are placed on-line through a
customized electronic catalog.
Under "Approval":
XMS allows the enterprise to determine the approval process and automatically
flags those reports that are not in compliance.
CompanyStore allows the enterprise to determine how the requisitions should be
processed.
Under "Processing":
XMS integrates with existing and future corporate charge cards, financial,
Intranet, e-mail and operating systems, allowing employees to be reimbursed more
quickly.
CompanyStore saves time by integrating with the customer's ERP system, allowing
orders to be entered into the purchasing system automatically and then forwarded
electronically to the vendor.
Under "Data Analysis and Reporting":
Provides access to expense trends and data, allowing negotiation of better
supplier rates.
Better data allows managers to determine how best to control costs, negotiate
more favorable supplier arrangements and consolidate vendors.
<PAGE> 111
PAGE 45
This graphic depicts the interconnection of various systems. A box with three
divisions, captioned "Concur Applications," is on the top. The three divisions
are the XMS logo, the CompanyStore logo and "Others" in text. A box with eight
divisions, captioned "Concur Technology Platform," is below the "Concur
Solutions" box. The eight divisions are "Prepopulation," "Workflow/Routing,"
"Business Intelligence," "Security," "Messaging," "Business Rules," "User
Management," and "Database," as text. A box with five divisions, captioned "ERP
Platforms," is below the "Concur Technology Platform" box. The five divisions
are "SAP," "Oracle," "PeopleSoft," "Others" and "Legacy Systems" as text. A box
with four divisions, captioned "E-Commerce," is to the right of the other three
boxes. The three divisions are "Travel Services," "Corporate Charge Card
Suppliers," "Vendors & Suppliers" and "Financial Institutions" as text. "Concur
Technology Platform" and "Concur Applications" have three double-ended arrows
pointing to each other. "Concur Technology Platform" and "E-Commerce" have a
double-ended arrow pointing to each other. "Concur Technology Platform" and "ERP
Platforms" have five double-ended arrows pointing to each other.
INSIDE BACK COVER
Graphic: Two screen shots, one of a CompanyStore page, and the other of an XMS
page. Both the CompanyStore logo with the slogan "Business to Business
Procurement: A Timely Solution" and XMS logos. A large Concur logo without the
words "Concur-TM TECHNOLOGIES" and without the box in the center of the circle.
Text:
CompanyStore-TM is an Intranet application designed to support procurement of
front-office goods and services.
The Xpense Management Solution-TM is a proven travel expense automation product
that has been licensed to more than 125 companies for use by hundreds of
thousands of employees around the world.
BACK COVER
Graphic:
Concur logo with shadow. Dark background.
<PAGE> 112
(This page intentionally left blank.)
<PAGE> 113
LOGO
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by the
Company in connection with the sale of shares of Common Stock being registered
hereby. All amounts are estimates except for the Securities and Exchange
Commission fee, the NASD filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 10,915
NASD filing fee............................................. 4,200
Nasdaq National Market filing fee........................... *
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 300,000
Printing and engraving expenses............................. 100,000
Road show expenses.......................................... 30,000
Transfer agent and registrar fees and expenses.............. 3,000
Custodian fees.............................................. *
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law
("DGCL"), the Company's Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. In addition, as permitted by Section 145
of the DGCL, the Bylaws of the Company provide that: (i) the Company is required
to indemnify its directors and executive officers to the fullest extent
permitted by the DGCL (except if such person is seeking indemnity in connection
with a proceeding (or part thereof) initiated by such person and not authorized
by the Board of Directors); (ii) the Company may, in its discretion, indemnify
other officers, employees and agents as set forth in the DGCL; (iii) upon
receipt of an undertaking to repay such advances if indemnification is
determined to be unavailable, the Company is required to advance expenses, as
incurred, to its directors and executive officers to the fullest extent
permitted by the DGCL in connection with a proceeding (except if the expenses
incurred by such person are incurred because the Company is directly bringing a
claim, in a proceeding, against such person, alleging that such person has
breached his or her duty of loyalty to the Company, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction); (iv) the
rights conferred in the Bylaws are not exclusive and the Company is authorized
to enter into indemnification agreements with its directors, officers, employees
and agents; and (v) the Company may not retroactively amend the Bylaw provisions
relating to indemnity.
The Company's policy is to enter into indemnity agreements with each of its
directors and executive officers. The indemnity agreements provide that
directors and executive officers will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Company, on account of their
services as directors, officers, employees or agents of the Company or as
directors, officers, employees or agents of any other company or enterprise when
they are serving in such capacities at the request of the Company. The
II-1
<PAGE> 115
Company will not be obligated pursuant to the agreements to indemnify or advance
expenses to an indemnified party with respect to proceedings or claims (i)
initiated by the indemnified party and not by way of defense, except with
respect to a proceeding authorized by the Board of Directors and successful
proceedings brought to enforce a right to indemnification under the indemnity
agreements; (ii) for any amounts paid in settlement of a proceeding unless the
Company consents to such settlement; (iii) on account of any suit in which
judgment is rendered against the indemnified party for an accounting of profits
made from the purchase or sale by the indemnified party of securities of the
Company pursuant to the provisions of sec. 16(b) of the Securities Exchange Act
of 1934 and related laws; (iv) on account of conduct by an indemnified party
that is finally adjudged to have been in bad faith or conduct that the
indemnified party did not reasonably believe to be in, or not opposed to, the
best interests of the Company; (v) on account of any criminal action or
proceeding arising out of conduct that the indemnified party had reasonable
cause to believe was unlawful; or (vi) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.
The indemnity agreement requires a director or executive officer to
reimburse the Company for expenses advanced only to the extent it is ultimately
determined that the director or executive officer is not entitled, under
Delaware law, the Bylaws, his or her indemnity agreement or otherwise to be
indemnified for such expenses. The indemnity agreement provides that it is not
exclusive of any rights a director or executive officer may have under the
Certificate of Incorporation, Bylaws, other agreements, any majority-in-interest
vote of the stockholders or vote of disinterested directors, Delaware law, or
otherwise.
The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Company and its directors and executive officers, may
be sufficiently broad to permit indemnification of the Company's directors and
executive officers for liabilities arising under the Securities Act.
As authorized by the Company's Bylaws, the Company, with approval by the
Company's Board of Directors, has applied for, and expects to obtain, directors
and officers liability insurance with a per claim and annual aggregate coverage
limit of $5 million.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Underwriting Agreement...................................... 1.01
Company's Certificate of Incorporation...................... 3.01
Company's Bylaws............................................ 3.04
Form of Indemnification Agreement........................... 10.06
</TABLE>
II-2
<PAGE> 116
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities of the
Company sold by the Company from August 15, 1995 to August 15, 1998. References
to warrants below assume the full exercise of all warrants.
<TABLE>
<CAPTION>
NUMBER AGGREGATE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES OF SECURITIES PURCHASE PRICE CONSIDERATION
- -------------------- ----------------- ----------------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1 investor May 15, 1996 Warrants to purchase -- $ -- --(1)
70,313 shares of Series
C Preferred Stock
10 investors July 10, 1996 Series C Preferred 9,375,000 7,500,000 Cash
Stock
2 investors May 22, 1997 Series C Preferred 337,301 269,697 --(2)
Stock
1 investor July 22, 1997 Warrants to purchase -- -- --(3)
169,539 shares of
Series D Preferred
Stock
10 investors July 23, 1997 Series D Preferred 3,188,357 4,655,001 Cash
Stock
1 investor September 3, 1997 Warrants to purchase -- -- --(4)
35,000 shares of Series
D Preferred Stock
1 investor April 28, 1998 Warrants to purchase -- -- --(5)
32,968 shares of Series
E Preferred Stock
1 investor May 8, 1998 Warrants to purchase -- -- --(6)
141,129 shares of
Series E Preferred
Stock
8 shareholders June 30, 1998 Common Stock 1,772,302 -- Exchange for(7)
Common Stock
of 7Software
Corporation
25 investors June 30, 1998 and Series E Preferred 4,121,676 12,777,196 Cash
August 11, 1998 Stock
1 investor August 11, 1998 Warrant to purchase -- -- --(8)
5,375,000 shares of
Series E Preferred
Stock
Officers, directors, August 15, 1995 Exercise of Options to 228,172 12,837 Cash(9)
employees and to August 15, purchase Common Stock
eligible 1998
participants
</TABLE>
- ---------------
* As part of the reincorporation of the Company into Delaware, the Company
exchanged 7,700,544 shares of its Common Stock, 25,533,926 shares of its
redeemable convertible preferred stock and warrants to purchase 5,823,949
shares of its redeemable convertible preferred stock for 7,700,544 shares of
Common Stock, 25,533,926 shares of redeemable convertible preferred stock
and warrants to purchase 5,823,949 shares of redeemable convertible
preferred stock, respectively.
(1) Issued to Imperial Bank as additional consideration for a bank line of
credit.
(2) In connection with the cancellation of previous indebtedness, 175,975 shares
of Series C Preferred Stock were issued to Michael W. Hilton and 161,326
shares of Series C Preferred Stock were issued to S. Steven Singh.
(3) Issued to Comdisco, Inc. as additional consideration for a promissory note
and an equipment lease.
(4) Issued to Imperial Bank as additional consideration for a bank line of
credit and other financing.
(5) Issued to Imperial Bank as additional consideration for additional
financing.
(6) Issued to Comdisco, Inc. as additional consideration for a promissory note.
(7) In connection with the Company's acquisition of 7Software, the Company
exchanged 1,772,302 shares of Common Stock for 7Software's Common Stock.
(8) Issued to TRS in connection with TRS's purchase of Series E Preferred Stock.
See "Certain Transactions."
II-3
<PAGE> 117
(9) With respect to the grant of stock options, exemption from registration
under the Securities Act was unnecessary in that none of such transactions
involved a "sale" of securities as such term is used in Section 2(3) of the
Securities Act.
All sales of Common Stock made pursuant to the exercise of stock options
granted under the stock option plans of the Company or its predecessors were
made pursuant to the exemption from the registration requirements of the
Securities Act afforded by Rule 701 promulgated under the Securities Act.
All other sales were made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act. The securities were
sold to a limited number of people with no general solicitation or advertising.
The purchasers were sophisticated investors with access to all relevant
information necessary to evaluate the investment and who represented to the
issuer that the shares were being acquired for investment.
II-4
<PAGE> 118
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C> <C>
1.01 -- Form of Underwriting Agreement.*
2.01 -- Form of Agreement and Plan of Merger between Company and
Concur Technologies, Inc., a Washington corporation.
2.02 -- Agreement and Plan of Reorganization between Company, PSC
Merger Corp., 7Software, Inc., Andrew Dent and Melissa
Widner dated June 30, 1998.
3.01 -- Company's Certificate of Incorporation.
3.02 -- Company's Certificate of Designation.*
3.03 -- Form of Company's Amended and Restated Certificate of
Incorporation to be filed with the Delaware Secretary of
State immediately following the Offering.
3.04 -- Company's Bylaws.
4.01 -- Specimen Certificate for Company's Common Stock.*
4.02 -- Second Amended and Restated Information and Registration
Rights Agreement dated May 24, 1998.
5.01 -- Opinion of Fenwick & West LLP regarding legality of the
securities being issued.*
10.01 -- Company's Amended and Restated 1994 Stock Option Plan and
related documents.
10.02 -- Company's 1998 Equity Incentive Plan and related documents.
10.03 -- Company's 1998 Employee Stock Purchase Plan and related
documents.
10.04 -- Company's 1998 Directors Stock Option Plan and related
documents.
10.05 -- Company's 401(k) Profit Sharing and Trust Plan.
10.06 -- Form of Indemnification Agreement entered into by Company
with each of its directors and executive officers.
10.07 -- Series D Preferred Stock Purchase Agreement dated July 22,
1997.
10.08 -- Series E Preferred Stock Purchase Agreement dated May 29,
1998.
10.09 -- Strategic Marketing Alliance Agreement between Company and
American Express Company dated December 17, 1997.**
10.10 -- Co-Branded XMS Service Marketing Agreement between Company
and American Express Company dated August 11, 1998.**
10.11 -- Warrant to purchase shares of Company's Series E Preferred
Stock issued by Company to American Express Travel Related
Services Company, Inc. ("TRS") dated August 11, 1998.
10.12 -- Voting Agreement among Company and stockholders of Company
identified therein dated May 29, 1998.
10.13 -- Amendment Agreement among Company and stockholders of
Company identified therein dated July 30, 1998.
10.14 -- Facility Lease between Company and CarrAmerica Realty
Corporation dated October 31, 1997, as amended on April 10,
1998.
10.15 -- Letter Agreement between Company and Sterling R. Wilson
dated April 21, 1994.
10.16 -- Letter Agreement between Company and Jon T. Matsuo dated
June 20, 1994.
10.17 -- Letter Agreement between Company and Frederick L. Ingham
dated December 5, 1996.
10.18 -- Letter Agreement between Company and John P. Russo, Jr.
dated April 1, 1996.
10.19 -- Standstill Agreement between Company and TRS dated August
10, 1998.
</TABLE>
II-5
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C> <C>
21.01 -- List of Company's subsidiaries.
23.01 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
24.01 -- Power of Attorney (included at Page II-7 of this
Registration Statement).
27.01 -- Financial Data Schedule.
99.01 -- Report of Ernst & Young LLP, Independent Auditors, on
Financial Statement Schedule.
</TABLE>
- ---------------
* To be supplied by amendment.
** Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Commission.
(b) The following financial statement schedule is filed herewith:
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes to provide to the underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 14 above, or otherwise, the
Company has been advised that in the opinion of the 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company 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 Company 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 Company 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-6
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington, on the 25th day of August, 1998.
CONCUR TECHNOLOGIES, INC.
By: /s/ S. STEVEN SINGH
------------------------------------
S. Steven Singh
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints S. Steven Singh and Sterling R. Wilson,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462 promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ S. STEVEN SINGH President, Chief Executive August 25, 1998
- ----------------------------------------------------- Officer and Director (principal
S. Steven Singh executive officer)
/s/ STERLING R. WILSON Chief Financial Officer and August 25, 1998
- ----------------------------------------------------- Vice President of Operations
Sterling R. Wilson (principal financial officer
and principal accounting
officer)
/s/ MICHAEL W. HILTON Chairman of the Board of August 25, 1998
- ----------------------------------------------------- Directors and Chief Technical
Michael W. Hilton Officer
/s/ JEFFREY D. BRODY Director August 25, 1998
- -----------------------------------------------------
Jeffrey D. Brody
/s/ NORMAN A. FOGELSONG Director August 25, 1998
- -----------------------------------------------------
Norman A. Fogelsong
</TABLE>
II-7
<PAGE> 121
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ MICHAEL J. LEVINTHAL Director August 25, 1998
- -----------------------------------------------------
Michael J. Levinthal
/s/ JAMES D. ROBINSON III Director August 25, 1998
- -----------------------------------------------------
James D. Robinson III
</TABLE>
II-8
<PAGE> 122
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
CONCUR TECHNOLOGIES, INC.
JUNE 30, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ------------------------ ------------- -------------
ADDITIONS
------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
----------- ------------ ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Period June 30, 1998:
Deducted from asset accounts:
Allowance for doubtful $170,000 $417,120 $ $114,462 $472,658
accounts.......................
Year ended September 30, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts..... 125,000 87,000 42,000 170,000
Year ended September 30, 1996:
Deducted from asset accounts:
Allowance for doubtful 18,000 108,197 1,197 125,000
accounts.......................
Year ended September 30, 1995:
Deducted from asset accounts:
Allowance for doubtful $ $ 25,000 $ $ 7,000 $ 18,000
accounts.......................
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
S-1
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C> <C>
2.01 -- Form of Agreement and Plan of Merger between Company and
Concur Technologies, Inc., a Washington corporation.
2.02 -- Agreement and Plan of Reorganization between Company, PSC
Merger Corp., 7Software, Inc., Andrew Dent and Melissa
Widner dated June 30, 1998.
3.01 -- Company's Certificate of Incorporation.
3.03 -- Form of Company's Amended and Restated Certificate of
Incorporation to be filed with the Delaware Secretary of
State immediately following the Offering.
3.04 -- Company's Bylaws.
4.02 -- Second Amended and Restated Information and Registration
Rights Agreement dated May 24, 1998.
10.01 -- Company's Amended and Restated 1994 Stock Option Plan and
related documents.
10.02 -- Company's 1998 Equity Incentive Plan and related documents.
10.03 -- Company's 1998 Employee Stock Purchase Plan and related
documents.
10.04 -- Company's 1998 Directors Stock Option Plan and related
documents.
10.05 -- Company's 401(k) Profit Sharing and Trust Plan.
10.06 -- Form of Indemnification Agreement entered into by Company
with each of its directors and executive officers.
10.07 -- Series D Preferred Stock Purchase Agreement dated July 22,
1997.
10.08 -- Series E Preferred Stock Purchase Agreement dated May 29,
1998.
10.09 -- Strategic Marketing Alliance Agreement between Company and
American Express Company dated December 17, 1997.**
10.10 -- Co-Branded XMS Service Marketing Agreement between Company
and American Express Company dated August 11, 1998.**
10.11 -- Warrant to purchase shares of Company's Series E Preferred
Stock issued by Company to American Express Travel Related
Services Company, Inc. ("TRS") dated August 11, 1998.
10.12 -- Voting Agreement among the Company and stockholders of
Company identified therein dated May 29, 1998.
10.13 -- Amendment Agreement among the Company and stockholders of
Company identified therein dated July 30, 1998.
10.14 -- Facility Lease between Company and CarrAmerica Realty
Corporation dated October 31, 1997, as amended on April 10,
1998.
10.15 -- Letter Agreement between Company and Sterling R. Wilson
dated April 21, 1994.
10.16 -- Letter Agreement between Company and Jon T. Matsuo dated
June 20, 1994.
10.17 -- Letter Agreement between Company and Frederick L. Ingham
dated December 5, 1996.
10.18 -- Letter Agreement between Company and John P. Russo, Jr.
dated April 1, 1996.
10.19 -- Standstill Agreement between Company and TRS dated August
10, 1998.
21.01 -- List of Company's subsidiaries.
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
24.01 -- Power of Attorney (included at Page II-7 of this
Registration Statement).
27.01 -- Financial Data Schedule.
99.01 -- Report of Ernst & Young LLP, Independent Auditors, on
Financial Statement Schedule.
</TABLE>
- ---------------
** Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Commission.
<PAGE> 1
EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") is
made as of _________________, 1998 by and between Concur Technologies, Inc., a
Washington corporation ("Concur Washington"), and Concur Technologies, Inc., a
Delaware corporation ("Concur Delaware"). Concur Washington and Concur Delaware
are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
R E C I T A L S
A. Concur Washington was incorporated on August 20, 1993. Its
current authorized capital stock consists of: (1) 60,000,000 shares of Common
Stock, no par value ("Concur Washington Common Stock"), of which 7,696,794
shares are issued and outstanding; and (2) 53,000,000 shares of Preferred Stock,
no par value ("Concur Washington Preferred Stock"), of which 3,824,092 shares
are designated as Series A Preferred Stock (the "Series A Stock"), of which
3,824,092 shares are outstanding, and of which 3,824,092 shares are designated
as Series A1 Preferred Stock (the "Series A1 Preferred Stock"), none of which
are outstanding, and of which 4,687,500 shares are designated as Series B
Preferred Stock (the "Series B Stock"), of which 4,687,500 shares are
outstanding, and of which 4,687,500 shares are designated as Series B1 Preferred
Stock (the "Series B1 Preferred Stock"), none of which are outstanding, and of
which 9,774,801 shares are designated as Series C Preferred Stock (the "Series C
Preferred Stock"), of which 9,712,301 shares are outstanding, and of which
9,774,801 shares are designated as Series C1 Preferred Stock ("Series C1
Preferred Stock"), none of which are outstanding, and of which 3,357,897 shares
are designated as Series D Preferred Stock (the "Series D Preferred Stock"), of
which 3,188,357 shares are outstanding, and of which 3,357,897 shares are
designated as Series D1 Preferred Stock (the "Series D1 Preferred Stock"), none
of which are outstanding, and of which 4,500,000 shares are designated as Series
E Preferred Stock (the "Series E Preferred Stock"), of which 4,121,676 shares
are outstanding, and of which 4,500,000 shares are designated as Series E1
Preferred Stock (the "Series E1 Preferred Stock"), none of which are
outstanding.
B. Concur Delaware was incorporated on August 5, 1998. Its
authorized capital stock consists of: (1) 60,000,000 shares of Common Stock, par
value $0.001 per share ("Concur Delaware Common Stock"), of which 1,000 shares
are issued and outstanding; and (2) 53,000,000 shares of Preferred Stock, $0.001
par value ("Concur Delaware Preferred Stock"), none of which shares are issued
and outstanding and of which 3,824,092 shares are designated as Series A
Preferred Stock, 3,824,092 shares are designated as Series A1 Preferred Stock,
4,687,500 shares are designated as Series B Preferred Stock, 4,687,500 shares
are designated as Series B1 Preferred Stock, 9,774,801 shares are designated as
Series C Preferred Stock, 9,774,801 shares are designated as Series C1 Preferred
Stock, 3,357,897 shares are designated as Series D Preferred Stock, 3,357,897
shares are designated as Series D1 Preferred Stock, 4,500,000 shares are
designated as Series E Preferred Stock, and 4,500,000 shares are designated as
Series E1 Preferred Stock.
C. The respective Boards of Directors of Concur Washington and
Concur Delaware deem it advisable and to the advantage of each of the
Constituent Corporations that Concur Washington merge with and into Concur
Delaware upon the terms and subject to the conditions set forth in this Merger
Agreement for the purpose of effecting a change of the state of incorporation of
Concur Washington from Washington to Delaware.
<PAGE> 2
Concur Technologies, Inc.
Agreement and Plan of Merger
D. The Board of Directors of each of the Constituent Corporations
has approved this Merger Agreement.
NOW, THEREFORE, the parties do hereby agree that Concur
Washington shall merge with and into Concur Delaware on the following terms,
conditions and other provisions:
1. MERGER AND EFFECTIVE TIME. At the Effective Time (as defined
below), Concur Washington shall be merged with and into Concur Delaware (the
"Merger"), and Concur Delaware shall be the surviving corporation of the Merger
(the "Surviving Corporation"). The Merger shall become effective upon the close
of business on the date when a duly executed copy of this Merger Agreement,
along with all required officers' certificates, is filed with the Secretary of
State of the State of Delaware (the "Effective Time").
2. EFFECT OF MERGER. At the Effective Time, the separate
corporate existence of Concur Washington shall cease; the corporate identity,
existence, powers, rights and immunities of Concur Delaware as the Surviving
Corporation shall continue unimpaired by the Merger; and Concur Delaware shall
succeed to and shall possess all the assets, properties, rights, privileges,
powers, franchises, immunities and purposes, and be subject to all the debts,
liabilities, obligations, restrictions and duties of Concur Washington, all
without further act or deed.
3. GOVERNING DOCUMENTS. At the Effective Time, the Certificate of
Incorporation of Concur Delaware in effect immediately prior to the Effective
Time shall become the Certificate of Incorporation of the Surviving Corporation,
and the Bylaws of Concur Delaware in effect immediately prior to the Effective
Time, without amendment thereto, shall become the Bylaws of the Surviving
Corporation.
4. DIRECTORS AND OFFICERS. At the Effective Time, the directors
and officers of Concur Delaware shall be and become the directors and officers
(holding the same titles and positions) of the Surviving Corporation and after
the Effective Time shall serve in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
5. CONVERSION OF SHARES OF CONCUR WASHINGTON. Subject to the
terms and conditions of this Agreement, at the Effective Time and without any
further action on the part of any shareholder of Concur Washington, each share
of Concur Washington Common Stock outstanding immediately prior thereto (other
than any shares held by persons exercising dissenters' rights in accordance with
the Washington Business Corporation Act ("Dissenting Shares")) shall be
automatically changed and converted into one fully paid and nonassessable,
issued and outstanding share of Concur Delaware Common Stock. At the Effective
Time: (a) each share of Concur Washington Series A Preferred Stock outstanding
immediately prior thereto shall be automatically changed and converted into one
fully paid and nonassessable, issued and outstanding share of Concur Delaware
Series A Preferred Stock; (b) each share of Concur Washington Series B Preferred
Stock outstanding immediately prior thereto shall be automatically changed and
converted into one fully paid and nonassessable, issued and outstanding share of
Concur Delaware Series B Preferred Stock; (c) each share of Concur Washington
Series C Preferred Stock outstanding immediately prior thereto shall be
automatically changed and converted into one fully paid and nonassessable,
issued and outstanding share of Concur Delaware Series C Preferred Stock; (d)
each share of Concur Washington Series D Preferred Stock outstanding immediately
prior thereto shall be automatically changed and converted into one fully paid
and nonassessable, issued and outstanding share of Concur Delaware Series D
Preferred Stock; and (e) each share of Concur Washington Series E Preferred
Stock outstanding immediately prior thereto shall be
-2-
<PAGE> 3
Concur Technologies, Inc.
Agreement and Plan of Merger
automatically changed and converted into one fully paid and nonassessable,
issued and outstanding share of Concur Delaware Series E Preferred Stock
6. CANCELLATION OF SHARES OF CONCUR DELAWARE. At the Effective
Time, all of the previously issued and outstanding shares of Concur Delaware
Common Stock that were issued and outstanding immediately prior to the Effective
Time shall be automatically retired and canceled.
7. STOCK CERTIFICATES. At and after the Effective Time, all of
the outstanding certificates that, prior to that date, represented shares of
Concur Washington Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Concur Delaware Common
Stock into which such shares of Concur Washington Common Stock are converted as
provided herein. At and after the Effective Time, all of the outstanding
certificates that, prior to that date, represented shares of a series of Concur
Washington Preferred Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of the series of Concur
Delaware Preferred Stock into which such shares of Concur Washington Preferred
Stock are converted as provided herein. The registered owner on the books and
records of Concur Washington of any such outstanding stock certificate for
Concur Washington Common Stock or Concur Washington Preferred Stock shall, until
such certificate shall have been surrendered for transfer or otherwise accounted
for to Concur Delaware or its transfer agent, be entitled to exercise any voting
and other rights with respect to, and to receive any dividend and other
distributions upon, the shares of Concur Delaware Common Stock or Concur
Delaware Preferred Stock evidenced by such outstanding certificate as above
provided.
8. CONVERSION OF OPTIONS OF CONCUR WASHINGTON. At the Effective
Time, all outstanding and unexercised portions of all options to purchase shares
of Concur Washington Common Stock under the Concur Washington 1994 Stock Option
Plan (the "1994 Plan") shall become options to purchase the same number of
shares of Concur Delaware Common Stock at the original exercise price per share
and shall, to the extent permitted by law and otherwise reasonably practicable,
have the same term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), if applicable, and all other material terms and conditions
(including but not limited to the terms and conditions applicable to such
options by virtue of the 1994 Plan). In addition, at the Effective Time, all
outstanding and unexercised portions of all options to purchase shares of Concur
Washington Common Stock granted by 7Software, Inc. ("7Software") under the 1997
Stock Option Plan of 7Software and assumed by Concur Washington in connection
with its acquisition of 7Software in June 1998 (such assumed 1997 Stock Option
Plan of 7Software hereinafter referred to as the "7Software Plan") shall become
options to purchase the same number of shares of Concur Delaware Common Stock at
the original exercise price per share and shall, to the extent permitted by law
and otherwise reasonably practicable, have the same term, exercisability,
vesting schedule, status as an "incentive stock option" under Section 422 of the
Code, if applicable, and all other material terms and conditions (including but
not limited to the terms and conditions applicable to such options by virtue of
the 7Software Plan). Additionally, at the Effective Time, all outstanding and
unexercised portions of all options to purchase shares of Concur Washington
Common Stock granted by 7Software outside of the 7Software Plan and assumed by
Concur Washington in connection with its acquisition of 7Software in June 1998
shall become options to purchase the same number of shares of Concur Delaware
Common Stock at the original exercise price per share and shall, to the extent
permitted by law and otherwise reasonably practicable, have the same term,
exercisability, vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, if applicable, and all other material terms and
conditions (including but not limited to the terms and conditions applicable to
such options by virtue of the 7Software Plan). Continuous employment with
7Software and Concur Washington will be credited to an optionee for purposes of
determining the vesting of the number of shares of Concur Delaware Common Stock
under a converted Concur Washington option at the Effective
-3-
<PAGE> 4
Concur Technologies, Inc.
Agreement and Plan of Merger
Time. At the Effective Time, Concur Delaware shall also adopt and assume the
1994 Plan and the 7Software Plan.
9. CONVERSION OF WARRANTS OF CONCUR WASHINGTON. At the Effective
Time, all outstanding and unexercised portions of all warrants to purchase
shares of Concur Washington Preferred Stock shall become warrants to purchase
the same number of shares of Concur Delaware Preferred Stock at the original
exercise price per share and shall, to the extent permitted by law and otherwise
reasonably practicable, have the same material terms and conditions.
10. FRACTIONAL SHARES. Since all shares of Concur Washington
Common Stock and Preferred Stock will be exchanged for a like number of shares
of Concur Delaware Common Stock and Preferred Stock, no fractional shares of
Concur Delaware Common Stock or Preferred Stock will be issued in connection
with the Merger.
11. EMPLOYEE BENEFIT PLANS. At the Effective Time, the
obligations of Concur Washington under or with respect to every plan, trust,
program and benefit then in effect or administered by Concur Washington for the
benefit of the directors, officers and employees of Concur Washington shall
become the lawful obligations of Concur Delaware and shall be implemented and
administered in the same manner and without interruption until the same are
amended or otherwise lawfully altered or terminated. Effective at the Effective
Time, Concur Delaware hereby expressly adopts and assumes all obligations of
Concur Washington under such employee benefit plans.
12. FURTHER ASSURANCES. From time to time, as and when required
by the Surviving Corporation or by its successors or assigns, there shall be
executed and delivered on behalf of Concur Washington such deeds, assignments
and other instruments, and there shall be taken or caused to be taken by it all
such further action as shall be appropriate, advisable or necessary in order to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
the title to and possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Concur Washington,
and otherwise to carry out the purposes of this Merger Agreement. The officers
and directors of the Surviving Corporation are fully authorized in the name of
and on behalf of Concur Washington, or otherwise, to take any and all such
actions and to execute and deliver any and all such deeds and other instruments
as may be necessary or appropriate to accomplish the foregoing.
13. CONDITION. The consummation of the Merger is subject to the
approval of this Merger Agreement and the Merger contemplated hereby by the
shareholders of Concur Washington and by the sole stockholder of Concur
Delaware, prior to or at the Effective Time.
14. ABANDONMENT. At any time before the Effective Time, this
Merger Agreement may be terminated and the Merger abandoned by the Board of
Directors of Concur Washington or the Board of Directors of Concur Delaware,
notwithstanding approval of this Merger Agreement by the Boards of Directors and
shareholders of Concur Washington and Concur Delaware.
15. AMENDMENT. At any time before the Effective Time, this Merger
Agreement may be amended, modified or supplemented by the Boards of Directors of
the Constituent Corporations, notwithstanding approval of this Merger Agreement
by the shareholders of Concur Washington and Concur Delaware; provided, however,
that any amendment made subsequent to the adoption of this Agreement by the
shareholders of Concur Washington or the sole stockholder of Concur Delaware
shall not: (i) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or upon conversion of any
shares of any class or series of Concur Washington; (ii) alter or change any of
the terms of the Certificate of Incorporation of the Surviving Corporation to be
-4-
<PAGE> 5
Concur Technologies, Inc.
Agreement and Plan of Merger
effected by the Merger; or (iii) alter or change any of the terms or conditions
of this Merger Agreement if such alteration or change would adversely affect the
holders of any shares of any class or series of Concur Washington or Concur
Delaware.
16. TAX-FREE REORGANIZATION. The Merger is intended to be a
tax-free plan of reorganization within the meaning of Section 368(a)(1)(F) of
the Code.
17. DISSENTERS' RIGHTS. Holders of Dissenting Shares who have
complied with all the requirements for perfecting the rights of dissenting
shareholders as set forth in the Washington Business Corporation Act shall be
entitled to their rights under such law.
18. GOVERNING LAW. This Agreement shall be governed by and
construed under the internal laws of the State of Washington as applied to
agreements among Washington residents entered into and to be performed entirely
within Washington, without reference to the principles of conflicts of law or
choice of laws, except to the extent that the laws of the State of Delaware
would apply in matters relating to the internal affairs of Concur Delaware and
the Merger.
19. COUNTERPARTS. In order to facilitate the filing and recording
of this Merger Agreement, it may be executed in any number of counterparts, each
of which shall be deemed to be an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Concur Technologies, Inc.
Agreement and Plan of Merger
IN WITNESS WHEREOF, this Merger Agreement is hereby executed on
behalf of each of the Constituent Corporations and attested by their respective
officers hereunto duly authorized.
CONCUR TECHNOLOGIES, INC. CONCUR TECHNOLOGIES, INC.
a Washington corporation a Delaware corporation
By: _______________________________ By: _______________________________
S. Steven Singh S. Steven Singh
Chief Executive Officer Chief Executive Officer
Attested By: Attested By:
___________________________________ ____________________________________
Matthew P. Quilter Matthew P. Quilter
Secretary Secretary
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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EXHIBIT 2.02
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is
entered into as of this 30th day of June, 1998, by and among Portable Software
Corporation, A Washington corporation ("PORTABLE"), PSC Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of Portable ("PORTABLE SUBSIDIARY"),
and 7Software, Inc., a California corporation ("SEVEN"), and Melissa Widner and
Andrew Dent, the principal shareholders of Seven (the "PRINCIPAL SHAREHOLDERS").
RECITALS
A. The parties intend that, subject to the terms and conditions of this
Agreement, Portable Subsidiary will merge with and into Seven in a reverse
triangular merger with Seven to be the surviving corporation of the Merger, all
pursuant to the terms and conditions of this Agreement and an Agreement of
Merger substantially in the form of Exhibit A (the "AGREEMENT OF MERGER") and
the applicable provisions of the laws of the States of Delaware and California.
Upon the effectiveness of the Merger, all the outstanding capital stock of Seven
will be converted into capital stock of Portable, and Portable will assume all
outstanding options to purchase shares of capital stock of Seven, as provided in
this Agreement and the Agreement of Merger.
B. The Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "CODE"), by virtue of the provisions of Section
368(a)(2)(E) of the Code.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms will have the
meanings set forth below:
1.1 The "MERGER" means the statutory merger of Portable
Subsidiary with and into Seven to be effected pursuant to the terms and
conditions of this Agreement.
1.2 The "EFFECTIVE TIME" means the time and date on which the
Merger first becomes legally effective under the laws of the States of
California and Delaware as a result of: (i) the filing with the California
Secretary of State of the Agreement of
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Merger and any required officers' certificates; and (ii) the filing with the
Delaware Secretary of State of the Agreement of Merger and any required
officers' certificates or, in lieu thereof at Portable's option, a Certificate
of Merger (the "CERTIFICATE OF MERGER"), conforming to the requirements of
Section 252 of the Delaware General Corporation Law.
1.3 "PORTABLE COMMON STOCK" means Portable's Common Stock, no
par value per share.
1.4 "SEVEN COMMON STOCK" means Seven's Common Stock, no par
value per share.
1.5 "SEVEN OPTIONS" means, collectively, options to purchase
shares of Seven Common Stock granted by Seven to Seven employees or consultants
(a) under the its 1997 Stock Option Plan (the "SEVEN OPTION PLAN") or (b)
outside of its 1997 Stock Option Plan as disclosed in the Seven Disclosure
Schedule.
1.6 "SEVEN DERIVATIVE SECURITIES" means, collectively: (a) any
warrant, option, right or other security issued by Seven that entitles the
holder thereof to purchase or otherwise acquire any shares of the capital stock
of Seven (collectively, "SEVEN STOCK RIGHTS"); (b) any note, evidence of
indebtedness, stock or other security of Seven that is convertible into or
exchangeable for any shares of the capital stock of Seven or any Seven Stock
Rights ("SEVEN CONVERTIBLE SECURITY"); and (c) any warrant, option, right, note,
evidence of indebtedness, stock or other security issued by Seven that entitles
the holder thereof to purchase or otherwise acquire any Seven Stock Rights or
any Seven Convertible Security from Seven; provided, however, that the term
"Seven Derivative Securities" does not include any of the Seven Options.
1.7 "NUMBER OF FULLY DILUTED SEVEN SHARES" means that number
of shares of Seven Common Stock that is equal to the sum of: (a) the total
number of shares of Seven Common Stock that are issued and outstanding
immediately prior to the Effective Time; plus (b) the total number of shares of
Seven Common Stock subject to or issuable under all Seven Options that are
issued and outstanding immediately prior to the Effective Time; plus (c) the
total number of shares of Seven Common Stock that, immediately prior to the
Effective Time, are, directly or indirectly, ultimately or potentially issuable
by Seven upon the exercise, conversion or exchange of all Seven Derivative
Securities (if any) that are issued and outstanding immediately prior to the
Effective Time.
1.8 "SEVEN SHAREHOLDERS" means those persons (each being
individually referred to herein as a "SEVEN SHAREHOLDER") who, immediately prior
to the Effective Time, hold the shares of Seven Common Stock that are
outstanding immediately prior to the Effective Time; provided, however, that for
purposes of Section 2.4 and Section 11 of this Agreement, the term "Seven
Shareholders" means only those Seven Shareholders (as defined above in this
Section) who are issued shares of Portable Common Stock in the Merger.
1.9 "SEVEN DISSENTING SHARES" means any shares of any capital
stock of Seven that (i) are outstanding immediately prior to the Effective Time
and qualify fully as "dissenting shares" within the meaning of Section 1300(b)
of the California Corporations Code and (ii) with respect to which dissenter's
rights to require the purchase of such dissenting shares
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for cash at their fair market value in accordance with Chapter 13 of the
California Corporations Code have been duly and properly exercised and perfected
in connection with the Merger.
1.10 "PORTABLE MERGER SHARES" means 2,082,118 shares of
Portable Common Stock.
1.11 "CONVERSION RATIO" means the quotient obtained by
dividing (a) the number of shares of Portable Common Stock constituting the
Portable Merger Shares by (b) the Number of Fully Diluted Seven Shares. For
example, if the Number of Fully Diluted Seven Shares is 2,446,294, then the
Conversion Ratio will be 2,082,118 divided by 2,446,294, or approximately
0.851132.
1.12 "KNOWLEDGE," when used with reference to Seven or Seven
Shareholders, means the collective actual knowledge of the Seven Shareholders,
the President and/or Chief Executive Officer of Seven, the Chief Financial
Officer of Seven and/or any Vice President of Seven.
2. PLAN OF REORGANIZATION
2.1 The Merger. Subject to the terms and conditions of this
Agreement, Portable Subsidiary will be merged with and into Seven pursuant to
this Agreement and the Agreement of Merger and in accordance with applicable
provisions of the laws of the States of Delaware and California as follows:
2.1.1 Conversion of Subsidiary Stock. At the
Effective Time, each share of the Common Stock of Portable Subsidiary that is
issued and outstanding immediately prior to the Effective Time will, by virtue
of the Merger and without the need for any further action on the part of the
holder thereof, be converted into and become one share of Seven Common Stock
that is issued and outstanding immediately after the Effective Time, and the
shares of Seven Common Stock into which the shares of Portable Subsidiary are so
converted in the Merger will be the only shares of capital stock of Seven that
are issued and outstanding immediately after the Effective Time.
2.1.2 Conversion of Shares. Each share of Seven
Common Stock, issued and outstanding immediately prior to the Effective Time
other than shares, if any, for which dissenters rights have been or will be
perfected in compliance with applicable law, will by virtue of the Merger and at
the Effective Time, and without further action on the part of any holder
thereof, be converted into a number of shares of Portable Common Stock that is
equal to the Conversion Ratio, subject to the provisions of 2.2 regarding the
elimination of fractional shares.
2.1.3 Adjustments for Capital Changes. If, prior to
the Effective Time, Portable or Seven recapitalizes through a split-up of its
outstanding shares into a greater number, or a combination of its outstanding
shares into a lesser number, reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities
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convertible into shares, the Conversion Ratio and the number of Portable Merger
Shares will be adjusted appropriately so as to maintain the proportionate
interests of the shareholders and optionholders of Portable and Seven in the
outstanding equity of Portable immediately following the Merger as contemplated
by this Agreement.
2.1.4 Dissenting Shares. Holders of shares of Seven
Common Stock who have complied with all requirements for perfecting
shareholders' rights of appraisal, as set forth in Section 1300 et seq of the
California General Corporation Law (the "CALIFORNIA LAW"), shall be entitled to
their rights under the California Law with respect to such shares.
2.2 Fractional Shares. No fractional shares of Portable Common
Stock will be issued in connection with the Merger, but in lieu thereof each
holder of Seven Common Stock who would otherwise be entitled to receive a
fraction of a share of Portable Common Stock will receive from Portable,
promptly after the Effective Time, an amount of cash (without interest)
determined by multiplying such fraction by $1.00.
2.3 Seven Options. Each Seven Option that is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger at the
Effective Time and without further action on the part of any holder thereof, be
assumed by Portable and converted into an option (a "PORTABLE OPTION") to
purchase after the Effective Time that number of shares of Portable Common
Stock, determined by multiplying the number of shares of Seven Common Stock
subject to such Seven Option immediately prior to the Effective Time by the
Conversion Ratio, at an exercise price per share of Portable Common Stock equal
to the exercise price per share of the Seven Option immediately prior to the
Effective Time divided by the Conversion Ratio and rounded up to the nearest
whole cent. If the foregoing calculation results in an assumed option being
exercisable for a fraction of a share, then the number of shares of Portable
Common Stock subject to such option will be rounded down to the nearest whole
number with no cash being payable for such fractional share. The terms,
exercisability, vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, if applicable, and all other terms of the Seven Options
will otherwise be unchanged. Continuous employment with Seven will be credited
to an optionee for purposes of determining the number of shares subject to such
optionee's Portable Option which may have become vested from time to time.
2.4 Escrow Agreement. At the closing of the Merger (the
"CLOSING"), Portable will withhold seventeen and one-half percent (17 1/2%) of
the Portable Merger Shares to be issued to each Seven Shareholder in accordance
with Section 2.1 (rounded down to the nearest whole number of shares to be
issued to each Seven Shareholder, and such that the shares to be withheld from
the Principal Shareholders will be divided equally between vested and unvested
shares as specified in the Escrow Agreement (as defined below)) and deliver such
shares (the "ESCROW SHARES") to the State Street Bank & Trust Company of
California, N.A. (the "ESCROW AGENT"), as escrow agent, to be held by Escrow
Agent as collateral for the indemnification obligations of Seven and the
Principal Shareholders under Section 11.2 and pursuant to the provisions of an
escrow agreement (the "ESCROW AGREEMENT") in substantially the form of Exhibit
2.4. The Escrow Shares will be represented by a certificate or certificates
issued in the name of the Escrow Agent and will be held by the Escrow Agent from
the Closing until the one year
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anniversary of the Closing Date (the "ESCROW PERIOD"). In the event that the
Merger is approved by the Seven Shareholders as provided herein, the Seven
Shareholders shall, without any further act of any Seven Shareholder, be deemed
to have consented to and approved (i) the use of the Escrow Shares as collateral
for the indemnification obligations of Seven and the Principal Shareholders
under Section 11.2 in the manner set forth in the Escrow Agreement, (ii) the
appointment of Melissa Widner as the representative of the Seven Shareholders
(the "REPRESENTATIVE") under the Escrow Agreement and as the attorney-in-fact
and agent for and on behalf of each Seven Shareholder (other than holders of
Seven Dissenting Shares), and the taking by the Representative of any and all
actions and the making of any decisions required or permitted to be taken by her
under the Escrow Agreement (including, without limitation, the exercise of the
power to authorize delivery to Portable of Escrow Shares in satisfaction of
claims by Portable; agree to, negotiate, enter into settlements and compromises
of and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims; resolve any claim made pursuant to
Section 11.2; and take all actions necessary in the judgment of the
Representative for the accomplishment of the foregoing) and (iii) to all of the
other terms, conditions and limitations in the Escrow Agreement. In the event
that the Escrow Agent is unable or unwilling to serve as escrow agent, the
parties agree that Fenwick & West LLP, or a third party mutually agreed upon
between Portable and the Representative, may serve as escrow agent under the
Escrow Agreement on substantially the same terms as the Escrow Agreement.
2.5 Effects of the Merger. At the Effective Time: (a) the
separate existence of Portable Subsidiary will cease and Portable Subsidiary
will be merged with and into Seven, and Seven will be the surviving corporation,
pursuant to the terms of the Agreement of Merger, (b) the Articles of
Incorporation and Bylaws of Seven will be amended to read as set forth in
Exhibit 2.5 attached hereto, and will be the Articles of Incorporation and
Bylaws of the surviving corporation, (c) each share of Portable Subsidiary
Common Stock outstanding immediately prior to the Effective Time will continue
to be an identical outstanding share of the surviving corporation, (d) each
share of Seven Common Stock and each Seven Option outstanding immediately prior
to the Effective Time will be converted as provide in Sections 2.1, 2.2 and 2.3;
(e) the officers and directors of the Surviving Corporation will be the officers
and directors of Portable Subsidiary, and (f) the Merger will, from and after
the Effective Time, have all of the effects provided by applicable law.
2.6 Further Assurances. Seven agrees that if, at any time before
or after the Effective Time, Portable considers or is advised that any further
deeds, assignments or assurances are reasonably necessary or desirable to vest,
perfect or confirm in Portable title to any property or rights of Seven,
Portable and its proper officers and directors may execute and deliver all such
proper deeds, assignments and assurances and do all other things necessary or
desirable to vest, perfect or confirm title to such property or rights in
Portable and otherwise to carry out the purpose of this Agreement, in the name
of Seven or otherwise.
2.7 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code. The parties
believe that the value of the Portable Common
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Stock to be received in the Merger is equal, in each instance, to the value of
the Seven Common Stock to be surrendered in exchange therefor. The Portable
Common Stock issued in the Merger will be issued solely in exchange for the
Seven Common Stock, and no other transaction other than the Merger represents,
provides for or is intended to be an adjustment to, the consideration paid for
the Seven Common Stock. Except for cash paid in lieu of fractional shares or for
Seven Dissenting Shares, no consideration that could constitute "other property"
within the meaning of Section 356 of the Code is being paid by Portable for the
Seven Common Stock in the Merger. The parties shall not take a position on any
tax returns inconsistent with this Section 2.7. In addition, Portable represents
now, and as of the Closing Date, that it presently intends to continue Seven's
historic business or use a significant portion of Seven's business assets in a
business.
2.8 Securities Laws Matters. Portable shall issue the shares
of Portable Common Stock to be issued in the Merger pursuant to Section 2.1.2 of
the Agreement and the Portable Options to be issued in the Merger pursuant to an
exemption from registration under Section 4(2) and/or Regulation D promulgated
under the 1933 Act and the exemption from qualification under Section 25120 of
the California Corporation Code (the "CCC") provided by Section 25103(h) of the
CCC, and shall make any requisite filings within the time prescribed by
applicable law. In connection therewith, (a) each Seven Shareholder shall
execute and deliver to Portable an Investment Representation letter in the form
of Exhibit 2.8A hereto (the "INVESTMENT REPRESENTATION LETTER"); and (b)
substantially all of the holders of outstanding Seven Options shall execute and
deliver to Portable an Optionee Investment Representation Letter in the form of
Exhibit 2.8B hereto (the "OPTIONEE INVESTMENT REPRESENTATION LETTER").
2.9 Purchase Accounting. The parties intend that the Merger be
treated as a purchase for accounting purposes.
3. REPRESENTATIONS AND WARRANTIES OF SEVEN AND THE PRINCIPAL
SHAREHOLDERS
As an inducement to Portable to enter into this Agreement,
each of the Principal Shareholders and Seven hereby jointly and severally
represents and warrants to Portable that, except as set forth on the Seven
Disclosure Schedule delivered to Portable herewith as Exhibit 3.0 (the "SEVEN
DISCLOSURE SCHEDULE").
3.1 Organization and Good Standing. Seven is a corporation
duly organized, validly existing and in good standing under the laws of
California, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified as a foreign corporation in each jurisdiction in
which a failure to be so qualified could reasonably be expected to have a
material adverse effect on its present or expected operations or financial
condition.
3.2 Power, Authorization and Validity.
3.2.1 Seven has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
all agreements to which Seven is or will
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be a party that are required to be executed pursuant to this Agreement (the
"SEVEN ANCILLARY AGREEMENTS") and Seven has all requisite corporate power and
authority to consummate the Merger. The execution, delivery and performance of
this Agreement and the Seven Ancillary Agreements have been duly and validly
approved and authorized by Seven's Board of Directors. Each of the Principal
Shareholders has the right, power, legal capacity, and authority to enter into,
execute, deliver, and perform his or her respective obligations under this
Agreement and each of the Ancillary Agreements to be executed and delivered by
such Principal Shareholder (the "PRINCIPAL SHAREHOLDER ANCILLARY AGREEMENTS").
3.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Seven or any Principal
Shareholder to enter into, and to perform its obligations under, this Agreement,
the Seven Ancillary Agreements, and the Shareholder Ancillary Agreements except
for (a) the filing of the Agreement of Merger with the California and Delaware
Secretaries of State, and the filing of appropriate documents with the relevant
authorities of other states in which Seven is qualified to do business, if any,
(b) such filings as may be required to comply with federal and state securities
laws, and (c) the approval of the Seven Shareholders of the transactions
contemplated hereby.
3.2.3 This Agreement and the Seven Ancillary
Agreements are, or when executed by Seven will be, valid and binding obligations
of Seven, except as to the effect, if any, of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally and (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies; provided, however, that the Agreement of Merger will not be effective
until filed with the Delaware and California Secretaries of State. This
Agreement and each of the Principal Shareholder Ancillary Agreements are, or
when executed by the each Principal Shareholder will be, valid and binding
obligations of such Principal Shareholder enforceable in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally and (b) rules
of law governing specific performance, injunctive relief and other equitable
remedies; provided, however, that the Agreement of Merger will not be effective
until filed with the Delaware and California Secretaries of State.
3.3 Capitalization. The authorized capital stock of Seven
consists of 10,000,000 shares of Common Stock, no par value, of which 2,082,294
shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, none
of which are issued or outstanding. Options to purchase a total of 366,000
shares of Seven Common Stock are outstanding. All issued and outstanding shares
of Seven Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to any right of rescission, and have
been offered, issued, sold and delivered by Seven in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws. A list of all holders of Seven
Options, Seven Derivative Securities, the number of shares, options and warrants
held by each is set forth on the Seven Disclosure Schedule. Except as set forth
in this Section, there are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
any of Seven's authorized but unissued capital stock or any securities
convertible into or exchangeable for shares of Seven
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Common Stock or obligating Seven to grant, extend, or enter into any such
option, warrant, call, right, commitment, conversion privilege or other right or
agreement, and there is no liability for dividends accrued but unpaid. There are
no voting agreements, rights of first refusal or other restrictions (other than
normal restrictions on transfer under applicable federal and state securities
laws) applicable to any of Seven's outstanding securities. Seven is not under
any obligation to register under the Securities Act any of its presently
outstanding securities or any securities that may be subsequently issued.
3.4 Subsidiaries. Seven does not have any subsidiaries or any
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity.
3.5 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor any Seven Ancillary Agreement by Seven or any
of the Principal Shareholders, nor the consummation of the transactions
contemplated hereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of (a)
any provision of the Articles of Incorporation or Bylaws of Seven, as currently
in effect, (b) in any material respect, any material instrument or contract,
letter of intent or memorandum of understanding, or commitment to which Seven is
a party or by which Seven is bound, or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation applicable to Seven
or its assets or properties. The consummation of the Merger in and of itself
will not require the consent of any third party and will not have a material
adverse effect upon any rights, licenses, franchises, leases or agreements of
Seven pursuant to the terms of those agreements.
3.6 Litigation. There is no action, proceeding, claim or
investigation pending against Seven before any court or administrative agency
that if determined adversely to Seven may reasonably be expected to have a
material adverse effect on the present or future operations or financial
condition of Seven, nor, to the best of Seven's knowledge, has any such action,
proceeding, claim or investigation been threatened. There is, to the best of
Seven's knowledge, no reasonable basis for any shareholder or former shareholder
of Seven, or any other person, firm, corporation, or entity, to assert a claim
against Seven based upon: (a) ownership or rights to ownership of any shares of
Seven Common Stock (except for dissenter's rights with respect to shares of
Portable Common Stock issuable by virtue of the Merger), (b) any rights as a
Seven shareholder, including any option or preemptive rights or rights to notice
or to vote, (c) any rights under any agreement among Seven and its shareholders,
or (d) Seven entering into this Agreement or any Seven Ancillary Agreement or
any of the transactions contemplated hereby or thereby. There is no judgment,
decree, injunction, rule, or order of any governmental entity or agency, court
or arbitrator outstanding against Seven.
3.7 Taxes. Seven has filed all federal, state, local and foreign
tax returns required to be filed, has paid all taxes required to be paid in
respect of all periods for which returns have been filed, has established an
adequate accrual or reserve for the payment of all taxes payable in respect of
the periods subsequent to the periods covered by the most recent applicable tax
returns, has made all necessary estimated tax payments, and has no material
liability for taxes in excess of the amount so paid or accruals or reserves so
established. Seven is
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not delinquent in the payment of any tax or in the filing of any tax returns,
and no deficiencies for any tax have been threatened, claimed, proposed or
assessed. No tax return of Seven has ever been audited by the Internal Revenue
Service or any state taxing agency or authority. For the purposes of this
Section, the terms "TAX" and "TAXES" include all federal, state, local and
foreign income, gains, franchise, excise, property, sales, use, employment,
license, payroll, occupation, recording, value added or transfer taxes,
governmental charges, fees, levies or assessments (whether payable directly or
by withholding), and, with respect to such taxes, any estimated tax, interest
and penalties or additions to tax and interest on such penalties and additions
to tax. To Seven's knowledge, all elections and notices required by Section
83(b) of the Code and any analogous provisions of applicable state tax laws have
been timely filed by all individuals who have purchased shares of Seven Common
Stock, and the Principal Shareholders expressly assume any liability for any
failure to file any such elections and notices.
3.8 Seven Financial Statements. Seven has delivered to Portable
as Exhibit 3.8 Seven's unaudited balance sheet as of June 1, 1998 (the "SEVEN
BALANCE SHEET") and income statement for the six month period then ended
(collectively, the "SEVEN FINANCIAL STATEMENTS"). The Seven Financial Statements
(a) are in accordance with the books and records of Seven, and (b) fairly
present the financial condition of Seven at the date therein indicated and the
results of operations for each period therein specified. Seven has no material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due, and which is required to
be reflected in a financial statement prepared in accordance with generally
accepted accounting principles, that is not reflected or reserved against in the
Seven Financial Statements, except for those that may have been incurred after
the date of the Seven Financial Statements in the ordinary course of its
business, consistent with past practice and that are not material in amount
either individually or collectively.
3.9 Title to Properties. Seven has good and marketable title to
all of its assets as shown on the Seven Balance Sheet, free and clear of all
liens, charges, restrictions or encumbrances (other than for taxes not yet due
and payable). All machinery and equipment included in such properties is in good
condition and repair, normal wear and tear excepted, and all leases of real or
personal property to which Seven is a party are fully effective and afford Seven
peaceful and undisturbed possession of the subject matter of the lease. Seven is
not in violation of any zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of owned or leased properties (the violation of which would have a material
adverse effect on its business), or has received any notice of violation with
which it has not complied. Seven does not own any real property.
3.10 Absence of Certain Changes. Since the date of the Seven
Balance Sheet, there has not been with respect to Seven any:
(a) material change in the financial condition,
properties, assets, liabilities, business or operations thereof which change by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has had or will have a material adverse effect
on Seven;
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(b) material contingent liability incurred by Seven
as guarantor or otherwise with respect to the obligations of others;
(c) mortgage, encumbrance or lien placed on any of
Seven's properties;
(d) material obligation or liability incurred by
Seven other than obligations and liabilities incurred in the ordinary course of
business;
(e) purchase, license or sale or other disposition,
or any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the properties or assets of Seven other than in the
ordinary course of business;
(f) damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties, assets
or business of Seven;
(g) declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock thereof, any split, combination or recapitalization of the capital stock
thereof or any direct or indirect redemption, purchase or other acquisition of
the capital stock of Seven;
(h) change in the compensation payable or to become
payable to any of its officers, employees or agents, or any bonus payment or
arrangement made to or with any of such officers, employees or agents;
(i) change with respect to the management,
supervisory or other key personnel thereof;
(j) transfer or grant of a right under any Seven IP
Rights (as such term is defined in Section 3.12 below) other than those
transferred or granted in the ordinary course of its business consistent with
past practice;
(k) issuance or sale of any debt or equity securities
of Seven or any options or other rights to acquire from Seven, directly or
indirectly, any debt or equity securities;
(l) payment or discharge of a material lien or
liability thereof which lien was not either shown on the Seven Balance Sheet or
incurred in the ordinary course of business thereafter; or
(m) obligation or liability incurred thereby to any
of its officers, directors or shareholders or any loans or advances made thereby
to any of its officers, directors or shareholders except normal compensation and
expense allowances payable to officers.
3.11 Contracts and Commitments. The Seven Disclosure Schedule
sets forth a list of each of the following written or oral contracts,
agreements, or commitments to which Seven is a party or by which it or any of
its assets or properties are bound: (i) any stock
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redemption or purchase agreement, financing agreement, license, lease or
franchise, (ii) any contract providing for the development of software for
Seven, or the license of software to Seven which is used or incorporated in any
products currently distributed by Seven, (iii) license agreement as licensor or
licensee (except for standard non-exclusive hardware and software licenses
granted to end-user customers by Seven, and standard non-exclusive hardware and
software licenses arising from the purchase of "off the shelf" or standard
products by Seven, in the ordinary course of business); (iv) material agreement
for the lease of real or personal property; (v) joint venture contract or
arrangement or any other agreement that involves a sharing of profits with other
persons; (vi) instrument evidencing or related in any way to indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise, except for trade
indebtedness incurred in the ordinary course of business, and except as
disclosed in the Seven Financial Statements; (vii) contract containing covenants
purporting to limit Seven's freedom to compete in any line of business in any
geographic area; (viii) contract involving a potential commitment or payment of
$10,000 or more; (ix) contract for the sale, license, distribution, or
manufacture of products or services which is not terminable upon ninety (90)
days' or less notice without cost or other liability to Seven or in which Seven
has granted or received manufacturing rights most favored customer pricing
provisions or exclusive marketing rights relating to any product or services,
groups of products or services, or territory; (x) contract or commitment for the
employment of any officer, employee or consultant of Seven, or any other type of
contract or understanding with any officer, employee, consultant or director
that is not immediately terminable by Seven without liability; (xi) agreement or
instrument governing any Seven IP Right; or (xii) any agreement relating to the
sale, issuance, grant, exercise, award, purchase, repurchase, or redemption of
any shares of capital stock or other securities of Seven or options, warrants,
or other rights to acquire such capital stock or securities, or options,
warrants or other rights therefor. A copy of each agreement or document listed
on the Seven Disclosure Schedule identified to this Section 3.11 has been
delivered to Portable's counsel. Seven is not nor to its knowledge is any other
party in default in any material respect under any contract, obligation or
commitment listed on the Seven Disclosure Schedule identified to this Section
3.11 or that is otherwise material to the business of Seven. Seven is not a
party to any contract or arrangement which has had or could reasonably be
expected to have a material adverse effect on its business or prospects. All
agreements, contracts, plans, leases, instruments, arrangements, licenses and
commitments listed on the Seven Disclosure Schedule identified to this Section
3.11 are valid and in full force and effect.
3.12 Intellectual Property. To Seven's knowledge, Seven owns, or
has the right to use, sell or license all Intellectual Property Rights (as
defined below) necessary or required for the conduct of its business as
presently conducted (such Intellectual Property Rights being hereinafter
collectively referred to as the "SEVEN IP RIGHTS") and such rights to use, sell
or license are reasonably sufficient for the conduct of its business. As used
herein, the term "INTELLECTUAL PROPERTY RIGHTS" shall mean all worldwide
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyright, copyright
applications, franchises, licenses, inventories, know-how, trade secrets,
customer lists, proprietary processes and formulae, all source and object code,
algorithms, architecture, structure, display screens, layouts, inventions,
development tools and all documentation and
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media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records.
(a) The Seven Disclosure Schedule lists (i) all
patents, copyrights, trademarks, service marks, any renewal rights for any of
the foregoing, and any applications and registrations for any of the foregoing
which are included in the Seven IP Rights and owned by Seven; (ii) all hardware
products, software products, and services that are currently published, offered
or under development by Seven; and (iii) all licenses, sublicenses and other
agreements to which Seven is a party either as licensor or licensee or pursuant
to which Seven has rights substantially equivalent to those of a licensor or
licensee (other than standard non-exclusive hardware and software licenses
arising from the purchase of "off the shelf" or standard products by Seven). The
disclosures described in (iii) hereof include the identities of the parties to
the relevant agreements, a description of the nature and subject matter thereof
(including without limitation a description of all exclusivity, rights of first
refusal, and noncompetition provisions), and the applicable royalty or summary
of formula or procedure for divorcing such royalty.
(b) All Seven IP Rights which consist of a license or
another right to third party property are set forth on the Seven Disclosure
Schedule. To Seven's knowledge, all other Seven IP Rights consists solely of
items and rights which are either: (i) owned by Seven, or (ii) in the public
domain. To Seven's knowledge, Seven has all rights in the Seven IP Rights
necessary to carry out Seven's current, former and anticipated future
activities, including without limitation rights to make, use, exclude others
from using, reproduce, modify, adapt, create derivative works based on,
translate, distribute (directly and indirectly), transmit, display and perform
publicly, license, rent, lease, assign, and sell the Seven IP Rights in all
geographic locations and fields of use, and to sublicense any or all such rights
to third parties, including the right to grant further sublicenses.
(c) Seven is not, nor as a result of the execution or
delivery of this Agreement, or performance of Seven's obligations hereunder,
will Seven be, in violation of any license, sublicense or agreement to which
Seven is a party or otherwise bound. Except as specifically described in the
Seven Disclosure Schedule, Seven is not obligated to provide any consideration
(whether financial or otherwise) to any third party, nor is any third party
otherwise entitled to any consideration with respect to any exercise of rights
by Seven or Portable in the Seven IP Rights.
(d) The use, manufacturing, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any product, work,
technology or process as now used or offered or proposed for use, licensing or
sale by Seven does not infringe on any copyright, trade secret, trademark,
service mark, trade name, firm name, logo, trade dress, mask work or patent of
any person; provided, however, that with respect to patent infringement, such
representation is limited to Seven's knowledge. No claims (i) challenging the
validity, effectiveness, or ownership by Seven of any of the Seven IP Rights, or
(ii) to the effect that the use, distribution, licensing, sublicensing, sale or
any other exercise of rights in any product, work technology or process as now
used or offered, proposed for use, licensing, sublicensing or sale, or under
development by Seven infringes or will infringe on any Intellectual Property
Right of any person have been
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asserted or, to the best knowledge of Seven and each of the Principal
Shareholders, are threatened by any person nor are there any valid grounds for
any bona fide claim of any such kind. All granted or issued patents and mask
works and all registered trademarks listed on the Seven Disclosure Schedule and
all copyright registrations held by Seven are valid, enforceable and subsisting.
To the best knowledge of Seven and each of the Principal Shareholders, there is
no unauthorized use, infringement or misappropriation of any of the Seven IP
Rights by any third party, employee or former employer.
3.13 Compliance with Laws. Seven has complied, and is now and at
the Closing Date will be in full compliance, in all material respects with all
applicable laws, ordinances, regulations, and rules, and all orders, writs,
injunctions, awards, judgments, and decrees applicable to it or to the assets,
properties, and business thereof. Seven has received all permits and approvals
from, and has made all filings with, third parties, including government
agencies and authorities, that are necessary in connection with its present
business, except to the extent the failure to obtain such permits and approvals
and to make such filings would not have a material adverse effect on Seven's
present or future operations or financial condition. To the best of Seven's
knowledge, there are no legal or administrative proceedings or investigations
pending or threatened, that, if enacted or determined adversely to Seven, would
result in any material adverse change in its present or future operations or
financial condition.
3.14 Certain Transactions and Agreements. None of the officers
of Seven, nor any member of their immediate families, has any direct or indirect
ownership interest in any firm or corporation that competes with Seven (except
with respect to any interest in less than one percent of the stock of any
corporation whose stock is publicly traded). None of said officers or directors,
or any member of their immediate families, is directly or indirectly interested
in any contract or informal arrangement with Seven, except for normal
compensation for services as an officer, director or employee thereof. None of
said officers or directors or family members has any interest in any property,
real or personal, tangible or intangible, including inventions, patents,
copyrights, trademarks or trade names or trade secrets, used in or pertaining to
the business of Seven, except for the normal rights of a shareholder.
3.15. Employees, ERISA and Other Compliance.
3.15.1 Except as set forth in the Seven Disclosure
Schedule, Seven does not have any employment contracts or consulting agreements
currently in effect that are not terminable at will (other than agreements with
the sole purpose of providing for the confidentiality of proprietary information
or assignment of inventions). All officers, employees and consultants of Seven
having access to proprietary information have executed and delivered to Seven an
agreement regarding the protection of such proprietary information and the
assignment of inventions to Seven; copies of the form of all such agreements
have been delivered to Portable's counsel.
3.15.2 Seven (i) has never been and is not now subject
to a union organizing effort, (ii) is not subject to any collective bargaining
agreement with respect to any of its employees, (iii) is not subject to any
other contract, written or oral, with any trade or labor union, employees'
association or similar organization, or (iv) does not have any current labor
disputes.
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Seven has good labor relations, and has no knowledge of any facts indicating
that the consummation of the transactions contemplated hereby will have a
material adverse effect on such labor relations, and has no knowledge that any
of its key employees intends to leave its employ.
3.15.3 The Seven Disclosure Schedule identifies each
"employee benefit plan" (each a "SEVEN EMPLOYEE PLAN") as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). To the knowledge of each of the Principal Shareholders and Seven,
after reasonable inquiry with legal counsel, each Seven Employee Plan is in
material compliance with ERISA and the Code.
3.15.4 The Seven Disclosure Schedule lists each
employment, severance or other similar contract, arrangement or policy and each
plan or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' benefits, vacation benefits,
severance benefits, disability benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which (A) is not a Seven Employee Plan,
(B) is entered into, maintained or contributed to, as the case may be, by Seven
and (C) covers any employee or former employee of Seven (such contracts, plans
and arrangements as are described in this Section 3.15.4 are herein referred to
collectively as the "SEVEN BENEFIT ARRANGEMENTS"). Each Seven Benefit
Arrangement has been maintained in substantial compliance in all material
respects with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Seven
Benefit Arrangement. Seven has delivered to Portable or its counsel a complete
and correct copy or description of each Seven Benefit Arrangement.
3.15.5 No benefit payable or which may become payable by
Seven pursuant to any Seven Employee Plan or any Seven Benefit Arrangement or as
a result of or arising under this Agreement shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code.
3.15.6 Seven is in compliance in all material respects
with all applicable laws, agreements and contracts relating to employment,
employment practices, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, but not including
ERISA.
3.15.7 No employee of Seven is in violation of any term
of any employment contract, patent disclosure agreement, noncompetition
agreement, or any other contract or agreement, or any restrictive covenant
relating to the right of any such employee to be employed thereby, or to use
trade secrets or proprietary information of others, and the employment of such
employees does not subject Seven to any liability.
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3.15.8 Seven has provided a list of all employees,
officers and consultants of Seven and their current compensation to Portable.
3.15.9 Seven is not a party to any (a) agreement with
any executive officer or other key employee thereof (i) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Seven in the nature of any of the
transactions contemplated by this Agreement and the Agreement of Merger, (ii)
providing any term of employment or compensation guarantee, or (iii) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment, or (b)
agreement or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be materially increased, or the vesting of benefits of which will be
materially accelerated, by the occurrence of any of the transactions
contemplated by this Agreement and the Agreement of Merger or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement and the Agreement of Merger.
3.16 Corporate Documents. Seven has made available to Portable
for examination all documents and information listed in the Seven Disclosure
Schedule or other exhibits called for by this Agreement which has been requested
by Portable's legal counsel, including, without limitation, the following: (a)
copies of Seven's Articles of Incorporation and Bylaws as currently in effect;
(b) its Minute Book containing all records of all proceedings, consents,
actions, and meetings of the shareholders, the board of directors and any
committees thereof; (c) its stock ledger and journal reflecting all stock
issuances and transfers; and (d) all permits, orders, and consents issued by any
regulatory agency with respect to Seven, or any securities of Seven, and all
applications for such permits, orders, and consents.
3.17 No Brokers. Neither Seven nor any of the Seven Shareholders
is obligated for the payment of fees or expenses of any investment banker,
broker or finder in connection with the origin, negotiation or execution of this
Agreement or the Agreement of Merger or in connection with any transaction
contemplated hereby or thereby.
3.18 Disclosure. To Seven's knowledge, neither this Agreement,
its exhibits and schedules, nor any of the certificates or documents to be
delivered by Seven to Portable under this Agreement, taken together, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which such statements were made, not misleading.
3.19 Books and Records. The books, records and accounts of Seven
(a) are in all material respects true, complete and correct, (b) have been
maintained in accordance with good business practices on a basis consistent with
prior years, (c) are stated in reasonable detail and accurately and fairly
reflect the transactions and dispositions of the assets of Seven, and (d)
accurately and fairly reflect the basis for the Seven Financial Statements.
3.20 Insurance. Seven maintains and at all times during the
prior year has maintained fire and casualty, general liability, business
interruption, product liability, and
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sprinkler and water damage insurance which it believes to be reasonably prudent
for similarly sized and similarly situated businesses.
3.21 Environmental Matters.
To their knowledge:
3.21.1 During the period that Seven has leased or owned
its properties or owned or operated any facilities, there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities. No knowledge of any
presence, disposals, releases or threatened releases of Hazardous Materials on,
from or under any of such properties or facilities, occurred prior to Seven
having taken possession of any of such properties or facilities. For the
purposes of this Agreement, the terms "disposal," "release," and "threatened
release" shall have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA"). For the purposes of this Agreement
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substance, material or
waste which is or becomes prior to the Closing regulated under, or defined as a
"hazardous substance," "pollutant," "contaminant," "toxic chemical," "hazardous
materials," "toxic substance" or "hazardous chemical" under (1) CERCLA; (2) any
similar federal, state or local law; or (3) regulations promulgated under any of
the above laws or statutes.
3.21.2 None of the properties or facilities of Seven is
in violation of any federal, state or local law, ordinance, regulation or order
relating to industrial hygiene or to the environmental conditions on, under or
about such properties or facilities, including, but not limited to, soil and
ground water condition. During the time that Seven has owned or leased its
respective properties and facilities, neither Seven nor, any third party, has
used, generated, manufactured or stored on, under or about such properties or
facilities or transported to or from such properties or facilities any Hazardous
Materials.
3.21.3 During the time that Seven has owned or leased
its respective properties and facilities, there has been no litigation brought
or threatened against Seven by, or any settlement reached by Seven with, any
party or parties alleging the presence, disposal, release or threatened release
of any Hazardous Materials on, from or under any of such properties or
facilities.
4. REPRESENTATIONS AND WARRANTIES OF PORTABLE AND PORTABLE SUBSIDIARY
As an inducement to Seven and the Principal Shareholders to
enter into this Agreement, Portable and Portable Subsidiary, jointly and
severally, hereby represent and warrant that, except as set forth on the
Portable Disclosure Schedule delivered to Seven as Exhibit 4.0 (the "PORTABLE
DISCLOSURE SCHEDULE"):
4.1 Organization and Good Standing. Portable is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington, and has the
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corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted and as proposed to be conducted. Portable
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to own, operate, and lease its properties and to carry on its business
as proposed to be conducted. Portable Subsidiary was formed solely for the
purpose of the Merger, and has not conducted any business other than related to
such purpose.
4.2 Power, Authorization and Validity.
4.2.1 Portable has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
all agreements to which Portable is or will be a party that are required to be
executed pursuant to this Agreement (the "PORTABLE ANCILLARY AGREEMENTS"). The
execution, delivery and performance of this Agreement and the Portable Ancillary
Agreements have been duly and validly approved and authorized by Portable's
Board of Directors, and do not require the approval by Portable's shareholders.
Portable Subsidiary has the right, power and authority to execute, deliver and
perform its obligations under this Agreement, and upon approval of the Merger
and the Agreement of Merger by Portable Subsidiary's sole stockholder, Portable
Subsidiary will have the right, power and authority to execute, deliver and
perform the Agreement of Merger and all agreements to which Portable Subsidiary
is or will be a party that are required to be executed pursuant to this
Agreement (the "PORTABLE SUBSIDIARY ANCILLARY AGREEMENTS"). The execution,
delivery and performance of this Agreement, the Agreement of Merger and all
other Portable Subsidiary Ancillary Agreements by Portable Subsidiary have been
duly and validly approved and authorized by Portable Subsidiary's Board of
Directors.
4.2.2 No filing, authorization or approval, governmental
or otherwise, is necessary to enable Portable or Portable Subsidiary to enter
into, and to perform their respective obligations under, this Agreement, the
Portable Ancillary Agreements and the Portable Subsidiary Ancillary Agreements
except for (a) the filing of the Agreement of Merger with the California and the
Delaware Secretary of State, (b) the recording of the Agreement of Merger in the
office of the Recorder of the Delaware county in which Portable Subsidiary's
registered office is located, and (c) such filings as may be required to comply
with federal and state securities laws.
4.2.3 This Agreement and the Portable Ancillary
Agreements are, or when executed by Portable will be, valid and binding
obligations of Portable enforceable in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (b) rules of law governing
specific performance, injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities; provided, however, that the Agreement
of Merger will not be effective until filed with the Delaware and California
Secretaries of State. This Agreement and the Portable Subsidiary Ancillary
Agreements are, or when executed by Portable Subsidiary will be, valid and
binding obligations of Portable Subsidiary, enforceable in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of
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creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies; provided, however,
that the Agreement of Merger will not be effective until filed with the Delaware
and California Secretaries of State.
4.3. Capitalization. At the close of business on May 17, 1998,
there were outstanding, on a fully-diluted basis, 30,846,194 shares of Portable
Common Stock (including shares issuable upon conversion of outstanding Preferred
Stock or exercise of outstanding options and warrants, shares available for
grant under the Portable's Stock Option Plan, and any other rights to, directly
or indirectly, acquire shares or options or warrants to acquire shares of
Portable capital stock). All of such outstanding shares of Portable Common Stock
have been duly authorized and validly issued, are fully paid and nonassessable,
are not subject to any right of rescission, and have been offered, issued, sold
and delivered by Portable in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws. The Portable Merger Shares, when issued in accordance
with this Agreement (and with respect to the Portable Merger Shares to be issued
upon the exercise of Portable Options, when issued in accordance with the
agreements governing such Portable Options), will be duly authorized, validly
issued, fully paid and nonassessable, and will have been offered, issued, sold
and delivered by Portable in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws.
4.4 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor any Portable Ancillary Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of (a) any provision of the Certificate of
Incorporation or Bylaws of Portable, as currently in effect, (b) in any material
respect, any material instrument or contract to which Portable is a party or by
which Portable is bound, or (c) any federal, state, local or foreign judgment,
writ, decree, order, statute, rule or regulation applicable to Portable or its
assets or properties.
4.5 Portable Financial Statements. Portable has delivered to
Seven as Exhibit 4.5 Portable's unaudited balance sheet as of April 30, 1998
(the "PORTABLE BALANCE SHEET"), Portable's income statement for the period then
ended and Portable's audited financial statements for the Portable's 1996 and
1997 fiscal years (collectively, the "PORTABLE FINANCIAL STATEMENTS"). The
Portable Financial Statements (a) are in accordance with the books and records
of Portable, and (b) fairly present the financial condition of Portable at the
date therein indicated and the results of operations for each period therein
specified. Portable has no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, and which is required to be reflected in a financial statement prepared in
accordance with generally accepted accounting principles, that is not reflected
or reserved against in the Portable Financial Statements, except for those that
may have been incurred after the date of the Portable Financial Statements in
the ordinary course of its business, consistent with past practice and that are
not material in amount either individually or collectively.
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4.6 Absence of Certain Changes. Since the date of the Portable
Balance Sheet, there has not been any change in the financial condition,
properties, assets, liabilities, business or operations of Portable which change
by itself or in conjunction with all other such changes, whether or not arising
in the ordinary course of business, has had or will have a material adverse
effect on Portable.
4.7 No Brokers. Portable is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Agreement of
Merger or in connection with any transaction contemplated hereby or thereby.
4.8 No Violation of Existing Agreements. Portable has not
received notice from any third party that it is or would, with the passage of
time, be (i) in material violation of any provision of the Articles of
Incorporation or Bylaws; or (ii) in default or violation of any material term,
condition or provision of (a) any material judgment, decree, order, injunction
or stipulation applicable to Portable or (b) any currently effective material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license, which default or violation would have a
material adverse effect on the business, operations or financial condition of
Portable.
4.9 Litigation. There is no action, claim, suit, arbitration,
proceeding, claim or investigation pending against Portable before any court,
administrative agency or arbitrator that, if determined adversely to Portable,
is likely to have a material adverse effect on Portable's financial condition or
results of operation, nor, to Portable's knowledge, has any such action, suit,
proceeding, arbitration, claim or investigation been threatened.
4.10 Disclosure. To Portable's knowledge, neither this
Agreement, its exhibits and schedules, nor any of the certificates or documents
to be delivered by Portable to Seven under this Agreement, taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading.
5. PRE-CLOSING COVENANTS OF SEVEN AND THE PRINCIPAL SHAREHOLDERS
During the period from the date of this Agreement until the
Effective Time, Seven and each Principal Shareholder covenants and agrees as
follows:
5.1 Advice of Changes. Seven will promptly advise Portable in
writing (a) of any event occurring subsequent to the date of this Agreement of
which Seven has knowledge that would render any representation or warranty of
Seven contained in this Agreement, if made on or as of the date of such event or
the Closing Date, untrue or inaccurate in any material respect and (b) of any
material adverse change in Seven's business, results of operations or financial
condition.
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5.2 Maintenance of Business. Seven will use its best efforts to
carry on and preserve its business and its relationships with customers,
suppliers, employees and others in substantially the same manner as it has prior
to the date hereof. If Seven becomes aware of a material deterioration in the
relationship with any customer, supplier or key employee, it will promptly bring
such information to the attention of Portable in writing and, if requested by
Portable, will exert its best efforts to restore the relationship.
5.3 Conduct of Business. Seven will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and will not, without the prior written consent of the President of
Portable (which may be given verbally to be promptly followed by written
confirmation):
(a) borrow any money except for expenses incurred in the
ordinary course consistent with past practice, or lend any money;
(b) enter into any transaction or agreement not in the
ordinary course of business consistent with past practice (other than the
engagement of a purchaser representative);
(c) encumber or permit to be encumbered any of its
assets;
(d) dispose of any of its assets;
(e) enter into any lease or contract for the purchase or
sale of any property;
(f) pay any bonus, increased salary or special
remuneration to any officer, employee or consultant (except pursuant to existing
arrangements previously disclosed to and approved in writing by Portable) or
enter into any new employment or consulting agreement with any such person or
terminate any employee;
(g) change any of its accounting methods;
(h) declare, set aside or pay any cash or stock dividend
or other distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock;
(i) amend or terminate any contract, agreement or
license to which it is a party (including any royalty arrangement);
(j) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course of
business consistent with past practice, not material in amount and documented by
receipts for the claimed amounts;
(k) guarantee or act as a surety for any obligation
except for the endorsement of checks and other negotiable instruments in the
ordinary course of business, consistent with past practice, which are not
material in amount;
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(l) waive or release any material right or claim except
in the ordinary course of business, consistent with past practice;
(m) issue or sell any shares of its capital stock of any
class (except upon the exercise of an option or warrant currently outstanding),
or any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock, or accelerate the vesting of any outstanding option or
other security;
(n) split or combine the outstanding shares of its
capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(o) merge, consolidate or reorganize with, or acquire
any entity;
(p) amend its Articles of Incorporation or Bylaws;
(q) license any of its technology or intellectual
property (other than to end-users in the ordinary course of business pursuant to
its standard end-user license agreement);
(r) change any insurance coverage or issue any
certificates of insurance; or
(s) agree to do, any of the things described in the
preceding clauses 5.3(a) through 5.3(r).
5.4 Shareholders Approval. Seven will hold a special meeting of
its shareholders (the "SHAREHOLDERS MEETING") (or solicit the written consent of
its shareholders in lieu thereof) at the earliest practicable date to submit
this Agreement, the Merger and related matters for the consideration and
approval of the Seven Shareholders, which approval will be recommended by
Seven's Board of Directors and management. Such meeting (or the solicitation of
a written consent in lieu thereof) will be called, held and conducted, and any
proxies will be solicited, in compliance with applicable law.
5.5 Regulatory Approvals. Seven will execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign which may be reasonably
required, or which Portable may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Seven will use
its best efforts to obtain all such authorizations, approvals and consents.
5.6 Necessary Consents. Seven will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby
and to allow Portable to carry on Seven's business after the Closing.
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5.7 Litigation. Seven will notify Portable in writing promptly
after learning of any material actions, suits, proceedings or investigations by
or before any court, board or governmental agency, initiated by or against it or
known by it to be threatened against it.
5.8 No Other Negotiations. From the date hereof until the
earlier of termination of this Agreement or consummation of the Merger, Seven
will not, and will not authorize or permit any officer, director, employee or
affiliate of Seven, or any other person, on its behalf to, directly or
indirectly, solicit or encourage any offer from any party or consider any
inquiries or proposals received from any other party, participate in any
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate with, facilitate or encourage any effort or attempt
by any person (other than Portable), concerning the possible disposition of all
or any substantial portion of Seven's business, assets or capital stock by
merger, sale or any other means or concerning any investment in Seven. Seven
will promptly notify Portable orally and in writing of any such inquiries or
proposals.
5.9 Access to Information. Until the Closing, Seven will allow
Portable and its agents reasonable access the files, books, records and offices
of Seven, including, without limitation, any and all information relating to
Seven's taxes, commitments, contracts, leases, licenses, and real, personal and
intangible property and financial condition. Seven will cause its accountants to
cooperate with Portable and its agents in making available all financial
information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
5.10 Satisfaction of Conditions Precedent. Seven will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 9, and Seven will use its best efforts to cause
the transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
5.11 Seven Dissenting Shares. As promptly as practicable after
the date of the Shareholders' Meeting and prior to the Closing Date, Seven shall
furnish Portable with the name and address of each holder of Seven Dissenting
Shares ("SEVEN DISSENTING SHAREHOLDER") and the number of Seven Dissenting
Shares owned by such Seven Dissenting Shareholder.
5.12 Blue Sky Laws. Seven shall use its best efforts to assist
Portable to the extent necessary to comply with the securities and Blue Sky laws
of all jurisdictions which are applicable in connection with the Merger.
6. PORTABLE PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Portable covenants and agrees as follows:
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6.1 Advice of Changes. Portable will promptly advise Seven in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Portable contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (b) of any material adverse
change in Portable's business, results of operations or financial condition.
6.2 Regulatory Approvals. Portable will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Seven may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Portable will
use its best efforts to obtain all such authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. Portable will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 8, and Portable will use its best efforts to
cause the transactions contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
6.4 Blue Sky Laws. Portable shall take such steps as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
which are applicable in connection with the Merger.
6.5 Employee Matters. Portable will have extended written offers
of employment to each of the Seven employees listed on Exhibit 6.5.
7. CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as
provided in Section 10 below, the Closing will take place at the offices of
Fenwick & West, Two Palo Alto Square, Palo Alto, California 94306 at 1:30 p.m.,
Pacific Standard Time on June 30, 1998, or, if all conditions to closing have
not been satisfied or waived by such date, such other place, time and date as
Seven and Portable may mutually select (the "Closing Date"). Concurrently with
the Closing, the Agreement of Merger will be filed in the office of the Delaware
and California Secretaries of State. The Agreement of Merger provides that the
Merger shall become effective upon filing with the California Secretary of
State.
7.2 Exchange of Certificates.
7.2.1 As of the Effective Time, all shares of Seven
Common Stock that are outstanding immediately prior thereto will, by virtue of
the Merger and without further action, cease to exist and will be converted into
the right to receive from Portable the number of shares
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of Portable Common Stock determined as set forth in Section 2.1.2, subject to
Sections 2.1.3, 2.1.4 and 2.2.
7.2.2 As soon as practicable after the Effective Time,
each holder of shares of Seven Common Stock that are not Seven Dissenting Shares
will surrender the certificate(s) for such shares (the "SEVEN CERTIFICATES"),
duly endorsed as requested by Portable, to Portable for cancellation. Within
five (5) business days of the date that Portable receives written confirmation
of the Effective Time, and conditioned upon Portable's receipt of such Seven
Certificates and any other documentation deliverable by any such holder under
this Agreement, Portable will issue to each tendering holder of Seven
Certificates a certificate for the number of shares of Portable Common Stock to
which such holder is entitled pursuant to Section 2.1.2 hereof, less the shares
of Portable Common Stock deposited into escrow pursuant to Section 2.4 hereof,
and distribute any cash payable under Section 2.2.
7.2.3 No dividends or distributions payable to holders
of record of Portable Common Stock after the Effective Time, or cash payable in
lieu of fractional shares, will be paid to the holder of any unsurrendered Seven
Certificate(s) until the holder of the Seven Certificate(s) surrenders such
Seven Certificate(s). Subject to the effect, if any, of applicable escheat and
other laws, following surrender of any Seven Certificate, there will be
delivered to the person entitled thereto, without interest, the amount of any
dividends and distributions therefor paid with respect to Portable Common Stock
so withheld as of any date subsequent to the Effective Time and prior to such
date of delivery.
7.2.4 All Portable Common Stock delivered upon the
surrender of Seven Common Stock in accordance with the terms hereof will be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Seven Common Stock. There will be no further registration of transfers on
the stock transfer books of Seven or its transfer agent of the Seven Common
Stock. If, after the Effective Time, Seven Certificates are presented for any
reason, they will be canceled and exchanged as provided in this Section 7.2.
7.2.5 Until certificates representing Seven Common Stock
outstanding prior to the Merger are surrendered pursuant to Section 7.2.2 above,
such certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of Portable Common Stock into which the Seven Common Stock will
have been converted, reduced by the number of shares withheld as Escrow Shares.
7.3 Assumption of Options. As soon as practicable after the
Effective Time, Portable will notify in writing each holder of a Seven Option of
the assumption of such Seven Option by Portable, and the number of shares of
Portable Common Stock that are then subject to such Portable Option and the
exercise price of such Portable Option, as determined pursuant to Sections 2.1
and 2.3 hereof.
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8. CONDITIONS TO OBLIGATIONS OF SEVEN
The obligations of Seven and the Principal Shareholders
hereunder are subject to the fulfillment or satisfaction, on and as of the
Closing, of each of the following conditions (any one or more of which may be
waived by Seven, but only in a writing signed by Seven):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of Portable and Portable Subsidiary set forth in
Section 4 shall be true and accurate in every material respect on and as of the
Closing with the same force and effect as if they had been made at the Closing,
and Seven shall receive a certificate to such effect executed by Portable's
President and Chief Financial Officer.
8.2 Covenants. Portable shall have performed and complied in all
material respects with all of its covenants contained in Section 6 on or before
the Closing, and Seven shall receive a certificate to such effect signed by
Portable's President and Chief Financial Officer.
8.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
8.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
federal and state securities laws.
8.5 Opinion of Portable's Counsel. Seven shall have received
from counsel to Portable, an opinion substantially in the form of Exhibit 8.5.
8.6 Employment and Non-Competition Agreements. Portable shall
execute and deliver Employment and Non-Competition Agreements in favor of
Melissa Widner and Andrew Dent substantially in the forms attached as Exhibit
8.6A and 8.6B.
8.7 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of Portable.
9. CONDITIONS TO OBLIGATIONS OF PORTABLE
The obligations of Portable hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Portable, but only in a
writing signed by a duly authorized representative of Portable):
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9.1 Accuracy of Representations and Warranties. The
representations and warranties of Seven and the Principal Shareholders set forth
in Section 3 shall be true and accurate in every material respect on and as of
the Closing with the same force and effect as if they had been made at the
Closing, and Portable shall receive a certificate to such effect executed by
Seven's President and Chief Financial Officer.
9.2 Covenants. Seven shall have performed and complied in all
material respects with all of its covenants contained in Section 5 on or before
the Closing, and Portable shall receive a certificate to such effect signed by
Seven's President and Chief Financial Officer.
9.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
9.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
federal and state securities laws.
9.5 Opinion of Seven's Counsel. Portable shall have received
from counsel to Seven, an opinion substantially in the form of Exhibit 9.5.
9.6 Consents. Portable shall have received duly executed copies
of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates specified on Exhibit 9.6.
9.7 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of Seven.
9.8 Requisite Approvals. The principal terms of this Agreement
and the Agreement of Merger shall have been approved and adopted by Seven
Shareholders, as required by applicable law and Seven's Articles of
Incorporation and Bylaws. Not less than ninety percent (90%) of the outstanding
equity securities of Seven shall have voted in favor of the Merger.
9.9 Seven Dissenting Shares. The Seven Dissenting Shares shall
not constitute more than five percent (5%) of the total number of shares of
Seven Common Stock outstanding immediately prior to the Effective Time.
9.10 Escrow. Portable shall have received the Escrow Agreement
executed by Seven and Melissa Widner, as the Representative for all Seven
Shareholders, the Escrow Agent and by all shareholders of Seven voting for
approval of this Agreement and the Merger providing for the escrow of the Escrow
Shares on the terms and conditions of the Escrow Agreement.
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9.11 Exercise of Seven Derivative Securities. All outstanding
Seven Derivative Securities shall have been exercised in full and thereby
converted into shares of Seven Common Stock.
9.12 Employment and Non-Competition Agreements. Portable shall
have received from each of Melissa Widner and Andrew Dent a duly executed
Employment and Non-Competition Agreement substantially in the form attached as
Exhibit 8.6.
9.13 Termination of Rights. Any registration rights, rights of
refusal, rights to any liquidation preference, or redemption rights of any Seven
Shareholder shall have been terminated or waived as of the Closing.
9.14 Maximum Number of Shares. Immediately prior to the Merger,
Seven shall not have outstanding a Number of Fully Diluted Seven Shares that
would require the issuance of more than 2,082,118 shares of Portable Common
Stock (including options exercisable therefor) in exchange therefor.
9.15 Resignation of Directors. By virtue of the Merger at the
Effective Time and without further action on the part of any person, the
directors of Seven in office immediately prior to the Effective Time of the
Merger will be deemed to have resigned as directors of Seven effective as of the
Effective Time.
9.16 Investment Letters Executed. Each of the Seven Shareholders
shall have executed and delivered to Seven an Investment Representation Letter,
and substantially all of the holders of outstanding Seven Options shall have
executed and delivered to Portable an Optionee Investment Representation Letter.
9.17 Continued Employment of Certain Employees. Each of the
persons listed on Exhibit 9.17 will be employed by Seven on the Closing Date.
10. TERMINATION OF AGREEMENT
10.1 Prior to Closing.
10.1.1 This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of each of the parties
hereto.
10.1.2 Unless otherwise agreed by the parties hereto,
this Agreement will be terminated if all conditions to the Closing have not been
satisfied or waived on or before July 15, 1998.
10.2 At the Closing. At the Closing, this Agreement may be
terminated and abandoned:
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10.2.1 By Portable if any of the conditions precedent to
Portable's obligations set forth in Section 9 above have not been fulfilled or
waived at and as of the Closing; or
10.2.2 By Seven if any of the conditions precedent to
Seven's obligations set forth in Section 8 above have not been fulfilled or
waived at and as of the Closing.
Any termination of this Agreement under this Section
10.2 will be effective by the delivery of notice of the terminating party to the
other party hereto.
10.3 No Liability. Any termination of this Agreement pursuant to
this Section 10 will be without further obligation or liability upon any party
in favor of the other party hereto other than the obligations provided in
Sections 12.2 and 12.16 and in the Reciprocal Nondisclosure Agreement between
Seven and Portable dated February 1, 1998, which will survive termination of
this Agreement; provided, however, that nothing herein will limit the obligation
of Seven and Portable to use their best efforts to cause the Merger to be
consummated, as set forth in Sections 5.10 and 6.3 hereof, respectively.
10.4 Break-Up Fee. Portable agrees to pay Seven a "break-up fee"
of Five Hundred Thousand Dollars ($500,000.00) in the event the Closing fails to
occur unless such failure is due to the failure or non-satisfaction of
conditions set forth in Sections 9.1, 9.2, 9.5, 9.6, 9.8, 9.9, 9.10, 9.11, 9.12,
9.13, 9.14, 9.16 or 9.17. Such amounts shall be paid to Seven within thirty (30)
days of the termination of this Agreement in cash, or partly in cash and partly
by cancellation of that certain Note dated May 23, 1998 payable to Portable
described in the Seven Disclosure Schedule.
11. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
11.1 Survival of Representations. All representations,
warranties and covenants of Portable contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement, until the earlier of the
termination of this Agreement or one year after the Closing Date, whereupon such
representations, warranties and covenants will expire (except for covenants that
by their terms survive for a longer period). Unless otherwise specified herein,
all representations, warranties and covenants of Seven will survive the
Effective Time and will continue until the expiration of the period set forth in
the previous sentence and covenants that by their terms survive thereafter will
continue to survive in accordance with their terms.
11.2 Agreement to Indemnify. Subject to the limitations set
forth in this Section 11, Seven will indemnify and hold harmless Portable and
its officers, directors, agents and employees, and each person, if any, who
controls or may control Portable within the meaning of the Securities Act
(hereinafter referred to individually as an "INDEMNIFIED PERSON" and
collectively as "INDEMNIFIED PERSONS") from and against any and all claims,
demands, actions, causes of actions, losses, costs, damages, liabilities and
expenses including, without
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limitation, reasonable legal fees actually incurred by Portable (hereinafter
referred to as "DAMAGES"):
(a) Arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties and covenants
given or made by Seven in this Agreement or any certificate, document or
instrument delivered by or on behalf of Seven pursuant hereto (other than with
respect to changes in the truth or accuracy of the representations and
warranties of Seven under this Agreement after the date hereof if Seven has
advised Portable of such changes in an update to Exhibit 3.0 delivered prior to
the Closing and Portable has nonetheless proceeded with the Closing); or
(b) Resulting from any failure of any Seven Shareholders
to have good, valid and marketable title to the issued and outstanding Seven
Common Stock held by such shareholders, free and clear of all liens, claims,
pledges, options, adverse claims, assessments or charges of any nature
whatsoever, or to have full right, capacity and authority to vote such Seven
Common Stock in favor of the Merger and the other transactions contemplated by
the Agreement of Merger.
In seeking indemnification for Damages under this Section, the
Indemnified Persons shall exercise their remedies solely with respect to the
Escrow Shares and any other assets deposited in escrow pursuant to the Escrow
Agreement; provided, however, that no such claim for Damages will be asserted
after the expiration of the Escrow Period. Except for intentional fraud: (i) no
Seven Shareholder shall have any liability to an Indemnified Person under this
Agreement except to the extent of such Seven Shareholder's Escrow Shares and any
other assets deposited under the Escrow Agreement and (ii) the remedies set
forth in this Section 11.2 shall be the exclusive remedies of Portable and the
other Indemnified Persons hereunder against any Seven Shareholder. The
indemnification provided for in this Section 11.2 shall not apply unless the
aggregate Damages for which one or more Indemnified Persons is entitled to
indemnification exceeds Twenty-Five Thousand Dollars ($25,000) (the "BASKET"),
in which case the indemnification provided for in this Section 11.2 shall apply
to the extent the aggregate Damages for which one or more Indemnified Persons is
entitled to indemnification exceeds Twelve Thousand Five Hundred Dollars
($12,500).
11.3 Notice and Defense of Third Party Claims.
(a) The Indemnified Persons shall give prompt written
notice to the Representative of any claim by a third party that might give rise
to a claim by the Indemnified Persons based upon the indemnity agreement
contained in Section 11.2 hereof, stating the nature and basis of such claim and
the amount thereof, to the extent known. The Indemnified Persons shall have the
sole right to control the defense of any such action, suit or proceeding. The
Representative shall be kept fully informed of such action, suit or proceeding
at all stages thereof. In addition, the Representative may, at its expense,
participate in the defense of any such action, suit or proceeding with one
counsel of its choice; provided, however, that the Indemnified Persons shall at
all times have the right to control such defense. The parties hereto
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shall render to each other such assistance as they may reasonably require of
each other in order to ensure the proper and adequate defense of any such
action, suit or proceeding.
(b) Neither the Indemnified Persons nor the
Representative shall make any settlement of any claims without the written
consent of the others, which consent shall not be unreasonably withheld.
12. MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
12.2 Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
12.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. The Agreement may be amended by the parties hereto at any
time before or after approval of the Seven Shareholders, but, after such
approval, no amendment will
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be made which by applicable law requires the further approval of the Seven
Shareholders without obtaining such further approval.
12.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
12.8 Expenses. Portable will pay promptly (and in any event
within thirty (30) days) upon demand the reasonable legal and accounting fees
and expenses, in excess of $2,000, incurred by Seven in this transaction, not to
exceed a combined total of $55,000.
12.9 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
12.10 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by registered or certified mail, postage prepaid and will be
deemed given upon delivery, if delivered personally, or three days after deposit
in the mails, if mailed, to the following addresses:
(i) If to Portable or Portable Subsidiary:
Portable Software Corporation
6222-185th Street, N.E.
Redmond, WA 98122
Attention: Fred Ingham
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Matthew P. Quilter, Esq.
(ii) If to Seven:
7Software, Inc.
25 Loyola Avenue
Menlo Park, CA 94025
Attention: President
with a copy to:
Gray Cary Ware & Freidenrich
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400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Peter M. Astiz, Esq.
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.10.
12.11 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section or an exhibit will mean a Section in, or exhibit to, this Agreement
unless otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
12.12 No Joint Venture. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
12.13 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
12.14 Absence of Third Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
12.15 Public Announcement. Portable will, at its discretion
issue a press release announcing the Merger, within six (6) months after the
Effective Date. Portable may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules. Prior to the publication of such press
release (unless this Agreement has been terminated), neither party will make any
public announcement relating to this Agreement or the transactions contemplated
hereby.
12.16 Confidentiality. Seven and Portable each recognize that
they have received and will receive confidential information concerning the
other during the course of the Merger negotiations and preparations.
Accordingly, Portable and Seven and each Principal
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Shareholder each agrees (a) to use its respective best efforts to prevent the
unauthorized disclosure of any confidential information concerning the other
that was or is disclosed during the course of such negotiations and
preparations, and is clearly designated in writing as confidential at the time
of disclosure, and (b) to not make use of or permit to be used any such
confidential information other than for the purpose of effectuating the Merger
and related transactions. The obligations of this section will not apply to
information that (i) is or becomes part of the public domain, (ii) is disclosed
by the disclosing party to third parties without restrictions on disclosure,
(iii) is received by the receiving party from a third party without breach of a
nondisclosure obligation to the other party or (iv) is required to be disclosed
by law. If this Agreement is terminated, all copies of documents containing
confidential information shall be returned by the receiving party to the
disclosing party.
12.17 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Reciprocal Nondisclosure Agreement between Seven and Portable dated February 1,
1998. The express terms hereof control and supersede any course of performance
or usage of the trade inconsistent with any of the terms hereof.
-33-
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first above written.
PORTABLE SOFTWARE CORPORATION 7SOFTWARE, INC.
By: /s/ STERLING WILSON By: /s/ MELISSA WIDNER
----------------------------- ---------------------------------------
Sterling Wilson, Chief Melissa Widner
Financial Officer CEO/President
PSC MERGER CORP.
By: /s/ DOUGLAS CHOI
-----------------------------
Douglas Choi, President
PRINCIPAL SHAREHOLDERS:
/s/ MELISSA WIDNER /s/ ANDREW DENT
- -------------------------------- ------------------------------------------
Melissa Widner Andrew Dent
-34-
<PAGE> 35
Exhibit A
Agreement of Merger
<PAGE> 36
Exhibit 2.4
Escrow Agreement
<PAGE> 37
Exhibit 2.5
Amended Articles and Bylaws of Seven
<PAGE> 38
Exhibit 2.8A
Investment Representation Letter
<PAGE> 39
Exhibit 2.8B
Optionee Investment Representation Letter
<PAGE> 40
Exhibit 3.0
Seven Disclosure Schedule
<PAGE> 41
Exhibit 3.8
Seven Financial Statements
<PAGE> 42
Exhibit 4.0
Portable Disclosure Schedule
This disclosure schedule (this "DISCLOSURE SCHEDULE") contains
exceptions to the representations and warranties made by Portable and Portable
Subsidiary in Section 4 of the Agreement and Plan of Reorganization dated as of
June 30, 1998 (the "AGREEMENT") by and among Portable, Portable Subsidiary,
Seven and the Principal Shareholders. The section references used herein are to
particular subsections in Section 4 of the Agreement. Any information disclosed
under any section in this Disclosure Schedule is deemed to be disclosed and
incorporated in any other section of this Disclosure Schedule where such
disclosure would or might be appropriate. Capitalized terms used in this
Disclosure Agreement, unless otherwise specified, have the same meanings given
to them in the Agreement. Nothing in this Disclosure Schedule constitutes an
admission to any third party of any liability or obligation of Portable or
Portable Subsidiary to any third party, nor an admission that any matter
referred to herein is or would be material or would be reasonably likely to
result in a material adverse effect on Portable or Portable Subsidiary.
Section 4.3. Capitalization.
<PAGE> 43
Exhibit 4.5
Portable Financial Statements
<PAGE> 44
Exhibit 6.5
Persons Offered Employment
Andrew Dent
Elena Donio
Terry Glenn
Ian Huynh
Vincent Payette
Kristin Reams
Karen Skjervem
Erik Wahlstrom
Melissa Widner
<PAGE> 1
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
CONCUR TECHNOLOGIES, INC.
ARTICLE I
The name of the corporation is Concur Technologies, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
19801, County of New Castle. The name of its registered agent at that address is
The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. Authorization of Shares
The total number of shares of all classes of stock which the corporation
has authority to issue is one hundred thirteen million (113,000,000) shares,
consisting of two classes: sixty million (60,000,000) shares of Common Stock,
$0.001 par value per share, and fifty-three million (53,000,000) shares of
Preferred Stock, $0.001 par value per share.
B. Designation of Future Series of Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof and to increase or decrease the number of shares of any such series (but
not below the number of shares of such series then outstanding). Subject to
approval by the Board of Directors, the number of authorized shares of Preferred
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the corporation entitled to vote, unless a vote of any other holders is
required pursuant to a certificate or certificates establishing a series of
Preferred Stock.
Except as expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series of Preferred
<PAGE> 2
Certificate of Incorporation
Stock may be designated, fixed and determined as provided herein by the Board of
Directors without approval of the holders of Common Stock or the holders of
Preferred Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred
Stock, or any future class or series of Preferred Stock or Common Stock.
If the certificate of designation creating a series of Preferred Stock
so provides, any shares of a series of Preferred Stock that are acquired by the
corporation, whether by redemption, purchase, conversion or otherwise, so that
such shares are issued but not outstanding, may not be reissued as shares of
such series or as shares of the class of Preferred Stock. Upon the retirement of
any such shares and the filing of a certificate of retirement pursuant to
Sections 103 and 243 of the Delaware General Corporation Law with respect
thereto, the shares of such series shall be eliminated and the number of shares
of Preferred Stock shall be reduced accordingly.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE VIII
Effective immediately after the closing of an underwritten public
offering of shares of the corporation's Common Stock pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission, actions shall be taken by the corporation's stockholders only at
annual or special meetings of stockholders, and the corporation's stockholders
shall not be able to act by written consent.
<PAGE> 3
Certificate of Incorporation
ARTICLE IX
The name and mailing address of the incorporator is Kevin S. Chou, c/o
Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: August 4, 1998 /s/ Kevin S. Chou
--------------------------------
Kevin S. Chou, Incorporator
<PAGE> 1
EXHIBIT 3.03
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CONCUR TECHNOLOGIES, INC.
ARTICLE I
The name of the corporation is Concur Technologies, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
19805, County of New Castle. The name of its registered agent at that address is
The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. Authorization of Shares
The total number of shares of all classes of stock which the corporation
has authority to issue is sixty-five million (65,000,000) shares, consisting of
two classes: sixty million (60,000,000) shares of Common Stock, $0.001 par value
per share, and five million (5,000,000) shares of Preferred Stock, $0.001 par
value per share.
B. Designation of Future Series of Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof and to increase or decrease the number of shares of any such series (but
not below the number of shares of such series then outstanding). Subject to
approval by the Board of Directors, the number of authorized shares of Preferred
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the corporation entitled to vote, unless a vote of any other holders is
required pursuant to a certificate or certificates establishing a series of
Preferred Stock.
<PAGE> 2
Concur Technologies, Inc.
Amended and Restated Certificate of Incorporation
Except as expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series of Preferred Stock may be designated, fixed
and determined as provided herein by the Board of Directors without approval of
the holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights
including, without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.
If the certificate of designation creating a series of Preferred Stock
so provides, any shares of a series of Preferred Stock that are acquired by the
corporation, whether by redemption, purchase, conversion or otherwise, so that
such shares are issued but not outstanding, may not be reissued as shares of
such series or as shares of the class of Preferred Stock. Upon the retirement of
any such shares and the filing of a certificate of retirement pursuant to
Sections 103 and 243 of the Delaware General Corporation Law with respect
thereto, the shares of such series shall be eliminated and the number of shares
of Preferred Stock shall be reduced accordingly.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation.
ARTICLE VI
A. Election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
B. Any action required or permitted to be taken by the stockholders of
the corporation must be effected at a duly called annual or special meeting of
stockholders of the corporation and may not be effected by any consent in
writing by such stockholders.
C. Special meetings of stockholders of the corporation may be called only
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board for adoption), the Chairman of the Board or the Chief
Executive Officer.
ARTICLE VII
A. The directors, other than those who may be elected by the holders of
Preferred Stock under specified circumstances, shall be divided into three
classes with the term of office of the first class (Class I) to expire at the
annual meeting of stockholders held in 1999; the term of office of the second
class (Class II) to expire at the annual meeting of stockholders held in 2000;
the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2001; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders
-2-
<PAGE> 3
Concur Technologies, Inc.
Amended and Restated Certificate of Incorporation
after such election. All directors shall hold office until the expiration of the
term for which elected, and until their respective successors are elected,
except in the case of the death, resignation or removal of any director.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation or other cause may be filled (a) by the
stockholders at any meeting, (b) by a majority of the directors, although less
than a quorum, or (c) by a sole remaining director, and directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders
at which the term of office of the class to which they have been elected
expires, and until their respective successors are elected, except in the case
of the death, resignation or removal of any director. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
ARTICLE VIII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
To the extent permitted by applicable law, this corporation is also
authorized to provide indemnification of (and advancement of expenses to) agents
(and any other persons to which Delaware law permits this corporation to provide
indemnification) through bylaw provisions, agreements with such agents or other
persons, vote of stockholders or disinterested directors or otherwise, in excess
of the indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach of
duty to the corporation, its stockholders, and others.
Neither any amendment nor repeal of any of the foregoing provisions of
this Article VIII, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article VIII, shall eliminate, reduce or
otherwise adversely affect any limitation on the personal liability of a
director of the corporation existing at the time of such amendment, repeal or
adoption of such an inconsistent provision.
-3-
<PAGE> 4
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CONCUR TECHNOLOGIES, INC.
(ORIGINALLY INCORPORATED ON AUGUST 5, 1998)
Concur Technologies, Inc., a Delaware corporation, hereby certifies
that the Amended and Restated Certificate of Incorporation of the corporation
attached hereto as Exhibit A, which is incorporated herein by this reference,
and which restates, integrates and further amends the provisions of the
Certificate of Incorporation of this corporation, has been duly adopted by the
corporation's Board of Directors and stockholders in accordance with Sections
228, 242 and 245 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its duly authorized
officers this ____ day of ___________, 1998.
CONCUR TECHNOLOGIES, INC.
a Delaware corporation
By:______________________________________
S. Steven Singh, President
ATTEST:
______________________________
Matthew P. Quilter, Secretary
<PAGE> 1
EXHIBIT 3.04
--------------------------
BYLAWS
OF
CONCUR TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
AS ADOPTED AUGUST 19, 1998
--------------------------
<PAGE> 2
BYLAWS
OF
CONCUR TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - STOCKHOLDERS........................................................ 1
Section 1.1: Annual Meetings..................................... 1
Section 1.2: Special Meetings.................................... 1
Section 1.3: Notice of Meetings.................................. 1
Section 1.4: Adjournments........................................ 1
Section 1.5: Quorum.............................................. 2
Section 1.6: Organization........................................ 2
Section 1.7: Voting; Proxies..................................... 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record........................................... 3
Section 1.9: List of Stockholders Entitled to Vote............... 3
Section 1.10: Action by Written Consent of Stockholders............ 4
Section 1.11: Inspectors of Elections............................. 5
Section 1.12: Notice of Stockholder Business; Nominations......... 6
ARTICLE II - BOARD OF DIRECTORS................................................. 8
Section 2.1: Number; Qualifications.............................. 8
Section 2.2: Election; Resignation; Removal; Vacancies........... 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 2.3: Regular Meetings.................................... 8
Section 2.4: Special Meetings.................................... 9
Section 2.5: Telephonic Meetings Permitted....................... 9
Section 2.6: Quorum; Vote Required for Action.................... 9
Section 2.7: Organization........................................ 9
Section 2.8: Written Action by Directors......................... 9
Section 2.9: Powers.............................................. 9
Section 2.10: Compensation of Directors........................... 9
ARTICLE III - COMMITTEES........................................................ 10
Section 3.1: Committees.......................................... 10
Section 3.2: Committee Rules..................................... 10
ARTICLE IV - OFFICERS........................................................... 11
Section 4.1: Generally........................................... 11
Section 4.2: Chief Executive Officer............................. 11
Section 4.3: Chairman of the Board............................... 12
Section 4.4: President........................................... 12
Section 4.5: Vice President...................................... 12
Section 4.6: Chief Financial Officer............................. 12
Section 4.7: Treasurer........................................... 12
Section 4.8: Secretary........................................... 12
Section 4.9: Delegation of Authority............................. 12
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.10: Removal............................................. 13
ARTICLE V - STOCK............................................................... 13
Section 5.l: Certificates........................................ 13
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate......................... 13
Section 5.3: Other Regulations................................... 13
ARTICLE VI - INDEMNIFICATION.................................................... 13
Section 6.1: Indemnification of Officers and Directors........... 13
Section 6.2: Advance of Expenses................................. 14
Section 6.3: Non-Exclusivity of Rights........................... 14
Section 6.4: Indemnification Contracts........................... 14
Section 6.5: Effect of Amendment................................. 14
ARTICLE VII - NOTICES........................................................... 15
Section 7.l: Notice.............................................. 15
Section 7.2: Waiver of Notice.................................... 15
ARTICLE VIII - INTERESTED DIRECTORS............................................. 15
Section 8.1: Interested Directors; Quorum........................ 15
ARTICLE IX - MISCELLANEOUS...................................................... 16
Section 9.1: Fiscal Year......................................... 16
Section 9.2: Seal................................................ 16
Section 9.3: Form of Records..................................... 16
Section 9.4: Reliance Upon Books and Records..................... 16
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 9.5: Certificate of Incorporation Governs................ 16
Section 9.6: Severability........................................ 16
ARTICLE X - AMENDMENT........................................................... 17
Section 10.1: Amendments.......................................... 17
</TABLE>
<PAGE> 6
BYLAWS
OF
CONCUR TECHNOLOGIES, INC.
(a Delaware corporation)
As Adopted August 19, 1998
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as the Board of Directors shall each
year fix. Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board, the
Chief Executive Officer or by a majority of the members of the Board of
Directors. Special meetings may not be called by any other person or persons. If
a special meeting of stockholders is called by any person or persons other than
by a majority of the members of the Board of Directors, then such person or
persons shall call such meeting by delivering a written request to call such
meeting to each member of the Board of Directors, and the Board of Directors
shall then determine the time, date and place of such special meeting, which
shall be held not more than one hundred twenty (120) nor less than thirty-five
(35) days after the written request to call such special meeting was delivered
to each member of the Board of Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
that if the adjournment is for more than thirty (30) days, or if after the
adjournment, a new record date is fixed for the adjourned meeting, then a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At the adjourned meeting, the Corporation may transact
any business that might have been transacted at the original meeting.
<PAGE> 7
Section 1.5: Quorum. At each meeting of stockholders, the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall fail
to attend any meeting, the chairman of the meeting or the holders of a majority
of the shares entitled to vote who are present, in person or by proxy, at the
meeting may adjourn the meeting. Shares of the Corporation's stock belonging to
the Corporation (or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation are held,
directly or indirectly, by the Corporation), shall neither be entitled to vote
nor be counted for quorum purposes; provided, however, that the foregoing shall
not limit the right of the Corporation or any other corporation to vote any
shares of the Corporation's stock held by it in a fiduciary capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairman of the Board, or, in the absence of such person,
the President of the Corporation, or, in the absence of such person, such person
as may be chosen by the holders of a majority of the shares entitled to vote who
are present, in person or by proxy, at the meeting. Such person shall be
chairman of the meeting and, subject to Section 1.12 hereof, shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seems to him or her to be
in order. The Secretary of the Corporation shall act as secretary of the
meeting, but in his or her absence, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
Certificate of Incorporation of the Corporation, and subject to the provisions
of Section 1.8 of these Bylaws, each stockholder shall be entitled to one (1)
vote for each share of stock held by such stockholder. Each stockholder entitled
to vote at a meeting of stockholders, or to express consent or dissent to
corporate action in writing without a meeting, may authorize another person or
persons to act for such stockholder by proxy. Such a proxy may be prepared,
transmitted and delivered in any manner permitted by applicable law. Voting at
meetings of stockholders need not be by written ballot unless such is demanded
at the meeting before voting begins by a stockholder or stockholders holding
shares representing at least one percent (1%) of the votes entitled to vote at
such meeting, or by such stockholder's or stockholders' proxy; provided,
however, that an election of directors shall be by written ballot if demand is
so made by any stockholder at the meeting before voting begins. If a vote is to
be taken by written ballot, then each such ballot shall state the name of the
stockholder or proxy voting and such other information as the chairman of the
meeting deems appropriate. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Unless otherwise provided by
applicable law, the Certificate of Incorporation of the Corporation or these
Bylaws, every matter other than the election of directors shall be decided by
the affirmative vote of the holders of a majority of the shares of stock
entitled to vote thereon that are present in person or represented by proxy at
the meeting and are voted for or against the matter.
-2-
<PAGE> 8
Section 1.8: Fixing Date for Determination of Stockholders of Record.
(a) Generally. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors and which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed by the
Board of Directors, then the record date shall be as provided by applicable law.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Stockholder Request for Action by Written Consent. For such period
of time as stockholders are authorized to act by written consent pursuant to the
provisions of the Certificate of Incorporation of the Corporation and Section
1.10 hereof, any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent without a meeting shall,
by written notice to the Secretary of the Corporation, request the Board of
Directors to fix a record date for such consent. Such request shall include a
brief description of the action proposed to be taken. The Board of Directors
shall, within ten (10) days after the date on which such a request is received,
adopt a resolution fixing the record date. Such record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and shall not be more than ten (10) days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors within ten
(10) days after the date on which such a request is received, then the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
to its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, then the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
-3-
<PAGE> 9
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Action by Written Consent of Stockholders.
(a) Procedure. Unless otherwise provided by the Certificate of
Incorporation of the Corporation, and except as set forth in Section 1.8(b)
above, any action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted; provided, however, that effective immediately after the closing of an
underwritten public offering of shares of the Corporation's Common Stock
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission, any action required or permitted to be taken
by the Corporation's stockholders shall be taken only at a duly called annual or
special meeting of such stockholders, and the Corporation's stockholders shall
not be able to act by written consent. For such period of time as written
stockholder consents are permitted, such consents shall bear the date of
signature of each stockholder who signs the consent and shall be delivered to
the Corporation by delivery to its registered office in the State of Delaware,
to its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. No written consent
shall be effective to take the action set forth therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate action
by stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and, in the case of a Certificate Action (as defined below), if the
Delaware General Corporation Law so requires, such notice shall be given prior
to filing of the certificate in question. If the action which is consented to
requires the filing of a certificate under the Delaware General Corporation Law
(a "Certificate Action"), then if the Delaware General Corporation Law so
requires, the certificate so filed shall state that written stockholder consent
has been given in accordance with Section 228 of the Delaware General
Corporation Law and that written notice of the taking of corporate action by
stockholders without a meeting as described herein has been given as provided in
such section.
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Section 1.11: Inspectors of Elections.
(a) Applicability. Unless otherwise provided in the Corporation's
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an interdealer quotation
system of a registered national securities association; or (iii) held of record
by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional and at the discretion of the
Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his or her ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors
of election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors and (v) certify
their determination of the number of shares represented at the meeting and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced by the inspectors at the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, the ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons that represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
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inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.12: Notice of Stockholder Business; Nominations.
(a) Annual Meeting of Stockholders.
(i) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders
shall be made at an annual meeting of stockholders (A) pursuant to the
Corporation's notice of such meeting, (B) by or at the direction of the Board of
Directors or (C) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this Section 1.12,
who is entitled to vote at such meeting and who complies with the notice
procedures set forth in this Section 1.12.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of subparagraph
(a)(i) of this Section 1.12, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than sixty (60) days after
such anniversary date, notice by the stockholder, to be timely, must be so
delivered not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation. Such stockholder's
notice shall set forth: (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (1) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (2) the class and number
of shares of the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner.
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(iii) Notwithstanding anything in the second sentence of
subparagraph (a)(ii) of this Section 1.12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased board of
directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.12 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary of the Corporation at the principal executive office
of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.12. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.12 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.12. Except as otherwise provided by law or these
Bylaws, the chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 1.12 and, if any proposed nomination or business is not in
compliance herewith, to declare that such defective proposal or nomination shall
be disregarded.
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(ii) For purposes of this Section 1.12, the term "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to sections 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
1.12, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
consist of one or more members. The initial number of directors shall be six
(6), and thereafter shall be fixed from time to time by resolution of the Board
of Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
The Board of Directors shall be divided into three classes, with the term of
office of the first class, which class initially consists of two (2) directors,
to expire at the annual meeting of stockholders held in 1999; the term of office
of the second class, which class initially consists of two (2) directors, to
expire at the annual meeting of stockholders held in 2000; the term of office of
the third class, which class initially consists of two (2) directors, to expire
at the annual meeting of stockholders held in 2001; and thereafter with the term
of office of each class to expire at the third succeeding annual meeting of
stockholders after the election of each such class. Each director shall hold
office until the expiration of his or her term of office and until his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Subject to the rights of any holders of Preferred Stock then
outstanding: (i) any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors and (ii) any vacancy occurring in the Board
of Directors for any cause, and any newly created directorship resulting from
any increase in the authorized number of directors to be elected by all
stockholders having the right to vote as a single class, may be filled by the
stockholders, by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of
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Directors may from time to time determine. Notice of regular meetings need not
be given if the date, times and places thereof are fixed by resolution of the
Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President or a
majority of the members of the Board of Directors then in office and may be held
at any time, date or place, within or without the State of Delaware, as the
person or persons calling the meeting shall fix. Notice of the time, date and
place of such meeting shall be given, orally or in writing, by the person or
persons calling the meeting to all directors at least four (4) days before the
meeting if the notice is mailed, or at least twenty-four (24) hours before the
meeting if such notice is given by telephone, hand-delivery, telegram, telex,
mailgram, facsimile or similar communication method. Unless otherwise indicated
in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee of the Board of Directors, may participate in a
meeting of the Board or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation of the Corporation, or
required by law, the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or in his or her absence by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence, the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8: Written Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing and
the writing or writings are filed with the minutes of proceedings of the Board
or committee, respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation of the Corporation, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
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ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not he, she or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation of the
Corporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in subsection (a) of Section 151 of the
Delaware General Corporation Law, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation, or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation, or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series, adopting an agreement of
merger or consolidation under Sections 251 or 252 of the Delaware General
Corporation Law, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these Bylaws; and unless the resolution of the Board of
Directors expressly so provides, no such committee shall have the power or
authority to declare a dividend, authorize the issuance of stock or adopt a
certificate of ownership and merger pursuant to section 253 of the Delaware
General Corporation Law.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules,
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
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ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist
of a Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairman of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
Chief Executive Officer of the Corporation to appoint officers other than the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until his or
her successor is elected and qualified or until his or her earlier death,
resignation or removal. Any number of offices may be held by the same person.
Any officer may resign at any time upon written notice to the Corporation. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds,
conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and
other papers and instruments in writing which have been authorized by the Board
of Directors or which, in the judgment of the Chief Executive Officer, should be
executed on behalf of the Corporation; to sign certificates for shares of stock
of the Corporation; and, subject to the direction of the Board of Directors, to
have general charge of the property of the Corporation and to supervise and
control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not designated
any other officer to be the Chief Executive Officer, then the Chairman of the
Board shall be the Chief Executive Officer.
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Section 4.3: Chairman of the Board. The Chairman of the Board shall
have the power to preside at all meetings of the Board of Directors and shall
have such other powers and duties as provided in these Bylaws and as the Board
of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairman of the Board and/or to any other officer, the President shall
have the responsibility for the general management and control of the business
and affairs of the Corporation and the general supervision and direction of all
of the officers, employees and agents of the Corporation (other than the Chief
Executive Officer, if the Chief Executive Officer is an officer other than the
President) and shall perform all duties and have all powers that are commonly
incident to the office of president or that are delegated to the President by
the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. Subject to the direction of the
Board of Directors and the President, the Chief Financial Officer shall perform
all duties and have all powers that are commonly incident to the office of chief
financial officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of a treasurer or as the Board of Directors or the President may from time to
time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
all authorized notices for, and shall keep or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of secretary or as the Board of Directors or the President may from time
to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
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Section 4.10: Removal. Any officer of the Corporation shall serve at
the pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice-Chairman of the Board of Directors, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it that is alleged to have been
lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative, to
agree to indemnify the Corporation and/or to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
or she (or a person of whom he or she is the legal representative) is or was a
director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law against all expenses, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes and penalties
and amounts paid or to be paid in settlement) reasonably
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incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the Corporation shall indemnify any such
person seeking indemnity in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation; provided, further, that
the Corporation shall not be required to indemnify a person for amounts paid in
settlement of a proceeding unless the Corporation consents in writing to such a
settlement (such consent not to be unreasonably withheld). As used herein, the
term "Reincorporated Predecessor" means a corporation that is merged with and
into the Corporation in a statutory merger where (a) the Corporation is the
surviving corporation of such merger and (b) the primary purpose of such merger
is to change the corporate domicile of the Reincorporated Predecessor, and shall
include Concur Technologies, Inc., a Washington corporation.
Section 6.2: Advance of Expenses. The Corporation shall pay all
expenses (including attorneys' fees) incurred by such a director or officer in
defending any such proceeding as such expenses are incurred in advance of its
final disposition; provided, however, that if the Delaware General Corporation
Law then so requires, the payment of such expenses incurred by such a director
or officer in advance of the final disposition of such proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a proceeding, alleging that such person has breached
his or her duty of loyalty to the Corporation, committed an act or omission not
in good faith or that involves intentional misconduct or a knowing violation of
law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation of the Corporation, these Bylaws, agreement, vote
or consent of stockholders or disinterested directors, or otherwise.
Additionally, nothing in this Article VI shall limit the ability of the
Corporation, in its discretion, to indemnify or advance expenses to persons whom
the Corporation is not obligated to indemnify or advance expenses pursuant to
this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification and
related rights to such person. Such rights may be greater than those provided in
this Article VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or
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<PAGE> 20
protection conferred on a person pursuant to this Article VI and existing at the
time of such amendment, repeal or modification.
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein
or required by law, all notices required to be given pursuant to these Bylaws
shall be in writing and may in every instance be effectively given by hand
delivery (including use of a delivery service) by depositing such notice in the
mail, postage prepaid, or by sending such notice by prepaid telegram, telex,
overnight express courier, mailgram or facsimile. Any such notice shall be
addressed to the person to whom notice is to be given at such person's address
as it appears on the records of the Corporation. The notice shall be deemed
given (i) in the case of hand delivery, when received by the person to whom
notice is to be given or by any person accepting such notice on behalf of such
person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in
the case of delivery by overnight express courier, on the first business day
after such notice is dispatched, and (iv) in the case of delivery via telegram,
telex, mailgram or facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or
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<PAGE> 21
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; (ii) the material facts as to
his, her or their relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of his or her duties, be fully protected in relying in
good faith upon records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Corporation's Certificate of
Incorporation shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible
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<PAGE> 22
consistent with such holding and the remaining provisions of these Bylaws
(including, without limitation, all portions of any section of these Bylaws
containing any such provision held to be invalid, illegal, unenforceable or in
conflict with the Corporation's Certificate of Incorporation that are not
themselves invalid, illegal, unenforceable or in conflict with the Corporation's
Certificate of Incorporation) shall remain in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
majority of the Corporation's outstanding voting stock shall have the power to
adopt, amend or repeal Bylaws. To the extent provided in the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation shall
also have the power to adopt, amend or repeal Bylaws of the Corporation, except
insofar as Bylaws adopted by the stockholders shall otherwise provide.
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<PAGE> 23
CERTIFICATION OF BYLAWS
OF
CONCUR TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
KNOW ALL BY THESE PRESENTS:
I, Matthew P. Quilter, certify that I am Corporate Secretary of
Concur Technologies, Inc., a Delaware corporation (the "Company"), that I am
duly authorized to make and deliver this certification and that the attached
Bylaws are a true and correct copy of the Bylaws of the Company in effect as of
the date of this certificate.
Dated: August 19, 1998
/s/ MATTHEW P. QUILTER
-----------------------------------------
Matthew P. Quilter, Secretary
<PAGE> 1
EXHIBIT 4.02
PORTABLE SOFTWARE CORPORATION
SECOND AMENDED AND RESTATED INFORMATION
AND REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Certain Definitions ........................................................ 1
2. Financial Statements and Reports to Shareholders ........................... 2
3. Additional Information ..................................................... 3
4. Inspection ................................................................. 3
5. Right of First Refusal ..................................................... 4
6. Termination of Covenants ................................................... 5
7. Demand Registration ........................................................ 5
7.1 Request for Registration on Form Other Than Form S-3 .................. 5
7.2 Right of Deferral of Registration on Form Other Than S-3 .............. 6
7.3 Request for Registration on Form S-3 .................................. 6
7.4 Registration of Other Securities in Demand Registration ............... 7
7.5 Underwriting in Demand Registration ................................... 7
7.5.1 Notice of Underwriting ....................................... 7
7.5.2 Inclusion of Other Holders in Demand Registration ............ 7
7.5.3 Selection of Underwriter in Demand Registration .............. 8
7.5.4 Marketing Limitation in Demand Registration .................. 8
7.5.5 Right of Withdrawal in Demand Registration ................... 8
7.6 Blue Sky in Demand Registration ....................................... 8
8. Piggyback Registration ..................................................... 9
8.1 Notice of Piggyback Registration and Inclusion of Registrable
Securities .................................................... 9
8.2 Underwriting in Piggyback Registration ............................ 9
8.2.1 Notice of Underwriting in Piggyback Registration ......... 9
8.2.2 Marketing Limitation in Piggyback Registration ........... 9
8.2.3 Allocation of Shares in Piggyback Registration ........... 10
8.2.4 Withdrawal in Piggyback Registration ..................... 10
8.3 Blue Sky in Piggyback Registration .................................... 10
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
9. Expenses of Registration ................................................... 11
10. Termination of Registration Rights ......................................... 11
11. Registration Procedures and Obligations .................................... 11
12. Information Furnished by Holder ............................................ 12
13. Indemnification ............................................................ 12
13.1 Company's Indemnification of Holders .................................. 12
13.2 Holder's Indemnification of Company ................................... 13
13.3 Indemnification Procedure ............................................. 14
13.4 Contribution .......................................................... 14
14. Limitations on Registration Rights Granted to Other Securities ............. 15
15. Transfer of Rights ......................................................... 15
16. Market Stand-off ........................................................... 15
17. Conversion of Preferred Stock .............................................. 16
18. Reports Under Securities Exchange Act of 1934 .............................. 16
19. Miscellaneous .............................................................. 17
19.1 Entire Agreement; Successors and Assigns .............................. 17
19.2 Governing Law ......................................................... 17
19.3 Counterparts .......................................................... 17
19.4 Headings .............................................................. 17
19.5 Notices ............................................................... 17
19.6 Amendment of Agreement ................................................ 18
19.7 Severability .......................................................... 18
</TABLE>
ii
<PAGE> 4
SECOND AMENDED AND RESTATED INFORMATION
AND REGISTRATION RIGHTS AGREEMENT
This SECOND AMENDED AND RESTATED INFORMATION AND REGISTRATION RIGHTS
AGREEMENT (the "Agreement") is made as of May 29, 1998, by and among Portable
Software Corporation, a Washington corporation (the "Company") and the persons
listed on the attached Schedule A who become signatories to this Agreement
(collectively, the "Investors").
R E C I T A L S
A. The Company and the Investors have entered into agreements for sale
by the Company and purchase by the Investors of the Company's securities.
B. In connection with the purchase and sale of the Company's
securities, the Company and the Investors desire to provide for the rights of
the Investors with respect to information about the Company and registration of
the Company's common stock ("Common Stock") issued upon conversion or exercise
of the securities according to the terms of this Agreement. In addition, the
Investors who were signatories to the Restated Information and Registration
Rights Agreement made as of July 12, 1996 and amended July 22, 1997 (as amended,
the "Previous Agreement") desire to restate the Previous Agreement as set forth
below and consent to the addition, as parties to this Agreement, of the
Investors who purchase shares of the Company's Series E Preferred Stock.
THE PARTIES AGREE AS FOLLOWS:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Convertible Securities" shall mean securities of the
Company convertible into or exchangeable for Common Stock of the Company or into
other securities that are convertible into or exchangeable for Common Stock.
(c) "Form S-3" shall mean Form S-3 issued by the
Commission or any substantially similar form then in effect.
(d) "Holder" shall mean any holder of outstanding
Registrable Securities which have not been sold to the public, but only if such
holder is one of the Investors or an assignee or transferee of Registration
rights as permitted by Section 15.
<PAGE> 5
(e) "Initiating Holders" shall mean Holders who in the
aggregate hold at least twenty-five percent (25%) of the Registrable Securities.
(f) "Material Adverse Event" shall mean an occurrence
having a consequence that either (a) is materially adverse as to the business,
properties, prospects, or financial condition of the Company or (b) is
reasonably foreseeable, has a reasonable likelihood of occurring, and if it were
to occur might materially adversely affect the business, properties, prospects,
or financial condition of the Company.
(g) The terms "Register", "Registered", and
"Registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act ("Registration
Statement"), and the declaration or ordering of the effectiveness of such
Registration Statement.
(h) "Registrable Securities" shall mean all Common Stock
not previously sold to the public and issued or issuable upon conversion or
exercise of any of the Company's Convertible Securities purchased by or issued
to the Investors, including Common Stock issued pursuant to stock splits, stock
dividends and similar distributions, and any securities of the Company granted
registration rights pursuant to Section 14 of this Agreement.
(i) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Sections 7 or 8 of this Agreement,
including, without limitation, all federal and state registration,
qualification, and filing fees, printing expenses, fees and disbursements of
counsel for the Company and one special counsel for Holders (if different from
the Company), blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration.
(j) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
(k) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement.
2. Financial Statements and Reports to Shareholders.
The Company shall deliver to each Investor as soon as
practicable after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, an audited consolidated balance sheet of the Company
as of the end of such year and audited consolidated statements of income,
shareholders' equity and cash flow for such year, which year-end financial
reports shall be in reasonable detail and shall be prepared in accordance with
generally accepted accounting principles and accompanied by the opinion of
independent public accountants of nationally recognized standing selected by the
Company. In addition, the Company shall deliver to the Investors: (a)
contemporaneously with delivery to holders of Common Stock, a copy of each
report of the Company delivered to holders of Common Stock and (b) an annual
capitalization summary.
2
<PAGE> 6
3. Additional Information.
As long as an Investor (together with any affiliate) or its
transferee holds the lesser of (i) all of the Convertible Securities purchased
by such Investor, (ii) not less than 5% of the total number of Convertible
Securities of the Company (or an equivalent number of shares consisting of
Registrable Securities issued upon conversion or exercise of the Convertible
Securities of the Company or a combination of such Registrable Securities and
such Convertible Securities), and (iii) 100,000 shares of Series E Preferred
Stock (including for these purposes as a share of Series E Preferred Stock
shares of Common Stock issued upon conversion of Series E Preferred Stock) as
adjusted for recapitalizations, stock splits, stock dividends and the like, the
Company will deliver to such Investor:
(a) As soon as practicable after the end of each month,
and in any event within 30 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such month, and
consolidated statements of income and cash flow for such month and for the
fiscal year to date, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes) and signed by the Chief Financial
Officer or President of the Company certifying that they fairly and accurately
present the financial condition and results of operation of the Company, subject
to changes resulting from year-end audit adjustment.
(b) As soon as practicable after the end of each of the
first three fiscal quarters of each fiscal year after fiscal year 1998, and in
any event within thirty (30) days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such quarter, and
consolidated statements of income and cash flow for such quarter and the fiscal
year to date, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes) and signed by the Chief Financial
Officer or President of the Company certifying that they fairly and accurately
present the financial condition and results of operation of the Company, subject
to changes resulting from year-end audit adjustment.
(c) As soon as practicable following submission to and
approval by the Board of Directors of the Company, but in no event later than 90
days after the end of each fiscal year, an operating budget and plan (the
"Plan") respecting the next fiscal year and a summary of such Plan together with
any update of the Plan as such update is prepared.
(d) Such other information relating to the financial
condition, business, prospects, or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(d) or any other subsection of Section 3 to provide information which it deems
in good faith to be a trade secret or confidential information unless the
Investor signs an appropriate confidentiality agreement with the Company.
4. Inspection.
The Company shall permit each Investor, at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the
3
<PAGE> 7
Company's affairs, finances, and accounts with its officers, all at such
reasonable times as may be requested by each such Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 4 to provide
any information which it reasonably considers to be a trade secret or
confidential information. Subject to Section 15, the rights of an Investor under
this Section 4 may not be assigned as part of such Investor's sale of any of the
Registrable Securities or Convertible Securities except with the consent of the
Company, which consent shall not be unreasonably withheld.
5. Right of First Refusal.
5.1 The Company hereby grants to each Investor the right
of first refusal to purchase up to its Pro Rata Share of the New Securities (as
defined below) which the Company may, from time to time, propose to sell and
issue. The Investors may purchase said New Securities on the same terms and at
the same price at which the Company proposes to sell the New Securities. The
"Pro Rata Share" of each Investor, for purposes of this right of first refusal,
is the ratio of (i) the total number of shares of Common Stock held by such
Investor (including any shares of Common Stock into which shares of the
Convertible Securities held by such Investor are convertible) to (ii) the total
number of shares of Common Stock and Common Stock options outstanding
immediately prior to the issuance of the New Securities (including any shares of
Common Stock into which outstanding shares of the Convertible Securities are
convertible).
5.2 "New Securities" shall mean any capital stock of the
Company, whether authorized or not, and any rights, options, or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided that "New Securities"
does not include (i) the Convertible Securities listed on Schedule A hereto or
the securities issuable upon conversion of such Convertible Securities, (ii)
securities offered pursuant to a registration statement filed under the
Securities Act, (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets, or other reorganization, if approved by the Company's Board of
Directors, (iv) shares issued or issuable to officers, directors, employees of,
or consultants to, the Company pursuant to a plan or arrangement approved by the
Company's Board of Directors, (v) shares issued without consideration pursuant
to a stock dividend, stock split, or similar transaction, and (vi) warrants, and
shares issuable upon exercise of such warrants, issued in connection with
equipment leasing transactions approved by the Company's Board of Directors.
5.3 In the event the Company proposes to undertake an
issuance of New Securities, it shall give to each Investor written notice (the
"Notice") of its intention, describing the type of New Securities, the price,
the terms upon which the Company proposes to issue the same, the number of
shares which such Investor is entitled to purchase, and a statement that each
Investor shall have twenty (20) days to respond to such Notice. Each Investor
shall have twenty (20) days from the date of receipt of the Notice to agree to
purchase any or all of its Pro Rata Share of the New Securities for the price
and upon the terms specified in the Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased
4
<PAGE> 8
and forwarding payment for such New Securities to the Company if immediate
payment is required by such terms.
5.4 In the event an Investor fails to exercise in full
the right of first refusal within said twenty (20) day period, the Company shall
have ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from date of said agreement) to sell the New Securities
respecting which such Investor's rights were not exercised, at a price and upon
general terms no more favorable to the purchaser thereof than specified in the
Notice. In the event the Company has not sold the New Securities within said
ninety (90) day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to such Investor in the manner provided above.
5.5 The right of first refusal granted under this Section
5 is assignable by each Investor to (i) any transferee of a minimum of One
Million (1,000,000) shares of Common Stock (including any shares of Common Stock
into which shares of Convertible Securities then held by it are convertible),
and (ii) any other transferee approved by the Board of Directors, such approval
not to be unreasonably withheld or delayed.
6. Termination of Covenants.
The covenants of the Company set forth in Sections 2, 3, 4 and
5 shall be terminated and be of no further force or effect upon the earlier of
(a) immediately prior to the closing of the first public offering of the Common
Stock of the Company that is effected pursuant to a Registration Statement filed
with, and declared effective by, the Commission under the Securities Act (other
than either a public offering limited solely to employees of the Company or an
offering pursuant to Rule 145 under the Securities Act) and (b) the date the
Company registers any securities under the Securities and Exchange Act of 1934,
and such covenants shall terminate as to any Investor as of the date such
Investor no longer holds any shares of the capital stock of the Company.
7. Demand Registration.
7.1 Request for Registration on Form Other Than Form S-3.
Subject to the terms of this Agreement, in the event
that the Company shall receive from the Initiating Holders at any time after the
earlier of (a) October 31, 1999 and (b) one year after the closing of the
Company's initial public offering of shares of Common Stock under a Registration
Statement, a written request that the Company effect any Registration with
respect to all or a part of the Registrable Securities on a Form other than Form
S-3 for an offering of at least 25% of the then outstanding Registrable
Securities (or any lesser percent if the reasonably anticipated aggregate
offering price to the public would exceed $10,000,000), the Company (i) shall
promptly give written notice of the proposed Registration to all other Holders
and (ii) shall, as soon as practicable, use its best efforts to effect
Registration of the Registrable Securities specified in such request, together
with any Registrable Securities of any Holder
5
<PAGE> 9
joining in such request as are specified in a written request given within 20
days after written notice from the Company. The Company shall not be obligated
to take any action to effect any such Registration pursuant to this Section 7.1
(i) during the period starting with the date sixty (60) days prior to the
Company's estimated date of filing, and ending on the date sixty (60) days
immediately following the effective date of an underwritten public offering
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan) provided
that the Company is employing all reasonable efforts in good faith to cause such
Registration to become effective or (ii) after the Company has effected three
such Registrations pursuant to this Section 7.1 and such Registrations have been
declared effective.
7.2 Right of Deferral of Registration on Form Other Than
Form S-3.
If the Company shall furnish to all such Holders who
joined in the request a certificate signed by the President of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for any Registration
to be effected as requested under Section 7.1, the Company shall have the right,
exercisable not more than once in any twelve-month period, to defer the filing
of a Registration Statement with respect to such offering for a period of not
more than 90 days from delivery of the request of the Initiating Holders.
7.3 Request for Registration on Form S-3.
(a) If a Holder or Holders of the outstanding
Registrable Securities request that the Company file a Registration Statement on
Form S-3 (or any successor form to Form S-3) for a public offering of shares of
Registrable Securities the reasonably anticipated aggregate price to the public
of which, net of underwriting discounts and commissions, would not be less than
$2,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use all
reasonable efforts to cause such Registrable Securities to be Registered for the
offering on such form and to cause such Registrable Securities to be qualified
in such jurisdictions as the Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than two
Registrations pursuant to this Section 7.3 in any twelve (12) month period. The
substantive provisions of Section 7.5 shall be applicable to each registration
initiated under this Section 7.3.
(b) Notwithstanding the foregoing, the Company shall
not be obligated to file a registration statement pursuant to this Section 7.3:
(i) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(ii) if the Company, within ten (10) days of
the receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a
6
<PAGE> 10
registration statement with the Commission within sixty (60) days of receipt of
such request (other than with respect to a registration statement relating to a
Rule 145 transaction or an offering solely to employees), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(iii) within six months immediately
following the effective date of any registration statement pertaining to the
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan); or
(iv) if the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 90 days from
the receipt of the request to file such registration by such Holder provided
that the Company shall not exercise the right contained in this paragraph (iv)
more than once in any twelve (12) month period.
7.4 Registration of Other Securities in Demand Registration.
Any Registration Statement filed pursuant to the
request of the Initiating Holders under this Section 7 may, subject to the
provisions of Section 7.5, include securities of the Company in addition to
Registrable Securities.
7.5 Underwriting in Demand Registration.
7.5.1 Notice of Underwriting.
If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 7, and the Company shall include such information in the written
notice referred to in Section 7.1 or 7.3. The right of any Holder to
Registration pursuant to Section 7 shall be conditioned upon such Holder's
agreement to participate in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting.
7.5.2 Inclusion of Other Holders in Demand
Registration.
If the Company, officers or directors of the Company
holding Common Stock other than Registrable Securities, or holders of securities
other than Registrable Securities, request inclusion in such Registration, the
Initiating Holders, to the extent they deem advisable and consistent with the
goals of such Registration, may, in their sole discretion, on behalf of all
Holders, offer to any or all of the Company, such officers or directors, and
such holders of securities other than Registrable Securities that such
securities other than Registrable Securities be included in the underwriting and
may condition such offer on the acceptance by such persons of the terms of this
Section 7. In the event, however, that the number of shares so
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<PAGE> 11
included exceeds the number of shares of Registrable Securities included by all
Holders, such Registration shall be treated as governed by Section 8 hereof
rather than Section 7, and it shall not count as a Registration for purposes of
Section 7.1 hereof.
7.5.3 Selection of Underwriter in Demand Registration.
The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement with the representative ("Underwriter's
Representative") of the underwriter or underwriters selected for such
underwriting by the Holders of a majority of the Registrable Securities being
registered by the Initiating Holders and agreed to by the Company.
7.5.4 Marketing Limitation in Demand Registration.
In the event the Underwriter's Representative
advises the Initiating Holders in writing that market factors (including,
without limitation, the aggregate number of shares of Common Stock requested to
be Registered, the general condition of the market, and the status of the
persons proposing to sell securities pursuant to the Registration) require a
limitation of the number of shares to be underwritten, then (i) first the Common
Stock (other than Registrable Securities) held by officers or directors of the
Company, (ii) next the securities other than Registrable Securities, and (iii)
last the securities requested to be registered by the Company, shall be excluded
from such Registration to the extent required by such limitation. If a
limitation of the number of shares is still required, the Initiating Holders
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the Registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities entitled to inclusion in such Registration
held by such Holders at the time of filing the Registration Statement. No
Registrable Securities or other securities excluded from the underwriting by
reason of this Section 7.5.4 shall be included in such Registration Statement.
7.5.5 Right of Withdrawal in Demand Registration.
If any Holder of Registrable Securities, or a holder
of other securities entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders delivered at least seven days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn from
the Registration Statement.
7.6 Blue Sky in Demand Registration.
In the event of any Registration pursuant to Section 7,
the Company will exercise its best efforts to Register and qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that (i) the Company shall
not be required to qualify to do business or to file a general consent to
service of
8
<PAGE> 12
process in any such states or jurisdictions, and (ii) notwithstanding anything
in this Agreement to the contrary, in the event any jurisdiction in which the
securities shall be qualified imposes a non-waivable requirement that expenses
incurred in connection with the qualification of the securities be borne by
selling shareholders, such expenses shall be payable pro rata by selling
shareholders.
8. Piggyback Registration.
8.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities.
Subject to the terms of this Agreement, in the event the
Company decides to Register any of its Common Stock (either for its own account
or the account of a security holder or holders exercising their respective
demand registration rights) on a form that would be suitable for a registration
involving solely Registrable Securities, the Company will: (i) promptly give
each Holder written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such securities
under the applicable Blue Sky or other state securities laws) and (ii) include
in such Registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request delivered to the Company by any Holder
within 20 days after delivery of such written notice from the Company.
8.2 Underwriting in Piggyback Registration.
8.2.1 Notice of Underwriting in Piggyback
Registration.
If the Registration of which the Company gives
notice is for a Registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.1. In such event, the right of any Holder to Registration
shall be conditioned upon such underwriting and the inclusion of such Holder's
Registrable Securities in such underwriting to the extent provided in this
Section 8. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
with the Underwriter's Representative for such offering. The Holders shall have
no right to participate in the selection of the underwriters for an offering
pursuant to this Section 8.
8.2.2 Marketing Limitation in Piggyback
Registration.
In the event the Underwriter's Representative
advises the Holders seeking registration of Registrable Securities pursuant to
Section 8 in writing that market factors (including, without limitation, the
aggregate number of shares of Common Stock requested to be Registered, the
general condition of the market, and the status of the persons proposing to sell
securities pursuant to the Registration) require a limitation of the number of
shares to be underwritten, the Underwriter's Representative (subject to the
allocation priority set forth in Section 8.2.3) may:
9
<PAGE> 13
(a) in the case of the Company's initial
Registered public offering, limit the number of shares of Registrable Securities
to be included in such registration and underwriting to not less than fifteen
percent (15%) of the securities included in such Registration (based on
aggregate market values); and
(b) in the case of any Registered public
offering subsequent to the initial public offering, limit the number of shares
of Registrable Securities to be included in such Registration and underwriting
to not less than thirty percent (30%) of the securities included in such
Registration (based on aggregate market values).
8.2.3 Allocation of Shares in Piggyback Registration.
In the event that the Underwriter's
Representative limits the number of shares to be included in a Registration
pursuant to Section 8.2.2, the number of shares to be included in such
Registration shall be allocated (subject to Section 8.2.2) in the following
manner: The shares (other than Registrable Securities) held by officers or
directors of the Company shall be excluded from such Registration and
underwriting to the extent required by such limitation. If a limitation of the
number of shares is still required after such exclusion, the number of shares
that may be included in the Registration and underwriting by selling
shareholders shall be allocated among all other Holders thereof, in proportion,
as nearly as practicable, to the respective amounts of securities (including
Registrable Securities) which such Holders would otherwise be entitled to
include in such Registration. No Registrable Securities or other securities
excluded from the underwriting by reason of this Section 8.2.3 shall be included
in the Registration Statement.
8.2.4 Withdrawal in Piggyback Registration.
If any Holder disapproves of the terms of any
such underwriting, such person may elect to withdraw therefrom by written notice
to the Company and the underwriter delivered at least seven days prior to the
effective date of the Registration Statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
8.3 Blue Sky in Piggyback Registration.
In the event of any Registration of Registrable Securities
pursuant to Section 8, the Company will exercise its best efforts to Register
and qualify the securities covered by the Registration Statement under such
other securities or Blue Sky laws of such jurisdictions (not exceeding 20 unless
otherwise agreed to by the Company) as shall be reasonably appropriate for the
distribution of such securities; provided, however, that (i) the Company shall
not be required to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, and (ii) notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, such expenses shall be payable pro rata by
selling shareholders.
10
<PAGE> 14
9. Expenses of Registration.
All Registration Expenses incurred in connection with three
Registrations pursuant to Section 7 and unlimited Registrations pursuant to
Sections 7.3 and 8, shall be borne by the Company. All Registration Expenses
incurred in connection with any other registration, qualification, or
compliance, shall be apportioned among the Holders and other holders of the
securities so registered on the basis of the number of shares so registered.
Notwithstanding the above, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 7 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (which Holders shall
bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 7; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a Material Adverse Event with respect to the
condition, business, or prospects of the Company not known to the Holders at the
time of their request, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 7. All Selling
Expenses shall be borne by the holders of the securities Registered pro rata on
the basis of the number of shares Registered.
10. Termination of Registration Rights.
The rights to cause the Company to register securities granted
under Sections 7 and 8 of this Agreement shall terminate, with respect to each
Holder, on the earlier of (i) the date five years after the closing date of the
Company's initial public offering and (ii) upon such Holder holding less than 1%
of the outstanding Registrable Securities (or, if less, one-half of the
Registrable Securities acquired by such Holder from the Company).
11. Registration Procedures and Obligations.
Whenever required under this Agreement to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities and use its best efforts
to cause such Registration Statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such Registration Statement effective for up to one hundred
twenty (120) days.
(b) Prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
11
<PAGE> 15
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such Registration Statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such Registration.
(h) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered for sale in connection with a
Registration pursuant to this Agreement, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such Registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, and (ii) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
12. Information Furnished by Holder.
It shall be a condition precedent of the Company's obligations
under this Agreement that each Holder of Registrable Securities included in any
Registration furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder or Holders as the Company may
reasonably request.
13. Indemnification.
13.1 Company's Indemnification of Holders.
To the extent permitted by law, the Company will
indemnify each Holder, each of its officers, directors, and constituent
partners, legal counsel for the Holders, and each person controlling such
Holder, with respect to which Registration, qualification, or compliance of
Registrable Securities has been effected pursuant to this Agreement, and each
underwriter, if
12
<PAGE> 16
any, and each person who controls any underwriter against all claims, losses,
damages, or liabilities (or actions in respect thereof) to the extent such
claims, losses, damages, or liabilities arise out of or are based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus or other document (including any related Registration Statement)
incident to any such Registration, qualification, or compliance, or are based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such Registration, qualification,
or compliance; and the Company will reimburse each such Holder, each such
underwriter, and each person who controls any such Holder or underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action;
provided, however, that the indemnity contained in this Section 13.1 shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability,
or action if settlement is effected without the consent of the Company (which
consent shall not unreasonably be withheld); and provided, further, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based upon any untrue
statement or omission based upon written information furnished to the Company by
such Holder, underwriter, or controlling person and stated to be for use in
connection with the offering of securities of the Company.
13.2 Holder's Indemnification of Company.
To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such Registration, qualification or, compliance is being effected pursuant
to this Agreement, indemnify the Company, each of its directors and officers,
each legal counsel and independent accountant of the Company, each underwriter,
if any, of the Company's securities covered by such a Registration Statement,
each person who controls the Company or such underwriter within the meaning of
the Securities Act, and each other such Holder, each of its officers, directors,
and constituent partners, and each person controlling such other Holder, against
all claims, losses, damages, and liabilities (or actions in respect thereof)
arising out of or based upon any untrue statement (or alleged untrue statement)
of a material fact contained in any such Registration Statement, prospectus,
offering circular, or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by such Holder of any
rule or regulation promulgated under the Securities Act applicable to such
Holder and relating to action or inaction required of such Holder in connection
with any such Registration, qualification, or compliance, and will reimburse the
Company, such Holders, such directors, officers, partners, persons, law and
accounting firms, underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the extent, but
in each case only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use in connection with
13
<PAGE> 17
the offering of securities of the Company, provided, however, that the indemnity
contained in this Section 13.2 shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld) and provided, further, that each Holder's liability under this Section
13.2 shall not exceed such Holder's proceeds from the offering of securities
made in connection with such Registration.
13.3 Indemnification Procedure.
Promptly after receipt by an indemnified party under this
Section 13 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 13, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unreasonably withheld; provided
further, however, that if either party reasonably determines that there may be a
conflict between the position of the Company and the Investors in conducting the
defense of such action, suit, or proceeding by reason of recognized claims for
indemnity under this Section 13, then counsel for such party shall be entitled
to conduct the defense to the extent reasonably determined by such counsel to be
necessary to protect the interest of such party. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 13, but the omission to so
notify the indemnifying party will not relieve such party of any liability that
such party may have to any indemnified party otherwise other than under this
Section 13.
13.4 Contribution.
If the indemnification provided for in this Section 13
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
14
<PAGE> 18
14. Limitations on Registration Rights Granted to Other Securities.
From and after the date of this Agreement, the Company shall
not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of any
information or Registration rights, except that, with the consent of (i) the
Holders of a majority of the aggregate of the Convertible Securities and
Registrable Securities then outstanding and (ii) if such holders are to receive
piggyback registration rights superior to or on a parity with the holders of
Series E Preferred Stock, with the consent of the holders of a majority of the
aggregate of the Series E Preferred Stock (and Registrable Securities issued
upon conversion thereof) then outstanding, additional holders may be added as
parties to this Agreement with regard to any or all securities of the Company
held by them. Any such additional parties shall execute a counterpart of this
Agreement, and upon execution by such additional parties and by the Company,
shall be considered an Investor for all purposes of this Agreement. The
additional parties and the additional Registrable Securities shall be identified
in an amendment to Schedule A hereto.
15. Transfer of Rights.
The rights to information under Sections 2, 3, and 4 and the
right to cause the Company to Register securities granted by the Company to the
Investors under this Agreement may be assigned by any Holder to a transferee or
assignee of any Convertible Securities or Registrable Securities not sold to the
public acquiring at least 100,000 shares of such Holder's Registrable Securities
(equitably adjusted for any stock splits, subdivisions, stock dividends,
changes, combinations or the like); provided, however, that (i) the shares of
Convertible Securities or Registrable Securities acquired by said transferee
must constitute at least 20% of Holder's aggregate of Convertible Securities and
Registrable Securities immediately prior to the transfer, (ii) the Company must
receive written notice prior to the time of said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such information and Registration rights are being assigned,
(iii) such transferee or assignee must agree to be bound by the provisions of
this Agreement, and (iv) the transferee or assignee of such be a person deemed
by the Board of Directors of its best judgment, to be a competitor or potential
competitor of the Company. Notwithstanding the limitation set forth in the
foregoing sentence respecting the minimum number of shares which must be
transferred, any Holder which is a partnership may transfer such Holder's
Registration rights to such Holder's constituent partners without restriction as
to the number or percentage of shares acquired by any such constituent partner.
16. Market Stand-off.
Each Holder hereby agrees that, if so requested by the Company
and the Underwriter's Representative (if any) in connection with the Company's
initial public offering, such Holder shall not sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise transfer or dispose of
any Registrable Securities or other securities of the Company without the prior
written consent of the Company and the Underwriters Representative for such
period of time (not to exceed 90 days) following the effective date of a
Registration Statement of
15
<PAGE> 19
the Company filed under the Securities Act as may be requested by the
Underwriter's Representative. The obligations of Holders under this Section 16
shall be conditioned (i) upon similar agreements being in effect with each other
shareholder who is an officer, director, or 1% shareholder of the Company, and
(ii) if marketing limitations are sought by the Underwriter's Representative,
upon imposition of marketing limitations no more extensive than those described
in Section 8.2.2(a).
17. Conversion of Preferred Stock.
The Registration rights of the Holders of the shares set forth
in this Agreement are conditioned upon the conversion of the shares with respect
to which Registration is sought into Common Stock immediately prior to the
closing of the offering of Common Stock effected pursuant to the Registration
Statement.
18. Reports Under Securities Exchange Act of 1934.
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the Commission that may at any time permit a Holder to sell securities of the
Company to the public without Registration or pursuant to a registration on Form
S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times after ninety (90)
days after the effective date of the first Registration Statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action to be
taken as soon as practicable after the end of the fiscal year in which the first
Registration Statement filed by the Company for the offering of its securities
to the general public is declared effective;
(c) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after ninety (90) days after the effective date of the first Registration
Statement filed by the Company), the Securities Act, and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the Commission which permits
the selling of any such securities without Registration or pursuant to such
form.
16
<PAGE> 20
19. Miscellaneous.
19.1 Entire Agreement; Successors and Assigns.
This Agreement constitutes the entire contract between
the Company and the Investors relative to the subject matter hereof. Any
previous agreement between the Company and any Investor concerning Registration
rights, including the Previous Agreement, is superseded by this Agreement.
Subject to the exceptions specifically set forth in this Agreement, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective executors, administrators, heirs, successor, and assigns of
the parties. Investors who are parties to the Previous Agreement are waiving
rights of first refusal; with respect to shares of Series E Preferred Stock that
it is not acquiring, each investor who was a signatory to the Previous Agreement
waives the right of first refusal with respect to the shares of Series E
Preferred Stock it has elected not to purchase. In addition, the Investors agree
to the grant of Registration rights with respect to the shares of Series E
Preferred Stock or other securities issuable upon exercise of certain warrants
issued to Comdisco, Inc., Imperial Bank, and the American Express Company, and
the Common Stock issuable upon conversion thereof.
19.2 Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California excluding those laws that
direct the application of the laws of another jurisdiction.
19.3 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19.4 Headings.
The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
19.5 Notices.
Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by registered or
certified mail, postage prepaid, addressed (i) if to the Company, as set forth
below the Company's name on the signature page of this Agreement, and (ii) if to
an Investor, at such Investor's address as set forth on Schedule A, or at such
other address as the Company or such Investor may designate by ten (10) days'
advance written notice to the Investors or the Company, respectively.
17
<PAGE> 21
19.6 Amendment of Agreement.
Any provision of this Agreement may be amended only by a
written instrument signed by the Company and by persons holding at least sixty
percent (60%) of the Registrable Securities as defined in Section 1 of this
Agreement.
19.7 Severability.
In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
18
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By /s/ STEVEN SINGH
-----------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: RRE INVESTORS, L.P.
By: RRE Investors II, LLC,
its General Partner
By /s/ ANDREW ZALASIN
-----------------------------------
Name: Andrew Zalasin
Title: Member General Partner
RRE INVESTORS FUND, L.P.
By: RRE Investors Fund GP, L.P.,
its General Partner
By: RRE Investors Fund LDC,
its General Partner
By /s/ ANDREW ZALASIN
-----------------------------------
Name: Andrew Zalasin
Title: Member, General Partner
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-----------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
By: /s/ ANN BUSQUET
-----------------------------------
Name: Ann Busquet
Title: President, American Express
Relationship Services
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By_________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: U.S.V.P. ENTREPRENEUR PARTNERS II, L.P.
A Delaware Limited Partnership
U.S. VENTURE PARTNERS IV, L.P.
SECOND VENTURES II, L.P.
By: Presidio Management Group IV, L.P.
Their General Partner
By:__________________________________
Title:_______________________________
Address: 2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
---------------------------------
S. Steven Singh, President
INVESTOR: INSTITUTIONAL VENTURE
PARTNERS VII, L.P.
by its General Partner
Institutional Venture Management VII,
L.P.
By: /s/ T. PETER THOMAS
---------------------------------
T. Peter Thomas, A General
Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR: IVP FOUNDERS FUND I, L.P.
by its General Partner
Institutional Venture Management VI, L.P.
By: /s/ T. PETER THOMAS
---------------------------------
T. Peter Thomas, A General
Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR: INSTITUTIONAL VENTURE MANAGEMENT VII,
L.P.
By: /s/ T. PETER THOMAS
---------------------------------
T. Peter Thomas, A General
Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By_________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures, L.P.
Its General Partner
By:________________________________
General Partner
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
---------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: MAYFIELD ASSOCIATES FUND III
A California Limited Partnership
MAYFIELD VIII
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Their General Partner
By: /s/ MICHAEL LEVINTHAL
---------------------------------
Title: Managing Member
Address: 2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
---------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: COMDISCO, INC.
By: /s/ JAMES P. LABE
---------------------------------
Title: James P. Labe, President
Comdisco Ventures Division
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement as of the day and year
first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
---------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: CAMBRIDGE TECHNOLOGY CAPITAL
FUND I, L.P.
By: Cambridge Technology GPLP, L.P.
By: Cambridge Technology CGP, Inc.
By: /s/ BARRY ROSENBAUM
---------------------------------
Barry Rosenbaum, Managing Director
Address: 11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: BRENTWOOD AFFILIATES FUND II, L.P.
By: Brentwood VII Ventures, LLC
Its General Partner
By: /s/ JEFFREY BRODY
-------------------------------------
Managing Member
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
1. /s/ JEFFREY BRODY
-------------------------------------
(Signature)
Jeffrey Brody
-------------------------------------
(Print Name)
2. /s/ JAMES MONGIELLO
-------------------------------------
(Signature)
James Mongiello
-------------------------------------
(Print Name)
3. /s/ ERIC CHIU
-------------------------------------
(Signature)
Eric Chiu
-------------------------------------
(Print Name)
<PAGE> 31
4. ________________________________
(Signature)
________________________________
(Print Name)
5. ________________________________
(Signature)
________________________________
(Print Name)
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS:
/s/ STEVE SINGH
----------------------------------------
S. Steven Singh
/s/ MICHAEL W. HILTON
----------------------------------------
Michael W. Hilton
/s/ STERLING WILSON
----------------------------------------
Sterling Wilson
/s/ JON MATSUO
----------------------------------------
Jon Matsuo
/s/ RAJ SINGH
----------------------------------------
Raj Singh
/s/ FREDERICK L. INGHAM
----------------------------------------
Fred Ingham
6222 185th Avenue NE
Redmond, WA 98052
<PAGE> 33
INVESTOR: HAMBRECHT & QUIST LLC
By: /s/ LISA L. LEWIS
-----------------------------------
Name: Lisa L. Lewis
---------------------------------
Title: Controller, Attorney-in-Fact
--------------------------------
Address: One Bush Street
San Francisco, CA 94104
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
--------------------------------------
S. Steven Singh, President
INVESTOR:
/s/ JEFFREY D. BRODY
-----------------------------------------
Jeffrey D. Brody
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
INVESTOR:
/s/ MATTHEW P. QUILTER
-----------------------------------------
Matthew P. Quilter
Address: c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and
Restated Information and Registration Rights Agreement.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
--------------------------------------
S. Steven Singh, President
INVESTOR:
/s/ CHRISTINA MORGAN
-----------------------------------------
Name: Christina Morgan
------------------------------------
/s/ DAN RIMER
-----------------------------------------
Name: Dan Rimer
------------------------------------
/s/ ANDREW KEARNS
-----------------------------------------
Name: Andrew Kearns
------------------------------------
-----------------------------------------
Name:
------------------------------------
-----------------------------------------
Name:
-----------------------------------------
Address: c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Information and Registration Rights Agreement.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
--------------------------------------
S. Steven Singh, President
INVESTORS:
/s/ JAMES MONGIELLO
-----------------------------------------
James Mongiello
/s/ ERIC CHIU
-----------------------------------------
Eric Chiu
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
<PAGE> 37
Schedule A
To Portable Software Corporation
Second Amended and Restated Information and Registration Rights Agreement
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------- ------------------------
INVESTOR NAME & ADDRESS PREFERRED STOCK NUMBER OF SHARES
- ------------------------------------------------- ------------------------- ------------------------
<S> <C> <C>
Brentwood Affiliates Fund II, L.P. Series E 170,632
Brentwood Associates VI, L.P. Series A 3,824,092
3000 Sand Hill Road Series B 781,250
Building One, Suite 260 Series C 593,750
Menlo Park, CA 94025 Series D 338,447
Attn: Jeffrey D. Brody
- ------------------------------------------------- ------------------------- ------------------------
Jeffrey D. Brody Series E 9,678
c/o Brentwood Venture Capital
3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025-7068
- ------------------------------------------------- ------------------------- ------------------------
Cambridge Technology Capital Fund I, L.P. Series E 161,290
11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
Attn: Barry Rosenbaum
Managing Director
- ------------------------------------------------- ------------------------- ------------------------
Eric Chiu Series E 3,226
c/o Brentwood Venture Capital
3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025-7068
- ------------------------------------------------- ------------------------- ------------------------
Comdisco, Inc. Series D 106,165
3000 Sand Hill Road Series E 80,645
Building One, Suite 155
Menlo Park, CA 94025
Attn: James P. Labe
- ------------------------------------------------- ------------------------- ------------------------
Hambrecht & Quist California Series E 51,614
One Bush Street
San Francisco, CA 94104
Attn: Jeff Fulcher
- ------------------------------------------------- ------------------------- ------------------------
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------- ------------------------
INVESTOR NAME & ADDRESS PREFERRED STOCK NUMBER OF SHARES
- ------------------------------------------------- ------------------------- ------------------------
<S> <C> <C>
Michael W. Hilton Series C 175,975
c/o Portable Software Corporation Series E 9,678
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
Fred Ingham Series E 6,425
c/o Portable Software Corporation
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
Institutional Venture Management VII, LP Series C 75,000
3000 Sand Hill Road Series D 6,510
Building Two, Suite 290 Series E 3,605
Menlo Park, CA 94025
Attn: Norman A. Fogelsong
- ------------------------------------------------- ------------------------- ------------------------
Institutional Venture Partners VII, LP Series C 4,750,000
3000 Sand Hill Road Series D 307,584
Building Two, Suite 290 Series E 174,821
Menlo Park, CA 94025
Attn: Norman A. Fogelsong
- ------------------------------------------------- ------------------------- ------------------------
IVP Founders Fund I, L.P. Series C 75,000
3000 Sand Hill Road Series D 11,392
Building Two, Suite 290 Series E 1,802
Menlo Park, CA 94025
Attn: Norman A. Fogelsong
- ------------------------------------------------- ------------------------- ------------------------
Andrew Kearns Series E 806
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
- ------------------------------------------------- ------------------------- ------------------------
Jon Matsuo Series E 6,452
c/o Portable Software Corporation
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
Mayfield Associates Fund III Series C 156,250
2800 Sand Hill Road, Suite 250 Series D 100,914
Menlo Park, CA 94025 Series E 8,734
Attn: Mike Levinthal
- ------------------------------------------------- ------------------------- ------------------------
</TABLE>
-2-
<PAGE> 39
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------- ------------------------
INVESTOR NAME & ADDRESS PREFERRED STOCK NUMBER OF SHARES
- ------------------------------------------------- ------------------------- ------------------------
<S> <C> <C>
Mayfield VIII Series C 2,968,750
2800 Sand Hill Road, Suite 250 Series D 1,917,359
Menlo Park, CA 94025 Series E 165,949
Attn: Mike Levinthal
- ------------------------------------------------- ------------------------- ------------------------
James Mongiello Series E 3,226
c/o Brentwood Venture Capital
3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025-7068
- ------------------------------------------------- ------------------------- ------------------------
Cristina M. Morgan Series E 6,613
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
- ------------------------------------------------- ------------------------- ------------------------
Matthew P. Quilter Series E 3,226
c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
- ------------------------------------------------- ------------------------- ------------------------
Daniel H. Rimer Series E 4,839
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
- ------------------------------------------------- ------------------------- ------------------------
RRE Investors, L.P. Series E 1,040,218
RRE Investors Fund, L.P. Series E 572,685
126 East 56th Street
New York, NY 10022
Attn: Andrew L. Zalasin
- ------------------------------------------------- ------------------------- ------------------------
Second Ventures II, L.P. Series B 410,156
2180 Sand Hill Road, Suite 300 Series C 65,625
Menlo Park, CA 94025 Series D 41,999
- ------------------------------------------------- ------------------------- ------------------------
The Schuster Revocable Trust Series C 31,250
dtd 2/10/95
c/o Brentwood Venture Capital
3000 Sand Hill Road
Bldg. One, Suite 260
Menlo Park, CA 94025-7068
- ------------------------------------------------- ------------------------- ------------------------
</TABLE>
-3-
<PAGE> 40
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------- ------------------------
INVESTOR NAME & ADDRESS PREFERRED STOCK NUMBER OF SHARES
- ------------------------------------------------- ------------------------- ------------------------
<S> <C> <C>
Rajeev Singh Series E 6,452
c/o Portable Software Corporation
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
S. Steven Singh Series C 161,326
c/o Portable Software Corporation Series E 9,678
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
USVP Entrepreneur Partners II, L.P. Series B 117,188
2180 Sand Hill Road, Suite 300 Series C 18,750
Menlo Park, CA 94025 Series D 12,000
- ------------------------------------------------- ------------------------- ------------------------
U.S. Venture Partners IV, L.P. Series B 3,378,906
2180 Sand Hill Road, Suite 300 Series C 540,625
Menlo Park, CA 94025 Series D 345,987
- ------------------------------------------------- ------------------------- ------------------------
Sterling Wilson Series E 6,452
c/o Portable Software Corporation
6222 185th Avenue, NE
Redmond, WA 98052
- ------------------------------------------------- ------------------------- ------------------------
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.01
1994 STOCK OPTION PLAN
OF
CONCUR TECHNOLOGIES, INC.
[LOGO]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. PURPOSE OF THE PLAN.................................................... 1
2. ELIGIBLE PERSONS....................................................... 1
3. STOCK SUBJECT TO THIS PLAN............................................. 1
4. ADMINISTRATION......................................................... 1
5. GRANTING OF OPTIONS; OPTION AGREEMENT.................................. 2
6. TERMS AND CONDITIONS OF OPTIONS........................................ 3
6.1 Terms and Conditions to Which All Options are Subject........... 3
6.1.1 Changes in Capital Structure......................... 3
6.1.2 Corporate Transactions............................... 3
6.1.3 Time of Option Exercise.............................. 4
6.1.4 Option Grant Date.................................... 4
6.1.5 Nonassignability of Option Rights.................... 4
6.1.6 Payment.............................................. 4
6.1.7 Termination of Employment............................ 5
6.1.8 Repurchase of Stock.................................. 5
6.1.9 Withholding and Employment Taxes..................... 6
6.1.10 Other Provisions..................................... 6
6.1.11 Determination of Value............................... 7
6.1.12 Option Term.......................................... 7
6.1.13 Exercise Price....................................... 7
6.2 Term and Conditions to Which Only NQOs Are Subject.............. 7
6.2.1 Exercise Price....................................... 7
6.3 Terms and Conditions to Which only ISOs Are Subject............. 8
6.3.1 Exercise Price....................................... 8
6.3.2 Disqualifying Dispositions........................... 8
6.3.3 Grant Date........................................... 8
6.3.4 Vesting.............................................. 8
6.3.5 Term................................................. 8
7. MANNER OF EXERCISE..................................................... 7
8. EMPLOYMENT OR CONSULTING RELATIONSHIP.................................. 8
9. CONDITIONS UPON ISSUANCE OF SHARES..................................... 8
10. NONEXCLUSIVITY OF THE PLAN............................................. 8
11. MARKET STANDOFF........................................................ 8
12. AMENDMENTS TO PLAN..................................................... 8
13. EFFECTIVE DATE OF PLAN................................................. 9
</TABLE>
i
<PAGE> 3
1994 STOCK OPTION PLAN
OF
CONCUR TECHNOLOGIES, INC.
1. PURPOSE OF THE PLAN
The purposes of the 1994 Stock Option Plan (the "Plan") of Concur
Technologies, Inc. (formerly Portable Software Corporation), a Washington
corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to
accept or continue employment or association with the Company or its Affiliates;
and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
option" ("ISOs") intended to satisfy the requirements of section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a full-time
employee of the Company or of any Affiliate (as defined below) of the Company is
eligible to receive NQOs or ISOs under this Plan. Every person who at the date
of grant is a consultant to, or non-employee director of, the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQOs under
this Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the total
number of shares of stock which may be issued under options granted pursuant to
this Plan shall not exceed 375,000 shares of Common Stock. The shares covered by
the portion of any grant under the Plan, which expires unexercised, shall become
available again for grants under the Plan.
4. ADMINISTRATION
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or, either in its entirety or only insofar as required
pursuant to Section 4(b) hereof, by a committee (the "Committee") of at least
two Board members to which administration of the Plan, is delegated (in either
case, the "Administrator").
<PAGE> 4
(b) From and after such time as the Company registers a class of
equity securities under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), it is intended hat this Plan shall be administered
in accordance with the disinterested administration requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.
(c) Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (i) to grant Options; (ii) to
determine the fair market value of the Common Stock subject to Options; (iii) to
determine the exercise price of Options granted; (iv) to determine the persons
to whom, and the time or times at which, Options shall be granted, and the
number of shares subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to this Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper.
(d) All questions of interpretation, implementation, and application
of this Plan shall be determined by the Administrator. Such determinations shall
be final and binding on all persons.
(e) With respect to persons subject to Section 16 of the Exchange
Act, if any, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Company, executed by the Company and the
person to whom such Option is granted; provided, however, that the failure by
the Company, the optionee, or both to execute such an agreement shall not
invalidate the granting of an Option, although te exercise of each option shall
be subject to Section 6.1.3.
(c) The stock option agreement shall specify whether each Option it
evidences is NQO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator
may approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.
2
<PAGE> 5
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms
and conditions set forth in Section 6.1. NQOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All
Options granted under this Plan shall be subject to the following terms and
conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2,
if the stock of the Company is changed by reason of stock split, reverse stock
split, stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.
6.1.2 Corporate Transactions. Except as provided in subsequent
sentences of this Section 6.1.2, upon a merger, consolidation, acquisition of
property or stock, reorganization or liquidation of the Company, as a result of
which the shareholders of the Company receive cash, stock or other property in
exchange for their shares of Common Stock, any option granted hereunder shall
terminate, provided that the Optionee shall have the right immediately prior to
any such merger, consolidation, acquisition of property or stock,
reorganization, or liquidation to exercise his or her option in whole or in part
whether or not the vesting requirement set forth in the option agreement have
been satisfied. If the shareholders of the Company receive capital stock of
another corporation ("Exchange Stock") in exchange for their shares of Common
Stock in any transaction involving a merger, consolidation, acquisition of
property or stock, or reorganization, all options granted hereunder shall
terminate in accordance with the provisions of the preceding sentence unless the
Board of Directors and the corporation issuing the Exchange Stock, in their sole
discretion and subject to any required action by the shareholders of the Company
and such corporation, agree that all such options granted hereunder are
converted into options to purchase shares of Exchange Stock. The amount and
price of such options shall be determined by adjusting the amount and price of
the options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock received in
such merger, consolidation, acquisition of property or stock, or reorganization.
The vesting schedule set forth in the option agreement shall continue to apply
to the options granted for the Exchange Stock.
6.1.3 Time of Option Exercise. Subject to Section 5 and
Section 6.3.4, Options granted under this Plan shall be exercisable (a)
immediately as of the effective date of the stock option agreement granting the
Option, or (b) in accordance with a schedule related to the date of the grant of
the Option, the date of first employment, or such other date as may be set by
the Administrator (in any case, the "Vesting Base Date") and specified in the
written stock option agreement relating to such Option; provided, however, that
the right to exercise an Option must vest at the rate of at least 20% per year
over five years from the date the option was granted. In any case, no Option
shall be exercisable until a written stock option agreement in form satisfactory
to the Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance
approvals described in Section 5(d), the date of grant of an Option under this
Plan shall be the date as of which the Administrator approves the grant.
3
<PAGE> 6
6.1.5 Nonassignability of Option Rights. No Option granted
under this Plan shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution. During the life of
the optionee, an Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more of
the following additional methods of payment:
(a) Acceptance of the optionee's full recourse
promissory not for all or part of the Option price, payable on such terms and
bearing such interest rate as determined by the Administrator (but in no event
less than the minimum interest rate specified under the Code at which no
additional interest would be imputed), which promissory not may be either
secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company);
(b) Delivery by the optionee of Common Stock already owned
by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of Exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if any
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator; and
(c) Any other consideration and method of payment to the
extent permitted under the Washington Business Corporation Act.
6.1.7 Termination of Employment. If for any reason other than
death or permanent and total disability, an optionee ceases to be employed by
the Company or any of its Affiliates (such event being called "Termination"),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three (3) months of the date of
such Termination, or such other period as is specified in the Option Agreement
(but in no event after the Expiration Date); provided, that if such exercise of
the Option would result in liability for the optionee under Section 16(b) of the
Exchange Act, then such three-month period automatically shall be extended until
the tenth (10) day following the last date upon which optionee has any liability
under Section 16(b) (but in no event after the Expiration Date). If an optionee
dies or becomes permanently and totally disabled (within the meaning of Section
22(e) (3) of the Code) while employed by the Company or an Affiliate or within
the period that the Option remains exercisable after Termination, Options then
held (to the extent then exercisable) may be exercised, in whole or in part, by
the optionee, by the optionee's personal representative or by the person to whom
the Option is transferred by devise or the laws of descent and distribution, at
any time within six (6) months after the death or six (6) months after the
permanent and total disability of the optionee or any longer period specified in
the Option Agreement (but in no event after the Expiration Date). For purposes
of this Section 6.1.7, "employment" includes service as a director or as a
consultant. For purposes of this Section 6.1.7, an optionee's employment shall
not be deemed to terminate by reason of sick leave, military leave or other
leave of absence approved by the Administrator, if the period of any such leave
does not exceed 90 days or, if longer, if the optionee's right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.
4
<PAGE> 7
6.1.8 Repurchase of Stock. At the option of the Administrator,
the stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase either:
(a) shall be at the Option exercise price and (i)
shall lapse at the rate of at lease 20% per year over five (5) years from the
date the Option is granted (without regard to the date it becomes exercisable),
and must be exercised for cash or cancellation of purchase money indebtedness
within 90 days of such termination and (ii) if the right is assignable by the
Company, the assignee must pay the Company upon assignment of the right (unless
the assignee is a 100% owned subsidiary of the Company or is an Affiliate) cash
equal to the difference between the Option exercise price and the value
(determined as set forth in Section 6.1.11) of the stock to be purchased if the
Option exercise price is less than such value; or
(b) shall be a the higher of the Option exercise
price or the value (determined as set forth in Section 6.1.11) of the stock
being purchased on the date of termination, and must be exercised for cash or
cancellation of purchase money indebtedness within 90 days of termination of
employment, and such right shall terminate when the Company's securities become
publicly traded.
Determination of the number of shares subject to any such right of
repurchase shall be made as of the date the employee's employment by, director's
director relationship with, or consultant's consulting relationship with, the
Company terminates, not as of the date that any Option granted to such employee,
director or consultant is thereafter exercised.
6.1.9 Withholding and Employment Taxes. At the time of
exercise of an Option or at such other time as the amount of such obligations
becomes determinable (the "Tax Date"), the optionee shall remit to the Company
in cash all applicable federal and state withholding and employment taxes. If
authorized by the Administrator in its sole discretion after considering any tax
or accounting consequences, an optionee may elect to (i) deliver a promissory
note on such terms as the Administrator deems appropriate, (ii) tender to the
Company previously owned shares of Stock or other securities of the Company, or
(iii) have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company to pay some or all of the amount of tax that is required
by law to be withheld by the Company as a result of the exercise of such Option,
subject to the following limitations:
(a) Any election pursuant to clause (iii) above by
an optionee subject to Section 16 of the Exchange Act shall either (x) be made
at least six months before the Tax Date and shall be irrevocable; or (y) shall
be made in (or made earlier to take effect in) any ten-day period beginning on
the third business day following the date of release for publication of the
Company" quarterly or annual summary statements of earnings and shall be subject
to approval by the Administrator, which approval may be given at any time after
such election has been made. In addition, in the case of (y), the Option shall
be held at least six months prior to the Tax Date.
(b) Any election pursuant to clause (ii) above,
where the optionee is tendering Common Stock issued pursuant to the exercise of
an Option, shall require that such shares be held at least six months prior to
the Tax Date.
Any of the foregoing limitations may be waived (or additional
limitations may be imposed) by the Administrator, in its sole discretion, if the
Administrator determines that such foregoing limitations are not required (or
that such additional limitations are required) in order that the transaction
shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3,
or any successor rule
5
<PAGE> 8
thereto. In addition, any of the foregoing limitations may be waived by the
Administrator, in its sole discretion, if the Administrator determines that Rule
16b-3, or any successor rule thereto, is not applicable to the exercise of the
Option by the optionee or for any other reason.
Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan
may contain such other terms, provisions, and conditions not inconsistent with
this Plan as may be determined by the Administrator, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code. If Options provide for a right of first refusal in favor of the
company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the earlier of (i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten years after the grant
date as set forth in Section 6.1.4.
6.1.11 Determination of Value. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any
established stock exchange or National Market System of the National Association
of Securities Dealers, Inc. Automated Quotations System, its fair market value
shall be the closing sales price for such stock or the closing bid if no sales
were reported, as quoted on such system or exchange (or the largest such
exchange) for the date the value is to be determined (or if there are no sales
for such date, then for the last preceding business day on which there were
sales), as reported in the Wall Street Journal or similar publication.
(b) If the stock of the Company is regularly quoted
by a recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for
the stock, the fair market value thereof shall be determined in good faith by
the Administrator, with reference to the Company's net worth, prospective
earning power, dividend-paying capacity, and other relevant factors, including
the goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.5, no Option shall
be exercisable more than ten years after the date of grant, or such lesser
period of time as is set forth in the stock option agreement (the end of the
maximum exercise period stated in the stock option agreement is referred to in
this Plan as the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option
granted to any person who owns, directly or by attribution under the Code
currently Section 424(d), stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a "Ten Percent Stockholder") shall in no event be less than 110% of the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted.
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<PAGE> 9
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options
granted under this Plan which are designated as NQOs shall be subject to the
following terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.13,
the exercise price of a NQO shall be not less than 85% of the fair market value
(determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13,
the exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no even be less than the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by
exercise of an ISO granted pursuant to this Plan is disposed of in a
"disqualifying disposition" within the meaning of Section 422 of the Code, the
holder of the stock immediately before the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and shall provide
such other information regarding the Option as the Company may reasonably
require.
6.3.3 Grant Date. If an ISO is granted in anticipation of
employment as provided in Section 5(d), the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this
Plan, ISOs granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 In fair market value of stock
(measured on the grant date(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator, the vesting
limitation described above shall be applied by deferring the exercisability of
those ISOs or portions of ISOs which have the highest per share exercise prices;
but in no event shall more than $100,000 in fair market value of stock (measured
on the grant date(s) vest in any calendar year. The ISOs or portions of ISOs
whose exercisability is so deferred shall become exercisable on the first day of
the first subsequent calendar year during which they may be exercised, as
determined by applying these same principles and all other provisions of this
Plan including those relating to the expiration and termination of ISOs. In no
even, however, will the operation of this Section 6.3.4 cause an ISO to vest
before its terms or, having vested, cease to be vested.
6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to
any Ten Percent Stockholder shall be exercisable more than five years after the
date of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give
written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price as provided in Section 6.1.6. The
date the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price will be considered as the date such Option was
exercised.
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<PAGE> 10
(b) Promptly after receipt of written notice of exercise of an
Option, the Company shall, without stock issue or transfer taxes to the optionee
or other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a shareholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the appropriate entry on the
books of the Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted thereunder shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate any optionee's employment or consulting at any time, nor
confer upon any optionee any right to continue in the employ of, or consult
with, the Company or any of its Affiliates.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common stock shall not be issued pursuant to the exercise
of an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
10. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.
11. MARKET STANDOFF
Each Optionee, if so requested by the Company or any representative
of the underwriters in connection with any registration of the offering of any
securities of the company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first two registration statements of the Company to
become effective under the Securities Act which includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of such
180-day period.
12. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration, suspension
or discontinuance may adversely affect outstanding Options except to conform
this Plan and ISOs granted under this Plan to the requirements of federal or
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
shareholder approval is advisable.
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<PAGE> 11
13. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board
provided, however, that no Option shall be exercisable unless and until written
consent of the shareholders of the Company, or approval of shareholders of the
Company voting at a validly called shareholders' meeting, is obtained within 12
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall terminate and be of no force
and effect from and after expiration of such 12-month period. Options may be
granted and exercised under this Plan only after there has been compliance with
all applicable federal and state securities laws.
Plan adopted by the Board of Directors on January 14, 1994. Plan approved by
Shareholders on January 14, 1994.
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<PAGE> 12
CONCUR TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
(A) NAME OF OPTIONEE: [Employee]
(B) GRANT DATE: 07/29/98
(C) NUMBER OF SHARES: [M_of_shares]
(D) EXERCISE PRICE: $[Price]
(E) VESTING BASE DATE: [start_date]
(F) EFFECTIVE DATE: 07/29/98
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"), is made and
entered into as of the date set forth in Item F above (the "Effective Date")
between Concur Technologies, Inc. (formerly Portable Software Corporation), a
Washington corporation (the "Company") and the person named in Item A above
("Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Option; Vesting Base Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to the
Company's 1994 Stock Option Plan (the "Plan"), a copy of which is attached to
this Agreement as Exhibit 1, an incentive stock option (the "ISO") to purchase
all or any part of an aggregate of the number of shares (the "ISO Shares") of
the Company's Common Stock (as defined in the Plan) listed in Item C above on
the terms and conditions set forth herein and in the Plan, the terms and
conditions of the Plan being hereby incorporated into this Agreement by
reference.
1.2 Vesting Base Date. The parties hereby establish the date set
forth in Item E above as the Vesting Base Date (as defined in Section 5.1
below).
2. Exercise Price. The exercise price for purchase of each share of Common
Stock covered by this ISO shall be the price set forth in Item D above.
3. Term. Unless otherwise specified on Exhibit 3 attached hereto, if any
(the absence of such exhibit indicating that no such exhibit was intended), this
ISO shall expire as provided in Section 6.1.12 of the Plan.
4. Adjustment of ISOs. The Company shall adjust the number and kind of
shares and the exercise price thereof in certain circumstances in accordance
with the provisions of Section 6.1.1 of the Plan.
5. Exercise of Options.
5.1 Vesting; Time of Exercise. This ISO shall be exercisable
according to the schedule set forth on Exhibit 5.1 attached hereto. Such
schedule shall commence as of the date set forth in Item (E) above (the "Vesting
Base Date").
5.2 Exercise After Termination of Status as an Employee, Director or
Consultant. In the event of termination of Optionee's continuous status as an
employee, director or consultant, this ISO may be exercised only in accordance
with the provisions of Section 6.1.7 of the Plan.
<PAGE> 13
5.3 Manner of Exercise. Optionee may exercise this ISO, or any
portion of this ISO, by giving written notice to the Company at its principal
executive office, to the attention of the officer of the Company designated by
the Plan Administrator, accompanied by a copy of the 1994 Stock Option Plan
Stock Purchase Agreement in substantially the form attached hereto as Exhibit
5.3 executed by Optionee (or at the option of the Company such other form of
stock purchase agreement as shall then be acceptable to the Company), payment of
the exercise price and payment of any applicable withholding or employment
taxes. The date the Company receives written notice of an exercise hereunder
accompanied by payment will be considered as the date this ISO was exercised.
5.4 Payment. Except as provided in Exhibit 5.4 attached hereto, if
any (the absence of such exhibit indicating that no exhibit was intended),
payment may be made for ISO Shares purchased at the time written notice of
exercise of the ISO is given to the Company, by delivery of cash, check,
previously owned shares of Common Stock (provided that delivery of previously
owned shares may not be made more than once in any six-month period), or a full
recourse promissory note equal to up to 90% of the exercise price and payable
over no more than five years. The proceeds of any payment shall constitute
general funds of the Company.
5.5 Delivery of Certificate. Promptly after receipt of written
notice of exercise of the ISO, the Company shall, without stock issue or
transfer taxes to the Optionee or other person entitled to exercise, deliver to
the Optionee or other person a certificate or certificates for the requisite
number of ISO Shares. An Optionee or transferee of an Optionee shall not have
any privileges as a shareholder with respect to any ISO Shares covered by the
option until the date of issuance of a stock certificate.
6. Nonassignability of ISO. This ISO is not assignable or transferable by
Optionee except by will or by the laws of descent and distribution. During the
life of Optionee, the ISO is exercisable only by the Optionee. Any attempt to
assign, pledge, transfer, hypothecate or otherwise dispose of this ISO in a
manner not herein permitted, and any levy of execution, attachment, or similar
process on this ISO, shall be null and void.
7. Company's Repurchase Rights. The ISO Shares arising from exercise of
this ISO shall be subject to a right of repurchase in favor of the Company (the
"Right of Repurchase") to the extent set forth on Exhibit 7 attached hereto (the
absence of such exhibit indicating that no such exhibit was intended and that
the ISO shall be subject to the limitations set forth on Exhibit 5.1). If the
Optionee's employment with the Company terminates before the Right of Repurchase
lapses in accordance in accordance with Exhibit 7, the Company may purchase ISO
shares subject to the Right of Repurchase (either by payment of cash or by
cancellation of purchase money indebtedness) for an amount equal to the price
the Optionee paid for such ISO Shares (exclusive of any taxes paid upon
acquisition of the stock) by giving notice at any time within the later of (a)
30 days after the acquisition of the ISO Shares upon option exercise, or (b) 90
days after such termination of employment, that the Company is exercising its
right of repurchase. The Company shall include with such notice payment in full
in cash or by evidence of cancellation of purchase money indebtedness. The
Optionee may not dispose of or transfer ISO Shares while such shares are subject
to the Right of Repurchase and any such attempted transfer shall be null and
void.
8. Company's Right of First Refusal.
8.1 Right of First Refusal. In the event that the Optionee proposes
to sell, pledge, or otherwise transfer any ISO Shares or any interest in such
shares to any person or entity, the Company shall have a right of first refusal
(the "Right of First Refusal") with respect to such ISO Shares. If Optionee
desires to transfer ISO Shares, Optionee shall give a written notice (the
"Transfer Notice") to the Company describing fully the proposed transfer,
including the number of ISO Shares proposed to be transferred, the proposed
transfer price, and the name and address of the proposed transferee. The
Transfer Notice shall be signed both by Optionee and by the proposed transferee
and must constitute a binding commitment of both such parties for the transfer
of such ISO Shares. The Company may elect to purchase all, but not less than
all, of the ISO Shares subject to the Transfer Notice by delivery of a notice of
exercise of the Company's Right of First Refusal within 30 days after the date
the Transfer Notice is delivered to the Company. The purchase price paid
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<PAGE> 14
by the Company shall be the price per share equal to the proposed per share
transfer price, and shall be paid to the Optionee within 60 days after the date
the Transfer Notice is received by the Company, unless a longer period for
payment was offered by the proposed transferee, in which case the Company shall
pay the purchase price within such longer period. The Company's rights under
this Section 8.1 shall be freely assignable, in whole or in part.
Notwithstanding the foregoing, the Right of First Refusal does not apply to a
transfer of shares by gift or devise to the Optionee's immediate family (i.e.,
parents, spouse or children or to a trust for the benefit of the Optionee or any
of the Optionee's immediate family members), but does apply to any subsequent
transfer of such shares by such immediate family members.
8.2 Transfer of ISO Shares. If the Company fails to exercise the Right of
First Refusal within 30 days after the date the Transfer Notice is delivered to
the Company, the Optionee may, not later than 75 days following delivery to the
Company of the Transfer Notice, conclude a transfer of the ISO Shares subject to
the Transfer Notice on the terms and conditions described in the Transfer
Notice. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer by
the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in Section 8.1
of this Agreement. If the Company exercises the Right of First Refusal, the
parties shall consummate the sale of ISO Shares on the terms, other than price,
as applicable under Section 8.1, set forth in the Transfer Notice; provided,
however in the event the Transfer Notice provides for payment for the ISO Shares
other than in cash, the Company shall have the option of paying for the ISO
Shares by paying in cash the present value of the consideration described in the
Transfer Notice; and further provided that if the value of noncash consideration
is to be paid and the Optionee disagrees with the value determined by the
Company, the Optionee may request an independent appraisal by an appraiser
acceptable to the Optionee and the Company, the costs of such appraisal to be
borne equally by the Optionee and the Company.
8.3 Binding Effect. The Right of First Refusal shall inure to the
benefit of the successors and assigns of the Company and shall be binding upon
any transferee of ISO Shares other than a transferee acquiring ISO Shares in a
transaction where the Company failed to exercise the Right of First Refusal (a
"Free Transferee") or a transferee of a Free Transferee.
8.4 Termination of Company's Right of First Refusal. Notwithstanding
anything in this Section 8, the Company shall have no Right of First Refusal,
and Optionee shall have no obligation to comply with the procedures in Sections
8.1 through 8.3 after the earlier of (i) the closing of the Company's initial
public offering to the public generally, or (ii) the date ten (10) years after
the Effective Date.
9. Market Standoff. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of the securities of the Company under the
Securities Act of 1933, as amended (the "Securities Act"), Optionee shall not
sell or otherwise transfer the ISO Shares for a period of 180 days following the
effective date of a Registration Statement filed under the Securities Act;
provided that such restrictions shall only apply to the first two registration
statements of the Company to become effective under the Securities Act which
include securities to be sold on behalf of the Company in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to the ISO Shares subject to the foregoing
restrictions until the end of each such 180-day period.
10. Restriction on Issuance of Shares.
10.1 Legality of Issuance. The Company shall not be obligated to
sell or issue any ISO Shares pursuant to this Agreement if such sale or
issuance, in the opinion of the Company and the Company's counsel, might
constitute a violation by the Company of any provision of law, including without
limitation the provisions of the Securities Act.
10.2 Registration or Qualification of Securities. The Company may,
but shall not be required to, register or qualify the sale of this ISO or any
ISO Shares under the Securities Act or any other applicable law. The Company
shall not be obligated to take any affirmative action in order to cause the
grant or exercise of this option or the issuance or sale of any ISO Shares
pursuant thereto to comply with any law.
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<PAGE> 15
11. Restriction on Transfer. Regardless whether the sale of the ISO Shares
has been registered under the Securities Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions upon
the sale, pledge or other transfer of ISO Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the Company
and the Company's counsel, such restrictions are necessary or desirable in order
to achieve compliance with the provisions of the Securities Act, the securities
laws of any state, or any other law, or if the Company does not desire to have a
trading market develop for its securities.
12. Stock Certificate. Stock certificates evidencing ISO Shares may bear
such restrictive legends as the Company and the Company's counsel deem necessary
or advisable under applicable law or pursuant to this Agreement.
13. Disqualifying Dispositions. If stock acquired by exercise of this ISO
is disposed of within two years after the Effective Date or within one year
after date of such exercise (as determined under Section 5.3 of this Agreement),
the Optionee immediately prior to the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and shall provide
such other information regarding the disposition as the Company may reasonably
require.
14. Representations, Warranties, Covenants, and Acknowledgments of
Optionee Upon Exercise of ISO. Optionee hereby agrees that in the event that the
Company and the Company's counsel deem it necessary or advisable in the exercise
of their discretion, the issuance of ISO Shares may be conditioned upon certain
representations, warranties, and acknowledgments by the person exercising the
ISO (the "Purchaser"), including, without limitation, those set forth in
Sections 14.1 through 14.8 inclusive:
14.1 Investment. Purchaser is acquiring the ISO Shares for Purchaser's
own account, and not for the account of any other person. Purchaser is acquiring
the ISO Shares for investment and not with a view to distribution or resale
thereof except in compliance with applicable laws regulating securities.
14.2 Business Experience. Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company evidenced by purchase
of the ISO Shares.
14.3 Relation to Company. Purchaser is presently an officer, director,
or other employee of, or consultant to the Company, and in such capacity has
become personally familiar with the business, affairs, financial condition, and
results of operations of the Company.
14.4 Access to Information. Purchaser has had the opportunity to ask
questions of, and to receive answers from, appropriate executive officers of the
Company with respect to the terms and conditions of the transaction contemplated
hereby and with respect to the business, affairs, financial condition, and
results of operations of the Company. Purchaser has had access to such financial
and other information as is necessary in order for Purchaser to make a
fully-informed decision as to investment in the Company by way of purchase of
the ISO Shares, and has had the opportunity to obtain any additional information
necessary to verify any of such information to which Purchaser has had access.
14.5 Speculative Investment. Purchaser's investment in the Company
represented by the ISO Shares is highly speculative in nature and is subject to
a high degree of risk of loss in whole or in part. The amount of such investment
is within Purchaser's risk capital means and is not so great in relation to
Purchaser's total financial resources as would jeopardize the personal financial
needs of Purchaser or Purchaser's family in the event such investment were lost
in whole or in part.
14.6 Registration. Purchaser must bear the economic risk of investment
for an indefinite period of time because the sale to Purchaser of the ISO Shares
has not been registered under the Securities Act and the ISO Shares cannot be
transferred by Purchaser unless such transfer is registered under the Securities
Act or an exemption from such registration is available. The Company has made no
agreements, covenants, or undertakings whatsoever to register the transfer of
any of the ISO Shares under the Securities Act. The Company has made no
representations, warranties, or covenants whatsoever as to whether any exemption
from
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<PAGE> 16
the Securities Act, including without limitation any exemption for limited sales
in routine brokers' transactions pursuant to Rule 144, will be available; if the
exemption under Rule 144 is available at all, it may not be available until at
least two years after payment of cash for the ISO Shares and not then unless:
(i) a public trading market then exists in the Company's common stock; (ii)
adequate information as to the Company's financial and other affairs and
operations is then available to the public; and (iii) all other terms and
conditions of Rule 144 have been satisfied. Purchaser understands that the
resale provisions of Rule 701 will not apply until 90 days after the Company
becomes subject to the reporting obligations of the Securities Exchange Act of
1934 (typically 90 days after the effective date of an initial public offering).
14.7 Public Trading. None of the Company's securities is presently
publicly traded, and the Company has made no representation, covenant, or
agreement as to whether there will be a public market for any of its securities.
14.8 Tax Advice. The Company has made no warranties or representations to
Purchaser with respect to the income tax consequences of the transactions
contemplated by the agreement pursuant to which the ISO Shares will be purchased
and Purchaser is in no manner relying on the Company or its representatives for
an assessment of such tax consequences.
15. Assignment; Binding Effect. Subject to the limitations set forth in
this Agreement, this Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, legal representatives, and successors of
the parties hereto; provided, however, that Optionee may not assign any of
Optionee's rights under this Agreement.
16. Damages. Optionee shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of ISO Shares which is not in conformity with the provisions of this
Agreement.
17. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Washington excluding those laws that direct the application of the laws of
another jurisdiction. The parties agree that the exclusive jurisdiction and
venue of any action with respect to this Agreement shall be in the Superior
Court of Washington for the County of King or the United States District Court
for the Western District of Washington, in either case as located in Seattle,
and each of the parties submits itself to the exclusive jurisdiction and venue
of such courts for the purpose of such action. The parties agree that service of
process in any such action may be effected in the manner provided in this
Agreement for delivery of notices.
18. Notices. All notices and other communications under this Agreement
shall be in writing. Unless and until the Optionee is notified in writing to the
contrary, all notices, communications, and documents directed to the Company and
related to the Agreement, if not delivered by hand, shall be mailed, addressed
as follows:
Concur Technologies, Inc.
6222 - 185th Avenue NE
Redmond, WA 98052
Unless and until the Company is notified in writing to the contrary, all
notices, communications, and documents intended for the Optionee and related to
this Agreement, if not delivered by hand, shall be mailed to Optionee's last
known address as shown on the Company's books. Notices and communications shall
be mailed by first class mail, postage prepaid; documents shall be mailed by
registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received when actually
received, if by hand delivery, and two business days after mailing, if by mail.
19. Entire Agreement. This Agreement, together with the Plan and any stock
purchase agreement relating to the purchase of ISO Shares, contains all of the
terms and conditions agreed upon by the parties relating to its subject matter
and supersedes any and all prior and contemporaneous agreements, negotiations,
correspondence, understandings and communications of the parties, whether oral
or written, respecting that subject matter.
5
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Incentive Stock Option
Agreement as of the Effective Date.
CONCUR TECHNOLOGIES, INC.
By
------------------------------------
Anne Kroger
Title: Director of Finance and Operations
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement and the Plan.
---------------------------------------
Employee
Dated: As of
--------------------------
Optionee's spouse indicates by the execution of this Incentive Stock Option
Agreement his or her consent to be bound by the terms thereof as to his or her
interests, whether as community property or otherwise, if any, in the option
granted hereunder, and in any ISO Shares purchased pursuant to this Agreement.
---------------------------------------
Optionee's Spouse
6
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit 1 1994 Stock Option Plan
Exhibit 3 (if applicable) Expiration of Incentive Stock Option
Exhibit 5.1 Time of Exercise
Exhibit 5.3 1994 Stock Option Plan Stock Purchase Agreement
Exhibit 5.4 (if applicable) Payment
Exhibit 7 (if applicable) Right of Repurchase
</TABLE>
7
<PAGE> 19
EXHIBIT 5.1 OF THE INCENTIVE STOCK OPTION AGREEMENT
The ISO shall be exercisable with respect to 25% of the total number of
ISO Shares one year after the Vesting Base Date and, thereafter, with respect to
an additional 1/36 of the remaining ISO Shares at the end of each month after
the month of the first anniversary of Vesting Base Date, so that all of the ISO
Shares may be purchased on and after the fourth anniversary of the Vesting Base
Date.
CONCUR TECHNOLOGIES, INC.
By
------------------------------------
Anne Kroger
-----------------------------------
Employee
8
<PAGE> 20
EXHIBIT 5.3 OF THE INCENTIVE STOCK OPTION AGREEMENT
9
<PAGE> 21
EXHIBIT 7 OF THE INCENTIVE STOCK OPTION AGREEMENT
[Intentionally Left Blank]
10
<PAGE> 1
EXHIBIT 10.02
CONCUR TECHNOLOGIES, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted August 21, 1998
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 8,100,000 Shares plus Shares that are subject to:
(a) issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option; (b) an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price; or (c) an Award that otherwise terminates without Shares being
issued. In addition, any authorized shares not issued or subject to outstanding
grants under the Company's 1994 Stock Option Plan (the "PRIOR PLAN") on the
Effective Date (as defined below) and any shares issued under the Prior Plan
that are forfeited or repurchased by the Company or that are issuable upon
exercise of options granted pursuant to the Prior Plan that expire or become
unexercisable for any reason without having been exercised in full, will no
longer be available for grant and issuance under the Prior Plan, but will be
available for grant and issuance under this Plan. At all times the Company shall
reserve and keep available a sufficient number of Shares as shall be required to
satisfy the requirements of all outstanding Options granted under this Plan and
all other outstanding but unvested Awards granted under this Plan. The total
number of Shares issued under the Plan upon exercise of ISOs (as defined in
Section 5 below) will in no event exceed 25,000,000 Shares (adjusted in
proportion to any adjustment under Section 2.2 below) over the term of the Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 1,200,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 1,500,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
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Concur Technologies, Inc.
1998 Equity Incentive Plan
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations relating
to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent
or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for
the administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
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1998 Equity Incentive Plan
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times
or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except
death, Disability or Cause, then the Participant may
exercise such Participant's Options only to the extent that
such Options would have been exercisable upon the
Termination Date no later than three (3) months after the
Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after
the Termination Date deemed to be an NQSO), but in any
event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three
(3) months after a Termination other than for Cause or
because of Participant's Disability), then Participant's
Options may be exercised only to the extent that such
Options would have been exercisable by Participant on the
Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee)
no later than twelve (12) months after the Termination Date
(or such shorter or longer time period not exceeding five
(5) years as may be determined by the Committee, with any
such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason
other than the Participant's death or Disability, or (b)
twelve (12) months after the Termination Date when the
Termination is for Participant's death or Disability,
deemed to be an NQSO), but in any event no later than the
expiration date of the Options.
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Concur Technologies, Inc.
1998 Equity Incentive Plan
(c) Notwithstanding the provisions in paragraph 5.6(a) above,
if a Participant is terminated for Cause, then the
Participant may exercise such Participant's Options, only
to the extent that such Options would have been exercisable
upon the Termination Date, no later than ten (10) days
after the Termination Date, but in any event, no later than
the expiration date of the Options. In making such
determination, the Board shall give the Participant an
opportunity to present to the Board evidence on his behalf.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISO are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISO, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
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Concur Technologies, Inc.
1998 Equity Incentive Plan
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment
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Concur Technologies, Inc.
1998 Equity Incentive Plan
may be made in the form of cash or whole Shares or a combination thereof, either
in a lump sum payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares
were purchased from the Company by use of a promissory
note, such note has been fully paid with respect to such
shares); or (2) were obtained by Participant in the public
market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the
Company will not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD DEALER") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion
of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant
and a NASD Dealer whereby the Participant
irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price
directly to the Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
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Concur Technologies, Inc.
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9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as determined by the
Committee and set forth in the Award Agreement with respect to Awards that are
not ISOs. During the lifetime of the Participant an Award will be exercisable
only by the Participant, and any elections with respect to an Award may be made
only by the Participant unless otherwise determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the
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Concur Technologies, Inc.
1998 Equity Incentive Plan
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed or quoted, as they are in effect on the date of
grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will 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 Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account
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Concur Technologies, Inc.
1998 Equity Incentive Plan
the existing provisions of the Awards). The successor corporation may also
issue, in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided above,
pursuant to a transaction described in this Subsection 18.1, such Awards will
expire on such transaction at such time and on such conditions as the Committee
will determine. Notwithstanding anything in this Plan to the contrary, the
Committee may, in its sole discretion, provide that the vesting of any or all
Awards granted pursuant to this Plan will accelerate upon a transaction
described in this Section 18. If the Committee exercises such discretion with
respect to Options, such Options will become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Committee
determines, and if such Options are not exercised prior to the consummation of
the corporate transaction, they shall terminate at such time as determined by
the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
effective on the date on which the registration statement filed by the Company
with the SEC under the Securities Act registering the initial public offering of
the Company's Common Stock is declared effective by the SEC (the "EFFECTIVE
DATE"). This Plan shall be approved by the stockholders of the Company
(excluding Shares issued pursuant to this Plan), consistent with applicable
laws, within twelve (12) months before or after the date this Plan is adopted by
the Board. Upon the Effective Date, the Committee may grant Awards pursuant to
this Plan; provided, however, that: (a) no Option may be exercised prior to
initial stockholder approval of this Plan; (b) no Option granted pursuant to an
increase in the number of Shares subject to this Plan approved by the Board will
be exercised prior to the time such increase has been approved by the
stockholders of the Company; (c) in the event that initial stockholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be cancelled, any Shares issued pursuant to any Awards shall be
cancelled and any purchase of Shares issued hereunder shall be rescinded; and
(d) in the event that stockholder approval of such increase is not obtained
within the time period provided herein, all Awards granted pursuant to such
increase will be cancelled, any Shares issued pursuant to any Award granted
pursuant to such increase will be cancelled, and any purchase of Shares pursuant
to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the date this Plan
is adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or
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Concur Technologies, Inc.
1998 Equity Incentive Plan
instrument to be executed pursuant to this Plan; provided, however, that the
Board will not, without the approval of the stockholders of the Company, amend
this Plan in any manner that requires such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Concur Technologies, Inc. or any successor
corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the
date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal;
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Concur Technologies, Inc.
1998 Equity Incentive Plan
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by the
Company's underwriters in the initial public offering of
the Company's Common Stock pursuant to a registration
statement filed with the SEC under the Securities Act; or
(d) if none of the foregoing is applicable, by the Committee
in good faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
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 a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization
and/or earnings before income taxes and
amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share
growth;
(f) Total stockholder return and/or total stockholder
return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Concur Technologies, Inc. 1998 Equity
Incentive Plan, as amended from time to time.
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Concur Technologies, Inc.
1998 Equity Incentive Plan
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if 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.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
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EXHIBIT 10.03
CONCUR TECHNOLOGIES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
As Adopted August 21, 1998
1. ESTABLISHMENT OF PLAN. Concur Technologies, Inc. (the "COMPANY")
proposes to grant options for purchase of the Company's Common Stock to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this Employee Stock Purchase Plan (this "PLAN"). For
purposes of this Plan, "PARENT CORPORATION" and "SUBSIDIARY" shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"CODE"). "PARTICIPATING SUBSIDIARIES" are Parent Corporations or Subsidiaries
that the Board of Directors of the Company (the "BOARD") designates from time to
time as corporations that shall participate in this Plan. The Company intends
this Plan to qualify as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments to or replacements of such Section), and this
Plan shall be so construed. Any term not expressly defined in this Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. A total of 800,000 shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate number
of shares of the Company's Common Stock reserved for issuance under the Plan
shall be increased automatically by a number of shares equal to one percent (1%)
of the total outstanding shares of the Company as of the immediately preceding
December 31; provided that such increase shall in no event exceed 800,000 shares
per year. Such number shall be subject to adjustments effected in accordance
with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary (10) days before the beginning of such Offering Period, except that
employees who are employed on the Effective Date of the Registration Statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or
less in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period,
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
would own stock or hold options to purchase stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or any of its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of twenty-four (24) months duration commencing on May 1 and
November 1 of each year and ending on the second April 30 and October 31
thereafter; provided, however, that notwithstanding the foregoing, the first
such Offering Period shall commence on the first business day on which price
quotations for the Company's Common Stock are available on the Nasdaq National
Market (the "FIRST OFFERING DATE") and shall end on October 31, 2000. Except for
the first Offering Period, each Offering Period shall consist of four (4) six
month purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no more than five and no fewer than three
Purchase Periods, any of which may be greater or less than six months as
determined by the Committee. The first business day of each Offering Period is
referred to as the "OFFERING DATE". The last business day of each Purchase
Period is referred to as the "PURCHASE DATE". The Committee shall have the power
to change the duration of Offering Periods with respect to offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company's treasury department (the "TREASURY DEPARTMENT") not
later than five (5) days before such Offering Date. Notwithstanding the
foregoing, the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. An eligible employee who does not deliver a
subscription agreement to the Treasury Department by such date after becoming
eligible to participate in such Offering Period shall not participate in that
Offering Period or any subsequent Offering Period unless such employee enrolls
in this Plan by filing a subscription agreement with the Treasury Department not
later than five (5) days preceding a subsequent Offering Date. Once an employee
becomes a participant in an Offering Period, such employee will automatically
participate in the Offering Period commencing immediately following the last day
of the prior Offering Period unless the employee withdraws or is deemed to
withdraw from this Plan or terminates further participation in the Offering
Period as set forth in Section 11 below. Such participant is not required to
file any additional subscription agreement in order to continue participation in
this Plan. An eligible employee may not participate in more than one Offering
Period at a time.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 10(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 10(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
below.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "FAIR MARKET VALUE" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the
date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Board in
good faith, which in the case of the First Offering Date
will be the price per share at which shares of the
Company's Common Stock are initially offered for sale to
the public by the Company's underwriters in the initial
public offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than two percent (2%), nor greater than ten percent (15%) or such lower
limit set by the Committee. Compensation shall mean all W-2 cash compensation,
including, but not limited to, base salary, wages, commissions, overtime, shift
premiums and bonuses, plus draws against commissions, provided, however, that
for purposes of determining a participant's compensation, any election by such
participant to reduce his or her regular cash remuneration under Sections 125 or
401(k) of the Code shall be treated as if the participant did not make such
election. Payroll deductions shall commence on the first payday of the Offering
Period and shall continue to the end of the Offering Period unless sooner
altered or terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
fifteen (15) days before the beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Treasury Department a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period commencing more than fifteen (15) days
after the Treasury Department's receipt of the request and no further payroll
deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date of
the request shall be used to purchase shares of Common Stock of the Company in
accordance with Section (e) below. A participant may not resume making payroll
deductions during the Offering Period in which he or she reduced his or her
payroll deductions to zero.
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
(d) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(e) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) On any single Purchase Date, a participant may not purchase more
than two hundred percent (200%) of the number of shares such participant could
have purchased if the purchase price were eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Offering Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which may
be purchased by any employee at any single Purchase Date (hereinafter the
"MAXIMUM SHARE AMOUNT"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. In no event shall the Maximum Share Amount
exceed the amounts permitted under Section 10(b) above. If a new Maximum Share
Amount is set, then all participants must be notified of such Maximum Share
Amount prior to the commencement of the next Offering Period. The Maximum Share
Amount shall continue to apply with respect to all succeeding Purchase Dates and
Offering Periods unless revised by the Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Com-
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
mittee shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares to be purchased under a
participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Treasury Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period. A participant does not need to file any forms with the Company to
automatically be enrolled in the subsequent Offering Period
12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that this Plan
shall terminate as of a date fixed by the Committee and give each participant
the right to purchase shares under this Plan prior to such termination. In the
event of (i) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iii)
the sale of all or substantially all of the assets of the Company or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, the Plan will continue with
regard to Offering Periods that commenced prior to the closing of the proposed
transaction and shares will be purchased based on the Fair Market Value of the
surviving corporation's stock on each Purchase Date, unless otherwise provided
by the Committee consistent with pooling of interests accounting treatment.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "Notice Period"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
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Concur Technologies, Inc.
1998 Employee Stock Purchase Plan
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the First Offering Date (as defined above).
This Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan; or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to the
Plan as the Board determines to be advisable, if the continuation of the Plan or
any Offering Period would result in financial accounting treatment for the Plan
that is different from the financial accounting treatment in effect on the date
this Plan is adopted by the Board.
-7-
<PAGE> 1
EXHIBIT 10.04
CONCUR TECHNOLOGIES, INC.
1998 DIRECTORS STOCK OPTION PLAN
As Adopted August 21, 1998
1. PURPOSE. This 1998 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for certain nonemployee members of the
Board of Directors of Concur Technologies, Inc. (the "COMPANY"), who are
described in Section 6.1 below, by granting such persons options to purchase
shares of stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become effective
on the time and date (the "EFFECTIVE DATE") on which the registration statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to register the
initial public offering of the Company's Common Stock is declared effective by
the SEC. This Plan shall be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months after the date this
Plan is adopted by the Board.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
non-qualified stock options ("NQSOS"). The shares of stock that may be purchased
upon exercise of Options granted under this Plan (the "SHARES") are shares of
the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 600,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the term
of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted
under this Plan; provided, however that if the aggregate number of Shares
subject to outstanding Options granted under this Plan plus the aggregate number
of Shares previously issued by the Company pursuant to the exercise of Options
granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 Eligibility. Options shall be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 17 below (each
such person referred to as an "Optionee").
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Concur Technologies, Inc.
1998 Directors Stock Option Plan
6.2 Initial Grant. Each Optionee who is or becomes a member of the
Board on or after the Effective Date will automatically be granted an Option for
50,000 Shares (an "INITIAL GRANT") on the later of the Effective Date or on the
date such Optionee first becomes a member of the Board.
6.3 Succeeding Grants. At each Annual Meeting of the Company, each
Optionee will automatically be granted an Option for 20,000 Shares (a
"SUCCEEDING GRANT"), provided the Optionee is a member of the Board on such date
and has served continuously as a member of the Board since the date of such
Optionee's Initial Grant.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant ("GRANT") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. The date an Optionee receives an Initial Grant or a
Succeeding Grant is referred to in this Plan as the "START DATE" for such
Option.
(a) Initial Grants. Each Initial Grant will vest as to
twenty-five percent (25%) of the Shares on the first anniversary of the Start
Date for such Initial Grant, and as to one thirty-sixth (1/36th) of the Shares
on each subsequent monthly anniversary of the Start Date, so long as the
Optionee continuously remains a director or a consultant of the Company.
(b) Succeeding Grants. Each Succeeding Grant will vest as to
twenty-five percent (25%) of the Shares on the first anniversary of the Start
Date for such Succeeding Grant, and as to one thirty-sixth (1/36th) of the
Shares on each subsequent monthly anniversary of the Start Date, so long as the
Optionee continuously remains a director or a consultant of the Company.
7.3 Exercise Price. The exercise price of an Option shall be the Fair
Market Value (as defined in Section 17.4) of the Shares, at the time that the
Option is granted.
7.4 Termination of Option. Except as provided below in this Section,
each Option shall expire ten (10) years after its Start Date (the "EXPIRATION
DATE"). The Option shall cease to vest when the Optionee ceases to be a member
of the Board or a consultant of the Company. The date on which the Optionee
ceases to be a member of the Board or a consultant of the Company shall be
referred to as the "TERMINATION DATE". An Option may be exercised after the
Termination Date only as set forth below:
(a) Termination Generally. If the Optionee ceases to be a member
of the Board or a consultant of the Company for any reason except death of the
Optionee or disability of the Optionee (whether temporary or permanent, partial
or total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee no later than seven (7) months after the Termination Date, but in no
event later than the Expiration Date.
(b) Death or Disability. If the Optionee ceases to be a member of
the Board or a consultant of the Company because of the death of the Optionee or
the disability of the Optionee (whether temporary or permanent, partial or
total, as determined by the Committee), then each Option then held by such
Optionee to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) no later than twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
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Concur Technologies, Inc.
1998 Directors Stock Option Plan
8. EXERCISE OF OPTIONS.
8.1 Exercise Period. Subject to the provisions of Section 8.5 below,
Options shall be exercisable as they vest; provided that the Committee may
provide that such Options shall be immediately exercisable subject to repurchase
in accordance with the vesting schedule set forth in Section 7.
8.2 Notice. Options may be exercised only by delivery to the Company
of an exercise agreement in a form approved by the Committee stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.3 Payment. Payment for the Shares purchased upon exercise of an
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by the Optionee for more than six (6)
months (and which have been paid for within the meaning of SEC Rule 144 and, if
such shares were purchased from the Company by use of a promissory note, such
note has been fully paid with respect to such shares) or were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
the Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the Shares so purchased to pay for the
exercise price and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the Company; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably
elects to exercise the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of the exercise price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the exercise price directly to the
Company; or (f) by any combination of the foregoing.
8.4 Withholding Taxes. Prior to issuance of the Shares upon exercise
of an Option, the Optionee shall pay or make adequate provision for any federal
or state withholding obligations of the Company, if applicable.
8.5 Limitations on Exercise. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act and all applicable state securities laws, as
they are in effect on the date of exercise.
(b) The Committee may specify a reasonable minimum number of
Shares that may be purchased upon any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise determined by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution,
unless otherwise determined by the Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the
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Concur Technologies, Inc.
1998 Directors Stock Option Plan
Company at such time after the close of each fiscal year of the Company as they
are released by the Company to its stockholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act, compliance with all other applicable state
securities laws and compliance with the requirements of any stock exchange or
national market system on which the Shares may be listed. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration or qualification requirement of any state securities laws,
stock exchange or national market system.
14. ACCELERATION OF OPTIONS ON CERTAIN CORPORATE TRANSACTIONS. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Optionees), (c) a merger in which the Company
is the surviving corporation but after which the stockholders of the Company
(other than any stockholder which merges (or which owns or controls another
corporation which merges) with the Company in such merger) cease to own their
shares or other equity interests in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, the vesting of all options granted pursuant to this Plan
will accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the Committee
determines, and must be exercised, if at all, within seven months of the
consummation of said event. Any options not exercised within such seven-month
period shall expire.
15. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan or any outstanding option, provided that the Board
may not terminate or amend the terms of any outstanding option without the
consent of the Optionee. In any case, no amendment of this Plan may adversely
affect any then outstanding Options or any unexercised portions thereof without
the written consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the Effective Date.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
17.1 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
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.
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Concur Technologies, Inc.
1998 Directors Stock Option Plan
17.2 "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if 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.
17.3 "AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
17.4 "FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on
a national securities exchange, its closing price on the date
of determination on the principal national securities exchange
on which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading
on a national securities exchange, the average of the closing
bid and asked prices on the date of determination as reported
in The Wall Street Journal;
(d) in the case of an Option granted on the Effective Date, the
price per share at which shares of the Company's Common Stock
are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with
the SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in
good faith.
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<PAGE> 1
EXHIBIT 10.05
KIBBLE & PRENTICE, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
<TABLE>
<S> <C>
2.1 TOP HEAVY PLAN REQUIREMENTS ................................ 16
2.2 DETERMINATION OF TOP HEAVY STATUS .......................... 16
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER ................ 20
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY .................... 21
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES .............. 21
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR ..................... 21
2.7 RECORDS AND REPORTS ........................................ 23
2.8 APPOINTMENT OF ADVISERS .................................... 23
2.9 INFORMATION FROM EMPLOYER .................................. 23
2.10 PAYMENT OF EXPENSES ........................................ 23
2.11 MAJORITY ACTIONS ........................................... 23
2.12 CLAIMS PROCEDURE ........................................... 24
2.13 CLAIMS REVIEW PROCEDURE .................................... 24
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY .................................. 25
3.2 EFFECTIVE DATE OF PARTICIPATION ............................ 25
3.3 DETERMINATION OF ELIGIBILITY ............................... 25
3.4 TERMINATION OF ELIGIBILITY ................................. 25
3.5 OMISSION OF ELIGIBLE EMPLOYEE .............................. 26
3.6 INCLUSION OF INELIGIBLE EMPLOYEE ........................... 26
3.7 ELECTION NOT TO PARTICIPATE ................................ 26
3.8 CONTROL OF ENTITIES BY OWNER-EMPLOYEE ...................... 26
</TABLE>
<PAGE> 3
ARTICLE IV
CONTRIBUTION AND ALLOCATION
<TABLE>
<S> <C>
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION ............ 27
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION ................. 28
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS ....... 28
4.4 MAXIMUM ANNUAL ADDITIONS ................................... 35
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS .................. 44
4.6 TRANSFERS FROM QUALIFIED PLANS ............................. 44
4.7 VOLUNTARY CONTRIBUTIONS .................................... 45
4.8 DIRECTED INVESTMENT ACCOUNT ................................ 47
4.9 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS ................. 47
4.10 ACTUAL CONTRIBUTION PERCENTAGE TESTS ....................... 48
4.11 INTEGRATION IN MORE THAN ONE PLAN .......................... 48
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND ................................ 48
5.2 METHOD OF VALUATION ........................................ 49
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT .................. 49
6.2 DETERMINATION OF BENEFITS UPON DEATH ....................... 49
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY ........... 51
6.4 DETERMINATION OF BENEFITS UPON TERMINATION ................. 51
6.5 DISTRIBUTION OF BENEFITS ................................... 55
6.6 DISTRIBUTION OF BENEFITS UPON DEATH ........................ 60
6.7 TIME OF SEGREGATION OR DISTRIBUTION ........................ 65
6.8 DISTRIBUTION FOR MINOR BENEFICIARY ......................... 66
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN ............. 66
6.10 PRE-RETIREMENT DISTRIBUTION ................................ 66
</TABLE>
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<TABLE>
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6.11 ADVANCE DISTRIBUTION FOR HARDSHIP .......................... 67
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS .................. 67
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS ......................... 68
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE ...................... 68
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE ................ 69
7.3 OTHER POWERS OF THE TRUSTEE ................................ 71
7.4 LOANS TO PARTICIPANTS ...................................... 74
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS ................... 76
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES .............. 76
7.7 ANNUAL REPORT OF THE TRUSTEE ............................... 76
7.8 AUDIT ...................................................... 77
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE ............. 78
7.10 TRANSFER OF INTEREST ....................................... 79
7.11 TRUSTEE INDEMNIFICATION .................................... 79
7.12 EMPLOYER SECURITIES AND REAL PROPERTY ...................... 79
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT .................................................. 79
8.2 TERMINATION ................................................ 81
8.3 MERGER OR CONSOLIDATION .................................... 81
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS ......................................... 81
9.2 PARTICIPANT'S RIGHTS ....................................... 82
9.3 ALIENATION ................................................. 82
9.4 CONSTRUCTION OF PLAN ....................................... 83
9.5 GENDER AND NUMBER .......................................... 83
</TABLE>
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<TABLE>
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9.6 LEGAL ACTION ............................................... 83
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS ..................... 83
9.8 BONDING .................................................... 83
9.9 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE ................. 84
9.10 INSURER'S PROTECTIVE CLAUSE ................................ 84
9.11 RECEIPT AND RELEASE FOR PAYMENTS ........................... 84
9.12 ACTION BY THE EMPLOYER ..................................... 85
9.13 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY ......... 85
9.14 HEADINGS ................................................... 85
9.15 APPROVAL BY INTERNAL REVENUE SERVICE ....................... 85
9.16 UNIFORMITY ................................................. 86
9.17 PAYMENT OF BENEFITS ........................................ 86
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER ................ 86
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS .................... 87
10.3 DESIGNATION OF AGENT ....................................... 87
10.4 EMPLOYEE TRANSFERS ......................................... 87
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES ...... 88
10.6 AMENDMENT .................................................. 88
10.7 DISCONTINUANCE OF PARTICIPATION ............................ 88
10.8 ADMINISTRATOR'S AUTHORITY .................................. 88
10.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE .......... 89
ARTICLE XI
CASH OR DEFERRED PROVISIONS
11.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION ............ 89
11.2 PARTICIPANT'S SALARY REDUCTION ELECTION .................... 90
11.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS ....... 94
</TABLE>
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11.4 ACTUAL DEFERRAL PERCENTAGE TESTS ........................... 97
11.5 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS ............. 100
11.6 ACTUAL CONTRIBUTION PERCENTAGE TESTS ....................... 104
11.7 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS ......... 107
11.8 ADVANCE DISTRIBUTION FOR HARDSHIP .......................... 111
</TABLE>
<PAGE> 7
ARTICLE I
DEFINITIONS
As used in this Plan, the following words and phrases shall have the
meanings set forth herein unless a different meaning is clearly required by the
context:
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the person(s) or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
1.3 "Adoption Agreement" means the separate Agreement which is executed by
the Employer and accepted by the Trustee which sets forth the elective
provisions of this Plan and Trust as specified by the Employer.
1.4 "Affiliated Employer" means the employer and any corporation which is a
member of a controlled group of corporations (as defined in Code Section 414(b))
which includes the Employer; any trade or business (whether or not incorporated)
which is under common control (as defined in Code Section 414(c)) with the
Employer; any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.5 "Aggregate Account" means with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2-2.
1.6 "Anniversary Date" means the anniversary date specified in C3 of the
Adoption Agreement.
1.7 "Beneficiary" means the person to whom a share of a deceased
Participant's interest in the Plan is payable, subject to the restrictions of
Sections 6.2 and 6.6.
1.8 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.9 "Compensation" with respect to any Participant means such Participant's
compensation as specified by the Employer in El of the Adoption Agreement that
is paid during the applicable period. Compensation for any Self-Employed
Individual shall be equal to his Earned Income.
In addition, if specified in the Adoption Agreement, Compensation for
all Plan purposes shall also include
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compensation which is not currently includible in the Participant's gross income
by reason of the application of Code Sections 125, 402(a)(8), 402(h)(1)(B), or
403(b).
Compensation in excess of $200,000 shall he disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d). In applying this limitation, the family group of a Highly
Compensated Participant who is subject to the Family Member aggregation rules of
Code Section 414(q)(6) because such Participant is either a "five percent owner"
of the Employer or one of the ten (10) Highly Compensated Employees paid the
greatest. "415 Compensation" during the year, shall be treated as a single
Participant, except that for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants who have not attained
age nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
(except for purposes of determining the portion of Compensation up to the
integration level if this plan is integrated), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application of this
limitation.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.10 "Contract" or "Policy" means any life insurance policy, retirement
income policy, or annuity contract (group or individual) issued by the Insurer.
In the event of any conflict between the terms of this Plan and the terms of any
insurance contract purchased hereunder, the Plan provisions shall control.
1.11 "Deferred Compensation" means, with respect to any Participant, that
portion of the Participant's total Compensation which has been contributed to
the Plan in accordance with the Participant's deferral election pursuant to
Section 11.2.
1.12 "Early Retirement Date" means the date specified in the Adoption
Agreement on which a Participant or Former Participant has satisfied the age and
service requirements specified in the Adoption Agreement (Early Retirement Age).
A Participant shall become fully Vested upon satisfying this requirement if
still employed at his Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.13 "Earned Income" means with respect to a Self-Employed Individual, the
net earnings from self-employment in the trade or
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<PAGE> 9
business with respect to which the Plan is established, for which the personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified Plan to the extent deductible under Code Section
404. In addition, for Plan Years beginning after December 31, 1989, net earnings
shall be determined with regard to the deduction allowed to the Employer by Code
Section 164(f).
1.14 "Elective Contribution" means the Employer's contributions to the Plan
that are made pursuant to the Participant's deferral election pursuant to
Section 11.2. In addition, if selected in E3 of the Adoption Agreement, the
Employer's matching contribution made pursuant to Section 11.1(b) shall be
considered an Elective Contribution for purposes of the Plan. Elective
Contributions shall be subject to the requirements of Sections 11.2(b) and
11.2(c) and shall further be required to satisfy the discrimination requirements
of Regulation 1. 401(k)-1(b)(3), the provisions of which are specifically
incorporated herein by reference.
1.15 "Eligible Employee" means any Employee specified in D1 of the Adoption
Agreement.
1.16 "Employee" means any person who is employed by the Employer, but
excludes any person who is employed as an independent contractor. The term
Employee shall also include Leased Employees as provided in Code Section 414(n)
or (o).
Except as provided in the Non-Standardized Adoption Agreement, all
Employees of all entities which are an Affiliated Employer will be treated as
employed by a single employer.
1.17 "Employer" means the entity specified in the Adoption Agreement, any
Participating Employer (as defined in Section 10.1) which shall adopt this
Plan, any successor which shall maintain this Plan and any predecessor
which has maintained this Plan.
1.18 "Excess Compensation" means, with respect to a Plan that is integrated
with Social Security, a Participant's Compensation which is in excess of
the amount set forth in the Adoption Agreement.
1.19 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions and Qualified Non-Elective Contributions made on
behalf of Highly Compensated Participants for the Plan Year over the
maximum amount of such contributions permitted under Section 11.4(a).
1.20 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate
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amount of such Participant's Deterred Compensation and the elective deferrals
pursuant to Section 11.2(f) actually made on behalf of such Participant for
such taxable year, over the dollar limitation provided for in Code Section
402(g), which is incorporated herein by reference.
1.21 "Family Member" means, with respect to an affected Participant, such
Participant's spouse, and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.22 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.2.3 "Fiscal Year" means the Employer's accounting year as specified in
the Adoption Agreement.
1.24 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Participant's
Account, or
(b) the last day of the Plan Year in which the Participant incurs five
(5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. In addition, the term Forfeiture shall also include
amounts deemed to be Forfeitures pursuant to any other provision of this Plan.
1.25 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.26 "414(s) Compensation" with respect to any Employee means his
Compensation as defined in Section 1.9. However, for purposes of this Section,
Compensation shall be Compensation paid and shall be determined by including,
in the case of a non-standardized Adoption Agreement, any items that are
excluded from Compensation pursuant to the Adoption Agreement. The amount
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<PAGE> 11
of "414(s) Compensation" with respect to any Employee shall include "414(s)
Compensation" during the entire twelve (12) month period ending on the last day
of such Plan Year, except that for Plan Years beginning prior to the later of
January 1, 1992, or the date that is sixty (60) days after the date final
Regulation are issued, "414(s) Compensation" shall only be recognized as of an
Employee's effective date of participation.
In addition, if specified in the Adoption Agreement, "414(s)
Compensation" shall also include compensation which is not currently includible
in the Participant's gross income by reason of" the application of Code Sections
125, 402(a)(8), 402(h)(1)(B), or 403(b), plus Elective Contributions
attributable to Deferred Compensation recharacterized as voluntary Employee
contributions pursuant to 11.5(a).
1.27 "415 Compensation" means compensation as defined in Section 4.4(f)(2).
1.28 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were five percent owners" as defined in Section 1.35(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation during the "look-back
year" from the Employer in excess of $50,000 and were in the Top Paid Group
of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of the
Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50 percent of the limit in
effect under Code Section 415(b){l)(A) for any such Plan Year. The number
of officers shall be limited to the lesser of (i) 50 employees; or (ii) the
greater of 3 employees or 10 percent of a11 employees. If the Employer
does not have at least one officer whose annual "415 Compensation" is in
excess of 50 percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer will be treated as a Highly
Compensated Employee.
(e) employees who are in the group consisting of the 100 Employees
paid the greatest "415 Compensation" during the "determination year" and
are also described in (b), (c)
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<PAGE> 12
(d) above when these paragraphs are modified to substitute
"determination year" for "look-back year".
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period. However, if the Plan Year is a calendar year, or if
another Plan of the Employer so provides, then the "look-back year" shall be
the calendar year ending with or within the Plan Year for which testing is being
performed, and the "determination year" (if applicable) shall be the period of
time, if any, which extends beyond the "look-back year" and ends on the last day
of the Plan Year for which testing is being performed (the "lag period"). With
respect to this election, it shall be applied on a uniform and consistent basis
to all plans, entities, and arrangements of the Employer.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, Code Section 403(b). Additionally, the dollar
threshold amounts specified in (b) and (c) above shall be adjusted at such time
and in such manner as is provided in Regulations. In the case of such an
adjustment, the dollar limits which shall be applied are those for the calendar
year in which the "determination year" or "look back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, all Affiliated Employers shall be taken into account as a single
employer and Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) shall be considered Employees unless such Leased Employees are covered
by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer. The exclusion of Leased Employees for
this purpose shall be applied on a uniform and consistent basis for all of the
Employer's retirement plans. In addition, Highly Compensated Former Employees
shall be treated as Highly Compensated Employees without regard to whether they
performed services during the "determination year".
1.29 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly compensated Former
Employee only if during the separation year (or year receding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the
6
<PAGE> 13
Employee's 55th birthday), the Employee either received "415 Compensation" in
excess of $50,000 or was a "five percent owner". For purposes of this Section,
"determination year, "415 Compensation" and "five percent owner" shall be
determined in accordance with Section 1.28. Highly Compensated Former Employees
shall be treated as Highly Compensated Employees. The method set forth in this
Section for determining who is a "Highly Compensated Former Employee" shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(g) definition is applicable.
1.30 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.31 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. The same Hours of Service shall not be credited both
under (1) or (2), as the case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are
not required to be credited for a payment which solely reimburses an Employee
for medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
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An Hour of Service must be counted for the purpose of determining a
Year of Service, a year of participation for purposes of accrued benefits, a
1-Year Break in Service, and employment commencement date (or reemployment
commencement date). The provisions of Department of Labor regulations
2530.200b-2(b) and (c) are incorporated herein by reference.
Hours of Service will be credited for employment with all Affiliated
Employers and for any individual considered to be a Leased Employee pursuant to
Code Sections 414(n) or 414(o) and the Regulations thereunder.
Hours of Service will be determined on the basis of the method
selected in the Adoption Agreement.
1.32 "Insurer" means any legal reserve insurance company which shall issue
one or more policies under the Plan.
1.33 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.34 "Joint and Survivor Annuity" means an annuity for the life of a
Participant with a survivor annuity for the life of the Participant's spouse
which is not less than 1/2, nor greater than the amount of the annuity payable
during the joint lives of the Participant and the Participant's spouse. The
Joint and Survivor Annuity will be the amount of benefit which can be purchased
with the Participant's Vested interest in the Plan.
1.35 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent interest and the largest interests in
the Employer.
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(c) a "five percent owner" of the Employer. "Five percent owner" means
any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers. However, in determining whether an individual has "415
Compensation" of more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, Code Section 403(b).
1.36 "Late Retirement Date" means the date of, or the first day of the
month or the Anniversary Date coinciding with or next following, whichever
corresponds to the election made for the Normal Retirement Date, a Participant's
actual retirement after having reached his Normal Retirement Date.
1.37 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one
year, and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
leased employee by the leasing organization which are attributable to services
9
<PAGE> 16
performed for the recipient employer shall be treated as provided by the
recipient employer.
A leased employee shall not be considered an Employee of the recipient
if: (i) such employee is covered by a money purchase pension plan providing: (1)
a nonintegrated employer contribution rate of at least 10 percent of
compensation, as defined in Code Section 415(c) (3), but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the employee's gross income under Code Sections 125, 402(a)(8), 402(h), or
403(b), (2) immediate participation, and (3) full and immediate vesting; and
(ii) leased employees do not constitute more than 20 percent of the recipient's
nonhighly compensated workforce.
1.38 "Net Profit" means with respect to any Fiscal Year the Employer's net
income or profit for such Fiscal Year determined upon the basis of the
Employer's books of account in accordance with generally accepted accounting
principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan and any other qualified plan.
1.39 "Non-Elective Contribution" means the Employer's contributions to the
Plan other than those made pursuant to the Participant's deferral election made
pursuant to Section 11.2 and any Qualified Non-Elective Contribution. In
addition, if selected in E3 of the Adoption Agreement, the Employer's Matching
Contribution made pursuant to Section 4.3(b) shall be considered a Non-Elective
Contribution for purposes of the Plan.
1.40 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.41 "Non-Key Employee" means any Employee or former Employee and his
Beneficiaries) who is not a Key Employee.
1.42 "Normal Retirement Age" means the age specified in the Adoption
Agreement at which time a Participant shall become fully Vested in his
Participant's Account.
1.43 "Normal Retirement Date" means the date specified in the Adoption
Agreement on which a Participant shall become eligible to have his benefits
distributed to him.
1.44 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence."
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"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a
child with the Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall be
credited for the computation period in which the absence from work begins, only
if credit therefore is necessary to prevent the Employee from incurring a 1-Year
Break in Service, or, in any other case, in the immediately following
computation period. The Hours of Service credited for a "maternity or paternity
leave of absence" shall be those which would normally have been credited but for
such absence, or, in any case in which the Administrator is unable to determine
such hours normally credited, eight (8) Hours of Service per day. The total
Hours of Service required to be credited for a "maternity or paternity leave of
absence" shall not exceed 501.
1.45 "Owner-Employee" means a sole proprietor who owns the entire interest
in the Employer or a partner who owns more than 10% of either the capital
interest or the profits interest in the Employer and who receives income for
personal services from the Employer.
1.46 "Participant" means any Eligible Employee who participates in the Plan
as provided in Section 3.2 and has not for any reason become ineligible to
participate further in the Plan.
1.47 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest
under the Plan resulting from (a) the Employer's contributions in the case of a
Profit Sharing Plan or Money Purchase Plan, and (b) the Employer's Non-Elective
Contributions in the case of a 401(k) Profit Sharing Plan.
1.48 "Participant's Combined Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest under the Plan resulting from the Employer's contributions.
1.49 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions and Qualified Non-Elective Contributions. A separate accounting
shall be maintained with respect to that portion of the Participant's Elective
Account attributable to Elective Contributions made
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pursuant to Section 11.2, Employer matching contributions if they are deemed to
be Elective Contributions, and any Qualified Non-Elective Contributions.
1.50 "Participant's Rollover Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from amounts transferred from another qualified
plan or "conduit" Individual Retirement Account in accordance with Section 4.6.
1.51 "Plan" means this instrument (hereinafter referred to as Kibble &
Prentice, Inc. Regional Prototype Defined Contribution Plan and Trust Basic Plan
Document #01) including all amendments thereto, and the Adoption Agreement as
adopted by the Employer.
1.52 "Plan Year" means the Plan's accounting year specified in C2 of the
Adoption Agreement.
1.53 "Pre-Retirement Survivor Annuity" means an immediate annuity for the
life of the Participant's spouse, the payments under which must be equal to the
actuarial equivalent of 50% of the Participant's Vested interest in the Plan as
of the date of death.
1.54 "Qualified Non-Elective Account" means the account established
hereunder to which Qualified Non-Elective Contributions are allocated.
1.55 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to E5 of the Adoption Agreement
and Section 11.1(d) which are used to satisfy the "Actual Deferral Percentage"
tests. Qualified Non-Elective Contributions are nonforfeitable when made and are
distributable only as specified in Sections 11.2(c) and 11.8. In addition, the
Employer's contributions to the Plan that are made pursuant to Section 11.7(h)
and which are used to satisfy the "Actual Contribution Percentage" tests shall
be considered Qualified Non-Elective Contributions.
1.56 "Qualified Voluntary Employee Contribution Account" means the account
established and maintained by the Administrator for each Participant with
respect to his total interest under the Plan resulting from the Participant's
tax deductible qualified voluntary employee contributions made pursuant to
Section 4.9.
1.57 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.58 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
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1.59 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.60 "Self-Employed Individual" means an individual who has earned income
for the taxable year from the trade or business for which the Plan is
established, and, also, an individual who would have had earned income but for
the fact that the trade or business had no net profits for the taxable year. A
Self-Employed Individual shall be treated as an Employee.
1.61 "Shareholder-Employee" means a Participant who owns more than five
percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as a Small Business Corporation under the
applicable Code Section.
1.62 "Short Plan Year" means, if specified in the Adoption Agreement, that
the Plan Year shall be less than a 12 month period. If chosen, the following
rules shall apply in the administration of this Plan. In determining whether an
Employee has completed a Year of Service for benefit accrual purposes in the
Short Plan Year, the number of the Hours of Service required shall be
proportionately reduced based on the number of days in the Short Plan Year. The
determination of whether an Employee has completed a Year of Service for vesting
and eligibility purposes shall be made in accordance with Department of Labor
Regulation 2530.203-2(c). In addition, if this Plan is integrated with Social
Security, the integration level shall also be proportionately reduced based on
the number of days in the Short Plan Year.
1.63 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.64 "Taxable Wage Base" means, with respect to any year, the maximum
amount of earnings which may be considered wages for such year under Code
Section 3121(a)(1).
1.65 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.66 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.67 "Top Heavy Plan Year" means a Plan Year commencing after December 31,
1983 during which the Plan is a Top Heavy Plan.
1.68 "Top Paid Group" shall be determined pursuant to Code Section 414(q)
and the Regulations thereunder and generally means
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the top 20 percent of Employees who performed services for the Employer during
the applicable year, ranked according to the amount of "415 Compensation" (as
determined pursuant to Section 1.28) received from the Employer during such
year. All Affiliated Employers shall be taken into account as a single employer,
and Leased Employees shall be treated as Employees pursuant to Code Section
414(n) or (o) Employees who are non-resident aliens who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded, however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.69 "Total and permanent Disability" means the inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The
disability of a Participant shall be determined by a licensed physician chosen
by the Administrator. However, if the condition constitutes total disability
under the federal Social Security Acts, the Administrator may rely upon such
determination that the Participant is Totally and Permanently Disabled for the
purposes of this Plan. The determination shall be applied uniformly to all
Participants.
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1.70 "Trustee" means the person or entity named in B6 of the Adoption
Agreement and any successors.
1.71 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.72 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.73 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's nondeductible voluntary
contributions made pursuant to Section 4.7.
1.74 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, and during which an Employee has completed
at least 1000 Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service (employment commencement date). The computation period beginning after a
1-Year Break in Service shall be measured from the date on which an Employee
again performs an Hour of Service. The succeeding computation periods shall
begin with the first anniversary of the Employee's employment commencement date.
However, if one (1) Year of Service or less is required as a condition of
eligibility, then after the initial eligibility computation period, the
eligibility computation period shall shift to the current Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service. An Employee who is credited with 1,000 Hours of Service in both
the initial eligibility computation period and the first Plan Year which
commences prior to the first anniversary of the Employee's initial eligibility
computation period will be credited with two Years of Service for purposes of
eligibility to participate.
For vesting purposes, and all other purposes not specifically
addressed in this Section, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan unless specifically
excluded pursuant to the Adoption Agreement.
Years of Service and breaks in service will be measured on the same
computation period.
Years of Service with any predecessor Employer which maintained this
Plan shall be recognized. Years of Service with any other predecessor Employer
shall be recognized as specified in the Adoption Agreement.
Years of Service with any Affiliated Employer shall be recognized.
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ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.3(i) of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the sum of the
Aggregate Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit and/or Aggregate Account balance shall not
be taken into account for purposes of determining whether this Plan is a
Top Heavy or Super Top Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top Heavy Group). In addition, if a Participant or
Former Participant has not performed any services for any Employer
maintaining the Plan at any time during the five year period ending on the
Determination Date, any accrued benefit for such Participant or Former
Participant shall not be taken into account for the purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
beginning after December 31, 1983, in which, as of the Determination Date,
(1) the Present Value of Accrued Benefits of Key Employees and (2) the sum
of the Aggregate Accounts of Key Employees under this Plan and all plans of
an Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most recent
valuation occurring within a
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twelve (12) month period ending on the Determination Date;
(2) for a Profit Sharing Plan, an adjustment for any contributions due
as of the Determination Date. Such adjustment shall be the amount of
any contributions actually made after the valuation date but before
the Determination Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any contributions made
after the Determination Date that are allocated as of a date in that
first Plan Year;
(3) for a money Purchase Plan, contributions that would be allocated
as of a date not later than the Determination Date, even though those
amounts are not yet made or required to be made.
(4) any Plan distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding Plan Years.
However, in the case of distributions made after the valuation date
and prior to the Determination Date, such distributions are not
included as distributions for top heavy purposes to the extent that
such distributions are already included in the Participant's Aggregate
Account balance as of the valuation date. In the case of a
distribution of an annuity Contract, the amount of such distribution
is deemed to be the current actuarial value of the Contract,
determined on the date of the distribution. Notwithstanding anything
herein to the contrary, all distributions, including distributions
made prior to January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have been required to
be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purpose of this
paragraph.
(5) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified voluntary
employee contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.
(6) with respect to unrelated rollovers and plan-to-plan transfers
(ones which are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides the rollovers or plan-to-plan transfers, it
shall always consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If this Plan is the
plan
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accepting such rollovers or plan-to-plan transfers, it shall not
consider such rollovers or plan-to-plan transfers accepted after
December 31, 1983 as part of the Participant's Aggregate Account
balance. However, rollovers or plan-to-plan transfers accepted prior
to January 1, 1984 shall be considered as part of the Participant's
Aggregate Account balance.
(7) with respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by
the same employer), if this Plan provides the rollover or plan-to-plan
transfer, it shall not be counted as a distribution for purposes of
this Section. If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account balance,
irrespective of the date on which such rollover or plan-to-plan
transfer is accepted.
(8) For the purposes of determining whether two employers are to be
treated as the same employer in 2.2(c)(6) and 2.2(c)(7) above, all
employers aggregated under Code Section 414(b), (c), (m) and (o) are
treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required Aggregation
Group hereunder, each qualified plan of the Employer, including any
Simplified Employee Pension Plan, in which a Key Employee is a
participant in the Plan Year containing the Determination Date or any
of the four preceding Plan Years, and each other qualified plan of the
Employer which enables any qualified plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410, will be required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation Group
is a Top Heavy Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan if the Required Aggregation Group is
not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include any
other plan of the Employer, including any Simplified Employee Pension
Plan, not required to be included in the Required Aggregation Group,
provided the resulting group, taken as a whole, would continue
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to satisfy the provisions of Code Sections 401 (a)(4) and 410. Such
group shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is
part of the Required Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top Heavy Group. No plan
in the Permissive Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination Dates
fall within the same calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years ending on
the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan
Year.
(f) Present Value of Accrued Benefit: In the case of a defined benefit
plan, the Present Value of Accrued Benefit for a Participant other than a
Key Employee shall be as determined using the single accrual method used
for all plans of the Employer and Affiliated Employers, or if no such
single method exists, using a method which results in benefits accruing not
more rapidly than the slowest accrual rate permitted under Code Section
411(b)(1)(C). The determination of the Present Value of Accrued Benefit
shall be determined as of the most recent valuation date that falls within
or ends with the 12-month period ending on the Determination Date, except
as provided in Code Section 416 and the Regulations thereunder for the
first and second plan years of a defined benefit plan.
However, any such determination must include present value of accrued
benefit attributable to any Plan distributions referred to in Section 2.2
(c)(4) above, any Employee contributions referred to in Section 2.2(c)(5)
above or any related or unrelated rollovers referred to in Sections
2.2(c)(6) and 2.2(c)(7) above.
(g) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
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(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group, exceeds sixty percent
(60%) of a similar sum determined for all Participants.
(h) The Administrator shall determine whether this Plan is a Top
Heavy Plan on the Anniversary Date specified in the Adoption Agreement.
Such determination of the top heavy ratio shall be in accordance with
Code Section 416 and the Regulations thereunder.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method",
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or its
delegate shall communicate such needs and goals to the Trustee, who
shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not, however,
constitute a directive to the Trustee as to investment of the Trust
Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Act.
(c) The Employer may, in its discretion, appoint an Investment
Manager to manage all or a designated portion of the assets of the Plan.
In such event, the Trustee shall follow the directive of the Investment
Manager in investing the assets of the Plan managed by the Investment
Manager.
(d) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
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2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify
his acceptance by filing written acceptance with the Employer. An
Administrator may resign by delivering his written resignation to the Employer
or be removed by the Employer by delivery of written notice of removal, to
take effect at a date specified therein, or upon delivery to the Administrator
if no date is specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this
position. If the Employer does not appoint an Administrator, the Employer will
function as the Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such
delegation is made by the Employer, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept
and rely upon any documents executed by the appropriate Administrator until
such time as the Employer or the Administrators file with the Trustee a
written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer
the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the
power and discretion to construe the terms of the Plan and determine all
questions arising in connection with the administration, interpretation, and
application of the Plan. Any such determination by the Administrator shall be
conclusive and binding upon all persons. The Administrator may establish
procedures, correct any defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary
or advisable to carry out the purpose of the Plan; provided, however, that any
procedure, discretionary act, interpretation or construction shall be done in
a nondiscriminatory manner based upon uniform principles consistently applied
and shall be consistent with the intent that the Plan shall continue to be
deemed a qualified plan under the terms of Code Section 401(a), and shall
comply with the terms of the Act and all regulations issued pursuant thereto.
The Administrator shall have all powers
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necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder
and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust Fund;
(d) to maintain all necessary records for the administration of
the Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any Contract to be purchased
from any Insurer, and to designate the Insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Trust Fund;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the Trustee
can exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect Joint
and Survivor Annuities and Pre-Retirement Survivor Annuities if required
by the code and Regulations thereunder;
(j) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
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2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by
law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons
as the Administrator or the Trustee deems necessary or desirable in connection
with the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the
Employer shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan.
The Administrator may rely upon such information as is supplied by the
Employer and shall have no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, including, but not limited to, fees
of accountants, counsel, and other specialists and their agents, and other
costs of administering the Plan. Until paid, the expenses shall constitute a
liability of the Trust Fund. However, the Employer may reimburse the Trust
Fund for any administration expense incurred. Any administration expense paid
to the Trust Fund as a reimbursement shall not be considered an Employer
contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
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2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the Claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has
been denied a benefit by a decision of the Administrator pursuant to Section
2.12 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator a written request
for a hearing. Such request, together with a written statement of the reasons
why the claimant believes his claim should be allowed, shall be filed with the
Administrator no later than 60 days after receipt of the written notification
provided for in Section 2.12. The Administrator shall then conduct a hearing
within the next 60 days, at which the claimant may be represented by an attorney
or any other representative of his choosing and expense and at which the
claimant shall have an opportunity to submit written and oral evidence and
arguments in support of his claim. At the hearing (or prior thereto upon 5
business days written notice to the Administrator) the claimant or his
representative shall have an opportunity to review all documents in the
possession of the Administrator which are pertinent to the Claim at issue and
its disallowance. Either the Claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder
on the date he has satisfied the requirements specified in the Adoption
Agreement.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee who has become eligible to be a Participant
shall become a Participant effective as of the day specified in the Adoption
Agreement.
In the event an Employee who has satisfied the Plan's
eligibility requirements and would otherwise have become a Participant shall
go from a classification of a noneligible Employee to an Eligible Employee,
such Employee shall become a Participant as of the date he becomes an Eligible
Employee.
In the event an Employee who has satisfied the Plans eligibility
requirements and would otherwise become a Participant shall go from a
classification of an Eligible Employee to a noneligible Employee and becomes
ineligible to participate and has not incurred a 1-Year Break in Service, such
Employee shall participate in the Plan as of the date he returns to an
eligible class of Employees. If such Employee does incur a 1-Year Break in
Service, eligibility will be determined under the Break in Service rules of
the Plan.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such
determination shall be subject to review per Section 2.13.
3.4 TERMINATION OF ELIGIBILITY
In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in his interest in the Plan for each Year of Service
completed while a noneligible Employee, until such time as his Participant's
Account shall be forfeited or distributed pursuant to the terms of the Plan.
Additionally, his interest in the Plan shall continue to share in the earnings
of the Trust Fund.
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3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by his Employer for the year has been
made, the Employer shall make a subsequent contribution, if necessary after
the application of Section 4.3(e), so that the omitted Employee receives a
total amount which the said Employee would have received had he not been
omitted. Such contribution shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under applicable provisions
of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the year
has been made, the Employer shall not be entitled to recover the contribution
made with respect to the ineligible person regardless of whether or not a
deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible person shall constitute a
Forfeiture for the Plan Year in which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate
must be communicated to the Employer, in writing, at least thirty (30) days
before the beginning of a Plan Year. For Standardized Plans, a Participant or
an Eligible Employee may not elect not to participate. Furthermore, the
foregoing election not to participate shall not be available with respect to
partners in a partnership.
3.8 CONTROL OF ENTITIES BY OWNER-EMPLOYEE
(a) If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which this Plan
is established and one or more other entities, this Plan and the plan
established for other trades or businesses must, when looked at as a
single Plan, satisfy Code Sections 401(a) and (d) for the Employees of
this and all other entities.
(b) If the Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be
included in a plan which satisfies Code Sections 401(a) and (d) and
which provides contributions and benefits not less favorable than
provided for Owner-Employees under this Plan.
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(c) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not controlled and
the individual controls a trade or business, then the benefits or
contributions of the employees under the plan of the trades or
businesses which are controlled must be as favorable as those provided
for him under the most favorable plan of the trade or business which is
not controlled.
(d) For purposes of the preceding paragraphs, an Owner-Employee,
or two or more Owner-Employees, will be considered to control an entity
if the Owner-Employee, or two or more Owner-Employees together:
(1) own the entire interest in an unincorporated entity, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
(e) For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-Employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
(a) For a Money Purchase Plan -
(1) The Employer shall make contributions over such period of
years as the Employer may determine on the following basis. On
behalf of each Participant eligible to share in allocations, for
each year of his participation in this Plan, the Employer shall
contribute the amount specified in the Adoption Agreement. All
contributions by the Employer shall be made in cash or in such
property as is acceptable to the Trustee. The Employer shall be
required to obtain a waiver from the Internal Revenue Service for
any Plan Year in which it is unable to make the full required
contribution to the Plan. In the event a waiver is obtained, this
Plan shall be deemed to be an individually designed plan.
(2) For any Plan Year beginning prior to January 1, 1990, and if
elected in the non-standardized
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<PAGE> 34
Adoption Agreement for any Plan Year beginning on or after
January 1, 1990, the Employer shall not contribute on behalf of a
Participant who performs less than a Year of Service during any
Plan Year, unless there is a Short Plan Year or a contribution is
required pursuant to 4.3(h).
(3) Notwithstanding the foregoing, the Employer's contribution
for any Fiscal Year shall not exceed the maximum amount allowable
as a deduction to the Employer under the provisions of Code
Section 404. However, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution
even if it exceeds the amount which is deductible under Code
Section 404.
(b) For a Profit Sharing Plan -
(1) For each Plan Year, the Employer shall contribute to the Plan
such amount as specified by the Employer in the Adoption
Agreement. Notwithstanding the foregoing, however, the employer's
contribution for any Fiscal Year shall not exceed the maximum
amount allowable as a deduction to the Employer under the
provisions of Code Section 404. A11 contributions by the Employer
shall be made in cash or in such property as is acceptable to the
Trustee.
(2) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution
even if it exceeds current or accumulated Net Profit or the
amount which is deductible under Code Section 404.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution
to the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer's federal income tax return
for the Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit as
of each Anniversary Date, or other valuation date, all amounts allocated
to each such Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date
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<PAGE> 35
of receipt by the Administrator of such information, the Administrator shall
allocate such contribution as follows:
(1) For a Money Purchase Plan:
(i) The Employer's Contribution shall be allocated to each
Participant's Combined Account in the manner set forth in Section
4.1 herein and as specified in Section E2 of the Adoption
Agreement.
(2) For an Integrated Profit Sharing Plan:
(i) The Employer's contribution shall be allocated to each
Participant's Account, except as provided in Section 4.3(f), in a
dollar amount equal to 5.7% of the sum of each Participant's total
Compensation plus Excess Compensation. If the Employer does not
contribute such amount for all Participants, each Participant will
be allocated a share of the contribution in the same proportion
that his total Compensation plus his total Excess Compensation for
the Plan Year bears to the total Compensation plus the total Excess
Compensation of all Participants for that year.
Regardless of the preceding, 4.3% shall be substituted for 5.7% above if
Excess Compensation is based on more than 20% and less than or equal to
80% of the Taxable Wage Base. If Excess Compensation is based on less
than 100% and more than 80% of the Taxable Wage Base, then 5.4% shall be
substituted for 5.7% above.
(ii) The balance of the Employer's contribution over the amount
allocated above, if any, shall be allocated to each Participant's
Combined Account in the same proportion that his total Compensation
for the Year bears to the total Compensation of all Participants
for such year.
(iii) Except, however, for any Plan Year beginning prior to January
1, 1990, and if elected in the non-standardized Adoption Agreement
for any Plan Year beginning on or after January 1, 1990, a
Participant who performs less than a Year of Service during any
Plan Year shall not share in the Employer's contribution for that
year, unless there is a Short Plan Year or a contribution is
required pursuant to Section 4.3(h).
(3) For a Non-Integrated Profit Sharing Plan:
(i) The Employer's contribution shall be allocated to each
Participant's Account in the
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<PAGE> 36
same proportion that each such Participant's Compensation for the
year bears to the total Compensation of all Participants for such
year.
(ii) Except, however, for any Plan Year beginning prior to January
1, 1990, and if elected in the non-standardized Adoption Agreement
for any Plan Year beginning on or after January 1, 1990, a
Participant who performs less than a Year of Service during any
Plan Year shall not share in the Employer's contribution for that
year, unless there is a Short Plan Year or a contribution is
required pursuant to Section 4.3(h).
(c) As of each Anniversary Date or other valuation date, before
allocation of Employer contributions and Forfeitures, any earnings or losses
(net appreciation or net depreciation) of the Trust Fund shall be allocated in
the same proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date. If any nonsegregated
account of a Participant has been distributed prior to the Anniversary Date or
other valuation date subsequent to a Participant's termination of employment,
no earnings or losses shall be credited to such account.
Notwithstanding the above, with respect to contributions made to
the Plan after the previous Anniversary Date or allocation date, the method
specified in the Adoption Agreement shall be used.
(d) Participants' Accounts shall be debited for any insurance or
annuity premiums paid, if any, and credited with any dividends or interest
received on insurance contracts.
(e) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 6.4(g)(2) or be used to satisfy any contribution that
may be required pursuant to Section 3.5 and/or 6.9. The remaining Forfeitures,
if any, shall be treated in accordance with the Adoption Agreement. Provided,
however, that in the event the allocation of Forfeitures provided herein shall
cause the "annual addition" (as defined in Section 4.4) to any Participant's
Account to exceed the amount allowable by the Code, the excess shall be
reallocated in accordance with Section 4.5. Except, however, for any Plan Year
beginning prior to January 1, 1990, and if elected in the non-standardized
Adoption Agreement for any Plan Year beginning on or after January 1, 1990, a
Participant who performs less than a Year of service during
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<PAGE> 37
any Plan Year shall not share in the Plan Forfeitures for that year, unless
there is a Short Plan Year or a contribution required pursuant to Section
4.3(h).
(f) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer's contributions and Forfeitures allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to at least three percent (3%)
of such Non-Key Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any defined
contribution plan included with this plan in a Required Aggregation Group).
However, if (i) the sum of the Employer's contributions and Forfeitures
allocated to the Participant's combined Account of each Key Employee for such
Top Heavy Plan Year is less than three percent (3%) of each Key Employee's "415
Compensation" and (ii) this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the requirements of
Code Section 401(a)(4) or 410, the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Combined Account of each Non-Key
Employee shall be equal to the largest percentage allocated to the Participant's
Combined Account of any Key Employee.
However, for each Non-Key Employee who is a Participant in a
paired Profit Sharing Plan or 401(k) Profit Sharing Plan and a paired Money
Purchase Plan, the minimum 3% allocation specified above shall be provided in
the Money Purchase Plan.
If this is an integrated Plan, then for any Top Heavy Plan Year
the Employer's contribution shall be allocated as follows:
(1) An amount equal to 3% multiplied by each Participant's Compensation
for the Plan Year shall be allocated to each Participant's Account. If
the Employer does not contribute such amount for all Participants, the
amount shall be allocated to each Participant's Account in the same
proportion that his total Compensation for the Plan Year bears to the
total Compensation of all Participants for such year.
(2) The balance of the Employer's contribution over the amount allocated
under subparagraph (1) hereof shall be allocated to each Participant's
Account in a dollar amount equal to 3% multiplied by a Participant's
Excess Compensation. If the Employer does not contribute such amount for
all Participants, each Participant will be allocated a share of the
contribution in the same proportion that his Excess
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Compensation bears to the total Excess Compensation of all Participants
for that year.
(3) The balance of the Employer's contribution over the amount allocated
under subparagraph (2) hereof shall be allocated to each Participant's
Account in a dollar amount equal to 2.7% multiplied by the sum of each
Participant's total Compensation plus Excess Compensation. If the
Employer does not contribute such amount for all Participants, each
Participant will be allocated a share of the contribution in the same
proportion that his total Compensation plus his total Excess
Compensation for the Plan Year bears to the total Compensation plus the
total Excess Compensation of all Participants for that year.
Regardless of the preceding, 1.3% shall be substituted for 2.7% above if
Excess Compensation is based on more than 20% and less than or equal to
80% of the Taxable Wage Base. If Excess Compensation is based on less
than 100% and more than 80% of the Taxable Wage Base, then 2.4% shall be
substituted for 2.7% above.
(4) The balance of the Employer's contributions over the amount
allocated above, if any, shall be allocated to each Participant's
Account in the same proportion that his total Compensation for the Plan
Year bears to the total Compensation of all Participants for such year.
For each Non-Key Employee who is a Participant in this Plan and
another non-paired defined contribution plan maintained by the Employer, the
minimum 3% allocation specified above shall be provided as specified in F3 of
the Adoption Agreement.
(g) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key Employee
shall be equal to the ratio of the sum of the Employer's contributions and
Forfeitures allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(h) For any Top Heavy Plan Year, the minimum allocations set forth
in this Section shall be allocated to the Participant's Combined Account of all
Non-Key Employees who are Participants and who are employed by the Employer on
the last day of the Plan Year, including Non-Key Employees who have (1) failed
to complete a Year of Service; or (2) declined to make mandatory contributions
(if required) or, in the case of a cash or deferred arrangement, elective
contributions to the Plan.
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(i) Notwithstanding anything herein to the contrary, in any Plan
Year in which the Employer maintains both this Plan and a defined benefit
pension plan included in a Required Aggregation Group which is top heavy, the
Employer shall not be required to provide a Non-Key Employee with both the full
separate minimum defined benefit plan benefit and the full separate defined
contribution plan allocations. Therefore, if the Employer maintains both a
Defined Benefit and a Defined Contribution Plan that area Top Heavy Group, the
top heavy minimum benefits shall be provided as follows:
(1) Applies if F1b of the Adoption Agreement is Selected -
(i) The requirements of Section 2.1 shall apply except that each
Non-Key Employee who is a Participant in the Profit Sharing Plan
or Money Purchase Plan and who is also a Participant in the
Defined Benefit Plan shall receive a minimum allocation of five
percent (5%) of such Participant's "415 Compensation" from the
applicable Defined Contribution Plan(s).
(ii) For each Non-Key Employee who is a Participant only in the
Defined Benefit Plan the Employer will provide a minimum
non-integrated benefit equal to 2% of his highest five
consecutive year average "415 Compensation" for each Year of
Service while a Participant in the Plan, in which the Plan is top
heavy, not to exceed ten.
(iii) For each Non-Key Employee who is a Participant only in this
Defined Contribution Plan, the Employer shall provide a
contribution equal to 3% of his "415 Compensation".
(2) Applies if Flc of the Adoption Agreement is Selected -
(i) The minimum allocation specified in Section 4-3(i)(1)(i)
shall be 7 1/2% if the Employer elects in the Adoption Agreement
for years in which the Plan is Top Heavy, but not Super Top
Heavy.
(ii) The minimum benefit specified in Section 4.3(i)(1)(ii) shall
be 3% if the Employer elects in the Adoption Agreement for years
in which the Plan is Top Heavy, but not Super Top Heavy.
(iii) The minimum allocation specified in Section 4.3(i)(1)(iii)
shall be 4% if the Employer elects
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<PAGE> 40
in the Adoption Agreement for years in which the Plan is Top
Heavy, but not Super Top Heavy.
(j) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000 (unless adjusted, in such manner as permitted under Code
Section 415(d)). However, for Plan Years beginning prior to January 1, 1989, the
$200,000 limit shall apply only for Top Heavy Plan Years and shall not be
adjusted.
(k) Notwithstanding anything herein to the contrary, any Participant
who terminated employment during the Plan Year for reasons other than death,
Total and Permanent Disability, or retirement shall or shall not share in the
allocations of the Employer's Contributions and Forfeitures as provided in the
Adoption Agreement. Notwithstanding the foregoing, for Plan Years beginning
after 1989, if this is a standardized Plan, any such terminated Participant
shall share in the allocations as provided in this Section provided such
Participant completed more than 500 Hours of Service.
(1) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability, or retirement
shall share in the allocations as provided in this Section regardless of whether
they completed a Year of Service during the Plan Year.
(m) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as follows:
(1) one account for nonforfeitable benefits attributable to pre-break
service; and
(2) one account representing his employer derived account balance in
the Plan attributable to post-break service.
(n) Notwithstanding any election in the Adoption Agreement to the
contrary, if this is a non-standardized Plan that would otherwise fail to meet
the requirements of Code Sections 401(a)(26), 410(b)(1), or 410(b)(2)(A)(i) and
the Regulations thereunder because Employer Contributions have not been
allocated to a sufficient number or percentage of Participants for a Plan Year,
then the following rules shall apply:
(1) The group of Participants eligible to share in the Employer's
contribution and Forfeitures for the Plan Year shall be expanded to
include the minimum number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable test specified
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<PAGE> 41
above. The specific participants who shall become eligible under
the terms of this paragraph shall be those who are actively
employed on the last day of the Plan Year and, when compared to
similarly situated Participants, have completed the greatest
number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants
eligible to share in the Employer's contribution and Forfeitures
for the Plan Year shall be further expanded to include the
minimum number of Participants who are not actively employed on
the last day of the Plan Year as are necessary to satisfy the
applicable test. The specific Participants who shall become
eligible to share shall be those Participants, when compared to
similarly situated Participants, who have completed the greatest
number of Hours of Service in the Plan Year before terminating
employment.
Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated to
satisfy these requirements. in such event, the Employer shall make an
additional contribution equal to the amount such affected Participants
would have received had they been included in the allocations, even if
it exceeds the amount which would be deductible under Code Section 404.
Any adjustment to the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the last day of the Plan
Year.
4.4 MAXIMUM ANNUAL ADDITIONS
(a)(1) if the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer, or a
welfare benefit fund (as defined in Code Section 419(e)), maintained by
the Employer, or an individual medical account (as defined in Code
Section 415(l)(2)) maintained by the Employer, which provides Annual
Additions, the amount of Annual Additions which may be credited to the
Participant's accounts for any Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's accounts
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
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<PAGE> 42
(2) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible
amount for a Participant on the basis of a reasonable estimation of the
Participant's Compensation for the Limitation Year, uniformly
determined for all Participants similarly situated.
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant's actual
compensation for such Limitation Year.
(4) If pursuant to Section 4.4 (a)(2) or as a result of the
allocation of Forfeitures, there is an Excess Amount, the excess will be
disposed of as follows:
(i) Any nondeductible voluntary Employee Contributions, to the
extent they would reduce the Excess Amount, will be returned to
the Participant;
(ii) If, after the application of subparagraph (i), an Excess
Amount still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
contributions (including any allocation of Forfeitures) for such
Participant in the next Limitation Year, and each succeeding
Limitation Year if necessary;
(iii) If, after the application of subparagraph (i), an Excess
Amount still exists, and the Participant is not covered by the
Plan at the end of a Limitation Year, the Excess Amount will be
held unallocated in a suspense account. The suspense account will
be applied to reduce future Employer contributions (including
allocation of any Forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding Limitation Year if
necessary;
(iv) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not participate
in the allocation of investment gains and losses. if a suspense
account is in existence at any time during a particular limitation
year, all amounts in the suspense account must be allocated and
reallocated to participants' accounts before any employer
contributions or any employee contributions may be made to the
plan for that limitation year. Excess
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<PAGE> 43
amounts may not be distributed to participants or former
participants.
(b)(1) This subsection applies if, in addition to this Plan, the
Participant is covered under another qualified Regional Prototype defined
contribution plan maintained by the Employer, or a welfare benefit fund (as
defined in Code Section 419(e)) maintained by the Employer, or an individual
medical account (as defined in Code Section 415(l)(2)) maintained by the
Employer, which provides Annual Additions, during any Limitation Year. The
Annual Additions which may be credited to a Participant's accounts under this
Plan for any such Limitation Year shall not exceed the Maximum Permissible
Amount reduced by the Annual Additions credited to a Participant's accounts
under the other plans and welfare benefit funds for the same Limitation Year. If
the Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer are less
than the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's accounts under this
Plan would cause the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and welfare benefit funds for the
Limitation Year will equal the Maximum Permissible Amount. if the Annual
Additions with respect to the Participant under such other defined contribution
plans and welfare benefit funds in the aggregate are equal to or greater than
the Maximum Permissible Amount, no amount will be contributed or allocated to
the Participant's account under this Plan for the Limitation Year.
(2) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in
Section 4.4(a)(2).
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year,
(4) If, pursuant to Section 4.4(b)(2) or as a result of the
allocation of Forfeitures, a Participant's Annual Additions under
this Plan and such other plans would result in an Excess Amount
for a Limitation Year, the Excess Amount will be deemed to consist
of the Annual Additions last allocated, except that Annual
Additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been
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<PAGE> 44
allocated first regardless of the actual allocation date.
(5) It an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan
will be the product of:
(i) the total Excess Amount allocated as of such date,
times
(ii) the ratio of (1) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this Plan to (2) the total Annual Additions allocated to
the Participant for the Limitation Year as of such date
under this and all the other qualified defined contribution
plans.
(6) Any Excess Amount attributed to this Plan will be disposed
in the manner described in Section 4.4(a)(4).
(c) If the Participant is covered under another qualified
defined contribution plan maintained by the Employer which is not a
Regional Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be
limited in accordance with Section 4.4(b), unless the Employer provides
other limitations in the Adoption Agreement.
(d) If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this Plan the
sum of the Participant's Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's account
under this Plan for any Limitation Year will be limited in accordance
with the Limitation on Allocations Section of the Adoption Agreement.
(e) For purposes of applying the limitations of Code Section
415, the transfer of funds from one qualified plan to another is not an
"annual addition". In addition, the following are not Employee
contributions for the purposes of Section 4.4(f)(1)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
from the Plan; (3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section
411(a)(3)(D) (mandatory contributions); and (5) Employee contributions to
a simplified employee pension excludable from gross income under Code
Section 408(k)(6).
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(f) For purposes of this Section, the following terms shall be
defined as follows;
(1) Annual Additions means the sum credited to a Participant's
accounts for any Limitation Year of (1) Employer contributions,
(2) effective with respect to "limitation years" beginning after
December 31, 1986, Employee contributions, (3) forfeitures, (4)
amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer and (5) amounts
derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are
attributed to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit fund (as defined in Code
Section 419(e)) maintained by the Employer. Except, however, the
"415 Compensation" percentage limitation referred to in paragraph
(a)(2) above shall not apply to: (1) any contribution for medical
benefits (within the meaning of Code Section 419A(f)(2)) after
separation from service which is otherwise treated as an "annual
addition" or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(l)(1). Notwithstanding the
foregoing, for "limitation years" beginning prior to January 1,
1987, only that portion of Employee contributions equal to the
lesser of Employee contributions in excess of six percent (6%) of
"415 Compensation" or one-half of Employee contributions shall be
considered an "annual addition".
For this purpose, any Excess Amount applied under Sections
4.4(a)(4) and 4.4(b)(6) in the Limitation Year to reduce Employer
contributions shall be considered Annual Additions for such
Limitation Year.
(2) Compensation means a Participant's earned income, wages,
salaries, fees for professional services and other amounts
received for personal services actually rendered in the course of
employment with the Employer maintaining the Plan (including, but
not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips, and bonuses) and excluding the
following:
(i) Employer contributions to a plan of deterred
compensation which are not includible in the Employee's
gross income for the taxable year in which contributed, or
Employer contributions under a simplified employee pension
plan to the extent such contributions are excludable from
the
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<PAGE> 46
Employee's gross income, or any distributions from a plan
of deferred compensation;
(ii) contributions made by the Employer to a Plan of
deferred compensation to the extent that all or a portion
of such contributions are recharacterized as a voluntary
Employee contribution;
(iii) amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held
by an Employee becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iv) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(v) other amounts which received special tax benefits, or
contributions made by an Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity contract described in Code Section 403(b) (whether
or not the contributions are excludable from the gross
income of the Employee).
For purposes of applying the limitations of this Section 4.4,
Compensation for any Limitation Year is the Compensation actually
paid or includible in gross income during such year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a profit-sharing plan who is permanently and
totally disabled (as defined in Code Section 22(e)(3)) is the
Compensation such Participant would have received for the
Limitation Year if the Participant had been paid at the rate of
Compensation paid immediately before becoming permanently and
totally disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is
not a Highly Compensated Employee and contributions made on behalf
of such Participant are nonforfeitable when made.
(3) Defined Benefit Fraction means a fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits
under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
Limitation Year under Code Sections 415(b) and (d) or 140 percent
of his Highest Average Compensation including any adjustments
under Code Section 415(b).
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<PAGE> 47
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which the
Participant had accrued as of the end of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986.
The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Code Section 415 for all Limitation Years beginning before January
1, 1987.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation
is being made pursuant to the Employer's election in Fl of the
Adoption Agreement. However, for any Plan Year in which this Plan
is a Super Top Heavy Plan, 100 shall be substituted for 125 in any
event.
(4) Defined Contribution Dollar Limitation means $30,000, or,
if greater, one-fourth of the defined benefit dollar limitation
set forth in Code Section 415(b)(1) as in effect for the
Limitation Year.
(5) Defined Contribution Fraction means a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the
current and all prior Limitation Years, (including the Annual
Additions attributable to the Participant's nondeductible
voluntary employee contributions to any defined benefit plans,
whether or not terminated, maintained by the Employer and the
annual additions attributable to all welfare benefit funds, as
defined in Code Section 419(e), and individual medical accounts,
as defined in Code Section 415(l)(2), maintained by the Employer),
and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of Service
with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount
in any Limitation Year is the lesser of 125 percent of the Defined
Contribution Dollar Limitation or 35 percent of the Participant's
Compensation for such year. For Limitation Years beginning prior
to January 1, 1987, the "annual addition" shall not be recomputed
to treat all Employee contributions as an Annual Addition.
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<PAGE> 48
If the Employee was a Participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer
which were in existence on May 5, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the
end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the
plan made after may 5, 1986, but using the Code Section 415
limitation applicable to the first Limitation Year beginning on or
after January 1, 1997.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation
is being made pursuant to the Employer's election in F1 of the
Adoption Agreement. However, for any Plan Year in which this Plan
is a Super Top Heavy Plan, 100 shall be substituted for 125 in any
event.
(6) Employer means the Employer that adopts this Plan and all
Affiliated Employers, except that for purposes of this Section,
Affiliated Employers shall be determined pursuant to the
modification made by Code Section 415(h).
(7) Excess Amount means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(8) Highest Average Compensation means the average Compensation
for the three consecutive Years of Service with the Employer that
produces the highest average. A Year of Service with the Employer
is the 12 consecutive month period defined in Section El of the
Adoption Agreement which is used to determine Compensation under
the Plan.
(9) Limitation Year means the Compensation Year (a 12
consecutive month period) as elected by the Employer in the
Adoption Agreement. All qualified plans maintained by the Employer
must use the same Limitation Year. If the Limitation Year is
amended to a different 12 consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year in
which the amendment is made.
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<PAGE> 49
(10) Maximum Permissible Amount means the maximum Annual
Addition that may be contributed or allocated to a Participant's
account under the plan for any Limitation Year, which shall not
exceed the lesser of:
(i) the Defined Contribution Dollar Limitation, or
(ii) 25 percent of the Participant's Compensation for the
Limitation Year.
The Compensation Limitation referred to in (ii) shall not
apply to any contribution for medical benefits (within the
meaning of Code Sections 401(h) or 419A(f)(2)) which is
otherwise treated as an annual addition under Code Sections
415(l)(1) or 419A(d)(2).
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different 12 consecutive month
period, the maximum Permissible Amount will not exceed the Defined
Contribution Dollar Contribution multiplied by the following
fraction:
number of months in the short Limitation Year
_____________________________________________
12
(11) Projected Annual Benefit means the annual retirement
benefit (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed In a form other than a
straight life annuity or qualified Joint and Survivor Annuity) to
which the Participant would be entitled under the terms of the
plan assuming:
(i) the Participant will continue employment until Normal
Retirement Age (or current age, if later), and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to
determine benefits under the Plan will remain constant for
all future Limitation Years.
(g) Regional Prototype Plan means a plan the form of which has
been the subject of a favorable notification letter from the Internal
Revenue Service.
(h) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the
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Regulations thereunder, the terms of which are specifically incorporated
herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's annual Compensation, or other facts
and circumstances to which Regulation 1.415-6(b)(6) shall be applicable,
the "annual additions" under this Plan would cause the maximum provided
in Section 4.4 to be exceeded, the Administrator shall treat the excess
in accordance with Section 4.4(a)(4).
4.6 TRANSFERS FROM QUALIFIED PLANS
(a) If specified in the Adoption Agreement and with the consent of
the Administrator, amounts may be transferred from other qualified plans,
provided that the trust from which such funds are transferred permits the
transfer to be made and the transfer will not jeopardize the tax exempt
status of the Plan or create adverse tax consequences for the Employer.
The amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account". Such account shall be
fully Vested at all times and shall not be subject to forfeiture for any
reason.
(b) Amounts in a Participant's Rollover Account shall be held by
the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in Paragraphs (c) and (d) of this Section.
(c) Amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-l(g)(4)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1-401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits, the
fair market value of the Participant's Rollover Account shall be used to
provide additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall
be made in a manner which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 411(a)(11) and 417 and the Regulations
thereunder. Furthermore, such amounts shall be considered as part of a
Participant's benefit in determining whether an involuntary cash-out of
benefits without Participant consent may be made.
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<PAGE> 51
(e) The Administrator may direct that employee transfers made after a
valuation date be segregated into a separate account for each Participant
until such time as the allocations pursuant to this Plan have been made, at
which time they may remain segregated or be invested as part of the general
Trust Fund, to be determined by the Administrator.
(f) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts transferred
to this Plan directly from another qualified plan; (ii) lump-sum
distributions received by an Employee from another qualified plan which are
eligible for tax free rollover to a qualified plan and which are
transferred by the Employee to this Plan within sixty (60) days following
his receipt thereof; (iii) amounts transferred to this Plan from a conduit
individual retirement account provided that the conduit individual
retirement account has no assets other than assets which (A) were
previously distributed to the Employee by another qualified plan as a
lump-sum distribution (B) were eligible for tax-free rollover to a
qualified plan and (C) were deposited in such conduit individual retirement
account within sixty (60) days of receipt thereof and other than earnings
on said assets; and (iv) amounts distributed to the Employee from a conduit
individual retirement account meeting the requirements of clause (iii)
above, and transferred by the Employee to this Plan within sixty (60) days
of his receipt thereof from such conduit individual retirement account.
(g) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and may
also require the Employee to provide an opinion of counsel satisfactory to
the Employer that the amounts to be transferred meet the requirements of
this Section.
(h) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having
the effect of such a transfer) shall only be permitted if it will not
result in the elimination or reduction of any "Section 411(d)(6) protected
benefit" as described in Section 8.1.
4.7 VOLUNTARY CONTRIBUTIONS
(a) If this is an amendment to a Plan that had previously allowed
voluntary Employee contributions, then, except as provided in 4.7(b) below,
this Plan will not accept voluntary Employee contributions for Plan Years
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<PAGE> 52
beginning after the Plan Year in which this Plan is adopted by the
Employer.
(b) For 401(k) Plans, if elected in the Adoption Agreement, each
Participant may, at the discretion of the Administrator in a
nondiscriminatory manner, elect to voluntarily contribute a portion of his
compensation earned while a Participant under this Plan. Such contributions
shall be paid to the Trustee within a reasonable period of time but in no
event later than 90 days after the receipt of the contribution.
(c) The balance in each Participant's Voluntary Contribution Account
shall be fully Vested at all times and shall not be subject to Forfeiture
for any reason.
(d) A Participant may elect to withdraw his voluntary contributions
from his Voluntary Contribution Account and the actual earnings thereon in
a manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 411(a)(11) and 417 and the Regulations thereunder. If the
Administrator maintains sub-accounts with respect to voluntary
contributions (and earnings thereon) which were made on or before a
specified date, a Participant shall be permitted to designate which
sub-account shall be the source for his withdrawal. No Forfeitures shall
occur solely as a result of an Employee's withdrawal of Employee
contributions.
In the event such a withdrawal is made, or in the event a
Participant has received a hardship distribution pursuant to Regulation
1.401(k)-1(d)(2)(iii)(B) from any plan maintained by the Employer, then
such Participant shall be barred from making any voluntary contributions
for a period of twelve (12) months after receipt of the withdrawal or
distribution.
(e) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to receive benefits, the fair market
value of the Voluntary Contribution Account shall be used to provide
additional benefits to the Participant or his Beneficiary.
(f) The Administrator may direct that voluntary contributions made
after a valuation date be segregated into a separate account until such
time as the allocations pursuant to this Plan have been made, at which time
they may remain segregated or be invested as part of the general Trust
Fund, to be determined by the Administrator.
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4.8 DIRECTED INVESTMENT ACCOUNT
(a) If elected in the Adoption Agreement, all Participants may direct
the Trustee as to the investment of all or a portion of any one or more of
their individual account balances. Participants may direct the Trustee in
writing to invest their account in specific assets as permitted by the
Administrator provided such investments are in accordance with the
Department of Labor regulations and are permitted by the Plan. That portion
of the account of any Participant so directing will thereupon be considered
a Directed Investment Account.
(b) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and their Directed Investment Account shall
be charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund Earnings, but it shall be
charged or credited as appropriate with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in market value during
each Plan Year attributable to such account.
(c) The Administrator shall establish a procedure, to be applied in a
uniform and nondiscriminatory manner, setting forth the permissible
investment options under this Section, how often changes between
investments may be made, and any other limitations that the Administrator
shall impose on a Participant's right to direct investments.
4.9 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS
(a) If this is an amendment to a Plan that previously permitted
deductible voluntary contributions, then each Participant who made a
"Qualified Voluntary Employee Contribution" within the meaning of Code
Section 219(e)(2) as it existed prior to the enactment of the Tax Reform
Act of 1986, shall have his contribution held in a separate Qualified
Voluntary Employee Contribution Account which shall be fully Vested at all
times. Such contributions, however, shall not be permitted if they are
attributable to taxable years beginning after December 31, 1986.
(b) A Participant may, upon written request delivered to the
Administrator, make withdrawals from his Qualified Voluntary Employee
Contribution Account. Any distribution shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5, including, but
not limited to, all notice and consent requirements of Code Sections
411(a)(11) and 417 and the Regulations thereunder.
(c) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to
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<PAGE> 54
receive benefits, the fair market value of the Qualified Voluntary Employee
Contribution Account shall be used to provide additional benefits to the
Participant or his Beneficiary.
(d) Unless the Administrator directs Qualified Voluntary Employee
Contributions made pursuant to this Section be segregated into a separate
account for each Participant, they shall be invested as part of the general
Trust Fund and share in earnings and losses.
4.10 ACTUAL CONTRIBUTION PERCENTAGE TESTS
In the event this Plan previously provided for voluntary or mandatory
Employee contributions, then, with respect to Plan Years beginning after
December 31, 1986, such contributions must satisfy the provisions of Code
Section 401(m) and the Regulations thereunder.
4.11 INTEGRATION IN MORE THAN ONE PLAN
If the Employer and/or an Affiliated Employer maintain qualified retirement
plans integrated with Social Security such that any Participant in this Plan is
covered under more than one of such plans, then such plans will be considered to
be one plan and will be considered to be integrated if the extent of the
integration of all such plans does not exceed 100%. For purposes of the
preceding sentence, the extent of integration of a plan is the ratio, expressed
as a percentage, which the actual benefits, benefit rate, offset rate, or
employer contribution rate, whatever is applicable, under the Plan bears to the
limitation applicable to such Plan. If the Employer maintains two or more
standardized paired plans, only one plan may be integrated with Social Security.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date", to determine the net worth of the assets comprising the
Trust Fund as it exists on the valuation date". In determining such net worth,
the Trustee shall value the assets comprising the Trust Fund at their fair
market value as of the "valuation dates and shall deduct all expenses for which
the Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.
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5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund
which are listed on a registered stock exchange, the Administrator shall direct
the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date". If such
securities were not traded on the "valuation date", or if the exchange on which
they are traded was not open for business on the "valuation date", then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date". Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date", which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire
for the purposes hereof an or after his Normal Retirement Date or Early
Retirement Date. Upon such Normal Retirement Date or Early Retirement Date, all
amounts credited to such Participant's Combined Account shall become
distributable. However, a Participant may postpone the termination of his
employment with the Employer to a later date, in which event the participation
of such Participant in the Plan, including the right to receive allocations
pursuant to Section 4.3, shall continue until his Late Retirement Date. Upon a
Participant's Retirement Date, or as soon thereafter as is practicable, the
Administrator shall direct the distribution of all amounts credited to such
Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The Administrator
shall direct, in accordance with the provisions of Sections 6.6 and 6.7,
the distribution of the deceased Participant's accounts to the
Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct, in accordance with the provisions of Sections 6.6 and 6.7, the
distribution of any
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<PAGE> 56
remaining amounts credited to the accounts of such deceased Former
Participant to such Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) Unless otherwise elected in the manner prescribed in Section 6.6,
the Beneficiary of the Pre-Retirement Survivor Annuity shall be the
Participant's spouse. Except, however, the Participant may designate a
Beneficiary other than his spouse for the Pre-Retirement Survivor Annuity
if:
(1) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in Section
6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic relations
order" as defined in Code Section 414(p) which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on
a form satisfactory to the Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any
change in Beneficiary unless the original consent acknowledged that the
spouse had the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elected to relinquish such right. The
Participant may, at any time, designate a Beneficiary for death benefits
payable under the Plan that are in excess of the Pre-Retirement Survivor
Annuity. In the event no valid designation of Beneficiary exists at the
time of the Participant's death, the death benefit shall be payable to his
estate.
(e) If the Plan provides an insured death benefit and a Participant
dies before any insurance coverage to which he is entitled under the Plan
is effected, his death benefit from such insurance coverage shall be
limited to the
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<PAGE> 57
standard rated premium which was or should have been used for such purpose.
(f) In the event of any conflict between the terms of this Plan and
the terms of any Contract issued hereunder, the Plan provisions shall
control.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to his
Retirement Date or other termination of his employment, all amounts credited to
such Participant's Combined Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Administrator, in accordance
with the provisions of Sections 6.5 and 6.7, shall direct the distribution to
such Participant of all amounts credited to such Participant's Combined Account
as though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date, or other valuation date,
coinciding with or subsequent to the termination of a Participant's
employment for any reason other than retirement, death, or Total and
Permanent Disability, the Administrator may direct that the amount of the
Vested portion of such Terminated Participant's Combined Account be
segregated and invested separately. In the event the Vested portion of a
Participant's Combined Account is not segregated, the amount shall remain
in a separate account for the Terminated Participant and share in
allocations pursuant to Section 4.3 until such time as a distribution is
made to the Terminated Participant. The amount of the portion of the
Participant's Combined Account which is not Vested may be credited to a
separate account (which will always share in gains and losses of the Trust
Fund) and at such time as the amount becomes a Forfeiture shall be treated
in accordance with the provisions of the Plan regarding Forfeitures.
Regardless of whether distributions in kind are permitted, in the
event that the amount of the Vested portion of the Terminated Participant's
Combined Account equals or exceeds the fair market value of any insurance
Contracts, the Trustee, when so directed by the Administrator and agreed to
by the Terminated Participant, shall assign, transfer, and set over to such
Terminated Participant all Contracts on his life in such form or with such
endorsements, so that the settlement options and forms of payment are
consistent with the provisions of Section 6.5. In the event that the
Terminated Participant's Vested portion does not at least equal the fair
market value of the Contracts, if any, the Terminated Participant may pay
over to the Trustee the sum needed to make the distribution equal
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to the value of the Contracts being assigned or transferred, or the
Trustee, pursuant to the Participant's election, may borrow the cash value
of the Contracts from the Insurer so that the value of the Contracts is
equal to the Vested portion of the Terminated Participant's Combined
Account and then assign the Contracts to the Terminated Participant.
Distribution of the funds due to a Terminated Participant shall be
made on the occurrence of an event which would result in the distribution
had the Terminated Participant remained in the employ of the Employer (upon
the Participant's death, Total and Permanent Disability, Early or Normal
Retirement). However, at the election of the Participant, the Administrator
shall direct that the entire Vested portion of the Terminated Participant's
Combined Account to be payable to such Terminated Participant provided the
conditions, if any, set forth in the Adoption Agreement have been
satisfied. Any distribution under this paragraph shall be made in a manner
which is consistent with and satisfies the provisions of Section 6.5,
including but not limited to, all notice and consent requirements of Code
Sections 411(a)(11) and 417 and the Regulations thereunder.
Notwithstanding the above, if the value of a Terminated Participant's
Vested benefit derived from Employer and Employee contributions does not
exceed, and at the time of any prior distribution, has never exceeded
$3,500, the Administrator shall direct that the entire Vested benefit be
paid to such Participant in a single lump-sum without regard to the consent
of the Participant or the Participant's spouse. A Participant's Vested
benefit shall not include Qualified Voluntary Employee Contributions within
the meaning of Code Section 72(o)(5)(B) for Plan Years beginning prior to
January 1, 1989.
(b) The Vested portion of any Participant's Account shall be a
percentage of such Participant's Account determined on the basis of the
Participant's number of Years of Service according to the vesting schedule
specified in the Adoption Agreement.
(c) For any Top Heavy Plan Year, one of the minimum top heavy vesting
schedules as elected by the Employer in the Adoption Agreement will
automatically apply to the Plan. The minimum top heavy vesting schedule
applies to all benefits within the meaning of Code Section 411(a)(7) except
those attributable to Employee contributions, including benefits accrued
before the effective date of Code Section 416 and benefits accrued before
the Plan became top heavy. Further, no decrease in a Participant's Vested
percentage may occur in the event the Plan's status as top heavy changes
for any Plan Year. However, this Section does not apply to the account
balances of any Employee who does not have an Hour of Service after the
Plan has initially become
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top heavy and the Vested percentage of such Employee's Participant's
Account shall be determined without regard to this Section 6.4(c).
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy
Plan, the Administrator shall continue to use the vesting schedule in
effect while the Plan was a Top Heavy Plan for each Employee who had an
Hour of Service during a Plan Year when the Plan was Top Heavy.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any full
or partial termination of the Plan, all amounts credited to the account of
any affected Participant shall become 100% Vested and shall not thereafter
be subject to Forfeiture.
(e) If this is an amended or restated Plan, then notwithstanding the
vesting schedule specified in the Adoption Agreement, the Vested percentage
of a Participant's Account shall not be less than the Vested percentage
attained as of the later of the effective date or adoption date of this
amendment and restatement. The computation of a Participant's
nonforfeitable percentage of his interest in the Plan shall not be reduced
as the result of any direct or indirect amendment to this Article, or due
to changes in the Plan's status as a Top Heavy Plan.
(f) If the Plan's vesting schedule is amended, or if the Plan is
amended in any way that directly or indirectly affects the computation of
the Participant's nonforfeitable percentage or if the Plan is deemed
amended by an automatic change to a top heavy vesting schedule, then each
Participant with at least 3 Years of Service as of the expiration date of
the election period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such amendment or change.
Notwithstanding the foregoing, for Plan Years beginning before January 1,
1989, or with respect to Employees who fail to complete at least one (1)
Hour of Service in a Plan Year beginning after December 31, 1988, five (5)
shall be substituted for three (3) in the preceding sentence. If a
Participant fails to make such election, then such Participant shall be
subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end 60 days
after the latest of;
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the amendment
from the Employer or Administrator.
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(g)(1) If any Former Participant shall be reemployed by the Employer
before a 1-Year Break in Service occurs, he shall continue to participate
in the Plan in the same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be reinstated
only if he repays the full amount distributed to him before the
earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer or the close of
the first period of 5 consecutive 1-Year Breaks in Service commencing
after the distribution. If a distribution occurs for any reason other
than a separation from service, the time for repayment may not end
earlier than five (5) years after the date of separation. In the event
the Former Participant does repay the full amount distributed to him,
the undistributed portion of the Participant's Account must be
restored in full, unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other valuation date preceding
his termination. If an employee receives a distribution pursuant to
this section and the employee resumes employment covered under this
plan, the employee's employer-derived account balance will be restored
to the amount on the date of distribution if the employee repays to
the plan the full amount of the distribution attributable to employer
contributions before the earlier of 5 years after the first date on
which the participant is subsequently re-employed by the employer, or
the date the participant incurs 5 consecutive 1-year breaks in service
following the date of the distribution. If a non-Vested Former
Participant was deemed to have received a distribution and such Former
Participant is reemployed by the Employer before five (5) consecutive
1-Year Breaks in Service, then such Participant will be deemed to have
repaid the deemed distribution as of the date of reemployment.
(3) If any Former Participant is reemployed after a 1-Year Break in
Service has occurred, Years of Service shall include Years of Service
prior to his 1-Year Break in Service subject to the following rules:
(i) Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting from
Employer contributions shall lose credits if his consecutive
1-Year Breaks in Service equal or exceed the greater of (A) five
(5) or (B) the
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<PAGE> 61
aggregate number of his pre-break Years of Service;
(ii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to
pre-break service shall not be increased as a result of
post-break service;
(iii) A Former Participant who is reemployed and who has not had
his Years of Service before a 1-Year Break in Service disregarded
pursuant to (i) above, shall participate in the Plan as of his
date of reemployment;
(iv) If a Former Participant completes a Year of Service (a
1-Year Break in Service previously occurred, but employment had
not terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he completes one
(1) Year of Service.
(h) In determining Years of Service for purposes of vesting under the
Plan, Years of Service shall be excluded as specified in the Adoption
Agreement.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who
is married on the "annuity starting date" and who does not die before the
"annuity starting date" shall receive the value of all of his benefits in
the form of a Joint and Survivor Annuity. The Joint and Survivor Annuity is
an annuity that commences immediately and shall be equal in value to a
single life annuity. Such joint and survivor benefits following the
Participant's death shall continue to the spouse during the spouse's
lifetime at a rate equal to 50% of the rate at which such benefits were
payable to the Participant. This Joint and Survivor Annuity shall be
considered the designated qualified Joint and Survivor Annuity and
automatic form of payment for the purposes of this Plan. However, the
Participant may elect to receive a smaller annuity benefit with
continuation of payments to the spouse at a rate of seventy-five percent
(75%) or one hundred percent (100%) of the rate payable to a Participant
during his lifetime which alternative Joint and Survivor Annuity shall be
equal in value to the automatic Joint and 50% Survivor Annuity. An
unmarried Participant shall receive the value of his benefit in the form of
a life annuity. Such unmarried Participant, however, may elect in writing
to waive the life annuity. The election must comply with the provisions of
this Section as if it were an election to waive the Joint and Survivor
Annuity by a married Participant, but without the spousal consent
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requirement. The Participant may elect to have any annuity provided for in
this Section distributed upon the attainment of the "earliest retirement
age" under the Plan. The "earliest retirement age" is the earliest date on
which, under the Plan, the Participant could elect to receive retirement
benefits.
(2) Any election to waive the Joint and Survivor Annuity must be made
by the Participant in writing during the election period and be
consented to by the Participant's spouse. If the spouse is legally
incompetent to give consent, the spouse's legal guardian, even if such
guardian is the Participant, may give consent. Such election shall
designate a Beneficiary (or a form of benefits) that may not be
changed without spousal consent (unless the consent of the spouse
expressly permits designations by the Participant without the
requirement of further consent by the spouse). Such spouse's consent
shall be irrevocable and must acknowledge the effect of such election
and be witnessed by a Plan representative or a notary public. Such
consent shall not be required if it is established to the satisfaction
of the Administrator that the required consent cannot be obtained
because there is no spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations. The election made
by the Participant and consented to by his spouse may be revoked by
the Participant in writing without the consent of the spouse at any
time during the election period. The number of revocations shall not
be limited. Any new election must comply with the requirements of this
paragraph. A former spouse's waiver shall not be binding on a new
spouse.
(3) The election period to waive the Joint and Survivor Annuity shall
be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section and Section 6.6, the "annuity
starting date" means the first day of the first period for which an
amount is paid as an annuity, or, in the case of a benefit not payable
in the form of an annuity, the first day on which all events have
occurred which entitles the Participant to such benefit.
(5) With regard to the election, the Administrator shall provide to
the Participant no less than 30 days and no more than 90 days before
the "annuity starting date" a written explanation of:
(i) the terms and conditions of the Joint and Survivor Annuity,
and
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(ii) the Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity, and
(iii) the right of the Participant's spouse to consent to any
election to waive the Joint and Survivor Annuity, and
(iv) the right of the Participant to revoke such election, and
the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a Joint
and Survivor Annuity, or if such Participant is not married, in the form of
a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the distribution to a Participant or his
Beneficiary any amount to which he is entitled under the Plan in one or
more of the following methods which are permitted pursuant to the Adoption
Agreement:
(1) One lump-sum payment in cash or in property;
(2) Payments over a period certain in monthly, quarterly, semiannual,
or annual cash installments. In order to provide such installment
payments, the Administrator may direct that the Participant's interest
in the Plan be segregated and invested separately, and that the funds
in the segregated account be used for the payment of the installments.
The period over which such payment is to be made shall not extend
beyond the Participant's life expectancy (or the life expectancy of
the Participant and his designated Beneficiary);
(3) Purchase of or providing an annuity. However, such annuity may not
be in any form that will provide for payments over a period extending
beyond either the life of the Participant (or the lives of the
Participant and his designated Beneficiary) or the life expectancy of
the Participant (or the life expectancy of the Participant and his
designated Beneficiary).
(c) The present value of a Participant's Joint and Survivor Annuity
derived from Employer and Employee contributions may not be paid without
his written consent if the value exceeds, or has ever exceeded at the time
of any prior distribution, $3,500. Further, the spouse of a Participant
must consent in writing to any immediate distribution. It the value of the
Participant's benefit derived from Employer and Employee contributions does
not exceed $3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator may immediately distribute such benefit
without such Participant's consent.
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No distribution may be made under the preceding sentence after the "annuity
starting date" unless the Participant and his spouse consent in writing to
such distribution. Any written consent required under this paragraph must
be obtained not more than 90 days before commencement of the distribution
and shall be made in a manner consistent with Section 6.5(a)(2).
(d) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded at the time of any prior distribution, $3,500 shall
require such Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard to this
required consent:
(1) No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the
Plan that would satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his right to defer receipt of
the distribution. If a Participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any
benefit. However, any election to defer the receipt of benefits shall
not apply with respect to distributions which are required under
Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
"annuity starting date".
(4) Written consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made
more than 90 days before the "annuity starting date".
(5) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, made on or after January 1, 1985,
whether under the Plan or through the purchase of an annuity Contract,
shall be made in accordance with the following requirements and shall
otherwise comply with Code Section 401(a)(9) and the Regulations thereunder
(including Regulation Section 1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
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(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires, provided, however,
that this clause (ii) shall not apply in the case of a Participant who
is a "five (5) percent owner" at any time during the five (5) Plan
Year period ending in the calendar year in which he attains age 70 1/2
or, in the case of a Participant who becomes a "five (5) percent
owner" during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st of the
calendar year following the calendar year in which such subsequent
Plan Year ends. Alternatively, distributions to a Participant must
begin no later than the applicable April lst as determined under the
preceding sentence and must be made over the life of the Participant
(or the lives of the Participant and the Participant's designated
Beneficiary) or, if benefits are paid in the form of a Joint and
Survivor Annuity, the life expectancy of the Participant (or the life
expectancies of the Participant and his designated Beneficiary) in
accordance with Regulations. For Plan Years beginning after December
31, 1988, clause (ii) above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before January 1, 1988 and was
not a "five (5) percent owner" at any time during the Plan Year ending
with or within the calendar year in which the Participant attained age
66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall only be
made in accordance with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations thereunder.
Additionally, for calendar years beginning before 1989, distributions
may also be made under an alternative method which provides that the
then present value of the payments to be made over the period of the
Participant's life expectancy exceeds fifty percent (50%) of the then
present value of the total payments to be made to the Participant and
his Beneficiaries.
(f) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity) shall
be redetermined annually in accordance with Regulations if permitted
pursuant to the Adoption Agreement. if the Participant or the Participant's
spouse may elect whether recalculations will be made, then the election,
once made, shall be irrevocable. If no election is made by the time
distributions must commence, then the life expectancy of the Participant
and the
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Participant's spouse shall not be subject to recalculation, Life expectancy
and joint and last survivor expectancy shall be computed using the return
multiples in Tables V and VI of Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be non-transferable
when distributed. Furthermore, the terms of any annuity Contract purchased
and distributed to a Participant or spouse shall comply with all of the
requirements of this Plan.
(h) Subject to the spouse's right of consent afforded under the Plan,
the restrictions imposed by this Section shall not apply if a Participant
has, prior to January 1, 1984, made a written designation to have his
retirement benefit paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982.
(i) If a distribution is made at a time when a Participant who has not
terminated employment is not fully vested in his Participant's Account and
the Participant may increase the Vested percentage in such account:
(1) A separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution, and
(2) At any relevant time the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (RxD)) - (R x D)
For purposes of applying the formula: P is the Vested percentage at
the relevant time, AB is the account balance at the relevant time, D
is the amount of distribution, and R is the ratio of the account
balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested Participant
who dies before the annuity starting date and who has a surviving spouse
shall have the Pre-Retirement Survivor Annuity paid to his surviving
spouse. The Participant's spouse may direct that payment of the
Pre-Retirement Survivor Annuity commence within a reasonable period after
the Participant's death, if the spouse does not so direct, payment of such
benefit will commence at the time the Participant would have attained the
later of his Normal Retirement Age or age 62. However, the spouse may elect
a
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later commencement date. Any distribution to the Participant's spouse shall
be subject to the rules specified in Section 6.6(h).
(b) Any election to waive the Pre-Retirement Survivor, Annuity before
the Participant's death must be made by the Participant in writing during
the election period and shall require the spouse's irrevocable consent in
the same manner provided for in Section 6.5(a)(2). Further, the spouse's
consent must acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse Beneficiary need not be
acknowledged, provided the consent of the spouse acknowledges that the
spouse has the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elects to relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor Annuity
shall begin on the first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's death. An earlier
waiver (with spousal consent) may be made provided a written explanation of
the Pre-Retirement Survivor Annuity is given to the Participant and such
waiver becomes invalid at the beginning of the Plan Year in which the
Participant turns age 35. In the event a Vested Participant separates from
service prior to the beginning of the election period, the election period
shall begin on the date of such separation from service.
(d) with regard to the election, the Administrator shall provide each
Participant within the applicable period, with respect to such Participant
(and consistent with Regulations), a written explanation of the
Pre-Retirement Survivor Annuity containing comparable information to that
required pursuant to Section 6.5(a)(5). For the purposes of this paragraph,
the term "applicable period" means, with respect to a Participant,
whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35;
(2) A reasonable period after the individual becomes a Participant.
For this purpose, in the case of an individual who becomes a
Participant after age 32, the explanation must be provided by the end
of the three-year period beginning with the first day of the first-
Plan Year for which the individual is a Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with
respect to the Participant;
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(4) A reasonable period ending after Code Section 401(a)(11) applies
to the Participant; or
(5) A reasonable period after separation from service in the case of a
Participant who separates before attaining age 35. For this purpose,
the Administrator must provide the explanation beginning one year
before the separation from service and ending one year after
separation.
(e) The Pre-Retirement Survivor Annuity provided for in this Section
shall apply only to Participants who are credited with an Hour of Service
on or after August 23, 1984. Former Participants who are not credited with
an Hour of Service on or after August 23, 1984 shall be provided with
rights to the Pre-Retirement Survivor Annuity in accordance with Section
303 (e) (2) of the Retirement Equity Act of 1984.
(f) If the value of the Pre-Retirement Survivor Annuity derived from
Employer and Employee contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution, the Administrator
shall direct the immediate distribution of such amount to the Participant's
spouse. No distribution may be made under the preceding sentence after the
annuity starting date unless the spouse consents in writing. If the value
exceeds, or has ever exceeded at the time of any prior distribution,
$3,500, an immediate distribution of the entire amount may be made to the
surviving spouse, provided such surviving spouse consents in writing to
such distribution. Any written consent required under this paragraph must
be obtained not more than 90 days before commencement of the distribution
and shall be made in a manner consistent with Section 6.5(a)(2).
(g)(1) In the event there is an election to waive the Pre-Retirement
Survivor Annuity, and for death benefits in excess of the Pre-Retirement
Survivor Annuity, such death benefits shall be paid to the Participant's
Beneficiary by either of the following methods, as elected by the
Participant (or if no election has been made prior to the Participant's
death, by his Beneficiary) subject to the rules specified in Section 6.6(h)
and the selections made in the Adoption Agreement:
(i) One lump-sum payment in cash or in property;
(ii) Payment in monthly, quarterly, semi-annual, or annual cash
installments over a period to be determined by the Participant or
his Beneficiary. After periodic installments commence, the
Beneficiary shall have the right to reduce the period over which
such periodic installments shall
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be made, and the cash amount of such periodic installments shall
be adjusted accordingly.
(iii) If death benefits in excess of the Pre-Retirement Survivor
Annuity are to be paid to the surviving spouse, such benefits may
be paid pursuant to (i) or (ii) above, or used to purchase an
annuity so as to increase the payments made pursuant to the
Pre-Retirement Survivor Annuity;
(2) In the event the death benefit payable pursuant to Section 6.2 is
payable in installments, then, upon the death of the Participant, the
Administrator may direct that the death benefit be segregated and
invested separately, and that the funds accumulated in the segregated
account be used for the payment of the installments.
(h) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant made on or after January 1,
1985, shall be made in accordance with the following requirements and shall
otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder.
(1) If it is determined, pursuant to Regulations, that the
distribution of a Participant's interest has begun and the Participant
dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution selected pursuant to
Section 6.5 as of his date of death.
(2) If a Participant dies before he has begun to receive any
distributions of his interest in the Plan or before distributions are
deemed to have begun pursuant to Regulations, then his death benefit
shall be distributed to his Beneficiaries in accordance with the
following rules subject to the selections made in the Adoption
Agreement and Subsections 6.6(h)(3) and 6.6(i) below;
(i) The entire death benefit shall be distributed to the
Participant's Beneficiaries by December 31st of the calendar year
in which the fifth anniversary of the Participant's death occurs;
(ii) The 5-year distribution requirement of (i) above shall not
apply to any portion of the deceased Participant's interest which
is payable to or for the benefit of a designated Beneficiary. In
such event, such portion shall be distributed over the life of
such designated Beneficiary (or over a period not extending
beyond the life
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expectancy of such designated Beneficiary) provided such
distribution begins not later than December 31st of the calendar
year immediately following the calendar year in which the
Participant died;
(iii) However, in the event the Participant's spouse (determined
as of the date of the Participant's death) is his designated
Beneficiary, the provisions of (ii) above shall apply except that
the requirement that distributions commence within one year of
the Participant's death shall not apply. In lieu thereof,
distributions must commence on or before the later of: (1)
December 31st of the calendar year immediately following the
calendar year in which the Participant died; or (2) December 31st
of the calendar year in which the Participant would have attained
age 70 1/2. If the surviving spouse dies before distributions to
such spouse begin, then the 5-year distribution requirement of
this Section shall apply as if the spouse was the Participant.
(3) Notwithstanding subparagraph (2) above, or any selections made in
the Adoption Agreement, if a Participant's death benefits are to be
paid in the form of a Pre-Retirement Survivor Annuity, then
distributions to the Participant's surviving spouse must commence on
or before the later of: (1) December 31st of the calendar year
immediately following the calendar year in which the Participant died;
or (2) December 31st of the calendar year in which the Participant
would have attained age 70 1/2.
(i) For purposes of Section 6.6(h)(2), the election by a designated
Beneficiary to be excepted from the 5-year distribution requirement (if
permitted in the Adoption Agreement) must be made no later than December
31st of the calendar year following the calendar year of the Participant's
death. Except, however, with respect to a designated Beneficiary who is the
Participant's surviving spouse, the election must be made by the earlier
of: (1) December 31st of the calendar year immediately following the
calendar year in which the Participant died or, if later, the calendar year
in which the Participant would have attained age 70 1/2; or (2) December
31st of the calendar year which contains the fifth anniversary of the date
of the Participant's death. An election by a designated Beneficiary must be
in writing and shall be irrevocable as of the last day of the election
period stated herein. In the absence of an election by the Participant or a
designated Beneficiary, the 5-year distribution requirement shall apply.
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(j) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity) shall
or shall not be redetermined annually as provided in the Adoption Agreement
and in accordance with Regulations. If the Participant or the Participant's
spouse may elect, pursuant to the Adoption Agreement, to have life
expectancies recalculated, then the election, once made shall be
irrevocable. If no election is made by the time distributions must
commence, then the life expectancy of the Participant and the Participant's
spouse shall not be subject to recalculation. Life expectancy and joint and
last survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation Section 1.72-9.
(k) In the event that less than 100% of a Participant's interest in
the Plan is distributed to such Participant's spouse, the portion of the
distribution attributable to the Participant's Voluntary Contribution
Account shall be in the same proportion that the Participant's Voluntary
Contribution Account bears to the Participant's total interest in the Plan.
(1) Subject to the spouse's right of consent afforded under the Plan,
the restrictions imposed by this Section shall not apply if a Participant
has, prior to January 1, 1984, made a written designation to have his death
benefits paid in an alternative method acceptable under Code Section 401(a)
as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever a distribution is to be
made, or a series of payments are to commence, on or as of an Anniversary Date,
the distribution or series of payments may be made or begun on such date or as
soon thereafter as is practicable, but in no event later than 180 days after the
Anniversary Date. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not later
than the 60th day after the close of the Plan Year in which the latest of the
following events occurs: (a) the date on which the Participant attains the
earlier of age 65 or the Normal Retirement Age specified herein, (b) the 10th
anniversary of the year in which the Participant commenced participation in the
Plan; or (c) the date the Participant terminates his service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and, if
applicable, the Participant's spouse, to consent to a distribution pursuant to
Section 6.5(d), shall be
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deemed to be an election to defer the commencement of payment of any benefit
sufficient to satisfy this Section.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored,
first from Forfeitures, if any, and then from an additional Employer
contribution if necessary.
6.10 PRE-RETIREMENT DISTRIBUTION
For Profit Sharing Plans and 401(k) Profit Sharing Plans, if elected in the
Adoption Agreement, at such time as a Participant shall have attained the age
specified in the Adoption Agreement, the Administrator, at the election of the
Participant, shall direct the distribution of up to the entire amount then
credited to the accounts maintained on behalf of the Participant. However, no
such distribution from the Participant's Account shall occur prior to 100%
Vesting. In the event that the Administrator makes such a distribution, the
Participant shall continue to be eligible to participate in the Plan on the same
basis as any other Employee. Any distribution made pursuant to this Section
shall be made in a manner consistent with Section 6.5, including, but not
limited to, all notice and consent requirements of Code Sections 411(a)(11) and
417 and the Regulations thereunder.
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6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) For Profit Sharing Plans, if elected in the Adoption Agreement,
the Administrator, at the election of the Participant, shall direct the
distribution to any Participant in any one Plan Year up to the lesser of
100% of his Participant's Combined Account valued as of the last
Anniversary Date or other valuation date or the amount necessary to satisfy
the immediate and heavy financial need of the Participant. Any distribution
made pursuant to this Section shall be deemed to be made as of the first
day of the Plan Year or, if later, the valuation date immediately preceding
the date of distribution, and the account from which the distribution is
made shall be reduced accordingly. Withdrawal under this Section shall be
authorized only if the distribution is on account of:
(1) Medical expenses described in Code Section 213(d) incurred by the
Participant, his spouse, or any of his dependents (as defined in Code
Section 152);
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Funeral expenses for a member of the Participant's family;
(4) Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, his spouse, children, or
dependents; or
(5) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No such distribution shall be made from the Participant's Account
until such Account has become fully Vested.
(c) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 411(a)(11) and 417 and the Regulations thereunder.
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected
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Participant has not reached the "earliest retirement age" under the Plan. For
the purposes of this Section, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meaning set forth under Code
Section 414(p).
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS
If elected in the Adoption Agreement, the following shall apply to a
Participant in a Profit Sharing Plan or 401(k) Profit Sharing Plan and to any
distribution, made on or after the first day of the first plan year beginning
after December 31, 1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in Code Section
72(o)(5)(B), and maintained on behalf of a participant in a money purchase
pension plan, (including a target benefit plan):
(a) The Participant shall be prohibited from electing benefits in the
form of a life annuity;
(b) Upon the death of the Participant, the Participant's entire Vested
account balances will be Paid to his or her surviving spouse, or, if there
is no surviving spouse or the surviving spouse has already consented to
waive his or her benefit, in accordance with Section 6.6, to his designated
Beneficiary; and
(c) Except to the extent otherwise provided in this Section and
Section 6.5(h), the other provisions of Sections 6.2, 6.5 and 6.6 regarding
spousal consent and the forms of distributions shall be inoperative with
respect to this Plan.
This Section shall not apply to any Participant if it is determined that
this Plan is a direct or indirect transferee of a defined benefit plan or money
purchase plan, or a target benefit plan, stock bonus or profit sharing plan
which would otherwise provide for a life annuity form of payment to the
Participant.
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by the
Employer to invest, manage, and control the Plan assets subject, however,
to the direction of an Investment Manager if the Employer should appoint
such manager as to all or a portion of the assets of the Plan;
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(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their death,
to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.7; and
(d) if there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income and in
such securities or property, real or personal, wherever situated, as the
Trustee shall deem advisable, including, but not limited to, stocks, common
or preferred, bonds and other evidences of indebtedness or ownership, and
real estate or any interest therein. The Trustee shall at all times in
making investments of the Trust Fund consider, among other factors, the
short and long-term financial needs of the Plan on the basis of information
furnished by the Employer. In making such investments, the Trustee shall
not be restricted to securities or other property of the character
expressly authorized by the applicable law for trust investments; however,
the Trustee shall give due regard to any limitations imposed by the Code or
the Act so that at all times this Plan may qualify as a qualified Plan and
Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical and
record-keeping nature.
(c) The Trustee may from time to time transfer to a common,
collective, or pooled trust fund maintained by any corporate Trustee
hereunder pursuant to Revenue Ruling 81-100, all or such part of the Trust
Fund as the Trustee may deem advisable, and such part or all of the Trust
Fund so transferred shall be subject to all the terms and provisions of the
common, collective, or pooled trust fund which contemplate the commingling
for investment purposes of such trust assets with trust assets of other
trusts. The Trustee may withdraw from such common, collective, or pooled
trust fund all or such part of the Trust Fund as the Trustee may deem
advisable.
(d) The Trustee, at the direction of the Administrator and pursuant to
instructions from the individual designated in the Adoption Agreement for
such purpose and subject to
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the conditions set forth in the Adoption Agreement, shall ratably apply for,
own, and pay all premiums on Contracts on the lives of the Participants. Any
initial or additional Contract purchased on behalf of a Participant shall have
a face amount of not less than $1,000, the amount set forth in the Adoption
Agreement, or the limitation of the Insurer, whichever is greater. If a life
insurance Contract is to be purchased for a Participant, the aggregate premium
for ordinary life insurance for each Participant must be less than 50% of the
aggregate contributions and Forfeitures allocated to a Participant's Combined
Account. For purposes of this limitation, ordinary life insurance Contracts
are contracts with both non-decreasing death benefits and non-increasing
premiums. If term insurance or universal life insurance is purchased with such
contributions, the aggregate premium must be 25% or less of the aggregate
contributions and Forfeitures allocated to a Participant's Combined Account.
If both term insurance and ordinary life insurance are purchased with such
contributions, the amount expended for term insurance plus one-half of the
premium for ordinary life insurance may not in the aggregate exceed 25% of the
aggregate Employer contributions and Forfeitures allocated to a Participant's
Combined Account. The Trustee must distribute the Contracts to the Participant
or convert the entire value of the Contracts at or before retirement into cash
or provide for a periodic income so that no portion of such value may be used
to continue life insurance protection beyond retirement. Notwithstanding the
above, the limitations imposed herein with respect to the purchase of life
insurance shall not apply, in the case of a Profit Sharing Plan, to the
portion of a Participant's Account that has accumulated for at least two (2)
Plan Years.
Notwithstanding anything hereinabove to the contrary, amounts
credited to a Participant's Qualified Voluntary Employee Contribution Account
pursuant to Section 4.9, shall not be applied to the purchase of life
insurance contracts.
(e) The Trustee will be the owner of any life insurance Contract
purchased under the terms of this Plan. The Contract must provide that the
proceeds will be payable to the Trustee; however, the Trustee shall be
required to pay over all proceeds of the Contract to the Participant's
designated Beneficiary in accordance with the distribution provisions of
Article VI. A Participant's spouse will be the designated Beneficiary pursuant
to Section 6.2, unless a qualified election has been made in accordance with
Sections 6.5 and 6.6 of the Plan, if applicable. Under no circumstances shall
the Trust retain any part of the proceeds. However, the Trustee shall not pay
the proceeds in a method that would violate the requirements of the Retirement
Equity Act, as stated in Article VI of the Plan, or Code Section 401(a)(9) and
the Regulations thereunder.
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7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under
common law, statutory authority, including the Act, and other provisions of
this Plan, shall have the following powers and authorities to be exercised in
the Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase,
or otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing with
the Trustee shall be bound to see to the application of the purchase money
or to inquire into the validity, expediency, or propriety of any such sale
or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights
or other options, and to make any payments incidental thereto; to oppose,
or to consent to, or otherwise participate in, corporate reorganizations
or other changes affecting corporate securities, and to delegate
discretionary powers, and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an owner with
respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any part,
of the Trust Fund; and no person lending money to the Trustee shall be
bound to see to the application of the money lent or to inquire into the
validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances
as the Trustee may, from time to time, deem to
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be in the best interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as it may deem advisable any
securities or other property received or acquired by it as Trustee hereunder,
whether or not such securities or other property would normally be purchased
as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits
and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be agent
or counsel for the Employer;
(k) To apply for and procure from the insurer as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any Participant)
as the Administrator shall deem proper; to exercise, at any time or from time
to time, whatever rights and privileges may be granted under such annuity, or
other Contracts; to collect, receive, and settle for the proceeds of all such
annuity, or other Contracts as and when entitled to do so under the provisions
thereof;
(1) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange registered
under the Securities Exchange Act of 1934, as amended, or, if the options are
not traded on a national securities exchange, are guaranteed by a member firm
of the New York Stock Exchange;
(o) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
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(p) To pool all or any of the Trust Fund, from time to time, with assets
belonging to any other qualified employee pension benefit trust created by the
Employer or any Affiliated Employer, and to commingle such assets and make joint
or common investments and carry joint accounts on behalf of this Plan and such
other trust or trusts, allocating undivided shares or interests in such
investments or accounts or any pooled assets of the two or more trusts in
accordance with their respective interests;
(q) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.
(r) Directed Investment Account. The powers granted to the Trustee shall
be exercised in the sole fiduciary discretion of the Trustee. However, if
elected in the Adoption Agreement, each Participant may direct the Trustee to
separate and keep separate all or a portion of his interest in the Plan; and
further each Participant is authorized and empowered, in his sole and absolute
discretion, to give directions to the Trustee in such form as the Trustee may
require concerning the investment of the Participant's Directed Investment
Account, which directions must be followed by the Trustee subject, however, to
restrictions on payment of life insurance premiums. Neither the Trustee nor any
other persons including the Administrator or otherwise shall be under any duty
to question any such direction of the Participant or to review any securities or
other property, real or personal, or to make any suggestions to the Participant
in connection therewith, and the Trustee shall comply as promptly as practicable
with directions given by the Participant hereunder. Any such direction may be of
a continuing nature or otherwise and may be revoked by the Participant at any
time in such form as the Trustee may require. The Trustee may refuse to comply
with any direction from the Participant in the event the Trustee, in its sole
and absolute discretion, deems such directions improper by virtue of applicable
law, and in such event, the Trustee shall not be responsible or liable for any
loss or expense which may result. Any costs and expenses related to compliance
with the Participant's directions shall be borne by the Participant's Directed
Investment Account.
Notwithstanding anything hereinabove to the contrary, the Trustee
shall not, at any time after December 31, 1981, invest any portion of a Directed
Investment Account in "collectibles" within the meaning of that term as employed
in Code Section 408(m).
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7.4 LOANS TO PARTICIPANTS
(a) If specified in the Adoption Agreement, the Trustee (or, if
loans are treated as Directed Investment pursuant to the Adoption
Agreement, the Administrator) may, in the Trustee's (or, if applicable,
the Administrator's) sole discretion, make loans to Participants or
Beneficiaries under the following circumstances: (1) loans shall be made
available to all Participants and Beneficiaries on a reasonably
equivalent basis; (2) loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Participants; (3) loans shall bear a reasonable rate
of interest; (4) loans shall be adequately secured; and (5) shall
provide for periodic repayment over a reasonable period of time.
(b) Loans shall not be made to any Shareholder-Employee or
Owner-Employee unless an exemption for such loan is obtained pursuant to
Act Section 408 and further provided that such loan would not be subject
to tax pursuant to Code Section 4975.
(c) Loans shall not be granted to any Participant that provide
for a repayment period extending beyond such Participant's Normal
Retirement Date.
(d) Loans made pursuant to this Section (when added to the
Outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans from
the Plan to the Participant on the date on which such loan was
made, or
(2) the greater of (A) one-half (1/2) of the present value of the
non-forfeitable accrued benefit of the Employee under the Plan, or
(B), if permitted pursuant to the Adoption Agreement, $10,000.
For purposes of this limit, all plans of the Employer
shall be considered one plan. Additionally, with respect to any loan
made prior to January 1, 1987, the $50,000 limit specified in (1) above
shall be unreduced.
(e) No Participant loan shall take into account the present value
of such Participant's Qualified Voluntary Employee Contribution Account.
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(f) Loans shall provide for level amortization with payments to
be made not less frequently than quarterly over a period not to exceed
five (5) years. However, loans used to acquire any dwelling unit which,
within a reasonable time, is to be used (determined at the time the loan
is made) as a principal residence of the Participant shall provide for
periodic repayment over a reasonable period of time that may exceed five
(5) years. Notwithstanding the foregoing, loans made prior to January 1,
1987 which are used to acquire, construct, reconstruct or substantially
rehabilitate any dwelling unit which, within a reasonable period of time
is to be used (determined at the time the loan is made) as a principal
residence of the Participant or a member of his family (within the
meaning of Code Section 267(c)(4)) may provide for periodic repayment
over a reasonable period of time that may exceed five (5) years.
Additionally, loans made prior to January 1, 1987, may provide for
periodic payments which are made less frequently than quarterly and
which do not necessarily result in level amortization.
(g) An assignment or pledge of any portion of a Participant's
interest in the Plan and a loan, pledge, or assignment with respect to
any insurance Contract purchased under the Plan, shall be treated as a
loan under this Section.
(h) Any loan made pursuant to this Section after August 18, 1985
where the Vested interest of the Participant is used to secure such loan
shall require the written consent of the Participant's spouse in a
manner consistent with Section 6.5(a) provided the spousal consent
requirements of such Section apply to the Plan. Such written consent
must be obtained within the 90-day period prior to the date the loan is
made. Any security interest held by the Plan by reason of an outstanding
loan to the Participant shall be taken into account in determining the
amount of the death benefit or Pre-Retirement Survivor Annuity. However,
no spousal consent shall be required under this paragraph if the total
accrued benefit subject to the security is not in excess of $3,500.
(i) With regard to any loans granted or renewed on or after the
last day of the first Plan Year beginning after December 31, 1988, a
Participant loan program shall be established which must include, but
need not be limited to, the following-
(1) the identity of the person or positions authorized
to administer the Participant loan program;
(2) a procedure for applying for loans;
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(3) the basis on which loans will be approved or
denied;
(4) limitations, if any, on the types and amounts of
loans offered, including what constitutes a hardship or
financial need if selected in the Adoption Agreement;
(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a
Participant loan; and
(7) the events constituting default and the steps that
will be taken to preserve plan assets.
Such Participant loan program shall be contained in a separate
written document which, when properly executed, is hereby incorporated
by reference and made a part of this plan. Furthermore, such Participant
loan program may be modified or amended in writing from time to time
without the necessity of amending this Section of the Plan.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from
time to time, in accordance with the terms of the Plan, make payments out of
the Trust Fund. The Trustee shall not be responsible in any way for the
application of such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as set
forth in the Trustee's fee schedule (if the Trustee has such a schedule) or as
agreed upon in writing by the Employer and the Trustee. An individual serving
as Trustee who already receives full-time pay from the Employer shall not
receive compensation from this Plan. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable counsel fees
incurred by it as Trustee. Such compensation and expenses shall be paid from
the Trust Fund unless paid or advanced by the Employer. All taxes of any kind
and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof,
shall be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the
Anniversary Date or receipt of the Employer's contribution for each Plan Year,
the Trustee, or its agent, shall furnish to the Employer and Administrator a
written statement of account
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with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund
upon sales or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust
Fund;
(d) all payments and distributions made from the Trust
Fund, and
(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer, forthwith upon
its receipt of each such statement of account, shall acknowledge
receipt thereof in writing and advise the Trustee and/or
Administrator of its approval or disapproval thereof. Failure by
the Employer to disapprove any such statement of account within
thirty (30) days after its receipt thereof shall be deemed an
approval thereof. The approval by the Employer of any statement
of account shall be binding as to all matters embraced therein
as between the Employer and the Trustee to the same extent as if
the account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its account in
a court of competent jurisdiction in which the Trustee, the
Employer and all persons having or claiming an interest in the
Plan were parties; provided, however, that nothing herein
contained shall deprive the Trustee of its right to have its
accounts judicially settled if the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required
by the Act and the regulations thereunder for any Plan Year, the
Administrator shall direct the Trustee to engage an behalf of
all Participants an independent qualified public accountant for
that purpose. Such accountant shall, after an audit of the books
and records of the Plan in accordance with generally accepted
auditing standards, within a reasonable period after the close
of the Plan Year, furnish to the Administrator and the Trustee a
report of his audit setting forth his opinion as to whether any
statements, schedules or lists, that are required by Act Section
103 or the Secretary of Labor to be filed with the Plan's annual
report, are presented fairly in conformity with generally
accepted accounting principles applied consistently.
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(b) All auditing and accounting fees shall be an expense of and
may, at the election of the Administrator, be paid from the Trust Fund.
(c) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or such other date as
may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to such Trustee at his last known address,
at least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with all
the estate, rights, powers, discretions, and duties of his predecessor
with like respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 7.7 or (ii) set forth in a special statement. Any
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such special statement of account should be rendered to the Employer no
later than the due date of the annual statement of account for the Plan
Year. The procedures set forth in Section 7.7 for the approval by the
Employer of annual statements of account shall apply to any special
statement of account rendered hereunder and approval by the Employer of
any such special statement in the manner provided in Section 7.7 shall
have the same effect upon the statement as the Employer's approval of
an annual statement of account. No successor to the Trustee shall have
any duty or responsibility to investigate the acts or transactions of
any predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the
Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing, or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that the trust to
which such transfers are made permits the transfer to be made.
7.11 TRUSTEE INDEMNIFICATION
The Employer agrees to indemnify and save harmless the Trustee
against any and all claims, losses, damages, expenses and liabilities the
Trustee may incur in the exercise and performance of the Trustee's powers and
duties hereunder, unless the same are determined to be due to gross negligence
or willful misconduct.
7.12 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying
Employer securities" and "qualifying Employer real property," as those terms are
defined in the Act. However, no more than 100%, in the case of a Profit Sharing
Plan or 401(k) Plan or 10%, in the case of a Money Purchase Plan of the fair
market value of all the assets in the Trust Fund may be invested in "qualifying
Employer securities" and "qualifying Employer real property".
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend this
Plan subject to the limitations of this Section. However, any amendment
which affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's
written
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consent. Any such amendment shall become effective as provided therein
upon its execution. The Trustee shall not be required to execute any
such amendment unless the amendment affects the duties of the Trustee
hereunder.
(b) The Employer may (1) change the choice of options in the
Adoption Agreement, (2) add overriding language in the Adoption
Agreement when such language is necessary to satisfy Code Sections 415
or 416 because of the required aggregation of multiple plans, and (3)
add certain model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan. An Employer that amends
the Plan for any other reason, including a waiver of the minimum funding
requirement under Code Section 412(d), will no longer participate in
this Regional Prototype Plan and will be considered to have an
individually designed plan.
(c) The Employer expressly delegates authority to the sponsoring
organization of this Plan, the right to amend this Plan by submitting a
copy of the amendment to each Employer who has adopted this Plan after
first having received a ruling or favorable determination from the
Internal Revenue Service that the Plan as amended qualifies under Code
Section 401(a) and the Act.
(d) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to or become property of
the Employer.
(e) Except as permitted by Regulations (including Regulation
1.411(d)-4), no Plan amendment or transaction having the effect of a
Plan amendment (such as a merger, plan transfer or similar transaction)
shall be effective if it eliminates or reduces any "Section 411(d)(6)
protected benefit" or adds or modifies conditions relating to "Section
411(d)(6) protected benefits" the result of which is a further
restriction on such benefit unless such protected benefits are preserved
with respect to benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected benefits"
are benefits described in Code Section 411(d)(6)(A), early retirement
benefits and retirement-type subsidies, and optional forms of benefit.
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8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested and shall not thereafter be subject to forfeiture, and all
unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets to Participants in a manner which
is consistent with and satisfies the provisions of Section 6.5.
Distributions to a Participant shall be made in cash (or in property if
permitted in the Adoption Agreement) or through the purchase of
irrevocable nontransferable deferred commitments from the Insurer.
Except as permitted by Regulations, the termination of the Plan shall
not result in the reduction of "Section 411(d)(6) protected benefits"
as described in Section 8.1.
8.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation and such merger or consolidation does not otherwise result in
the elimination or reduction of any "Section 411(d)(6) protected benefits" as
described in Section 8.1(e).
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS
(a) Any organization may become the Employer hereunder by
executing the Adoption Agreement in form satisfactory to the Trustee,
and it shall provide such additional information as the Trustee may
require. The consent of the Trustee to act as such shall be signified
by its execution of the Adoption Agreement.
(b) Except as otherwise provided in this Plan, the affiliation
of the Employer and the participation of its Participants shall be
separate and apart from that of any other employer and its participants
hereunder.
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9.2 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between
the Employer and any Participant or to be a consideration or an inducement
for the employment of any Participant or Employee. Nothing contained in this
Plan shall be deemed to give any Participant or Employee the right to be
retained in the service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at any time regardless of
the effect which such discharge shall have upon him as a Participant of this
Plan.
9.3 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable to any person (including a Participant or his
Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge,
and any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void; and no such benefit
shall in any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor shall it be
subject to attachment or legal process for or against such person, and
the same shall not be recognized except to such extent as may be
required by law.
(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, for any reason, under any
provision of this Plan. At the time a distribution is to be made to or
for a Participant's or Beneficiary's benefit, such proportion of the
amount to be distributed as shall equal such indebtedness shall be paid
to the Plan, to apply against or discharge such indebtedness. Prior to
making a payment, however, the Participant or Beneficiary must be given
written notice by the Administrator that such indebtedness is to be so
paid in whole or part from his Participant's Combined Account. If the
Participant or Beneficiary does not agree that the indebtedness is a
valid claim against his Vested Participant's Combined Account, he shall
be entitled to a review of the validity of the claim in accordance with
procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations
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order", a former spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan.
9.4 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to
the Act and the laws of the State or Commonwealth in which the Employer's
principal office is located, other than its laws respecting choice of law, to
the extent not preempted by the Act.
9.5 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply,
9.6 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding
the Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of the Trust,
by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any Trust Fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make a contribution under a
mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the
Employer may demand repayment of such contribution at any time within
one (1) year following the time of payment and the Trustees shall return
such amount to the Employer within the one (1) year period. Earnings of
the Plan attributable to the contributions may not be returned to the
Employer but any losses attributable thereto must reduce the amount so
returned.
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9.8 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount
not less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
9.9 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall
be responsible for the validity of any Contract issued hereunder or for the
failure on the part of the Insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.
9.10 INSURER'S PROTECTIVE CLAUSE
The Insurer who shall issue Contracts hereunder shall not have
any responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The Insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the Insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the Insurer.
9.11 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of this Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee
and the Employer.
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9.12 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.13 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator, (3) the Trustee, and (4) any Investment Manager appointed
hereunder. The named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Employer shall have the sole responsibility for making the
contributions provided for under Section 4.1; and shall have the sole authority
to appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend the elective provisions of the
Adoption Agreement or terminate, in whole or in part, the Plan. The
Administrator shall have the sole responsibility for the administration of the
Plan, which responsibility is specifically described in the Plan. The Trustee
shall have the sole responsibility of management of the assets held under the
Trust, except those assets, the management of which has been assigned to an
Investment Manager, who shall be solely responsible for the management of the
assets assigned to it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in accordance with the provisions of the Plan, authorizing
or providing for such direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action of another
named Fiduciary as being proper under the Plan, and is not required under the
Plan to inquire into the propriety of any such direction, information or action
It is intended under the Plan that each named Fiduciary shall be responsible for
the proper exercise of its own powers, duties, responsibilities and obligations
under the Plan. No named Fiduciary shall guarantee the Trust Fund in any manner
against investment loss or depreciation in asset value. Any person or group may
serve in more than one Fiduciary capacity.
9.14 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.15 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, if,
pursuant to a timely application filed by or in behalf of the Plan, the
Commissioner of Internal Revenue Service or his delegate should
determine that the Plan does not
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initially qualify as a tax-exempt plan under Code Sections 401 and 501,
and such determination is not contested, or if contested, is finally
upheld, then if the Plan is a new plan, it shall be void ab initio and
all amounts contributed to the Plan, by the Employer, less expenses
paid, shall be returned within one year and the Plan shall terminate,
and the Trustee shall be discharged from all further obligations. If
the disqualification relates to an amended plan, then the Plan shall
operate as if it had not been amended and restated.
(b) Except as specifically stated in the Plan, any contribution
by the Employer to the Trust Fund is conditioned upon the deductibility
of the contribution by the Employer under the Code and, to the extent
any such deduction is disallowed, the Employer may within one (1) year
following a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final decision of a
court of competent jurisdiction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.16 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner.
9.17 PAYMENT OF BENEFITS
Benefits under this Plan shall be paid, subject to Section 6.10
and Section 6.11 only upon death, Total and Permanent Disability, normal or
early retirement, termination of employment, or upon Plan Termination.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER
Notwithstanding anything herein to the contrary, with the consent
of the Employer and Trustee, any Affiliated Employer may adopt this Plan and all
of the provisions hereof, and participate herein and be known as a Participating
Employer, by a properly executed document evidencing said intent and will of
such Participating Employer.
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10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each Participating Employer shall be required to select
the same Adoption Agreement provisions as those selected by the
Employer other than the Plan Year, the Fiscal Year, and such other
items that must, by necessity, vary among employers.
(b) Each such Participating Employer shall be required to use
the same Trustee as provided in this Plan.
(c) The Trustee may, but shall not be required to, commingle,
hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof.
(d) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the
Employer or a Participating Employer, shall not affect such
Participant's rights under the Plan, and all amounts credited to
such Participant's Combined Account as well as his accumulated
service time with the transferor or predecessor, and his length of
participation in the Plan, shall continue to his credit.
(e) Any expenses of the Plan which are to be paid by the
Employer or borne by the Trust Fund shall be paid by each
Participating Employer in the same proportion that the total amount
standing to the credit of all Participants employed by such Employer
bears to the total standing to the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this
Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related
to its adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
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10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES
Any contribution or Forfeiture subject to allocation during each
Plan Year shall be allocated among all Participants of all Participating
Employers in accordance with the provisions of this Plan. On the basis of the
information furnished by the Administrator, the Trustee shall keep separate
books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so
as to evidence that a particular Participating Employer is the interested
Employer hereunder, but in the event of an Employee transfer from one
Participating Employer to another, the employing Employer shall immediately
notify the Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there
shall be a Participating Employer hereunder shall only be by the written
action of each and every Participating Employer and with the consent of the
Trustee where such consent is necessary in accordance with the terms of this
Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Except in the case of a Standardized Plan, any Participating
Employer shall be permitted to discontinue or revoke its participation in the
Plan at any time. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed shall
be delivered to the Trustee. The Trustee shall thereafter transfer, deliver
and assign Contracts and other Trust Fund assets allocable to the
Participants of such Participating Employer to such new Trustee as shall have
been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees provided, however, that
no such transfer shall be made if the result is the elimination or reduction
of any "Section 411(d)(6) protected benefits" in accordance with Section
8.1(e). If no successor is designated, the Trustee shall retain such assets
for the Employees of said Participating Employer pursuant to the provisions
of Article VII hereof. In no such event shall any part of the corpus or
income of the Trust Fund as it relates to such Participating Employer be used
for or diverted for purposes other than for the exclusive benefit of the
Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all
necessary rules or regulations, binding upon all Participating Employers and
all Participants, to effectuate the purpose of this Article.
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10.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE
If any Participating Employer is prevented in whole or in part
from making a contribution which it would otherwise have made under the Plan
by reason of having no current or accumulated earnings or profits, or because
such earnings or profits are less than the contribution which it would
otherwise have made, then, pursuant to Code Section 404(a)(3)(B), so much of
the contribution which such Participating Employer was so prevented from
making may be made, for the benefit of the participating employees of such
Participating Employer, by other Participating Employers who are members of
the same affiliated group within the meaning of Code Section 1504 to the
extent of their current or accumulated earnings or profits, except that such
contribution by each such other Participating Employer shall be limited to the
proportion of its total current and accumulated earnings or profits remaining
after adjustment for its contribution to the Plan made without regard to this
paragraph which the total prevented contribution bears to the total current
and accumulated earnings or profits of all the Participating Employers
remaining after adjustment for all contributions made to the Plan without
regard to this paragraph.
A Participating Employer on behalf of whose employees a
contribution is made under this paragraph shall not be required to reimburse the
contributing Participating Employers.
ARTICLE XI
CASH OR DEFERRED PROVISIONS
Notwithstanding any provisions in the Plan to the contrary, the
provisions of this Article shall apply with respect to any 401(k) Profit Sharing
Plan.
11.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 11.2(a), which amount shall be
deemed an Employer's Elective Contribution, plus
(b) If specified in E3 of the Adoption Agreement, a matching
contribution equal to the percentage specified in the Adoption Agreement
of the Deferred Compensation of each Participant eligible to share in
the allocations of the matching contribution, which amount shall be
deemed an Employer's Non-Elective or Elective Contribution as selected
in the Adoption Agreement, plus
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(c) If specified in E4 of the Adoption Agreement, a
discretionary amount, if any, which shall be deemed an Employer's
Non-Elective Contribution, plus
(d) If specified in E5 of the Adoption Agreement, a Qualified
Non-Elective Contribution.
(e) Notwithstanding the foregoing, however, the Employer's
contributions for any Fiscal Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or
in such property as is acceptable to the Trustee.
(f) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution even
if it exceeds current or accumulated Net Profit or the amount which is
deductible under Code Section 404.
(g) Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on
which such contributions can reasonably be segregated from the
Employer's general assets, but in any event within ninety (90) days
from the date on which such amounts would otherwise have been payable
to the Participant in cash. The provisions of Department of Labor
regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable
to the Participant's Elective Account for a Plan Year shall be paid to
the Plan no later than the twelve-month period immediately following
the close of such Plan Year.
11.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) If selected in the Adoption Agreement, each Participant may
elect to defer his Compensation which would have been received in the
Plan Year, but for the deferral election, subject to the limitations of
this Section and the Adoption Agreement. A deferral election (or
modification of an earlier election) may not be made with respect to
Compensation which is currently available on or before the date the
Participant executed such election, or if later, the latest of the date
the Employer adopts this cash or deferred arrangement, or the date such
arrangement first became effective. Any elections made pursuant to this
Section shall become effective as soon as is administratively feasible.
Additionally, if elected in the Adoption Agreement,
each Participant may elect to defer and have allocated for a Plan Year
all or a portion of any cash bonus attributable to services performed
by the Participant for
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the Employer during such Plan Year and which would have been received by the
Participant on or before two and one-half months following the end of the Plan
Year but for the deferral. A deferral election may not be made with respect to
cash bonuses which are currently available on or before the date the Participant
executed such election. Notwithstanding the foregoing, cash bonuses attributable
to services performed by the Participant during a Plan Year but which are to be
paid to the Participant later than two and one-half months after the close of
such Plan Year will be subjected to whatever deferral election is in effect at
the time such cash bonus would have otherwise been received.
The amount by which Compensation and/or cash bonuses are reduced
shall be that Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective Account.
Once made, a Participant's election to reduce Compensation shall
remain in effect until modified or terminated. Modifications may be made as
specified in the Adoption Agreement, and terminations may be made at any time.
Any modification or termination of an election will become effective as soon as
is administratively feasible.
(b) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective Account and Qualified
Non-Elective Account may be distributable as permitted under the Plan, but in no
event prior to the earlier of;
(1) a Participant's termination of employment, Total and Permanent
Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the proven financial hardship of a Participant, subject to the
limitations of Section 11.8;
(4) the termination of the Plan without the existence at the time of
Plan termination of another defined contribution plan (other than an
employee stock ownership plan as defined in Code Section 4975(e)(7)) or
the establishment of a successor defined contribution plan (other than
an employee stock ownership plan as defined in Code Section 4975(e)(7))
by the Employer or an Affiliated Employer within the period ending
twelve months after distribution of all assets from the Plan maintained
by the Employer;
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(5) the date of the sale by the Employer to an entity that is not an
Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) with respect to a Participant who
continues employment with the corporation acquiring such assets; or
(6) the date of the sale by the Employer or an Affiliated Employer of
its interest in a subsidiary (within the meaning of Code Section
409(d)(3)) to an entity that is not an Affiliated Employer with respect
to a Participant who continues employment with such subsidiary.
(d) In any Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed the limitation imposed by Code Section 402(g), as in
effect for the calendar year in which such Plan Year began. This dollar
limitation shall be adjusted annually pursuant to the method provided in
Code Section 415(d) in accordance with Regulations.
(e) In the event a Participant has received a hardship distribution
pursuant to Regulation 1.401(k)-l(d)(2)(iii)(B) from any other plan maintained
by the Employer or from his Participant's Elective Account pursuant to
Section 11.8, then such Participant shall not be permitted to elect to have
Deferred Compensation contributed to the Plan on his behalf for a period of
twelve (12) months following the receipt of the distribution. Furthermore, the
dollar limitation under Code Section 402(g) shall be reduced, with respect to
the Participant's taxable year following the taxable year in which the
hardship distribution was made, by the amount of such Participant's Deferred
Compensation, if any, made pursuant to this Plan (and any other plan
maintained by the Employer) for the taxable year of the hardship distribution.
(f) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-l(b)) under
another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)), a
salary reduction arrangement (within the meaning of Code Section
3121(a)(5)(D), a deferred compensation plan under Code Section 457, or a trust
described in Code Section 501(c)(18) cumulatively exceed the limitation
imposed by Code Section 402(g) (as adjusted annually in accordance with the
method provided in Code Section 415(d) pursuant to Regulations) for such
Participant's taxable year, the Participant may, not later than March lst
following the close of his taxable year, notify the Administrator in
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writing of such excess and request that his Deferred Compensation under this
Plan be reduced by an amount specified by the Participant. In such event, the
Administrator shall direct the Trustee to distribute such excess amount (and any
Income allocable to such excess amount) to the Participant not later than the
first April 15th following the close of the Participant's taxable year.
Distributions in accordance with this paragraph may be made for any taxable year
of the Participant which begins after December 31, 1986. Any distribution of
less than the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and Income.
The amount distributed shall not exceed the Participant's Deferred Compensation
under the Plan for the taxable year. Any distribution on or before the last day
of the Participant's taxable year must satisfy each of the following conditions:
(1) the Participant shall designate the distribution as Excess Deferred
Compensation;
(2) the distribution must be made after the date on which the Plan
received the Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
For the purpose of this Section, "Income" means the amount of
income or loss allocable to a Participant's Excess Deferred Compensation and
shall be equal to the sum of the allocable gain or loss for the taxable year of
the Participant and the allocable gain or loss for the period between the end of
the taxable year of the Participant and the date of distribution ("gap period").
The income or loss allocable to each such period is calculated separately and is
determined by multiplying the income or loss allocable to the Participant's
Deferred Compensation for the respective period by a fraction. The numerator of
the fraction is the Participant's Excess Deferred Compensation for the taxable
year of the Participant. The denominator is the balance, as of the last day of
the respective period, of the Participant's Elective Account that is
attributable to the Participant's Deferred Compensation reduced by the gain
allocable to such total amount for the respective period and increased by the
loss allocable to such total amount for the respective period.
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable income or loss for the
"gap period". Under such "safe harbor method", allocable income or loss for the
"gap period" shall be deemed to equal ten percent (10%) of the income or loss
allocable to a Participant's Excess Deferred
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Compensation for the taxable year of the Participant multiplied by the
number of calendar months in the "gap period". For purposes of
determining the number of calendar months in the "gap period", a
distribution occurring on or before the fifteenth day of the month
shall be treated as having been made on the last day of the preceding
month and a distribution occurring after such fifteenth day shall be
treated as having been made on the first day of the next subsequent
month.
Income or loss allocable to any distribution of Excess
Deferred Compensation on or before the last day of the taxable year of
the Participant shall be calculated from the first day of the taxable
year of the Participant to the date on which the distribution is made
pursuant to either the "fractional method" or the "safe harbor method".
Notwithstanding the above, for the 1987 calendar year,
Income during the "gap period" shall not be taken into account.
(g) Notwithstanding the above, a Participant's Excess Deferred
Compensation shall be reduced, but not below zero, by any distribution
and/or recharacterization of Excess Contributions pursuant to Section
11.5(a) for the Plan Year beginning with or within the taxable year of
the Participant.
(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market value
of the Participant's Elective Account shall be used to provide benefits
to the Participant or his Beneficiary.
(i) Employer Elective Contributions made pursuant to this Section
may be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate, or other
short-term debt security acceptable to the Trustee until such time as
the allocations pursuant to Section 11.3 have been made.
(j) The Employer and the Administrator shall adopt a procedure
necessary to implement the salary reduction elections provided for
herein.
11.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit as
of each Anniversary Date, or other valuation date, all amounts
allocated to each such Participant as set forth herein.
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(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable period of time after
the date of receipt by the Administrator of such information, the
Administrator shall allocate such contribution as follows:
(1) With respect to the Employer's Elective Contribution made pursuant
to Section 11.1(a), to each Participant's Elective Account in an
amount equal to each such Participant's Deferred Compensation for the
year.
(2) With respect to the Employer's Matching Contribution made pursuant
to Section 11.1(b), to each Participant's Account, or Participant's
Elective Account as selected in E3 of the Adoption Agreement, in
accordance with Section 11.1(b).
Except, however, a Participant who is not credited with a Year of
Service during any Plan Year shall or shall not share in the
Employer's Matching Contribution for that year as provided in E3 of
the Adoption Agreement. However, for Plan Years beginning after 1989,
if this is a standardized Plan, a Participant shall share in the
Employer's Matching Contribution regardless of Hours of Service.
(3) With respect to the Employer's Non-Elective contribution made
pursuant to Section 11.1(c), to each Participant's Account in
accordance with the provisions of Sections 4.3(b)(2) or 4.3(b)(3),
whichever is applicable, 4.3(k) and 4.3(l).
(4) With respect to the Employer's Qualified Non-Elective Contribution
made pursuant to Section 11.1(d), to each Participant's Qualified
Non-Elective Contribution Account in the same proportion that each
such Participant's Compensation for the year bears to the total
Compensation of all Participants for such year. However, for any Plan
Year beginning prior to January 1, 1990, and if elected in the
non-standardized Adoption Agreement for any Plan Year beginning on or
after January 1, 1990, a Participant who is not credited with a Year
of Service during any Plan Year shall not share in the Employer's
Qualified Non-Elective Contribution for that year, unless required
pursuant to Section 4.3(h). In addition, the provisions of Sections
4.3(k) and 4.3(l) shall apply with respect to the allocation of the
Employer's Qualified Non-Elective contribution.
(c) Notwithstanding anything in the Plan to the contrary, for Plan
Years beginning after December 31, 1988,
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in determining whether a Non-Key Employee has received the required minimum
allocation pursuant to Section 4.3(f) such Non-Key Employee's Deferred
Compensation and matching contributions used to satisfy the "Actual
Deferral Percentage" test pursuant to Section 11.4(a) or the "Actual
Contribution Percentage" test of Section 11.6(a) shall not be taken into
account.
(d) Notwithstanding anything herein to the contrary, participants who
terminated employment during the Plan Year shall share in the salary
reduction contributions made by the Employer for the year of termination
without regard to the Hours of Service credited.
(e) Notwithstanding anything herein to the contrary (other than
Sections 11.3(d) and 11.3(g)), any Participant who terminated employment
during the Plan Year for reasons other than death, Total and Permanent
Disability, or retirement shall or shall not share in the allocations of
the Employer's Matching Contribution made pursuant to Section 11.1(b), the
Employer's Non-Elective contributions made pursuant to Section 11.1(c), the
Employer's Qualified Non-Elective Contribution made pursuant to Section
11.1(d), and Forfeitures as provided in the Adoption Agreement.
Notwithstanding the foregoing, for Plan Years beginning after 1989, if this
is a standardized Plan, any such terminated Participant shall share in such
allocations provided the terminated Participant completed more than 500
Hours of Service.
(f) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability, or
retirement shall share in the allocation of the Employer's Matching
Contribution made pursuant to Section 11.1(b), the Employer's Non-Elective
Contributions made pursuant to Section 11.1(c), the Employer's Qualified
Non-Elective Contribution made pursuant to Section 11.1(d), and Forfeitures
as provided in this Section, regardless of whether they completed a Year of
service during the Plan Year.
(g) Notwithstanding any election in the Adoption Agreement to the
contrary, if this is a non-standardized Plan that would otherwise fail to
meet the requirements of Code Sections 401(a)(26), 410(b)(1), or
410(b)(2)(A)(i) and the Regulations thereunder because Employer matching
Contributions made pursuant to Section 11.1(b), Employer Non-Elective
Contributions made pursuant to Section 11.1(c) or Employer Qualified
Non-Elective Contributions made pursuant to Section 11.1(d) have not been
allocated to a sufficient number or percentage of Participants for a Plan
Year, then the following rules shall apply:
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(1) The group of Participants eligible to share in the respective
contributions for the Plan Year shall be expanded to include the
minimum number of Participants who would not otherwise be eligible as
are necessary to satisfy the applicable test specified above. The
specific participants who shall become eligible under the terms of
this paragraph shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly situated
Participants, have completed the greatest number of Hours of Service
in the Plan Year.
(2) If after application of paragraph (1) above, the applicable test
is still not satisfied, then the group of Participants eligible to
share for the Plan Year shall be further expanded to include the
minimum number of Participants who are not actively employed on the
last day of the Plan Year as are necessary to satisfy the applicable
test. The specific Participants who shall become eligible to share
shall be those Participants, when compared to similarly situated
Participants, who have Completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
11.4 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1986, the annual allocation derived from Employer Elective
Contributions and Qualified Non-Elective Contributions to a Participant's
Elective Account and Qualified Non-Elective Account shall satisfy one of
the following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group multiplied
by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group shall not be more
than two percentage points. Additionally, the "Actual Deferral
Percentage" for the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group multiplied by 2. The provisions of Code Section
401(k)(3) and Regulation 1.401(k)-l(b) are incorporated herein by
reference.
However, for Plan Years beginning after December 31, 1988, to prevent
the multiple use of the alternative method described in (2) above and
Code
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Section 401(m)(9)(A), any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 11.2 and to make Employee
contributions or to receive matching contributions under this Plan or
under any other plan maintained by the Employer or an Affiliated
Employer shall have his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2, the provisions of which are incorporated herein
by reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the average of
the ratios, calculated separately for each Participant in such group, of
the amount of Employer Elective Contributions and Qualified Non-Elective
Contributions allocated to each Participant's Elective Account and
Qualified Non-Elective Account for such Plan Year, to such Participant's
"414(s) Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each group, for
Plan Years beginning after December 31, 1988, shall be calculated to the
nearest one-hundredth of one percent of the Participant's "414(s)
Compensation". Employer Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are made under this
Plan or any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year,
the following shall apply:
(1) The combined actual deferral ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be the
greater of: (i) the ratio determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all eligible Family Members
who are Highly Compensated Participants without regard to family
aggregation; and (ii) the ratio determined by aggregating Employer
Elective Contributions and "414(s) Compensation" of all eligible
Family Members (including Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s) Compensation" for Plan Years
beginning after December 31, 1988, Family Members shall include only
the affected Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
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(2) The Employer Elective Contributions and "414(s) Compensation" of
all Family Members shall be disregarded for purposes of determining
the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in paragraph
(1) above.
(3) If a Participant is required to be aggregated as a member of more
than one family group in a plan, all Participants who are members of
those family groups that include the Participant are aggregated as one
family group in accordance with paragraphs (1) and (2) above.
(d) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 401(b)(2)(A)(ii) as in effect
for Plan Years beginning after December 31, 1988), the cash or deferred
arrangements included in such plans shall be treated as one arrangement. In
addition, two or more cash or deferred arrangements may be considered as a
single arrangement for purposes of determining whether or not such
arrangements satisfy code Sections 401(a)(4), 410(b) and 401(k). In such a
case, the cash or deferred arrangements included in such plans and the
plans including such arrangements shall be treated as one arrangement and
as one plan for purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k). For plan years beginning after December 31, 1989, plans
may be aggregated under this paragraph (e) only if they have the same plan
year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(k).
(e) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two (2) or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part of an
employee stock ownership plan as defined in Code Section 4975(e)(7) for
Plan Years beginning after December 31, 1988) of the Employer or an
Affiliated Employer, all such cash or deferred arrangements shall be
treated as one cash or deferred arrangement for the purpose of determining
the actual deferral ratio with respect to such Highly Compensated
Participant. However, for Plan Years beginning after December 31, 1988, if
the cash or deferred arrangements have different Plan Years, this paragraph
shall
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be applied by treating all cash or deferred arrangements ending with or
within the same calendar year as a single arrangement.
11.5 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions and Qualified Non-Elective Contributions do not satisfy one of the
tests set forth in Section 11.4, for Plan Years beginning after December 31,
1986, the Administrator shall adjust Excess Contributions pursuant to the
options set forth below:
(a) on or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him and/or at his election recharacterized as
a voluntary Employee contribution pursuant to Section 4.7 until one of the
tests set forth in Section 11.4 is satisfied, or until his actual deferral
ratio equals the actual deferral ratio of the Highly Compensated
Participant having the second highest actual deferral ratio. This process
shall continue until one of the tests set forth in Section 11.4 is
satisfied. For each Highly Compensated Participant, the amount of Excess
Contributions is equal to the Elective Contributions and Qualified
Non-Elective Contributions made on behalf of such Highly Compensated
Participant (determined prior to the application of this paragraph) minus
the amount determined by multiplying the Highly Compensated Participant's
actual deferral ratio (determined after application of this paragraph) by
his "414(s) Compensation". However, in determining the amount of Excess
Contributions to be distributed and/or recharacterized with respect to an
affected Highly Compensated Participant as determined herein, such amount
shall be reduced by any Excess Deferred Compensation previously distributed
to such affected Highly Compensated Participant for his taxable year ending
with or within such Plan Year. Any distribution and/or recharacterization
of Excess Contributions shall be made in accordance with the following:
(1) With respect to the distribution of Excess Contributions pursuant
to (a) above, such distribution;
(i) may be postponed but not later than the close of the Plan
Year following the Plan Year to which they are allocable;
(ii) shall be made first from unmatched Deferred Compensation
and, thereafter, simultaneously from Deferred Compensation which
is matched and matching contributions which relate to such
Deferred Compensation. However, any such matching
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contributions which are not vested shall be forfeited in lieu of
being distributed;
(iii) shall be made from Qualified Non-Elective Contributions
only to the extent that Excess Contributions exceed the balance
in the Participant's Elective Account attributable to Deferred
Compensation and Employer matching contributions.
(iv) shall be adjusted for Income; and
(v) shall be designated by the Employer as a distribution of
Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess Contributions
pursuant to (a) above, such recharacterized amounts:
(i) shall be deemed to have occurred on the date on which the
last of those Highly Compensated Participants with Excess
Contributions to be recharacterized is notified of the
recharacterization and the tax consequences of such
recharacterization;
(ii) for Plan Years ending on or before August 8, 1988, may be
postponed but not later than October 24, 1988;
(iii) shall not exceed the amount of Deferred Compensation on
behalf of any Highly Compensated Participant for any Plan Year;
(iv) shall be treated as voluntary Employee contributions for
purposes of Code Section 401(a)(4) and Regulation 1.401(k)-l(b).
However, for purposes of Sections 2.2 and 4.3(f), recharacterized
Excess Contributions continue to be treated as Employer
contributions that are Deferred Compensation. For Plan Years
beginning after December 31, 1988, Excess Contributions
recharacterized as voluntary Employee contributions shall
continue to be nonforfeitable and subject to the same
distribution rules provided for in Section 11.2(c);
(v) which relate to Plan Years ending on or before October 24,
1988, may be treated as either Employer contributions or
voluntary Employee contributions and therefore shall not be
subject to the restrictions of Section 11.2(c);
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(vi) are not permitted if the amount recharacterized plus
voluntary Employee contributions actually made by such Highly
Compensated Participant, exceed the maximum amount of voluntary
Employee contributions (determined prior to application of
Section 11.6) that such Highly Compensated Participant is
permitted to make under the Plan in the absence of
recharacterization;
(vii) shall be adjusted for Income.
(3) Any distribution and/or recharacterization of less than the entire
amount of Excess Contributions shall be treated as a pro rata
distribution and/or recharacterization of Excess Contributions and
Income.
(4) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose actual deferral ratio is
determined under the family aggregation rules shall be accomplished as
follows:
(i) If the actual deferral ratio for the Highly Compensated
Participant is determined in accordance with Section
11.4(c)(1)(ii), then the actual deferral ratio shall be reduced
as required herein and the Excess Contributions for the family
unit shall be allocated among the Family Members in proportion to
the Elective Contributions of each Family Member that were
combined to determine the group actual deferral ratio.
(ii) if the actual deferral ratio for the Highly Compensated
Participant is determined under Section 11.4(c)(1)(i), then the
actual deferral ratio shall first be reduced as required herein,
but not below the actual deferral ratio of the group of Family
Members who are not Highly Compensated Participants without
regard to family aggregation. The Excess Contributions resulting
from this initial reduction shall be allocated (in proportion to
Elective Contributions) among the Highly Compensated Participants
whose Elective Contributions were combined to determine the
actual deferral ratio. If further reduction is still required,
then Excess Contributions resulting from this further reduction
shall be determined by taking into account the contributions of
all Family Members and shall be allocated among them in
proportion to their respective Elective Contributions.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer shall make a special Qualified
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Non-Elective Contribution on behalf of Non-Highly Compensated Participants
in an amount sufficient to satisfy one of the tests set forth in Section
11.4(a). Such contribution shall be allocated to the Participant's
Qualified Non-Elective Account of each Non-Highly Compensated Participant
in the same proportion that each Non-Highly Compensated Participant's
Compensation for the year bears to the total Compensation of all Non-Highly
Compensated Participants.
(c) For purposes of this Section, "Income" means the income or loss
allocable to Excess Contributions which shall equal the sum of the
allocable gain or loss for the Plan Year and the allocable gain or loss for
the period between the end of the Plan Year and the date of distribution
("gap period"). The income or loss allocable to Excess Contributions for
the Plan Year and the "gap period" is calculated separately and is
determined by multiplying the income or loss for the Plan Year or the "gap
period" by a fraction. The numerator of the fraction is the Excess
Contributions for the Plan Year. The denominator of the fraction is the
total of the Participant's Elective Account attributable to Elective
Contributions and the Participant's Qualified Non-Elective Account as of
the end of the Plan Year or the "gap period", reduced by the gain allocable
to such total amount for the Plan Year or the "gap period" and increased by
the loss allowable to such total amount for the Plan Year or the "gap
period".
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable Income for the "gap
period". Under such "safe harbor method", allocable Income for the "gap
period" shall be deemed to equal ten percent (10%) of the Income allocable
to Excess Contributions for the Plan Year of the Participant multiplied by
the number of calendar months in the "gap period". For purposes of
determining the number of calendar months in the "gap period", a
distribution occurring on or before the fifteenth day of the month shall be
treated as having been made on the last day of the preceding month and a
distribution occurring after such fifteenth day shall be treated as having
been made on the first day of the next subsequent month.
Notwithstanding the above, for Plan Years which began in 1987,
Income during the "gap period" shall not be taken into account.
(d) Any amounts not distributed or recharacterized within 2 1/2 months
after the end of the Plan Year shall be subject to the 10% Employer excise
tax imposed by Code Section 4979.
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11.6 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage", for Plan Years beginning
after the later of the Effective Date of this Plan or December 31, 1986,
for the Highly Compensated Participant group shall not exceed the greater
of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the Non-Highly
Compensated Participant group, or such percentage for the Non-Highly
Compensated Participant group plus 2 percentage points. However, for
Plan Years beginning after December 31, 1988, to prevent the multiple
use of the alternative method described in this paragraph and Code
Section 401(m)(9)(A), any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 11.2 or any other cash or
deferred arrangement maintained by the Employer or an Affiliated
Employer and to make Employee contributions or to receive matching
contributions under any plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio reduced
pursuant to Regulation 1.401(m)-2. The provisions of Code Section
401(m) and Regulations 1.401(m)-l(b) and 1.401(m)-2 are incorporated
herein by reference.
(b) For the purposes of this Section and Section 11.7, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group,
the average of the ratios (calculated separately for each Participant in
each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 11.1(b) (to the extent such matching contributions are not
used to satisfy the tests set forth in Section 11.4), voluntary
Employee contributions made pursuant to Section 4.7 and Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.5 on behalf of each such Participant for such
Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
11.7(d), only Employer matching contributions contributed to the Plan prior
to the end of the succeeding Plan Year shall be considered. In addition,
the Administrator may elect to take into account,
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with respect to Employees eligible to have Employer matching contributions
made pursuant to Section 11.1(b) or voluntary Employee contributions made
pursuant to Section 4.7 allocated to their accounts, elective deferrals (as
defined in Regulation 1.402(g)-l(b)) and qualified non-elective
contributions (as defined in Code Section 401(m)(4)(C)) contributed to any
plan maintained by the Employer. Such elective deferrals and qualified
non-elective contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-l(b)(2) which is incorporated
herein by reference. However, for Plan Years beginning after December 31,
1988, the Plan Year must be the same as the plan year of the plan to which
the elective deferrals and the qualified non-elective contributions are
made.
(d) For the purpose of determining the actual contribution ratio of a
Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Employee is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
(1) The combined actual contribution ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be the
greater of: (i) the ratio determined by aggregating Employer matching
contributions made pursuant to Section 11.1(b) (to the extent such
matching contributions are not used to satisfy the tests set forth in
Section 11.4), voluntary Employee contributions made pursuant to
Section 4.7, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to section 11.5 and "414(s)
Compensation" of all eligible Family Members who are Highly
Compensated Participants without regard to family aggregation; and
(ii) the ratio determined by aggregating Employer matching
contributions made pursuant to Section 11.1(b) (to the extent such
matching contributions are not used to satisfy the tests set forth in
Section 11.4), voluntary Employee contributions made pursuant to
Section 4.7, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 11.5 and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000 limit to
"414(s) Compensation" for Plan Years beginning after December 31,
1988, Family Members shall include only the affected Employee's spouse
and any lineal descendants who have not attained age 19 before the
close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section
11.1(b) (to the extent such matching contributions are not used to
satisfy the tests set
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forth in Section 11.4), voluntary Employee contributions made pursuant
to Section 4.7, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 11.5 and "414(s)
Compensation" of all Family Members shall be disregarded for purposes
of determining the "Actual Contribution Percentage" of the Non-Highly
Compensated Participant group except to the extent taken into account
in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of more
than one family group in a plan, all Participants who are members of
those family groups that include the Participant are aggregated as one
family group in accordance with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one
plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii) as in effect for
Plan Years beginning after December 31, 1988), such plans shall be treated
as one plan. In addition, two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made may be
considered as a single plan for purposes of determining whether or not such
plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case,
the aggregated plans must satisfy this Section and Code Sections 401(a)(4),
410(b) and 401(m) as though such aggregated plans were a single plan. For
plan years beginning after December 31, 1989, plans may be aggregated under
this paragraph only if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) may not be aggregated with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a Participant under two or
more plans (other than an employee stock ownership plan as defined in Code
Section 4975(e)(7) for Plan Years beginning after December 31, 1988) which
are maintained by the Employer or an Affiliated Employer to which matching
contributions, Employee contributions, or both, are made, all such
contributions on behalf of such Highly Compensated Participant shall be
aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, for Plan
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Years beginning after December 31, 1988, if the plans have different plan
years, this paragraph shall be applied by treating all plans ending with or
within the same calendar year as a single plan.
(g) For purposes of Section 11.6(a) and 11.7, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to have matching contributions made pursuant to Section
11.1(b) (whether or not a deferred election was made or suspended pursuant
to Section 11.2(e)) allocated to his account for the Plan Year or to make
salary deferrals pursuant to Section 11.2 (if the Employer uses salary
deferrals to satisfy the provisions of this Section) or voluntary Employee
contributions pursuant to Section 4.7 (whether or not voluntary Employee
contributions are made) allocated to his account for the Plan Year.
(h) For purposes of this Section, "Matching Contribution" shall mean
an Employer contribution made to the Plan, or to a contract described in
Code Section 403(b), on behalf of a Participant on account of an Employee
contribution made by such Participant, or on account of a participant's
deferred compensation, under a plan maintained by the Employer.
11.7 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that for Plan Years beginning after December 31,
1986, the "Actual Contribution Percentage" for the Highly Compensated
Participant group exceeds the "Actual Contribution Percentages for the
Non-Highly Compensated Participant group pursuant to Section 11.6(a), the
Administrator (on or before the fifteenth day of the third month following
the end of the Plan Year, but in no event later than the close of the
following Plan Year) shall direct the Trustee to distribute to the Highly
Compensated Participant having the highest actual contribution ratio, his
portion of Excess Aggregate Contributions (and Income allocable to such
contributions) or, if forfeitable, forfeit such non-Vested Excess Aggregate
Contributions attributable to Employer matching contributions (and Income
allocable to such Forfeitures) until either one of the tests set forth in
Section 11.6(a) is satisfied, or until his actual contribution ratio equals
the actual contribution ratio of the Highly Compensated Participant having
the second highest actual contribution ratio. This process shall continue
until one of the tests set forth in Section 11.6(a) is satisfied. The
distribution and/or Forfeiture of Excess Aggregate Contributions shall be
made in the following order:
(1) Employer matching contributions distributed and/or forfeited
pursuant to Section 11.5(a)(1);
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(2) Voluntary Employee contributions including Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5(a)(2);
(3) Remaining Employer matching contributions.
(b) Any distribution or Forfeiture of less than the entire amount of
Excess Aggregate Contributions (and Income) shall be treated as a pro rata
distribution of Excess Aggregate Contributions and Income. Distribution of
Excess Aggregate Contributions shall be designated by the Employer as a
distribution of Excess Aggregate Contributions (and Income). Forfeitures of
Excess Aggregate Contributions shall be treated in accordance with Section
4.3. However, no such Forfeiture may be allocated to a Highly Compensated
Participant whose contributions are reduced pursuant to this Section.
(c) Excess Aggregate Contributions attributable to amounts other than
voluntary Employee contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
(d) For the purposes of this Section and Section 11.6, "Excess
Aggregate Contributions" means, with respect to any Plan Year, the excess
of:
(1) the aggregate amount of Employer matching contributions made
pursuant to Section 11.1(a) (to the extent such contributions are
taken into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or elective
deferrals taken into account pursuant to Section 11.6(c) actually made
on behalf of the Highly Compensated Participant group for such Plan
Year, over
(2) the maximum amount of such contributions permitted under the
limitations of Section 11.6(a).
(e) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the total Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken into
account pursuant to Section 11.6(a)), voluntary Employee contributions made
pursuant to Section 4.7, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 11.5 and any Qualified
Non-Elective Contributions or elective deferrals taken into account
pursuant to Section 11.6(c) on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph)
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minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application of
this paragraph) by his "414(s) Compensation". The actual contribution ratio
must be rounded to the nearest one-hundredth of one percent for Plan Years
beginning after December 31, 1988. In no case shall the amount of Excess
Aggregate Contribution with respect to any Highly Compensated Participant
exceed the amount of Employer matching contributions made pursuant to
Section 11.1(b) (to the extent taken into account pursuant to Section
11.6(a)), voluntary Employee contributions made pursuant to Section 4.7,
Excess Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.5 and any Qualified Non-Elective Contributions or
elective deferrals taken into account pursuant to Section 11.6(c) on behalf
of such Highly Compensated Participant for such Plan Year.
(f) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the Plan Year or which
are treated as voluntary Employee contributions due to recharacterization
pursuant to Section 11.5.
(g) The determination and correction of Excess Aggregate Contributions
of a Highly Compensated Participant whose actual contribution ratio is
determined under the family aggregation rules shall be accomplished as
follows:
(1) if the actual contribution ratio for the Highly Compensated
Participant is determined in accordance with Section 11.6(d)(1), then
the actual contribution ratio shall he reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken
into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or elective
deferrals taken into account pursuant to Section 11.6(c) of each
Family Member that were combined to determine the group actual
contribution ratio.
(2) If the actual contribution ratio for the Highly Compensated
Participant is determined under Section 11.6(d)(2), then the actual
contribution ratio shall
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first be reduced, as required herein, but not below the actual
contribution ratio of the group of Family Members who are not Highly
Compensated Participants without regard to family aggregation. The
Excess Aggregate Contributions resulting from this initial reduction
shall be allocated among the Highly Compensated Participants whose
Employer matching contributions made pursuant to Section 11.1(b) (to
the extent taken into account pursuant to Section 11.6(a)), voluntary
Employee contributions made pursuant to Section 4.7, Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.5 and any Qualified Non-Elective Contributions
or elective deferrals taken into account pursuant to Section 11.6(c)
were combined to determine the actual contribution ratio. If further
reduction is still required, then Excess Aggregate Contributions
resulting from this further reduction shall be determined by taking
into account the contributions of all Family Members and shall be
allocated among them in proportion to their respective Employer
matching contributions made pursuant to Section 11.1(b) (to the extent
taken into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or elective
deferrals taken into account pursuant to Section 11.6(c).
(h) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 11.6. Such
contribution shall be allocated to the Participant's Qualified Non-Elective
Account of each Non-Highly Compensated Participant in the same proportion
that each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated Participants.
A separate accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 11.4.
(i) For purposes of this Section, "Income" means the income or loss
allocable to Excess Aggregate Contributions which shall equal the sum of
the allocable gain or loss for the Plan Year and the allocable gain or loss
for the period between the end of the Plan Year and the date of
distribution ("gap period"). The income or loss allocable to Excess
Aggregate Contributions for the Plan Year and the "gap period" is
calculated separately and is determined by multiplying the income or loss
for the Plan Year or the "gap
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period" by a fraction. The numerator of the fraction is the Excess
Aggregate Contributions for the Plan Year. The denominator of the fraction
is the total Participant's Account and Voluntary Contribution Account
attributable to Employer matching contributions subject to Section 11.6,
voluntary Employee contributions made pursuant to Section 4.7, and any
Qualified Non-Elective Contributions and elective deferrals taken into
account pursuant to Section 11.6(c) as of the end of the Plan Year or the
"gap period", reduced by the gain allocable to such total amount for the
Plan Year or the "gap period" and increased by the loss allocable to such
total amount for the Plan Year or the "gap period".
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable Income for the "gap
period". Under such "safe harbor method", allocable Income for the "gap
period" shall be deemed to equal ten percent (10%) of the Income allocable
to Excess Aggregate Contributions for the Plan Year of the Participant
multiplied by the number of calendar months in the "gap period". For
purposes of determining the number of calendar months in the "gap period",
a distribution occurring on or before the fifteenth day of the month shall
be treated as having been made on the last day of the preceding month and a
distribution occurring after such fifteenth day shall be treated as having
been made on the first day of the next subsequent month.
The Income allocable to Excess Aggregate Contributions resulting
from recharacterization of Elective contributions shall be determined and
distributed as if such recharacterized Elective Contributions had been
distributed as Excess Contributions.
Notwithstanding the above, for Plan Years which began in 1987,
Income during the "gap period" shall not be taken into account.
11.8 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan Year up
to the lesser of (1) 100% of his accounts as specified in the Adoption
Agreement valued as of the last Anniversary Date or other valuation date or
(2) the amount necessary to satisfy the immediate and heavy financial need
of the Participant. Any distribution made pursuant to this Section shall be
deemed to be made as of the first day of the Plan Year or, if later, the
valuation date immediately preceding the date of distribution, and the
account from which the distribution is made shall be reduced accordingly.
Withdrawal under this Section shall be authorized only if the distribution
is on
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account of one of the following or any other items permitted by the
Internal Revenue Service:
(1) Medical expenses described in Code Section 213(d) incurred by the
Participant, his spouse, or any of his dependents (as defined in Code
Section 152);
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, his spouse, children, or
dependents; or
(4) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No such distribution shall be made from the Participant's Account
until such Account has become fully Vested.
(c) No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other
facts as are known to the Administrator, determines that all of the
following conditions are satisfied:
(1) The distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer, provide
that the Participant's elective deferrals and voluntary Employee
contributions will be suspended for at least twelve (12) months after
receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer, provide
that the Participant may not make elective deferrals for the
Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such next taxable year less the amount of such
Participant's elective deferrals for the taxable year of the hardship
distribution.
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(d) Notwithstanding the above, distributions from the Participant's
Elective Account and Qualified Non-Elective Account pursuant to this
Section shall be limited solely to the Participant's Deferred Compensation
and any income attributable thereto credited to the Participant's Elective
Account as of December 31, 1988.
(e) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 411(a)(11) and 417 and the Regulations thereunder.
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AMENDMENT TO THE
KIBBLE & PRENTICE, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
1. Section 1.9 is amended by the addition of the following:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provisions of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(b) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
2. Section 6.13 is amended by the addition of the following:
If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(2) the participant, after receiving the notice, affirmatively elects a
distribution.
<PAGE> 121
AMENDMENT TO THE
KIBBLE & PRENTICE, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
Kibble & Prentice, Inc. Regional Prototype Defined Contribution Plan and Trust
is hereby amended as follows:
1. Section 1.9 is amended by replacing the first paragraph with the following
paragraphs:
"Compensation" with respect to any Participant means one of the following
as elected in the Adoption Agreement. However, compensation for any
Self-Employed Individual shall be equal to his Earned Income.
i. Information required to be reported under sections 6041, 6051 and
6052 (Wages, Tips and Other Compensation Box on Form W-2).
Compensation is defined as wages as defined in section 3401(a) and all
other payments of compensation to an employee by the employer (in the
course of the employer's trade or business) for which the employer is
required to furnish the employee a written statement under sections
6041(d) and 6051(a)(3) of the Code. Compensation must be determined
without regard to any rules under section 3401(a) that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in section 3401(a)(2)).
ii. Section 3401(a) wages. Compensation is defined as wages within the
meaning of section 3401(a) for the purposes of income tax withholding
at the source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of
the employment or the services performed (such as the exception for
agricultural labor in section 3401(a)(2)).
iii. 415 safe-harbor compensation. Compensation is defined as wages,
salaries, and fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment
with the employer maintaining the plan to the extent that the amounts
are includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits and reimbursements or other expense
allowances under a non-accountable plan (as described in 1.62-2(c)),
and excluding the following:
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a. Employer contributions to a plan of deferred compensation which
are not includible in the employee's gross income for the taxable
year in which contributed, or employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the employee, or any distributions from a plan
of deferred compensation;
b. Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
c. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
d. Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of
the employee).
If, in connection with the adoption of this or any other amendment, the
definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of such amendment,
Compensation means compensation determined pursuant to the Plan then in
effect.
2. Section 1.14 is amended in its entirety to read as follows:
"Elective Contribution" means the Employer's contributions to the Plan that
are made pursuant to the Participant's deferral election pursuant to Section
11.2, excluding any such amounts distributed as "excess annual additions"
pursuant to Section 4.4. in addition, if selected in E3 of the Adoption
Agreement, the Employer's matching contribution shall or shall not be considered
an Elective Contribution for purposes of the Plan, as provided in Section
11.1(b). Elective Contributions shall be subject to the requirements of Sections
11.2(b) and 11.2(c) and shall further be required to satisfy the discrimination
requirements of Regulation 1.401(k)-1(b)(3), the provisions of which are
specifically incorporated herein by reference.
3. Section 1.20 is amended in its entirety to read as follows:
"Excess Deferred Compensation" means with respect to any taxable year of a
Participant, the excess of the aggregate amount of such Participant's Deferred
Compensation and the elective deferrals pursuant to Section 11.2(f) actually
made on behalf of
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such Participant for such taxable year, over the dollar limitation provided for
in Code Section 402(g), which is incorporated herein by reference. Excess
Deferred Compensation shall be treated as an "annual addition" pursuant to
Section 4.4 when contributed to the Plan unless distributed to the affected
Participant not later than the first April 15th following the close of the
Participant's taxable year.
4. Section 1.26 is amended in its entirety to read as follows:
"414(s) Compensation" with respect to any Employee means his Compensation
as defined in Section 1.9. However, for purposes of this Section, Compensation
shall be Compensation paid and, if selected in the Adoption Agreement, shall
only be recognized as of an Employee's effective date of participation. If, in
connection with the adoption of this or any other amendment, the definition of
"414(s) Compensation" has been modified, then, for Plan Years prior to the Plan
Year which includes the adoption date of such amendment, "414(s) Compensation"
means compensation determined pursuant to the Plan then in effect.
5. Section 1.27 ("415 Compensation") is amended by the addition of the
following paragraph:
If, in connection with the adoption of this or any other amendment, the
definition of "415 Compensation" has been modified, then, for Plan Years prior
the Plan Year which includes the adoption date of such amendment, "415
Compensation" means compensation determined pursuant to the Plan then in effect.
6. Section 4.4(a)(4) and 4.4(a)(4)(i) are amended to read as follows:
(4) If there is an excess amount pursuant to Section 4.4(a)(2) or Section
4.5, the excess will be disposed of in one or the following manners,
as uniformly determined by the Plan Administrator for all Participants
similarly situated:
(i) Any Deferred Compensation or nondeductible Voluntary Employee
Contributions, to the extent they would reduce the Excess Amount
will be distributed to the Participant;
7. Section 4.4(f)(2) is amended in its entirety to read as follows:
Compensation means a Participant's Compensation as elected in the Adoption
Agreement. However, regardless of any selection made in the Adoption Agreement,
"415 Compensation" shall exclude compensation which is not currently includible
in the Participant's gross income by reason of the application of Code Sections
125, 402(a)(8), 402(h)(1)(B), or 403(b).
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For limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation year is
the compensation actually paid or made available during such limitation year.
Notwithstanding the preceding sentence, compensation for a participant in a
defined contribution plan who is permanently and totally disabled (as defined in
section 22(e)(3) of the Internal Revenue Code) is the compensation such
participant would have received for the limitation year if the participant had
been paid at the rate of compensation paid immediately before becoming
permanently and totally disabled; such imputed compensation for the disabled
participant may be taken into account only if the participant is not a Highly
Compensated Employee and contributions made on behalf of such participant are
nonforfeitable when made.
8. Section 4.5(a) is amended in its entirety to read as follows:
(a) If as a result of the allocation of Forfeitures, a reasonable error in
estimating a Participant's annual compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any Participant under the limits of
Section 4.4, or other facts and circumstances to which Regulation 1.415-6(b)(6)
shall be applicable, the "annual additions" under this Plan would cause the
maximum provided in Section 4.4 to be exceeded, the Administrator shall treat
the excess in accordance with Section 4.4(a)(4).
9. Sections 6.11(a)(1) and (a)(4) are amended in their entirety to read as
follows:
(1) Medical expenses described in Code Section 213(d) incurred by the
Participant, his spouse, or any of his dependents (as defined in Code Section
152) or expenses necessary for these persons to obtain medical care;
(4) Payments of tuition and related educational fees for the next 12 months
of post-secondary education for the participant, his spouse, children, or
dependents;
10. Section 7.10 is amended by the addition of the following paragraphs:
(a) Notwithstanding any provision of the plan to the contrary, with respect
to distributions made after December 31, 1992, a Participant shall be permitted
to elect to have any "eligible rollover distribution" transferred directly to an
"eligible retirement plan" specified by the Participant. The Plan provisions
otherwise applicable to distributions continue to apply to the direct transfer
option. The Participant shall, in the time and manner prescribed by the
Administrator, specify the
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amount to be directly transferred and the "eligible retirement plan" to receive
the transfer. Any portion of a distribution which is not transferred shall be
distributed to the Participant.
(b) For purposes of this Section, the term "eligible rollover distribution"
means any distribution other than a distribution of substantially equal periodic
payments over the life or life expectancy of the Participant (or joint life or
joint life expectancies of the Participant and the designated beneficiary) or a
distribution over a period certain of ten years or more. Amounts required to be
distributed under Code Section 401(a)(9) are not eligible rollover
distributions. The direct transfer option described in subsection (a) applies
only to eligible rollover distributions which would otherwise be includible in
gross income if not transferred.
(c) For purposes of this Section, the term "eligible retirement plan" means
an individual retirement account as described in Code Section 408(a), an
individual retirement annuity as described in Code Section 408(b), an annuity
plan as described in Code Section 403(a), or a defined contribution plan as
described in code Section 401(a) which is exempt from tax under Code Section
501(a) and which accepts rollover distributions.
(d) The election described in subsection (a) also applies to the surviving
spouse after the Participant's death; however, distributions to the surviving
spouse may only be transferred to an individual retirement account or individual
retirement annuity. For purposes of subsection (a), a spouse or former spouse
who is the alternate payee under a qualified domestic relations order as defined
in Code Section 414(p) will be treated as the Participant.
11. Section 11.2(d) is amended in its entirety to read as follows:
(d) In any Plan Year beginning after December 31, 1986, a Participant's
Deferred Compensation made under this Plan and all other plans, contracts or
arrangements of the Employer maintaining this Plan shall not exceed the
limitation imposed by Code Section 402(g), as in effect for the calendar year in
which such Plan Year began. If such dollar limitation is exceeded solely from
elective deferrals made under this Plan or any other plan maintained by the
Employer, a Participant will be deemed to have notified the Administrator of
such excess amount which shall be distributed in a manner consistent with
Section 11.2(f). This dollar limitation shall be adjusted annually pursuant to
the method provided in Code Section 415(d) in accordance with Regulations.
12. Section 11.2(f) is amended by the addition of the following paragraph after
paragraph (f)(3) to read as follows:
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Any distribution under this Section shall be made first from unmatched
Deferred Compensation and, thereafter, simultaneously from Deferred Compensation
which is matched and matching contributions which relate to such Deferred
Compensation. However, any such matching contributions which are not Vested
shall be forfeited in lieu of being distributed.
13. Section 11.2(f) is amended by the addition of the following paragraph as
the second to the last paragraph of such subsection:
Notwithstanding the above, for any distribution under this Section which is
made after August 15, 1991, such distribution shall not include any income for
the "gap period". Further provided, for any distribution under this Section
which is made after August 15, 1991, the amount of Income may be computed using
a reasonable method that is consistent with Section 4.3(c), provided such method
is used consistently for all Participants and for all such distributions for the
Plan Year.
14. Section 11.5(c) is amended by the addition of the following paragraph as
the second to the last paragraph of such subsection:
Notwithstanding the above, for any distribution under this Section which is
made after August 15, 1991, such distribution shall not include any income for
the "gap period". Further provided, for any distribution under this Section
which is made after August 15, 1991, the amount of Income may be computed using
a reasonable method that is consistent with Section 4.3(c), provided such method
is used consistently for all Participants and for all such distributions for the
Plan Year.
15. Section 11.6(c) is amended in its entirety to read as follows;
(c) For purposes of determining the "Actual Contribution Percentage" and
the amount of Excess Aggregate Contributions pursuant to section 11.7(d), only
Employer matching contributions (excluding matching contributions forfeited or
distributed pursuant to Section 11.2(f), 11.5(a), or 11.7(a)) contributed to the
Plan prior to the end of the succeeding Plan Year shall be considered. In
addition, the Administrator may elect to take into account, with respect to
Employees eligible to have Employer matching contributions made pursuant to
Section 11.1(b) or voluntary Employee contributions made pursuant to Section 4.7
allocated to their accounts, elective deferrals (as defined in Regulation
1.402(g)-l(b)) and qualified non-elective contributions (as defined in Code
Section 401(m)(4)(C)) contributed to any plan maintained by the Employer. Such
elective deferrals and qualified non-elective contributions shall be treated as
Employer matching contributions subject to Regulation 1.401(m)-1(b)(2) which is
incorporated herein by reference. However, for Plan Years beginning after
December 31, 1988, the Plan Year must be the same as the plan year of the plan
to which
6
<PAGE> 127
the elective deferrals and the qualified non-elective contributions are made.
16. Section 11.7(i) is amended by the addition of the following paragraph as
the second to the last paragraph of such subsection:
Notwithstanding the above, for any distribution under this Section which is made
after August 15, 1991, such distribution shall not include any Income for the
"gap period". Further provided, for any distribution under this Section which is
made after August 15, 1991, the amount of Income may be computed using a
reasonable method that is consistent with Section 4.3(c), provided such method
is used consistently for all Participants and for all such distributions for the
Plan Year.
17. Sections 11.8(a)(1) and (a)(3) are amended in their entirety to read as
follows:
(1) Medical expenses described in Code Section 213(d) incurred by the
Participant, his spouse, or any of his dependents (as defined in Code Section
152) or expenses necessary for these persons to obtain medical care;
(2) Payment of tuition and related educational fees for the next 12 months
of post-secondary education for the Participant, his spouse, children, or
dependents; or
l8. Section 11.8(c)(1) is amended in its entirety to read as follows:
(1) The distribution is not in excess of the amount of the immediate and
heavy financial need of the Participant. The amount of the immediate and heavy
financial need may include any amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result from the
distribution.
19. Article XI is amended by the addition of the following:
Notwithstanding anything in this Article to the contrary, effective as of
the Plan Year in which this amendment becomes effective, the Actual Deferral
Percentage Test and the Actual contribution Percentage Test shall be applied
(and adjusted) by applying the Family Member aggregation rules of Code Section
414 (q)(6).
20. Section Ela. of the Adoption Agreement is amended in its entirety to read
as follows:
Compensation with respect to any Participant means:
1. ( ) Wages, Tips and other Compensation (Box 10 on Form W-2).
7
<PAGE> 128
2. ( ) Section 3401(a) wages (wages for withholding purposes).
3. ( ) 415 Safe-harbor compensation.
AND Compensation
( ) shall
( ) shall not
exclude (even if includible in gross income) reimbursements or other
expense allowances, fringe benefits (cash or noncash), moving expenses,
deferred compensation, and welfare benefits.
21. Section E3 of the 401(k) Adoption Agreement(s) is amended by the addition
of the following:
( ) Notwithstanding anything in the Plan to the contrary, all matching
contribution which relate to distributions of Excess Deferred
Compensation, Excess Contributions and Excess Aggregate Contributions
shall be Forfeited. (Select this option only if it is applicable.)
8
<PAGE> 129
AMENDMENT NUMBER ONE TO
PORTABLE SOFTWARE, INC.
401(K) PLAN
BY THIS AGREEMENT, Portable Software, Inc. 401(k) Plan (herein referred to
as the "Plan") is hereby amended as follows, effective as of November 1, 1995:
G1 LOANS TO PARTICIPANTS (Plan Section 7.4)
a. (X) Yes, loans may be made up to $50,000 or 1/2 Vested interest.
b. ( ) No, loans may not be made.
If YES, (check all that apply) ...
c. (X) loans shall be treated as a Directed Investment.
d. ( ) loans shall only be made for hardship or financial necessity.
e. (X) the minimum loan shall be $1,000.
f. ( ) $10,000 de minimis loans may be made regardless of Vested interest.
(If selected, plan may need security in addition to Vested
interest)
NOTE: Department of Labor Regulations require the adoption of a separate
written loan program setting forth the requirements outlined in Plan
Section 7.4.
IN WITNESS WHEREOF, this Amendment has been executed this
1st day of December, 1995.
By: /s/ PORTABLE SOFTWARE COMPUTER
-------------------------------
Employer
/s/ STERLING WILSON
-----------------------------------
Sterling Wilson, Trustee
/s/ MICHAEL HILTON
-----------------------------------
Michael Hilton, Trustee
<PAGE> 130
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned Secretary of Portable Software, Inc. (the Corporation)
hereby certifies that the following resolution was duly adopted by the board of
directors of the Corporation on 12/7/95, and that such resolution has not been
modified or rescinded as of the date hereof:
RESOLVED, that Amendment Number ONE to the 401(k) Profit Sharing Plan and
Trust effective November 1, 1995, presented to this meeting is hereby approved
and adopted and that the proper officers of the Corporation are hereby
authorized and directed to execute and deliver to the Trustee of the Plan one or
more counterparts of the amendment.
The undersigned further certifies that attached hereto as exhibit A, is
true copy of Amendment Number ONE to the Portable Software, Inc. 401(k) Plan
approved and adopted in the foregoing resolution.
/s/ STERLING WILSON
-----------------------------------
Secretary
Date: 12/7/95
-----------------------------
<PAGE> 1
EXHIBIT 10.06
CONCUR TECHNOLOGIES, INC.
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of _____________, 1998, is made by
and between Concur Technologies, Inc., a Delaware corporation (the "Company"),
and _________________, a director and/or officer of the Company (the
"Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary for the Company to contractually
indemnify officers and directors, and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify by
agreement its officers, directors, employees and agents, and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE> 2
1. DEFINITIONS.
1.1 Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or was a director or officer of a foreign or domestic corporation which
was a predecessor corporation of the Company or a subsidiary of the Company, or
was a director or officer of another enterprise or affiliate of the Company at
the request of, for the convenience of, or to represent the interests of such
predecessor corporation. The term "enterprise" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "expenses" includes
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other
out-of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement, "proceeding"
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
1.4 Subsidiary. For purposes of this Agreement, "subsidiary"
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue to
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, faithfully and to the best of his ability so
long as he is duly appointed or elected and qualified in accordance with the
applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that the Indemnitee may at any time and for
any reason resign from such position (subject to any contractual obligation that
the Indemnitee may have assumed apart from this Agreement) and that the Company
or any subsidiary shall have no obligation under this Agreement to continue the
Indemnitee in any such position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the extent
that the Board determines it to be economically reasonable, maintain a policy of
directors' and officers' liability insurance ("D&O Insurance"), on such terms
and conditions as may be approved by the Board.
2
<PAGE> 3
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
shall indemnify the Indemnitee:
4.1 Third Party Actions. If the Indemnitee is a person who was or
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) actually and reasonably incurred
by him in connection with the investigation, defense, settlement or appeal of
such proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; and
4.2 Derivative Actions. If the Indemnitee is a person who was or
is a party or is threatened to be made a party to any proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was an agent of the Company, or by reason of anything done or not
done by him in any such capacity, against any amounts paid in settlement of any
such proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement, or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company; except that no
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding
the foregoing, the Company shall not be obligated to indemnify the Indemnitee
for expenses or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) to the extent such have been paid directly to Indemnitee by D&O
Insurance.
5. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but not entitled, however, to indemnification for all of
the total amount thereof, the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to the indemnification.
3
<PAGE> 4
6. MANDATORY ADVANCEMENT OF EXPENSES.
6.1 Advancement. Subject to Section 9 below, the Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to repay such amounts advanced only if, and to the extent that, it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Company under the provisions of this Agreement, the Certificate of
Incorporation or Bylaws of the Company, the General Corporation Law of Delaware
or otherwise. The advances to be made hereunder shall be paid by the Company to
the Indemnitee within thirty (30) days following delivery of a written request
therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee to the extent such arise from a lawsuit filed directly by the Company
against the Indemnitee if an absolute majority of the members of the Board of
Directors reasonably determines in good faith, within thirty (30) days of the
Indemnitee's request to be advanced expenses, that the facts known to them at
the time such determination is made demonstrate clearly and convincingly that
the Indemnitee acted in bad faith. If such a determination is made, the
Indemnitee may have such decision reviewed by another forum, in the manner set
forth in Sections 8.3, 8.4 and 8.5 hereof, with all references therein to
"indemnification" being deemed to refer to "advancement of expenses", and the
burden of proof shall be on the Company to demonstrate clearly and convincingly
that, based on the facts known at the time, the Indemnitee acted in bad faith.
The Company may not avail itself of this Section 6.2 as to a given lawsuit if,
at any time after the occurrence of the activities or omissions that are the
primary focus of the lawsuit, the Company has undergone a change in control. For
this purpose a change in control shall mean a given shareholder or group of
affiliated shareholders increasing their beneficial ownership interest in the
Company by at least twenty (20) percentage points without advance Board
approval.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
4
<PAGE> 5
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (a) the Indemnitee shall have the right to employ his
own counsel in any such proceeding at the Indemnitee's expense; (b) the
Indemnitee shall have the right to employ his own counsel in connection with any
such proceeding, at the expense of the Company, if such counsel serves in a
review, observer, advice and counseling capacity and does not otherwise
materially control or participate in the defense of such proceeding; and (c) if
(i) the employment of counsel by the Indemnitee has been previously authorized
by the Company, (ii) the Indemnitee shall have reasonably concluded that there
may be a conflict of interest between the Company and the Indemnitee in the
conduct of any such defense or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
8.1 To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4.1 or
4.2 of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not
apply to the entire proceeding, the Company shall nonetheless indemnify the
Indemnitee unless the Company shall prove by clear and convincing evidence to a
forum listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 The Indemnitee shall be entitled to select the forum in which
the validity of the Company's claim under Section 8.2 hereof that the Indemnitee
is not entitled to indemnification will be heard from among the following,
except that the Indemnitee can select a forum consisting of the stockholders of
the Company only with the approval of the Company:
(a) A quorum of the Board consisting of directors who
are not parties to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel selected by the Indemnitee, and
reasonably approved by the Board, which counsel shall make such determination in
a written opinion; or
5
<PAGE> 6
(d) A panel of three arbitrators, one of whom is selected
by the Company, another of whom is selected by the Indemnitee, and the last of
whom is selected by the first two arbitrators so selected.
8.4 As soon as practicable, and in no event later than 30 days
after written notice of the Indemnitee's choice of forum pursuant to Section 8.3
above, the Company shall, at its own expense, submit to the selected forum in
such manner as the Indemnitee or the Indemnitee's counsel may reasonably
request, its claim that the Indemnitee is not entitled to indemnification; and
the Company shall act in the utmost good faith to assure the Indemnitee a
complete opportunity to defend against such claim.
8.5 If the forum listed in Section 8.3 hereof selected by the
Indemnitee determines that the Indemnitee is entitled to indemnification with
respect to a specific proceeding, such determination shall be final and binding
on the Company. If the forum listed in Section 8.3 hereof selected by the
Indemnitee determines that the Indemnitee is not entitled to indemnification
with respect to a specific proceeding, the Indemnitee shall have the right to
apply to the Court of Chancery of Delaware, the court in which that proceeding
is or was pending or any other court of competent jurisdiction, for the purpose
of determining whether the Indemnitee is entitled to indemnification and
enforcing the Indemnitee's right to indemnification pursuant to the Agreement.
8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, except with
respect to proceedings specifically authorized by the Board of Directors or
brought to establish or enforce a right to indemnification and/or advancement of
expenses under this Agreement, the charter documents of the Company or any
subsidiary, or any statute or law or otherwise, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee
hereunder for any amounts paid in settlement of a proceeding unless the Company
consents in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
6
<PAGE> 7
9.3 Securities Law Actions. To indemnify the Indemnitee on
account of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a
final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission takes
the position that indemnification for liabilities arising under the federal
securities law is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements, or otherwise, both as
to action in the Indemnitee's official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
11. GENERAL PROVISIONS
11.1 Interpretation of Agreement. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.
11.2 Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of the Agreement (including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraphs of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
7
<PAGE> 8
11.4 Subrogation. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary or desirable to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
11.7 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (a) if delivered by hand and receipted for by the party addressee or (b)
if mailed by certified or registered mail with postage prepaid, on the third
business day after the mailing date. Addresses for notice to either party are as
shown on the signature page of this Agreement, or as subsequently modified by
written notice.
11.8 Governing Law. This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
with Delaware.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
The parties hereto have entered into this Indemnity Agreement effective
as of the date first written above.
CONCUR TECHNOLOGIES, INC.
Address: 14715 Northeast 95th Street
Redmond, Washington 98052
By:
-------------------------------
Its:
------------------------------
INDEMNITEE:
--------------------------------
Address: --------------------------------
--------------------------------
[SIGNATURE PAGE TO CONCUR TECHNOLOGIES, INC. INDEMNITY AGREEMENT]
9
<PAGE> 1
EXHIBIT 10.07
================================================================================
PORTABLE SOFTWARE CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURCHASE AND SALE OF SERIES D PREFERRED STOCK...................... 1
1.1 Sale and Issuance of Series D Preferred Stock................ 1
1.2 Closing...................................................... 1
2. DEFINITIONS........................................................ 2
2.1 Material Adverse Event....................................... 2
2.2 Subsidiary................................................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO INVESTORS......... 2
3.1 Corporate Organization and Authority......................... 2
3.2 Capitalization............................................... 2
3.3 Subsidiaries................................................. 3
3.4 Authorization................................................ 4
3.5 Corporate Power.............................................. 4
3.6 Validity of Shares........................................... 4
3.7 No Conflict with Other Instruments........................... 5
3.8 Litigation................................................... 5
3.9 Title to Properties; Liens and Encumbrances.................. 5
3.10 Patents and Other Proprietary Rights......................... 5
3.11 Taxes........................................................ 6
3.12 Financial Statements......................................... 7
3.13 Changes...................................................... 7
3.14 Company's Contracts.......................................... 8
3.15 No Defaults, Violations, or Conflicts........................ 9
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.16 Insurance.................................................. 9
3.17 Private Offering........................................... 9
3.18 Prior Registration Rights.................................. 9
3.19 Disclosure................................................. 9
3.20 Distributions.............................................. 9
3.21 Employee Compensation Plans................................ 9
3.22 Employee Relations......................................... 10
3.23 Employee Proprietary Information and Inventions Agreement.. 10
3.24 Brokers and Finders........................................ 10
3.25 Corporate Documents........................................ 10
3.26 Governmental Consents...................................... 10
3.27 Permits.................................................... 10
3.28 Environmental and Safety Laws.............................. 11
3.29 Returns and Complaints..................................... 11
3.30 Manufacturing and Marketing Rights......................... 11
3.31 Section 83(b) Elections.................................... 11
3.32 Stock Restriction Agreements............................... 11
3.33 Real Property Holding Company.............................. 11
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS;
RESTRICTIONS ON TRANSFERABILITY.................................. 11
4.1 Authorization.............................................. 11
4.2 Brokers and Finders........................................ 12
4.3 Investment................................................. 12
4.4 No Public Market........................................... 12
4.5 Limitations on Transferability............................. 12
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.6 Experience................................................... 13
4.7 Legends...................................................... 13
4.8 Accredited Investor.......................................... 14
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING................... 14
5.1 Representations and Warrants................................. 14
5.2 Performance.................................................. 14
5.3 Qualifications............................................... 14
5.4 Opinion of Company's Counsel................................. 14
5.5 Board of Directors........................................... 14
5.6 Proceedings Satisfactory, Compliance Certificate............. 14
5.7 Information and Registration Rights Agreement................ 15
5.8 Restated Articles............................................ 15
5.9 Stock Restriction and Co-Sale Agreement...................... 15
5.10 Certificate of Existence/Authority........................... 15
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING................ 15
6.1 Representations and Warranties............................... 15
6.2 Blue Sky Compliance.......................................... 15
6.3 Restated Articles............................................ 15
6.4 Legal Matters................................................ 15
6.5 Information and Registration Rights Agreement................ 16
6.6 Stock Restriction and Co-Sale Agreement...................... 16
6.7 Comdisco Credit Facilities................................... 16
7. POST CLOSING COVENANTS OF THE COMPANY............................. 16
7.1 Securities Laws Compliance................................... 16
</TABLE>
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TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
7.2 Employee Proprietary Information and Inventions Agreement.... 16
7.3 Stock Purchase and Restriction Agreements.................... 16
7.4 Stock Plans.................................................. 17
7.5 Key Person Insurance......................................... 17
8. MISCELLANEOUS..................................................... 17
8.1 Entire Agreement; Successors and Assigns..................... 17
8.2 Governing Law................................................ 17
8.3 Counterparts................................................. 18
8.4 Headings..................................................... 18
8.5 Notices...................................................... 18
8.6 Survival of Warranties....................................... 18
8.7 Amendment of Agreement....................................... 18
8.8 California Securities Laws................................... 18
8.9 Finders Fees................................................. 18
8.10 Expenses..................................................... 19
</TABLE>
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<PAGE> 6
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of July 22, 1997, by and among Portable Software Corporation, a
Washington corporation (the "Company"), and the Investors listed in Schedule
1.1 attached hereto (the "Investors").
RECITALS
A. The Board of Directors of the Company has adopted the Amended and
Restated Articles of Incorporation ("Restated Articles") in the form attached
hereto as Exhibit A which, among other matters, establish the rights,
preferences and privileges of the Company's no par value Series D Preferred
Stock (the "Series D Preferred Stock") and Series D1 Preferred Stock") and
Series D1 Preferred Stock (the "Series D1 Preferred Stock").
B. The Company desires to sell shares of Series D Preferred Stock to
the Investors, and the Investors desire to purchase that number of shares of
Series D Preferred Stock set forth on Schedule 1.1, on the terms and subject to
the conditions set forth in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. Purchase and Sale of Series D Preferred Stock.
1.1 Sale and Issuance of Series D Preferred Stock. The Company
shall sell to the investors and the Investors shall purchase from the Company,
at a purchase price of $1.46 per share, a total of 3,188,357 shares of Series D
Preferred Stock (the "Shares").
1.2 Closing. The purchase and sale of the Shares shall take
places at the offices of Heller, Ehrman, White & McAuliffe, 525 University
Avenue, Suite 1100, Palo Alto, CA 94301, on July 23, 1997, at 9:30 a.m. (the
"Closing") or at such other place and time as the Company and the Investors
mutually agrees either orally or in writing (or in the case of Investors Cor
disco, Inc., such date not later than July 31, 1997, as each of the conditions
in Section ___ have been fulfilled); the date of the Closing is hereinafter
referred to as the "Closing Date". At the Closing, the Company will deliver to
each Investor purchasing shares a certificate representing the number of Shares
which such Investor is purchasing against delivery to the Company by such
Investor at the Closing of (a) an executed counterpart of this Agreement, and
(b) the purchase price of such Shares by wire transfer, cancellation of
indebtedness, or by a check payable to the Company, all as set forth in
Schedule 1.1
<PAGE> 7
2. Definitions. For purposes of this Agreement.
2.1 "Material Adverse Event" shall mean an occurrence having a
consequence that either (a) is materially adverse as to the business,
properties, prospects, or financial condition of the Company or materially
changes the equity ownership of the Company, or (b) is reasonably foreseeable,
and if it were to occur might materially adversely affect the business,
properties, prospects, or financial condition of the Company.
2.2 "Subsidiary" means any corporation more than 50% of whose
stock (measured by virtue of voting rights) in the aggregate is owned by the
Company.
3. Representations and Warranties of the Company to Investors. Except
as set forth in the Schedule of Exceptions attached as Exhibit 3, the Company
hereby represents and warrants to the Investors that:
3.1 Corporate Organization and Authority. The Company:
(a) is a corporation duly organized, validly existing,
authorized to exercise all its corporate powers, rights and privileges, and in
good standing in the State of Washington;
(b) has the corporate power and corporate authority to own
and operate its properties and to carry on its business as now conducted and as
proposed to be conducted; and
(c) is qualifies as a foreign corporation in all
jurisdictions in which such qualification is required; provided, however, that
the Company need not be qualified in a jurisdiction in which its failure to
qualify would not have a material adverse effect on the business, properties,
prospects or financial condition of the Company.
3.2 Capitalization. Immediately prior to the Closing, the
authorized capital of the Company shall consist of (i) Sixty Million
(60,000,000) shares of Common Stock, of which Five Million Seven Hundred
Twenty-One Thousand One Hundred Twenty-Seven (5,721,127) are issued and
outstanding as of the Closing Date and held by the persons and in the amounts
set forth in Exhibit 3, and (ii) Forty-Three Million (43,000,000) shares of
Preferred Stock (the "Preferred") of which (a) Three Million Eight Hundred
Twenty-Four Thousand and Ninety Two (3,824,092) shares have been designated
Series A Preferred Stock all of which is issued or outstanding, (b) Three
Million Eight Hundred Twenty-Four Thousand Ninety-Two (3,824,092) have been
designated Series A1 Preferred Stock, none of which is issued and outstanding,
(c) Four Million Six Hundred Eighty-Seven Thousand Five Hundred (4,687,500)
shares have been designated Series B Preferred Stock, all of which are issued
and outstanding, (d) Four Million Six Hundred Eighty-Seven Thousand Five Hundred
(4,687,500) shares have been
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<PAGE> 8
designated Series B1 Preferred Stock, none of which is issued or outstanding,
(e) Nine Million Seven Hundred Seventy-Four Thousand Eight Hundred and One
(9,774,801) shares have been designated Series C Preferred Stock, 9,712,301 of
which are issued and outstanding, (f) Nine Million Seven Hundred Seventy-Four
Thousand Eight Hundred and One (9,774,801) shares have been designated Series
C1 Preferred Stock, none of which is issued or outstanding, (g) Three Million
Three Hundred Fifty-Seven Thousand Eight Hundred Ninety-Seven (3,357,897)
shares have been designated Series D Preferred Stock, none of which is issued
or outstanding, and (h) Three Million Three Hundred Fifty-Seven Thousand Eight
Hundred Ninety-Seven (3,357,897) shares have been designated Series D1 Preferred
Stock, none of which is issued or outstanding. The Series D Preferred, the
Series D1 Preferred, the Series C Preferred Stock, the Series C1 Preferred
Stock, the Series B Preferred Stock, the Series B1 Preferred Stock, the Series
A Preferred Stock, and the Series A1 Preferred Stock have the respective
rights, preferences, privileges, and restrictions set forth in the Restated
Articles. The outstanding shares of Common Stock, Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred have been duly authorized and
validly issued (including, without limitation, issued in compliance with
applicable federal and state securities laws), fully paid, and non-assessable.
The Company has reserved 3,824,092 shares of Common Stock for issuance upon
conversion of Series A Preferred Stock and Series A1 Preferred Stock, 4,687,500
shares of Common Stock for issuance upon conversion of Series B Preferred Stock
and Series B1 Preferred Stock, 9,774,801 shares of Common Stock for issuance
upon conversion of Series C Preferred Stock and Series C1 Preferred Stock, and
an additional 3,188,357 shares of Common Stock for issuance upon conversion of
the Shares (or the Series D1 Preferred Stock into which the Shares may be
converted). The Company has options outstanding to its employees for the
purchase of 1,925,950 shares of Common Stock and has reserved an additional
1,500,327 shares of Common Stock for issuance to officers, directors,
employees, or consultants of the Company. Except as set forth above, in the
Restated Articles and on Exhibit 3, there are no outstanding warrants, options,
conversion privileges, preemptive rights, or other rights or agreements to
purchase or otherwise acquire or issue any equity securities of the Company,
nor has the issuance of any of the aforesaid rights to acquire securities of
the Company been authorized. The Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects
or relates to the voting or giving of written consents with respect to any
security or by a director of the Company other than as set forth in Section 5.5
and in Exhibit ____.
3.3 Subsidiaries. The Company does not presently own, have any
investment in, or control, directly or indirectly, any Subsidiaries,
associations, or other business entities. The Company is not a participant in
any joint venture or partnership.
3.4 Authorization. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution, delivery,
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<PAGE> 9
and performance of all obligations under this Agreement, the Restated
Information and Registration Rights Agreement, including Amendment No. 1
thereto (the "Rights Agreement") attached hereto as Exhibit 5.7, and the
Amended and Restated Stock Restriction and Co-Sale Agreement, including
Amendment No. 1 thereto, (the "Co-Sale Agreement") attached hereto as Exhibit
5.9, and for the authorization, issuance and delivery of the Shares and the
Series D1 Preferred Stock and of the Common Stock issuable upon conversion of
the Shares and the Series D1 Preferred Stock has been taken, and this
Agreement, the Rights Agreement, and the Co-Sale Agreement (collectively, the
"Transactional Agreements") constitute legally binding and valid obligations of
the Company enforceable in accordance with their terms.
3.5 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver the
Transactional Agreements, to sell and issue the Shares hereunder, to issue the
Series D1 Preferred Stock and the Common Stock issuable upon conversion of the
Shares and the Series D1 Preferred Stock, and to carry out and perform its
obligations under the terms of the Transactional Agreements.
3.6 Validity of Shares. The Shares, when issued, sold, and delivered in
accordance with the terms and for the consideration expressed in this
Agreement, will be duly and validly issued (including, without limitation,
issue in compliance with applicable federal and state securities laws), fully
paid and non-assessable and will be owned free and clear of any adverse claims
(within the meaning of Section 8 102(1)(a) of Article 8 of the Washington
Uniform Commercial Code), assuming that the Investors are "protected
purchasers" within the meaning of Section 8-303 of Article 8 of the Washington
Uniform Commercial Code. The Common Stock and the Series D1 Preferred Stock
issuable upon conversion of the Shares have been duly and validly reserved and,
assuming such shares are issued to the Investors, upon issuance in accordance
with the Restated Articles will be duly and validly issued (including, without
limitation, issued in compliance with all applicable federal and state
securities laws), fully-paid, and non-assessable and will be free of any liens
or encumbrances other than any liens or encumbrances created by or imposed
thereon by the holders; provided, however, that the Shares (and the Series D1
Preferred Stock and Common Stock issuable upon conversion thereof) shall be
subject to restrictions on transfer under state and/or federal securities laws.
The Shares and the Series D1 Preferred Stock, and the Common Stock issuable
upon conversion of the Shares and the Series D1 Preferred Stock, are not subject
to any preemptive rights or rights of first refusal except as specified in
Exhibit A.
3.7 No Conflict with Other Instruments. The execution, delivery and
performance of the Transactional Agreements will not: (a) result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice: (i) any provision of the
Company's Restated Articles or Bylaws; (ii) any provision of any judgment,
decree, or order to which the Company is a party or by which
4
<PAGE> 10
it is bound; (iii) any material contract, obligation, or commitment to which the
Company is a party or by which it is bound; or (iv) any material statute, rule,
or governmental regulation applicable to the Company, or (b) result in the
creation or acceleration of any lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization, or approval applicable to the Company,
its business or operations, or any of its assets or properties.
3.8 Litigation. There is no action, proceeding, or investigation
pending or threatened, or any basis therefor known to the Company, that
questions the validity of the Transactional Agreements or the right of the
Company to enter into the Transactional Agreements or to consummate the
transactions contemplated hereby and thereby, or that would result, either
individually or in the aggregate, in any Material Adverse Event, including,
without limitation, any action, proceeding, or investigation involving the prior
employment or consultancy of any of the Company's employees or consultants or
their use of any information or techniques alleged to be proprietary to any
former employer of any such employee or consultant or their obligations under
any agreements with prior employers. There is no judgment, decree, or order of
any court in effect against the Company and the Company is not in default with
respect to any order of any governmental authority to which the Company is a
party or by which it is bound. There is no action, suit, proceeding, or
investigation by the Company currently pending or which the Company presently
intends to initiate.
3.9 Title to Properties; Liens and Encumbrances. The Company has
good and marketable title to all of its properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance, or charge, other than (i) the lien of current taxes not
yet due and payable, and (ii) liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company. With respect to the property and assets it leases,
the Company is not in default under such leases in any material respect.
3.10 Patents and Other Proprietary Rights.
(a) The Company has sufficient title and ownership of all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights, and processes (collectively, "Intellectual
Property") necessary for its business as now conducted, and believes it can
obtain, on commercially reasonable terms, any additional rights necessary for
its business as proposed to be conducted, and the Company's Intellectual
Property does not, and, to the knowledge of the Company, would not, conflict
with or constitute an infringement of the rights of others;
(b) There are no outstanding options, licenses, or
agreements of any kind relating to the matters listed in subsection 3.10(a) or
that grants rights to any
5
<PAGE> 11
other person to manufacture, license, produce, assemble, market, or sell the
Company's products, nor is the Company bound by or a party to any options,
licenses, or agreements of any kind with respect to the Intellectual Property
rights of any other person or entity;
(c) The Company has not received any communications alleging that
the Company or its employees has violated or infringed or, by conducting its
business as proposed, would violate or infringe any of the Intellectual Property
rights of any other person or entity;
(d) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would cause the Company to infringe
upon the Intellectual Property rights of any other person or entity, that would
interfere with the use of such employee's best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed to
be conducted; and
(e) Neither the execution nor delivery of the Transactional
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
3.11 Taxes. All federal, state, local, and foreign tax returns
required to be filed by the Company have been filed and are true in all material
respects, and all taxes, assessments, fees, and other governmental charges upon
the Company, or upon any of its properties, income, or franchises, shown in such
returns to be due and payable have been paid except those contested by the
Company in good faith as described in Exhibit 3 and for which adequate reserves
have been set up; or if any of such tax returns have not been filed or if any
such taxes have not been paid or so reserved for, the failure so to file or to
pay would not in the aggregate constitute a Material Adverse Event. The Company
has not elected to be treated as a "consenting corporation" pursuant to Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
3.12 Financial Statements. The Company has delivered to each Investor
its audited financial statements (balance sheet and statements of operations,
stockholders' equity, and cash flows) for the fiscal year ended September 30,
1996, and, has provided each Investor with a statement of cash flow in addition
to a balance sheet and income statement for each month thereafter through May
31, 1997, (together, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects. The Financial Statements
accurately set out and describe the financial
6
<PAGE> 12
condition of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end adjustments. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to May 31, 1997 which, individually or in the aggregate, do
not constitute a Materially Adverse Event and (ii) obligations under contracts
and commitments incurred in the ordinary course of business not in excess of
$25,000 individually.
3.13 Changes. Since May 31, 1997, there has not been, except as
contemplated herein:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
constituted, in the aggregate, a Material Adverse Event;
(b) any damage, destruction or loss, whether or not covered by
insurance, constituting a Material Adverse Event;
(c) any waiver by the Company of a valuable right or of a material
debt owed to it;
(d) any satisfaction or discharge or any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) any change or amendment to any material contract or arrangement
by which the Company or any of its assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee; or
(g) to the Company's knowledge, any other event or condition of any
character which constitutes a Material Adverse Event.
3.14 Company's Contracts.
(a) All of the contracts and agreements (i) with expected receipts or
expenditures in excess of $100,000, (ii) involving a license or grant of rights
to or from the Company involving patents, trademarks, copyrights, or other
proprietary information applicable to the business of the Company, (iii) with
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services, or (iv) that provide indemnification by
the Company with respect to
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<PAGE> 13
infringements of proprietary rights to which the Company is a party as of the
date of the Closing are listed on Exhibit 3. All such contracts and agreements
are legally binding, valid, and in full force and effect in all material
respects, and there is no indication of reduced activity relating to such
contract or agreement (other than in the ordinary course of business) by any of
the parties to any such contract or agreement.
(b) The Company has not (i) incurred any indebtedness for money
borrowed in excess of $50,000 in the aggregate, (ii) made any loans or advances
to any person, other than ordinary advances for travel expenses, or (iii) sold,
exchanged, or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(c) The Company is not party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Restated
Articles or Bylaws, which adversely affects its business as now conducted or as
proposed to be conducted, its properties, or its financial condition.
(d) Except for (i) transactions relating to the purchase of shares of
the Company's Common Stock, or options therefor, as listed on Exhibit 3, and
(ii) regular salary payments and fringe benefits under an individual's
compensation package with the Company, no officer, director, Rajeev Singh,
Kenneth Fern, or spouse, parent, sibling or child of any such person, or any
other employee has any agreement, understanding, proposed transaction or is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the best of the Company's
knowledge, no officer, director, Rajeev Singh, Kenneth Fern, or spouse, parent,
sibling or child of any such person has any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation that
competes with the Company, except that any such person may own stock in publicly
traded companies that may compete with the Company. No spouse, parent, sibling
or child or any officer or director of the Company is directly or indirectly
interested in any material contract with the Company.
3.15 No Defaults, Violations, or Conflicts. The Company is not in violation
of any term or provision of any charter provision, bylaw, or any term or
provision of any indebtedness, mortgage, indenture, contract, agreement,
judgment, or to the Company's knowledge, any decree, order, statute, rule, or
regulation applicable to the Company where such violation, or violations in the
aggregate, is a Material Adverse Event.
3.16 Insurance. The Company has in effect insurance covering risks
associated with its business in such amounts as are customary in its industry.
The Company is not aware of any pending or threatened claims against the Company
for personal injuries or property damages.
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3.17 Private Offering. The Company agrees that neither the Company nor
anyone acting on its behalf will offer any of the Shares or any similar
securities for issuance or sale to, or solicit any offer to acquire any of the
same from, anyone or take any other action so as to make the issuance and sale
of the Shares subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
3.18 Prior Registration Rights. Except as provided in the Rights Agreement,
the Company is under no obligation to register under the Securities Act any of
its presently outstanding securities or any of its securities that may
subsequently be issued.
3.19 Disclosure. The Transactional Agreements and any other documentation
or written information furnished to the Investors by the Company in connection
with their decision to purchase the Shares, together with any exhibits or
appendices hereto do not contain any untrue statement of a material fact or omit
any material fact necessary to make the statements contained therein or herein
in view of the circumstances under which they were made not misleading, except
that, with respect to any projections that have been furnished, the Company
represents only that such projections were prepared in good faith and that the
Company reasonably believes that there is a reasonable basis for such
projections. The Company has provided each Investor with all the information
that Investor or Investor's legal counsel has requested for deciding whether to
purchase the Shares.
3.20 Distributions. There has been no declaration or payment by the Company
of any dividend, nor any distribution by the Company of any assets of any kind
to any of its shareholders in redemption or as the purchase price of any of the
Company's securities.
3.21 Employee Compensation Plans. The Company is not party to or bound by
any currently effective employment contracts, deferred compensation agreements,
bonus plans, incentive plans, profit sharing plans, retirement agreements, or
other employee compensation agreements.
3.22 Employee Relations. The Company believes its relations with its
employees are satisfactory. The Company's employees are not represented by any
labor unions nor, to the Company's knowledge, is any union organization campaign
in progress. The Company is not aware that any of its officers or employees
intends to terminate employment nor does the Company have any present intention
to terminate the employment of any of the foregoing. Subject to general
principles related to wrongful termination of any employees, the employment of
each officer and employee of the Company is terminable at the will of the
Company.
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3.23 Employee Proprietary Information and Inventions Agreement. Each
officer, employee and consultant of the Company has executed and delivered to
the Company an Employee Proprietary Information and Inventions Agreement
substantially in the form of Exhibit 7.2. The Company, after reasonable
investigation, is not aware that any of its employees, officers or consultants
are in violation thereof, and the Company will use its best efforts to prevent
any such violation.
3.24 Brokers and Finders. The Company has not retained any investment
banker, broker, or finder in connection with the transactions contemplated by
this Agreement.
3.25 Corporate Documents. The Company has furnished the Investors with
copies of the Articles of Incorporation and Bylaws as currently in effect and
the minute books. Said copies are true, correct, and complete and contain all
amendments and all minutes through the Closing Date.
3.26 Governmental Consents. Subject to the accuracy of Investors'
representationS in Section 4 of this Agreement, no consent, approval, order, or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local, or provincial governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement, except for filings pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as
amended, rule 460-44A of the Washington Administrative Code, and other
applicable state securities laws, which filings and qualifications, if
required, will be effected in a timely manner.
3.27 Permits. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would constitute a Material Adverse Event,
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, license, or other similar authority.
3.28 Environmental and Safety Laws. To the best of its knowledge, the
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety as the Company's
business is conducted and is proposed to be conducted, and to the best of its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law, or regulation where such violation would
constitute a Material Adverse Event.
3.29 Returns and Complaints. The Company has received no customer
complaints concerning its products and/or services, nor has it had any of its
products returned by a purchaser thereof, other than minor, non-recurring
warranty problems.
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3.30 Manufacturing and Marketing Rights. The Company is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products.
3.31 Section 83(b) Elections. All individuals who have purchased
shares of the Company's Common Stock have, if applicable, filed timely elections
under Section 83(b) of the code and any analogous provisions of applicable state
tax laws.
3.32 Stock Restriction Agreements. Holders of all of the shares of
the Common Stock of the Company and of all of the outstanding options to
purchase Common Stock of the Company have executed and delivered to the Company
Stock Purchase and Restriction Agreements substantially in the form of Exhibit
7.3 attached hereto.
3.33 Real Property Holding Company. The Company is not a "U.S. real
property holding corporation" within the meaning of Section 897 of the Code.
4. Representations and Warranties of the Investors; Restrictions on
Transferability. Each Investor represents and warrants to the Company as
follows:
4.1 Authorization. When executed and delivered by the Investor,
and assuming execution and delivery by the Company, the Transactional Agreements
will each constitute a valid obligation of the Investor, enforceable in
accordance with their respective terms.
4.2 Brokers and Finders. Investor has not retained any investment
banker, broker, or finder in connection with the transactions contemplated by
this Agreement.
4.3 Investment. This Agreement is made with Investor in reliance
upon its representation to the Company, which by Investor's execution of this
Agreement Investor hereby confirms, that the Shares to be received by Investor
will be acquired for investment for Investor's own account, not as a nominee or
agent, and not with a view to the sale or distribution of any part thereof, and
that Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, Investor
further represents that it has no contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any of the Shares.
4.4 No Public Market. Investor understands and acknowledges that
the offering of the Shares pursuant to this Agreement will not be registered
under the Securities Act on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration pursuant to Section
4(2) of the Securities Act, and that the Company's reliance upon such exemption
is predicated upon Investor's
11
<PAGE> 17
representations set forth in this Agreement. Investor further understands that
no public market now exists for any of the securities issued by the Company, and
that the Company has made no assurances that a public market will ever exist for
the Company's securities.
4.5 Limitations on Transferability. Investor covenants that in
no event will it dispose of any of the Shares (other than pursuant to Rule 144
promulgated by the Securities and Exchange Commission ("Commission") under the
Securities Act ("Rule 144") or any similar or analogous rule) unless and until
(i) Investor shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and (ii), if requested by the Company,
Investor shall have furnished the Company with an opinion of counsel
satisfactory in form and substance to the Company and the Company's counsel to
the effect that (x) such disposition will not require registration under the
Securities Act and (y) appropriate action necessary for compliance with the
Securities Act and any applicable state, local, or foreign law has been taken.
It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the limitations set forth in the foregoing sentence, if Investor
is a partnership it may transfer Shares to its constituent partners or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or transfer by gift, will, or intestate
succession to any such partner's spouse or lineal descendants or ancestors
without the necessity of registration or opinion of counsel if the transferee
agrees in writing to be subject to the terms of this Agreement to the same
extent if such transferee were an Investor; provided, however, that Investor
hereby covenants not to effect such transfer if such transfer either would
invalidate the securities laws exemptions pursuant to which the Shares were
originally offered and sold or would itself require registration under the
Securities Act or applicable state securities laws. Each certificate evidencing
the Shares transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 4.7 below, except that such certificate shall not
bear such legend if the transfer was made in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that such legend
is not required in order to establish compliance with any provisions of the
Securities Act.
4.6 Experience. Investor represents that: (i) it has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its prospective investment in the Shares;
(ii) it believes it has received all the information it has requested from the
Company and considers necessary or appropriate for deciding whether to purchase
the Shares; (iii) it has had the opportunity to discuss the Company's business
management, and financial affairs with its management, (iv) it has the ability
to bear the economic risks of its prospective investment; and (v) it is able,
without materially impairing its financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on its investment. The
foregoing, however,
12
<PAGE> 18
does not modify the representations and warranties of the Company in Section 3
of this Agreement or the right of the Investors to rely thereon.
4.7 Legends.
(a) All certificates for the Shares shall bear the following
legend:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended ("Act"). Such
securities may not be transferred unless a Registration
Statement under the Act is in effect as to transfer or, in
the opinion of counsel for the Company registration under
the Act is unnecessary in order for such transfer to comply
with the Act or unless sold pursuant to Rule 144 of the
Act."
(b) The certificates evidencing the Shares shall also bear
any legend required by the Commissioner of Corporations of the State of
California or the Washington State Administrator of Securities or required
pursuant to any state, local, or foreign law governing such securities.
4.8 Accredited Investor. Investor presently qualifies, and
will as of the Closing Date qualify, as an "accredited investor" within the
meaning of Regulation D of the rules and regulations promulgated under the
Securities Act of 1933.
5. Conditions of Investors' Obligations at Closing. The obligations of
each Investor under Section 1 of this Agreement are subject to the fulfillment
at or before the Closing of each of the following conditions, any of which may
be waived in writing by such Investor:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 shall be true on and as of the
Closing with the same effect as if made on and as of the Closing.
5.2 Performance. The Company shall have performed or fulfilled
all agreements, obligations and conditions contained herein required to be
performed or fulfilled by the Company before the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
any state that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement shall be duly obtained effective as of the
Closing.
13
<PAGE> 19
5.4 Opinion of Company's Counsel. The Investors shall have
received from Heller, Ehrman, White & McAuliffe, counsel to the Company, an
opinion addressed to them, dated the Closing Date, in substantially the form of
Exhibit 5.4.
5.5 Board of Directors. All requisite proceedings shall have been
taken so that immediately following the Closing, Yogen K. Dalal will have been
elected to the Board of Directors which will consist of the persons listed on
Schedule 5.5.
5.6 Proceedings Satisfactory; Compliance Certificate. All
corporate and legal Proceedings taken by the Company in connection with the
transactions contemplated by this Agreement and all documents and papers
relating to such transactions shall be satisfactory in all material respects to
the Investors, in the reasonable exercise of its judgment. The Company shall
have delivered to the Investors a certificate dated as of such Closing, signed
by the Company's President, certifying that the conditions set forth in Sections
5.1, 5.2, 5.3 and 5.5 have been satisfied.
5.7 Information and Registration Rights Agreement. The Company
and the Investors shall have entered into the Amendment Agreement to the
Company's Rights Agreement attached as Exhibit 5.7.
5.8 Restated Articles. The Company shall have filed its Restated
Articles with the Secretary of State of the State of Washington, which Restated
Articles shall be in full force and effect on the Closing Date.
5.9 Stock Restriction and Co-Sale Agreement. The Company and the
Investors who are holders of its Series C Preferred Stock shall have entered
into the Amendment Agreement attached as Exhibit 5.9.
5.10 Certificate of Existence/Authority. The Company shall have
delivered to the Investors a Certificate of Existence/Authority relating to the
Company issued by the Washington Secretary of State dated no earlier than five
(5) days prior to the Closing.
6. Conditions of the Company's Obligations at Closing The obligations
of the Company under Section 1 of this Agreement are subject to the fulfillment
at or before the Closing of each of the following conditions, any of which may
be waived in writing by the Company:
6.1 Representations and Warranties. The representations and
warranties of the Investors contained in Section 4 shall be true on and as of
the Closing with the same effect as though said representations and warranties
had been made on and as of the Closing.
14
<PAGE> 20
6.2 Blue Sky Compliance. The Company shall have complied with and
be effective under the securities laws of the State of California, the State of
Washington, and any other applicable states as necessary to offer and sell the
Shares to the Investors.
6.3 Restated Articles. The Restated Articles shall have been
filed with the Secretary of State of the State of Washington and shall be in
full force and effect on the Closing Date.
6.4 Legal Matters. All material matters of a legal nature which
pertain to this Agreement, the Co-Sale Agreement, and the Rights Agreement, and
the transactions contemplated hereby, shall have been reasonably approved by
counsel to the Company.
6.5 Information and Registration Rights Agreement. The Company
and the Investors shall have entered into the Amendment Agreement to the
Company's Rights Agreement attached as Exhibit 5.7.
6.6 Stock Restriction and Co-Sale Agreement. The Company and the
Investors who are holders of its Series C Preferred Stock shall have entered
into the Amendment Agreement attached as Exhibit 5.9.
6.7 Comdisco Credit Facilities. The obligations of the Company
under Section 1 of this Agreement with respect to the sale of Shares to
Comdisco, Inc., but not to the other Investors, are also subject to the Company
having received from Comdisco, Inc. (i) $1,800,000 as the proceeds of the
sale-leaseback of the Company's equipment pursuant to the Master Lease Agreement
dated July _, 1997, between the Company and Comdisco, Inc., and (ii) $1,500,000
as the proceeds of the loans made by Comdisco, Inc. to the Company pursuant to
the Subordinated Loan and Security Agreement dated July __, 1997, between the
Company and Comdisco, Inc.
7. Post Closing Covenants of the Company.
7.1 Securities Laws Compliance. The Company shall within 15 days
of the Closing file a notice of the sale of the Shares to the Investors pursuant
to Section 25102(f) of the California Corporations Code, and shall make any
other filings required by Rule 460-44A of the Washington Administrative Code and
the securities or Blue Sky laws of any other application jurisdiction.
7.2 Employee Proprietary Information and Inventions Agreement.
Unless otherwise determined by the Board of Directors, the Company shall require
all future officers, directors, and employees of, and consultants to, the
Company and its Subsidiaries to execute and deliver an Employee Proprietary
Information and Inventions Agreement in substantially the form of Exhibit 7.2.
15
<PAGE> 21
7.3 Stock Purchase and Restriction Agreements. The Company shall
cause all future purchasers of, and all future holders of options to purchase,
shares of the Company's Common Stock to execute and deliver Stock Purchase and
Restriction Agreements (or Stock Option Agreements) substantially in the form
set forth in Exhibit 7.3, but with vesting over four (4) years.
7.4 Stock Plans. The Company may sell shares of stock and grant
options to employees, advisors, officers, and directors of, and consultants to,
the Company and its Subsidiaries only pursuant to such arrangements, contracts,
or plans as are recommended by management and approved by the Board of
Directors, which arrangements, contracts or plans shall provide for vesting of
options, or lapsing of repurchase rights in the case of shares, over a four (4)
year period, 25% after the first year and ratably thereafter on a monthly basis,
subject to acceleration under certain circumstances in the event of an
acquisition or merger.
7.5 Key Person Insurance. The Company shall continue to maintain
on the life of Michael W. Hilton and the life of S. Steven Singh key person life
insurance, each in the amount of $1,000,000, with proceeds payable to the
Company, until the Board of Directors of the Company determines otherwise, which
determination shall include the consent of at least two directors representing
the Investors.
8. Miscellaneous.
8.1 Entire Agreement; Successors and Assigns. This Agreement
constitutes the entire contract between the Company and the Investors relative
to the subject matter hereof. Any previous agreement between the Company and the
Investors is superseded by this Agreement. Subject to the exceptions
specifically set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors, and assigns of the parties. By
their execution of this Agreement, each of Brentwood Associates VI, L.P., U.S.
Venture Partners IV, L.P., Second Ventures II, L.P., USVP Entrepreneur Partners
II, L.P., Institutional Venture Partners VII, IVP Founders Fund I, Institutional
Venture Management VII, Mayfield VIII, and Mayfield Associates Fund III waive,
with respect to the issuance of the Shares (including for this purpose the
shares issuable upon exercise of those warrants issued to ComDisco, Inc. in
connection with the establishment and/or extension of certain credit
facilities), the Right of First Refusal granted to them under Section 5 of that
Restated Information and Registration Rights Agreement dated as of July 12,
1996. By its execution of this Agreement, the Company acknowledges and confirms
that it has requested that such Investors waive their Right of First Offer for
purposes of Section 6 of Article 5 of the Company's Restated Articles of
Incorporation.
8.2 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Washington, excluding
those laws that direct the application of another jurisdiction's laws.
16
<PAGE> 22
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Headings. The headings of the Sections of this Agreement
are for convenience and shall not by themselves determine the interpretation of
this Agreement.
8.5 Notices. Any notice required or permitted hereunder
shall be given in writing and shall be conclusively deemed effectively given
upon personal delivery or delivery by courier, or five days after deposit in the
United States mail, by registered or certified mail, postage prepaid, addressed
to the Company or an Investor, as the case may be, as set forth below its name
on the signature page of this Agreement, or at such other address as the Company
or such Investor may designate by ten (10) days' advance written notice to the
other.
8.6 Survival of Warranties. The warranties and
representations of the parties contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing;
provided, however, that such representations and warranties need only be
accurate as of the date of such execution and delivery and as of the Closing.
8.7 Amendment of Agreement. Any provision of this Agreement
may be amended by a written instrument signed by the Company and by persons
holding at least a majority of the aggregate of (a) the then outstanding Shares
and (b) the then outstanding shares of Common Stock into which the Shares have
been converted, other than shares of Common Stock which have been sold to the
public.
8.8 California Securities Laws. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT AND EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.9 Finders Fees. Each of the Company and the Investors will
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party, asserting such claims and the indemnifying
party, and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
17
<PAGE> 23
8.10 Expenses. The Company and the Investors will each bear
their respective legal and other fees and expenses with respect to this
Agreement and the transactions contemplated hereby, provided, however, that the
Company will pay at the Closing upon submission of an appropriate invoice the
reasonable legal fees and expenses of Latham & Watkins, counsel to the
Investors, provided that such fees do not exceed Twelve Thousand Five Hundred
Dollars ($12,500).
18
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION,
a Washington corporation
By: /s/ S. STEVEN SINGH
-------------------------------------
Name: S. Steven Singh
Title: President
Investor: MAYFIELD ASSOCIATES FUND III
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Its General Partner
By:
------------------------------------
Title: Managing Member
Address: 2800 Sand Hill Road
Menlo Park, CA 94025
Investor: MAYFIELD VIII
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Its General Partner
By:
-------------------------------------
Title: Managing Member
Address: 2800 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION,
A Washington corporation
By:
-----------------------------------
S. Steven Singh, President
Address: 14715 NE 95th Street
Redmond, WA 98052
Investor: BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures, L.P.
Its General Partner
By: [SIG]
---------------------------------
General Partner
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION,
a Washington Corporation
By:
-------------------------------------
Name: S. Steven Singh, President
Investor: COMDISCO, INC.
By: /s/ JAMES P. LABE
-------------------------------------
James P. Labe, President
Title: COMDISCO VENTURES DIVISION
Address: 3000 Sand Hill Road
Building 1, Suite 156
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION
A Washington corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 14715 NE 95th Street
Redmond, WA 98052
Investor: U.S. VENTURE PARTNERS IV, L.P.
By: Presidio Management Group IV, L.P.
Its General Partner
By:
-------------------------------------
Title:
----------------------------------
Address: 2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Investor: SECOND VENTURES II, L.P.
By: Presidio Management Group IV, L.P.
Its General Partner
By:
-------------------------------------
Title:
----------------------------------
Address: 2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION
A Washington corporation
By:
---------------------------------------
S. Steven Singh, President
Address: 4715 NE 95th Street
Redmond, WA 98052
Investor: U.S.V.P. ENTREPRENEUR PARTNERS II, L.P.
A Delaware Limited Partnership
By: Presidio Management Group IV, L.P.
Its General Partner
By:
---------------------------------------
Title:
------------------------------------
Address: 2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Investor: INSTITUTIONAL VENTURE PARTNERS VII, L.P.
by its General Partner
Institutional Venture Management VII, L.P.
By:
---------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION
A Washington corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 14715 NE 95th Street
Redmond, WA 98052
Investor: IVP FOUNDERS FUND I, L.P.
by its General Partner
Institutional Venture Management VI, L.P.
By:
--------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
Investor: INSTITUTIONAL VENTURE MANAGEMENT VII, L.P.
By:
---------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION
A Washington corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 14715 NE 95th Street
Redmond, WA 98052
Investor: BRENTWOOD ASSOCIATES VI, L.P.
By: Brentwood VI Ventures, L.P.
Its General Partner
By:
-------------------------------------
General Partner
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Series D
Preferred Stock Purchase Agreement as of the day and year first above written.
Company: PORTABLE SOFTWARE CORPORATION
A Washington corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 14715 NE 95th Street
Redmond, WA 98052
Investor: MAYFIELD ASSOCIATES FUND III,
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Its General Partner
By:
-------------------------------------
Managing Member
Address: 2800 Sand Hill Road
Menlo Park, CA 94025
Investor: MAYFIELD VIII
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Its General Partner
By:
------------------------------------
Managing Member
Address: 2800 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
19
<PAGE> 32
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Section
<S> <C>
Exhibit A Amended and Restated Articles of Incorporation
Exhibit 3 Schedule of Exceptions to Representations and Warranties
Exhibit 5.4 Opinion of Heller Ehrman White & McAuliffe
Exhibit 5.7 Restated Information and Registration Rights Agreement; Amendment Agreement
Exhibit 5.9 Amended and Restated Stock Restriction and Co-Sale Agreement; Amendment Agreement
Exhibit 7.2 Employee Proprietary Information and Invention Agreement
Exhibit 7.3 Stock Restriction Agreement
Schedule 1.1 Investors
Schedule 5.5 Board of Directors
</TABLE>
20
<PAGE> 33
SCHEDULE 1.1
Investors
<TABLE>
<CAPTION>
Number of
Name of Investor Shares of Stock Purchase Price
---------------- --------------- --------------
<S> <C> <C>
Institutional Venture Partners VII, L.P. 307,584 $449,072.64
IVP Founders Fund I, L.P. 11,392 $16,632.32
Institutional Venture Management VII, L.P. 6,510 $9,504.60
3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
Attn: Norman A. Fogelsong
Brentwood Associates VI, L.P. 338,447 $494,132.62
3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
Attn: Jeffrey D. Brody
Mayfield Associates Fund III 100,914 $147,334.44
Mayfield VIII 1,917,359 $2,799,344.14
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
Attn: Mike Levinthal
Comdisco, Inc. 106,165 $155,000.90
3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: James P. Labe
Second Ventures II, L.P. 41,999 $61,318.54
USVP Entrepreneur Partners II, L.P. 12,000 $17,520.00
U.S. Venture Partners IV, L.P. 345,987 $505,141.02
2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
Attn: Michael Maher
---------- -------------
3,188,357 $4,655,001.22
</TABLE>
1
<PAGE> 1
EXHIBIT 10.08
================================================================================
PORTABLE SOFTWARE CORPORATION
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
1. PURCHASE AND SALE OF SERIES E PREFERRED STOCK...........................................................1
1.1 Sale and Issuance of Series E Preferred Stock..................................................1
1.2 Closing........................................................................................1
2. DEFINITIONS.............................................................................................1
2.1 Material Adverse Event.........................................................................1
2.2 Subsidiary.....................................................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO INVESTORS..............................................2
3.1 Corporate Organization and Authority...........................................................2
3.2 Capitalization.................................................................................3
3.3 Subsidiaries...................................................................................3
3.4 Authorization..................................................................................3
3.5 Corporate Power................................................................................3
3.6 Validity of Shares.............................................................................4
3.7 No Conflict with Other Instruments.............................................................4
3.8 Litigation.....................................................................................4
3.9 Title to Properties; Liens and Encumbrances....................................................5
3.10 Patents and Other Proprietary Rights...........................................................5
3.11 Taxes..........................................................................................6
3.12 Financial Statements...........................................................................6
3.13 Changes........................................................................................6
3.14 Company's Contracts............................................................................7
3.15 No Defaults, Violations, or Contracts..........................................................8
3.16 Insurance......................................................................................8
i
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Continued)
Page
----
<S> <C>
3.17 Private Offering...............................................................................8
3.18 Prior Registration Rights......................................................................8
3.19 Disclosure.....................................................................................8
3.20 Distributions..................................................................................8
3.21 Employee Compensation Plans....................................................................8
3.22 Employee Relations.............................................................................8
3.23 Employee Proprietary Information and Inventions Agreement......................................9
3.24 Brokers and Finders............................................................................9
3.25 Corporate Documents............................................................................9
3.26 Governmental Consents..........................................................................9
3.27 Permits........................................................................................9
3.28 Environmental and Safety Laws..................................................................9
3.29 Returns and Complaints........................................................................10
3.30 Manufacturing and Marketing Rights............................................................10
3.31 Section 83(b) Elections.......................................................................10
3.32 Stock Restriction Agreements..................................................................10
3.33 Real Property Holding Company.................................................................10
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS;
RESTRICTIONS ON TRANSFERABILITY........................................................................10
4.1 Authorization.................................................................................10
4.2 Brokers and Finders...........................................................................10
4.3 Investment....................................................................................10
4.4 No Public Market..............................................................................10
ii
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Continued)
Page
----
<S> <C>
4.5 Limitations on Transferability................................................................11
4.6 Experience....................................................................................11
4.7 Legends.......................................................................................12
4.8 Accredited Investor...........................................................................12
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING........................................................12
5.1 Representations and Warranties................................................................12
5.2 Performance...................................................................................12
5.3 Qualifications................................................................................12
5.4 Opinion of Company's Counsel..................................................................12
5.5 Board of Directors............................................................................12
5.6 Proceedings Satisfactory; Compliance Certificate..............................................13
5.7 Information and Registration Rights Agreement.................................................13
5.8 Restated Articles.............................................................................13
5.9 Stock Restriction and Co-Sale Agreement.......................................................13
5.10 Voting Agreement..............................................................................13
5.11 Certificate of Existence/Authority............................................................13
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.....................................................13
6.1 Representations and Warranties................................................................13
6.2 Blue Sky Compliance...........................................................................13
6.3 Restated Articles.............................................................................13
6.4 Legal Matters.................................................................................14
6.5 Information and Registration Rights Agreement.................................................14
6.6 Stock Restriction and Co-Sale Agreement.......................................................14
iii
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Continued)
Page
----
<S> <C>
6.7 Voting Agreement..............................................................................14
7. POST-CLOSING COVENANTS OF THE COMPANY..................................................................14
7.1 Securities Laws Compliance....................................................................14
7.2 Employee Proprietary Information and Inventions Agreement.....................................14
7.3 Stock Purchase and Restriction Agreements.....................................................14
7.4 Stock Plans...................................................................................14
7.5 Key Person Insurance..........................................................................14
7.6 Board Committees..............................................................................15
7.7 Reincorporation in Delaware...................................................................15
8. MISCELLANEOUS...........................................................................................15
8.1 Entire Agreement; Successors and Assigns......................................................15
8.2 Governing Law.................................................................................15
8.3 Counterparts..................................................................................15
8.4 Headings......................................................................................15
8.5 Notices.......................................................................................15
8.6 Survival of Warranties........................................................................16
8.7 Amendment of Agreement........................................................................16
8.8 California Securities Laws....................................................................16
8.9 Finders Fees..................................................................................16
8.10 Expenses......................................................................................16
iv
</TABLE>
<PAGE> 6
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of May 29, 1998, by and among Portable Software Corporation, a
Washington corporation (the "Company"), and the Investors listed in Schedule 1.1
attached hereto (the "Investors").
R E C I T A L S
A. The Board of Directors of the Company has adopted the Amended and
Restated Articles of Incorporation ("Restated Articles") in the form attached
hereto as Exhibit A which, among other matters, establish the rights,
preferences and privileges of the Company's no par value Series E Preferred
Stock (the "Series E Preferred Stock") and Series E1 Preferred Stock (the
"Series E1 Preferred Stock").
B. The Company desires to sell shares of Series E Preferred Stock to
the Investors, and the Investors desire to purchase that number of shares of
Series E Preferred Stock set forth on Schedule 1.1, on the terms and subject to
the conditions set forth in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. Purchase and Sale of Series E Preferred Stock.
1.1. Sale and Issuance of Series E Preferred Stock. The
Company shall sell to the Investors and the Investors shall purchase from the
Company, at a purchase price of $3.10 per share, a total of up to 4,200,000
shares of Series E Preferred Stock (the "Shares").
1.2. Closing. The purchase and sale of the Shares shall
take place at the offices of the Company, 6222 185th Avenue NE, Redmond, WA
98052 on May 29, 1998, at 11:00 a.m. (the "Closing") or at such other place and
time as the Company and the Investors mutually agree either orally or in
writing; the date of the Closing is hereinafter referred to as the "Closing
Date". At the Closing, the Company will deliver to each Investor purchasing
Shares a certificate representing the number of Shares which such Investor is
purchasing against delivery to the Company by such Investor at the Closing of
(a) an executed counterpart of this Agreement, and (b) the purchase price of
such Shares by wire transfer, cancellation of indebtedness, or by a check
payable to the Company, all as set forth in Schedule 1.1
2. Definitions. For purposes of this Agreement.
2.1. "Material Adverse Event" shall mean an occurrence
having a consequence that either (a) is materially adverse as to the business,
properties, prospects, or financial condition of the Company or materially
changes the equity ownership of the Company, or (b) is reasonably foreseeable or
is more likely to occur than not, and if it were to occur might materially
adversely affect the business, properties, prospects, or financial condition of
the Company.
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2.2. "Subsidiary" means any corporation more than 50% of
whose stock (measured by virtue of voting rights) in the aggregate is owned by
the Company.
3. Representations and Warranties of the Company to Investors. Except
as set forth in the Schedule of Exceptions attached as Exhibit 3, the Company
hereby represents and warrants to the Investors that:
3.1. Corporate Organization and Authority. The Company:
(a) is a corporation duly organized, validly
existing, authorized to exercise all its corporate powers, rights and
privileges, and in good standing in the State of Washington;
(b) has the corporate power and corporate authority
to own and operate its properties and to carry on its business as now conducted
and as proposed to be conducted; and
(c) is qualified as a foreign corporation in all
jurisdictions in which such qualification is required; provided, however, that
the Company need not be qualified in a jurisdiction in which its failure to
qualify would not have a material adverse effect on the business, properties,
prospects or financial condition of the Company.
3.2. Capitalization. Immediately prior to the Closing, the
authorized capital of the Company shall consist of (i) Sixty Million
(60,000,000) shares of Common Stock, of which Five Million Eight Hundred
Twenty-Five Thousand Eight Hundred Four (5,825,804) are issued and outstanding
as of the Closing Date and held by the persons and in the amounts set forth in
Exhibit 3, and (ii) Fifty-Three Million (53,000,000) shares of Preferred Stock
(the "Preferred") of which (a) Three Million Eight Hundred Twenty-Four Thousand
and Ninety Two (3,824,092) shares have been designated Series A Preferred Stock
all of which is issued and outstanding, (b) Three Million Eight Hundred
Twenty-Four Thousand Ninety-Two (3,824,092) have been designated Series Al
Preferred Stock, none of which is issued and outstanding, (c) Four Million Six
Hundred Eighty-Seven Thousand Five Hundred (4,687,500) shares have been
designated Series B Preferred Stock, all of which are issued and outstanding,
(d) Four Million Six Hundred Eighty-Seven Thousand Five Hundred (4,687,500)
shares have been designated Series B 1 Preferred Stock, none of which is issued
or outstanding, (e) Nine Million Seven Hundred Seventy-Four Thousand Eight
Hundred and One (9,774,801) shares have been designated Series C Preferred
Stock, 9,712,301 of which are issued and outstanding, (f) Nine Million Seven
Hundred Seventy-Four Thousand Eight Hundred and One (9,774,801) shares have been
designated Series C1 Preferred Stock, none of which is issued or outstanding,
(g) Three Million Three Hundred Fifty-Seven Thousand Eight Hundred Ninety-Seven
(3,357,897) shares have been designated Series D Preferred Stock, 3,188,357 of
which are issued and outstanding, (h) Three Million Three Hundred Fifty-Seven
Thousand Eight Hundred Ninety-Seven (3,357,897) shares have been designated
Series D1 Preferred Stock, none of which is issued or outstanding, (i) Four
Million Five Hundred Thousand (4,500,000) shares have been designated Series E
Preferred Stock, none of which is issued or outstanding, and (j) Four Million
Five Hundred Thousand (4,500,000) shares have been designated Series E1
Preferred Stock, none of which is issued or outstanding. The Series E Preferred,
the Series E1 Preferred, the Series D Preferred
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<PAGE> 8
Stock, the Series D1 Preferred Stock, the Series C Preferred Stock, the Series
C1 Preferred Stock, the Series B Preferred Stock, the Series B1 Preferred Stock,
the Series A Preferred Stock, and the Series Al Preferred Stock have the
respective rights, preferences, privileges, and restrictions set forth in the
Restated Articles. The outstanding shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D
Preferred Stock have been duly authorized and validly issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws), fully paid, and non-assessable. The Company has reserved 3,824,092 shares
of Common Stock for issuance upon conversion of Series A Preferred Stock and
Series Al Preferred Stock, 4,687,500 shares of Common Stock for issuance upon
conversion of Series B Preferred Stock and Series B1 Preferred Stock, 9,774,801
shares of Common Stock for issuance upon conversion of Series C Preferred Stock
and Series C1 Preferred Stock, 3,188,357 shares of Common Stock for issuance
upon conversion of Series D Preferred Stock and Series D1 Preferred Stock, and
an additional 4,200,000 shares of Common Stock for issuance upon conversion of
the Shares (or the Series E1 Preferred Stock into which the Shares may be
converted). The Company has options outstanding to its employees for the
purchase of 3,257,093 shares of Common Stock and has reserved an additional
834,007 shares of Common Stock for issuance to officers, directors, employees,
or consultants of the Company. Except as set forth above, in the Restated
Articles, and on Exhibit 3, there are no outstanding warrants, options,
conversion privileges, preemptive rights, or other rights or agreements to
purchase or otherwise acquire or issue any equity securities of the Company, nor
has the issuance of any of the aforesaid rights to acquire securities of the
Company been authorized. The Company is not a party or subject to any agreement
or understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company other than as set forth in Section 5.5, Section 5.10,
and in Exhibit A.
3.3. Subsidiaries. The Company does not presently own,
have any investment in, or control, directly or indirectly, any Subsidiaries,
associations, or other business entities. The Company is not a participant in
any joint venture or partnership.
3.4. Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery, and performance of all obligations under
this Agreement, the Restated Information and Registration Rights Agreement, (the
"Rights Agreement") attached hereto as Exhibit 5.7, and the Amended and Restated
Stock Restriction and Co-Sale Agreement, (the "Co-Sale Agreement") attached
hereto as Exhibit 5.9, and for the authorization, issuance and delivery of the
Shares and the Series E1 Preferred Stock and of the Common Stock issuable upon
conversion of the Shares and the Series E1 Preferred Stock has been taken, and
this Agreement, the Rights Agreement, and the Co-Sale Agreement (collectively,
the "Transactional Agreements") constitute legally binding and valid obligations
of the Company enforceable in accordance with their terms.
3.5. Corporate Power. The Company will have at the Closing
Date all requisite legal and corporate power and authority to execute and
deliver the Transactional Agreements, to sell and issue the Shares hereunder, to
issue the Series E1 Preferred Stock and the
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<PAGE> 9
Common Stock issuable upon conversion of the Shares and the Series E1 Preferred
Stock, and to carry out and perform its obligations under the terms of the
Transactional Agreements.
3.6. Validity of Shares. The Shares, when issued, sold,
and delivered in accordance with the terms and for the consideration expressed
in this Agreement, will be duly and validly issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws), fully paid and non-assessable and will be owned free and clear of any
adverse claims (within the meaning of Section 8-102(1)(a) of Article 8 of the
Washington Uniform Commercial Code), assuming that the Investors are "protected
purchasers" within the meaning of Section 8-303 of Article 8 of the Washington
Uniform Commercial Code. The Common Stock and the Series E1 Preferred Stock
issuable upon conversion of the Shares have been duly and validly reserved and,
assuming such shares are issued to the Investors, upon issuance in accordance
with the Restated Articles will be duly and validly issued (including, without
limitation, issued in compliance with all applicable federal and state
securities laws), fully-paid, and non-assessable and will be free of any liens
or encumbrances other than any liens or encumbrances created by or imposed
thereon by the holders; provided, however, that the Shares (and the Series E1
Preferred Stock and Common Stock issuable upon conversion thereof) shall be
subject to restrictions on transfer under state and/or federal securities laws.
The Shares and the Series E1 Preferred Stock, and the Common Stock issuable upon
conversion of the Shares and the Series E1 Preferred Stock, are not subject to
any preemptive rights or rights of first refusal except as specified in Exhibit
A.
3.7. No Conflict with Other Instruments. The execution,
delivery, and performance of the Transactional Agreements will not: (a) result
in any violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice: (i) any provision of the
Company's Restated Articles or Bylaws; (ii) any provision of any judgment,
decree, or order to which the Company is a party or by which it is bound; (iii)
any material contract, obligation, or commitment to which the Company is a party
or by which it is bound; or (iv) any material statute, rule, or governmental
regulation applicable to the Company, or (b) result in the creation or
acceleration of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization, or approval applicable to the Company, its
business or operations, or any of its assets or properties.
3.8. Litigation. There is no action, proceeding, or
investigation pending or threatened, or any basis therefor known to the Company,
that questions the validity of the Transactional Agreements or the right of the
Company to enter into the Transactional Agreements or to consummate the
transactions contemplated hereby and thereby, or that would result, either
individually or in the aggregate, in any Material Adverse Event, including,
without limitation, any action, proceeding, or investigation involving the prior
employment or consultancy of any of the Company's employees or consultants or
their use of any information or techniques alleged to be proprietary to any
former employer of any such employee or consultant or their obligations under
any agreements with prior employers. There is no judgment, decree, or order of
any court in effect against the Company and the Company is not in default with
respect to any order of any governmental authority to which the Company is a
party or by which it is
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<PAGE> 10
bound. There is no action, suit, proceeding, or investigation by the Company
currently pending or which the Company presently intends to initiate.
3.9. Title to Properties; Liens and Encumbrances. The
Company has good and marketable title to all of its properties and assets, both
real and personal, and has good title to all its leasehold interests, in each
case subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance, or charge, other than (i) the lien of current taxes not
yet due and payable, and (ii) liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company. With respect to the property and assets it leases,
the Company is not in default under such leases in any material respect.
3.10. Patents and Other Proprietary Rights.
(a) The Company has sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights, and processes (collectively, "Intellectual
Property") necessary for its business as now conducted, and believes it can
obtain, on commercially reasonable terms, any additional rights necessary for
its business as proposed to be conducted, and the Company's Intellectual
Property does not, and, to the knowledge of the Company, would not, conflict
with or constitute an infringement of the rights of any other party;
(b) There are no outstanding options, licenses, or
agreements of any kind relating to the matters listed in subsection 3.10(a) or
that grant rights to any other person to manufacture, license, produce,
assemble, market, or sell the Company's products, nor is the Company bound by or
a party to any options, licenses, or agreements of any kind with respect to the
Intellectual Property rights of any other person or entity;
(c) The Company has not received nor is the Company
on notice of any communications alleging that the Company or its employees or
agents has violated or infringed or, by conducting its business as proposed,
would violate or infringe any of the Intellectual Property rights of any other
person or entity;
(d) The Company is not aware that any of its
employees or consultants is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
cause the Company to infringe upon the Intellectual Property rights of any other
person or entity, that would interfere with the use of such employee's and
consultant's best efforts to promote the interests of the Company, or that would
conflict with the Company's business as proposed to be conducted; and
(e) Neither the execution nor delivery of the
Transactional Agreements, nor the carrying on of the Company's business by the
employees and consultants of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such
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<PAGE> 11
employees or consultants is now obligated. The Company does not believe it is or
will be necessary to utilize any inventions of any of its employees (or people
it currently intends to hire) made prior to their employment by the Company.
3.11. Taxes. All federal, state, local, and foreign tax
returns required to be filed by the Company have been filed and are true in all
material respects, and all taxes, assessments, fees, and other governmental
charges upon the Company, or upon any of its properties, income, or franchises,
shown in such returns to be due and payable have been paid except those
contested by the Company in good faith as described in Exhibit 3 and for which
adequate reserves have been set up; or if any of such tax returns have not been
filed or if any such taxes have not been paid or so reserved for, the failure so
to file or to pay would not in the aggregate constitute a Material Adverse
Event. The Company has not elected to be treated as a "consenting corporation"
pursuant to Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code").
3.12. Financial Statements. The Company has delivered to
each Investor its audited financial statements (balance sheet and statements of
operations, stockholders' equity, and cash flows) for the fiscal year ended
September 30, 1997, and, has provided each Investor with a statement of cash
flow in addition to a balance sheet and income statement for each month
thereafter through April 30, 1998, (together, the "Financial Statements"). The
Financial Statements are complete and correct in all material respects. The
Financial Statements accurately set out and describe the financial condition of
the Company as of the dates, and for the periods, indicated therein, subject to
normal year-end adjustments. Except as set forth in the Financial Statements,
the Company has no material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to April 30,
1998 which, individually or in the aggregate, do not constitute a Materially
Adverse Event and (ii) obligations under contracts and commitments incurred in
the ordinary course of business not in excess of $25,000 individually.
3.13. Changes. Since April 30, 1998, there has not been,
except as contemplated herein:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not constituted, in the aggregate, a Material Adverse Event;
(b) any damage, destruction or loss, whether or not
covered by insurance, constituting a Material Adverse Event;
(c) any waiver by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge or any lien, claim
or encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which
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is not material to the assets, properties, financial condition, operating
results or business of the Company (as such business is presently conducted and
as it is proposed to be conducted);
(e) any change or amendment to any material contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
(f) any material change in any compensation
arrangement or agreement with any employee; or
(g) to the Company's knowledge, any other event or
condition of any character which constitutes a Material Adverse Event or impairs
the ability of the Company to conduct its business as it is now being conducted
or proposed to be conducted.
3.14. Company's Contracts.
(a) All of the contracts and agreements (i) with
expected receipts or expenditures in excess of $100,000, (ii) involving a
license or grant of rights to or from the Company involving patents, trademarks,
copyrights, or other proprietary information applicable to the business of the
Company, (iii) with provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv) that
provide indemnification by the Company with respect to infringements of
proprietary rights to which the Company is a party as of the date of the Closing
are listed on Exhibit 3. All such contracts and agreements are legally binding,
valid, and in full force and effect in all material respects, and there is no
indication of reduced activity relating to such contract or agreement (other
than in the ordinary course of business) by any of the parties to any such
contract or agreement.
(b) The Company has not (i) incurred any indebtedness
for money borrowed, or guaranteed borrowings, in excess of $50,000 in the
aggregate, (ii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iii) sold, exchanged, or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(c) The Company is not party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Articles or Bylaws, which adversely affects its business as now
conducted or as proposed to be conducted, its properties, or its financial
condition.
(d) Except for (i) transactions relating to the
purchase of shares of the Company's Common Stock, or options therefor, as listed
on Exhibit 3, and (ii) regular salary payments and fringe benefits under an
individual's compensation package with the Company, no officer, director, Rajeev
Singh, Kenneth Fern, or spouse, parent, sibling or child of any such person, or
any other employee has any agreement, understanding, proposed transaction or is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the best of the Company's
knowledge, no officer, director, Rajeev Singh, Kenneth Fern or spouse, parent,
sibling or child of any such person has any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
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<PAGE> 13
with which the Company has a business relationship, or any firm or corporation
that competes with the Company, except that any such person may own stock in
publicly traded companies that may compete with the Company. No spouse, parent,
sibling or child of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
3.15 No Defaults, Violations, or Conflicts. The Company is
not in violation of any term or provision of any charter provision, bylaw, or
any term or provision of any indebtedness, mortgage, indenture, contract,
agreement, judgment, or to the Company's knowledge, any decree, order, statute,
rule, or regulation applicable to the Company where such violation, or
violations in the aggregate, is a Material Adverse Event.
3.16 Insurance. The Company has in effect insurance
covering risks associated with its business in such amounts as are customary in
its industry. The Company is not aware of any pending or threatened claims
against the Company for personal injuries or property damages.
3.17 Private Offering. The Company agrees that neither the
Company nor anyone acting on its behalf will offer any of the Shares or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone or take any other action so as to make the issuance and
sale of the Shares subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
3.18 Prior Registration Rights. Except as provided in the
Rights Agreement, the Company is under no obligation to register under the
Securities Act any of its presently outstanding securities or any of its
securities that may subsequently be issued.
3.19 Disclosure. The Transactional Agreements and any
other documentation or written information furnished to the Investors by the
Company in connection with their decision to purchase the Shares, together with
any exhibits or appendices hereto do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements
contained therein or herein in view of the circumstances under which they were
made not misleading, except that, with respect to any projections that have been
furnished, the Company represents only that such projections were prepared in
good faith and that the Company reasonably believes that there is a reasonable
basis for such projections. The Company has provided each Investor with all the
information that the Investors or Investors' legal counsel has requested for
deciding whether to purchase the Shares.
3.20 Distributions. There has been no declaration or
payment by the Company of any dividend, nor any distribution by the Company of
any assets of any kind to any of its shareholders in redemption or as the
purchase price of any of the Company's securities.
3.21 Employee Compensation Plans. The Company is not party
to or bound by any currently effective employment contracts, deferred
compensation agreements, bonus plans, incentive plans, profit sharing plans,
retirement agreements, or other employee compensation agreements.
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<PAGE> 14
3.22 Employee Relations. The Company believes its
relations with its employees are satisfactory. The Company's employees are not
represented by any labor unions nor, to the Company's knowledge, is any union
organization campaign in progress. The Company is not aware that any of its
officers or employees intends to terminate employment nor does the Company have
any present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
3.23 Employee Proprietary Information and Inventions
Agreement. Each officer, employee and consultant of the Company has executed and
delivered to the Company an Employee Proprietary Information and Inventions
Agreement substantially in the form of Exhibit 7.2. The Company, after
reasonable investigation, is not aware that any of its employees, officers or
consultants are in violation thereof, and the Company will use its best efforts
to prevent any such violation.
3.24 Brokers and Finders. The Company has not retained any
investment banker, broker, or finder in connection with the transactions
contemplated by this Agreement.
3.25 Corporate Documents. The Company has furnished the
Investors with copies of the Articles of Incorporation and Bylaws as currently
in effect and the minute books. Said copies are true, correct, and complete and
contain all amendments and all minutes (and resolutions adopted by the
shareholders and the Board of Directors) through the Closing Date.
3.26 Governmental Consents. Subject to the accuracy of
Investors' representations in Section 4 of this Agreement, no consent, approval,
order, or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, local, or provincial
governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement, except for
filings pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, Rule 460-44A of the Washington Administrative Code, and
other applicable state securities laws, which filings and qualifications, if
required, will be effected in a timely manner.
3.27 Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which would constitute a Material Adverse
Event, and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, license, or other similar authority.
3.28 Environmental and Safety Laws. To the best of its
knowledge, the Company is not in violation of any applicable statute, law, or
regulation relating to the environment or occupational health and safety as the
Company's business is conducted and is proposed to be conducted, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation where such violation
would constitute a Material Adverse Event.
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3.29 Returns and Complaints. The Company has received no
customer complaints concerning its products and/or services, nor has it had any
of its products returned by a purchaser thereof, other than minor, non-recurring
warranty problems.
3.30 Manufacturing and Marketing Rights. The Company is
not bound by any agreement that affects the Company's exclusive right to
develop, manufacture, assemble, distribute, market, or sell its products.
3.31 Section 83(b) Elections. All individuals who have
purchased shares of the Company's Common Stock have, if applicable, filed timely
elections under Section 83(b) of the Code and any analogous provisions of
applicable state tax laws.
3.32 Stock Restriction Agreements. Holders of all of the
shares of the Common Stock of the Company and of all of the outstanding options
to purchase Common Stock of the Company have executed and delivered to the
Company Stock Purchase and Restriction Agreements substantially in the form of
Exhibit 7.3 attached hereto.
3.33 Real Property Holding Company. The Company is not a "U.S.
real property holding corporation" within the meaning of Section 897 of the
Code.
4. Representations and Warranties of the Investors; Restrictions on
Transferability. Each Investor severally represents and warrants to the Company
as follows:
4.1 Authorization. When executed and delivered by the
Investor, and assuming execution and delivery by the Company, the Transactional
Agreements will each constitute a valid obligation of the Investor, enforceable
in accordance with their respective terms.
4.2 Brokers and Finders. Investor has not retained any
investment banker, broker, or finder in connection with the transactions
contemplated by this Agreement.
4.3 Investment. This Agreement is made with Investor in
reliance upon its representation to the Company, which by Investor's execution
of this Agreement Investor hereby confirms, that the Shares to be received by
Investor will be acquired for investment for Investor's own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents that it has no contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant
participation to such person or to any third person, with respect to any of the
Shares.
4.4 No Public Market. Investor understands and
acknowledges that the offering of the Shares pursuant to this Agreement will not
be registered under the Securities Act on the grounds that the offering and sale
of securities contemplated by this Agreement are exempt from registration
pursuant to Section 4(2) of the Securities Act, and that the Company's reliance
upon such exemption is predicated upon Investor's representations set forth in
this Agreement. Investor further understands that no public market now exists
for any of the
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securities issued by the Company, and that the Company has made no assurances
that a public market will ever exist for the Company's securities.
4.5 Limitations on Transferability. Investor covenants that in
no event will it dispose of any of the Shares (other than pursuant to Rule 144
promulgated by the Securities and Exchange Commission ("Commission") under the
Securities Act ("Rule 144") or any similar or analogous rule) unless and until
(i) Investor shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and (ii), if requested by the Company,
Investor shall have furnished the Company with an opinion of counsel
satisfactory in form and substance to the Company and the Company's counsel to
the effect that (x) such disposition will not require registration under the
Securities Act and (y) appropriate action necessary for compliance with the
Securities Act and any applicable state, local, or foreign law has been taken.
It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the limitations set forth in the foregoing sentence, if Investor
is a partnership it may transfer Shares to its constituent partners or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or transfer by gift, will, or intestate
succession to any such partner's spouse or lineal descendants or ancestors
without the necessity of registration or opinion of counsel if the transferee
agrees in writing to be subject to the terms of this Agreement to the same
extent if such transferee were an Investor; provided, however, that Investor
hereby covenants not to effect such transfer if such transfer either would
invalidate the securities laws exemptions pursuant to which the Shares were
originally offered and sold or would itself require registration under the
Securities Act or applicable state securities laws. Each certificate evidencing
the Shares transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 4.7 below, except that such certificate shall not
bear such legend if the transfer was made in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that such legend
is not required in order to establish compliance with any provisions of the
Securities Act.
4.6 Experience. Investor represents that: (i) it has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its prospective investment in the Shares;
(ii) it believes it has received all the information it has requested from the
Company and considers necessary or appropriate for deciding whether to purchase
the Shares; (iii) it has had the opportunity to discuss the Company's business
management, and financial affairs with its management, (iv) it has the ability
to bear the economic risks of its prospective investment; and (v) it is able,
without materially impairing its financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on its investment. The
foregoing, however does not modify the representations and warranties of the
Company in Section 3 of this Agreement or the right of the Investors to rely
thereon.
11
<PAGE> 17
4.7 Legends.
(a) All certificates for the Shares shall bear the
following legend:
"The securities represented hereby have not been
registered under the Securities Act of 1933, as
amended ("Act"). Such securities may not be
transferred unless a Registration Statement under the
Act is in effect as to such transfer or, in the
opinion of counsel for the Company, registration
under the Act is unnecessary in order for such
transfer to comply with the Act or unless sold
pursuant to Rule 144 of the Act."
(b) The certificates evidencing the Shares shall also
bear any legend required by the Commissioner of Corporations of the State of
California or the Washington State Administrator of Securities or required
pursuant to any state, local, or foreign law governing such securities.
4.8 Accredited Investor. Investor presently qualifies,
and will as of the Closing Date qualify, as an "accredited investor" within the
meaning of Regulation D of the rules and regulations promulgated under the
Securities Act of 1933.
5. Conditions of Investors' Obligations at Closing. The obligations of
each Investor under Section 1 of this Agreement are subject to the fulfillment
at or before the Closing of each of the following conditions, any of which may
be waived in writing by such Investor:
5.1 Representations and Warranties. The representations
and warranties of the Company contained in Section 3 shall be true on and as of
the Closing with the same effect as if made on and as of the Closing.
5.2 Performance. The Company shall have performed or
fulfilled all agreements, obligations, and conditions contained herein required
to be performed or fulfilled by the Company before the Closing.
5.3 Qualifications. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or any state that are required in connection with the lawful issuance and
sale of the Shares pursuant to this Agreement shall be duly obtained effective
as of the Closing.
5.4 Opinion of Company's Counsel. The Investors shall
have received from Fenwick & West, LLP, counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form of Exhibit
5.4.
5.5 Board of Directors. All requisite proceedings shall have
been taken so that immediately following the Closing, James D. Robinson III, the
initial RRE Designee to the Board of Directors, will have been elected to the
Board of Directors which will consist of the persons listed on Schedule 5.5.
"RRE Designee" shall mean the individual designated by RRE
12
<PAGE> 18
Investors, L.P. and RRE Investors Fund, L.P. to serve as a director of the
Company in respect of the Series E Preferred Stock board seat.
5.6 Proceedings Satisfactory; Compliance Certificate. All
corporate and legal proceedings taken by the Company in connection with the
transactions contemplated by this Agreement and all documents and papers
relating to such transactions shall be satisfactory in all material respects to
the Investors, in the reasonable exercise of its judgment. The Company shall
have delivered to the Investors a certificate dated as of such Closing, signed
by the Company's President, certifying that the conditions set forth in Sections
5.1, 5.2, 5.3 and 5.5 have been satisfied.
5.7 Information and Registration Rights Agreement. The Company
and the Investors shall have entered into the Rights Agreement attached as
Exhibit 5.7.
5.8 Restated Articles. The Company shall have filed its
Restated Articles with the Secretary of State of the State of Washington, which
Restated Articles shall be in full force and effect on the Closing Date.
5.9 Stock Restriction and Co-Sale Agreement. The Company, S.
Steven Singh, Michael W. Hilton, and the Investors shall have entered into the
Co-Sale Agreement attached as Exhibit 5.9.
5.10 Voting Agreement. The Investors and the Company shall
have entered into the Voting Agreement attached as Exhibit 5.10.
5.11 Certificate of Existence/Authority. The Company shall
have delivered to the Investors a Certificate of Existence/Authority relating to
the Company issued by the Washington Secretary of State dated no earlier than
five (5) days prior to the Closing.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company under Section 1 of this Agreement are subject to the fulfillment
at or before the Closing of each of the following conditions, any of which may
be waived in writing by the Company:
6.1 Representations and Warranties. The representations
and warranties of the Investors contained in Section 4 shall be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.
6.2 Blue Sky Compliance. The Company shall have complied
with and be effective under the securities laws of the State of California, the
State of Washington, and any other applicable states as necessary to offer and
sell the Shares to the Investors.
6.3 Restated Articles. The Restated Articles shall have
been filed with the Secretary of State of the State of Washington and shall be
in full force and effect on the Closing Date.
13
<PAGE> 19
6.4 Legal Matters. All material matters of a legal nature
which pertain to this Agreement, the Co-Sale Agreement, and the Rights
Agreement, and the transactions contemplated hereby, shall have been reasonably
approved by counsel to the Company.
6.5 Information and Registration Rights Agreement. The
Investors shall have entered into the Company's Rights Agreement attached as
Exhibit 5.7.
6.6 Stock Restriction and Co-Sale Agreement. The Investors
shall have entered into the Co-Sale Agreement attached as Exhibit 5.9.
6.7 Voting Agreement. The Investors shall have entered into
the Voting Agreement attached as Exhibit 5.10.
7. Post Closing Covenants of the Company.
7.1 Securities Laws Compliance. The Company shall within
15 days of the Closing file a notice of the sale of the Shares to the Investors
pursuant to Section 25102(f) of the California Corporations Code, and shall make
any other filings required by Rule 460-44A of the Washington Administrative Code
and the securities or Blue Sky laws of any other applicable jurisdiction.
7.2 Employee Proprietary Information and Inventions
Agreement. Unless otherwise determined by the Board of Directors, the Company
shall require all future officers, directors, and employees of, and consultants
to, the Company and its Subsidiaries to execute and deliver an Employee
Proprietary Information and Inventions Agreement in substantially the form of
Exhibit 7.2.
7.3 Stock Purchase and Restriction Agreements. The
Company shall cause all future purchasers of, and all future holders of options
to purchase, shares of the Company's Common Stock to execute and deliver Stock
Purchase and Restriction Agreements (or Stock Option Agreements) substantially
in the form set forth in Exhibit 7.3, but with vesting over four (4) years.
7.4 Stock Plans. The Company may sell shares of stock and
grant options to employees, advisors, officers, and directors of, and
consultants to, the Company and its Subsidiaries only pursuant to such
arrangements, contracts, or plans as are recommended by management and approved
by the Board of Directors, which arrangements, contracts or plans shall provide
for vesting of options, or lapsing of repurchase rights in the case of shares,
over a four (4) year period, 25% after the first year and ratably thereafter on
a monthly basis, subject to acceleration under certain circumstances in the
event of an acquisition or merger.
7.5 Key Person Insurance. The Company shall continue to
maintain on the life of Michael W. Hilton and the life of S. Steven Singh key
person life insurance, each in the amount of $1,000,000, with proceeds payable
to the Company, until the Board of Directors of the Company determines
otherwise.
14
<PAGE> 20
7.6 Board Committees. The Company agrees that each member
of its Board of Directors shall be eligible to serve on each committee of the
Board. The Company shall reimburse each member of its Board of Directors and
each advisor to the Board for costs incurred by such member and advisor in
attending the Board of Directors and other Company meetings.
7.7 Reincorporation in Delaware. The Company agrees that,
in connection with any reincorporation in Delaware while it is not subject to
the requirements of the Securities Exchange Act of 1934, it will not modify the
rights, preferences, or privileges of any series of Preferred Stock, except as
required by the Delaware General Corporation Law.
8. Miscellaneous.
8.1 Entire Agreement; Successors and Assigns. This
Agreement constitutes the entire contract between the Company and the Investors
relative to the subject matter hereof. Any previous agreement between the
Company and the Investors is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors, and assigns of the parties. By
their execution of this Agreement, each of Brentwood Associates VI, L.P., U.S.
Venture Partners IV, L.P., Second Ventures II, L.P., USVP Entrepreneur Partners
II, L.P., Institutional Venture Partners VII, IVP Founders Fund 1, Institutional
Venture Management VII, Mayfield VIII, and Mayfield Associates Fund III waive,
with respect to the issuance of the Shares (including for this purpose the
shares issuable upon exercise of those warrants issued to ComDisco, Inc. in
connection with the establishment and/or extension of certain credit
facilities), the Right of First Refusal granted to them under Section 5 of that
Restated Information and Registration Rights Agreement dated as of July 12, 1996
(as amended). By its execution of this Agreement, the Company acknowledges and
confirms that it has requested that such Investors waive their Right of First
Offer for purposes of Section 6 of Article 5 of the Company's Restated Articles
of Incorporation.
8.2 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California, excluding
those laws that direct the application of another jurisdiction's laws.
8.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.4 Headings. The headings of the Sections of this Agreement
are for convenience and shall not by themselves determine the interpretation of
this Agreement.
8.5 Notices. Any notice required or permitted hereunder
shall be given in writing and shall be conclusively deemed effectively given
upon personal delivery or delivery by courier, or five days after deposit in the
United States mail, by registered or certified mail, postage prepaid, addressed
to the Company or an Investor, as the case may be, as set forth below its name
on the signature page of this Agreement, or at such other address as the Company
or such Investor may designate by ten (10) days' advance written notice to the
other.
15
<PAGE> 21
8.6 Survival of Warranties. The warranties and
representations of the parties contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
any investigation by or on behalf of any party; provided, however, that such
representations and warranties need only be accurate as of the date of such
execution and delivery and as of the Closing.
8.7 Amendment of Agreement. Any provision of this
Agreement may be amended by a written instrument signed by the Company and by
persons holding at least a seventy-five percent (75%) majority of the aggregate
of (a) the then outstanding Shares and (b) the then outstanding shares of Common
Stock into which the Shares have been converted, other than shares of Common
Stock which have been sold to the public.
8.8 California Securities Laws. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT PROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
8.9 Finders Fees. Each of the Company and the Investors
will indemnify the other against all liabilities incurred by the indemnifying
party with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
8.10 Expenses. The Company and the investors will each
bear their respective legal and other fees and expenses with respect to this
Agreement and the transactions contemplated hereby, provided, however, that the
Company will pay at the Closing upon submission of appropriate invoices (i) the
reasonable fees and expenses of RRE Investors, and of counsel to and accountants
for RRE Investors, and (ii) of counsel to and accountants for the American
Express Company, each of which shall not exceed (in the aggregate) Twenty
Thousand Dollars ($20,000).
16
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By /s/ S. STEVEN SINGH
-----------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: RRE INVESTORS, L.P.
By RRE Investors II, LLC,
its General Partner
By _________________________________
Name:
Title:
RRE INVESTORS FUND, L.P.
By: RRE Investors Fund GP, L.P.,
its General Partner
By: RRE Investors Fund LDC,
its General Partner
By _________________________________
Name:
Title:
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By
-----------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: RRE INVESTORS, L.P.
By RRE Investors II, LLC,
its General Partner
By /s/ ANDREW L. ZALASIN
-----------------------------------
Name: Andrew L. Zalasin
Title: Member, General Partner
RRE INVESTORS FUND, L.P.
By: RRE Investors Fund GP, L.P.,
its General Partner
By: RRE Investors Fund LDC,
its General Partner
By /s/ ANDREW L. ZALASIN
-----------------------------------
Name: Andrew L. Zalasin
Title: Member, General Partner
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _________________________________
S. Steven Singh, President
INVESTOR: INSTITUTIONAL VENTURE
PARTNERS VII, L.P.
by its General Partner
Institutional Venture Management VII, L.P.
By: /s/ T. PETER THOMAS
-----------------------------------
T. Peter Thomas, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR: IVP FOUNDERS FUND I, L.P.
by its General Partner
Institutional Venture Management VI, L.P.
By: /s/ T. PETER THOMAS
-----------------------------------
T. Peter Thomas, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR: INSTITUTIONAL VENTURE MANAGEMENT
VII, L.P.
By: /s/ T. PETER THOMAS
-----------------------------------
T. Peter Thomas, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-----------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: BRENTWOOD AFFILIATES FUND II, L.P.
By: Brentwood VIII Ventures, LLC
Its General Partner
By: /s/ JEFFREY BRODY
-----------------------------------------
Managing Member
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
1. /s/ JEFFREY BRODY
------------------------------------
(Signature)
Jeffrey Brody
------------------------------------
(Print Name)
2. /s/ JAMES MONGIELLO
------------------------------------
(Signature)
James Mongiello
------------------------------------
(Print Name)
3. /s/ ERIC CHIU
------------------------------------
(Signature)
Eric Chiu
------------------------------------
(Print Name)
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-------------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: MAYFIELD ASSOCIATES FUND III
A California Limited Partnership
MAYFIELD VIII
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Their General Partner
By: /s/ MICHAEL LEVINTHAL
--------------------------------------
Title: Managing Member
Address: 2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: COMDISCO, INC.
By: /s/ JAMES P. LABE
--------------------------------
Title: James P. Labe, President
Comdisco Ventures Division
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: CAMBRIDGE TECHNOLOGY CAPITAL
FUND I, L.P.
By: Cambridge Technology GPLP, L.P.
By: Cambridge Technology CGP, Inc.
By: /s/ BARRY ROSENBAUM
----------------------------------
Barry Rosenbaum, Managing Director
Address: 11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: CAMBRIDGE TECHNOLOGY CAPITAL
FUND I, L.P.
By: Cambridge Technology GPLP, L.P.
By: Cambridge Technology CGP, Inc.
By:
----------------------------------
Barry Rosenbaum, Managing Director
Address: 11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
HAMBRECHT & QUIST CALIFORNIA
By: /s/ LISA L. LEWIS
--------------------------------
Name: Lisa L. Lewis
--------------------------------
Title: Controller
--------------------------------
Attorney-in-fact
--------------------------------
Address: One Bush Street
San Francisco, CA 94104
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
INVESTOR: _________________________________________
Name:____________________________________
_________________________________________
Name: Cristina Morgan
-----------------------------------
_________________________________________
Name: Dan Rimer
-----------------------------------
/s/ ANDREW M. KEARNS
------------------------------------------
Name: Andrew Kearns
__________________________________________
Name: Brad Rohal
------------------------------------
Address: c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
--------------------------------------
S. Steven Singh, President
INVESTOR:
-----------------------------------------
Name:
------------------------------------
-----------------------------------------
Name: Cristina Morgan
-----------------------------------
/s/ DAN RIMER
-----------------------------------------
Name: Dan Rimer
-----------------------------------
-----------------------------------------
Name: Andrew Kearns
------------------------------------
-----------------------------------------
Name: Brad Rohal
------------------------------------
Address: c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
INVESTOR: _________________________________________
Name:____________________________________
/s/ CHRISTINA MORGAN
-----------------------------------------
Name: Cristina Morgan
-----------------------------------
_________________________________________
Name: Dan Rimer
-----------------------------------
------------------------------------------
Name: Andrew Kearns
------------------------------------
__________________________________________
Name: Brad Rohal
------------------------------------
Address: c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
INVESTOR: /s/ JEFFREY D. BRODY
-----------------------------------------
Jeffrey D. Brody
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
INVESTOR:
-----------------------------------------
Matthew P. Quilter
Address: c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
INVESTORS: /s/ JAMES MONGIELLO
-----------------------------------------
James Mongiello
/s/ ERIC CHIU
-----------------------------------------
Eric Chiu
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: /s/ S. STEVEN SINGH
--------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: /s/ S. STEVEN SINGH
------------------------------------
S. Steven Singh
/s/ MICHAEL W. HILTON
------------------------------------
Michael W. Hilton
/s/ STERLING WILSON
------------------------------------
Sterling Wilson
____________________________________
Jon Matsuo
____________________________________
Raj Singh
____________________________________
Fred Ingham
6222 185th Avenue NE
Redmond, WA 98052
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
--------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS:
------------------------------------
S. Steven Singh
------------------------------------
Michael W. Hilton
------------------------------------
Sterling Wilson
/s/ JON MATSUO
------------------------------------
Jon Matsuo
/s/ RAJEEV SINGH
------------------------------------
Raj Singh
/s/ FREDERICK L. INGHAM
------------------------------------
Fred Ingham
6222 185th Avenue NE
Redmond, WA 98052
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
INVESTOR:
-----------------------------------------
Jeffrey D. Brody
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
INVESTOR: /s/ MATTHEW P. QUILTER
-----------------------------------------
Matthew P. Quilter
Address: c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have executed this Series E Preferred
Stock Purchase Agreement as of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By: _____________________________________
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
By: /s/ ANN BUSQUET
---------------------------------------
Name: Ann Busquet
Title: President, American Express
Relationship Services
<PAGE> 39
EXHIBITS AND SCHEDULES TO
PORTABLE SOFTWARE CORPORATION
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULES
1.1 Schedule of Investors
5.5 List of Directors of the Company
EXHIBITS
A Amended and Restated Articles of Incorporation
3. Schedule of Exceptions
5.4 Fenwick & West LLP opinion
5.7 Restated Information and Registration Rights Agreement
5.9 Amended and Restated Stock Restriction and Co-Sale Agreement
5.10 Voting Agreement
7.2 Form of Employee Proprietary Information and Inventions Agreement
7.3 Form of Stock Purchase and Restriction Agreements for Common Stock
Shareholders
<PAGE> 40
SCHEDULE 1.1
Investors
FIRST CLOSING
<TABLE>
<CAPTION>
Stock Number of
Name of Investor Cert. No. Shares of Stock Purchase Price
- ---------------- --------- --------------- --------------
<S> <C> <C> <C>
RRE Investors, L.P. PE- 1 1,040,218 $ 3,224,675.80
RRE Investors Fund, L.P. PE-2 572,685 $ 1,775,323.50
126 East 56th Street
New York, N.Y. 10022
Attn: Andrew L. Zalasin
Institutional Venture Partners VII, L.P. PE-4 174,821 $ 541,945.10
IVP Founders Fund I, L.P. PE-5
1,802 $5,586.20
Institutional Venture Management VII, L.P. PE-6 3,605 $ 11,175.50
3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
Attn: Norman A. Fogelsong
Brentwood Affiliates Fund II, L.P. PE-7 170,632 $ 528,959.20
3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
Attn: Jeffrey D. Brody
Mayfield Associates Fund III PE-8 8,734 $ 27,075.40
Mayfield VIII PE-9 165,949 $ 514,441.90
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
Attn: Mike Levinthal
Comdisco, Inc. PE-10 80,645 $ 249,999.50
3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: James P. Labe
Cambridge Technology Capital Fund I, L.P. PE-11 161,290 $ 499,999.00
11512 El Camino Real
Suite 215
San Diego, CA 92130-2046
</TABLE>
1
<PAGE> 41
<TABLE>
<S> <C> <C>
American Express Company 1,612,903 $ 4,999,999.30
American Express Tower
World Financial Center
New York, N.Y, 10285
Attn: Jason Ewell
Carol V. Schwartz, Esq
Hambrecht & Quist California 51,614 $ 160,003.40
One Bush Street
San Francisco, CA 94104
Attn: Jeff Fulcher
Andrew Kearns 806 $ 2,498.60
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco. CA 94104
John B. Rohal 645 $ 1,999.50
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Daniel H. Rimer 4,839 $ 15,000.90
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Cristina M. Morgan 6,613 $ 20,500.30
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Jeffrey D. Brody 9,678 $ 30,001.80
c/o Brentwood Associates
3000 San Hill Road
Bldg. Two, Suite 290
Menlo Park, CA 94025-7068
James Mongiellio 3,226 $ 10,000.60
c/o Brentwood Associates
3000 San Hill Road
Bldg. Two, Suite 290
Menlo Park, CA 94025-7068
</TABLE>
2
<PAGE> 42
<TABLE>
<S> <C> <C>
Eric Chiu 3,226 $ 10,000.60
c/o Brentwood Associates
3000 San Hill Road
Bldg. Two, Suite 290
Menlo Park, CA 94015-7068
Fred Ingham 6,452 $ 20,001.20
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond, WA 98052
Michael W. Hilton 9,678 $ 30,001.80
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond, WA 98052
Jon Matsuo 6,452 $ 20,001.20
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond, WA 98052
Matthew P. Quilter 3,226 $ 10,000.60
c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Rajeev Singh 6,452 $ 20,001.20
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond. WA 98052
S. Steven Singh 9,678 $ 30,001.80
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond. WA 98052
Sterling Wilson 6,452 $ 20,001.20
c/o Portable Software Corporation
6222 185th Avenue NE
Redmond WA 98052
--------- ---------------
4,122,321 $ 12,779,195.10
</TABLE>
3
<PAGE> 43
SCHEDULE 1.1
Investors
SECOND CLOSING
<TABLE>
<CAPTION>
Stock Number of
Name of Investor Cert. No. Shares of Stock Purchase Price
- ---------------- --------- --------------- --------------
<S> <C> <C> <C>
American Express Travel Related PE-27 1,612,903 $4,999,999.30
Services Company, Inc.
American Express Tower
World Financial Center
New York, N.Y. 10285
Attn: Jason Ewell
Carol V. Schwartz, Esq.
</TABLE>
1
<PAGE> 44
SCHEDULE 5.5
DIRECTORS OF PORTABLE SOFTWARE CORPORATION
S. Steve Singh
Michael W. Hilton
Jeffrey D. Brody
Norman A. Fogelsong
Dale J. Vogel
Michael Levinthal
James D. Robinson III
<PAGE> 1
**Confidential treatment has been requested with
respect to certain information contained in this
document. Confidential portions have been omitted
from the public filing and have been filed separately
with the Securities and Exchange Commission
EXHIBIT 10.09
STRATEGIC MARKETING ALLIANCE AGREEMENT
This Strategic Marketing Alliance Agreement (the "Agreement") is made
and entered into as of December 17, 1997 (the "Effective Date") between Portable
Software Corporation ("Portable"), a Washington corporation and American Express
Company ("AmEx"), a New York corporation.
R E C I T A L S
A. Portable has developed and is licensing and marketing its Xpense
Management Solution enterprise software products to customers;
B. AmEx provides, inter alia, personal and corporate credit card
products and services, travel agency services, and electronic travel booking
services and products;
C. Portable and AmEx desire to enter into a strategic worldwide
marketing alliance providing for the integration of XMS with complementary
products and services of AmEx and for the marketing of XMS to Customers and
Prospects of AmEx on the terms and conditions set forth in this Agreement.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS.
1.1 [*]
1.2 "Affiliate" shall mean with respect to any person (which for
purposes of this definition shall include individuals and all legal entities),
any other person directly or indirectly controlling, controlled by, or under
common control with such person. For purposes of this definition, "control"
shall mean the power to direct or cause the direction of, the management and
policies of such person whether through the ownership of voting interests, by
contract, or otherwise.
1.3 "Authorized User" shall have the meaning given to it in the Volume
License Agreement and shall include [*].
1.4 "AXI" shall mean AmEx's corporate travel booking software product.
1.5 "Closing" shall mean conversion of a Lead into a Referred Customer.
1.6 "Corporate Card" shall mean a corporate charge, credit or
procurement card issued by AmEx to the employees and agents of Customers for use
in connection
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
with travel and entertainment expenses or procurement expenses incurred on
behalf of Customers.
1.7 "Customer" shall mean a business enterprise that is authorized to
use the Corporate Card, [*] or XMS for its own internal business purposes.
1.8 [*]
1.9 [*]
1.10 "Incremental Net Software License Revenue" is the Net Software
License Revenue received by Portable from an [*] during the [*] period beginning
on the effective date of the Volume License Agreement, that is attributable to
[*]
1.11 "Integration Program" shall mean the integration of product and
service offerings of the Parties in order to add value to the customer
experience in using such products and services, including providing
compatibility between certain software products and enabling the communication
of data between such products.
1.12 "Lead Referral Sales Cycle" shall mean the length of time that
elapses between acceptance of a Lead by Portable and the closing of the
applicable license transaction.
1.13 Net Software License Revenues shall have the meaning set forth in
Section 7.4.
1.14 "Party" shall mean Portable or AmEx.
1.15 "Prospect" shall mean a potential Customer.
1.16 "Referred Customer" shall mean a Prospect with respect to which (i)
AmEx has submitted a Lead (as defined in Section 7.1 hereof), (ii) Portable has
accepted the Lead, and (iii) Portable has entered into a Volume License
Agreement on or before the Lead Expiration Date. Referred Customers include
[*] to the extent XMS is licensed for [*]
1.17 [*]
1.18 "Technical Information" shall mean all technical information of a
Party that is reasonably necessary in order to carry out the Integration
Program, including data technologies, specifications, designs, plans, drawings,
data prototypes, processes, methods, know-how, software, and copyrighted or
copyrightable materials.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 3
1.19 "Volume License Agreement" shall mean Portable's standard
enterprise customer license agreement, a copy of which is attached as Exhibit A.
1.20 "Work Plan" shall mean a plan setting forth the specifications for
a component of the Integration Program, a description of the development tasks
to be accomplished to complete production of such component of the Integration
Program, and a schedule for completion of those tasks.
1.21 "XMS" shall mean Portable's Xpense Management Solution software
product.
2. MARKETING AND LICENSING OF XMS TO [*]
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 4
[*]
3. MARKETING AND LICENSING OF XMS TO OTHER CUSTOMERS.
3.1 General. Portable and AmEx wish to cooperate in marketing XMS to
Customers and Prospects who are [*]. Portable agrees that it will offer XMS to
such Customers on pricing terms no less favorable than those set forth in the
then current Master Price List (a copy of which (a) has been provided to AmEx
prior to the execution of this Agreement and (b) shall be provided to AmEx
whenever such list is revised). Portable represents and warrants to AmEx that it
has, or will obtain as promptly as is commercially practicable, the necessary
personnel and capacity to adequately provide the services set forth in the
Volume License Agreement if such Prospect becomes a Referred Customer.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 5
3.2 Rebate. In consideration of AmEx's efforts in promoting the use of
XMS, Portable agrees to pay a rebate to AmEx in accordance with the provisions
of Section 7 of this Agreement.
3.3 Future Negotiations. Upon notice from AmEx given on or before [*],
Portable agrees to enter into negotiations regarding the remarketing and/or
reselling of XMS by AmEx to Prospects. Portable and AmEx each agree to negotiate
in good faith, the terms and conditions of a remarketing or reseller license.
While establishment of a reseller relationship is the long term intent of the
Parties, nothing in this Agreement shall bind either Party to enter such a
relationship or any other relationship other than the relationship defined in
this Agreement and neither Party shall have any liability to the other should a
reseller relationship not be established.
4. INTERNAL LICENSE.
4.1 License Option. AmEx shall have the right, exercisable at any time
on or before [*] after the Effective Date, to acquire a license (the "License")
to use the current version of XMS for its internal data processing operations on
the terms and subject to the conditions set forth in Section 4.2 and in the
Volume License Agreement, subject to such modifications thereto as may be agreed
through good faith negotiations of the Parties. The License will permit use of
XMS by a maximum of [*] North America-based Authorized Users.
4.2 License Pricing. If AmEx exercises its option to acquire a License,
AmEx agrees to pay to Portable, on the terms set forth in the Volume License
Agreement, (i) a license fee of [*] and (ii) annual maintenance fees equal to
[*] of the aggregate software license fees paid under the Volume License
Agreement. Licenses covering additional Authorized Users may thereafter be
purchased at a rate of [*] per Authorized User. Portable agrees, that for the
[*] period commencing on the exercise of the License option, it will provide
AmEx with consulting services related to AmEx's implementation of XMS at a rate
of [*]. AmEx shall reimburse Portable for its actual travel and out-of-pocket
expenses incurred in connection with providing consulting services.
5. PRODUCT INTEGRATION.
5.1 Integration Program. Both Parties agree (i) that they will mutually
develop Work Plans regarding the Integration Program, (ii) that each will commit
and utilize sufficient resources to meet the milestones set forth in any aspect
of the Integration Program and to complete development of each Integration
Program component in accordance with the Work Plans (including the schedule set
forth therein), (iii) that each will use reasonable best efforts to maintain the
compatibility of their respective products and services [*] that are part of the
Integration Program either currently (as listed in the following sentence) or as
later added to the Integration Program by mutual agreement, and (iv) that each
will provide to the other, from time to time, a set of features and possible
product extensions for
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 6
inclusion in the Integration Program. The initial portion of the Integration
Program will be the design and development of [*]. The currently contemplated
features of the initial portion of the Integration Program are set forth in
Exhibit C-1. [*]
5.2 Technical Information. Each Party agrees to grant to the other Party
a nontransferable limited license, during the term of this Agreement, to use its
Technical Information in connection with the other Party's development of
Integration Program components; provided, however, if any such Technical
Information is owned by a third party and is non-assignable, prior to any use by
any Party, the other Party shall (a) first obtain the consent of the owner to
such transfer and (b) use its reasonable best efforts to obtain such consent.
5.3 No Financial Obligation. Neither Party shall have any financial
obligation with respect to any development work undertaken by the other Party,
except as may be set forth in a separate written agreement, or amendment to this
Agreement, executed in either case by both Parties.
5.4 Support After Termination. Each Party agrees that following any
termination of this Agreement it will take such actions as are reasonably
necessary to maintain for each Customer that is a Customer of both AmEx and
Portable the level of product and service integration that existed at
termination.
6. MARKETING AND SUPPORT.
6.1 Joint Marketing Responsibilities.
(a) AmEx shall participate with Portable in the development and
delivery of a press release announcing the relationship between AmEx and
Portable. The press release shall be subject to the prior written approval of
both AmEx and Portable.
(b) All information to be disseminated externally about the
relationship between Portable and AmEx and the products marketed hereunder shall
be reviewed and approved by both Parties prior to any use or other publication.
(c) Portable and AmEx each agree, upon reasonable request, to
provide training to one another's sales and marketing personnel regarding the
products and services that are being marketed to Customers and Prospects under
this Agreement and the Integration Program.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
6
<PAGE> 7
(d) The Parties agree to participate in a committee (the
"Steering Committee") through designated personnel of equal number. The Parties
intend that the Steering Committee shall meet at least once per calendar quarter
to review the status and direction of the Parties' relationship, the Integration
Program, and any issues of concern to either Party regarding the matters that
are the subject of this Agreement. All details regarding time, manner, place and
agenda for such meetings shall be decided by the Steering Committee.
6.2 Marketing and Support Responsibilities of Portable.
(a) Portable shall provide AmEx with Portable marketing
literature in such quantities as are reasonably requested from time to time by
AmEx for distribution to its Customers and other valid purposes.
(b) Portable shall provide AmEx with such reasonable access to
appropriate sales and marketing personnel of Portable as may be mutually agreed
by the Parties in order to present information about AmEx's products or
services, the Integration Program, and to conduct the training referenced in
Section 6.1(c).
(c) Portable may provide a link from its Website to AmEx's
corporate services Website if requested by AmEx, and in that connection agrees
to enter into a Hyperlink Agreement in the form annexed hereto as Exhibit D
subject to such modifications thereto as may be agreed through good faith
negotiations of the Parties. Any material presented on Portable's Website
regarding AmEx shall be prepared by AmEx, approved in writing by Portable and
subject to the continuing approval of Portable and AmEx.
(d) Portable will provide warranty service and support and
Customer One Services to Customers, including [*] under the terms of its Volume
License Agreement with each Customer.
(e) Portable agrees that copies of XMS licensed to [*] and
Referred Customers shall include an AmEx logo on the splash screen and other
mutually agreed areas in a manner proposed by AmEx, and subject to reasonable
approval of Portable.
6.3 Marketing Responsibilities of AmEx.
(a) AmEx shall provide Portable with marketing literature of AmEx
in such quantities as are reasonably requested from time to time by Portable for
distribution to Customers and other valid purposes.
(b) AmEx may arrange for Portable's participation in events
sponsored or attended by AmEx that provide a forum for the joint marketing of
XMS and the products and/or services of AmEx (e.g. user groups, vendor fairs,
trade shows, seminars). Each Party will be responsible for its own out-of-pocket
expenses incurred in connection
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 8
with these events.
(c) AmEx shall provide Portable with such reasonable access to
appropriate sales and marketing personnel of AmEx as may be mutually agreed by
the Parties in order to present information about Portable's products and
services, the Integration Program, and to conduct the training referenced in
Section 6.1(c).
(d) AmEx may provide a link from its corporate services Website
to Portable's Website if requested by Portable, and in that connection agrees to
enter into the Hyperlink Agreement in the form annexed hereto as Exhibit D
subject to such modifications thereto as may be agreed through good faith
negotiations of the Parties. Any material presented on AmEx's Website regarding
Portable shall be prepared by Portable, approved in writing by AmEx, and subject
to the continuing approval of AmEx and Portable.
(e) AmEx shall make no representations, warranties, or guarantees
to Prospects, Expense Manager Customers, Customers, or the trade with respect to
the specifications, features, or capabilities of XMS or the Customer One
Services that are substantively inconsistent with the documentation Portable
supplies with XMS, the warranties and disclaimers contained in the Volume
License Agreement, or the XMS literature supplied by Portable.
7. LEAD REFERRALS AND ACCEPTANCE.
7.1 Lead Referrals. AmEx agrees to provide Portable with qualified XMS
customer leads (a "Lead") and shall be responsible for the customer development,
marketing, and support functions set forth in Exhibit D for which it is
designated a Responsible Party. In order to be eligible to receive a rebate in
connection with the referral of a Lead, AmEx must complete and submit within
thirty (30) days of pre-qualifying a referral, a "Lead Referral Worksheet" in
the form of the attached Exhibit E for each sales opportunity AmEx identifies
for XMS. Each Lead Referral Worksheet must be completed in all material
respects. A Lead Referral Worksheet may be submitted in either paper or
electronic form. [*]
7.2 Lead Acceptance. Portable shall act diligently in responding to
Leads submitted by AmEx; a Lead shall be deemed accepted by Portable unless
rejected within [*] from the date Portable receives the Lead Referral Worksheet.
Portable may [*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
8
<PAGE> 9
[*]. Any conflicts will be submitted to the Steering Committee for
resolution. With respect to Leads that it has accepted, Portable shall be
responsible for the customer development, marketing, and support activities set
forth in Exhibit E for which it is designated a Responsible Party.
7.3 Rebate Payment Eligibility. Rebate payments shall be payable by
Portable to AmEx on each Lead accepted during the term of this Agreement, which
is converted into a Referred Customer on or before the Lead Expiration Date. The
Lead Expiration Date shall be [*] after the date a Lead is accepted by Portable.
Leads may be resubmitted by AmEx after the Lead Expiration Date and will be
treated pursuant to the terms of Section 7.2 above.
7.4 Rebate Program. For each Referred Customer, Portable shall pay to
AmEx a rebate payment [*]
(a) Standard Rebate Rate. For transactions in which the Lead
Referral Sales Cycle is [*] the applicable Rebate Rate shall be determined
as follows:
<TABLE>
<CAPTION>
Range of [*]
Where The Closing Occurs in This Lead Rebate [*]
Referral Sales Cycle Applicable Within Each Range
------------------------------------- -----------------------------
<S> <C>
Level 1 [*] [*]
Level 2 [*] [*]
Level 3 [*] [*]
</TABLE>
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
9
<PAGE> 10
(b) Preferred Rebate Rate. For transactions in which the Lead
Referral Sales Cycle is [*] the applicable Rebate Rate shall be determined as
follows:
<TABLE>
<CAPTION>
Range of [*]
Where The Closing Occurs in This Lead Rebate [*]
Referral Sales Cycle Applicable Within Each Range
------------------------------------- -----------------------------
<S> <C>
Level 1 [*] [*]
Level 2 [*] [*]
Level 3 [*] [*]
</TABLE>
(c) [*]
7.5 Reporting and Payment. (a) Portable will provide a monthly report to
AmEx within thirty (30) days following the end of a calendar month of all
accepted or rejected Leads submitted by AmEx and a quarterly report of [*].
Additional reports shall be provided by Portable at AmEx's reasonable request.
Portable shall use diligent efforts to transition to reporting on [*] on a
monthly basis by September 1, 1998.
(b) Rebate payments will not be paid to AmEx until the [*] to
which the payment relates are collected by Portable from a Referred Customer.
Portable will make such payments to AmEx not later than thirty (30) days
following the end of a calendar quarter (or calendar month, after the transition
to a monthly reporting system has occurred) based on the [*] collected by
Portable during the applicable period.
7.6 Audit. AmEx may from time to time, but not more than once every
twelve (12) months, perform an audit upon reasonable notice to Portable to
determine compliance with the terms of this Agreement. Any audit must be
conducted during the hours of 8 AM and 5 PM Pacific Time by an independent
certified public accountant selected by AmEx and reasonably satisfactory to
Portable and all costs of an audit shall be borne by AmEx; provided, however,
that if the results of an audit disclose a shortfall, Portable shall promptly
pay to AmEx the amount of such underpayment and, if the results
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
10
<PAGE> 11
disclose a shortfall of more than two percent (2%) shall also promptly pay to
AmEx interest on such underpayment at the rate of twelve percent per annum and
the reasonable costs of the audit.
8. TERM AND TERMINATION.
8.1 This Agreement shall commence on the Effective Date and, unless
sooner terminated as provided in this Agreement, shall remain in full force and
effect for a term of [*] (the "Initial Term"). Thereafter, this Agreement shall
automatically renew for successive [*] (each, a "Renewal Term"), provided,
however, that a Party may terminate this Agreement on the expiration of the
Initial Term or any Renewal Term by delivering written notice of termination to
the other not less than sixty (60) days before the expiration of such Initial or
Renewal Term.
8.2 Termination. This Agreement may be terminated at any time prior to
the expiration of its term, as follows:
(a) By either Party by written notice to the other Party if a
receiver shall have been appointed over the whole or any substantial part of the
assets of the other Party, a petition or similar document is filed by the other
Party initiating any bankruptcy or reorganization proceeding, or such a petition
is filed against the other Party and such proceeding shall not have been
dismissed or stayed within sixty (60) days after such filing;
(b) By either Party upon written notice if the other Party has
breached the terms of this Agreement in any material respect and fails to cure
such breach within thirty (30) days after receipt of written notice of such
default;
(c) by AmEx if the Financial Statements provided by Portable
pursuant to Section 12.4 do not demonstrate that Portable is solvent and able to
pay its commercial insurance premiums in commercially reasonable amounts;
(d) by either Party upon written notice given upon the
Acquisition (as defined in Section 13.5) of Portable by a [*]; and
(e) by AmEx upon the acquisition of [*] or more of the voting or
equity securities of Portable by an AmEx Competitor.
8.3 Effect of Termination. Upon any termination or expiration of this
Agreement:
(a) For a period of one year after the date of termination, all
applicable books and records of Portable shall be made available to AmEx for the
purpose of determining compliance by Portable with its obligations under this
Agreement;
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
11
<PAGE> 12
(b) Each Party shall immediately cease distribution of all items
in its possession which bear the trademarks of the other Party, shall as
promptly as is practicable cease all use of the trademarks of the other Party,
and will not use any mark which is confusingly similar to any trademarks of the
other Party;
(c) Each Party shall return to the other Party marketing
literature and materials of the other Party in its possession or shall destroy
such items and certify their destruction to the other Party; and
(d) Each Party's rights and obligations with respect to payments
due hereunder as well as the provisions of Sections 2.3, 3.2, 4.1 (unless the
Agreement has been terminated by AmEx), 4.2, 5.4, 7.4, 7.5, 7.6, 8.3, 8.4, 9,
10, 11, 12, and 13 shall survive termination of this Agreement. In addition,
upon a termination of this Agreement pursuant to Section 8.2(d) or Section
8.2(e), the Parties agree that the provisions of Sections 3.1, 5.1, 5.2, 5.3,
6.1(b), 6.1(d), 6.2, 6.3, 7.1, 7.2, and 7.3 (or such other provisions as may be
negotiated pursuant to Section 3.3 hereof) shall survive termination for a
period of twelve (12) months.
8.4 No Damages. NEITHER PORTABLE NOR AMEX SHALL BE LIABLE TO THE OTHER
FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF
GOODWILL OR LOSS OF PROSPECTIVE PROFITS, ON ACCOUNT OF THE TERMINATION OR
EXPIRATION OF THIS AGREEMENT STRICTLY IN ACCORDANCE WITH THE TERMS OF 8.1 OR
8.2; PROVIDED, HOWEVER, THAT A PARTY TERMINATING THE AGREEMENT FOR BREACH
PURSUANT TO SECTION 8.2 (b) SHALL BE ENTITLED TO RECOVER FOR DIRECT DAMAGES
CAUSED BY THE BREACH. EACH OF AMEX AND PORTABLE WAIVES ANY RIGHT IT MAY HAVE TO
RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OR EXPIRATION OF THIS
AGREEMENT IN ACCORDANCE WITH ITS TERMS. THE PARTIES ACKNOWLEDGE THAT THIS
SECTION 8.4 HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER
INTO THIS AGREEMENT AND THAT THE PARTIES WOULD NOT HAVE ENTERED INTO THIS
AGREEMENT, BUT FOR THE LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
9. TITLE AND COPYRIGHT.
9.1 General Overview. The Parties contemplate that the Integration
Program will include the joint development of technical specifications followed
by the independent development of software modules, based in part on such
technical specifications, that will integrate the products that are part of the
Integration Program. The Parties contemplate that such software modules will be
incorporated in the product offering(s) of the developing Party ("Incorporated
Modules") and will not be independent components or software programs. [*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
12
<PAGE> 13
[*]
9.2 Portable. AmEx acknowledges and agrees that, as between AmEx and
Portable, XMS and any software module developed by Portable as part of the
Integration Program and used by Portable as an Incorporated Module (a "Portable
Module") are and shall remain the exclusive property of Portable and that
Portable will retain all right, title and interest thereto during the term of
this Agreement and thereafter. Copyright to all of the source code, object code,
documentation, any other embodiment of XMS and any Portable Module belong to and
shall remain with Portable.
9.3 AmEx. Portable acknowledges and agrees that, as between Portable and
AmEx, any software module developed by AmEx as part of the Integration Program
and used by AmEx as an Incorporated Module (an "AmEx Module") shall remain the
exclusive property of AmEx and that AmEx will retain all right, title and
interest therein during the term of this Agreement and thereafter. Copyright to
all of the source code, object code and any other embodiment of any AmEx Module
belong to and shall remain with AmEx.
9.4 [*]
10. LIMITATIONS OF LIABILITY.
EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 10, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUES, LOSS OF PROFITS, OR
COST OF PROCUREMENT OF SUBSTITUTE TECHNOLOGY, EVEN IF THAT PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO ANY
CLAIM OR CAUSE OF ACTION WHETHER IN CONTRACT OR TORT (INCLUDING NEGLIGENCE)
STRICT LIABILITY, OR BREACH OF WARRANTY, BUT SHALL NOT APPLY IF (A) A PRODUCT IS
DETERMINED TO BE DEFECTIVE AND TO HAVE CAUSED BODILY INJURY OR DEATH, OR (B) IF
SUCH DAMAGES ARE THE RESULT OF THE OTHER PARTY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
11. PROPRIETARY INFORMATION AND CONFIDENTIALITY.
11.1 Proprietary Information. The Parties intend to disclose and
exchange confidential, proprietary and trade secret, Technical Information,
technical and business plans, proposed products, and marketing and sales reports
regarding their businesses and, in the case of Portable, benchmark tests of XMS,
the Rebate Rates, and the pricing terms set forth in this Agreement (the
"Proprietary Information").
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 14
11.2 Obligation of Confidentiality. Each Party shall protect and keep
confidential any and all Proprietary Information of the other Party embodied in
any information licensed or disclosed hereunder, and shall not use, disclose or,
except as permitted by Section 11.3, allow any third party access to any such
Proprietary Information, except to the extent allowed by the licenses granted in
this Agreement. In furtherance and not in limitation of the foregoing, each
Party agrees to maintain the strict confidentiality of any source code delivered
by the other Party.
11.3 Limited Access. Each Party shall use its best efforts to ensure
that only employees and third parties whose duties give them a need to know such
Proprietary Information of the other Party shall have access thereto. All such
persons and entities shall be instructed to treat the same as proprietary and
confidential and the receiving Party shall take such other measures to protect
the confidentiality of such Proprietary Information as it deems reasonable under
the circumstances. Without limiting the generality of the foregoing, each Party
shall require any third party to whom it discloses any Proprietary Information
to sign a confidentiality agreement, enforceable by the other Party, whereby
such third party agrees to be bound by the confidentiality provisions set forth
in Section 11.2.
11.4 Required Disclosure. If a Party, or any of its employees, shall be
under a legal obligation in any administrative, governmental, or judicial
circumstance involuntarily to disclose any Proprietary Information of the other,
it shall give the Party that owns such Proprietary Information (the "Disclosing
Party") prompt notice thereof so that the Disclosing Party may seek an
appropriate protective order. If the Disclosing Party is finally unsuccessful in
obtaining such protective order, and if the Party receiving such Proprietary
Information (the "Receiving Party") or any such employee would, in the opinion
of its counsel, be held in contempt or suffer other censure or penalty for
failure to disclose, disclosure pursuant to the order or decree of an
administrative, governmental or judicial authority with jurisdiction over such
Party may be made by the Receiving Party or its employees without liability
hereunder.
11.5 Permitted Disclosures. Notwithstanding the foregoing, neither Party
shall be liable to the other with regard to any disclosure of Proprietary
Information of the other Party which:
(a) was known to the Receiving Party, without restriction, at the
time of disclosure, as shown by the files of the Receiving Party in existence at
the time of disclosure;
(b) is disclosed with the prior written approval of the
Disclosing Party;
(c) was independently developed by the Receiving Party, without
any use of the Proprietary Information and by employees or other agents of (or
independent contractors hired by) the Receiving Party who have not been exposed
to such Proprietary Information; or
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<PAGE> 15
(d) becomes known to the Receiving Party, without restriction,
from a source who obtained such information other than through the breach of
this Agreement by the Receiving Party and not otherwise in violation of the
Disclosing Party's rights.
11.6 Remedies. The Parties recognize and acknowledge that Proprietary
Information may have competitive value and be of a confidential nature and that
irreparable damage might result to the Disclosing Party if such Proprietary
Information were improperly disclosed by a Receiving Party to a third party.
11.7 Survival. The obligations of confidentiality and limitations of
use, disclosure, and access set forth herein shall survive the termination of
this Agreement for a period of three years from the date of such termination.
12. INDEMNIFICATION.
12.1 By Portable. Portable agrees to indemnify, defend and hold harmless
AmEx and its Affiliates, and their respective directors, officers, employees,
and agents, from any and all third party claims, suits and liabilities
(including reasonable attorney's fees and expenses) arising out of or resulting
from (a) any claim, suit, or proceeding, and any damages or liability therefrom
or settlement thereof (including reasonable fees of attorneys and related costs)
to the extent based on a claim that XMS or Portable infringes the patent,
copyright, trademark, trade secret, or other proprietary right of a third party,
(b) any actual or alleged act or omission on the part of Portable, its
directors, officers, employees or agents (including Affiliates and licensees) in
the marketing or selling of XMS or its predecessors and successors (other than
to [*] unless the acts or omissions of Portable are primarily responsible for
the claims of the [*]), whether or not such acts or omissions occurred prior to
the Effective Date.
12.2 By AmEx. AmEx agrees to indemnify, defend and hold harmless
Portable and its Affiliates, and their respective directors, officers, employees
and agents, from any and all claims, suits and liabilities (including reasonable
attorney's fees and expenses) (a) arising out or resulting from any actual or
alleged act or omission on the part of AmEx, its directors, officers, employees
or agents (including Affiliates and licensees) in the marketing or selling of
(i) [*] and (ii) any AmEx products or services to Customers and Prospects,
whether or not such acts or omissions occurred prior to the Effective Date,
including without limitation, providing representations, commitments, or
warranties (or failing to effectively disclaim all warranties and liabilities on
behalf of Portable) to Prospects and [*] and (b) of third parties arising out of
or resulting from any claim, suit, or proceeding, and any damages or liability
therefrom or settlement thereof (including reasonable fees of attorneys and
related costs) to the extent based on a claim that [*] or AmEx infringes the
patent, copyright, trademark, trade secret, or other proprietary right of a
third party.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 16
12.3 Indemnification Procedure. If any action shall be brought against
either Party in respect of which indemnity may be sought from the other Party
pursuant to the provisions of this Section 12 ("Claim"), the indemnified party
shall promptly notify the indemnifying party in writing, specifying the nature
of the Claim, the total monetary amount sought, as well as such relief as is
sought therein. The indemnified party shall cooperate with the indemnifying
party at the indemnifying party's expense in all reasonable respects in
connection with the defense of the Claim if by a third party. If the Claim from
a third party is solely for monetary damages or a claim of infringement, the
indemnifying party shall, upon written notice to the indemnified party,
undertake the defense or settlement of the Claim; in all other instances, the
indemnified party, upon written notice to the indemnifying party, may undertake
the defense or settlement of the Claim. In the event the indemnified party
undertakes the defense or settlement of the Claim, the indemnifying party shall
have the right to employ separate counsel at its own expense and participate in
the defense of the Claim. The indemnifying party shall reimburse the indemnified
party upon demand the judgment of a court of competent jurisdiction or pursuant
to a bona fide compromise or settlement of claims, demands or actions, and shall
reimburse the indemnified party upon demand for any payments of attorney's fees
and related expenses made by the indemnified party. A Party's failure to give
timely notice or to provide copies of documents or to furnish relevant data in
connection with any claim for indemnification shall not constitute a defense (in
part or in whole) to any claim for indemnification for such Party, except and
only to the extent that such failure shall result in any prejudice to the
indemnifying party; provided, that any such compromise or settlement must be
approved by the indemnifying party, and any such compromise or settlement must
be approved by the indemnified party, which approval shall not be unreasonably
withheld.
12.4 Financial Statements. As promptly as practicable following the end
of each of its fiscal years during the term of this Agreement, Portable shall
deliver to AmEx a complete copy of Portable's audited financial statements
certified by Portable's independent certified accountants (the "Financial
Statements"). The Financial Statements shall be Proprietary Information of
Portable.
13. GENERAL.
13.1 Entire Agreement; Amendment. This Agreement, together with any
exhibits attached hereto, contains the complete and exclusive understanding and
agreement of the parties with respect to its subject matter and supersedes,
merges, and replaces all prior writings, discussions and understandings relating
to such subject matter. This Agreement may only be amended by a written
agreement and signed by authorized representatives of both parties.
13.2 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding those laws that
direct the application of the laws of another jurisdiction. The Parties hereby
consent to the exclusive jurisdiction of any State or Federal court located in
New York County. Neither
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Party shall knowingly take or fail to take any action that might cause it or the
other Party to be in violation of any law or regulation of the United States,
including the United States Foreign Corrupt Practices Act.
13.3 Force Majeure. Neither Party shall be liable for any delay or
failure to meet its obligations pursuant to this Agreement due to natural
circumstances beyond its reasonable control, including, but not limited to war,
riots, insurrection, civil commotion, fire, flood, storm or inability to obtain
necessary labor, materials or manufacturing facilities as a direct result of
such natural disasters.
13.4 Severability. If any term or provision of this Agreement is found
to be invalid or unenforceable for any reason, it shall be adjusted rather than
avoided, if possible, so as best to accomplish the objective of the parties to
the extent possible. In any event, the remaining terms and provisions shall be
deemed valid and enforceable. It is expressly understood and agreed that each
provision of this Agreement providing for a limitation of liability disclaimer
or limitation of warranties, or exclusion of damages is intended by the parties
to be severable and independent of any other provisions and to be enforced as
such.
13.5 Assignment. This Agreement shall be binding on the Parties and on
their successors and assigns. Except as expressly provided herein, neither Party
shall transfer, assign or subcontract any right or obligation hereunder without
the prior written consent of the other Party, which consent shall not be
unreasonably withheld; provided, however, that consent shall not be required (i)
in connection with any assignment to an entity that acquires all or
substantially all of a Party's assets, voting stock, or business (an
"Acquisition"); or (ii) to an Affiliate of a Party.
13.6 Waiver. The failure of either Party any time to require performance
by the other Party of any provision hereof shall not affect in any way the full
right to require such performance at any time thereafter; nor shall the waiver
by either Party of a breach of any provision hereof be taken or held to be a
waiver of the provision itself.
13.7 Indemnification; Attorneys' Fees. Subject to the limitations of
Article 10, each Party agrees to indemnify and hold harmless the other and their
respective Affiliates and their respective directors, officers, employees, from
losses, damages and liabilities to the extent arising out of or based upon a
breach by such Party of this Agreement. In the event of any suits and actions
with respect to this Agreement, the prevailing Party shall be entitled to
recover reasonable attorneys' fees and other costs and expenses incurred in
resolving such dispute.
13.8. Cooperation. Each Party to this Agreement agrees to execute and
deliver all documents and to perform all further acts and to take any and all
further steps that may be reasonably necessary to carry out the provisions of
this Agreement and the transactions contemplated hereby.
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<PAGE> 18
13.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which together shall constitute a
single instrument.
13.10 Notices. All notices relating to this Agreement shall be in
writing, signed by the Party giving or making such notice or communication, and
shall be delivered by: (a) personal delivery; (b) telecopier facsimile
transmission; or (c) by postage-prepaid certified or registered mail (airmail if
available), return receipt requested. Notices shall be sent to the address of
the other Party set forth below, or such other address as either Party may
specify in writing in accordance with this Section 13.10, and shall be deemed
given upon personal delivery, three (3) business days after deposit in the mail,
or upon acknowledgment or receipt of facsimile transmission:
<TABLE>
<S> <C>
For Portable: For AmEx:
S. Steven Singh [*]
President and CEO [*]
Portable Software Corporation [*]
14715 NE 95th Street American Express Company
Redmond, WA 98052 140 Broadway (43rd Floor)
New York, NY 10005
</TABLE>
13.11 Voluntary Preliminary Dispute Resolution.
(a) In the event of any controversy or claim arising out of or
relating to this Agreement, the Steering Committee will first attempt in good
faith to resolve the matter. If the Steering Committee is unable to resolve such
matter, the Parties will attempt in good faith to resolve such matter by
negotiations between senior executives of the Parties who have settlement
authority but do not have direct responsibility for the administration of this
Agreement. If the Parties are unable to resolve a controversy or claim within
sixty (60) days after written submission to the Steering Committee, then the
matter may be submitted to a court of competent jurisdiction. All negotiations
conducted pursuant to this Section 13.11 are confidential and shall be treated
as compromise and settlement negotiations for purposes of the Federal Rules of
Evidence and state rules of evidence;
(b) The Parties shall submit any claim, dispute, or controversy
within one year after such claim, dispute, or controversy becomes known to the
Party seeking redress; and
(c) This Section 13.11 sets forth the exclusive method for
adjudicating disputes between the Parties arising out of or relating to this
Agreement; provided that nothing in this Section 13.11 shall prevent a Party
from applying to the federal or state courts to obtain injunctive relief pending
resolution of the dispute through the voluntary dispute resolution procedures
set forth herein and to join in any such action such other claims as may be
required to be brought by applicable joinder rules.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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13.12 No Agency. All decisions regarding effectuation this Agreement and
any action to be taken hereunder shall be solely at the discretion of the Party
making such decision. Neither Party shall hold itself out as an agent of the
other. Neither Party shall have any authority to bind or obligate the other in
any manner.
13.13 Insurance. Portable shall at all times during the term of this
Agreement maintain insurance in commercially reasonable amounts covering
interruption of services and other general liabilities. Such insurance shall
name AmEx as an additional insured. Portable shall promptly notify AmEx in the
event of a cancellation or other termination of any such policy.
13.14 Trademarks. The use by a Party of any logo, trademark or other
mark owned by the other Party or Affiliates of the other Party shall be strictly
limited to each specific right to use articulated in this Agreement.
13.15 Investment. Portable agrees to grant AmEx an option to purchase
shares of Portable's Series E Preferred Stock, for an aggregate purchase price
of One Million Dollars and at a pre-money valuation of not less than [*] on the
terms set forth in Exhibit G. This option shall expire at the earlier of (i)
February 14, 1998, and (ii) delivery of written notice of expiration to AmEx by
Portable.
13.16 Interpretation. The headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, a limited
liability company, an unincorporated organization and a government or any
department or agency thereof. In the event of a conflict between the terms of
this Agreement and the terms of an Exhibit, the terms of this Agreement shall
control.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 20
IN WITNESS WHEREOF, the Parties hereto agree to the provisions set forth
above and have executed this Strategic Marketing Alliance Agreement as of the
Effective Date.
PORTABLE SOFTWARE CORPORATION AMERICAN EXPRESS COMPANY
By: /s/ S. STEVEN SINGH By: /s/ [*]
---------------------------------- ---------------------------------
S. Steven Singh [*]
Title: President and CEO Title: [*]
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 21
EXHIBIT A
Portable Software Corporation Volume License Agreement
<PAGE> 22
PORTABLE AGREEMENT NUMBER:__________
PORTABLE SOFTWARE CORPORATION
VOLUME LICENSE AGREEMENT
Volume License Agreement (the "Agreement") made this ______ day of ____________,
1997, (the "Agreement Date") by and between Portable Software Corporation
("Portable") and _____________________ ("Customer").
In consideration of the license fee paid by Customer to Portable and of the
mutual covenants and conditions set forth herein, the parties agree as follows:
DEFINITIONS:
"Authorized User" means an employee or agent of Customer (including any
wholly-owned subsidiary of Customer) who prepares or processes a Customer
expense report.
"CustomerOne Services" means the technical support and related services provided
by Portable for the Licensed Programs as set forth in Section 5.1 and Exhibit B.
"Documentation" means technical manuals and other documentation relating to the
operation and use of the Licensed Programs which are delivered with the
respective Licensed Programs.
"Licensed Programs" means the Portable Software and the Third Party Software.
"Portable Software" means object code versions of the software programs
developed by or for Portable and described in Exhibit A including any
accompanying Documentation, and also including all Updates thereto which may be
provided to Customer by Portable pursuant to the terms of Section 5.
"Third Party Software" means the object code versions of the third party
software programs described in Exhibit A, including any accompanying
Documentation, and including all Updates thereto which may be provided to
Customer by Portable pursuant to the terms of Section 5.
"Updates" means one (1) copy of all published revisions and corrections to the
Documentation and one (1) copy of corrections and new releases of the Licensed
Programs that are generally made available at no additional cost to Portable's
customers who have ordered CustomerOne Services for the relevant time period.
Updates shall not include any options or future products which Portable or third
party vendors license separately.
1. LICENSE
1.1 Portable hereby grants to Customer, subject to the terms and conditions
of this Agreement and payment of the license fees set forth in Exhibit
A, a fully-paid, non-exclusive license without right of sublicense (the
"License") to have the Licensed Programs used by Authorized Users
solely for Customer's own internal data processing operations. This
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<PAGE> 23
License permits Customer to have the Licensed Programs used by a number
of Authorized Users not exceeding the number of user licenses Customer
has purchased as listed on Exhibit A. Portable reserves the right to
include within the Licensed Programs means to audit or determine the
number of Authorized Users using the Licensed Programs. Customer may
only duplicate the Licensed Programs and the Documentation in order to
make a copy available to each Authorized User.
1.2 Customer agrees to maintain an annual record of the number of users who
have submitted an expense report. Such record will be obtained by
running a report against Customer's XMS database. These annual records
must be retained for as long as the Licensed Programs remain in use and
for a period of two (2) years thereafter, and must be made available
for inspection by Portable or its authorized representative upon
demand.
1.3 Other than as provided in the preceding paragraph, Customer may not
copy any Licensed Programs, or any portion thereof, except to (a) make
one copy solely for backup or archival purposes; or (b) transfer the
Licensed Programs to a single hard disk provided Customer keeps the
original solely for backup or archival purposes. Customer agrees to
reproduce on each copy the copyright and other proprietary notices
provided on the Master Disk(s) and the Documentation. Customer may not
market, rent, lease, or relicense the Licensed Programs or use the
Licensed Programs for third party training, commercial timesharing, or
service bureau use.
1.4 Customer is authorized to use the Licensed Programs on a back-up
computer, at no additional charge, when its primary computer is
temporarily inoperable until operable status is restored and processing
on the back-up computer is completed. In addition, Customer may install
the Licensed Programs on a nonproduction test computer, at Customer's
disaster recovery site, for a period not to exceed thirty (30) days per
year, solely to recreate Customer's production environment for disaster
recovery testing. Customer expressly agrees that it shall neither apply
nor benefit from the functionality of the Licensed Programs under such
disaster recovery testing, except in the case of disaster.
1.5 Customer agrees not to alter, merge, modify or adapt the Licensed
Programs or the Documentation in any way or remove or obscure
Portable's copyright or trademark notices. In particular, Customer
agrees not to cause or permit the disassembly, decompilation, or
reverse engineering of any Licensed Program. In jurisdictions where a
right to reverse engineer is provided by law unless information is
available about products in order to achieve interoperability,
functional compatibility, or similar objectives, Customer agrees to
submit a detailed written proposal to Portable
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<PAGE> 24
concerning Customer's information needs before engaging in reverse
engineering.
1.6 Other Portable products and/or run time versions of Third Party
Software, may be embedded in or delivered with the Licensed Programs
under this Agreement ("Embedded Programs"). Customer's right to use any
Embedded Programs shall be limited to use necessary to implement the
Licensed Programs it has licensed. Customer shall have no right to use
such Embedded Programs other than as necessary for the licensed
ordinary use of the Licensed Programs.
2. OWNERSHIP
2.1 Portable is the owner of, or has the rights to distribute, all of the
software components of the Licensed Programs, all copies of the
Licensed Programs, the forms generated by the Licensed Programs and the
Documentation for the Licensed Programs. The Licensed Programs and the
Documentation are also protected under applicable copyright laws and
Customer's right to use the Licensed Programs and the Documentation is
limited to the terms and conditions set forth in this Agreement. Any
use of the Licensed Programs by the U.S. government is subject to
"restricted rights" as that term is defined in FAR 52.227-19(c)(2) or
DFAR 252.227.7013(c)(1) (if used in a defense related agency). Customer
does not acquire any rights, express or implied, in the Licensed
Programs, other than those specified in this Agreement.
3. LIMITED WARRANTY AND LIMITATION OF REMEDIES
3.1 Warranties
A. Licensed Programs
Portable warrants that (i) each Licensed Program will perform in all
material respects in accordance with the Documentation for a period of
ninety (90) days from the date of delivery of such Licensed Program to
Customer, and (ii) each Licensed Program will not, as a result of the
date change from December 31, 1999 to January 1, 2000 fail to perform
in all material respects in accordance with the Documentation in the
year 2000 and beyond.
Portable further warrants that the Licensed Programs do not contain any
time bombs, usage authorization codes, or other codes or programming
devices that may be used to access, modify, delete, damage, deactivate
or disable the Licensed Programs. The foregoing will not be deemed to
prohibit or limit Portable in any way from including features in the
Licensed Programs which restrict unlicensed use.
B. Media
Portable warrants that the Master Disk provided by Portable will be
free from defects in materials and workmanship under normal use for a
period of ninety (90) days from the
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date of delivery of the Master Disk to Customer.
C. Services
Portable warrants that its CustomerOne Services and consulting services
will be performed consistent with generally accepted industry
standards. This warranty shall be valid for ninety (90) days from
performance of service.
3.2 Limitations of Warranty
The warranties above are the sole warranties provided by Portable. To
be covered by these limited warranties, Customer must provide Portable
with written notice of the breach of warranty within the applicable
warranty period. Please do not return any defective Master Disks until
you have called Portable's technical service support group and received
a return authorization number ("RMA"). The warranties do not apply if a
Master Disk has been damaged by
misuse, or abuse or if a Licensed Program error is caused, in whole or
in part, by the failure of any hardware or other equipment to function
in accordance with the specifications of the applicable manufacturer.
PORTABLE SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTY
OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE LICENSED PROGRAMS, THE MEDIA, THE CUSTOMERONE
SERVICES AND CONSULTING SERVICES. In no event does Portable warrant
that the LICENSED PROGRAMS, related Documentation, or services will
satisfy Customer's requirements, be without errors, or that all
Licensed Program errors will be corrected, or that the operation of the
LICENSED PROGRAMS will be uninterrupted.
3.3 Exclusive Remedies
Customer's exclusive remedy, and Portable's entire liability for any
breach of warranty, shall be:
A. For Licensed Programs
At the option of Portable, either correction of the error that caused
the breach of warranty, or refund of the license fees paid to Portable
for the non-performing Licensed Program.
B. For Media
Portable will replace the defective materials unless the Master Disks
have been damaged by misuse or abuse.
C. For Services
At the option of Portable, either the reperformance of the services, or
refund the fees paid to Portable for the unsatisfactory services.
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4. LIMITATION OF LIABILITY AND DAMAGES
4.1 NEITHER PARTY (INCLUDING PORTABLE'S THIRD PARTY SOFTWARE PROVIDERS)
WILL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, INDIRECT, OR
THIRD PARTY DAMAGES (INCLUDING LOST PROFITS OR SAVINGS, BUSINESS
INTERRUPTION, LOSS OF DATA, OR SIMILAR CLAIMS), WHETHER IN AN ACTION IN
CONTRACT OR IN TORT, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The limitation of
liability set forth in this Section shall not be applicable to claims
by Portable for Customer's breach of the scope of the license rights
under Section 1.
4.2 To the maximum extent permitted by law, Portable's total liability
under this Agreement, for whatever cause other than bodily injury,
whether in an action in contract or in tort, will be limited to the
actual license fees paid by Customer under this Agreement, and if such
liability results from Customer's use of the Licensed Programs or from
services provided by or on behalf of Portable, such liability will be
limited to the actual fees paid by Customer for the relevant Licensed
Program or services giving rise to the liability. The limitation of
liability set forth in this Section shall not be applicable to claims
of infringement under Section 9.
4.3 The parties acknowledge that this Agreement allocates the risks between
Portable and Customer and that the fees reflect the limited warranties,
limitation of liability, and allocation of risk under this Agreement.
Customer further acknowledges that the pricing and terms of this
Agreement would have been different had there been a different
allocation of risk.
4.4 The parties acknowledge and agree that the limitations specified in
this Section will survive and apply even if any remedy provided in this
Agreement is determined to have failed of its essential purpose.
5. CUSTOMERONE, CONSULTING AND INTEGRATION SERVICES
5.1 CustomerOne Services will be provided to customer only under the terms
of Portable's CustomerOne policies (including applicable fees) in
effect on the date customer support is rendered. Portable's current
policies for its CustomerOne Services are set forth in Exhibit B
attached to this Agreement. Reinstatement of lapsed CustomerOne
Services is subject to Portable's CustomerOne reinstatement fees in
effect on the date CustomerOne Services are reordered.
5.2 Portable will provide consulting and training services agreed to by the
parties in writing under the terms of this Agreement. All consulting
services shall be billed on a time and materials basis unless the
parties
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<PAGE> 27
expressly agree otherwise in writing. Any consulting or training
services acquired from Portable shall be bid separately from the
Licensed Programs and Customer may acquire either Licensed Programs or
consulting services without acquiring the other. For any on-site
services requested in writing by Customer, Customer shall reimburse
Portable for reasonable, actual travel and out-of-pocket expenses
incurred.
6. PAYMENT AND TAXES
6.1 Payment of license fees shall be due thirty (30) days after delivery of
the Licensed Programs. All other fees, including fees for CustomerOne
Services which are payable in advance of the applicable Support Period,
shall be paid within thirty (30) days of Customer receipt of a proper
invoice. If Customer's procedures require that an invoice be submitted
against a purchase order before payments can be made, Customer will be
responsible for issuing the purchase order at the time of order.
Customer agrees to pay applicable media and shipping charges. Customer
shall pay all applicable shipping charges and any federal, state, or
local excise, sales, use or other taxes (except taxes based on
Portable's net income) imposed in respect of the License granted
hereunder or otherwise arising out of this Agreement. In the event that
Portable is required to pay any such tax, Customer shall promptly
reimburse Portable for the same. Customer shall reimburse Portable for
all reasonable travel and out-of-pocket expenses incurred by Portable
in rendering any services. If past due amounts owing from Customer are
not paid within thirty (30) days (i) the unpaid amount shall bear
interest at the rate of 1% per month, and (ii) Portable will have the
right to terminate this Agreement upon thirty (30) days written notice
to Customer. Customer shall reimburse Portable for all reasonable cost
incurred (including reasonable attorneys' fees) in collecting past due
amounts.
7. EXPORT RESTRICTIONS
7.1 Customer agrees to comply fully with all relevant export laws and
regulations of the United States ("Export Laws") to ensure that neither
the Licensed Programs nor any direct product thereof are (i) exported
directly or indirectly, in violation of Export Laws; or (ii) intended
to be used for any purposes prohibited by the Export Laws, including
without limitation, nuclear, chemical, or biological weapons
proliferation. If a Licensed Program has been rightfully obtained by
Customer outside of the United States, Customer agrees not to re-export
such Licensed Program or any related technical information except as
permitted by the laws and regulations of the United States and those of
the jurisdiction in which Customer obtained such Licensed Programs.
8. TERM AND TERMINATION
8.1 This Agreement remains effective until terminated. Customer can
terminate this Agreement at any
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other time upon returning the Master Disk to Portable and destroying
all the copies of the Licensed Programs in any form in Customer's
possession. This License will also terminate if Customer fails to
comply with any material term or condition of this Agreement and such
breach is not cured within thirty (30) days following written notice
from Portable specifying such breach. This Agreement will terminate
automatically upon any transfer of a copy of the Licensed Programs by
Customer other than as permitted by this Agreement. The parties rights
and obligations under Sections 1.2, 2, 3.2, 4, 6, 7, 8.1, 9, 10, 11,
and 12 shall survive termination of this Agreement.
8.2 In the event of a termination of this Agreement, and in addition to any
other rights or remedies available to Portable, Customer shall promptly
return to Portable the Master Disk and destroy all copies of the
Licensed Programs in any form in Customer's possession. Within two (2)
weeks after any termination, Customer shall certify in writing to
Portable that it has destroyed any and all copies of the Licensed
Programs in Customer's possession. Except as provided in Section 3,
Customer shall not be entitled to a refund of any portion of the
license fee upon termination of this Agreement.
9. INDEMNIFICATION FOR INFRINGEMENT
9.1 Portable warrants to Customer that the Licensed Programs do not
infringe any patent issued in the United States or a European Union
country, or any trade secret, copyright, or other proprietary rights.
As Customer's exclusive remedy for breach of this warranty and
Portable's entire liability for infringement, Portable agrees to
indemnify and hold Customer harmless with respect to any suit, claim,
or proceeding brought against Customer alleging that Customer's
permitted use of the Licensed Programs under this Agreement constitutes
an infringement of any patent issued in the United States or a European
Union country, or any trade secret, copyright, or other proprietary
right. Portable shall defend Customer against any such suit, claim, or
proceeding, and pay all litigation costs and reasonable attorneys' fees
incurred in connection with such suit, claim or proceeding, and all
settlement payments and damages awarded therein, provided that Portable
is notified in writing within thirty (30) days of any such suit, claim
or proceeding, Customer tenders the control of any such claim or
proceeding to Portable, and Customer cooperates with Portable in the
defense or settlement of same.
9.2 Upon notice of alleged infringement or if in Portable's opinion such a
claim is likely, Portable shall have the right, at its option and
expense, either: (a) to procure for Customer the right to continue
using the Licensed Programs; or (b) to replace or modify the Licensed
Programs so that they provide substantially the same, or greater,
functionality and performance than the infringing
8
<PAGE> 29
Licensed Program, but are no longer subject to a claim or infringement.
If, in Portable's opinion, none of the options above are reasonably
available, Customer's sole and exclusive remedy shall be to return the
infringing Licensed Programs to Portable in exchange for a refund of
the price that Customer paid to Portable for such Licensed Programs,
less reasonable amortization pro-rated over a forty-eight (48) month
term from the date the infringing Licensed Programs are shipped to
Customer. Portable shall not have any obligation under this Section:
(a) to the extent the claim arises from a modification of the Licensed
Program other than by or on behalf of Portable or from Customer's use
of the Licensed Program in combination with other non-Portable
software, equipment or devices; or (b) if Portable has provided
Customer with a non-infringing version of the Licensed Programs (that
provide substantially the same, or greater, functionality and
performance than the infringing Licensed Program) and Customer does not
promptly replace all copies of the infringing version of the Licensed
Programs with the non-infringing version.
10. CONFIDENTIALITY
10.1 By virtue of this Agreement, Portable and Customer may have access to
information that is confidential to one another ("Confidential
Information"). Confidential Information shall be limited to the
Licensed Programs, the results of any benchmark testing of the Licensed
Programs (both of the foregoing are trade secrets of Portable), the
terms and pricing under this Agreement and all information clearly
identified as confidential. A party's Confidential Information shall
not include information that: (a) is or becomes a part of the public
domain through no act or omission of the other party; (b) was
rightfully in the possession of the other party or was known by it
prior to its disclosure; (c) is independently developed by the
receiving party without use of any Confidential Information of the
other party; or (d) was or is provided by the disclosing party to third
parties without restriction on disclosure.
10.2 The parties (including their respective employees and agents) agree to
hold each other's Confidential Information in confidence during the
term of this Agreement and for two (2) years thereafter. The parties
further agree, unless required by law or by court order, not to
disclose or make any Confidential Information of the other party
available in any form to any third party or to use it for any purpose
other than the implementation of this Agreement. Customer will not
permit anyone except Authorized Users to have access to the Licensed
Programs.
11. RIGHT TO AUDIT
11.1 Portable may from time to time request Customer to provide a
certification that actual use of the Licensed Programs are in
compliance with the terms of this
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<PAGE> 30
Agreement. Portable may also, upon advance notice of at least five (5)
days, perform an audit during regular business hours to determine
compliance with the terms of this Agreement, provided that such audit
shall not unreasonably interfere with Customer's operations. If the
number of copies or Authorized Users is found to be greater than that
specified in this Agreement, or any modification to this Agreement,
Portable may charge Customer the applicable current license fees
therefor. If the resulting adjustment to the license fees owing by
Customer are greater than 5% of the license fees previously paid by
Customer to Portable, Portable may also charge Customer the reasonable
expenses associated with such audit.
12. GENERAL TERMS
12.1 This Agreement is governed by the laws of the State of Washington,
excluding those laws that direct the application of the laws of another
jurisdiction. The parties agree that this Agreement shall not be
governed by the 1980 U.N. Convention on Contracts for the International
Sale of Goods and that English is the governing language of this
Agreement. The parties hereby irrevocably consent to the personal
jurisdiction of the federal and state courts sitting in King County in
the State of Washington, and to service of process within or without
Washington by certified mail requiring a signed receipt, and the
parties agree that any court action relating to the enforcement of any
arbitration award or judgment or seeking injunctive or other equitable
relief, shall be brought in such courts.
12.2 All controversies or claims arising out of or relating to this
Agreement shall be resolved in accordance with the terms and conditions
set forth in this Section. First, the parties will attempt in good
faith to resolve each controversy or claim within sixty (60) days by
negotiations between senior executives of the parties who have
settlement authority and who do not have direct responsibility for the
administration of this Agreement. The disputing party shall give the
other party written notice of the controversy or claim in accordance
with the notice provision of this Agreement. The other party shall
submit a response within twenty (20) days after receiving said notice.
The notice and response shall include (a) a summary of the party's
position and a summary of the evidence and arguments supporting its
position, and (b) the name of the executive who will represent the
party. The executives shall meet at a mutually acceptable time and
place within thirty (30) days of the disputing party's notice and
thereafter as often as they deem reasonably necessary to resolve the
controversy or claim. Portable and Customer agree that all negotiations
conducted pursuant to this Section are confidential and shall be
treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence.
If the controversy or claim has not been resolved within sixty (60)
days
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<PAGE> 31
of the disputing party's notice, the controversy or claim will be
resolved through binding arbitration conducted in accordance with the
commercial arbitration rules of the American Arbitration Association
("AAA") then in effect. If Customer initiates arbitration, the
arbitration proceeding will be held in King County in the State of
Washington and if Portable initiates arbitration, the arbitration
proceeding will be held in the city of the federal district courthouse
closest to Customer's principal place of business. The parties agree
that service of any notices in the course of such arbitration at their
respective addresses as provided in Section 12.4 shall be valid and
sufficient. All proceedings will be held and a transcribed record
prepared in English. The parties will choose, by mutual agreement, one
arbitrator within thirty (30) days of receipt by a party of the other
party's notice of its intent to arbitrate. If no arbitrator is
appointed within the time provided in this Agreement or any extension
of time which is mutually agreed upon, the AAA will make such
appointment within thirty (30) days of such failure. The award rendered
by the arbitrator shall include costs of arbitration, reasonable
attorneys' fees and reasonable costs for expert and other witnesses,
and judgment on such award may be entered in any court having
jurisdiction thereof. Nothing in this Section shall be deemed to
prohibit or restrict either party from seeking injunctive relief and
such other rights and remedies as it may have at law or equity for any
actual or threatened breach of any provision of this Agreement relating
to a party's confidential information or proprietary rights. Except for
actions for nonpayment or breach of proprietary rights in the Licensed
Programs, no action, regardless of form, arising out of this Agreement
may be brought more than one (1) year after the cause of action has
accrued.
12.3 Except for Customer's obligation to pay Portable, neither party shall
be liable for any delay or failure to perform due to external causes
beyond its reasonable control.
12.4 All notices shall be in writing and shall be delivered personally
(including overnight mail by private courier) or sent by first-class
mail (return receipt requested) or facsimile transmission to the
address listed in the signature page to this Agreement. Notice shall be
deemed to have been given at the time of delivery, twelve (12) hours
after confirmation of receipt if sent by facsimile, and three (3)
business days after mailing if sent by first-class mail. If Customer
has any questions concerning this Agreement, Customer can contact
Portable at the following address:
Portable Software Corporation
14715 NE 95th Street
Redmond, WA 98052
Attention: Contract Administration
12.5 Customer acknowledges that it has read this Agreement, understands it
and agrees to be bound by its terms
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<PAGE> 32
and conditions. Customer further agrees that this Agreement (including
the Exhibits attached to this Agreement) is the complete and exclusive
statement of the agreement between Customer and Portable regarding its
subject matter and supersedes and merges any earlier proposal or prior
arrangement, whether oral or written, and any other communications
between Customer and Portable relative to the subject matter of this
Agreement. If any provision of this Agreement is found void or
unenforceable, that provision will be enforced to the maximum extent
possible, and the remaining provisions of this Agreement will remain in
full force and effect. To expedite order processing, Customer agrees
that Portable may treat documents faxed by Customer to Portable as
original documents; nevertheless, either party may require the other to
exchange original signed documents. No purchase order, other ordering
document, or any handwritten or typewritten text which purports to
modify or supplement the printed text of this Agreement shall add to or
vary the terms of this Agreement. Customer consents to Portable
identifying Customer as a customer of the Licensed Programs on
Portable's customer list.
12.6 Neither this Agreement nor the License granted herein may be assigned
or transferred without the prior written permission of Portable, which
permission shall not be unreasonably withheld. Any attempted assignment
without such consent will be void.
<TABLE>
<S> <C>
Portable: Portable Software Corporation Customer:_____________________________________
Name: Tim Fitzgerald Name:_________________________________________
Title: Vice President of North American Sales Title:________________________________________
Signature: ______________________________________ Signature:____________________________________
Date: _____________________________________________ Date:_________________________________________
Volume License Administrator:_________________
Phone / Fax:__________________________________
Address:______________________________________
_______________________________________
</TABLE>
12
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT A
VOLUME AGREEMENT
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
DATE MODIFICATION SOFTWARE PRODUCTS # OF USER [*] [*]
NUMBER LICENSED LICENSES
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$ $
[*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] [*] $
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
</TABLE>
o Amounts above do not include applicable taxes and shipping charges.
o For a period of ____ years from the Agreement Date, Customer may purchase
additional user licenses of the software products listed above for the
applicable per user price specified above, provided that Customer submits a
minimum order of ____ user licenses for each such purchase.
CUSTOMERONE SERVICES
<TABLE>
<CAPTION>
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
DATES MODIFICATION SOFTWARE PRODUCTS # OF USER [*] [*]
COVERED NUMBER LICENSED LICENSES
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$ $
[*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] $
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] $
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] $
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] $
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
[*] [*] [*] [*]
- ------------------- ------------------- ---------------------------------- ------------- ------------- -----------------
</TABLE>
o Amounts above do not include applicable taxes and shipping charges.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 34
EXHIBIT B
Summary of CustomerOne Services
<PAGE> 35
During the one year period commencing on the Agreement Date, Portable
will provide the CustomerOne Services described below for the fees indicated on
Exhibit A. The period during which CustomerOne Services will be provided to and
purchased by Customer will be automatically extended: (i) for an additional
one-year period unless terminated in writing by Portable or Customer at least
thirty (30) days before the end of the initial one-year period and; (ii)
thereafter, for successive additional one-year periods unless terminated in
writing at least thirty (30) days before the end of the initial one-year period
by Portable or Customer (the initial end of any one-year period and each
subsequent extension period are hereinafter each referred to as a "Support
Period"). Portable reserves the right to change any term of its CustomerOne
Services (including the fee), effective at the beginning of any Support Period,
by giving Customer written notice at least sixty (60) days before the end of the
prior Support Period. This Agreement may also be terminated during a Support
Period as provided in Section 8 of the Agreement.
A. Updates. Portable will promptly provide to Customer at no additional charge
Updates of the Licensed Program(s) if and when each such Update is
generally made available by Portable to its customers. Customer
acknowledges and agrees that each such shall be regarded as a Licensed
Program under this Agreement, and Customer's use of the Updates shall be
subject to all the terms and conditions of this Agreement regarding
Licensed Programs. It is expressly understood and agreed by Customer that
Portable is under no obligation to issue Updates under future products that
Portable or a third party vendor licenses separately.
B. Technical Support. Portable will provide to Customer telephone technical
support for seven (7) days a week and twenty-four (24) hours per day,
excluding holidays. During the hours of 6:00 p.m. to 6:00 a.m. Portable's
technical support department is available via a pager service. Customer
will be given the pager number. No support will be available from 6:00 p.m.
Pacific Time on the day immediately preceding a holiday until 6:00 a.m.
Pacific Time on the day immediately following a holiday. Portable currently
observes the following holidays: New Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, Day after Thanksgiving, and Christmas
Day. These holidays are subject to change without prior notice to Customer.
The following categories of telephone technical support will be provided:
o Second tier support for QuickXpense Enterprise Software. Second tier
technical support is defined as those questions forwarded to Portable
from the internal help desk or designated representative of Customer.
o End user support for all other Licensed Programs.
C. Error Corrections. Provided that the Licensed Programs are running under an
operating environment that is support by Portable (each, a "Supported
Environment"), Portable shall use its reasonable efforts to correct any
reproducible programming error in a Licensed Program which significantly
degrades the use of the Licensed Program ("Error") with a level of effort
commensurate with the severity of the Error, provided that Portable (i)
shall have no obligation to correct all Errors in the Licensed Programs;
and
<PAGE> 36
(ii) shall not be responsible for correctly any Errors not attributable to
the Licensed Programs. Errors attributable to Portable shall be those that
are reproducible by Portable on unmodified Licensed Program. Errors
attributable to Customer's modification or misuse of a Licensed Program, or
to Customer's change in or of its Supported Environment, will be billed at
Portable's standard consulting rates then in effect.
D. XpensePolicy. Provide XpensePolicy development and redesign services for
one (1) modifications or one (1) new XpensePolicy during each Support
Period.
E. Exclusions and Limitations. Portable is not required to provide any
CustomerOne Services relating to problems arising out of (i) Customer's
failure to implement all Updates issued under the Agreement; (ii) any
alternations or additions to the Licensed Programs performed by parties
other than Portable; (iii) interconnection or the Licensed Programs with
other software products not supplied by Portable except as expressly
prescribed in the Documentation; or (iv) use of the Licensed Programs on a
system other than a Supported Environment.
Portable reserves the right to terminate support (including Error
correction services) of any Licensed Program or prior release that has been
superseded by a new release anytime after six (6) months have elapsed since
the shipment of a new release.
2
<PAGE> 37
EXHIBIT B
[*]
<TABLE>
<CAPTION>
[*]
NAME OF [*] [*]
CUSTOMER [*] [*]
<S> <C> <C>
</TABLE>
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 38
Sheet 1
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
Page 1
<PAGE> 39
Sheet 1
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
Page 2
<PAGE> 40
Sheet 1
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
Page 3
<PAGE> 41
Sheet 1
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
Page 4
<PAGE> 42
EXHIBIT C-1
Integration Program Features
4
<PAGE> 43
Integration Program Feature Set
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 44
EXHIBIT C-2
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 45
EXHIBIT E
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6
<PAGE> 46
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 47
EXHIBIT F
LEAD REFERRAL WORKSHEET
2
<PAGE> 48
Portable Software Corporation
XMS Lead Referral Worksheet
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 49
EXHIBIT G
SUMMARY OF TERMS
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
**Confidential treatment has been requested with
respect to certain information contained in this
document. Confidential portions have been omitted
from the public filing and have been filed separately
with the Securities and Exchange Commission
EXHIBIT 10.10
CO-BRANDED XMS SERVICE
MARKETING AGREEMENT
This CO-BRANDED XMS SERVICE MARKETING AGREEMENT (this "Agreement") is made and
entered into as of August 11th, 1998 (the "Effective Date") between Concur
Technologies, Inc. (formerly known as Portable Software Corporation), a
Washington corporation ("Concur") and American Express Travel Related Services
Company, Inc., a New York corporation ("AMEX").
R E C I T A L S
WHEREAS, Concur plans to develop an outsource business travel and entertainment
expense management service for customers;
WHEREAS, AMEX and its licensees provide, inter alia, corporate charge, credit,
procurement, smart and store value card products and services, travel agency
services and electronic travel booking services and products;
WHEREAS, Concur and AMEX desire to enter into a marketing agreement providing
for the development and marketing of a co-branded version of the Concur
outsource business travel and entertainment expense management service for use
by AMEX Clients;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" shall mean with respect to any person (which for purposes
of this definition shall include individuals, business entities and
other legal entities), any other person directly or indirectly
controlling, controlled by or under common control with such person.
For purposes of this definition, "control" shall mean the power to
direct or cause the direction of, the management and policies of such
person whether through the ownership of voting interests, by contract
or otherwise.
1.2 "AMEX Client" shall mean a business enterprise, including without
limitation divisions or departments thereof, that has a Corporate
Card account or an American Express Business Travel Account from time
to time during the term of this Agreement.
1.3 "AMEX Competitor" shall mean a person, firm or enterprise engaged in
the business of [*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
[*]
1.4 "AXP/XMS Customer" shall mean an AMEX Client that enters into an
AXP/XMS Service Agreement for its internal use of the Co-Branded XMS
Service.
1.5 "AXP/XMS Service Agreement" shall have the meaning set forth in
Section 2.3.
1.6 [*] shall have the meaning set forth in Section 5.1.
1.7 [*]
1.8 [*] shall have the meaning set forth in Section 5.1(b).
1.9 "Co-Branded XMS Service" shall mean the travel and entertainment
expense management service to be developed by Concur in accordance
with the terms of this Agreement (more particularly described on
Exhibit A-1 hereto) which incorporates the Exclusive Features (as
defined in Section 2.3).
1.10 "Consulting Revenue" shall mean amounts received by Concur from an
AXP/XMS Customer with respect to a Service Period for consulting,
implementation services, training and other similar services related
to the Co-Branded XMS Service (including amounts for the services
referenced in Section 5.4) less [*] duties or sales use or other
taxes or withholdings other than those based on Concur's before tax
income.
1.11 "Corporate Card" shall mean a corporate charge, credit or procurement
card issued by AMEX or its licensees to the employees and agents of
AMEX Clients for use in connection with travel, entertainment and
procurement expenses incurred on behalf of AMEX Clients.
1.12 [*] shall have the meaning set forth in Section 5.1(b).
1.13 "Party" shall mean Concur or AMEX.
[*] Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
2
<PAGE> 3
1.14 "Concur Competitor" shall mean a person, firm or enterprise providing
a software product or software-enabled service in the travel and
entertainment expense management field.
1.15 "Prior Agreement" shall mean that Strategic Marketing Alliance
Agreement entered into as of December 17, 1997 between the Parties.
1.16 "Revenue" shall mean the aggregate of all amounts paid by any AXP/XMS
Customer with respect to a Service Period and relating to the
Co-Branded XMS Service including, without limitation, transaction
fees and one-time payments, but excluding (i) [*] (ii) direct costs
for licensing of third party software products that are integrated
into the Co-Branded XMS Service and (iii) duty, sales, use or other
taxes or withholdings other than those based on Concur's income.
1.17 "Service Launch Date" shall mean the date on which the Co-Branded XMS
Service is commercially available for use by an AMEX client in
accordance with the terms of Section 2.2.
1.18 "Service Period" shall mean the period during which an AXP/XMS
Customer is a party to an AXP/XMS Service Agreement, [*]
1.19 [*] shall have the meaning set forth in Section 5.1(b).
1.20 "Steering Committee" shall have the meaning set forth in Section
6.1(d) of the Prior Agreement.
1.21 [*] shall have the meaning set forth in Section
5.1.
2. DEVELOPMENT OF THE CO-BRANDED XMS SERVICE.
2.1 In accordance with the terms of this Agreement, the Co-Branded XMS
Service will be offered to AMEX Clients and made available only to
such AMEX Clients who have agreed to be bound by the terms and
conditions set forth in the AXP/XMS Service Agreement. The Co-Branded
XMS Service shall be installed at the AXP/XMS Customer site (or at
the site of a data center partner) and accessible via an Internet
browser supplied by Microsoft Internet Explorer 3.02 or higher or
Netscape Navigator Version 3.0 or higher.
2.2 Concur agrees to develop, in accordance with the terms and conditions
set forth in this Agreement, the Co-Branded XMS Service for
commercial distribution to AXP/XMS Customers on or before [*];
provided that if Concur cannot develop the Co-
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 4
Branded XMS Service on or before [*] but can demonstrate to AMEX's
reasonable satisfaction that Concur can, in accordance with the terms
of this Agreement, develop the Co-Branded XMS Service for commercial
distribution by a date not beyond [*] then AMEX may, it its sole
discretion, agree that the Co-Branded XMS Service will be made
commercially available by a date no later than [*]. AMEX, in its sole
reasonable discretion, shall determine whether the Co-Branded XMS
Service is available for commercial distribution.
2.3 Exclusive Features. Concur and AMEX shall develop from time to time
during the term of this Agreement certain service features for
integration into the Co-Branded XMS Service (the "Exclusive
Features"). Listed on Exhibit C hereto are the Exclusive Features
being developed by AMEX and Concur as of the date hereof. The Parties
acknowledge and agree that their ownership rights in the Exclusive
Features and the related technical specifications shall be governed
by the principles stated in Section 10.2 hereof.
3. MARKETING OF CO-BRANDED XMS SERVICE.
3.1 Marketing and License Rights. Subject to the terms and conditions of
this Agreement, Concur hereby grants to AMEX and AMEX hereby accepts
from Concur, a nonexclusive and nontransferable right in the United
States and throughout the world to market the Co-Branded XMS Service,
directly and through AMEX's agents and Affiliates, to AMEX Clients.
[*]
3.2 AXP/XMS Service Agreement.
(a) All AMEX Clients that desire to use the Co-Branded XMS Service
shall execute Concur's customized service agreement in
substantially the form of Exhibit F attached hereto (the
"AXP/XMS Service Agreement"). The AXP/XMS Service Agreement
shall provide the terms and conditions of use by such AMEX
Client of the Co-Branded XMS Service and grant to such AMEX
Client a nonexclusive and nontransferable right to use the
Co-Branded XMS Service in accordance with the terms and
conditions stated therein.
(b) Concur agrees that the AXP/XMS Service Agreement shall offer
to the respective AXP/XMS Customer a service contract up to
[*] in length and shall contain other terms and conditions,
including without limitation Concur's Year
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 5
2000 warranty, not materially less favorable to the AXP/XMS
Customer than offered to Concur's own business customers.
(c) The AXP/XMS Service Agreement will provide for payments by the
AXP/XMS Customer directly to Concur. Concur and not AMEX,
shall be deemed the seller of the Co-Branded XMS Service
hereunder and shall be responsible for collection and
remittance to the appropriate jurisdiction any and all
applicable sales/use taxes or other similar transaction taxes.
Concur shall fully indemnify and hold AMEX harmless from any
sales/use or similar transaction taxes that are assessed
(whether against AMEX or Concur) with respect to such sales.
3.3 User's Manual. As and when the Co-Branded XMS Service (including
without limitation any upgrade thereof) is made available to AXP/XMS
Customers, Concur shall deliver to AMEX, in a format reasonably
requested by AMEX, a comprehensive user's manual which any user of
the Co-Branded XMS Service (including without limitation any upgrade
thereof) may utilize in order to properly operate the Co-Branded XMS
Service. AMEX, in accordance with Section 7.1 hereof, shall brand and
publish such manual for delivery to AXP/XMS Customers. Concur will
reasonably assist AMEX in the production of such manual and will
provide AMEX with all materials created by Concur that may be useful
in the production of such manual.
3.4 [*]
3.5 Certain Marketing Exclusivities.
(a) Concur agrees that for the [*] period immediately following
the general commercial offering of a Exclusive Feature (as
described in Section 2.3 hereof), Concur will not, and will
not permit any of its licensees to, include such Exclusive
Feature in any of product or service commercially offered by
or on behalf of Concur or any of its licensees.
(b) [*]
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Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 6
[*]
(c) Prior to the expiration of the exclusivity arrangement
described in Section 3.5(a)(i) hereof with respect to any
Exclusive Feature (the "Exclusivity Expiration Date"), the
Steering Committee shall identify and select additional
features that will be added to the set of Exclusive Features
available to AXP/XMS Customers during the [*] period following
the Exclusivity Expiration Date. The parties hereto agree to
develop such features and make the same available as
"Exclusive Features" with the exclusive conditions provided in
Section 3.5(a)(i). [*]
4. TRAINING AND SUPPORT.
4.1 Training of AMEX Sales Personnel.
(a) Periodically during the term of this Agreement and at mutually
agreeable times and locations, Concur agrees to train AMEX
sales personnel with respect to the Co-Branded XMS Service
(including each new version thereof) for the purpose of
educating AMEX's sales team on the features and benefits of
the Co-Branded XMS Service (or such new version, as the case
may be) and how to demonstrate and market it. [*]
(b) AMEX shall make available for training by Concur (in
accordance with Section 4.1(a) hereof) those AMEX sales
managers that shall be responsible for the promotion of the
Co-Branded XMS Service. AMEX shall reasonably assist Concur,
[*] in the training of such sales managers. AMEX personnel who
successfully complete this training shall certified by Concur
(if such personnel have previously been certified on an
earlier version of the Co-Branded XMS Service and are
receiving training on a new version, shall be recertified by
Concur).
4.2 Support. Concur will provide warranty service and support to AXP/XMS
Customers on the terms set forth in the AXP/XMS Service Agreement.
This will include maintenance and upgrade notices and support, as
well as a dedicated AMEX/XMS telephone support line during Concur's
customary support hours. Concur agrees that the level of service and
support provided to AXP/XMS Customers will be no less favorable than
(i) the level of service and support generally provided to Concur's
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 7
commercial customers and (ii) the level of service and support
provided to Concur's commercial clients of any other marketer or
reseller of the Concur's product generally similar to the Co-Branded
XMS Service.
4.3 AXP/XMS Customer Training. Concur agrees to furnish training to
AXP/XMS Customers at Concur's customary rates.
5. MARKETING AND SUPPORT.
5.1 Announcements.
(a) AMEX shall participate with Concur in the development and
delivery of a press release announcing the relationship between
AMEX and Concur regarding the Co-Branded XMS Service. The press
release shall be subject to the prior written approval of both
AMEX and Concur.
(b) All information to be disseminated to third parties about the
relationship between Concur and AMEX regarding AMEX's marketing
of or relationship or involvement with, the Co-Branded XMS
Service shall be reviewed and approved by both Parties prior to
any use or other publication.
(c) Concur and AMEX agree to jointly develop information about the
Co-Branded XMS Service relationship between Concur and AMEX to
be used in communications to AMEX Clients and to AXP/XMS
Customers.
5.2 Marketing Responsibilities of AMEX.
(a) AMEX shall provide Concur, [*] reasonable access to appropriate
AMEX sales managers as may be mutually agreed by the Parties in
order to present information about the Co-Branded XMS Service
and to conduct the training referenced in Section 4 hereof.
(b) AMEX, [*] will undertake marketing programs and efforts
regarding the Co-Branded XMS Service as AMEX shall determine
from time to time.
(c) Upon receipt from Concur of the user manual described in Section
3.3 hereof, AMEX will provide customized branding to such manual
in accordance with the terms hereof and provide marketing edits
thereto. All marketing edits made by AMEX shall be subject to
Concur's reasonable approval prior to any distribution thereof
to AXP/XMS Customers. The approved manual (the "Quick Start
Guide") shall be printed by AMEX [*] and shall be made available
for
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 8
distribution to AXP/XMS Customers. AMEX shall not use any of the
materials created by Concur and which AMEX receives from Concur
except as contemplated by this Agreement.
(d) AMEX agrees that AMEX shall neither market the Co-Branded XMS
Service to any third party except as provided in this Agreement.
AMEX agrees not to make any representations, warranties,
commitments or guarantees to AMEX Clients (including without
limitation AXP/XMS Customers) with respect to the Co-Branded XMS
Service (including its features and capabilities) that are
materially inconsistent with materials, representations,
warranties, commitments or guarantees provided by Concur.
6. PRICING, FEES & PAYMENT PROCEDURE.
6.1 Pricing and Allocation of Revenue.
(a) Pricing to the AXP/XMS Customer. Concur's standard licensing fees
for the Co-Branded XMS Service is listed as part of Exhibit A-2
hereto (the [*]). Concur's licensing fees do not include any
national, state or local sales, use, value added or other taxes,
customs duties or similar tariffs and fees which Concur may be
required to pay or collect upon the delivery of the Co-Branded
XMS Service or upon collection of the fees or otherwise. Concur
will provide AMEX with not less than thirty (30) days notice of
any adjustment to the [*]. [*] available commercially on a
standalone basis.
(b) Allocation of Revenue and Consulting Revenue.
(i) Collection of Revenue. Concur shall be responsible for
the collection and accounting of all Revenue and
Consulting Revenue.
(ii) Revenue Allocation. Concur shall be entitled to [*] of
all Revenue and AMEX shall be entitled to [*] of all
Revenue; provided, however, that any portion of the
Revenue attributable to licensing fees payable by any
AXP/XMS Customer to Concur shall be [*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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[*]
(iii) Consulting Revenue. [*]. Concur will retain [*] of
Consulting Revenue from AXP/XMS Customers and will pay
the balance to AMEX.
(iv) [*]
(c) Timing of Payments.
(i) With respect to Revenue actually received by Concur in
any calendar month, Concur agrees to remit to AMEX
AMEX's share of such Revenue as provided in subsection
(b)(ii) hereof no later than forty-five (45) days
following the end of such calendar month. Such
remittance shall be made by check or by wire transfer to
an account designated by AMEX in writing. Concur shall
pay interest at the rate of [*] percent [*] per
annum on all such amounts paid after the due date. Upon
remittance to AMEX of its share of the Revenue, Concur
shall be entitled to retain for its own account its
share of the Revenue as provided in subsection (b)(ii)
hereof.
(ii) With respect to Revenue actually received by Concur in
any calendar month, Concur shall, at the end of every
calendar month, calculate any [*] amounts payable by
AMEX. Concur shall invoice such [*] amounts and forward
such invoice, along with appropriate back-up
documentation, to AMEX. AMEX agrees to pay such invoiced
amount within forty-five (45) days of its receipt
thereof and to pay interest at the rate of [*]
percent [*] per annum on all such amounts paid after
such due date.
(d) Competitive Pricing. Concur agrees that, during the term of this
Agreement, if Concur enters into an agreement of similar scope
and general purpose with an AMEX Competitor regarding the
marketing or reselling of the a product generally similar to the
Co-Branded XMS Service and providing for a lower level of
revenue
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 10
to be paid or retained to Concur than [*]
(e) International Venues. For purposes of this Agreement, Revenues
derived from international (i.e. non-U.S.A.) licensing of the
Co-Branded XMS Service shall be calculated in the same manner as
the determination with respect to domestic (U.S.A). Revenue
shall be converted into U.S. Dollars in a consistent manner and
in accordance with Concur's commercially reasonable practices.
6.2 Reporting. Concur will provide to AMEX a monthly report within thirty
(30) days following the end of each calendar month detailing the
Revenues received during such calendar month from AXP/XMS Customers
and indicating [*] where applicable. Within thirty (30) days after
the end of each calendar quarter following the Service Launch Date,
Concur will provide a report, with appropriate back-up documentation,
to AMEX detailing all Consulting Revenues generated during such
calendar quarter, including without limitation, the associated
Burdened Costs.
6.3 Audit. Upon request from AMEX, Concur shall give AMEX reasonable
access and audit and verification documentation as AMEX may
reasonably request in order to assure Concur's compliance with the
terms of this Agreement including but not limited to data security.
Such requests shall be limited to the scope of this Agreement and
shall not be made more frequently than once in any four-month period.
Any audit must be conducted during the hours of 8 AM and 5 PM.
Notwithstanding the foregoing, if AMEX has reasonable grounds to
believe a breach of data security has occurred, AMEX reserves the
right to visit and audit the premises of Concur or its
subcontractors, unannounced, during normal business hours.
6.4 Implementation Fees. Implementation of the Co-Branded XMS Service,
including the establishment of links to G/L, will be provided by
Concur and billed to AXP/XMS Customers by Concur at its then standard
rates for such services.
6.5 Referral Payments to Concur. AMEX shall compensate Concur under the
terms and conditions specified in Exhibit D hereto in connection with
the referral to AMEX of leads for Corporate Card accounts.
7. TRADEMARKS AND TRADE NAMES.
7.1 Use of Parties Marks.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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(a) During the term of this Agreement, Concur authorizes AMEX to use
the trademarks provided by Concur from time to time during the
term of this Agreement in connection with AMEX's marketing,
advertisement and promotion of the Co-Branded XMS Service.
Concur may revoke or modify its authorization to AMEX from time
to time in its sole reasonable discretion. Nothing contained in
this Agreement shall give AMEX any interest in such trademarks.
AMEX agrees that it will not at any time during or after this
Agreement assert or claim any interest in or do anything which
may adversely affect the validity or enforceability of any
trademark or trade name belonging to or licensed to Concur. AMEX
will not register, seek to register or cause to be registered
any of Concur's trademarks without Concur's prior written
consent. AMEX agrees not to attach any additional trademarks or
trade designations to any Co-Branded XMS Service other than
those mutually agreed to by the Parties.
(b) During the term of this Agreement, AMEX authorizes Concur to use
the trademarks as provided by AMEX from time to time during the
term if this Agreement in connection with Concur's marketing,
advertisement and promotion of the Co-Branded XMS Service. AMEX
may revoke or modify its authorization to Concur from time to
time in its sole reasonable discretion. Nothing contained in
this Agreement shall give Concur any interest in such
trademarks. Concur agrees that it will not at any time during or
after this Agreement assert or claim any interest in or do
anything which may adversely affect the validity or
enforceability of any trademark or trade name belonging to or
licensed to AMEX. Concur will not register, seek to register or
cause to be registered any of AMEX's trademarks without AMEX's
prior written consent. Concur agrees not to attach any
additional trademarks or trade designations to any Co-Branded
XMS Service other than those mutually agreed to by the Parties.
7.2 Branding of the Co-Branded XMS Service. The Co-Branded XMS Service
shall be branded with a trademark identified by AMEX from time to
time during the term of the Agreement. Furthermore, AMEX and Concur
shall include the "XMS" logo and the designation "Powered by XMS" (or
other designation(s) determined by Concur and agreed to by AMEX) on
all printed and electronic marketing materials which references the
Co-Branded XMS Service. AMEX acknowledges and agrees that Concur will
include a Concur designation or logo on the screen of the software
delivered to AXP/XMS Customers as part of the Co-Branded XMS Service.
The size and placement of such reference shall be consistent with
such branding guidelines [*]. Concur agrees to develop customized
screens for the Co-Branded XMS Service marketed and sold to AXP/XMS
Customers that include designations and/or logos determined by AMEX
and consistent with the branding guidelines [*]. In the event the
parties cannot agree on branding guidelines as required herein, then
the decision of the Steering Committee shall govern.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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8. TERM AND TERMINATION.
8.1 This Agreement shall commence on the Effective Date and, unless
sooner terminated as provided in this Agreement, shall remain in full
force and effect for a term of [*] following the
Service Launch Date (the "Initial Term"). Thereafter, this Agreement
shall automatically renew for successive [*] (each, a
"Renewal Term"), provided, however, that a Party may terminate this
Agreement on the expiration date of the Initial Term or any Renewal
Term by delivering written notice of termination to the other not
less than ninety (90) days before the expiration of such Initial Term
or Renewal Term.
8.2 Termination. This Agreement may be terminated at any time prior to
the expiration of its then current term, as follows:
(a) by either Party by written notice to the other Party if a
receiver shall have been appointed over the whole or any
substantial part of the assets of the other Party, a petition or
similar document is filed by the other Party initiating any
bankruptcy or reorganization proceeding or such a petition is
filed against the other Party and such proceeding shall not have
been dismissed or stayed within sixty (60) days after such
filing;
(b) by either Party upon written notice if the other Party has
breached the terms of this Agreement in any material respect and
fails to cure such breach within thirty (30) days after receipt
of written notice of such default;
(c) by AMEX upon written notice upon the acquisition of a
controlling interest in Concur by an AMEX Competitor;
(d) by AMEX upon written notice upon the appointment of an officer,
director or other designee of an AMEX Competitor to serve on the
Board of Directors of Concur; or
(e) by AMEX in the event Concur [*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 13
8.3 Special Renegotiation Rights. [*]
8.4 Effect of Termination. Upon any termination or expiration of this
Agreement:
(a) For a period of one year after the date of termination, all
applicable books and records of Concur shall be made available
to AMEX for the purpose of determining compliance by Concur with
its obligations under this Agreement;
(b) Each Party shall immediately cease distribution of all items in
its possession which bear the trademarks of the other Party,
shall as promptly as is practicable cease all use of the
trademarks of the other Party and will not use any mark which is
confusingly similar to any trademarks of the other Party;
(c) Each Party shall return to the other Party marketing literature
and materials of the other Party in its possession or shall
destroy such items and certify their destruction to the other
Party; and
(d) Each Party's rights and obligations with respect to payments due
hereunder (including, without limitation, amounts due to AMEX
and Concur pursuant to Section 6.1) as well as the provisions of
Sections 6.2, 6.3, Sections 7, 8, 9, 10, 11, 12, 13 and 14,
shall survive termination of this Agreement.
8.5 Non-Solicitation.
(a) AXP/XMS Customers. During the term of this Agreement [*]
(b) Employees. During the term of this Agreement and for one (1)
year thereafter, the Parties agree not to solicit for employment
any employee of the other Party involved in the development,
marketing or sale of the Co-Branded XMS Service.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 14
9. LIMITATIONS OF LIABILITY. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION, LOSS OF REVENUES, LOSS OF PROFITS or COST OF PROCUREMENT OF
SUBSTITUTE TECHNOLOGY, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO ANY CLAIM OR
CAUSE OF ACTION WHETHER IN CONTRACT OR TORT, STRICT LIABILITY OR BREACH OF
WARRANTY, BUT SHALL NOT APPLY IF (A) A PRODUCT IS DETERMINED TO BE
DEFECTIVE AND TO HAVE CAUSED BODILY INJURY OR DEATH or (B) IF SUCH DAMAGES
ARE THE RESULT OF THE OTHER PARTY'S NEGLIGENCE OR WILLFUL MISCONDUCT.
THE PARTIES ACKNOWLEDGE THAT THIS SECTION 9 HAS BEEN INCLUDED AS A
MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT AND THAT
THE PARTIES WOULD NOT HAVE ENTERED INTO THIS AGREEMENT, BUT FOR THE
LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
10. REPRESENTATIONS AND WARRANTIES.
10.1 Due Authorization, etc. Each of Concur and AMEX represents and
warrants that (i) it has all right, power and authority to execute,
deliver and perform this Agreement and all agreements and documents
executed in connection herewith (the "Ancillary Documents"); (ii)
each of this Agreement and the Ancillary Documents have been duly
authorized, executed and delivered by it and is or when executed will
be, its legal, valid and binding obligations in accordance with their
terms; (iii) the entering into and performance of this Agreement and
the Ancillary Documents by it does not require the consent or
approval of any third party or governmental authority; and (iv) there
is no litigation, action at law or equity, suit, arbitral or
administrative proceeding, claim or to its knowledge, governmental
investigation presently pending or to its knowledge, threatened
against it or any of its Affiliates that would impair or otherwise
affect its ability to perform its obligations hereunder and
thereunder.
10.2 Intellectual Property Ownership.
(a) Concur hereby represents and warrants to AMEX that (i) Concur is
the owner of the Co-Branded XMS Service and the components
thereof, or otherwise has the right to sell, license and market
the Co-Branded XMS Service, as contemplated by the terms of this
Agreement, without infringing or violating any law, rule,
regulation, United States or foreign copyright, patent, trade
secret or other proprietary rights of any third party and (ii)
the grant of rights hereunder to AMEX does not violate or
constitute a default under any agreement to which
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<PAGE> 15
Concur is a party, nor shall the performance by AMEX hereunder
in accordance with the terms of this Agreement subject AMEX to
liability as a result of any such agreement.
(b) As used herein "Developed Materials" shall mean, hereunder, all
inventions, methods, techniques, works of authorship, computer
software, computer upgrades, computer programs, service
providers, vendors information, training materials,
telemarketing scripts, computer screens, reports, data, any
other proprietary or confidential information made, created,
developed or written hereunder and other intellectual property
created, developed or written in accordance with the activities
contemplated hereunder. [*]. As used herein, "AMEX Property"
shall mean the Developed Material as described in (i) and (ii)
above; "Concur Property" shall mean the Developed Material as
described in (iii) and (iv) above.
(c) All Developed Materials shall be deemed Proprietary Information
(as defined in Section 11 hereof) and subject to the
confidentiality provisions of this Agreement.
(d) Nothing herein shall be construed to restrict, impair or deprive
Concur or AMEX of any of their respective rights or proprietary
interests in technology or products that existed prior to and
independent of the performance of their respective obligations
hereunder.
10.3 Intellectual Property. Concur represents and warrants to AMEX that,
to the best knowledge of Concur, it is unaware of any patents or
other third party rights which
[*] Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 16
cover the Co-Branded XMS Service and/or any component thereof. Concur
has not received any notices from any third party indicating an
infringement or other violation of third party intellectual property
rights.
10.4 Year 2000. Concur represents and warrants to AMEX that the Co-Branded
XMS Service and each component thereof have been and will be tested
and are and will be fully capable of providing accurate results using
data having date ranges spanning the twentieth (20th) and
twenty-first (21st) centuries (e.g., years 1900-2099). Without
limiting the generality of the foregoing, Concur represents and
warrants to AMEX that the Co-Branded XMS Service and each component
thereof shall (a) manage and manipulate data involving all dates from
the 20th and 21st centuries without functional or data abnormality
related to such dates; (b) manage and manipulate data involving all
dates from the 20th and 21st centuries without inaccurate results
related to such dates; (c) have user interfaces and data fields
formatted to distinguish between dates from the 20th and 21st
centuries; and (d) represent all data related to include indications
of the millennium, century and decade as well as the actual year.
The exclusive remedy of AMEX and the entire liability of Concur, for
breach of this Section shall be a right of indemnification under
Section 12 for its direct damages arising out of AXP/XMS Customers
claims, suits or proceedings related to such breach.
10.5 AXP/XMS Customer Warranty. EXCEPT AS SET FORTH IN THE AXP/XMS SERVICE
AGREEMENT OR EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, CONCUR
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
WITH RESPECT TO THE CO-BRANDED XMS SERVICE.
11. PROPRIETARY INFORMATION AND CONFIDENTIALITY.
11.1 Proprietary Information. The Parties intend to disclose and exchange
confidential, proprietary and trade secret, technical information,
technical and business plans, proposed products and marketing and
sales reports regarding their businesses and, (i) in the case of
Concur, internal processes related to the operation of the Co-Branded
XMS Service, the [*] and [*] and (ii) in the case of AMEX,
information provided by AMEX with respect to internal AMEX processes
and [*] (the "Proprietary Information"). Information with respect to
AXP/XMS Customers contained in the AXP/XMS Service Agreement shall be
deemed Proprietary Information of AMEX.
11.2 Obligation of Confidentiality. Each Party shall protect and keep
confidential any and all Proprietary Information of the other Party
embodied in any information disclosed
[*] Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 17
hereunder and shall not use, disclose or allow any third party access
to any such Proprietary Information, except to support or perform its
obligations under this Agreement. In furtherance and not in
limitation of the foregoing, each Party agrees to maintain the strict
confidentiality of any source code delivered by the other Party.
Furthermore, with respect to Proprietary Information that relates to
any AMEX Client, Concur agrees to comply, and cause its third party
contractor to comply, with the AMEX security principles attached
hereto as Exhibit E.
11.3 Limited Access. Each Party shall use its best efforts to ensure that
only employees and third parties whose duties give them a need to
know such Proprietary Information of the other Party shall have
access thereto. All such persons and entities shall be obligated to
treat the same as proprietary and confidential and the receiving
Party shall take such other measures to protect the confidentiality
of such Proprietary Information. Without limiting the generality of
the foregoing, each Party shall require any third party to whom it
discloses any Proprietary Information to sign a confidentiality
agreement, enforceable by the other Party, whereby such third party
agrees to be bound by the confidentiality provisions set forth in
Section 11.2.
11.4 Required Disclosure. If a Party or any of its employees, shall be
under a legal obligation in any administrative, governmental or
judicial circumstance involuntarily to disclose any Proprietary
Information of the other Party, it shall give the Party that owns
such Proprietary Information (the "Disclosing Party") prompt notice
thereof so that the Disclosing Party may seek an appropriate
protective order. If the Disclosing Party is finally unsuccessful in
obtaining such protective order and if the Party receiving such
Proprietary Information (the "Receiving Party") or any such employee
would, in the opinion of its counsel, be held in contempt or suffer
other censure or penalty for failure to disclose, disclosure pursuant
to the order or decree of an administrative, governmental or judicial
authority with jurisdiction over such Party may be made by the
Receiving Party or its employees without liability hereunder.
11.5 Permitted Disclosures. Notwithstanding the foregoing, neither Party
shall be liable to the other with regard to any disclosure of
Proprietary Information of the other Party which:
(a) was known to the Receiving Party, without restriction, at the
time of disclosure, as shown by the files of the Receiving Party
in existence at the time of disclosure;
(b) is disclosed with the prior written approval of the Disclosing
Party;
(c) was independently developed by the Receiving Party, without any
use of the Proprietary Information and without the assistance of
any employee or other agents of (or independent contractors
hired by) the Receiving Party who have been exposed to such
Proprietary Information;
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<PAGE> 18
(d) becomes known to the Receiving Party, without restriction, from
a source who obtained such information other than through the
breach of this Agreement by the Receiving Party or the breach of
any confidential or fiduciary obligations to the Disclosing
Party; or
(e) is required to be disclosed pursuant to law or in accordance
with judicial or other governmental order.
11.6 Remedies. The Parties agree that money damages would not be a
sufficient remedy for any breach of this Section 11 by Receiving
Party and the Disclosing Party shall be entitled, in addition to
money damages, to specific performance and injunctive relief and any
other appropriate equitable remedies for any such breach. Such
remedies shall not be deemed to be the exclusive remedies for a
breach of this Section 11 by Receiving Party but shall be in addition
to all other remedies available at law or in equity to Disclosing
Party. If a court or other authority determines that a Party has
materially breached its obligations under this Section 11, the other
Party will be entitled to payment of its legal fees and
disbursements, court costs and other expenses of enforcing, defending
or otherwise protecting its interests hereunder.
11.7 Survival. The obligations of confidentiality and limitations of use,
disclosure and access set forth herein shall survive the termination
of this Agreement.
12. INDEMNIFICATION.
12.1 By Concur. Concur agrees to indemnify, defend and hold harmless AMEX
and its Affiliates and their respective directors, officers,
employees and agents (collectively, the "AMEX Group"), from and
against any and all claims, suits, losses, damages and liabilities
(including reasonable attorney's fees and expenses) arising out of or
resulting from
(a) any third party claim, suit or proceeding and any settlement
thereof (including reasonable fees of attorneys and related
costs), to the extent based on a claim that the Co-Branded XMS
Service or Concur infringes the patent, copyright, trademark,
trade secret or other proprietary right of a third party;
(b) the intentional or negligent act or omission of Concur or its
officers, directors, employees, contractors or agents
(collectively, the "AMEX Agents") in the course of the
performance of Concur's duties and obligations under this
Agreement;
(c) the failure of Concur or its Agents, as the case may be, to
comply with the terms of this Agreement; or
(d) the failure of Concur (including without limitation its Agents
who perform on behalf of Company hereunder) to comply with its
obligations under any and all laws, rules or regulations
applicable to Concur, its Agent or the Co-Branded XMS Service,
as the case may be.
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12.2 By AMEX. AMEX agrees to indemnify, defend and hold harmless Concur
and its Affiliates and their respective directors, officers,
employees and agents, from and against any and all claims, suits,
losses, damages and liabilities (including reasonable attorney's fees
and expenses) arising out of or resulting from
(a) any third party claim, suit or proceeding and any settlement
thereof (including reasonable fees of attorneys and related
costs), to the extent based on a claim that AMEX's intellectual
property incorporated into the Co-Branded XMS Service or the
marketing thereof infringes the patent, copyright, trademark,
trade secret or other proprietary right of a third party,
(b) the intentional or negligent act or omission of AMEX or its
officers, directors, employees, contractors or agents
(collectively, the "AMEX Agents") in the course of the
performance of Concur's duties and obligations under this
Agreement;
(c) the failure of AMEX or the AMEX Agents, as the case may be, to
comply with the terms of this Agreement; or
(d) the failure of AMEX to comply with its obligations under any and
all laws, rules or regulations applicable to AMEX.
12.3 Indemnification Procedure. If any action shall be brought against
either Party in respect of which indemnity may be sought from the
other Party pursuant to the provisions of this Section 12 ("Claim"),
the indemnified Party shall promptly notify the indemnifying Party in
writing, specifying the nature of the Claim, the total monetary
amount sought, as well as such relief as is sought therein. The
indemnified Party shall cooperate with the indemnifying Party at the
indemnifying Party's expense in all reasonable respects in connection
with the defense of the Claim if by a third party. If the Claim from
a third party is solely for monetary damages or a claim of
infringement, the indemnifying Party shall, upon written notice to
the indemnified Party, undertake the defense or settlement of the
Claim; in all other instances, the indemnified Party, upon written
notice to the indemnifying Party, may undertake the defense or
settlement of the Claim. In the event the indemnified Party
undertakes the defense or settlement of the Claim, the indemnifying
Party shall have the right to employ separate counsel at its own
expense and participate in the defense of the Claim. The indemnifying
Party shall reimburse the indemnified Party upon demand the judgment
of a court of competent jurisdiction or pursuant to a bona fide
compromise or settlement of claims, demands or actions and shall
reimburse the indemnified Party upon demand for any payments of
attorney's fees and related expenses made by the indemnified Party. A
Party's failure to give timely notice or to provide copies of
documents or to furnish relevant data in connection with any claim
for indemnification shall not constitute a defense (in part or in
whole) to any claim for indemnification for such Party, except and
only to the extent that such failure shall result in any prejudice
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to the indemnifying Party; provided, that any such compromise or
settlement must be approved by the indemnifying Party and any such
compromise or settlement must be approved by the indemnified Party,
which approval shall not be unreasonably withheld.
13. AXP/XMS CUSTOMER LISTS. Subject to Section 11 hereof, [*]. The terms of
this Section 13 shall survive the termination of this Agreement.
14. GENERAL.
14.1 Entire Agreement; Amendment. This Agreement, together with any
exhibits attached hereto, contains the complete and exclusive
understanding and agreement of the Parties with respect to its
subject matter and supersedes, merges and replaces all prior
writings, discussions and understandings relating to such subject
matter. This Agreement may only be amended by a written agreement and
signed by authorized representatives of both Parties.
14.2 Governing Law. This Agreement shall be governed by and construed in
accordance with, the laws of the State of New York, excluding those
laws that direct the application of the laws of another jurisdiction.
The Parties hereby consent to the exclusive jurisdiction of any State
or Federal court located in New York County. Neither Party shall
knowingly take or fail to take any action that might cause it or the
other Party to be in violation of any law or regulation of the United
States, including the United States Foreign Corrupt Practices Act.
14.3 Force Majeure. Neither Party shall be liable for any delay or failure
to meet its obligations pursuant to this Agreement due to natural
circumstances beyond its reasonable control, including, but not
limited to war, riots, insurrection, civil commotion, fire, flood,
storm or inability to obtain necessary labor, materials or
manufacturing facilities as a direct result of such natural
disasters.
14.4 Severability. If any term or provision of this Agreement is found to
be invalid or unenforceable for any reason, it shall be adjusted
rather than avoided, if possible, so as best to accomplish the
objective of the Parties to the extent possible. In any event, the
remaining terms and provisions shall be deemed valid and enforceable.
It is
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
20
<PAGE> 21
expressly understood and agreed that each provision of this Agreement
providing for a limitation of liability disclaimer or limitation of
warranties or exclusion of damages is intended by the Parties to be
severable and independent of any other provisions and to be enforced
as such.
14.5 Assignment. This Agreement shall be binding on the Parties and on
their successors and assigns. Except as expressly provided herein,
neither Party shall transfer, assign or subcontract any right or
obligation hereunder without the prior written consent of the other
Party, which consent shall not be unreasonably withheld.
14.6 Waiver. The failure of either Party any time to require performance
by the other Party of any provision hereof shall not affect in any
way the full right to require such performance at any time
thereafter; nor shall the waiver by either Party of a breach of any
provision hereof be taken or held to be a waiver of the provision
itself.
14.7 Attorneys' Fees. In the event of any suits and actions with respect
to this Agreement, including actions for indemnification under
Section 12, the prevailing Party shall be entitled to recover
reasonable attorneys' fees and other costs and expenses incurred in
resolving such dispute.
14.8 Cooperation. Each Party to this Agreement agrees to execute and
deliver all documents and to perform all further acts and to take
any and all further steps that may be reasonably necessary to carry
out the provisions of this Agreement and the transactions
contemplated hereby.
14.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which together shall
constitute a single instrument.
14.10 Notices. All notices relating to this Agreement shall be in writing,
signed by the Party giving or making such notice or communication
and shall be delivered by: (a) personal delivery; (b) telecopier
facsimile transmission; or (c) by postage-prepaid certified or
registered mail (airmail if available), return receipt requested.
Notices shall be sent to the address of the other Party set forth
below or such other address as either Party may specify in writing
in accordance with this Section and shall be deemed given upon
personal delivery, five (5) business days after deposit in the mail
or upon acknowledgment or actual receipt of facsimile transmission:
To Concur:
S. Steven Singh
President and CEO
Concur Technologies, Inc.
(formerly Portable Software Corporation)
21
<PAGE> 22
6222 - 185th NE
Redmond, WA 98052
with a copy to:
Fenwick & West LLP
2 Palo Alto Square
Suite 800
Palo Alto, California 94306
Attention: Matthew P. Quilter
To AMEX:
[*]
[*]
American Express Travel Related Services
Company, Inc.
140 Broadway (43rd Floor)
New York, NY 10005
with a copy to:
General Counsel's Office
American Express Travel Related Services
Company, Inc.
3 World Financial Center
New York, New York 10285-4909
Attention: [*]
14.11 Voluntary Preliminary Dispute Resolution.
(a) In the event of any controversy or claim arising out of or
relating to this Agreement, the Steering Committee will first
attempt in good faith to resolve the matter. If the Steering
Committee is unable to resolve such matter, the Parties will
attempt in good faith to resolve such matter by negotiations
between senior executives of the Parties who have settlement
authority but do not have direct responsibility for the
administration of this Agreement. [*]. All negotiations
conducted pursuant to this Section 14.11 are confidential and
shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of
evidence;
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
22
<PAGE> 23
(b) This Section 14.11 sets forth the exclusive method for
adjudicating disputes between the Parties arising out of or
relating to this Agreement; provided that nothing in this
Section 14.11 shall prevent a Party from applying to the
federal or state courts to obtain injunctive relief pending
resolution of the dispute through the voluntary dispute
resolution procedures set forth herein and to join in any such
action such other claims as may be required to be brought by
applicable joinder rules.
14.12 No Creation of Partnership. This Agreement does not create or
constitute a partnership for tax or other purposes. All decisions
regarding effectuation this Agreement and any action to be taken
hereunder shall be solely at the discretion of the Party making such
decision. Neither Party shall hold itself out as an agent of the
other. Neither Party shall have any authority to bind or obligate
the other in any manner.
14.13 [*]
14.14 Insurance.
(a) During the term of this Agreement and for any period that the
Service is made available to Customers (including without
limitation Enrollees), Concur agrees to maintain, at its own
expense, insurance in at least the following amounts (or such
reasonable higher amounts upon which the parties may hereafter
agree) to insure against both Concur's and AMEX's risk of loss
in connection with the services described in this Agreement:
(i) commercial general liability insurance, including coverage
for contractual liability, fire and casualty, business
interruption and complete operations, in the amount of $10
million per occurrence with at least $5 million personal injury
coverage; and (ii) errors and omissions liability insurance
covering the acts, errors, omissions and infringement of Concur
in the amount of at least $2 million per occurrence with an
annual aggregate of $10 million.
(b) Concur shall provide AMEX with certificates of insurance or
adequate proof of the foregoing insurance to AMEX on the date
hereof and within five (5) days of the issuance of a renewal
certificate for each such insurance policy. The commercial
general liability insurance policy shall name AMEX and its
affiliate companies as additional insureds with respect to the
Service. All insurance policies required hereunder shall
contain a provision stating the name and address of AMEX and
that AMEX is to be notified in writing by the insurer at least
thirty (30) days prior to cancellation of or a material change
in, any policy issued by such insurer.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
23
<PAGE> 24
(c) All policies required hereunder shall be maintained with
insurers acceptable to AMEX. AMEX reserves the right to
disallow coverage from any insurer that does not maintain a
rating of B+++ or higher from A.M. Best.
14.15 Trademarks. The use by a Party of any logo, trademark or other mark
owned by the other Party or Affiliates of the other Party shall be
strictly limited to each specific right to use articulated from time
to time.
14.16 Headings. The headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the
Parties and shall not in any way affect the meaning or
interpretation of this Agreement.
24
<PAGE> 25
IN WITNESS WHEREOF, the Parties hereto agree to the provisions set forth above
and have executed this Agreement as of the Effective Date.
CONCUR TECHNOLOGIES, INC.
(formerly known as Portable Software Corporation)
By: /s/ STEVE SINGH
----------------------------------
Name: Steve Singh
--------------------------------
Title: President & CEO
-------------------------------
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.
By: /s/ [*]
----------------------------------
Name: [*]
--------------------------------
Title: [*]
-------------------------------
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
25
<PAGE> 26
LIST OF EXHIBITS
Exhibit A-1 Description of the Co-Branded XMS Service
Exhibit A-2 Suggested Price List and Base Price List
Exhibit B Support
Exhibit C Exclusive Features
Exhibit D Lead Referral Compensation Payable By AMEX to Concur
Exhibit E AMEX Security Principles
Exhibit F Form of AXP/XMS Service Agreement
Exhibit G Data Security Agreement
<PAGE> 27
EXHIBIT A-1
DESCRIPTION OF THE CO-BRANDED XMS SERVICE
The Co-Branded XMS Service is an Internet travel expense management outsourcing
solution that automates the entire travel expense management process - from
expense report preparation and approval to processing and data analysis. The
Co-Branded XMS Service is powered by the Xpense Management Solution - a software
developed and owned by Concur -- and the hardware, application, operations, and
Internet connections are hosted by a third party web hosting partner. Automated
web reporting and payment services are optionally available.
The Co-Branded XMS Service is based on the XMS version 3.01 and includes the
Exclusive Features developed from time to time in accordance with the terms of
the Agreement.
<PAGE> 28
EXHIBIT A-2
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 29
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
29
<PAGE> 30
EXHIBIT B
SUPPORT
{See Support as described in the Prior Agreement}
<PAGE> 31
EXHIBIT C
EXCLUSIVE FEATURES
Proposal for Exclusive Integration Features
================================================================================
OBJECTIVE:
AMEX and Concur wish to provide AXP/XMS Customers with a set of exclusive
features (identified in the body of this Agreement as the "Exclusive Features")
for the Co-Branded XMS Service which will enhance the relationship, provide
competitive advantage for the RTS value proposition, and position the joint
offering as the market leading solution.
APPROACH:
- - This document proposes "rolling exclusivity" for these features, i.e.
available only to AMEX Clients for a specific period of time described
in the Agreement following general release. This document proposes the
first set of features governed by rolling exclusivity. The feature set
was developed jointly by AMEX and Concur.
- - [*]
- - The proposal follows the guiding principle to implement exclusive
features; neither party will remove functionality that is currently
available.
- - The proposal addresses product integration between Concur and AMEX
products and services. It does not recommend integrating efforts for
the business relationship (e.g. implementation, pricing, resource
sharing).
- - This draft includes a matrix of proposed features. Potential
availability of features, impact on the current feature integration
plans, and requirements, which are external to Concur, have not yet
been identified.
SUMMARY:
- - [*]
- - [*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
30
<PAGE> 32
JOINTLY RECOMMENDED FEATURES
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 33
EXHIBIT D
Lead Referral Compensation Payable By AMEX to Concur
The following are the terms and conditions for payment to Concur in connection
with lead referrals to AMEX of entities that have an actual business
relationship with Concur for the provisions of a service or product similar to
the Co-Branded XMS Service and which are interested in the American Express(R)
Corporate Card system and the American Express Business Travel Account program
(such entities, a "Potential Client"). All applications are subject to AMEX
approval.
Concur may, in writing and containing such information as AMEX shall reasonably
require from time to time, refer to AMEX a Potential Client for purposes of
AMEX's solicitation of such Potential Client for applications for a new
Corporate Card account ("Corporate Card Account")or new Business Travel Account
("BTA"). AMEX will approve or reject such referrals in accordance with
procedures it establishes from time to time. AMEX may, in its sole option,
choose or decide not to solicit such Potential Client.
If, during the term of the Agreement, AMEX establishes a new Corporate Card
Account or new BTA with a Potential Client which conforms with the conditions
set forth below (a "Qualified Lead"), AMEX agrees to pay Concur a [*] in
accordance with the terms set forth below.
In order for a referred Potential Client to be deemed a Qualified Client, all of
the following conditions must be satisfied:
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 34
If all of the preceding conditions are satisfied, then the Potential Client will
be considered a "Qualified Client" hereunder and thereby qualify Concur for the
following one-time incentive fee with respect to each Qualified Client that
establishes a new Corporate Card Account with AMEX:
<TABLE>
<S> <C>
[*]
</TABLE>
Also during such term, Concur will be entitled to a [*] fee of [*] for each
Qualified Client that establishes a new BTA.
Any incentive fee payable by AMEX will be based on the BTA or Corporate Card
Account as it exists three (3) months following the actual setup of the
respective account.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 35
EXHIBIT E
AMEX SECURITY PRINCIPLES
INFORMATION SECURITY REQUIREMENTS
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 36
[*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 37
DATA SECURITY RECOMMENDED CONTROLS AND PROCEDURES
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 38
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 39
EXHIBIT F
FORM OF AXP/XMS SERVICE AGREEMENT
<PAGE> 40
EXHIBIT G
DATA SECURITY AGREEMENT
This Data Security Agreement (the "Agreement") is entered into by and between
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. ("Amexco") and CONCUR
TECHNOLOGIES, INC. (formerly known as Portable Software Corporation), a
Washington corporation ("Service Organization").
Amexco hereby agrees to supply, and provide Service Organization with access to,
data (hereinafter referred to as "Files") containing proprietary information of
Amexco, and/or its parent company, subsidiaries and affiliates from time to time
to the Service Organization subject to the following terms and conditions.
I. [*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 41
[*]
II. CONFIDENTIALITY
Service Organization understands and agrees that information furnished
through the Files shall be considered confidential, shall not be
communicated to Service Organization's employees except on a "need to
know" basis, shall not be used for any purpose except in connection
with the specific job for which it was supplied, and shall not be
disclosed for any purpose to third parties by Service Organization,
other than those third parties listed in Addendum A.
Service Organization understands that all information contained in the
Files must be strictly safeguarded and protected from unauthorized use
or dissemination by it, its employees or any of the third parties
listed in Addendum A. Accordingly, Service Organization will take all
or any actions necessary to safeguard all or any data contained in the
Files, and will indemnify Amexco for any loss or misuse of data by its
employees or the third parties listed in Addendum A. Service
Organization agrees that if there is any disclosure of the information
in the Files, by its employees or the employees of any of the third
parties listed in Addendum A, it will enforce for Amexco's benefit
through litigation, if necessary, all rights provided under law to
compensate Amexco for any damages arising out of such disclosure and to
protect Amexco from additional disclosure. Service Organization also
agrees to pay for all costs reasonably incurred to enforce this
Agreement including, but not limited to, all attorney's fees and court
costs.
Service Organization further agrees that (i) any printed material
containing information from the Files, which is not returned to Amexco,
will be shredded or otherwise destroyed in a manner which will prevent
reconstruction; (ii) neither external nor internal labels, nor other
identifiers for House Files, computer systems, or computer programs,
will contain any references, abbreviated or otherwise, to American
Express; (iii) all media, other than printed media, on which the Files
are contained will be returned to the appropriate Amexco office within
7 business days of receipt.
Upon the completion or termination of a job, with the exception of
Files specified as exceptions per the stipulations in condition 5 of
this Agreement, Service Organization will immediately eliminate from
its House Files all information extracted from the Files. Upon the
expiration or termination of this Agreement, Service Organization will
immediately eliminate from its possession all information belonging to
Amexco. The method of such elimination will be at the discretion of
Amexco's Data Security Department.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 42
III. GOVERNING LAW AND INTERPRETATION
This Agreement and the rights and obligations of the parties hereto
shall be governed by and construed in accordance with the laws of the
State of New York. Headings are for reference only and are not intended
to affect the meaning of any terms. If any provision of this Agreement
is held invalid, illegal or unenforceable, the remaining provisions
will remain unimpaired.
IV. ENTIRE AGREEMENT
No modification, amendment, supplement to or waiver of this Agreement
or any of its provisions shall be binding upon the parties hereto
unless made in writing and duly signed by both parties. This Agreement
shall become effective as of __________, 1998.
ACCEPTED AND AGREED TO:
Signature:___________________________
Printed Name:________________________
Title:_______________________________
TO BE COMPLETED BY AMEXCO DATA SECURITY ONLY
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.
SIGNATURE:
---------------------------------------
PRINTED NAME: [*]
-----------------------------------
TITLE: [*]
------------------------------------------
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 43
ADDENDUM A
(Please provide the name, address, contact, and telephone number for any
companies listed.)
4
<PAGE> 1
EXHIBIT 10.11
Portable Software Corporation
WARRANT TO PURCHASE SHARES
OF SERIES E PREFERRED STOCK
THIS CERTIFIES THAT, for value received, American Express Travel Related
Services Company, Inc. ("ATRS"), and its assignees are entitled to subscribe for
and purchase shares of the fully paid and nonassessable Series E Preferred Stock
(as adjusted pursuant to Section 4 hereof, the "Shares") of Portable Software
Corporation, a Washington corporation (the "Company"), in the amounts and at the
prices per share set forth below (such price and such other price as shall
result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the "Exercise Price"), subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein, (a) the term
"Series Preferred" shall mean the Company's presently authorized Series E
Preferred Stock, and any stock into or for which such Series E Preferred Stock
may hereafter be converted or exchanged, and (b) the term "Date of Grant" shall
mean the Date of Grant listed on the signature page hereof. If all of the Series
Preferred is converted into shares of Common Stock in connection with a
registration of the Company's Common Stock under the 1933 Act, then this Warrant
shall automatically become exercisable for that number of shares of Common Stock
equal to the number of shares of Common Stock that would have been received if
this Warrant had been exercised in full and the shares of Series Preferred
received thereupon had been simultaneously converted into shares of Common Stock
immediately prior to such event, and the Exercise Price per Share for each
Tranche noted below shall be automatically adjusted to equal the amount obtained
by dividing (i) the aggregate Exercise Price of the shares of Series Preferred
for which this Warrant was exercisable in such Tranche immediately prior to such
conversion, by (ii) the number of shares of Common Stock for which this Warrant
is exercisable in such Tranche immediately after such conversion.
1. AMOUNT OF SHARES, EXERCISE PRICE AND TERM.
(a) Subject to Section 1(b) below, this Warrant is exercisable in
four tranches, for the following amounts, Exercise Price and terms:
<TABLE>
<CAPTION>
Exercise Price Last Day to Exercise with
Tranche Number of Shares per Share Respect to these Shares
- -------------- ---------------- --------------------------- ------------------------------------
<S> <C> <C> <C>
Tranche 1 750,000 The price offered to the Midnight, 21 days prior to the
public in the Company's closing of the IPO, effective as of
initial public offering (the said closing
"IPO"), less 7%
Tranche 2 1,750,000 $13.50 Midnight, October 15, 1999
Tranche 3 1,750,000 $20.25 Midnight, January 15, 2001
Tranche 4 1,750,000 $34.00 Midnight, January 15, 2002
</TABLE>
(b) 25% of the shares in Tranche 1 and 2 may be cancelled if
determined to be appropriate by the Board of Directors of the Company within 60
days of the date hereof and the holder has been so notified in writing by such
time.
(c) Any Tranche 1 Shares shall be registered and fully tradable on
and after the date of the IPO, subject to any "lock-up" provisions contained in
the Second Amended and Restated Information Agreement dated May 29, 1998. The
payment for the Tranche 1 Shares shall be due and payable upon the closing of
the IPO. The Company shall advise the holder of this Warrant in writing at
least 30 days in advance of the scheduled closing date for the IPO.
(d) The number of shares and exercise prices will be appropriately
adjusted in the event of any stock split, stock dividend, recapitalization, and
the like.
<PAGE> 2
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT: Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and
by the payment to the Company, by certified or bank check, or by wire transfer
to an account designated by the Company (a "Wire Transfer") of an amount equal
to the then applicable Exercise Price multiplied by the number of Shares then
being purchased or (b) if in connection with a registered public offering of
the Company's securities, the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A-1 duly completed and executed) at
the principal office of the Company together with notice of arrangements
reasonably satisfactory to the Company for payment to the Company either by
certified or bank check or by Wire Transfer from the proceeds of the sale of
shares to be sold by the holder in such public offering of an amount equal to
the then applicable Exercise Price per share multiplied by the number of Shares
then being purchased. The person or persons in whose name(s) any certificate(s)
representing shares of Series Preferred shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the dates upon which this Warrant is exercised. In
the event of any exercise of the rights represented by this Warrant,
certificates for the shares of stock so purchased shall be delivered to the
holder hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. From and after the earlier of (i) the day of the exercise of
Tranche 1 or (ii) thirty (30) days after receipt of a request from ATRS, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock and/or Series Preferred, as the
case may be, provided that the Company covenants that it will reserve a
sufficient number of shares of its Common Stock for the exercise by the holder
hereof of the Tranche 1 shares.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into corporation
(other than a merger with another corporation in which the Company is the
acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the holder of this Warrant
(in form and substance satisfactory to the holder of this Warrant), so that the
holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion
of this warrant, and in lieu of the shares of Series Preferred theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Series Preferred then
purchasable under this Warrant. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4 and, in the case of a new Warrant issuable after
conversion of the authorized shares of the Series Preferred into shares of
Common Stock or after the amendment of the terms of the anti-dilution
protection of the Series Preferred, shall provide for anti-dilution protection
that shall be as nearly equivalent as may be practicable to the anti-dilution
provisions applicable to the Series Preferred on the Date of Grant. the
provisions of this subparagraph (a) shall similarly apply to successive
reclassifications, changes, mergers and transfers.
2
<PAGE> 3
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Exercise Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in Sections 4(a) and 4(b)), of Series Preferred, then
the Exercise Price shall be adjusted, from and after the date of determination
of shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Exercise Price in effect immediately prior
to such date of determination by a fraction (i) the numerator of which shall be
the total number of shares of Series Preferred outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which shall be the
total number of shares of Series Preferred outstanding immediately after such
dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Exercise Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise Price immediately prior to such adjustment and the denominator of
which shall be the Exercise Price immediately thereafter.
(e) ANTI-DILUTION RIGHTS. The other antidilution rights applicable
to the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Articles of Incorporation, as amended through the Date of Grant, a
true and complete copy of which has been supplied to the holder of this Warrant
(the "Charter"). Any changes to the rights of the Series Preferred that treat
the holder of this Warrant in any manner different than all holders of the
Series Preferred shall require the written consent of the holder hereof. The
Company shall promptly provide the holder hereof with any restatement,
amendment, modification or waiver of the Charter promptly after the same has
been made.
5. NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the Exercise Price and the number of Shares purchasable hereunder after
giving effect to such adjustment, and shall cause copies of such certificate to
be mailed (without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant. In addition, whenever the conversion
price or conversion ratio of the Series Preferred shall be adjusted, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the
holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Series A Preferred will
be issued in connection with any exercise hereunder, but in lien of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. COMPLIANCE; DISPOSITION OF WARRANT OR SHARES OF SERIES PREFERRED.
(a) COMPLIANCE. The holder of this Warrant, by acceptance hereof,
agrees that this Warrant, and the shares of Series Preferred to be issued upon
exercise hereof and any Common Stock issued upon conversion thereof are being
acquired for investment and that such holder will not offer, sell or otherwise
dispose of this Warrant, or any shares of Series Preferred to be issued upon
exercise hereof or any Common Stock issued upon conversion thereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act") or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
3
<PAGE> 4
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account
for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof in violation of the
Act.
(2) The holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder's investment intent as expressed herein.
(3) The holder further understands that this Warrant must be
held indefinitely unless subsequently registered under the Act and
qualified under any applicable state securities laws, or unless
exemptions from registration and qualification are otherwise
available. The holder is aware of the provisions of Rule 144,
promulgated under the Act.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any offer,
sale or other disposition of this Warrant or any shares of Series Preferred
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, or other evidence, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the
Act as then in effect or any federal or state securities law then in effect) of
this Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice and
reasonably satisfactory opinion or other evidence, if so requested, the
Company, as promptly as practicable but no later than fifteen (15) days after
receipt of the written notice, shall notify such holder that such holder may
sell or otherwise dispose of this Warrant or such shares of Series Preferred or
Common Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 7(b) that
the opinion of counsel for the holder or other evidence is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
with details thereof after such determination has been made. Notwithstanding
the foregoing, this Warrant or such shares of Series Preferred or Common Stock
may, as to such federal laws, be offered, sold or otherwise disposed of in
accordance with Rule 144 or 144A under the Act, provided that the Company shall
have been furnished with such information as the Company may reasonably request
to provide a reasonable assurance that the provisions of Rule 144 or 144A have
been satisfied. Each certificate representing this Warrant or the shares of
Series Preferred thus transferred (except a transfer pursuant to Rule 144 or
144A) shall bear a legend as to the applicable restrictions on transferability
in order to ensure compliance with such laws, unless in the aforesaid opinion
of counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions. This Warrant may not
be transferred by ATRS except to an
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<PAGE> 5
Entity (i) in which ATRS owns not less than 50% of the beneficial interest,
(ii) which owns 50% or more of the capital stock of ATRS, or (iii) 50% or more
of whose beneficial interest is owned by an entity described in (ii).
(c) Applicability of Restrictions. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (i) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; provided however, in
any such transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time
be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to receive notice of meetings, or to receive dividends
or subscription rights or otherwise until this Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.
9. REGISTRATION RIGHTS. The Company grants registration rights to the
holder of this Warrant for any Common Stock of the Company obtained upon
conversion of the Series Preferred, comparable to the registration rights
granted to the investors in the Second Amended and Restated Information and
Registration Agreement dated May 29, 1998.
10. ADDITIONAL RIGHTS AND LIMIT.
10.1 SECONDARY SALES. The Company agrees that it will not interfere with
the holder of this Warrant in obtaining liquidity with respect to the Shares if
opportunities to make secondary sales of the Company's securities become
available.
10.2 MERGERS. The Company shall provide the holder of this Warrant with at
least thirty (30) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the Company), or any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of. The
Company will cooperate with the holder in arranging the sale of this Warrant in
connection with any such transaction.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and
other equitable remedies;
(b) Subject to the last provision of Section 3, the Shares have been
duly authorized and reserved for issuance by the Company and, when issued in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Series Preferred and the holders thereof are as set forth
in the Charter, as amended to the Date of the Grant, a true and complete copy
of which has been delivered to the original holder of this Warrant;
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<PAGE> 6
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms of the Charter will be validly issued,
fully paid and nonassessable;
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have an adverse effect on the ability of
the Company to perform its obligations under this Warrant.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon, the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing to the holder hereof
in respect of any rights (including, without limitation, any right to
registration of the Shares) to which the holder hereof shall continue to be
entitled after such exercise or conversion in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such request shall
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the
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<PAGE> 7
Company and the holder hereof contained herein shall survive indefinitely
until, by their respective terms, they are no longer operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or the rights
either by suit in equity and/or by action at law, including but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Warrant against impairment.
21. SEVERABILITY. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any order jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
22. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is thought for the enforcement of this Warrant, or because of an
alleged disputes, breach, default, or misinterpretation in connection with any
of the provisions of the Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or preceding, in addition to any other relief to which
it or they may be entitled.
23. ENTIRE AGREEMENT; MODIFICATION. This Warrant, constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and imposed all prior agreements, representations, and undertakings of
the parties, whether oral or written, with respect to such subject matter.
Portable Software Corporation
By: /s/ STERLING WILSON
------------------------------------
Title: CFO and VP of Operations
---------------------------------
Address: 6222 185th Street N.E.
-------------------------------
Redmond, WA 98052
---------------------------------------
Date of Grant: August 11, 1998
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<PAGE> 8
EXHIBIT A
NOTICE OF EXERCISE
To: Portable Software Corporation
1. The undersigned hereby:
/ / elects to purchase ________ shares of Series E Preferred
Stock of Portable Software Corporation pursuant to the terms of
the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full, or
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such name or names as are specified
below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for sale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
_______________________________
(Signature)
___________________
(Date)
<PAGE> 9
EXHIBIT A-1
NOTICE OF EXERCISE
To: Portable Software Corporation (the "Company")
1. Contingent upon and effective at the closing (the"Closing") of
the Company's public offering contemplated by the Registration Statement on
Form S _______, filed ____________, 19__, the undersigned hereby:
/ / elects to purchase _________ shares of Common Stock of the
Company pursuant to the terms of the attached Warrant, or
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such [________] shares.
____________________________
(Signature)
____________________
(Date)
<PAGE> 1
EXHIBIT 10.12
VOTING AGREEMENT
This Voting Agreement (this "AGREEMENT") is made and entered into as of
May 29, 1998 (the "EFFECTIVE DATE") by and among Portable Software Corporation,
a Washington corporation (the "COMPANY"), and the parties listed on Exhibit A
attached hereto (the "SHAREHOLDERS").
A. Concurrently herewith, the Shareholders are purchasing from the
Company shares of its Series E Preferred Stock (the "SERIES E PREFERRED STOCK")
pursuant to a Series E Preferred Stock Purchase Agreement dated of even date
herewith between the Company and the Shareholders (the "PURCHASE AGREEMENT").
B. The Amended and Restated Articles of Incorporation of the Company
provide for the election of one (1) member of the Company's Board of Directors
by the holders of the Series E Preferred Stock.
C. As an inducement to RRE Investors, L.P. and RRE Investors Fund, L.P.
(collectively, "RRE"), who are two of the Shareholders, to purchase the Series E
Preferred Stock pursuant to the Purchase Agreement, the Shareholders and the
Company desire to enter into this Agreement to set forth their agreements and
understandings with respect to how shares of the Company's Series E Preferred
Stock will be voted on certain matters.
NOW THEREFORE, in consideration of the above recitals and the mutual
covenants made herein, the parties hereby agree as follows:
1. ELECTION OF BOARD OF DIRECTORS.
1.1 Voting; Board Composition. During the term of this
Agreement, each Shareholder agrees to vote all shares of Series E Preferred
Stock of the Company now or hereafter directly or indirectly owned (of record or
beneficially) by such Shareholder, in such manner as may be necessary to elect
(and maintain in office) as a member of the Company's Board of Directors, the
individual designated by RRE from time to time in a writing delivered to the
Company and signed by RRE (the "RRE DESIGNEE");
1.2 Initial RRE Designee. The initial RRE Designee shall be
James D. Robinson III.
1.3 Changes in RRE Designee. From time to time during the term
of this Agreement, RRE may, in its sole discretion:
(a) elect to remove from the Company's Board of
Directors any incumbent RRE Designee who occupies a Board seat for
which RRE is entitled to designate the RRE Designee under Section 1.1;
and/or
<PAGE> 2
(b) designate a new RRE Designee (who shall be
reasonably acceptable to the Board of Directors of the Company) for
election to a Board seat for which RRE is entitled to designate the RRE
Designee under Section 1.1 (whether to replace a prior RRE Designee or
to fill a vacancy in such Board seat); provided such removal and/or
designation of the RRE Designee is approved in a writing signed by RRE,
in which case such election to remove the RRE Designee and/or elect a
new RRE Designee will be binding on the Shareholders. In the event of
such a removal and/or designation of the RRE Designee under this
Section 1.3, the Shareholders shall vote their shares of the Company's
Series E Preferred Stock as provided in Section 1.1, and the other
directors of the Board shall take any required action, to cause: (a)
the removal from the Company's Board of Directors of the RRE Designee
so designated for removal by RRE; and (b) the election to the Company's
Board Directors of any new RRE Designee so designated for election to
the Company's Board of Directors by RRE.
1.4 Notice; Cumulative Voting. The Company shall promptly give
each of the Shareholders written notice of any change in composition of the
Company's Board of Directors and of any proposal by RRE to remove or elect a new
RRE Designee. In any election of directors pursuant to this Section 1, the
Shareholders shall vote their shares in a manner sufficient to elect to the
Company's Board of Directors the individual to be elected thereto as provided in
this Section 1.
2. FURTHER ASSURANCES. Each of the Shareholders and the Company agree
not to vote any shares of Company's Series E Preferred Stock, or to take any
other actions, that would in any manner defeat, impair, be inconsistent with or
adversely affect the stated intentions of the parties under Section 1 of this
Agreement.
3. TRANSFEREES; LEGENDS ON CERTIFICATES.
3.1 Effect on Transferees. Each and every transferee or
assignee of the Series E Preferred Stock of the Company from any Shareholder
shall be bound by and subject to the terms and conditions of this Agreement that
are applicable to such transferee's transferor or assignor, and the Company
shall require, as a condition precedent to the transfer of the Series E
Preferred Stock of the Company subject to this Agreement, that the transferee
agrees in writing to be bound by, and subject to, all the terms and conditions
of this Agreement.
3.2 Legend. The Shareholders agree that all Company shares
certificates now or hereafter held by them that represent shares of Series E
Preferred Stock of the Company subject to this Agreement will be stamped or
otherwise imprinted with a legend to read as follows:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AGREEMENTS AND
RESTRICTIONS WITH REGARD TO THE VOTING OF SUCH SHARES AND THEIR
TRANSFER, AS PROVIDED IN THE PROVISIONS OF A VOTING AGREEMENT, A COPY
OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION."
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<PAGE> 3
4. ENFORCEMENT OF AGREEMENT. Each of the Shareholders acknowledge and
agree that any breach by any of them of this Agreement shall cause the other
Shareholders irreparable harm which may not be adequately compensable by money
damages. Accordingly, in the event of a breach or threatened breach by a
Shareholder of any provision of this Agreement, the Company and each other
Shareholder shall each be entitled to the remedies of specific performance,
injunction or other preliminary or equitable relief, including the right to
compel any such breaching Shareholder, as appropriate, to vote such
Shareholder's shares of Series E Preferred Stock of the Company in accordance
with the provisions of this Agreement, in addition to such other rights remedies
as may be available to the Company or any Shareholder for any such breach or
threatened breach, including but not limited to the recovery of money damages.
5. TERM. This Agreement shall commence on the Effective Date and shall
terminate upon the first to occur of the following:
(a) May 29, 2008;
(b) Shareholders holding seventy-five percent (75%) of the
shares of the Company's then outstanding Series E Preferred Stock
issued under the Purchase Agreement execute a written agreement to
terminate this Agreement;
(c) The consummation of the first sale of securities of the
Company to the public pursuant to an effective registration statement
filed by the Company under the Securities Act of 1933, as amended;
(d) Immediately prior to the closing of (i) any consolidation
or merger of the Company with or into any other corporation or
corporations in which the holders of the Company's outstanding shares
immediately before such consolidation or merger do not, immediately
after such consolidation or merger, retain stock representing a
majority of the voting power of the surviving corporation of such
consolidation or merger or stock representing a majority of the voting
power of a corporation that wholly owns, directly or indirectly, the
surviving corporation of such consolidation or merger; (ii) the sale,
transfer or assignment of securities of the Company representing a
majority of the voting power of all the Company's outstanding voting
securities by the holders thereof to an acquiring party in a single
transaction or series of related transactions; (iii) any other sale,
transfer or assignment of securities of the Company representing over
fifty percent (50%) of the voting power of the Company's then
outstanding voting securities by the holders thereof to an acquiring
party; or (iv) the sale of all or substantially all the Company's
assets.
6. GENERAL PROVISIONS.
6.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Washington
applicable to contracts made among residents of, and wholly to be performed
within, the State of Washington, without regard to principles of conflict of
laws or choice of laws.
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<PAGE> 4
6.2 Further Instruments. From time to time, each party hereto
shall execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
6.3 Successors. This Agreement shall be binding upon and shall
inure to the benefit of the executors, administrators, legal representatives,
heirs, successors, and assigns of the parties hereto; provided, however, that
any transferee of any shares of stock of the Company affected by this Agreement
shall be required, as a condition precedent to acquiring such shares, to first
agree in writing to be bound by all the terms and conditions of this Agreement
applicable to such transferee's transferor; and provided further, that no rights
under this Agreement may be assigned apart from the related shares of the
Company' stock.
6.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Entire Agreement. This document constitutes and contains
the entire agreement and understanding of the parties regarding the subject
matter of this Agreement and supersedes any and all prior negotiations,
correspondence, understandings and agreements among the parties respecting the
subject matter hereof.
6.6 Amendments and Waivers. Any terms of this Agreement may be
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular) instance and either retroactively or
prospectively), with the written consent of (a) the Company's Board of Directors
and (b) the Shareholders holding seventy-five percent (75%) of the outstanding
shares of the Company's Series E Preferred Stock issued under the Purchase
Agreement. Any amendment or waiver effected in accordance with this Section
shall be binding upon the Company, all the Shareholders, and their permitted
transferees and assignees.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION RRE INVESTORS, L.P.
A Washington Corporation By: RRE Investors II, LLC,
its General Partner
By_________________________________
S. Steven Singh, President By_________________________________
Name:
Address: 6222 185th Avenue Title:
Redmond, WA 98052
RRE INVESTORS FUND, L.P.
By: RRE Investors Fund GP, L.P.,
its General Partner
By: RRE Investors Fund LDC,
its General Partner
By_________________________________
Name:
Title:
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION AMERICAN EXPRESS COMPANY
A Washington Corporation
By_________________________________
By_________________________________ Name:
S. Steven Singh, President Title:
Address: 6222 185th Avenue
Redmond, WA 98052
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION U.S.V.P. ENTREPRENEUR PARTNERS II, L.P.
A Washington Corporation A Delaware Limited Partnership
U.S. VENTURE PARTNERS IV, L.P.
By_________________________________ SECOND VENTURES II, L.P.
S. Steven Singh, President
By: Presidio Management Group IV, L.P.
Address: 6222 185th Avenue Their General Partner
Redmond, WA 98052
By:______________________________________
Title: __________________________________
Address: 2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTOR:
PORTABLE SOFTWARE CORPORATION INSTITUTIONAL VENTURE
A Washington Corporation PARTNERS VII, L.P.
by its General Partner
Institutional Venture Management VII, L.P.
By_________________________________
S. Steven Singh, President By: ______________________________________
Norman A. Fogelsong, A General Partner
Address: 6222 185th Avenue
Redmond, WA 98052 Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR:
IVP FOUNDERS FUND I, L.P.
by its General Partner
Institutional Venture Management VI, L.P.
By: ______________________________________
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INVESTOR:
INSTITUTIONAL VENTURE MANAGEMENT VII, L.P.
By: ______________________________________
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION BRENTWOOD ASSOCIATES VI, L.P.
A Washington Corporation
By: Brentwood VI Ventures, L.P.
Its General Partner
By_________________________________
S. Steven Singh, President By: ______________________________
General Partner
Address: 6222 185th Avenue
Redmond, WA 98052 Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION MAYFIELD ASSOCIATES FUND III
A Washington Corporation A California Limited Partnership
MAYFIELD VIII
A California Limited Partnership
By_________________________________
S. Steven Singh, President By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Address: 6222 185th Avenue Their General Partner
Redmond, WA 98052
By: ____________________________________
Title: Managing Member
Address: 2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION COMDISCO, INC.
A Washington Corporation
By:________________________________
By_________________________________ Title: James P. Labe, President
S. Steven Singh, President Comdisco Ventures Division
Address: 6222 185th Avenue Address: 3000 Sand Hill Road
Redmond, WA 98052 Building 1, Suite 155
Menlo Park, CA 94025
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Voting Agreement on
the date and year first above written.
COMPANY: INVESTORS:
PORTABLE SOFTWARE CORPORATION CAMBRIDGE TECHNOLOGY CAPITAL
A Washington Corporation FUND I, L.P.
By: Cambridge Technology GPLP, L.P.
By: Cambridge Technology CGP, Inc.
By_________________________________
S. Steven Singh, President
By: _____________________________________
Address: 6222 185th Avenue Barry Rosenbaum, Managing Director
Redmond, WA 98052
Address: 11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
<PAGE> 13
EXHIBIT A
SHAREHOLDERS
RRE Investors, L.P.
RRE Investors Fund, L.P.
American Express Company
U.S.V.P. Entrepreneur Partners II., L.P.
U.S. Venture Partners IV, L.P.
Second Ventures II, L.P.
Institutional Venture Partners VII, L.P.
IVP Founders Fund I, L.P.
Institutional Venture Management VII, L.P.
Brentwood Associates VI, L.P.
Mayfield Associates Fund III
Mayfield VIII
Comdisco, Inc.
Cambridge Technology Capital Fund
<PAGE> 1
EXHIBIT 10.13
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT (the "AMENDMENT") is made as of July 30, 1998,
by and between Portable Software Corporation, a Washington corporation (the
"COMPANY"), and the persons and entities named on the Schedule of Investors
attached to the Series E Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT") dated as of May 29, 1998 among the Company and the parties listed on
Schedule of Investors attached thereto (each hereinafter individually referred
to as an "INVESTOR" and collectively referred to as the "INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell shares of its Series E Preferred
Stock (the "Shares") to American Express Travel Related Services Company, Inc.
(the "NEW INVESTOR"), and the New Investor desires to purchase the Shares from
the Company on the same terms and conditions set forth in the Purchase
Agreement.
WHEREAS, the Company has requested that the Purchase Agreement be
amended to extend the latest closing date for an Additional Closing to August
11, 1998.
WHEREAS, the Company has requested that the Voting Agreement entered
into between the Company and the Investors dated May 29, 1998 be amended to
provide for the election to the Company's Board of Directors of Mr. Ed Gilligan
as the second director elected by the holders of Series E Preferred.
WHEREAS, Section 8.7 of the Purchase Agreement provides that the
Purchase Agreement may be modified by the Company and the holders of a
seventy-five percent (75%) majority of the outstanding shares of Series E
Preferred Stock issued under the Purchase Agreement.
WHEREAS, Section 6.6 of the Voting Agreement provides that the Voting
Agreement may be modified by the Company and the holders of seventy-five percent
(75%) of the outstanding shares of Series E Preferred Stock issued under the
Purchase Agreement.
WHEREAS, the Investors signatory hereto hold more than seventy-five
percent (75%) of the outstanding shares of Series E Preferred Stock issued under
the Purchase Agreement and are willing to so amend the Purchase Agreement and
the Voting Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions. Except as otherwise expressly provided herein,
capitalized terms used herein shall have the meanings given them in the Purchase
Agreement, as amended hereby.
2. Closing Date. Paragraph (a) of Section 1.3 of the Purchase Agreement
is amended by substituting "August 11, 1998" for "July 10, 1998."
3. Modification of Recitals. Recitals B and C of the Voting Agreement
are hereby deleted in their entirety and replaced with the following:
<PAGE> 2
3.1 "B. The Amended and Restated Articles of Incorporation of the
Company provide for the election of two (2) members of the Company's Board of
Directors by the holders of the Series E Preferred Stock."
3.2 "C. As an inducement to RRE Investors, L.P. and RRE Investors
Fund, L.P. (collectively, "RRE") and American Express Travel Related Services
Company, Inc. ("AmEx"), who are three of the Shareholders, to purchase the
Series E Preferred Stock pursuant to the Purchase Agreement, the Shareholders
and the Company desire to enter into this Agreement to set forth their
agreements and understandings with respect to how shares of the Company's Series
E Preferred Stock will be voted on certain matters."
4. Board Composition. Section 1.1 of the Voting Agreement is hereby
deleted in its entirety and replaced with the following:
"1.1 Voting; Board Composition. During the term of this
Agreement, each Shareholder agrees to vote all shares of Series E Preferred
Stock of the Company now or hereafter directly or indirectly owned (of record or
beneficially) by such Shareholder, in such manner as may be necessary to elect
(and maintain in office) as a member of the Company's Board of Directors, one
individual designated by RRE from time to time in a writing delivered to the
Company and signed by RRE (the "RRE DESIGNEE") and one individual designated by
AmEx from time to time in a writing delivered to the Company and signed by AmEx
(the "AMEX DESIGNEE");
5. AmEx Designee. A new Section 1.4, providing as follows, shall be
added to the Agreement:
"1.4 Initial AmEx Designee; Changes in AmEx Designee. The initial
AmEx Designee shall be Ed Gilligan. From time to time during the term of this
Agreement, AmEx may:
(a) elect to remove from the Company's Board of Directors any
incumbent AmEx Designee who occupies a Board seat for which AmEx is entitled to
designate the AmEx Designee under Section 1.1; and/or
(b) designate a new AmEx Designee (who shall be reasonably
acceptable to the Board of Directors of the Company) for election to a Board
seat for which AmEx is entitled to designate the AmEx Designee under Section 1.1
(whether to replace a prior AmEx Designee or to fill a vacancy in such Board
seat); provided such removal and/or designation of the AmEx Designee is approved
in a writing signed by AmEx, in which case such election to remove the AmEx
Designee and/or elect a new AmEx Designee will be binding on the Shareholders.
In the event of such a removal and/or designation of the AmEx Designee under
this Section 1.4, the Shareholders shall vote their shares of the Company's
Series E Preferred Stock as provided in Section 1.1, and the other directors of
the Board shall take any required action, to cause: (a) the removal from the
Company's Board of Directors of the AmEx Designee so designated for removal by
AmEx; and (b) the election to the Company's Board of Directors of any new
2
<PAGE> 3
AmEx Designee so designated for election to the Company's Board of Directors by
AmEx as provided in this Section 1.4.".
6. Section 1.4 shall be deleted in its entirely and replaced with
the following Section 1.5: "1.5 Notice; Cumulative Voting. The Company shall
promptly give each of the Shareholders written notice of any change in
composition of the Company's Board of Directors and of any proposal by RRE or
AmEx to remove or elect a new RRE Designee or a new AmEx Designee. In any
election of directors pursuant to this Section 1, the Shareholders shall vote
their shares in a manner sufficient to elect to the Company's Board of Directors
the individuals to be elected thereto as provided in this Section 1.
7. No Other Amendment. Except as expressly set forth herein, each of the
Purchase Agreement and the Voting Agreement is unmodified and continues in full
force and effect.
8. Governing Law. This Amendment shall be governed by and construed
under the internal laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California, without reference to principles of conflict of laws or choice of
laws.
9. Entire Agreement. This Amendment, constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties with respect to the
subject matter hereof.
10. Counterparts. This Amendment may be executed in two or more
counterparts, including by facsimile, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
11. Further Assurances. From and after the date of this Amendment, upon
the request of any Investor or the Company, the Company and the Investors shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
a Washington corporation
By: /s/ S. Steven Singh
-------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: RRE INVESTORS, L.P.
By: RRE Investors II, LLC,
its General Partner
By: /s/ Andrew Zalasin
----------------------------------
Name:
Title:
RRE INVESTORS FUND, L.P.
By: RRE Investors Fund GP, L.P.,
its General Partner
By: RRE Investors Fund LDC,
its General Partner
By: /s/ Andrew Zalasin
----------------------------------
Name:
Title:
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-------------------------------------
S. Steven Singh, President
INVESTORS: INSTITUTIONAL VENTURE
PARTNERS VII, L.P.
by its General Partner
Institutional Venture Management VII, L.P.
By: /s/ Norman A. Fogelsong
-------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
IVP FOUNDERS FUND I, L.P.
by its General Partner
Institutional Venture Management VI, L.P.
By: /s/ Norman A. Fogelsong
-------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
INSTITUTIONAL VENTURE MANAGEMENT
VII, L.P.
By: /s/ Norman A. Fogelsong
-------------------------------------
Norman A. Fogelsong, A General Partner
Address: 3000 Sand Hill Road
Building Two, Suite 290
Menlo Park, CA 94025
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
-------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTOR: BRENTWOOD AFFILIATES FUND II, L.P.
By: Brentwood VII Ventures, LLC
Its General Partner
By: /s/ Jeffrey Brody
-------------------------------------
Managing Member
Address: 3000 Sand Hill Road
Building One, Suite 260
Menlo Park, CA 94025-7068
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: MAYFIELD ASSOCIATES FUND III
A California Limited Partnership
MAYFIELD VIII
A California Limited Partnership
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A Delaware Limited Liability Company
Their General Partner
By: /s/ Yogen K. Dalal
-----------------------------------------
Title: Managing Member
Address: 2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
----------------------------------------
S. Steven Singh, President
Address: 6222 185th Avenue
Redmond, WA 98052
INVESTORS: /s/ S. Steven Singh
---------------------------------------------
S. Steven Singh
/s/ Michael W. Hilton
---------------------------------------------
Michael W. Hilton
/s/ Sterling Wilson
---------------------------------------------
Sterling Wilson
/s/ Jon Matsuo
---------------------------------------------
Jon Matsuo
/s/ Rajeev Singh
---------------------------------------------
Raj Singh
/s/ Frederick L. Ingham
---------------------------------------------
Fred Ingham
6222 185th Avenue NE
Redmond, WA 98052
<PAGE> 9
INVESTOR: CAMBRIDGE TECHNOLOGY CAPITAL
FUND I, L.P.
By: Cambridge Technology GPLP, L.P.
By: Cambridge Technology CGP, Inc.
By: _________________________________________
Barry Rosenbaum, Managing Director
Address: 11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
HAMBRECHT & QUIST LLC
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Address: One Bush Street
San Francisco, CA 94104
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
COMPANY: PORTABLE SOFTWARE CORPORATION
A Washington Corporation
By:
----------------------------------------
S. Steven Singh, President
INVESTORS: /s/ Jeffrey Brody
---------------------------------------------
Jeffrey D. Brody
Address: c/o Brentwood Venture Capital
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
/s/ Matthew P. Quilter
---------------------------------------------
Matthew P. Quilter
Address: c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
[SIGNATURE PAGE TO AMENDMENT]
<PAGE> 1
EXHIBIT 10.14
Lease
REDMOND HILLTOP
Between
PORTABLE SOFTWARE CORPORATION
(Tenant)
and
CARRAMERICA REALTY CORPORATION
(Landlord)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. LEASE AGREEMENT 3
2. RENT 3
A. Types of Rent 3
(1) Base Rent 4
(2) Operating Cost Share Rent 4
(3) Tax Share Rent 4
(4) Additional Rent 4
(5) Rent 4
B. Payment of Operating Cost Share Rent and Tax Share Rent 5
(1) Payment of Estimated Operating Cost Share Rent
and Tax Share Rent 5
(2) Correction of Operating Cost Share Rent 5
(3) Correction of Tax Share Rent 5
C. Definitions 6
(1) Included Operating Costs 6
(2) Excluded Operating Costs 6
(3) Taxes 7
(4) Lease Year 8
(5) Fiscal Year 8
D. Computation of Base Rent and Rent Adjustments 9
(1) Prorations 8
(2) Default Interest 8
(3) Rent Adjustments 8
(4) Books and Records 8
(5) Miscellaneous 9
3. PREPARATION AND CONDITION OF PREMISES;
POSSESSION AND SURRENDER OF PREMISES 9
A. Condition OF Premises 9
B. Tenant's Possession 9
C. Maintenance 9
4. PROJECT SERVICES 9
A. Heating and Air Conditioning 10
B. Elevators 10
C. Electricity 10
D. Water 10
E. Janitorial Service 10
F. Interruption of Services 10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5. ALTERATIONS AND REPAIRS 11
A. Landlord's Consent and Conditions 11
B. Damage to Systems 12
C. No Liens 12
D. Ownership of Improvements 12
E. Removal at Termination 13
6. USE OF PREMISES 13
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES 13
8. WAIVER OF CLAWS; INDEMNIFICATION; INSURANCE 14
A. Waiver of Claims 14
B. Indemnification 14
C. Tenant's Insurance 14
D. Insurance Certificates 16
E. Landlord's Insurance 16
9. FIRE AND OTHER CASUALTY 16
A. Termination 16
B. Restoration 16
10. EMINENT DOMAIN 17
11. RIGHTS RESERVED TO LANDLORD 17
A. Name 17
B. Signs 17
C. Window Treatments 17
D. Keys 17
E. Access 17
F. Preparation for Reoccupancy 17
G. Heavy Articles 17
H. Show Premises 17
I. Use of Lockbox 18
J. Repairs and Alterations 18
K. Landlord's Agents 18
L. Building Services 18
M. Other Actions 18
12. TENANT'S DEFAULT 18
A. Rent Default 18
B. Assignment/Sublease or Hazardous
Substances Default 18
C. Other Performance Default 19
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
D. Credit Default 19
E. Vacation or Abandonment Default 19
13. LANDLORD REMEDIES 19
A. Termination of Lease or Possession 19
B. Lease Termination Damages 19
C. Possession Termination Damages 20
D. Landlord's Remedies Cumulative 20
E. WAIVER OF TRIAL BY JURY 20
F. Litigation Costs 20
14. SURRENDER 21
15. HOLDOVER 21
16. SUBORDINATION TO GROUND LEASES AND MORTGAGES 21
A. Subordination 21
B. Termination of Ground Lease or
Foreclosure of Mortgage 21
C. Security Deposit 21
D. Notice and Right to Cure 22
E. Definitions 22
17. ASSIGNMENT AND SUBLEASE 22
A. In General 22
B. Landlord's Consent 22
C. Procedure 23
D. Change of Management or Ownership 23
E. Excess Payments 23
18. CONVEYANCE BY LANDLORD 23
19. ESTOPPEL CERTIFICATE 23
20. SECURITY DEPOSIT 24
A. TIME 24
B. ECONOMIC PERFORMANCE 24
21. FORCE MAJEURE 25
22. NOTICES 25
A. LANDLORD 25
B. TENANT 26
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
23. QUIET POSSESSION 26
24. REAL ESTATE BROKER 26
25. MISCELLANEOUS 26
A. Successors and Assigns 26
B. Date Payments Are Due 26
C. Meaning of "Landlord", "Re-Entry",
"including" and "Affiliate" 26
D. Time of the Essence 27
E. No Option 27
F. Severability 27
G. Governing Law 27
H. No Oral Modification 27
I. Landlord's Right to Cure 27
J. Captions 27
K. Authority 27
L. Landlord's Enforcement of Remedies 27
M. Entire Agreement 27
N. Landlord's Title 27
O. Light and Air Rights 28
P. Singular and Plural 28
Q. No Recording by Tenant 28
R. Exclusivity 28
S. No Construction Against Drafting Party 28
T. Survival 28
U. Rent Not Based on Income 28
V. Building Manager and Service Providers 28
W. Late Charge and Interest on Late Payments 28
X. Parking 29
Y. Signage 29
26. UNRELATED BUSINESS INCOME 29
27. HAZARDOUS SUBSTANCES 29
28. EXCULPATION 29
</TABLE>
APPENDIX A - PLAN OF THE PREMISES
APPENDIX B - RULES AND REGULATIONS
APPENDIX C - TENANT IMPROVEMENT AGREEMENT
APPENDIX D - MORTGAGES CURRENTLY AFFECTING THE PROJECT
APPENDIX E - COMMENCEMENT DATE CONFIRMATION
APPENDIX F - LEGAL DESCRIPTION
ADDENDUM 1 - EXTENSION OPTION
<PAGE> 6
LEASE
THIS LEASE (the "lease") is made as of ____, 1997 between CARRAMERICA
REALTY CORPORATION, a Maryland corporation (the "Landlord") and the Tenant as
named in the Schedule below. The term "Project" means the buildings B and C
(individually the "Building" and collectively the "Buildings") known as "Redmond
Hilltop" and the land (the "Land") located at 6222 and 6244 185th Avenue NE,
Redmond, Washington 98052. The land is legally described on Appendix F, attached
hereto. "Premises" means Building B leased to Tenant described in the Schedule
and outlined on Appendix A.
The following schedule (the "Schedule") is an integral part of this
Lease. Terms defined in this Schedule shall have the same meaning throughout the
Lease.
SCHEDULE
1. TENANT: Portable Software Corporation, a Washington corporation.
2. PREMISES: Building B
3. RENTABLE SQUARE FEET OF THE PREMISES: 43,046 square feet
4. TENANT'S PROPORTIONATE SHARE: (a) 100% (based upon a total of
43,046 rentable square feet in Building B) as to all Operating
Costs relating specifically to Building B, including, without
limitation, HVAC maintenance and repairs, elevator maintenance
and repairs, budding management fee, janitorial services and
supplies, window cleaning, and property insurance; (b) 46.22%
of all Operating Costs relating to the Project, including,
without limitation, landscape costs, parking lot repair and
maintenance, Landlord's liability insurance costs, and Taxes
[provided, however, that should Building B and the land on which
it is located be separately assessed from the remainder of the
Project, Tenant's Proportionate Share of Taxes shall be 100% of
Taxes payable with respect to such separately assessed parcel];
and (c) an amount fairly and equitably apportioned by Landlord,
based on the rentable square feet in the Premises and the total
rentable square feet in the remainder of the buildings in the
Redmond East Business Campus, of Landlord's administration and
overhead costs.
5. SECURITY DEPOSIT: $450,000 Letter of Credit
6. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: Puget Sound
Properties
7. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: CB Commercial Real
Estate Group, Inc.
8. TENANT IMPROVEMENTS, IF ANY: See the Tenant Improvement
Agreement attached hereto as Appendix C.
9. COMMENCEMENT DATE: On Tenant's acceptance of the premises
substantially complete (estimated 12/31/97 or 1/31/98), but if
the Premises are subject to new construction pursuant to
Appendix C, then on the Completion Date, as defined therein, if
it is later; Landlord and Tenant shall execute a Commencement
Date
2
<PAGE> 7
Confirmation substantially in the form of Appendix E promptly
following final completion of all improvements.
10. TERMINATION DATE/TERM; Sixty (60) months after the Commencement
Date, or if the Commencement Date is not the first day of a
month, then after the first day of the following month.
11. GUARANTOR: None
12. BASE RENT:
<TABLE>
<CAPTION>
Annual Monthly Per Sq. Ft.
Period Base Rent Base Rent Rent
------ --------- --------- ----
<S> <C> <C> <C>
Months 1 through 5 $301,322 $25,111 $ 7.00 nnn/rsf
Months 6 through 36 $639,233 $53,269 $14.85 nnn/rsf
Months 37 through 60 $703,802 $58,650 $16.35 nnn/rsf
</TABLE>
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.
2. RENT.
A. Types of Rent. Tenant shall pay the following Rent in the form of a
check to Landlord at the following address:
CARRAMERICA REALTY CORPORATION
WILLOW CREEK CORPORATE CENTER
P.O. Box ___________________[to be inserted when determined]
ATLANTA, GA 30384-0566
or by wire transfer as follows:
Account Name: NationsBank, N.A. (South)
Account Number:
ABA Number:
Bank Name: NationsBank of Georgia
Notification:
Telephone: (202)
or in such other manner as Landlord may notify Tenant in writing.
3
<PAGE> 8
(1) Base Rent in monthly installments in advance, the first monthly
installment payable concurrently with the execution of this Lease and
thereafter on or before the first day of each month of the Term in the amount
set forth on the Schedule. Notwithstanding the foregoing, Landlord shall provide
Tenant with a "space pocket" of 15,000 rentable square feet for a period of 12
months, or until the space is used or occupied for any reason, whichever comes
first. During this time period, Tenant shall receive a base rent credit equal to
15,000 times the then current rental rate per square foot, divided by twelve.
Accordingly, Landlord and Tenant agree that until the first anniversary of the
Commencement Date, the Base Rent for months one through five (1 - 5) of the
Lease Term Tenant's monthly Base Rent payment shall be $16,361 and months six
through twelve (6 - 12) the monthly Base Rent payment shall be $34,707 plus, in
either case, an amount equal to the product arrived at by multiplying the
applicable Base Rent per square foot (as set forth in item 12 of the schedule)
by the rentable area of that portion (if any) of the 15,000 square foot space
pocket actually occupied by Tenant. Thereafter, Tenant's Base Rent obligation
shall be as set forth in the Schedule.
However, all Operating Cost Share Rent, Tax Share Rent and Additional
Rent shall be based on 43,046 rentable square feet from and after the
commencement of the Lease Term.
(2) Operating Cost Share Rent in an amount equal to the Tenant's
Proportionate Share of the Operating Costs for the applicable Fiscal Year (as
defined in Paragraph E(5) below) of the Lease, paid monthly in advance in an
estimated amount. Definitions of Operating Costs and Tenant's Proportionate
Share, and the method for billing and payment of Operating Cost Share Rent are
set forth in Sections 2B, 2C and 2D.
(3) Tax Share Rent in an amount equal to the Tenant's Proportionate
Share of the Taxes for the applicable Fiscal Year of this Lease, paid monthly
in advance in an estimated amount. A definition of Taxes and the method for
billing and payment of Tax Share Rent are set forth in Sections 2B, 2C and 2D.
(4) Additional Rent in the amount of all costs, expenses, liabilities,
and amounts which Tenant is required to pay under this Lease, excluding Base
Rent, Operating Cost Share Rent, and Tax Share Rent, but including any interest
for late payment of any item of Rent.
(5) Rent as used in this Lease means Base Rent, Operating Cost Share
Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay Rent is an
independent covenant, with no right of setoff, deduction or counterclaim of any
kind; provided, however, that Tenant shall be permitted to offset from Rent the
amount of any final monetary judgment Tenant obtains against Landlord.
4
<PAGE> 9
B. Payment of Operating Cost Share Rent and Tax Share Rent.
(1) Payment of Estimated Operating Cost Share Rent and Tax Share Rent.
Landlord shall estimate the Operating Costs and Taxes of the Project by April 1
of each Fiscal Year, or as soon as reasonably possible thereafter. Landlord may
revise these estimates whenever it obtains more accurate information (but no
more often than quarterly), such as the final real estate tax assessment or tax
rate for the Project.
Within ten (10) days after receiving the original or revised estimate
from Landlord, Tenant shall pay Landlord (or, if the resulting difference is
negative and exceeds Tenant's obligation for its Proportionate Share applicable
to the following sixty days, Landlord shall reimburse the same to Tenant)
one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate,
multiplied by the number of months that have elapsed in the applicable fiscal
year to the date of such payment including the current month, minus payments
previously made by Tenant for the months elapsed. On the first day of each month
thereafter, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
Proportionate Share of this estimate, until a new estimate becomes applicable.
(2) Correction of Operating Cost Share Rent. Landlord shall deliver to
Tenant a report for the previous Fiscal Year (the "Operating Cost Report") by
April 1 of each year, or as soon as reasonably possible thereafter, setting
forth (a) the actual Operating Costs incurred, (b) the amount of Operating Cost
Share Rent due from Tenant, and (c) the amount of Operating Cost Share Rent paid
by Tenant. Within twenty (20) days after such delivery, Tenant shall pay to
Landlord the amount due minus the amount paid. If the amount paid exceeds the
amount due, Landlord shall apply the excess to Tenant's payments of Operating
Cost Share Rent next coming due; provided, however, that if the amount paid
exceeds Tenant's payments of Operating Cost Share Rent coming due for the next
60 days, the difference shall be refunded to Tenant.
(3) Correction of Tax Share Rent. Landlord shall deliver to Tenant a
report for the previous fiscal year (the "Tax Report") by April 1 of each year,
or as soon as reasonably possible thereafter, setting forth (a) the actual
Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the amount of
Tax Share Rent paid by Tenant. Within twenty (20) days after such delivery,,
Tenant shall pay to Landlord the amount due from Tenant minus the amount paid by
Tenant. If the amount paid exceeds the amount due, Landlord shall apply any
excess as a credit against Tenant's payments of Tax Share Rent next coming due;
provided, however, that if the amount paid exceeds Tenant's payments for Tax
Share Rent coming due for the next 60 days, the difference shall be refunded to
Tenant.
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C. Definitions
(1) included Operating costs. "Operating Costs" means any expenses,
costs and disbursements of any kind other than Taxes, paid or incurred by
Landlord in connection with the management maintenance, operation, insurance,
repair and other related activities in connection with the Premises and any
part of the Project and of the personal property, fixtures, machinery,
equipment, systems and apparatus used in connection therewith, including the
cost of providing those services required to be furnished by Landlord under this
Lease. Operating Costs shall also include the costs of any capital improvements
which are intended to reduce Operating Costs or improve safety, and those made
to keep the Project in compliance with changes in governmental requirements
applicable from time to time (collectively, "Included Capital Items"); provided,
that the costs of any Included Capital Item shall be amortized by Landlord,
together with an amount equal to interest at nine percent (9%) per annum, over
the estimated useful life of such item and such amortized costs are only
included in Operating Costs for that portion of the useful life of the Included
Capital Item which falls within the Term.
(2) Excluded Operating Costs. Operating Costs shall not include:
(a) costs of alterations of tenant premises;
(b) costs of capital improvements other than Included Capital Items;
(c) interest and principal payments on mortgages or any other debt
costs, or rental payments on any ground lease of the Project;
(d) real estate brokers' leasing commissions;
(e) legal fees, space planner fees and advertising expenses incurred
with regard to leasing the Building or portions thereof;
(f) any cost or expenditure for which Landlord is reimbursed, by
insurance proceeds or otherwise, except by Operating Cost Share
Rent;
(g) the cost of any service furnished to any office tenant of the
Project which Landlord does not make available to Tenant;
(h) depreciation (except on any Included Capital Items);
(i) franchise or income taxes imposed upon Landlord;
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(j) costs of correcting defects in construction of the Building (as
opposed to the cost of normal repair, maintenance and
replacement expected with the construction materials and
equipment installed in the Building in light of their
specifications);
(k) legal and auditing fees which are for the benefit of Landlord
such as collecting delinquent rents, preparing tax returns and
other financial statements, and audit other than those incurred
in connection with the preparation of reports required pursuant
to Section 2B above;
(l) the wages of any employee for services not related directly to
the management, maintenance, operation and repair of the
Building; and
(m) fines, penalties and interest
(3) Taxes. "Taxes" means any and all taxes, assessments and charges of
any kind, general or special, ordinary or extraordinary, levied against the
Project (subject to the terms of paragraph 4 on page 2 hereof), which Landlord
shall pay or become obligated to pay in connection with the ownership, leasing,
renting, management, use, occupancy, control or operation of the Project or of
the personal property, fixtures, machinery, equipment, systems and apparatus
used in connection therewith. Taxes shall include real estate taxes, personal
property taxes, sewer rents, water rents, special or general assessments,
transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or
the interest of Landlord under this Lease (the "Rent Tax"). Taxes shall also
include all fees and other costs and expenses (a) paid by Landlord in reviewing
any tax, and (b) in seeking a refund or reduction of any Taxes, provided,
however, that as to amounts incurred by Landlord in seeking a refund or
reduction of Taxes, Tenant's obligation shall not exceed the amount by which
Taxes paid by Tenant are reduced by such efforts. Landlord shall contest Taxes
in accordance with reasonable and prudent property management practices.
For any year, the amount to be included in Taxes (a) from taxes or
assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year,
except that general real estate taxes shall be included in Taxes for any Fiscal
Year in the amount payable during such Fiscal Year. Any refund or other
adjustment to any Taxes by the taxing authority, shall apply during the year
with respect to which the adjustment is made.
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Taxes shall not include any net income, capital, stock, succession,
transfer, franchise, gift, estate or inheritance tax, except to the extent that
such tax shall be imposed in lieu of any portion of Taxes.
(4) Lease Year. "Lease Year" means each consecutive twelve-month period
beginning with the Commencement Date, except that if the Commencement Date is
not the first day of a calendar month, then the first Lease Year shall be the
period from the Commencement Date through the final day of the twelve months
after the first day of the following month, and each subsequent Lease Year shall
be the twelve months following the prior Lease Year.
(5) Fiscal Year. "Fiscal Year" means the calendar year, except that the
first Fiscal Year and the last Fiscal Year of the Term may be a partial calendar
year.
D. Computation of Base Rent and Rent Adjustments.
(1) Prorations. If this Lease begins on a day other than the first day
of a month, the Base Rent, Operating Cost Share Rent and Tax Share Rent shall be
prorated for such partial month based on the actual number of days in such
month. If this Lease begins on a day other than the first day, or ends on a day
other than the last day, of the fiscal year, Operating Cost Share Rent and Tax
Share Rent shall be prorated for the applicable fiscal year.
(2) Default Interest. Any sum due from Tenant to Landlord not paid when
due shall bear interest from the date due until paid at fifteen percent (15%)
per annum.
(3) Rent Adjustments. The square footage of the Premises and the
Building set forth in the Schedule are conclusively deemed to be the actual
square footage thereof, without regard to any subsequent remeasurement of the
Premises . If any Operating Cost paid in one Fiscal Year relates to more than
one Fiscal Year, Landlord may proportionately allocate such Operating Cost among
the related Fiscal Years.
(4) Books and Records. Landlord shall maintain books and records
reflecting the Operating Costs and Taxes in accordance with generally accepted
accounting principles and management practices. Tenant and its certified public
accountant shall have the right to inspect Landlord's records at Landlord's
office upon at least seventy-two (72) hours' prior notice during normal business
hours during the ninety (90) days following the respective delivery of the
Operating Cost Report or the Tax Report. The results of any such inspection
shall be kept strictly confidential by Tenant and its agents, and Tenant and its
certified public accountant must agree, in their contract for such services, to
such confidentiality restrictions and shall specifically agree that the results
shall not be made available to any other tenant of the Building. Unless Tenant
sends to
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Landlord any written exception to either such report within said ninety
(90) day period, such report shall be deemed final and accepted by
Tenant. Tenant shall pay the amount shown on the Operating Cost Report
and the Tax Report in the manner prescribed in this Lease, whether or
not Tenant takes any such written exception, without any prejudice to
such exception. If Tenant makes a timely exception, Landlord and Tenant
shall cause an independent certified public accountant to issue a final
and conclusive resolution of Tenant's exception. Tenant shall pay the
cost of such certification unless Landlord's original determination of
annual Operating Costs or Taxes overstated the amounts thereof by more
than five percent (5 %).
(5) Miscellaneous. So long as Tenant is in default of any
obligation under this Lease, Tenant shall not be entitled to any refund
of any amount from Landlord. If this Lease is terminated for any reason
prior to the annual determination of Operating Cost Share Rent or Tax
Share Rent, either party shall pay the full amount due to the other
within fifteen (15) days after Landlord's notice to Tenant of the amount
when it is determined. Landlord may commingle any payments made with
respect to Operating Cost Share Rent or Tax Share Rent, without payment
of interest.
3. PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF
PREMISES.
A. Condition of Premises Landlord shall cause the Premises to be
completed in accordance with the Tenant Improvement Agreement attached as
Appendix C.
B. Tenant's Possession. Tenant's taking possession of any portion of the
Premises shall be conclusive evidence that the Premises were in good order,
repair and condition. If Landlord authorizes Tenant to take possession of any
part of the Premises prior to the Commencement Date for purposes of doing
business, all terms of this Lease shall apply to such pre-Term possession,
including Base Rent at the rate set forth for the First Lease Year in the
Schedule prorated for any partial month.
C. Maintenance. Throughout the Term, Tenant shall maintain the Premises
in their condition as of the Completion Date, loss or damage caused by the
elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises to Landlord in broom-clean condition. To the extent Tenant fails to
perform either obligation, Landlord may, but need not, restore the Premises to
such condition and Tenant shall pay the cost thereof.
4. PROJECT SERVICES.
Landlord shall furnish services as follows:
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A. Heating and Air Conditioning. Landlord shall furnish heating and air
conditioning to provide a comfortable temperature for normal business
operations, except to the extent Tenant installs unusual equipment which
adversely affects the temperature maintained by the air conditioning system. If
Tenant installs such equipment, Landlord may install supplementary air
conditioning units in the Premises, and Tenant shall pay to Landlord upon demand
as Additional Rent the cost of installation, operation and maintenance thereof.
Landlord shall furnish heating and air conditioning after business hours, as
required by Tenant, on a thermostatically controlled basis.
B. Elevators. Landlord shall provide passenger elevator at all times.
C. Electricity. Landlord shall provide sufficient electricity to operate
normal office lighting and equipment. Tenant shall not install or operate in the
Premises any electrically operated equipment or other machinery other than
business machines and equipment normally employed for Tenant's permitted uses
(which do not require high electricity consumption for operation), without
obtaining the prior written consent of Landlord.
D. Water. Landlord shall furnish hot and cold tap water for drinking,
shower and toilet purposes. Tenant shall pay Landlord for water furnished for
any other purpose as Additional Rent at Landlord's actual cost. Tenant shall not
permit water to be wasted.
E. Janitorial Service. Landlord shall furnish janitorial service as
generally provided to other tenants in the Building.
F. Interruption of Services. If any of the Building equipment or
machinery ceases to function properly for any cause Landlord shall use
reasonable diligence to repair the same promptly. Landlord's inability to
furnish, to any extent, the Project services set forth in this Section 4, or any
cessation thereof in either case resulting from any causes beyond Landlord's
reasonable control, including any entry for repairs pursuant to this Lease, and
any renovation, redecoration or rehabilitation of any area of the Building shall
not render Landlord liable for damages to either person or property or for
interruption or loss to Tenant's business, nor be construed as an eviction of
Tenant, nor work an abatement of any portion of rent, nor relieve Tenant from
fulfillment of any covenant or agreement hereof. However, in the event that an
interruption of the Project services set forth in this Section 4 causes the
Premises to be untenantable for a period of at least three (3) consecutive
business days, monthly Rent shall be abated proportionately.
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5. ALTERATIONS AND REPAIRS.
A. Landlord's Consent and Conditions
Tenant shall not make any improvements or alterations to the Premises
(the "Work") which term shall not include the Initial Improvements to which
Appendix C refers) without in each instance submitting plans and specifications,
for the Work to Landlord and obtaining Landlord's prior written consent. Tenant
shall pay Landlord's standard charge ($250) for review of the plans and all
other items submitted by Tenant. Landlord will be deemed to be acting reasonably
in withholding its consent for any Work which (a) impacts the base structural
components or systems of the Building, (b) impacts any other tenant's premises,
or (c) is visible from outside the Premises.
Tenant shall reimburse Landlord for actual costs incurred for review of
the plans and all other items submitted by Tenant. Tenant shall pay for the cost
of all Work. All work shall become the property of Landlord upon its
installation, except for Tenant's trade fixtures and for items which Landlord
requires Tenant to remove at Tenant's cost at the termination of the Lease
pursuant to Section 5D.
The following requirements shall apply to all Work:
(1) Prior to commencement, Tenant shall furnish to Landlord
building permits, certificates of insurance satisfactory to Landlord,
and, at Landlord's request, reasonable security for payment of all
costs.
(2) Tenant shall perform all Work so as to maintain peace and
harmony among other contractors serving the Project and shall avoid
interference with other work to be performed or services to be rendered
in the Project.
(3) The Work shall be, performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials
in the Building, and shall comply with all insurance requirements and
all applicable governmental laws, ordinances and regulations
("Governmental Requirements").
(4) Tenant shall perform all Work so as to minimize or prevent
disruption to other tenants, and Tenant shall comply with all reasonable
requests of Landlord in response to complaints from other tenants.
(5) Tenant shall perform all Work in compliance with Landlord's
"Policies, Rules and Procedures for Construction Projects" in effect at
the time the Work is performed.
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(6) Tenant shall permit Landlord to supervise all Work.
(7) Upon completion, Tenant shall furnish Landlord with
contractor's affidavits and full and final statutory waivers of liens,
as-built plans and specifications, and receipted bills covering all
labor and materials, and all other close-out documentation required in
Landlord's "Policies, Rules and Procedures for Construction Projects".
B. Damage to Systems. If any part of the mechanical, electrical,
structural, or other systems in the Premises shall be damaged, Tenant shall
promptly notify Landlord, and Landlord shall, repair such damage. Landlord may
also at any reasonable time make any repairs or alterations which Landlord deems
necessary for the safety or protection of the Project, or which Landlord is
required to make by any court or pursuant to any Governmental Requirement.
Tenant shall at its expense make all other repairs necessary to keep the
Premises, and Tenant's fixtures and personal property, in good order, condition
and repair; to the extent Tenant fails to do so, Landlord may make such repairs
itself. The cost of any repairs made by Landlord on account of Tenant's default,
or on account of the mis-use or neglect by Tenant or its invitees, contractors
or agents anywhere in the Project, shall become Additional Rent payable by
Tenant on demand.
C. No Liens. Tenant has no authority to cause or permit any lien or
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only. If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days thereafter either
discharge or contest the lien or claim. If Tenant contests the lien or claim,
then Tenant shall (i) within such ten (10) day period, provide Landlord adequate
security for the lien or claim, (ii) contest the lien or claim in good faith by
appropriate proceedings that operate to stay its enforcement, and (iii) pay
promptly any final adverse judgment entered in any such proceeding. If Tenant
does not comply with these requirements, Landlord may discharge the lien or
claim, and the amount paid, as well as attorney's few and other expenses
incurred by Landlord, shall become Additional Rent payable by Tenant on demand.
D. Ownership of Improvements. All Work as defined in this Section 5,
partitions, hardware, equipment, machinery and all other improvements and all
fixtures except trade fixtures, constructed in the Premises by either Landlord
or Tenant, (i) shall become Landlord's property upon installation without
compensation to Tenant, unless Landlord consents otherwise in writing, and (ii)
shall at Landlord's option either (a) be surrendered to Landlord with the
Premises at the termination of the Lease or of Tenant's right to possession, or
(b) be removed in accordance with Subsection 5E below (but only if Landlord at
the time it gives its consent to the performance of such construction expressly
asserts in writing the right to require such removal).
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E. Removal at Termination. Upon the termination of this Lease or
Tenant's right of possession Tenant shall remove from the Project its trade
fixtures, furniture, moveable equipment and other personal property, and any
improvements which Landlord elects shall be removed by Tenant pursuant to
Section 5D. If Tenant does not timely remove such property, then Tenant shall be
conclusively presumed to have, at Landlord's election (i) conveyed such property
to Landlord without compensation or (ii) abandoned such property, and Landlord
may dispose of or store any part thereof in any manner at Tenant's sole cost,
without waiving Landlord's right to claim from Tenant all expenses arising out
of Tenant's failure to remove the property, and without liability to Tenant or
any other person. Landlord shall have no duty to be a bailee of any such
personal property. If Landlord elects abandonment, Tenant shall pay to Landlord,
upon demand, any expenses incurred for disposition.
6. USE OF PREMISES. Tenant shall use the Premises only for software
development, software testing and software duplication, and other general office
purposes. Tenant shall not allow any use of the Premises which will negatively
affect the cost of coverage of Landlord's insurance on the Project. Tenant shall
not allow any inflammable or explosive liquids or materials to be kept on the
Premises. Tenant shall not allow any use of the Premises which would cause the
value or utility of any part of the Premises to diminish or would unreasonably
interfere with any other Tenant or with the operation of the Project by
Landlord. Tenant shall not permit any nuisance or waste upon the Premises, or
allow any offensive noise or odor in or around the Premises.
If any governmental authority shall deem the Premises to be a "place of
public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Premises under
such laws.
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply
with all Governmental Requirements applying to its use of the Premises. Tenant
shall also comply with all reasonable rules established for the Project from
time to time by Landlord. The present rules and regulations are contained in
Appendix B. Failure by another tenant to comply with the rules or failure by
Landlord to enforce them shall not relieve Tenant of its obligation to comply
with the rules or make Landlord responsible to Tenant in any way. Landlord
shall use reasonable efforts to apply the rules and regulations uniformly with
respect to Tenant and tenants in the Building under leases containing rules and
regulations similar to this Lease. In the event of alterations and repairs
performed by Tenant, Tenant shall comply with the provisions of Section 5 of
this Lease and also Landlord's "Policies, Rules and Regulations for Construction
Projects".
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8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
A. Waiver of Claims, To the extent permitted by law, Tenant waives any
claims it may have against Landlord or its officers, directors, employees or
agents for business interruption or damage to property sustained by Tenant as
the result of any act or omission of Landlord.
To the extent permitted by law, Landlord waives any claims it may have
against Tenant or its officers, directors, employees or agents for loss of rents
or damage to property sustained by Landlord as the result of any act or omission
of Tenant.
B. Indemnification. Tenant shall indemnify, defend and hold harmless
Landlord and its officers, directors, employees and agents against any claim by
any third party for injury to any person or damage to or loss of any property
occurring in the Project and arising from the use of the Premises or from any
other act or omission or negligence of Tenant or any of Tenant's employees or
agents. Tenant's obligations under this section shall survive the termination of
this Lease.
Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees and agents against any claim by any third party
for injury to any person or damage to or loss of property and arising from any
act or omission or negligence of Landlord or any of Landlord's employees or
agents. Landlord's obligations under this section shall survive the termination
of this Lease.
AS BETWEEN LANDLORD AND TENANT, TENANT HEREBY WAIVES ITS IMMUNITY UNDER
THE INDUSTRIAL INSURANCE ACT (RCW TITLE 51) AND/OR THE LONGSHOREMAN'S AND
HARBORWORKER'S ACT AND/OR ANY EQUIVALENT ACTS AND TENANT EXPRESSLY AGREES TO
INDEMNIFY DEFEND, WITH COUNSEL REASONABLY SATISFACTORY TO LANDLORD, AND HOLD
LANDLORD HARMLESS FROM POTENTIAL LIABILITY FOR ACTIONS BROUGHT AGAINST LANDLORD
BY TENANT'S EMPLOYEES. THIS WAIVER AND INDEMNITY HAS BEEN SPECIFICALLY
NEGOTIATED BY THE PARTIES TO THIS LEASE AND SHALL SURVIVE TERMINATION OF THIS
LEASE. TENANT HAS HAD THE OPPORTUNITY TO, AND HAS BEEN ENCOURAGED, TO CONSULT
WITH INDEPENDENT COUNSEL REGARDING THIS WAIVER.
C. Tenant's Insurance. Tenant shall maintain insurance as follows, with
such other terms, coverages and insurers, as Landlord shall reasonably require
from time to time:
(1) Commercial General Liability Insurance, with (a) Contractual
Liability including the indemnification provisions contained in this
Lease, (b) a severability of interest endorsement, (c) limits of not
less than Two Million Dollars ($2,000,000)
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combined single limit per occurrence and not less than Two Million
Dollars ($2,000,000) in the aggregate for bodily injury, sickness or
death, and property damage, and umbrella coverage of not less than Five
Million Dollars ($5,000,000).
(2) Property Insurance against "All Risks" of physical loss
covering the replacement cost of all improvements, fixtures and personal
property owned by Tenant and located on the Premises. Tenant waives all
rights of subrogation, and Tenant's property insurance shall include a
waiver of subrogation in favor of Landlord.
(3) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease-Policy Limit $500,000
Disease-Each Employee $500,000
Tenant's insurance shall be primary and not contributory to that carried
by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's building
manager or agent and ground lessor shall be named as additional insureds as
respects to insurance required of the Tenant in Section 8C(l). The company or
companies writing any insurance which Tenant is required to maintain under this
Lease, as well as the form of such insurance, shall at all times be subject to
Landlord's approval, and any such company shall be licensed to do business in
the state in which the Building is located. Such insurance companies shall have
a A.M. Best rating of A VI or better.
Tenant shall cause any contractor of Tenant performing work on the
Premises to maintain insurance as follows, with such other terms, coverages and
insurers, as Landlord shall reasonably require from time to time:
(1) Commercial General Liability Insurance, including
contractor's liability coverage, contractual liability coverage,
completed operations coverage, broad form property damage endorsement,
and contractor's protective liability coverage, to afford protection
with limits, for each occurrence, of not less than One Million Dollars
($1,000,000) with respect to personal injury, death or property damage.
(2) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease-Policy Limit $500,000
Disease--Each Employee $500,O00
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Tenant's contractor's insurance shall be primary and not contributory to
that carried by Tenant, Landlord, their agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.
D. Insurance Certificates. Tenant shall deliver to Landlord certificates
evidencing all required insurance no later than five (5) days prior to the
Commencement Date and each renewal date. Each certificate will provide for
thirty (30) days prior written notice of cancellation to Landlord and Tenant.
E. Landlord's Insurance. Landlord shall maintain "All-Risk" property
insurance at replacement cost, including loss of rents, on the Premises, and
Commercial General Liability insurance policies covering the common areas of
the Project, each with such terms, coverages and conditions as are normally
carried by reasonably prudent owners of properties similar to the Project. With
respect to property insurance, Landlord and Tenant mutually waive all rights of
subrogation, and the respective "All-Risk" coverage property insurance policies
carried by Landlord and Tenant shall contain enforceable waiver of subrogation
endorsements.
9. FIRE AND OTHER CASUALTY.
A. Termination. If a fire or other casualty causes substantial damage to
the Premises, Landlord shall engage a registered architect to certify within one
(1) month of the casualty to both Landlord and Tenant the amount of time needed
to restore the Premises to tenantability, using standard working methods. If the
time needed exceeds nine (9) months from the beginning of the restoration, or
two (2) months therefrom if the restoration would begin during the last twelve
(12) months of the Lease, then either Landlord or Tenant may terminate this
lease by notice to the other party within ten (10) days after the notifying
party's receipt of the architect's certificate. The termination shall be
effective thirty (30) days from the date of the notice and Rent shall be paid by
Tenant to that date, with an abatement for any portion of the space which has
been untenantable after the casualty.
B. Restoration. If a casualty causes damage to the Premises but this
Lease is not terminated for any reason, then subject to the rights of any
mortgagees or ground lessors, Landlord shall obtain the applicable insurance
proceeds and diligently restore the Premises subject to current Governmental
Requirements. Tenant shall replace its damaged improvements, personal property
and fixtures. Rent shall be abated on a per diem basis during the restoration
for any portion of the Premises which is untenantable, except to the extent that
Tenant's negligence caused the casualty; provided, however, that Rent shall in
any event abate to the extent covered by Landlord's rental interruption
insurance.
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10. EMINENT DOMAIN. If a part of the Project is taken by eminent domain
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. Rent
shall abate from the date of the taking in proportion to any part of the
Premises taken. The entire award for a taking of any kind shall be paid to
Landlord, and Tenant shall have no right to share in the award, provided,
however, that Tenant may recover for loss of its trade fixtures on account of
any such taking. All obligations accrued to the date of the taking shall be
performed by each party.
11. RIGHTS RESERVED TO LANDLORD.
Landlord may exercise any of the following rights respecting the
operation of the Project without liability to the Tenant of any kind:
A. Name. To change the name or street address of the Building or the
suite number(s) of the Premises, following sixty (60) days' notice to Tenant.
B. Signs. To install and maintain any signs on the exterior and in the
interior of the Building, and to approve at its sole discretion, prior to
installation, any of Tenant's signs in the Premises visible from the common
areas or the exterior of the Building.
C. Window Treatments. To approve, at its discretion, prior to
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.
D. Keys. To retain and use at any time passkeys to enter the Premises or
any door within the Premises. Tenant shall not alter or add any lock or bolt.
E. Access. To have access to inspect the Premises at all reasonable
times upon 24 hours' notice (except in the case of an emergency), and to perform
its obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.
F. Preparation for Reoccupancy. To decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy at any time after Tenant abandons
the Premises, without relieving Tenant of any obligation to pay Rent.
G. Heavy Articles. To approve the weight, size, placement and time and
manner of movement within the Building of any safe, central filing system or
other heavy article of Tenant's property. Tenant shall move its property
entirely at its own risk.
H. Show Premises. To show the Premises to prospective purchasers,
tenants, brokers, lenders, investors, rating agencies or others at any
reasonable time, provided that
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Landlord gives prior notice to Tenant and does not materially interfere with
Tenant's use of the Premises.
I. Use of Lockbox. To designate a lockbox collection agent for
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment. However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant.
J. Repairs and Alterations. Upon 24 hours' notice (except in the case of
an emergency), to make repairs or alterations to the Project and in doing so
transport any required material through the Premises, close entrances, doors,
corridors, elevators and other facilities in the Project, open any ceiling in
the Premises, or temporarily suspend services or use of common areas in the
Building. Landlord may perform any such repairs or alterations during ordinary
business hours only if it can do so without materially interfering with the
conduct of Tenant's business. Landlord may do or permit any work on any nearby
building, land, street, alley or way.
K. Landlord's Agents. If Tenant is in default under this Lease,
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.
L. Building Services. To install, use and maintain through the Premises,
pipes, conduits, wires and ducts serving the Building, provided that such
installation, use and maintenance does not unreasonably interfere with Tenant's
use of the Premises.
M. Other Actions. To take any other action which Landlord deems
reasonable in connection with the operation, maintenance or preservation of the
Building.
12. TENANT'S DEFAULT.
Any of the following shall constitute a default by Tenant:
A. Rent Default. Tenant fails to pay any Rent within five (5) days
following written notice from Landlord;
B. Assignment/Sublease or Hazardous Substances Default. Tenant defaults
in its obligations under Section 17 Assignment and Sublease or Section 28
Hazardous Substances;
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C. Other Performance Default. Tenant fails to perform any other
obligation to Landlord under this Lease, and, in the case of only the first two
(2) such failures during the Term of this Lease, this failure continues for ten
(10) days after written notice from Landlord, except that if Tenant begins to
cure its failure within the ten (10) day period but cannot reasonably complete
its cure within such period, then, so long as Tenant continues to diligently
attempt to cure its failure, the ten (10) day period shall be extended to sixty
(60) days, or such lesser period as is reasonably necessary to complete the
cure;
D. Credit Default. One of the following credit defaults occurs:
(1) Tenant commences any proceeding under any law relating to
bankruptcy, insolvency, reorganization or relief of debts, or seeks
appointment of a receiver, trustee, custodian or other similar official
for the Tenant or for any substantial part of its property, or any such
proceeding is commenced against Tenant and either remains undismissed
for a period of sixty days or results in the entry of an order for
relief against Tenant which is not fully stayed within fourteen days
after entry;
(2) Tenant becomes insolvent or bankrupt, does not generally pay
its debts as they become due, or admits in writing its inability to pay
its debts, or makes a general assignment for the benefit of creditors;
(3) Any third party obtains a levy or attachment under process
of law against Tenant's leasehold interest.
E. Vacation or Abandonment Default. Tenant vacates or abandons the
Premises.
13. LANDLORD REMEDIES.
A. Termination of Lease or Possession. If Tenant defaults, Landlord may
elect by notice to Tenant either to terminate this Lease or to terminate
Tenant's possession of the Premises without terminating this Lease. In either
case, Tenant shall immediately vacate the Premises and deliver possession to
Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant.
B. Lease Termination Damages. If Landlord terminates the Lease due to
Tenant's default, Tenant shall pay to Landlord all Rent due on or before the
date of termination, plus Landlord's reasonable estimate of the aggregate Rent
that would have been payable from the date of termination through the
Termination Date, reduced by the rental value of the Premises calculated as of
the date of termination for the same period, taking into account reletting
expenses and market concessions, both discounted to present value at the
discount rate of the Federal Reserve Bank of San Francisco plus two percent
(2%). If Landlord shall relet any part
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of the Premises for any part of such period before such present value amount
shall have been paid by Tenant or finally determined by a court, than the amount
of Rent payable pursuant to such reletting (taking into account any concessions)
shall be deemed to be the reasonable rental value for that portion of the
Premises relet during the period of the reletting.
C. Possession Termination Damages. If Landlord terminates Tenant's
right to possession without terminating the Lease and Landlord takes possession
of the Premises itself, Landlord may relet any part of the Premises for such
Rent, for such time, and upon such terms as Landlord in its sole discretion
shall determine, without any obligation to do so prior to renting other vacant
areas in the Building. Any proceeds from reletting the Premises shall first be
applied to the expenses of reletting, including redecoration, repair,
alteration, advertising, brokerage, legal, and other reasonably necessary
expenses. If the reletting proceeds after payment of expenses are insufficient
to pay the full amount of Rent under this Lease, Tenant shall pay such
deficiency to Landlord monthly upon demand as it becomes due. Any excess
proceeds shall be retained by Landlord.
D. Landlords's Remedies Cumulative. All of Landlord's remedies under
this Lease shall be in addition to all other remedies Landlord may have at law
or in equity. Waiver by Landlord of any breach of any obligation by Tenant shall
be effective only if it is in writing, and shall not be deemed a waiver of any
other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such other
actions for Tenant's account as reasonably may be required to cure or mitigate
any default by Tenant. Tenant shall immediately reimburse Landlord for any such
advance, and such sums shall bear interest at the default interest rate until
paid.
E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT
OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE. EACH
PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS LEASE IN
A FEDERAL OR STATE COURT LOCATED IN KING COUNTY, WASHINGTON, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.
F. Litigation Costs. In the event of a dispute arising under this Lease,
the prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and other costs, whether or not suit is filed.
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14. SURRENDER. Upon termination of this Lease or Tenant's right to
possession, Tenant shall return the Premises to Landlord in good order and
condition, ordinary wear and casualty damage excepted. Subject to the limitation
set forth in Section 5D, if Landlord requires Tenant to remove any alterations,
then Tenant shall remove the alterations in a good and workmanlike manner and
restore the Premises to its condition prior to their installation.
15. HOLDOVER. If Tenant retains possession of any part of the Premises
after the Term, Tenant shall become a month-to-month tenant for the entire
Premises upon all of the terms of this Lease as might be applicable to such
month-to-month tenancy, except that Tenant shall pay all of Base Rent, Operating
Cost Share Rent and Tax Share Rent at 150% of the rate in effect immediately
prior to such holdover, computed on a monthly basis for each full or partial
month Tenant remains in possession. Tenant shall also pay Landlord all of
Landlord's direct and consequential damages. No acceptance of Rent or other
payments by Landlord under these holdover provisions shall operate as a waiver
of Landlord's right to regain possession or any other of Landlord's remedies.
16. SUBORDINATION TO GROUP LEASES AND MORTGAGES.
A. Subordination. This Lease shall be subordinate to any present or
future ground lease or mortgage respecting the Project, and any amendments to
such ground lease or mortgage, at the election of the ground lessor or mortgagee
as the case may be, effected by notice to Tenant in the manner provided in this
Lease, provided that such lessor or mortgagor shall agree not to disturb
Tenant's possession of the Premises under the terms and conditions set forth in
this Lease in the event of termination of such ground lease or foreclosure of
such mortgage. The subordination shall be effective upon such notice, but at the
request of Landlord or ground lessor or mortgagee, Tenant shall within ten (10)
days of the request, execute and deliver to the requesting party any reasonable
documents provided to evidence the subordination.
B. Termination of Ground Lease or Foreclosure of Mortgage. If any ground
lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given
and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project. At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any document furnished by the requesting party to evidence
Tenant's agreement to attorn.
C. Security Deposit. Any ground lessor or mortgagee shall be responsible
for the return of any security deposit by Tenant only to the extent the security
deposit is received by such ground lessor or mortgagee.
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D. Notice and Right to Cure. The Project is subject to any ground law
and mortgage identified with name and address of ground lessor or mortgagee in
Appendix D to this Lease (as the same may be amended from time to time by
written notice to Tenant). Tenant agrees to send by registered or certified mail
to any ground lessor or mortgagee identified either in such Appendix or in any
later notice from Landlord to Tenant a copy of any notice of default sent by
Tenant to Landlord. If Landlord fails to cure such default within the required
time period under this Lease, but ground lessor or mortgagee begins to cure
within ten (10) days after such period and proceeds diligently to complete such
cure, then ground lessor or mortgagee shall have such additional time as is
necessary to complete such cure, including any time necessary to obtain
possession if possession is necessary to cure, and Tenant shall not begin to
enforce its remedies so long as the cure is being diligently pursued.
E. Definitions. As used in this Section 16, "mortgage" shall include
"trust deed" and "mortgagee" shall include "trustee", "mortgagee" shall include
the mortgagee of any ground lessee, and "ground lessor", "mortgagee", and
"purchaser at a foreclosure sale" shall include, in each case, all of its
successors and assigns, however remote.
17. ASSIGNMENT AND SUBLEASE.
A. In General. Tenant shall not, without the prior consent of Landlord
in each case, (i) make or allow any assignment or transfer, by operation of law
or otherwise, of any part of Tenant's interest in this Lease, other than an
assignment to an entity acquiring substantially all of the assets of Tenant's
business, a transfer of a controlling interest in the stock of Tenant, or a
merger of Tenant, with or to, in any of such cases, an entity whose net worth
and working capital are equal to that of Tenant at the time of the transfer,
(ii) grant or allow any lien or encumbrance, by operation of law or otherwise,
upon any part of Tenant's interest in this Lease, (iii) sublet any part of the
Premises, or (iv) permit anyone other than Tenant and its employees to occupy
any part of the Premises. Tenant shall remain primarily liable for all of its
obligations under this Lease, notwithstanding any assignment or transfer. No
consent granted by Landlord shall be deemed to be a consent to any subsequent
assignment or transfer, lien or encumbrance, sublease or occupancy. Tenant shall
pay all of Landlord's reasonable attorneys' fees and other expenses up to $500
per request incurred in connection with any consent requested by Tenant or in
reviewing any proposed assignment or subletting. Any assignment or transfer,
grant of lien or encumbrance, or sublease or occupancy without Landlord's prior
written consent shall be void. If Tenant shall assign this Lease or sublet the
Premises in its entirety any rights of Tenant to renew this Lease, extend the
Term or to lease additional space in the Project shall be extinguished thereby
and will not be transferred to the assignee or subtenant, all such rights being
personal to the Tenant named herein.
B. Landlord's Consent. Landlord will not unreasonably withhold its
consent to any proposed assignment or subletting. It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the financial
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responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iii) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord's standards for the Building or are in violation of the terms of this
Lease or any other leases in the Project, (iv) the proposed assignee or
subtenant is a government entity, or (v) the proposed assignment is for less
than the entire Premises or for less than the remaining Term of the Lease. The
foregoing shall not exclude any other reasonable basis for Landlord to withhold
its consent.
C. Procedure. Tenant shall notify Landlord of any proposed assignment or
sublease at least thirty (30) days prior to its proposed effective date. The
notice shall include the name and address of the proposed assignee or subtenant,
its corporate affiliates in the case of a corporation and its partners in a case
of a partnership, an execution copy of the proposed assignment or sublease, and
sufficient information to permit Landlord to determine the financial
responsibility and character of the proposed assignee or subtenant. As a
condition to any effective assignment of this Lease, the assignee shall execute
and deliver in form satisfactory to Landlord at least fifteen (15) days prior to
the effective date of the assignment, an assumption of all of the obligations of
Tenant under this Lease. As a condition to any effective sublease, subtenant
shall execute and deliver in form satisfactory to Landlord at least fifteen (15)
days prior to the effective date of the sublease, an agreement to comply with
all of Tenant's obligations under this Lease, and at Landlord's option, an
agreement (except for the economic obligations which subtenant will undertake
directly to Tenant) to attorn to Landlord under the terms of the sublease in the
event this Lease terminates before the sublease expires.
D. Change of Management or Ownership. Any transfer of the direct or
indirect power to affect the management or policies of Tenant or direct or
indirect change in 25% or more of the ownership interest in Tenant shall
constitute an assignment of this Lease.
E. Excess Payments. If Tenant shall assign this Lease or sublet any part
of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space subject to the assignment or sublet, then Tenant shall
pay to Landlord as Additional Rent 50% of any such excess immediately upon
receipt.
18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
interest in the Project or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any security deposit not delivered to its transferee, and Tenant shall
look solely to Landlord's successors for performance of such obligations. This
Lease shall not be affected by any such transfer. Landlord shall give Tenant
prompt notice of any such transfer.
19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the
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other party or its designee a certificate stating, subject to a specific
statement of any applicable exceptions, that the Lease as amended to date is in
full force and effect, that the Tenant is paying Rent and other charges on a
current basis, and that to the best of the knowledge of the certifying party,
the other party has committed no uncured defaults and has no offsets or claims.
The certifying party may also be required to state the date of commencement of
payment of Rent, the Commencement Date, the Termination Date, the Base Rent, the
current Operating Cost Share Rent and Tax Share Rent estimates, the status of
any improvements required to be completed by Landlord, the amount of any
security deposit, and such other matters as may be reasonably requested. Failure
to deliver such statement within the time required shall be conclusive evidence
against the non-certifying party that this Lease, with any amendments identified
by the requesting party, is in full force and effect, that there are no uncured
defaults by the requesting party, that not more than one month's Rent has been
paid in advance, and that the non-certifying party has no claims or offsets
against the requesting party.
20. SECURITY DEPOSIT. Tenant shall deposit with Landlord on the date of
this Lease, security for the performance of all of its obligations an
irrevocable, unconditional standby letter of credit (the "Letter of Credit") in
form and content reasonably satisfactory to Landlord, in the amount of $450,000.
The amount of the Letter of Credit may be reduced under either of the
following conditions:
A. Time. The amount of the Letter of Credit shall be reduced after the
first 36 months of the Lease by $125,000, to $325,000. Provided that Tenant
shall not be in default under the Lease beyond any applicable cure period,
Landlord agrees to further reduce the amount of the Letter of Credit by $92,000
at the expiration of each six-month interval thereafter; provided, however, that
the amount required under the Letter of Credit shall in no event by reduced
below $50,000.00.
B. Economic Performance. Landlord agrees to release $400,000 of the
Letter of Credit upon Tenant's reasonably demonstrating to Landlord that
Tenant's Operating Income from continuous operations under GAAP exceeds $300,000
for three consecutive quarters, and two of the following three events have
occurred:
(I) Tenant's accounts receivable equal at least 125% of Tenant's
accounts payable;
(ii) Tenant's cash and receivables total at least $3,000,000;
and
(iii) Tenant concludes an initial public offering which raises a
minimum of $15 million in net proceeds and results in the amount of stock
outstanding multiplied by the price per share equaling at least $100 million.
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Tenant may at any time deposit cash amounts with Landlord equivalent to
the amounts set forth above as to the Letter of Credit, and such cash or the
Letter of Credit or any combination thereof, shall be deemed the "Security
Deposit" and shall be subject to release in the manner set forth in paragraph A
above. If Tenant defaults under the Lease, Landlord may use any part of the
Security Deposit to make any defaulted payment, to pay for Landlord's cure of
any defaulted obligation or to compensate Landlord for any loss or damage
resulting from any default. To the extent any portion of the deposit is used,
Tenant shall, within five (5) days after demand from Landlord, restore the
deposit to its full amount, as adjusted pursuant to the foregoing provisions of
this Section 20. Landlord may keep the Security Deposit, if cash, in its general
funds and shall not be required to pay interest to Tenant on the deposit amount.
If Tenant shall perform all of its obligations under this Lease and return the
Premises to Landlord at the end of the Term, Landlord shall return all of the
remaining Security Deposit to Tenant within thirty (30) days after the end of
the Term. The Security Deposit shall not serve as an advance payment of Rent or
a measure of Landlord's damages for any default under this Lease.
If Landlord transfers its interest in the Project or this Lease,
Landlord may transfer the Security Deposit to its transferee. Upon such transfer
(except to the extent Landlord was, prior to the transfer, obligated to refund
all or some portion of such Security Deposit to Tenant), Landlord shall have no
further obligation to return the Security Deposit to Tenant, and Tenant's right
to the return of the Security Deposit shall apply solely against Landlord's
transferee.
21. FORCE MAJEURE. Neither Tenant nor Landlord shall be in default under
this Lease to the extent it is unable to perform any of its obligations on
account of any strike or labor problem, energy shortage, governmental
pre-emption or prescription, national emergency, or any other cause of any kind
beyond its reasonable control ("Force Majeure").
22. NOTICES. All notices, consents, approvals and similar communications
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:
A. Landlord. To Landlord as follows:
CARRAMERICA REALTY CORPORATION
18640 NE 67th Court, Suite 150
Redmond, Washington 98052
Attn: Market Officer
with a copy to:
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Lease Administration
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or to such other person at such other address Landlord may designate by notice
to Tenant.
B. Tenant. To Tenant as follows;
Portable Software Corporation
6222 185th Avenue N.E.
Redmond, Washington 98052
Attn: Anne Kroger, Director of Finance
or to such other person at such other address as Tenant may designate by notice
to Landlord.
Mailed notices shall be sent by United States certified or registered
mail, or by a reputable national overnight courier service, postage prepaid.
Mailed notices shall be deemed to have been given on the earlier of actual
delivery of three (3) business days after posting in the United States mail in
the case of registered or certified mail, and one business day in the case of
overnight courier.
24. QUIET POSSESSION. So long as Tenant shall perform all of its
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord.
25. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has
not dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule (whose commissions shall be paid by Landlord),
and no other broker is in any way entitled to any broker's fee or other payment
arising from Tenant's actions in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind owing as a result of Tenant's actions in
connection with this Lease.
26. MISCELLANEOUS.
A. Successors and Assigns. Subject to the limits on Tenant's assignment
contained in Section 17, the provisions of this Lease shall be binding upon and
inure to the benefit of all successors and assigns of Landlord and Tenant.
B. Date Payments Are Due. Except for payments to be made by Tenant under
this Lease which are due upon demand, Tenant shall pay to Landlord any amount
for which Landlord renders a statement of account within fifteen days of
Tenant's receipt of Landlord's statement.
C. Meaning of "Landlord", "Re-entry, "including" and "Affiliate". The
term "Landlord" means only the owner of the Project and the lessor's interest in
this Lease from time to time. The words "re-entry" and "re-enter" are not
restricted to their technical legal meaning.
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The words "including" and similar words shall mean "without limitation." The
word "affiliate" shall mean a person or entity controlling, controlled by or
under common control with the applicable entity. "Control" shall mean the power
directly or indirectly, by contract or otherwise, to direct the management and
policies of the applicable entity.
D. Time of the Essence. Time is of the essence of each provision of this
Lease.
E. No Option. This document shall not be effective for any purpose until
it has been executed and delivered by both parties; execution and delivery by
one party shall not create any option or other right in the other party.
F. Severability. The unenforceability of any provision of this Lease
shall not affect any other provision.
G. Governing Law. This Lease shall be governed in all respects by the
laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.
H. No Oral Modification. No modification of this Lease shall be
effective unless it is a written modification signed by both parties.
I. Landlord's Right to Cure. If Landlord breaches any of its obligations
under this Lease, Tenant shall notify Landlord in writing and shall take no
action respecting such breach so long as Landlord immediately begins to cure the
breach and diligently pursues such cure to its completion.
J. Captions. The captions used in this Lease shall have no effect on the
construction of this Lease.
K. Authority. Landlord and Tenant each represents to the other that it
has full power and authority to execute and perform this lease.
L. Landlord's Enforcement of Remedies. Landlord may enforce any of its
remedies under this Lease either in its own name or through an agent.
M. Entire Agreement. This Lease, together with its Addendum and all
Appendices, constitutes the entire agreement between the parties. No
representations or agreements of any kind have been made by either party which
are not contained in this Lease.
N. Landlord's Title. Nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.
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O. Light and Air Rights. Landlord does not grant in this Lease any
rights to light and air in connection with Project. Landlord reserves to itself,
the Land, the Building below the improved floor of the bottom floor of the
Premises, the, Building above the ceiling of the top floor of the Premises, the
exterior of the Premises and the areas on the same floor outside the Premises,
along with the areas within the Premises required for the installation and
repair of utility lines and other items required to serve other tenants of the
Building.
P. Singular and Plural. Wherever appropriate in this Lease, a singular
term shall be construed to mean the plural where necessary, and a plural term
the singular. For example, if at any time two parties shall constitute Landlord
or Tenant, then the relevant term shall refer to both parties together.
Q. No Recording by Tenant. Tenant shall not record in any public records
any memorandum or any portion of this Lease.
R. Exclusivity. Landlord does not grant to Tenant in this Lease any
exclusive right except the right to occupy its Premises.
S. No Construction Against Drafting Party. The rule of construction that
ambiguities are resolved against the drafting party shall not apply to this
Lease.
T. Survival. All obligations of Landlord and Tenant under this Lease
shall survive the termination of this Lease.
U. Rent Not Based on Income. No rent or other payment in respect of the
Premises shall be based in any way upon net income or profits from the Premises.
Tenant may not enter into or permit any sublease or license or other agreement
in connection with the Premises which provides for a rental or other payment
based on net income or profit.
V. Building Manager and Service Providers. Landlord may perform any of
its obligations under this Lease through its employees or third parties hired by
the Landlord.
W. Late Charge and Interest on Late Payments. Without limiting the
provisions of Section 12A, if Tenant fails to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay a
late charge equal to the greater of five percent (5%) of the amount of such
payment or $250. In addition, interest shall be paid by Tenant to Landlord on
any late payments of Rent from the date due until paid at the rate provided in
Section 2D(2). Such late charge and interest shall constitute additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.
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X. Parking. Landlord shall maintain a parking ratio in the parking area
serving the Premises of three (3) cars per 1,000 rentable square feet of
Premises area. Landlord agrees to identify thirty-three (33) stalls in front of
the Premises for use by Tenant.
Y. Signage. Tenant shall be provided the business park's standard
building signage by Landlord at Landlord's sole cost and expense.
27. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.
28. HAZARDOUS SUBSTANCES. Tenant shall not cause or permit any Hazardous
Substances to be brought upon, produced, stored, used, discharged or disposed of
in or near the Project unless Landlord has consented to such storage or use in
its sole discretion; provided, however, that Tenant may use and store in the
Premises those routine office and cleaning supplies, and such products and
materials as are reasonably related to the operation of Tenant's permitted
business in the Premises, in compliance with all applicable laws, rules and
regulations. "Hazardous Substances" include those hazardous substances described
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any other applicable
federal, state or local law, and the regulations adopted under these laws. If
any lender or governmental agency shall require testing for Hazardous Substances
in the Premises, Tenant shall pay for such testing.
29. EXCULPATION. Landlord shall have no personal liability under this
Lease; its liability shall be limited to its interest in the Project, and shall
not extend to any other property or assets of the Landlord. In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's
//
//
//
//
//
29
<PAGE> 34
obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
LANDLORD:
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By:
--------------------------------------------
Print Name:
------------------------------------
Print Title:
-----------------------------------
TENANT:
PORTABLE SOFTWARE CORPORATION
a Washington corporation
By: /s/ STERLING WILSON
--------------------------------------------
Print Name: Sterling Wilson
------------------------------------
Print Title: CFO & VP of Professional Services
-----------------------------------
30
<PAGE> 35
DISTRICT OF COLUMBIA )
) SS.
)
On this _________ day of ______________, 1997, before me, the
undersigned, a Notary Public in and for the District of Columbia, duly
commissioned and sworn as such, personally appeared___________________ , to me
known to be the _______________ of CARRAMERICA REALTY CORPORATION, the
corporation that executed the within and foregoing instrument, and acknowledged
the said instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned, and on oath stated that
he was authorized to execute said instrument, and that the seal affixed is the
corporate seal of said corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
---------------------------------------
Printed Name:
--------------------------
NOTARY PUBLIC in and for the District
of Columbia, residing at
---------------
My commission expires:
-----------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I CERTIFY that I know or have satisfactory evidence that Sterling Wilson
is the person who appeared before me, and acknowledged that he signed this
instrument, on oath stated that he was authorized to execute the instrument, and
acknowledged it as the CFO & Vice President of Prof Svcs. of PORTABLE SOFTWARE
CORPORATION, to be the free and voluntary act of such party for the uses and
purposes mentioned in the instrument.
DATED: 10/31/97
-------------------
/s/ Mellisa S. DeLaurentis
---------------------------------------
Printed Name: Mellisa S. DeLaurentis
--------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle
---------------
My commission expires: 3-30-97
[NOTARY SEAL] -----------------
31
<PAGE> 36
APPENDIX A
PLAN OF THE PREMISES
(ATTACH FLOOR PLAN DEPICTING THE PREMISES)
<PAGE> 37
APPENDIX B
RULES AND REGULATIONS
1. Tenant shall not place anything, or allow anything to be placed
near the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside of the Project.
2. The Project directory shall be available to Tenant solely to
display names and their location in the Project, which display shall be as
directed by Landlord.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises. Tenant shall lend its
full cooperation to keep such areas free from all obstruction and in a clean and
sightly condition and shall move all supplies, furniture and equipment as soon
as received directly to the Premises and move all such items and waste being
taken from the Premises (other than waste customarily removed by employees or
contractors of Landlord) directly to the shipping platform at or about the time
arranged for removal therefrom. The halls, passages, exits, entrances,
elevators, stairways, balconies and roof are not for the use of the general
public and Landlord shall, in all cases, retain the right to control and prevent
access thereto by all persons (other than Tenant) whose presence in the judgment
of Landlord, reasonably exercised, shall be prejudicial to the safety,
character, reputation and interests of the Project. Neither Tenant nor any
employee or invitee of Tenant shall go upon the roof of the Project.
4. The toilet rooms, urinals, wash bowls and other apparatuses shall
not be used for any purposes other than that for which they were constructed,
and no foreign substance of any kind whatsoever shall be thrown therein, and to
the extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.
5. Tenant shall not cause any unnecessary janitorial labor or services
by reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.
6. Tenant shall not install or operate any refrigerating, heating or
air conditioning apparatus, or carry on any mechanical business without the
prior written consent of Landlord; use the Premises for housing, lodging or
sleeping purposes; or permit preparation or warming of food in the Premises
(warming of coffee, and individual meals with employees and guests excepted).
Tenant shall not occupy or use the Premises or permit the Premises to be
occupied or used for any purpose, act or thing which is in violation of any
Governmental Requirement or which may be dangerous to persons or property.
7. Tenant shall not bring upon, use or keep in the Premises or the
Project any kerosene, gasoline or inflammable of combustible fluid or material,
or any hazardous materials prohibited by the Lease, or use any method of heating
or air conditioning other than that supplied by Landlord.
<PAGE> 38
8. Landlord shall have the power to direct electricians as to where
and how telephone and other wires are to be introduced. No boring or cutting for
wires is to be allowed without the consent of Landlord. The location of
telephones, call boxes and other office equipment affixed to the Premises shall
be subject to the approval of Landlord.
9. No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises. Tenant shall not change, existing locks or the
mechanism thereof. Upon termination of the lease, Tenant shall deliver to
Landlord all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished Tenant.
In the event of the loss of keys so furnished, Tenant shall pay
Landlord therefor. Tenant shall not make, or cause to be made, any such keys and
shall order all such keys solely from Landlord and shall pay Landlord for any
keys in addition to the two sets of keys originally furnished by Landlord for
each lock.
10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
11. Tenant shall cause all doors to the Premises to be closed and
securely locked and shall turn off all utilities (except power and air
conditioning necessary to operate Tenant's computer equipment), lights and
machines before leaving the Project at the end of the day.
12. Without the prior written consent of Landlord, Tenant shall not
use the name of the Project or any picture of the Project in connection with, or
in promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.
13. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain from attempting to adjust any controls, other
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed.
14. Tenant assumes full responsibility for protecting the interior of
the Premises from theft, robbery and pilferage, which may arise from a cause
other than Landlord's negligence, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
15. Peddlers, solicitors and beggars shall be reported to the office
of the Project or as Landlord otherwise requests.
16. Tenant shall not advertise the business, profession or activities
of Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
<PAGE> 39
17. No vehicle, other than bicycles, and no animals or pets shall be
allowed in the Premises, halls, freight docks, or any other parts of the
Building except that blind persons may be accompanied by "seeing eye" dogs.
Tenant shall not make or permit any noise, vibration or odor to emanate from the
Premises, or do anything therein tending to create, or maintain, a nuisance, or
do any act tending to injure the reputation of the Building.
18. Tenant acknowledges that Building security problems may occur
which may require the employment of extreme security measures in the day-to-day
operation of the Project.
Accordingly:
(a) Landlord may, at any time, or from time to time, or for
regularly scheduled time periods, as deemed advisable by Landlord and/or its
agents, in their sole discretion, require that persons entering or leaving the
Project or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.
(b) Tenant agrees that it and its employees will cooperate fully
with Project employees in the implementation of any and all security procedures.
(c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by Landlord in
connection therewith, it being understood that Landlord is not required to
provide any security procedures and shall have no liability for such security
procedures or the lack thereof.
19. Tenant shall not do or permit the manufacture, sale, or purchase
of any fermented, intoxicating or alcoholic beverages without obtaining written
consent of Landlord.
20. Tenant shall not disturb the quiet enjoyment of any other tenant.
21. Tenant shall not provide any janitorial services or cleaning
without Landlord's written consent and then only subject to supervision of
Landlord and at Tenant's sole responsibility and by janitor or cleaning
contractor or employees at all times satisfactory to Landlord.
22. Landlord may retain a pass key to the Premises and be allowed
admittance thereto at all reasonable times following 24 hours' notice (except in
an emergency) which notice shall specify the identity of any person to whom the
Premises will be shown, to enable its representatives to examine the Premises
from time to time.
23. No equipment, mechanical ventilators, awnings, special shades or
other forms of window covering shall be permitted either inside or outside the
windows of the Premises without the prior written consent of Landlord, and then
only at the expense and risk of Tenant, and they shall be of such shape, color,
material, quality, design and make as may be approved by Landlord.
<PAGE> 40
24. Tenant shall not during the term of this Lease canvas or solicit
other tenants of the Building for any purpose.
25. Tenant shall not install or operate any phonograph, musical or
sound-producing instrument or device, radio transmitter, TV transmitter, or
similar device (other than portable telephones) in the Building, nor install or
operate any antenna, aerial, wires or other equipment inside or outside the
Building, nor operate any electrical device from which may emanate electrical
waves which may interfere with or impair radio or television broadcasting or
reception from or in the Building or elsewhere, without in each instance the
prior written approval of Landlord. The use thereof, if permitted, shall be
subject to control by Landlord to the end that others shall not be disturbed.
26. Tenant shall promptly remove all rubbish and waste from the
Premises other than waste removed by Landlord or Landlord's contractor.
27. Tenant shall not exhibit, sell or offer for sale, rent or exchange
in the Premises or at the Project any article, thing or service, except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.
28. Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.
29. Tenant shall not do any painting in the Premises, or mark, paint,
cut or drill into, drive nails or screws into, or in any way deface any part of
the exterior of the Building, without the prior written consent of Landlord.
30. Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment.
31. Tenant and its employees shall cooperate in all fire drills
conducted by Landlord in the Building.
<PAGE> 41
APPENDIX C
TENANT IMPROVEMENT AGREEMENT
1. INITIAL IMPROVEMENTS. Landlord shall cause to be performed design
and construction of the improvements (the "Initial Improvements") in the
Premises in accordance with plans and specifications approved by Tenant and
Landlord (the "Plan"), which approvals shall not be unreasonably withheld. The
Initial Improvements shall consist of (a) Landlord's building standard
improvements as set forth on Appendix C-1, which shall be provided at the
Landlord's cost ("Landlord's Contribution"), subject to the remaining terms
hereof, and (ii) those non-standard building improvements, including
non-standard millwork, lighting, finishes and fixtures, as set forth on Appendix
C-2, which shall be paid for by Tenant.
Landlord shall cause the Plans to be prepared by a registered
professional architect, and mechanical and electrical engineer(s). As of the
date of this lease, the Plans consist of Appendix A 10/23/97 , which Tenant has
approved. The parties shall negotiate in good faith to reach final agreement as
to the plans and specifications, and Landlord shall cause the plans and
specifications to be prepared in accordance with the parties' final agreement.
Landlord, with consultation of Tenant, shall select a contractor to
perform the construction of the Initial Improvements. Such contractor shall be
selected by a competitive bid process between three contractors selected by
Landlord, with consultation of Tenant. Landlord shall use commercially
reasonable efforts to cause the Initial Improvements to be substantially
completed, except for minor "Punch List" items, on or before the Commencement
Date specified in the Schedule to the Lease, subject to Tenant Delay (as defined
in Section 4 hereof) and Force Majeure.
2. CHANGE ORDERS. If, prior to the Commencement Date, Tenant shall
require improvements or changes (individually or collectively, "Change Orders")
to the Premises in addition to, revision of, or substitution for the Initial
Improvements, Tenant shall deliver to Landlord for its approval plans and
specifications for such Change Orders. If Landlord does not approve of the plans
for Change Orders, Landlord shall advise Tenant of the revisions required.
Tenant shall revise and redeliver the plans and specifications to Landlord
within five (5) business days of Landlord's advice or Tenant shall be deemed to
have abandoned its request for such Change Orders. Tenant shall pay for all
increased costs resulting from preparations and revisions of plans and
specifications, and the construction of all Change Orders requested by Tenant.
3 . LANDLORD'S COSTS. Notwithstanding any provision hereof, Landlord's
costs of Initial Improvements shall not exceed those applicable to construction
of Landlord's building standard improvements. Landlord has no obligation to pay
for costs of the Initial Improvements or Change Orders in excess of Landlord's
Contribution. If any comments to the plans provided by Tenant affect the cost of
the Initial Improvements, and/or the cost of Change Orders initiated
<PAGE> 42
by Tenant result in costs exceeding those otherwise applicable to Landlord's
building standard improvements, Tenant shall pay such overage to Landlord upon
completion of construction of the Initial Improvements and/or Change Orders.
4. COMMENCEMENT DATE DELAY. Commencement Date shall be delayed until
the later of the date on which the City of Redmond issues a certificate of
occupancy for the Premises and the date on which the Initial Improvements have
been substantially completed (the "Completion Date"), except to the extent that
the delay shall be caused by any one or more of the following (a "Tenant
Delay"):
(a) Tenant's request for Change Orders whether or not any such
Change Orders are actually performed; or
(b) Contractor's performance of any Change Orders; or
(c) Tenant's request for materials, finishes or installations
requiring unusually long lead times; or
(d) Tenant's delay in reviewing, revising or approving plans and
specifications beyond the periods set forth herein, or
(e) Tenant's delay in providing information critical to the
normal progression of the project. Tenant shall provide such information as soon
as reasonably possible, but in no event longer than one week after receipt of
such request for information from the Landlord; or
(f) Tenant's delay in making payments to Landlord for costs of
the Initial Improvements and/or Change Orders in excess of the Landlord's, costs
for building standard improvements; or
(g) Any other act or omission constituting negligence or willful
misconduct by Tenant, its agents, contractors or persons employed by any of such
persons.
If the Commencement Date is delayed for any reason, then Landlord shall cause
Landlord's Architect to certify the date on which the Initial Improvements would
have been completed but for such Tenant Delay, or were in fact completed without
any Tenant Delay.
5. ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Landlord at its
discretion may permit Tenant and its agents to enter the Premises prior to the
Commencement Date to prepare the Premises for Tenant's use and occupancy. Any
such permission shall constitute a license only, conditioned upon Tenant's:
(a) working in harmony with Landlord and Landlord's agents,
contractors, workmen, mechanics and suppliers and with other tenants and
occupants of the Building;
(b) obtaining in advance Landlord's approval of the contractors
proposed to be used by Tenant and depositing with Landlord in advance of any
work (i) security reasonably
<PAGE> 43
satisfactory to Landlord for the completion thereof, and (ii) the contractor's
affidavit for the proposed work and the waivers of lien from the contractor and
all subcontractors and suppliers of material; and
(c) furnishing Landlord with such insurance as Landlord may
require against liabilities which may arise out of such entry.
Landlord shall have the right to withdraw such license for any reason
upon twenty-four (24) hours' written notice to Tenant. Landlord shall not be
liable in any way for any injury, loss or damage which may occur to any of
Tenant's property or installations in the Premises prior to the Commencement
Date. Tenant shall protect, defend, indemnify and save harmless Landlord from
all liabilities, costs, damages, fees and expenses arising out of the activities
of Tenant or its agents, contractors, suppliers or workmen in the Premises or
the Building. Any entry and occupation permitted under this Section shall be
governed by Section 5 and all other terms of the Lease.
6. MISCELLANEOUS.
Terms used in this Appendix C shall have the meanings assigned to them
in the Lease. The terms of this Appendix C are subject to the terms of the
Lease.
<PAGE> 44
APPENDIX D
MORTGAGES CURRENTLY AFFECTING THE PROJECT
NONE
<PAGE> 45
APPENDIX E
COMMENCEMENT DATE CONFIRMATION
Landlord: CarrAmerica Realty Corporation, a Maryland corporation
Tenant: Portable Software, Corporation, a Washington corporation
This Commencement Date Confirmation is made by Landlord and Tenant
pursuant to that certain Lease dated as of , 199__ (the "Lease") for certain
premises known as Suite _____ in the building commonly known as Redmond Hilltop
(the "Premises"). This Confirmation is made pursuant to Item 9 of the Schedule
to the Lease.
1 . Lease Commencement Date, Termination Date. Landlord and Tenant
hereby agree that the Commencement Date of the Lease is 199_, and the
Termination Date of the Lease is_______________,____.
2. Acceptance of Premises. Tenant has inspected the Premises and
affirms that the Premises are acceptable in all respects in their current
"as is" condition.
3. Incorporation. This Confirmation is incorporated into the Lease,
and forms an integral part thereof. This Confirmation shall be construed and
interpreted in accordance with the terms of the Lease for all purposes.
TENANT:
PORTABLE SOFTWARE CORPORATION
a Washington corporation
By:_________________________________
Name:_______________________________
Title:______________________________
LANDLORD:
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE> 46
APPENDIX F
LEGAL DESCRIPTION OF REAL PROPERTY
Lot 2, City of Redmond Short Plat Number SPL 91-0009, recorded under Recording
Number 9111159007; said short plat being a portion of the southwest quarter of
Section 7, Township 25 North, Range 6 East, W.M., in King County, Washington.
<PAGE> 47
ADDENDUM 1
EXTENSION OPTION
EXTENSION OPTION. Subject to Subsection B below, Tenant may at its
option extend the Term of this Lease for one (1) period of five (5) years. Such
period is called a "Renewal Term". The Renewal Term shall be upon the same terms
contained in this Lease except for the payment of Base Rent during the Renewal
Term; and any reference in the Lease to the "Term" of the Lease shall be deemed
to include any Renewal Term and apply thereto, unless it is expressly provided
otherwise. Tenant shall have no additional extension options.
A. The Base Rent during a Renewal Term shall be the greater of (i) the
Base Rent applicable to the last day of the final Lease Year prior to the
applicable Renewal Term, or (ii) 100% of the Market Rate (defined hereinafter)
for such space for a term commencing on the first day of the Renewal Term.
"Market Rate" shall mean the then prevailing market rate for a comparable term
commencing on the first day of the Renewal Term for tenants of comparable size
and creditworthiness for comparable space in the Building and other first class
office buildings in the vicinity of the Building.
B. To exercise any option, Tenant must deliver a binding notice
(subject to Tenant's cancellation rights set forth in paragraph C(i) below) to
Landlord not less than nine (9) months prior to the expiration of the initial
Term of this Lease. Thereafter, the Market Rate for the Renewal Term shall be
calculated pursuant to Subsection C below and Landlord shall inform Tenant of
the Market Rate. Such calculations shall be final and shall not be recalculated
at the actual commencement of such Renewal Term. If Tenant fails to timely give
its notice of exercise, Tenant will be deemed to have waived its option to
extend.
C. Market Rate shall be determined as follows:
(i) If Tenant provides Landlord with its binding notice of exercise
pursuant to Subsection B above, then within thirty (30) days thereafter,
Landlord shall calculate and inform Tenant of the Market Rate. If Tenant
rejects the Market Rate as calculated by Landlord, Tenant shall inform
Landlord of its rejection within ten (10) days after Tenant's receipt of
Landlord's calculation, and Landlord and Tenant shall commence negotiations
to agree upon the Market Rate. If Tenant fails to timely reject Landlord's
calculation of the Market Rate it will be deemed to have accepted such
calculation. If Landlord and Tenant are unable to reach agreement within
ten (10) days after Landlord's receipt of Tenant's notice of rejection,
then Tenant may, upon written notice given to Landlord within five (5) days
thereafter, cancel its notice of exercise of the option to renew. Should
Tenant fail to give such notice to Landlord within such 5-day period,
Tenant shall be deemed to have waived its right to cancel, time being of
the essence hereof, and the Market Rate shall be determined in accordance
with (ii) below.
ADDENDUM 1
Page 1 of 2
<PAGE> 48
(ii) If Landlord and Tenant are unable to reach agreement on the
Market Rate within said ten (10) day period, then within seven (7) days,
Landlord and Tenant shall each simultaneously submit to the other in a
sealed envelope its good faith estimate of the Market Rate. If the higher
of such estimates is not more than one hundred five percent (105%) of the
lower, then the Market Rate shall be the average of the two. Otherwise,
the dispute shall be resolved by arbitration in accordance with (iii)
below.
(iii) Within seven (7) days after the exchange of estimates, the
parties shall select as an arbitrator an independent MAI appraiser with at
least five (5) years of experience in appraising office space in the
metropolitan area in which the Project is located (a "Qualified
Appraiser"). If the parties cannot agree on a Qualified Appraiser, then
within a second period of seven (7) days, each shall select a Qualified
Appraiser and within ten (10) days thereafter the two appointed Qualified
Appraisers shall select a third Qualified Appraiser and the third Qualified
Appraiser shall be the sole arbitrator. If one party shall fail to select a
Qualified Appraiser within the second seven (7) day period, then the
Qualified Appraiser chosen by the other party shall be the sole arbitrator.
(iv) Within twenty-one (21) days after submission of the matter to the
arbitrator, the arbitrator shall determine the Market Rate by choosing
whichever of the estimates submitted by Landlord and Tenant the arbitrator
judges to be more accurate. The arbitrator shall notify Landlord and Tenant
of its decision, which shall be final and binding. If the arbitrator
believes that expert advice would materially assist him, the arbitrator may
retain one or more qualified persons to provide expert advice. The fees of
the arbitrator and the expenses of the arbitration proceeding, including
the fees of any expert witnesses retained by the arbitrator, shall be paid
by the party whose estimate is not selected. Each party shall pay the fees
of its respective counsel and the fees of any witness called by that party.
D. Tenant's option to extend this Lease is subject to the conditions
that: (i) on the date that Tenant delivers its binding notice exercising an
option to extend, Tenant is not in default under this Lease after the expiration
of any applicable notice and cure periods, and (ii) Tenant shall not have
assigned the Lease other than to an assignee to whom an assignment is permitted
under the terms of Section 17 hereof, or sublet any portion of the Premises
under a sublease which is effective at any time during the final twelve (12)
months of the initial Term.
ADDENDUM 1
Page 2 of 2
<PAGE> 49
ADDENDUM 2
REVISION TO SPACE POCKET OPTION
THIS ADDENDUM is to that certain Lease Agreement (the "Lease") dated
October _________ , 1997, between CarrAmerica Realty corporation, a Maryland
corporation (the "Landlord"), and Portable Software Corporation, a Washington
corporation (the "Tenant"). Wherein this addendum differs from the terms of the
Lease, the terms of this Addendum shall control.
1. Space Pocket. Notwithstanding the terms of paragraph 2.A. (1),
Tenant may, upon written notice given to Landlord no later than thirty (30) days
prior to the expiration of the first twelve (12) months of the Lease term, and
subject to the remaining terms of this Addendum, extend the 12-month "space
pocket" period referenced in the fifth line of paragraph 2.A. (1) for an
additional period of six (6) months. Accordingly, Landlord and Tenant agree that
upon Tenant's exercise of such right to extend the "space pocket" period, the
Base Rent for months thirteen through eighteen (13 through 18) of the Lease term
shall be Thirty-Four Thousand Seven Hundred Seven Dollars ($34,707.00) plus in
amount equal to the product arrived by multiplying the applicable Base Rent per
square foot (as set forth in Item 12 of the schedule) by the rentable area of
that portion (if any) of the 15,000 square foot space pocket actually occupied
by Tenant. In addition, should Tenant exercise its option to extend the period
of the space pocket as set forth herein, the Base Rent schedule contained in
Item 12 of the schedule shall be modified as follows:
<TABLE>
<CAPTION>
Annual Monthly Per Sq. Ft.
Period Base Rent Base Rent Rent
------ --------- --------- ----
<S> <C> <C> <C>
Months 6 through 18 $416,484 $34,707 $14.85 nnn/rsf
Months 19 through 37 $682,284 $56,857 $15.85 nnn/rsf
Months 37 through 60 $746,844 $62,237 S17.35 nnn/rsf
</TABLE>
2. Security Deposit. It shall be a condition to the effectiveness of
Tenant's extension of the "space pocket" period as set forth in the preceding
paragraph that, on or before the thirteenth (13th) month of the Lease term,
Tenant shall increase the Letter of Credit referenced in paragraph 20 of the
lease to $580,000.00. In such event, paragraph 20.A shall be amended to provide
that (i) the Letter of Credit shall be reduced after the first thirty-six (36)
months of the Lease by $125,000.00, to $455,000.00; and (ii) provided that
Tenant shall not be in default under the Lease beyond any applicable cure
period, Landlord shall reduce the amount of the Letter of Credit by $101,250.00
at the expiration of each six (6) month interval thereafter; provided further,
however, that the amount required under the Letter of Credit shall in no event
be reduced below $50,000.00. Further, in the event the security deposit shall
be increased as aforesaid, the term "$400,000.00" in the first line of paragraph
20.B shall instead be "$530,000.00".
ADDENDUM 2
Page 1 of 2
<PAGE> 50
3. No Other Modifications. Except as expressly set forth in this
Addendum, the parties' Lease shall be unmodified and shall continue in full
force and effect.
ADDENDUM 2
Page 1 of 2
<PAGE> 51
APPENDIX C-2
NON-STANDARD IMPROVEMENTS
TO BE PAID BY TENANT
<TABLE>
<CAPTION>
Millwork Approximate Cost
- -------- ----------------
<S> <C>
Board room counter and cabinets $2,033
Board room display rail 1,637
Large conference/training room: counter and cabinets 2,568
Board room: white board inc.
Reception desk includes light wood paneling at reception area. 7,426
(Tenant must decide if they want to install by November 7)
Finishes
Carpet at lobby/reception and board room 10,215
In-fill panel at overhead door in lunch room with glazing 1,130
(1/2 of approximate cost; the other 1/2 to be paid by landlord)
Terrazzo stone may not be installed in the lobby area and
instead, Landlord and Tenant will agree on certain upgrades to
the lobby area to approximately equal the value of the stone or
about $14,500.
Additional Requirements
34 down light can fixtures with dimmer switches in the following areas:
7 - Board room 2 - Lunch room 6,426
10 - Large conference /training room 8 - Reception area
7 - Lounge
Office relites for interior offices @ $243 each x 54 total 13,116
Recessed electric projection screen 2,203
</TABLE>
Other Items:
<TABLE>
<S> <C>
Voice and data lines Exterior and Interior Signage
Security system/key card entry Demountable partitions and hook up
UPS system or generator Appliances
Office equipment Wall covering
Separate fire protection for computer rooms Separate HVAC for computer rooms
</TABLE>
Tenant will, with Landlord's approval, contract for these "other items"
separately and such costs will be paid by Tenant.
These Costs are estimates only and do not include WSST. Final costs, once
determined, will be paid by Tenant to Landlord upon completion of the
improvements in accordance with Paragraph 1 of Appendix C.
<PAGE> 52
All items contemplated by the Plans dated 10/23/97 and which are attached to
this Lease are included in Landlord's Contribution and will be paid for by
Landlord unless such items are specifically included in this Appendix C-2.
<PAGE> 53
APPENDIX C-1
BUILDING STANDARD FINISHES
HILLTOP B & C
1. Floors - Landlord shall provide cured and sealed concrete floors which are
level to within industry standards and ready to receive tenant's finish
flooring.
2. Acoustical Treatment - Interior partitions shall receive foam sound gasket
at ceiling, floor, and mullion connections. Tenant may request full height
insulated walls for sound isolation purposes at Tenant's expense.
3 Insulation - Landlord shall provide all exterior wall and ceiling
insulation and moisture barriers required to meet current Washington State
Energy Code. All piping, waterlines, and rain leaders shall be insulated as
part of the shell core scope of work.
4. Finish Carpentry and Millwork - Millwork shall consist of countertops,
cabinets, shelving and trim where indicated on space plan. Millwork and
trim that is part of the building's lobby, restrooms, showers, and stairs
shall be provided by Landlord. Millwork and trim located with Tenant's
premises shall be included in tenant improvement allowance. Quality and
type shall be as follows:
<TABLE>
<S> <C>
Quality Custom grade matching commercial standard
product lines using European style
construction. Provide marine grade plywood at
all cafeteria countertops and bases.
Door Design Flush Overlay
Hinges Concealed, Soss or equal
Pulls Wire type, finish to match hardware
Millwork Finish All surfaces shall have plastic laminate, matte
finish, Nevamar or equal.
Backsplash 4" plastic laminate in all wet areas.
</TABLE>
5. Finish Carpentry - All wood finish material shall be prefinished stain
birch solids and veneers. Finish Carpentry in building lobby shall be by
landlord.
6. Doors - All interior doors shall be 1 3/4" x 3'-0" x 7'-0" solid core birch
veneer with solid hardwood edge and clear lacquer finish. Custom stain
grade or better.
7. Frames - All interior frames shall be Hemlockjams with clear lacquer
finish.
8. Hardware - Locks and latches shall be commercial grade ADA compliant
mortise type with lever handles and with Yale cores.
9. Core and Shell Partitions - Core wall partitions shall have taped and
finished GWB surface ready to receive tenant's finish.
PAGE 1 OF 3
<PAGE> 54
10. Interior Partitions - Building standard partition shall consist of 5/8" GWB
over 2 1/2" metal studs at 2'-0" O.C. with 1/2" reveal at ceiling. Code
required one hour construction and sound isolation walls will continue to
structure above.
11. Ceiling - Tenant Improvement Allowance shall be used for finished ceiling
construction. Ceilings shall be lay-in acoustical tile ceiling in suspended
metal grid. Standard tile shall be 2'x4' Second Look tile with tegular
edge.
12. Restrooms - Landlord to provide finished restrooms with ceramic tile on the
floor, base and wet walls, plastic laminate floor mounted toilet
partitions, and plastic laminate countertops with mirror above. Walls to
receive vinyl wallcovering (except at wet walls). All standard toilet
accessories to be provided.
13. Carpet - Building standard carpet is a 26 oz. loop pile, glued down.
14. Base - 4" Rubber base.
15. Paint - Building standard paint to be eggshell finish, applied in two coats
over a primer.
16. Sprinkler - Landlord shall provide a complete sprinkler system to meet
local standards based on a B-2 occupancy. Sprinkler heads to be turned down
and located per tenant improvement plans as part of the tenant improvement
allowance.
17. Electrical - Landlord to provide electrical service to the building, and
provide a distribution system to a circuit panel on each floor. The system
will be designed to meet all current codes and standards. All electrical
work necessary to install the Tenant's electrical outlets, and connect them
to the main building electrical service and Building Shell and Core circuit
panels, shall be part of the tenant improvements.
18. HVAC - Landlord has provided a rooftop Dx packaged air conditioning unit
for each building. A medium duct distribution system distributes air to
each floor terminating in perimeter zone VAV units. Heating is provided at
each VAV unit. Additional zones and supplemental cooling are tenant costs.
19. Light Fixtures - 2 x 4 parabolic deep cell, 3 lamp with electronic
ballasts.
20. Fire Alarm System - Landlord to provide a fire alarm system as required by
code.
21. Window Coverings - Landlord to provide horizontal 1" mini-blinds at all
exterior windows. Installation costs on the blinds to be part of standard
improvement allowance.
PAGE 2 OF 3
<PAGE> 55
HILLTOP B & C
BUILDING STANDARD FINISHES
SCHEME A
Carpet
Mannington Commercial Carpet
Pattern: Carthage II 26 oz.
Color: Mineral Buff (MIBL)
Base
Johnsonite
Rubber Wall Base
Color: Grey DC-48
General Paint
Benjamin Moore
Color: #972
Accent Paint
Benjamin Moore
Color: #HC-144 (Green)
Benjamin Moore
Color: #1393 (Purple)
Benjamin Moore
Color: #1045 (Yellow)
SCHEME B
Carpet Mannington Commercial Carpet
Pattern: Carthage II 26 oz.
Color: Rock Crystal (ROCR)
Base
Johnsonite
Rubber Wall Base
Color: Moon Rock DC-29
General Paint
Benjamin Moore
Color: Navajo White
Accent Paint
Benjamin Moore
Color: #1039 (Gold)
Benjamin Moore
Color: #1274 (Rust)
Benjamin Moore
Color: Hamilton Blue
(PAGE 3 OF 3)
<PAGE> 56
FIRST AMMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment") dated April 10, 1998, by
and between CARRAMERICA REALTY CORPORATION, a Maryland corporation ("Landlord"),
and PORTABLE SOFTWARE CORPORATION, a Washington corporation ("Tenant"),
W I T N E S S N E T H:
WHEREAS,, Landlord and Tenant entered a Lease Agreement (the "Lease")
dated October 31st, 1997 for those certain Premises commonly known as Building B
at 6222 185th Avenue NE, Redmond, Washington 98052, located on that land legally
described on Appendix A hereto;
WHEREAS, the Lease provides, as more particularly set forth in
Appendix C thereto, that Tenant shall pay to Landlord upon completion of
construction of the Initial Improvements the cost of any tenant improvements in
excess of the cost of Landlord's building standard improvements; and
WHEREAS, the parties have determined the amount of such excess cost
(the "Additional Tenant Improvement Cost") and desire to amend the Lease
regarding Tenant's payment of Additional Rent to Landlord;
NOW, THEREFORE, in consideration of the terms hereof, the parties
agree as follows:
1. Payment of Additional Rent. Notwithstanding any other provision of
the Lease, Tenant covenants and agrees to pay to Landlord, as Additional Rent,
but without offset or deduction of any kind, compensation for the Additional
Tenant Improvement Cost of FIFTY THOUSAND SEVEN HUNDRED SEVENTY-FIVE DOLLARS
AND 84/100 ($50,775.84). Such amount shall be payable in monthly installments of
ONE THOUSAND EIGHTY-TWO DOLLARS ($1,082.00), or more, commencing February 1,
1999, and on or before the first day of each calendar month thereafter through
January 1, 2003.
2. Landlord's Remedies. If Tenant shall fail to pay timely any
installment of the Additional Rent provided for herein and Landlord elects to
terminate the Lease, all amounts payable under the terms of this Amendment shall
be deemed Rent due before such termination.
FIRST AMENDMENT TO LEASE - 1
KLB: February 5, 1998
<PAGE> 57
3. No Other Modifications. Except as expressly set forth herein, the
parties' Lease shall remain unmodified and shall continue in full force and
effect.
LANDLORD: CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ PHILIP L. HAWKINS
---------------------------------
Print Name: PHILIP L. HAWKINS
-------------------------
Print Title: MANAGING DIRECTOR
------------------------
TENANT: PORTABLE SOFTWARE CORPORATION,
a Washington corporation
By: /s/ ANNE KROGEN
---------------------------------
Print Name: ANNE KROGEN
-------------------------
Print Title: DIRECTOR OF FINANCE
------------------------
FIRST AMENDMENT TO LEASE - 2
KLB : February 5, 1998
<PAGE> 58
APPENDIX A
LEGAL DESCRIPTION OF REAL PROPERTY
Lot 2, City Of Redmond Short Plat Number SPL 91-0009, recorded under Recording
Number 9111159007; said short plat being a portion of the southwest quarter of
Section 7, Township 25 North, Range 6 East, W.M., in King County, Washington.
<PAGE> 59
)
DISTRICT OF COLUMBIA ) ss.
)
On this 17th day of April, 1998, before me, the undersigned, a Notary
Public in and for the District of Columbia, duly commissioned and sworn as
such, personally appeared Philip L. Hawkins, to me known to be the Managing
Director of CARRAMERICA REALTY CORPORATION, the corporation that executed the
within and foregoing instrument, and acknowledged the said instrument to be the
free and voluntary act and deed of said corporation for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument, and that the seal affixed is the corporate seal of said corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
/s/ OLIVIA M. KERR
----------------------------------------
Olivia M. Kerr
----------------------------------------
[print name]
NOTARY PUBLIC in and for the District of
Columbia, residing at Lorton, VA.
My commission expires 11-30-01
STATE OF WASHINGTON )
) ss.
County of KING )
I CERTIFY that I know or have satisfactory evidence that Ann Kroger is the
person who appeared before me, and acknowledged that she signed this
instrument, on oath stated that she was authorized to execute the instrument,
and acknowledged it as the Director of Finance of PORTABLE SOFTWARE
CORPORATION, to be the free and voluntary act of such party for the uses and
purposes mentioned in the instrument.
DATED: April 10th, 1998
/s/ LISA FOYSTON
----------------------------------------
Lisa Foyston
----------------------------------------
[print name]
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle, WA
My appointment expires 10-14-2000
FIRST AMENDMENT TO LEASE - 3
KLB: February 5, 1998
<PAGE> 1
EXHIBIT 10.15
[MOOREA SOFTWARE CORPORATION LETTERHEAD]
April 21, 1994
Sterling Wilson
5944 Cape Coral Drive
Austin, TX 78746
Dear Sterling:
Moorea Software Corporation (the "Company" or "Moorea") is please to offer you a
position as Chief Financial Officer at a salary, payable semi-monthly, which is
equivalent to a monthly salary of Seven Thousand Five Hundred Dollars ($7,500).
Upon completion of initial external financing, your salary will be increased to
a monthly salary of Eight Thousand Eight Hundred Dollars ($8,800), with a bonus
plan that will allow you to earn up to an additional Thirty Six Thousand
($36,000) per year. You will be entitled to the benefits that the Company makes
available to employees in positions comparable to yours and you will be granted
an option for the purchase of Fifty Thousand (50,000) shares of Common Stock,
which currently represents Five Percent (5%) of all shares of stock, calculated
on a fully diluted basis. This option will vest with respect to one third (33
1/3%) of the shares after one year, with the balance vesting in equal monthly
increments over the succeeding two years. The exercise price of this option will
be Forty Cents ($0.40) per share.
Immediately prior to completion of initial external financing, the number of
shares issuable under your Stock Option Agreement will be adjusted, either up
or down, to an amount equal to Five Percent (5%) of all shares of stock,
calculated on a fully diluted basis, following the completion of the financing.
Any adjustments made to your Stock Option Agreement immediately prior to
completion of the financing will be subject to the same price and terms as
stated in the original Stock Option Agreement.
The Company will pay your reasonable costs to relocate to Seattle. Included in
these costs will be one house hunting trip for you and your wife.
The Company asks that you complete the enclosed "Employee Confidential
Information and Inventions Agreements" prior to commencing employment. In part,
this Agreement requests that a departing employee refrain from using or
disclosing the Company's Confidential Information (as defined in the Agreement)
in any manner which might be detrimental to or conflict with the business
interests of Moorea or its employees. This agreement does not prevent a former
employee from using his or her general knowledge and experience, no matter when
or how gained, in any new field or position. If you should
<PAGE> 2
have any questions about the "Employee Confidential Information and Inventions
Agreements", please call me.
We hope that you and Moorea Software Corporation will find mutual satisfaction
with your employment. All of us at Moorea are very excited about your joining
our team and look forward to a beneficial and fruitful relationship.
Nevertheless, employees have the right to terminate their employment at any
time with or without cause or notice, and the Company reserves for itself an
equal right. We both agree that any dispute arising with respect to your
employment, shall be conclusively settled by arbitration in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association (AAA)
at the AAA office in Seattle, Washington.
This letter and the "Employee Confidential Information and Inventions
Agreements" contain the entire agreement with respect to your employment. The
terms of this offer may only be changed by written agreement, although the
Company may from time to time, in its sole discretion, adjust the salaries and
benefits paid to you and its other employees. Should you have any questions
with regard to any of the items indicated above, please feel free to call me.
Very Truly Yours,
/s/ MICHAEL W. HILTON
- ---------------------------------
Michael W. Hilton
President
ACCEPTED BY
/s/ STERLING WILSON
- ---------------------------------
Sterling Wilson
5/4/94
- ---------------------------------
Date
<PAGE> 1
EXHIBIT 10.16
[MOOREA SOFTWARE CORPORATION LETTERHEAD]
June 20, 1994
Jon Matsuo
24115 NE 29th
Redmond, WA 98053
Dear Jon:
Moorea Software Corporation (the "Company" or "Moorea") is pleased to offer you
a position as Executive Vice President, Sales and Marketing, at a salary,
payable semi-monthly, which is equivalent to a monthly salary of Seven Thousand
Five Hundred Dollars ($7,500). Upon completion of initial external financing,
your salary will be increased to a monthly salary of Eight Thousand Seven
Hundred Fifty Dollars ($8,750.00), with a bonus plan, to be determined by the
Moorea Board of Directors, that will allow you to earn up to an additional
Fifty Thousand Dollars ($50,000) per year. You will be entitled to the benefits
that the Company makes available to employees in positions comparable to yours
and you will be granted an option for the purchase of Sixty Five Thousand
(65,000) shares of Common Stock. This option will vest with respect to the
following:
o Twenty Thousand (20,000) shares will vest immediately. If you terminate your
employment with Moorea at any time within your first year as an employee, the
Company will reserve the right to repurchase all Twenty Thousand (20,000)
shares at your exercise price plus interest at an interest rate of 7%.
o The remaining Forty Five Thousand (45,000) shares will vest in equal monthly
increments over the succeeding two years following your first year of
employment.
The Company asks that you complete the enclosed "Employee Confidential
Information and Inventions Agreements" prior to commencing employment. In part,
this Agreement requests that a departing employee refrain from using or
disclosing the Company's Confidential Information (as defined in the Agreement)
in any manner which might be detrimental to or conflict with the business
interests of Moorea or its employees. This agreement does not prevent a former
employee from using his or her general knowledge and experience, no matter when
or how gained, in any new field or position. If you should have any questions
about the "Employee Confidential Information and Inventions Agreements", please
call me.
We hope that you and Moorea Software Corporation will find mutual satisfaction
with your employment. All of us at Moorea are very excited about your joining
our team and look forward to a beneficial and fruitful relationship.
Nevertheless, employees have the right to terminate their employment at any
time with or without cause or notice, and the
<PAGE> 2
Company reserves for itself an equal right. We both agree that any dispute
arising with respect to your employment, shall be conclusively settled by
arbitration in accordance with the Voluntary Labor Arbitration Rules of the
American Arbitration Association (AAA) at the AAA office in Seattle,
Washington.
This letter and the "Employee Confidential Information and Inventions
Agreements" contain the entire agreement with respect to your employment. The
terms of this offer may only be changed by written agreement, although the
Company may from time to time, in its sole discretion, adjust the salaries and
benefits paid to you and its other employees. Should you have any questions
with regard to any of the items indicated above, please feel free to call me.
Very Truly Yours,
/s/ MICHAEL W. HILTON
- -------------------------------
Michael W. Hilton
President
ACCEPTED BY
/s/ JON MATSUO
- -------------------------------
Jon Matsuo
6/20/94
- -------------------------------
Date
<PAGE> 1
EXHIBIT 10.17
[PORTABLE SOFTWARE LETTERHEAD]
December 5, 1996
Mr. Fred Ingham
2961 Linden Avenue
Berkeley, CA 94705
Dear Fred:
Portable Software Corporation (the "Company" or "Portable") is pleased to offer
you the position of Vice President, Business Development, reporting to Steve
Singh, President and Chief Executive Officer. Following is a summary of the
compensation and benefits which are included in our offer:
Compensation: $4,458.34 per semi-monthly pay period. There are 24 pay periods in
a year.
Bonus Plan: You will be eligible to participate in a bonus plan, similar to the
other members of the Executive Staff. This bonus plan is designed to allow you
to earn up to and additional $21,400 (20% of base salary) if the Company
achieves its revenue budget for FY97. As is the case with all the Company's
bonus plans, your plan is subject to change, at any time, at the Company's
discretion.
Relocation: Our offer includes the following relocation assistance. Actual
relocation expenses for you and your family to relocate to the Seattle area
(including airfare or mileage plus travel expenses if you choose to drive); the
reasonable cost of moving your household goods and 1 (one) automobile from the
Bay Area; and temporary housing expenses (i.e. rent) up to a maximum of 3
months until you find a permanent residence in the Seattle area. In addition,
Portable will incur the reasonable cost of a 4 day house-hunting trip for you
and your spouse in the Seattle area. In the unlikely event that you voluntarily
terminate employment with Portable Software within twelve (12) months of your
start date, you agree to reimburse the Company for all relocation expenses
incurred by the Company on your behalf.
Benefits: You will be entitled to the benefits that the Company makes available
to employees in positions comparable to yours.
<PAGE> 2
Page 2
401(k): The Company has a salary savings plan which allows you to defer
current compensation up to the limits provided under the 401k provision
of the Internal Revenue Code. You are eligible to enroll in this plan on
the first day of the calendar quarter following your date of hire. Your
contributions to this plan are 100% vested.
Stock: It will be recommended to the Board of Directors that you be
granted an option for the purchase of 65,000 shares of Common Stock.
This option will vest with respect to one-fourth (25%) of the shares
after one year, with the balance vesting in equal monthly increments
over the succeeding three years.
Medical and Dental Benefits: The Company provides a comprehensive
Medical and Dental plan. Portable pays the entire contribution for the
employee. There may be a small contribution for dependents. These
insurance benefits begin on your date of hire.
Life Insurance: The Company provides group life insurance in the amount
of $10,000 and accidental death insurance in the amount of $10,000
additional. Portable pays the entire premium.
Long Term Disability Insurance: The Company provides a long-term
disability salary continuance plan which pays 66 2/3% of your covered
monthly earnings up to a maximum of $7000/month until age 65 for
disabled employees. Portable pays the entire premium.
Vacation: You will receive 10 business days (two weeks) of vacation,
which begins to accrue on your date of hire.
The Company asks that you complete the enclosed "Employee Confidential
Information and Inventions Agreements" prior to commencing employment. In part,
the Agreement requests that a departing employee refrain from using or
disclosing the Company's Confidential Information (as defined in the Agreement)
in any manner which might be detrimental to or conflict with the business
interests of Portable or its employees. This agreement does not prevent a former
employee from using his or her general knowledge and experience, no matter when
or how gained, in any new field or position.
This letter and the "Employee Confidential Information and Inventions
Agreements" contain the entire agreement with respect to our employment. The
terms of this offer may only be changed by written agreement, although the
Company may from time to time, in its sole discretion, adjust the compensation
and benefits paid to you and its other employees.
<PAGE> 3
Page 3
Under Washington State law, employees have the right to terminate their
employment at any time with or without cause or notice, and the Company reserves
for itself an equal right.
It is anticipated that your start date will be on or before January 20, 1996.
Should you have any questions with regard to any of the items indicated above,
please feel free to call me. The acceptance of this offer may be made by signing
the enclosed copy and returning it to this office by the close of business at
5:00 p.m. on December 13, 1996.
You will need to provide employment eligibility verification within three days
of your start date. This is required by the Immigration and Naturalization
Service law passed in 1986. Please bring identification with you on your first
day so that we may complete the I-9 form during orientation.
We hope that you and Portable will find mutual satisfaction with your
employment. All of us at Portable are very excited about your joining our team
and look forward to a beneficial and fruitful relationship.
Very Truly Yours,
/s/ NEENA KENNEDY
- ------------------------
Neena Kennedy
Human Resources Manager
ACCEPTED BY
/s/ FRED INGHAM 12/10/96
- ------------------------ -----------
Fred Ingham Date
Start date: 1/20/96
-----------
<PAGE> 1
EXHIBIT 10.18
[PORTABLE SOFTWARE LETTERHEAD]
Monday, April 01, 1996
John Russo
6744 Mount Pakron Drive
San Jose, CA 95120
Dear John:
Portable Software Corporation (the "Company" or "Portable") is pleased to offer
you a position as Senior Director of Marketing at a salary, payable
semi-monthly, which is equivalent to a monthly salary of Eight Thousand One
Hundred Twenty-Five Dollars ($8,125.00). Portable also agrees to pay your
reasonable costs to relocate to Seattle. These costs will include one house
hunting trip, the cost of transporting your household goods, and the cost for
you to fly or drive to Seattle upon your relocation. In addition, Portable will
pay the cost of your apartment rental in Seattle up to a maximum of three (3)
months. We would ask that you review any significant costs with me prior to
incurring them. If you voluntarily terminate your employment with Portable
within the first twelve (12) months after your start date, you will reimburse
the Company for all costs it incurred in your relocation. These moneys will be
due at the time of your termination.
You will be entitled to the benefits that the Company makes available to
employees in positions comparable to yours and it will be recommended to the
Board of Directors that you be granted an option for the purchase of Eighty
Thousand (80,000) shares of Common Stock. This option will vest with respect to
one fourth (25%) of the shares after one year, with the balance vesting in
equal monthly increments over the succeeding three years.
The Company asks that you complete the enclosed "Employee Confidential
Information and Inventions Agreements" prior to commencing employment. In part,
this Agreement requests that a departing employee refrain from using or
disclosing the Company's Confidential Information (as defined in the Agreement)
in any manner which might be detrimental to or conflict with the business
interests of Portable or its employees. This agreement does not prevent a
former employee from using his or her general knowledge and experience, no
matter when or how gained, in any new field or position. If you should have any
questions about the "Employee Confidential Information and Inventions
Agreements", please call me.
<PAGE> 2
We hope that you and Portable Software corporation will find mutual
satisfaction with your employment. All of us at Portable are very excited about
your joining our team and look forward to a beneficial and fruitful
relationship. Nevertheless, employees have the right to terminate their
employment at any time with or without cause or notice, and the Company
reserves for itself an equal right. We both agree that any dispute arising with
respect to your employment, shall be conclusively settled by arbitration in
accordance with the Voluntary Labor Arbitration rules of the American
Arbitration Association (AAA) at the AAA office in Seattle, Washington.
This letter and the "Employee Confidential Information and Inventions
Agreements" contain the entire agreement with respect to your employment. The
terms of this offer may only be changed by written agreement, although the
Company may from time to time, in its sole discretion, adjust the salaries and
benefits paid to you and its other employees.
It is anticipated that your start date will be on or before April 22, 1996.
This offer will expire at 5:00 PM on Monday, April 1, 1996. Should you have any
questions with regard to any of the items indicated above, please feel free to
call me.
Very Truly Yours,
Sterling Wilson
CFO and Vice President of Operations
ACCEPTED BY
JOHN RUSSO
- ------------------------------------
John Russo
4/1/96
- ------------------------------------
Date Accepted
4/22/96
- ------------------------------------
Start Date
<PAGE> 1
EXHIBIT 10.19
STANDSTILL AGREEMENT
This Standstill Agreement (this "AGREEMENT") is made and entered into as
of August 10, 1998 by and between Portable Software Corporation, a Washington
corporation whose name effective August 3, 1998 is Concur Technologies, Inc.
("PORTABLE" or the "COMPANY"), and American Express Travel Related Services
Company, Inc. ("ATRS").
R E C I T A L S
A. Portable and certain investors are parties to a Series E Preferred
Stock Purchase Agreement (the "PURCHASE AGREEMENT").
B. Portable and AmEx desire that ATRS become a party to the Purchase
Agreement and purchase shares of Portable's Series E Preferred Stock.
C. Concurrently with the execution and delivery of this Agreement,
Portable is issuing a Warrant to AmEx exercisable for a maximum of Six Million
shares of Portable's capital stock.
D. As an inducement to Portable's sale of Series E Preferred Stock to
ATRS and issuance of the Warrant, ATRS and Portable desire to enter into this
Agreement, which, among other things, places limitations on ATRS's equity
ownership interest in Portable.
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, Portable and ATRS hereby agree as follows:
1. EFFECTIVE DATE. This Agreement will be effective as of the closing of
AmEx's purchase of shares of Series E Preferred Stock under the Purchase
Agreement (the "CLOSING").
2. STANDSTILL PROVISIONS.
2.1 ATRS hereby agrees that prior to February 10, 2000 it will not,
without the written consent of Portable, (i) acquire, or enter into arrangements
or understandings with any third party to acquire, beneficial ownership (as
defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934 as
amended) of any securities of the Company entitled to vote with respect to the
election of any directors of the Company ("Voting Stock") any securities
convertible into, exchangeable for or exerciseable for any Voting Stock or any
other right to acquire Voting Stock, if the effect of such acquisition would be
that ATRS, together with its majority-owned subsidiaries, would then
beneficially own and/or have the right to acquire more than seventeen percent
(17%) of the Voting Stock of Portable (the "Standstill Percentage"); or (ii)
make, or in any way participate in, any "solicitation" of "proxies" to vote any
Voting Stock (as such terms are defined or used in Regulation 14A under the
Securities Exchange Act of 1934, as such Regulation is currently in effect) of
Portable if Portable is at the time publicly-traded and subject to the proxy
rules.
<PAGE> 2
2.2 Notwithstanding the restriction set forth in Section 2.1 hereof:
(a) ATRS may acquire Voting Stock without regard to the foregoing
limitation, and such limitation shall be suspended, but not terminated, if and
for as long as (i) a tender or exchange offer is made and is not withdrawn or
terminated by another person or group to purchase or exchange for cash or other
consideration and Voting Stock that, if accepted or if otherwise successful,
would result in such person or group beneficially owning or having the right to
acquire shares of Voting Stock with aggregate Voting Power of more than twenty
percent (20%) of the Total Voting Power of the Company then in effect (not
counting for these purposes any shares of Voting Stock of the Company originally
acquired by such person or group from ATRS or any majority-owned subsidiary of
ATRS), and such offer is not withdrawn or terminated prior to ATRS making an
offer to acquire Voting Stock or acquiring Voting Stock; provided, however, that
the foregoing standstill limitation will be reinstated once any such tender or
exchange offer is withdrawn or terminated, (ii) another person or group
hereafter acquires Voting Stock and aggregate Voting Power of more than ten
percent (10%) of the Total Voting Power of the Company then in effect (not
counting for these purposes any shares of Voting Stock of the Company originally
acquired by such person or group from ATRS or any majority-owned subsidiary of
ATRS), where such person or group files a Schedule 13D (under the rules
promulgated under Section 13(d) under the Securities and Exchange Act of 1934 as
such rules and section are in effect on the date hereof), or other similar or
successor schedule or form, indicating that such person's or group's holdings
exceed ten percent (10%); provided, however, that the foregoing standstill
limitation will be reinstated once the percentage of Total Voting Power
beneficially owned by such other person or group falls below ten percent (10%);
(iii) another person or group hereafter acquires Voting Stock that results in
such person or group being required to file a Schedule 13G, or other similar or
successor schedule or form, indicating that such other person or group
beneficially owns or has the right to acquire Voting Stock with aggregate Voting
Power of more than ten percent (10%) of the Total Voting Power of the Company
(not counting for these purposes any shares of Voting Stock of the Company
originally acquired by such person or group from ATRS or any majority-owned
subsidiary of ATRS); provided, however, that the foregoing standstill limitation
will be reinstated once the percentage of Total Voting Power beneficially owned
by such other person or group falls below ten percent (10%); (iv) another person
or group orally or in writing contacts the Company and advises the Company of
such person's or group's intention to commence a tender or exchange offer or
propose an acquisition that, if so commenced, would result in a suspension
pursuant to clause (i) above (e.g., a "bear hug" offer); provided, however, that
the foregoing standstill limitation will be reinstated if such intention is
withdrawn in writing or other reasonable evidence of such withdrawal is provided
to ATRS; or (v) if it is publicly disclosed or ATRS otherwise learns that the
Company has entered into any letter of intent or agreement with a person or
group that, if consummated, would result in such person or group owning or
having the right to acquire shares of Voting Stock having aggregate Voting Power
of more than 50% of the Voting Power of all shares of Voting Stock then
outstanding. The Company shall notify ATRS in writing of the occurrence of any
event described in clauses (i) through (iv) of the immediately preceding
sentence as soon as practicable following the Company's becoming aware of any
such event, and in any case, shall provide ATRS written notice of any such event
within two (2) business days of the Company's being aware of the occurrence of
any such event.
-2-
<PAGE> 3
(b) ATRS will not be obliged to dispose of any Voting Stock to
the extent that the aggregate percentage of the Total Voting Power of the
Company represented by Voting Stock beneficially owned by ATRS (including any
majority-owned subsidiaries) or which ATRS (including any majority-owned
subsidiaries) has a right to acquire is increased beyond the Standstill
Percentage (i) as a result of a recapitalization of the Company or a repurchase
or exchange of securities by the Company or any other action taken by the
Company or its affiliates; (ii) as the result of acquisitions of Voting Stock
made during the period when ATRS's "standstill" obligations are suspended or
terminated pursuant to Section 2.1(a); (iii) by way of stock dividends or other
distributions or rights or offerings made available to holders of shares of
Voting Stock generally; or (iv) with the consent of a simple majority of the
independent authorized members of the Company's Board of Directors and ATRS is
expressly allowed to request from the Board that this Agreement be suspended or
terminated; or (v) as part of a transaction on behalf of ATRS's Profit Sharing
Retirement Plan, 401(k) Savings Plan, or any successor or additional retirement
plans thereto (collectively, the "Retirement Plans") where the Company's shares
in such Retirement Plans are voted by a trustee for the benefit of ATRS
employees or, for those Retirement Plans where ATRS controls voting, where ATRS
agrees not to vote any shares of such Retirement Plan Voting Stock that would
cause ATRS to exceed the Standstill Percentage.
(c) As used in this Section 2, (i) the term "Voting Power" of any
Voting Stock means the number of votes such Voting Stock is entitled to cast for
directors of the Company at any meeting of shareholders of the Company, and (ii)
the term "Total Voting Power" means the total number of votes which may be cast
in the election of directors of the Company at any meeting of shareholders of
the Company if all Voting Stock was represented and voted to the fullest extent
possible at such meeting, other than votes that may be cast only upon the
happening of a contingency that has not occurred.
3. GENERAL PROVISIONS.
3.1 Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) if to Portable, at:
Portable Software Corporation
6222 185th Avenue NE
Redmond, WA 98052
Attention: President
Facsimile: 425/702-8828
-3-
<PAGE> 4
with a copy to:
Fenwick & West LLP
Two Palo Alto Square, Suite 800
Palo Alto, CA 94306
Attention: Matthew Quilter, Esq.
Facsimile: 650/494-1417
(b) If to ATRS:
American Express Travel Related Services Company, Inc.
American Express Tower
World Financial Center
New York, NY 10285
Attention: General Counsel
Facsimile: 212/619-7099
with a copy to:
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111-3143
Attention: Richard D. Harroch, Esq.
Facsimile: 415/773-5930
Any party hereto (and such party's permitted assigns) may by notice so given
provide and change its address for future notices hereunder. Notice shall
conclusively be deemed to have been given when personally delivered or when
deposited in the mail in the manner set forth above.
3.2 Entire Agreement. This Agreement, constitutes and contains
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
3.3 Amendment of Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Portable and ATRS (and/or any of their permitted successors
or assigns).
3.4 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the State of
Delaware as applied to agreements among Delaware residents entered into and to
be performed entirely within Delaware, excluding that body of law relating to
conflict of laws and choice of law.
-4-
<PAGE> 5
3.5 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
3.6 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
3.7 Successors And Assigns. The provisions of this Agreement
shall inure to the benefit of, and shall be binding upon, the successors and
permitted assigns of the parties hereto.
3.8 Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
3.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3.10 Costs And Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and attorneys' fees incurred in each such
action, suit or other proceeding, including any and all appeals or petitions
therefrom.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Standstill
Agreement as of the date and year first above written.
AMERICAN EXPRESS TRAVEL PORTABLE SOFTWARE CORPORATION
RELATED SERVICES COMPANY, INC.
By: /s/ ANNE BUSQUET By: /s/ STERLING WILSON
-------------------------------- --------------------------------
Name: Anne Busquet Name: Sterling Wilson
------------------------------ ------------------------------
Title: President, American Express Title: Vice President and Chief
----------------------------- -----------------------------
Relationship Services Financial Officer
----------------------------- -----------------------------
[SIGNATURE PAGE TO STANDSTILL AGREEMENT]
-6-
<PAGE> 1
EXHIBIT 21.01
LIST OF SUBSIDIARIES OF CONCUR TECHNOLOGIES, INC.
1. XMS UK Ltd., a corporation organized under the laws of the United Kingdom.
2. 7Software, Inc., a California corporation.
<PAGE> 1
Exhibit 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our reports dated
August 14, 1998 in the Registration Statement on Form S-1 and the related
Prospectus of Concur Technologies, Inc. for the registration of 3,000,000 shares
of its common stock.
Seattle, Washington ERNST & YOUNG LLP
August 25, 1998
/S/ ERNST & YOUNG LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1997 OCT-01-1996
<PERIOD-END> JUN-30-1998 SEP-30-1997
<CASH> 15,604 6,695
<SECURITIES> 0 0
<RECEIVABLES> 3,572 4,365
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 19,574 11,225
<PP&E> 2,652 2,077
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 23,319 13,330
<CURRENT-LIABILITIES> 10,105 5,042
<BONDS> 0 0
25,041 17,264
0 0
<COMMON> 6,268 259
<OTHER-SE> (27,628) (13,969)
<TOTAL-LIABILITY-AND-EQUITY> 23,319 13,330
<SALES> 8,039 6,347
<TOTAL-REVENUES> 11,715 8,270
<CGS> 318 394
<TOTAL-COSTS> 4,020 2,663
<OTHER-EXPENSES> 9,365 3,401
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 327 88
<INCOME-PRETAX> (13,095) (5,524)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (13,095) (5,524)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,095) (5,524)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
Exhibit 99.01
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated balance sheets of Concur Technologies, Inc. as
of September 30, 1996 and 1997, and June 30, 1998, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended September 30, 1997, and the nine
months ended June 30, 1998, and have issued our report thereon dated August 14,
1998 (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in Item 16(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Seattle, Washington ERNST & YOUNG LLP
August 14, 1998
/S/ ERNST & YOUNG LLP
