<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOTTOMLINE TECHNOLOGIES (DE), INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 02-0433294
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
---------------------
155 FLEET STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
DANIEL M. MCGURL
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOTTOMLINE TECHNOLOGIES (DE), INC.
155 FLEET STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOHN A. BURGESS, ESQ. MARK L. JOHNSON, ESQ.
PHILIP P. ROSSETTI, ESQ. RICHARD G. COSTELLO, ESQ.
HALE AND DORR LLP FOLEY, HOAG & ELIOT LLP
60 STATE STREET ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02109
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 832-1000
TELECOPY: (617) 526-5000 TELECOPY: (617) 832-7000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value per share....... [ ]shares $[ ] $40,000,000 $11,120
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</TABLE>
(1) Includes [ ] shares which the Underwriters have the option to purchase
from the Company to cover over-allotments, if any. See "Underwriting."
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE +
+SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1998
[LOGO]
[ ] SHARES
COMMON STOCK
Bottomline Technologies (de), Inc. is offering [ ] shares of its common
stock and the Selling Stockholders are selling an additional [ ] shares. This
is Bottomline's initial public offering and no public market currently exists
for its shares. We have applied for approval for quotation on the Nasdaq
National Market under the symbol "EPAY" for the shares we are offering. We
anticipate that the initial public offering price will be between $ and $
per share.
---------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to the Company......................................... $ $
Proceeds to the Selling Stockholders............................ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Bottomline has granted the Underwriters a 30-day option to purchase up to an
additional [ ] shares of Common Stock to cover over-allotments. BancBoston
Robertson Stephens Inc. expects to deliver the shares of Common Stock to
purchasers on , 1999.
---------------
BANCBOSTON ROBERTSON STEPHENS
BT ALEX BROWN INCORPORATED
CIBC OPPENHEIMER
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
[INSIDE FRONT COVER]
[This is a graphic which shows a paper check with a universal "no" sign
through it. The words "Payment Management Software and Services that enable
Organizations to Manage their Transition from Paper Checks to Electronic
Payments" will be above the graphic]
[FRONT COVER FOLDOUT]
[This is a graphic which contains the following text:
"Bottomline Technologies is a Leading Provider of Enterprise-wide Payment
Management Solutions -- Payment Management Software and Services that
Enable Organizations to Manage their Transition from Paper Checks to
Electronic Payments
> Payments are Universal
> Electronic Payments Bring Significant Benefits
> Bottomline Provides the Platform to Transition to Electronic Payments
> Single-platform for paper and electronic payments
> Cash Management
> Enterprise-wide payment control
> Security and Fraud Protection
> Ability to meet Government EFT mandates
> Internet Access
Beside the text is a graphic containing three concentric circles. The
inside circle represents a Payment Server and contains the following text:
"Electronic Payments/Receipts; LaserCheck Printing; Electronic Remittance
Advices; Check Fraud Avoidance"
The Second Circle is divided into four quadrants. Each quadrant in the
second circle is color coded to relate to three color coded rings in the outer
circle. The quadrants in the second circle and the related outside rings contain
the following text:
"Financial Institutions (Large Banks, Federal Reserve and Small Banks).
Payees (Individual, Government and Business). Internet (Employees, Customers and
Vendors); and Payors (Accounting Software, Legacy Financial and ERP Systems)."]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, THE
"COMPANY," "BOTTOMLINE," "WE," "US" AND "OUR" REFER TO BOTTOMLINE TECHNOLOGIES
(DE), INC. (UNLESS THE CONTEXT OTHERWISE REQUIRES).
UNTIL [ ], 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 17
Business................................................................. 30
Management............................................................... 43
Principal and Selling Stockholders....................................... 51
Description of Capital Stock............................................. 52
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 56
Legal Matters............................................................ 57
Experts.................................................................. 57
Additional Filings and Company Information............................... 58
Index to Financial Statements............................................ F-1
</TABLE>
---------------------
Bottomline Technologies, CheckGard, LaserCheck and PayBase are registered
trademarks of Bottomline. All other trademarks or trade names referred to in
this prospectus are the property of their respective owners.
3
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully. Unless otherwise indicated, all information
contained in this prospectus assumes that the underwriters will not exercise
their over-allotment option. This prospectus contains forward-looking
statements which involve risks and uncertainties. Bottomline'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.
THE COMPANY
We are a leading provider of enterprise-wide payment solutions. Our software
and services enable organizations to transition from the traditional paper
check process to electronic payments and to facilitate electronic commerce. We
provide a single platform to control, manage and issue all payments. Our
software complements and integrates with existing corporate payment
applications, such as accounts payable, payroll, travel and entertainment
expense, insurance claims and commissions. Our products provide Internet
capability and run on Windows NT technology. Today, we have more than 2,000
customers, representing every major industry-sector, including The Charles
Schwab Corporation, Dow Jones & Company, Inc., Harvard University, Microsoft
Corporation and Nissan Motor Acceptance Corporation.
Most enterprises today still rely on pre-printed, paper checks to generate
and receive payments. It is estimated that in 1997, United States businesses
issued or received paper checks in approximately 73 billion transactions. With
the significant growth of the Internet and electronic commerce, many
enterprises are seeking to implement a cost-effective, secure, electronic
payment system. The National Automated Clearing House Association ("NACHA")
estimates that the cost of a business-to-business electronic payment averages
$3.00 compared to $8.33 for a similar paper-based payment. NACHA estimates that
approximately 4.4 billion automated clearing house payments were made in 1997,
an increase of approximately 430% since 1991.
Bottomline's PayBase product suite is designed to provide a single platform
to control, manage and issue all payments, whether paper-based or electronic,
across an enterprise. Our software modules permit customers to leverage the
flexibility of the Internet while increasing security and fraud avoidance. Our
technology complements our customers' existing information systems and payment
applications. We provide multiple options for delivery of detailed payment or
remittance information, including via the Internet. Our LaserCheck offering is
a cost-effective, software-based, laser-printing system that allows an
enterprise to streamline its paper-payment process and to generate checks at
the point of need. We also offer consulting services and related equipment and
supplies to help customers plan, design and implement the transistion from
paper to electronic payments.
Bottomline's objective is to be the leading provider of enterprise-wide
payment solutions. In addition to our direct selling efforts, we also promote
our products and services through relationships with enterprise resource
planning and accounting system vendors, such as Oracle and SAP, and
implementation consultants. For example, we recently entered into a working
agreement with Arthur Andersen LLP. Under the working agreement, Arthur
Andersen LLP will work with us to develop a marketing program and to utilize
the enterprise consulting experience of Arthur Andersen LLP to demonstrate the
benefits of migrating to our enterprise-wide PayBase/32/ payment solution. In
March 1998, we were selected by the Federal Reserve System to provide the
necessary software to enable over 12,000 banks to process electronic payments
with remittance information for their commercial customers.
Bottomline was originally organized as a New Hampshire corporation in 1989
and was reincorporated as a Delaware corporation in August 1997. Bottomline's
principal office is located at 155 Fleet Street, Portsmouth, New Hampshire
03801 and its telephone number is (603) 436-0700. The Company's web site is
www.bottomline.com. The Company's web site is not a part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.. [ ] shares
Common Stock offered by the Selling
Stockholders....................... [ ] shares
Common Stock to be outstanding after
the Offering....................... [ ] shares(1)
Use of Proceeds...................... To fund continued growth and expansion
of its business, product development,
potential acquisitions and other general
corporate purposes
Nasdaq National Market symbol........ EPAY
</TABLE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------------------- -------------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues................ $10,408 $15,115 $18,067 $22,126 $29,037 $ 6,064 $ 8,105
Income (loss) from
operations............ 1,454 1,234 1,553 (1,732) 2,830 358 747
Net income (loss)....... 924 775 883 (1,252) 1,603 194 457
Earnings (loss) per
share available to
common
stockholders(2)(3):
Basic................. $ 0.49 $ 0.37 $ 0.42 $ (0.68) $ 0.71 $ 0.08 $ 0.20
Diluted............... $ 0.39 $ 0.30 $ 0.34 $ (0.68) $ 0.61 $ 0.07 $ 0.17
Shares used in computing
earnings (loss) per
share available to
common
stockholders(3):
Basic................. 1,752 1,841 1,898 1,995 2,105 2,102 2,120
Diluted............... 2,179 2,283 2,334 1,995 2,439 2,432 2,485
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED (4)(5)
------- ------------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 1,491 $
Working capital...................................... 4,127
Total assets......................................... 12,084
Redeemable common stock, at redemption value......... 1,381 --
Stockholders' equity................................. 4,797
</TABLE>
- --------
(1) The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of September 30, 1998 and
does not include the following:
. 371,000 shares subject to options outstanding as of September 30, 1998
at a weighted average exercise price of $21.85 per share;
. 639,000 shares that could be issued under Bottomline's 1997 Stock
Incentive Plan;
. 250,000 shares that could be issued under Bottomline's 1998 Employee
Stock Purchase Plan; and
. 100,000 shares that could be issued under Bottomline's 1998 Director
Stock Option Plan.
(2) Earnings (loss) per share available to common stockholders reflects the
reduction from net income of accretion attributable to the redeemable
common stock.
(3) Shares used in computing diluted earnings (loss) per share available to
common stockholders reflect the dilutive effect of all redeemable common
stock.
(4) Gives effect to the termination of redemption rights of the redeemable
common stock upon the effectiveness of this offering.
(5) Gives effect to the sale by Bottomline of [ ] shares of common stock
offered hereby at an assumed public offering price of $[ ] per share and
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by Bottomline. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an investment
decision. The risks described below are not the only ones that we face.
Additional risks that generally apply to publicly traded companies, that are
not yet identified or that we currently think are immaterial may also impair
our business operations. Our business, operating results and financial
condition could be adversely affected by any of the following risks. The
trading price of our common stock could decline due to any of these risks, and
you could lose all or part of your investment. You should also refer to the
other information set forth in this prospectus, including our financial
statements and the related notes. This prospectus contains forward-looking
statements that involve risks and uncertainties. These forward-looking
statements are usually accompanied by words such as "believes," "anticipates,"
"plans," "expects" and similar expressions. Our actual results may differ
materially from the results discussed in the forward-looking statements because
of factors such as the Risk Factors discussed below.
VARIABILITY OF QUARTERLY PERFORMANCE
Our revenues and operating results may fluctuate from period to period.
Factors that could cause these fluctuations include:
<TABLE>
<S> <C>
. the timing of orders and . the incurrence of costs
longer sales cycles, relating to the integration
particularly due to increased of software products and
average selling prices of our operations in connection with
enterprise-wide payment acquisitions of technologies
solutions or businesses
. the loss of key employees and . delivery interruptions
the time required to train relating to equipment and
new hires, particularly sales supplies purchased from
and engineering personnel third-party vendors, which
could delay system sales
. the timing and market
acceptance of new products or . economic conditions which may
product enhancements by affect our customers' and
either us or our competitors potential customers' budgets
for technological
expenditures
. the timing of product
implementations, which are
highly dependent on
customers' resources and
discretion
</TABLE>
In addition, during our second fiscal quarter ended December 31, revenues
have typically increased as customers on a calendar-based fiscal year completed
their capital spending plans. During our third fiscal quarter ended March 31,
revenues have typically declined as customers focus internal resources on
statutory and regulatory reporting requirements. Our fourth fiscal quarter
ended June 30, generally has the largest revenues as customers complete
projects before summer, when activity in many corporate financial departments
tends to slow. As a result, the Company has historically experienced first
quarter revenues that are lower than those of the immediately preceding
quarter. In addition, we could encounter unanticipated problems which could
adversely affect our results of operations in one or more quarters. For
example, during fiscal year 1997, the Company experienced significant problems
with a third-party printer it had been reselling. The printer problems had a
material adverse effect on our operating results, including: (i) increased
customer support expenses incurred in receiving, investigating and responding
to printer-related issues, (ii) increased service, maintenance and supply
expenses incurred in repairing and, in some cases, replacing the defective
printers, (iii) a decrease in orders from both new and existing customers as
printer problems adversely affected sales productivity and (iv) inventory
write-offs related to the defective printers.
A significant percentage of our expenses, particularly personnel costs and
rent, are relatively fixed, and, therefore, shortfalls in revenues may cause
significant variations in operating results in any quarter. Because of these
factors, we believe that period to period comparisons of our results of
operations are not necessarily
6
<PAGE>
meaningful, and that investors should not rely on them as indicators of future
performance. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." In addition, it is possible that in some future
quarters our results of operations will be below the expectations of public
market analysts and investors, and in that case the price of our common stock
could be materially adversely affected.
DEPENDENCE ON PAYMENT MANAGEMENT SOLUTIONS
Substantially all of our revenues come from the license and maintenance of
our payment management solutions and sales of related products and services.
Our PayBase software products are designed to provide a single platform to
control, manage and issue all payments, whether paper-based or electronic,
across an enterprise. Our future performance will depend to a large degree upon
the market acceptance of PayBase as an enterprise-wide payment solution. Our
prospects will also depend upon enterprises seeking to enhance their payment
functions to integrate electronic payment capabilities. In addition, our future
results will depend on the continued market acceptance of our department server
platforms, including our LaserCheck solution, and our ability to introduce
enhancements to meet the market's evolving needs for secure, payment-management
solutions. Any reduction in demand for the Company's payment management
solutions, increased competition in the market for automated payment management
systems, changes in technology or lack of meaningful growth in the market for
electronic and enterprise-wide payment solutions could have a material adverse
effect on Bottomline's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Products and Services."
RAPID TECHNOLOGICAL CHANGE
Our success is dependent on the ability to develop new and enhanced software,
services and related products to meet rapidly evolving requirements for payment
management software. Trends which could have a critical impact on Bottomline
include:
. rapidly changing technology, particularly in the areas of database
management and network technology;
. evolving industry standards, including both formal and de facto
standards relating to electronic payments;
. developments and changes relating to the Internet;
. competing products which offer increased functionality; and
. changes in customer requirements.
If we are unable to develop and introduce new products, or enhancements to
existing products, in a timely and successful manner, our business, operating
results and financial condition could be materially adversely affected.
COMPETITION
The market for payment management software is intensely competitive and
characterized by rapid technological change. Our competitors are diverse and
offer a range of solutions directed at different segments of the payment
management market. These competitors include:
. companies offering a broad suite of electronic data interchange
products, such as Sterling Commerce;
. companies that provide a broad spectrum of electronic payment
solutions, such as CheckFree;
. companies that offer laser-check printing software and services; and
. providers of traditional payment products, including check stock and
check printing software and services, such as Standard Register.
7
<PAGE>
Some of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, greater brand
recognition and a larger installed customer base than we do. In addition,
current and potential competitors may make strategic acquisitions or establish
cooperative relationships to expand their product offerings and to offer more
comprehensive solutions. In order to be successful in the future, we must
respond promptly and effectively to our competitors' innovations and industry
trends. We also expect to face additional competition as other established and
emerging companies enter the market for payment management solutions. Sales
opportunities may also be reduced to the extent that organizations choose to
develop payment management solutions internally. We may not be able to compete
effectively with current and future competitors. Increased competition may
result in price reductions of our products and services, reduced revenues and
gross margins and loss of market share, any one of which could have a material
adverse effect on our business, operating results and financial condition. See
"Business--Competition."
MANAGEMENT OF GROWTH
Our rapid growth has sometimes strained, and may in the future strain, our
managerial and other resources. Our ability to manage growth will depend in
part on our ability to continue to enhance our operating, financial and
management information systems. There can be no assurance that our personnel,
systems, procedures and controls will be adequate to support our growth. If we
are unable to manage growth effectively, the quality of our services, our
ability to retain key personnel and our business, operating results and
financial condition could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY PERSONNEL
Our success depends upon the efforts and ability of our executive officers
and key technical employees who are skilled in electronic commerce, payment
methodology and regulation, and Internet, database and network technologies. We
currently do not maintain "key man" life insurance policies on any of our
employees. While certain executive officers have employment agreements with us,
the loss of the services of any of our senior executive officers or other key
employees could have a material adverse effect on our business, operating
results and financial condition. See "Management."
ABILITY TO ATTRACT AND RETAIN SKILLED PERSONNEL
We are dependent upon the ability to attract, hire, train and retain highly
skilled technical, sales and marketing, and support personnel, particularly
with expertise in electronic payment technology and knowledge of the banking
industry. Competition for qualified personnel is intense. In addition, our
location in Portsmouth, New Hampshire may limit our access to skilled
personnel. Any failure to attract, hire or retain such personnel could have a
material adverse effect on our business, operating results and financial
condition. In addition, we plan to expand our sales and marketing and customer
support organizations. Based on our experience, it takes an average of six
months for a salesperson to become fully productive. There can be no assurance
that we will be successful in increasing the productivity of our sales
personnel, and the failure to do so could have a material adverse effect on our
business, operating results and financial condition.
RISKS ASSOCIATED WITH THE YEAR 2000
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to meet Year 2000
requirements ("Year 2000"). Significant uncertainties exist in the software
industry concerning the potential effects associated with such compliance.
We have assessed our internal systems and our currently supported products,
including tools, equipment and software provided by others, for possible
problems in processing, reporting, displaying, functioning with and otherwise
handling date data containing the year 2000 and beyond. We are in the process
of formulating
8
<PAGE>
contingency plans in the event that we are unsuccessful in implementing our
plans to make all of our systems, facilities and currently supported products
Year 2000 ready. The Company believes that all of its products installed after
February 1997 were Year 2000 ready at the time of installation.
Notwithstanding our efforts, any of our internal systems and facilities and
any of the products we supply to customers could have undetected Year 2000
problems. In addition, customers using previous generations of our products may
assert claims against us because of the failure of our products to meet Year
2000 requirements. Any failure by us to make Year 2000 ready our internal
systems and facilities could cause significant operational problems for us.
Further, our failure to timely provide adequate resources to correct identified
Year 2000 problems in our currently supported products could result in claims
by or liability to customers, which may have a material adverse effect on our
business, operating results and financial condition. Failure of third-party
software and equipment incorporated in our currently supported products to be
Year 2000 ready could require us to incur unanticipated expenses to remedy Year
2000 problems, which could have a material adverse effect on our business,
operating results and financial condition. Furthermore, the purchasing patterns
of our customers or potential customers may be affected by Year 2000 issues
because they may be required to expend significant resources on Year 2000
compliance, rather than investing in new software solutions or services such as
those offered by us, which could have a material adverse effect on our
business, operating results and financial condition.
RISK OF SOFTWARE DEFECTS
Our software products could contain errors or "bugs" that could adversely
affect their performance. Additionally, we regularly introduce new releases and
periodically introduce new versions of our software products. Any defects or
errors in new products or enhancements could result in adverse customer
reactions, negative publicity regarding Bottomline and our products and could
have a material adverse effect on our business, operating results and financial
condition. See "Business--Products and Services."
PROBLEMS WITH THIRD-PARTY HARDWARE
We resell laser printers made by third parties as part of our overall product
offerings. During our 1997 fiscal year, we experienced a significant problem
with a third-party printer that we were then reselling. The problem resulted in
increased customer support and service expenses, a decrease in orders from new
and existing customers, and an inventory write-off for defective printers of
approximately $217,000. In response, we have revised and enhanced our quality
assurance control programs and now utilize multiple printers and printer
vendors. Any repetition of these problems could, however, have a material
adverse effect on our business, operating results and financial condition.
PRODUCT LIABILITY
Our software and hardware products are designed to provide critical payment
management functions and to limit the risk of fraud or loss in effecting such
transactions. As a result, our products are critical to our customers and there
is the potential for significant product liability claims. Our license
agreements with customers typically place the responsibility for use of the
system on the customer and contain provisions intended to limit our exposure to
product liability claims. However, these limitation provisions may not preclude
all potential claims. We have not experienced any product liability claims to
date. However, a product liability claim brought against us, even if not
successful, would likely be time consuming and costly. A successful liability
claim could have a material adverse effect on our business, operating results
and financial condition. See "Business--Products and Services."
9
<PAGE>
INTELLECTUAL PROPERTY RIGHTS
We rely upon a combination of patent, copyright and trademark laws and non-
disclosure and other intellectual property contractual arrangements to protect
our proprietary rights. We have one allowed United States patent application
relating to certain security aspects of our dual payment process. However,
there can be no assurance that our allowed patent, or any other patents that
may be issued in the future, will be of sufficient scope and strength to
provide meaningful protection of our technology or any commercial advantage to
us, or that the patents will not be challenged, invalidated or circumvented. We
enter into agreements with our employees and clients that seek to limit and
protect the distribution of proprietary information. There can be no assurance
that the steps we have taken to protect our property rights, however, will be
adequate to deter misappropriation of proprietary information, and we may not
be able to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights.
Although we believe that our products and services do not infringe upon the
intellectual property rights of others and that we have all rights necessary to
utilize the intellectual property employed in our business, we are subject to
the risk of claims alleging infringement of third-party intellectual property
rights. Any such claims could require us to spend significant sums in
litigation, pay damages, delay product installments, develop non-infringing
intellectual property or acquire licenses to intellectual property that is the
subject of any such infringement. Therefore, such claims could have a material
adverse effect on our business, operating results and financial condition. See
"Business--Proprietary Rights."
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
We may, from time to time, pursue acquisitions that could provide additional
new product or service offerings, additional industry expertise, a broader
client base or an expanded geographic presence. Future acquisitions by us may
result in the use of significant amounts of cash, potentially dilutive
issuances of equity securities, incurrence of debt or amortization expenses
related to goodwill and other intangible assets, any of which could materially
adversely affect our business, operating results and financial condition. In
addition, acquisitions involve numerous risks, including: (i) difficulties in
the assimilation of the operations, technologies, products and personnel of the
acquired company, (ii) the diversion of management's attention from other
business concerns, (iii) risks of entering markets in which we have no or
limited prior experience and (iv) the potential loss of key employees of the
acquired company. From time to time, we have engaged in discussions with third
parties concerning potential acquisitions of product lines, technologies and
business. However, there are currently no active negotiations, commitments or
agreements with respect to any such acquisition. In the event that such an
acquisition does occur, there can be no assurance that our business, operating
results and financial condition will not be materially adversely affected.
SIGNIFICANT UNALLOCATED NET PROCEEDS
We have no specific uses for most of the anticipated net proceeds of this
offering other than general working capital purposes. Our management will have
broad discretion to use and invest the net proceeds. As a result, investors in
this offering will be relying upon management's judgment with only limited
information about its specific intentions regarding the use of proceeds. See
"Use of Proceeds."
NO PRIOR PUBLIC MARKET
Before this offering, there has been no public market for our common stock.
Bottomline, the selling stockholders and the Underwriters will determine the
public offering price by negotiations, and this price may not be the price at
which our common stock will trade. See "Underwriting" for a discussion of
factors to be considered in determining the public offering price. Although our
common stock will be quoted on the Nasdaq National Market, an active trading
market may not develop and be sustained after this offering. The market price
of our common stock may fluctuate substantially due to a variety of factors,
including:
. quarterly fluctuations in operating results;
. adverse circumstances affecting the introduction or market acceptance
of new products or services offered by us;
10
<PAGE>
. announcements of new products or services by competitors;
. changes in earnings estimates by analysts;
. changes in accounting principles;
. sales of common stock by existing holders; and
. loss of key personnel and other factors.
In addition, the stock market is subject to extreme price and volume
fluctuations. Securities class action litigation has often been brought against
companies that experience volatility in the market price of their securities.
Litigation brought against us could result in substantial costs and a diversion
of management's attention and resources, which could have a material adverse
effect on our business, operating results and financial condition.
IMMEDIATE AND SUBSTANTIAL DILUTION
The public offering price per share of common stock is expected to be
substantially higher than the net tangible book value per share of our common
stock. Purchasers of shares of common stock in this offering will experience
immediate and substantial dilution of $[ ] in the pro forma net tangible
book value per share of common stock (assuming a public offering price of
$[ ] per share). The exercise of outstanding options to purchase our common
stock will result in additional dilution per share. See "Dilution."
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Delaware corporate law contains, and our certificate of incorporation and by-
laws will contain, certain provisions that could have the effect of delaying,
deferring or preventing a change in control of Bottomline. See "Description of
Capital Stock" for a discussion of these provisions. These provisions could
limit the price that certain investors might be willing to pay in the future
for shares of our common stock. Certain of these provisions:
. authorize the issuance of "blank check" preferred stock (preferred
stock which can be created and issued by the board of directors
without prior stockholder approval) with rights senior to those of
common stock;
. provide for a staggered board of directors (so that it would take
three successive annual meetings to replace all directors);
. prohibit stockholder action by written consent; and
. establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can
be acted upon by stockholders at a meeting.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of our common stock in the public market following this offering could
adversely affect the market price of our common stock. All of the shares
offered under this prospectus will be freely tradable in the open market. The
remaining [ ] shares of common stock which will be outstanding after this
offering are considered "restricted securities" under Rules 144 or 701 of the
Securities Act. Generally, restricted securities that have been owned for a
period of at least two years may be sold immediately after the completion of
this offering and restricted securities that have been owned for at least one
year may be sold 90 days after the completion of this offering. Certain of the
restricted securities are subject to lock-up agreements with the Underwriters.
Persons subject to lock-up agreements have agreed not to sell shares of common
stock without the prior permission of the Underwriters for a period of 180 days
after the completion of this offering. The table below sets forth information
regarding potential sales of restricted securities.
. [ ] shares may be sold immediately after completion of this offering;
. [ ] shares may be sold 90 days after completion of this offering; and
. [ ] shares may be sold upon the expiration of the lock-up agreements.
11
<PAGE>
Shares of common stock may also be issued and then sold in the open market
upon the exercise of options. We intend to register an aggregate of 1,110,000
shares of common stock, which may be issued under our 1989 Stock Option Plan,
1997 Stock Incentive Plan and 1998 Director Stock Option Plan after this
offering. The table below sets forth information regarding potential sales of
common stock as a result of the exercise of options outstanding on the date of
this prospectus.
. [ ] shares may be sold 90 days after consummation of this offering;
and
. [ ] shares may be sold upon the expiration of the lock-up agreements.
In addition, Bottomline intends to register an aggregate of 250,000 shares of
common stock reserved for issuance under its 1998 Employee Stock Purchase Plan.
However, no shares will be issuable under the 1998 Employee Stock Purchase Plan
until [ ], 1999.
12
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of [ ] shares of common
stock offered by us are estimated to be $[ ] after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us and
assuming a public offering price of $[ ] per share. We will not receive any
of the proceeds from the sale of shares by the selling stockholders.
The principal purposes of this offering are:
. to increase our equity capital;
. to facilitate future access by us to public equity markets;
. to provide increased visibility and credibility in a marketplace where
several of our current and potential competitors are, or may in the
future be, public companies; and
. to enhance our ability to use our common stock as consideration for
acquisitions and as a means of attracting and retaining key employees.
We will use the net proceeds from this offering for growth and expansion of
our business, product development, international expansion, possible
acquisitions and for working capital and other general corporate purposes. We
have not identified specific uses for such proceeds and management will have
discretion over their use and investment. We intend to invest the net proceeds
from this offering in short-term, investment grade, interest-bearing
instruments until they are used.
We intend to seek acquisitions that could provide additional new product or
service offerings, additional industry expertise, a broader client base or an
expanded geographic presence, and a portion of the net proceeds may be used for
such acquisitions. While we discuss potential acquisitions from time to time,
we currently have no plans, commitments or agreements for any acquisitions and
there can be no assurances that any acquisitions will be made.
DIVIDEND POLICY
We currently intend to retain earnings, if any, to fund the development and
growth of our business and do not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of our Board of Directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs and plans for expansion. Under the terms of our revolving credit
agreement, there are restrictions on our ability to declare and pay dividends.
13
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1998: (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the termination of redemption rights of the redeemable
common stock upon the effectiveness of this offering and (iii) the pro forma as
adjusted capitalization of the Company after giving effect to the sale by the
Company of [ ] shares of common stock offered hereby at an assumed public
offering price of $[ ] per share and after deducting the estimated
underwriting discounts and commissions and offering expenses payable by the
Company. See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Redeemable common stock, at redemption value;
authorized, issued and outstanding 267,000
shares, actual; no shares authorized, issued
and outstanding, pro forma and pro forma as
adjusted.................................... $1,381 $ -- $ --
Stockholders' equity:
Preferred stock, $.001 par value;
authorized shares -- none, actual and pro
forma; authorized shares -- 4,000,000,
pro forma as adjusted (1); no shares
issued and outstanding, actual, pro forma
and pro forma as adjusted................. -- -- --
Common stock, $.001 par value; authorized
shares -- 15,000,000, actual and pro
forma; authorized shares -- 50,000,000,
pro forma as adjusted (1); issued and
outstanding shares -- 2,161,709,
actual(2); issued and outstanding
shares -- 2,428,709, pro forma(2); issued
and outstanding shares -- [ ], pro
forma as adjusted(2)...................... 2 2
Additional paid-in-capital.................... 1,871 3,252
Retained earnings............................. 2,924 2,924
-------- ------ ----
Total stockholders' equity............... 4,797 6,178
-------- ------ ----
Total capitalization.................... $ 6,178 $6,178 $
======== ====== ====
</TABLE>
- --------
(1) Gives effect to the additional shares of common stock and the shares of
preferred stock to be authorized immediately prior to the effectiveness of
this offering.
(2) Excludes:
. 371,000 shares subject to options outstanding as of September 30, 1998
at a weighted average exercise price of $21.85 per share;
. 639,000 shares that could be issued under Bottomline's 1997 Stock
Incentive Plan;
. 250,000 shares that could be issued under Bottomline's 1998 Employee
Stock Purchase Plan; and
. 100,000 shares that could be issued under Bottomline's 1998 Director
Stock Option Plan.
14
<PAGE>
DILUTION
The pro forma net tangible book value of Bottomline as of September 30, 1998,
assuming the termination of redemption rights of the redeemable common stock
upon the effectiveness of this offering was $6,178,000 or $2.54 per share of
common stock. Pro forma net tangible book value per share is determined by
dividing Bottomline's pro forma tangible net worth (tangible assets less
liabilities) by the number of shares of common stock outstanding. After giving
effect to the sale of [ ] shares of common stock offered hereby at an
assumed public offering price of $[ ] per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by Bottomline, the net tangible book value of Bottomline as of September 30,
1998 would have been $[ ] per share. This represents an immediate increase
in such net tangible book value of $[ ] per share to existing stockholders
and an immediate dilution of $[ ] per share to new investors purchasing
shares in this offering. If the public offering price is higher or lower, the
dilution to the new investors will in turn be greater or less. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share......................... $
Pro forma net tangible book value per share as of September
30, 1998.................................................... $ 2.54
Increase per share attributable to this offering..............
------
Net tangible book value per share after this offering...........
----
Dilution per share to new investors............................. $
====
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1998, the total number of shares of common stock purchased from Bottomline, the
total consideration paid and the average consideration paid per share by the
existing stockholders and by the new investors based (for new investors) upon
an assumed public offering price of $[ ] per share (before deducting the
estimated underwriting discounts and commissions and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ----------------------- PRICE
NUMBER(2) PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1)(2).................... 2,428,709 % $ 2,674,000 % $1.10
New investors...............
--------- ----- ------------ -------
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 approximately [ ]%
of the total number of shares of common stock outstanding after this
offering. Conversely, sales by the selling stockholders will increase the
number of shares held by new investors to [ ], or approximately [ ]%
of the total number of shares of common stock outstanding after this
offering.
(2) Gives effect to the termination of redemption rights of the redeemable
common stock upon the effectiveness of this offering.
15
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are derived from the financial
statements of Bottomline. The selected financial data as of June 30, 1997 and
1998 and for each of the three years in the period ended June 30, 1998 are
derived from financial statements, which have been audited by Ernst and Young
LLP, independent auditors, included elsewhere in this prospectus. The selected
financial data as of June 30, 1994, 1995 and 1996 and for each of the two years
in the period ended June 30, 1995 are derived from financial statements, which
have been audited by Ernst and Young LLP, independent auditors, not included in
this prospectus. The selected financial data as of September 30, 1998 and for
the three months ended September 30, 1997 and 1998 are derived from unaudited
financial statements, included elsewhere in this prospectus. The data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Financial Statements
and the Notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
----------------------------------------- ---------------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- ------ ------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues:
Software licenses...... $ 3,337 $ 4,144 $ 4,689 $ 6,392 $ 9,887 $1,591 $ 3,477
Service and
maintenance.......... 1,643 3,083 4,580 6,729 9,701 1,937 2,254
Equipment and
supplies............. 5,428 7,888 8,798 9,005 9,449 2,536 2,374
------- ------- ------- ------- ------- ------ -------
Total revenues........ 10,408 15,115 18,067 22,126 29,037 6,064 8,105
Cost of revenues:
Software licenses...... 72 54 27 160 215 48 123
Service and
maintenance.......... 1,030 1,790 2,655 4,206 4,261 851 1,106
Equipment and
supplies............. 3,138 5,215 5,361 6,410 6,526 1,648 1,682
------- ------- ------- ------- ------- ------ -------
Total cost of
revenues............ 4,240 7,059 8,043 10,776 11,002 2,547 2,911
------- ------- ------- ------- ------- ------ -------
Gross profit............ 6,168 8,056 10,024 11,350 18,035 3,517 5,194
Operating expenses:
Sales and marketing.... 2,728 3,716 4,190 6,631 7,675 1,557 2,242
Product development and
engineering.......... 231 701 1,237 2,185 3,158 670 928
General and
administrative....... 1,755 2,405 3,044 4,266 4,372 932 1,277
------- ------- ------- ------- ------- ------ -------
Total operating
expenses............ 4,714 6,822 8,471 13,082 15,205 3,159 4,447
------- ------- ------- ------- ------- ------ -------
Income (loss) from
operations............ 1,454 1,234 1,553 (1,732) 2,830 358 747
Interest income
(expense), net........ 11 12 (6) (56) (50) (22) 15
------- ------- ------- ------- ------- ------ -------
Income (loss) before
provision (benefit)
for income taxes and
cumulative effect of
change in accounting
for income taxes...... 1,465 1,246 1,547 (1,788) 2,780 336 762
Provision (benefit) for
income taxes.......... 577 471 664 (536) 1,177 142 305
Cumulative effect of
change in accounting
for income taxes...... 36 -- -- -- -- -- --
------- ------- ------- ------- ------- ------ -------
Net income (loss)....... $ 924 $ 775 $ 883 $(1,252) $ 1,603 $ 194 $ 457
======= ======= ======= ======= ======= ====== =======
Earnings (loss) per
share available to
common
stockholders(1)(2)
Basic.................. $ 0.49 $ 0.37 $ 0.42 $ (0.68) $ 0.71 $ 0.08 $ 0.20
======= ======= ======= ======= ======= ====== =======
Diluted................ $ 0.39 $ 0.30 $ 0.34 $ (0.68) $ 0.61 $ 0.07 $ 0.17
======= ======= ======= ======= ======= ====== =======
Shares used in computing
earnings (loss) per
share available to
common stockholders(2):
Basic.................. 1,752 1,841 1,898 1,995 2,105 2,102 2,120
======= ======= ======= ======= ======= ====== =======
Diluted................ 2,179 2,283 2,334 1,995 2,439 2,432 2,485
======= ======= ======= ======= ======= ====== =======
<CAPTION>
JUNE 30, SEPTEMBER 30,
----------------------------------------- -------------
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 910 $ 632 $ 1,080 $ 827 $ 1,362 $ 1,491
Working capital......... 1,323 2,027 3,123 2,476 3,884 4,127
Total assets............ 4,130 7,394 9,144 10,481 11,301 12,084
Short-term and long-term
debt.................. -- 499 597 1,384 75 50
Redeemable common stock,
at redemption value... 973 1,061 1,148 1,246 1,353 1,381
Stockholders' equity.... 1,222 2,183 3,708 2,680 4,368 4,797
</TABLE>
- --------
(1) Earnings (loss) per share available to common stockholders reflects the
reduction from net income of accretion attributable to the redeemable
common stock.
(2) Shares used in computing diluted earnings (loss) per share available to
common stockholders reflect the dilutive effect of all redeemable common
stock.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion 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 as a result of certain
factors including those set forth under "Risk Factors" and elsewhere in this
prospectus. The following discussion and analysis should be read in conjunction
with "Selected Consolidated Financial Data" and the Financial Statements and
Notes thereto appearing elsewhere in this prospectus.
OVERVIEW
The Company is a leading provider of enterprise-wide payment solutions. In
1989, the Company released its first product, LaserCheck for DOS, to offer
enterprises a cost-effective method to issue checks with specialized laser
printers and toners, eliminating the need for pre-printed, negotiable check
stock. In 1992, the Company entered into an arrangement with Xerox to sell an
advanced laser printer and newly developed magnetic ink character recognition
("MICR") toners. Over the next few years, the Company became one of the largest
re-sellers of Xerox Corporation MICR products, adapted its LaserCheck products
to run on Windows 3.X and Windows 95 operating platforms and developed new
check fraud avoidance software applications. In 1996, in order to expand its
offerings to include an electronic-payment solution, the Company acquired
CertiSoft Solutions, Inc. ("CertiSoft"), a developer of software applications
that are designed exclusively to make secure electronic payments. In February
1997, the Company released its PayBase/32/ and PayBase/16/ software suites of
fully integrated 32- and 16-bit modular software products that run on Windows
98 and Windows NT operating platforms and enable enterprises to control, manage
and issue all payments across an enterprise. In March 1998, the Company was
selected by the Federal Reserve System to develop financial electronic data
interchange ("EDI") translation software for its 12,000 member financial
institutions. Today, Bottomline's customer base includes over 2,000 customers
in industries such as financial services, health care, communications,
education, media, manufacturing and government.
The Company's revenues are primarily derived from three sources: (i) software
license fees, (ii) service and maintenance fees and (iii) equipment and
supplies sales. The Company derives software license revenues primarily from
PayBase software licenses fees, which are generally based on the number of
software application and user licenses purchased. Fees from sales of software
licenses are generally recognized upon delivery of the software to the
customer, unless the Company has significant obligations remaining with respect
to the software. The Company derives service and maintenance revenues from: (i)
consulting, design and training fees which are fixed on a project-to-project
basis and (ii) customer support and maintenance fees. Revenues related to
consulting, design and service fees are recognized at the time services are
rendered. Customer support and training fees are established as a percentage,
typically 18% of the list price for the software license and are prepaid
annually. Support and maintenance agreements generally have a term of 12 months
and are renewable annually. The Company recognizes revenues related to customer
support and maintenance fees ratably over the life of the agreement. The
Company derives equipment and supply revenues from the sale of printers, MICR
toners and check stock and are recognized at the time of delivery.
The Company expects to continue making significant investments in product
development and engineering in order to enhance its current products, develop
new products and further advance its Internet and payment technologies. Future
investments in product development and engineering will generally be related to
the hiring of additional software engineering personnel.
The continued investment in and expansion of the Company's direct sales force
is an important part of the Company's strategy. The Company intends to add
approximately 10 new sales professionals during fiscal year 1999. The Company
also intends to continue to increase the promotion of its products and services
through conferences, seminars, direct marketing and trade publications, as well
as through relationships with enterprise resource planning and accounting
system vendors, such as Oracle and SAP, and implementation consultants.
17
<PAGE>
In addition, the Company expects to increase its system engineering and sales
support personnel located in its existing field sales offices in San Francisco,
California; Chicago, Illinois; Englewood, Colorado; and New York, New York and
to open additional field sales offices in other major cities.
The Company records software development costs in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 86. The Company has not had
any software development costs that were capitalized during the last fiscal
year and does not currently have any software development costs that are being
capitalized.
In October 1997, the Accounting Standards Executive Committee ("ACSEC") of
the American Institute of Certified Public Accountants issued Statement of
Position No. 97-2 "Software Revenue Recognition" ("SOP 97-2"), which the
Company adopted on July 1, 1998. The Company believes that SOP 97-2 will not
have a material impact on its future operating results.
RECENT DEVELOPMENT
In October 1998, the Company entered into a working agreement with Arthur
Andersen LLP. Under the working agreement, Arthur Andersen LLP will work with
the Company to introduce the Company's PayBase/32/ solution to enterprises that
would likely benefit from anticipated cost efficiencies and enhanced internal
controls realized from PayBase/32/. The Company plans to utilize the enterprise
consulting experience of Arthur Andersen LLP to demonstrate to the users of the
Company's departmental payment products the benefits of migrating to the
Company's PayBase/32/ enterprise-wide payment solution. In October 1998, Arthur
Andersen LLP also made an investment in the Company's common stock.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998 1997 1998
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses............. 25.9% 28.9% 34.0% 26.3% 42.9%
Service and maintenance....... 25.4 30.4 33.4 31.9 27.8
Equipment and supplies........ 48.7 40.7 32.6 41.8 29.3
-------- -------- -------- ------ ------
Total revenues............... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses............. 0.1 0.7 0.7 0.8 1.5
Service and maintenance....... 14.7 19.0 14.7 14.0 13.6
Equipment and supplies........ 29.7 29.0 22.5 27.2 20.8
-------- -------- -------- ------ ------
Total cost of revenues....... 44.5 48.7 37.9 42.0 35.9
-------- -------- -------- ------ ------
Gross profit 55.5 51.3 62.1 58.0 64.1
Operating expenses:
Sales and marketing........... 23.2 29.9 26.4 25.7 27.7
Product development and
engineering................. 6.9 9.9 10.9 11.0 11.4
General and administrative.... 16.8 19.3 15.1 15.4 15.8
-------- -------- -------- ------ ------
Total operating expenses..... 46.9 59.1 52.4 52.1 54.9
-------- -------- -------- ------ ------
Income (loss) from operations.. 8.6 (7.8) 9.7 5.9 9.2
Interest income (expense),
net.......................... -- (0.3) (0.1) (0.4) 0.2
-------- -------- -------- ------ ------
Income (loss) before provision
(benefit) for income taxes... 8.6 (8.1) 9.6 5.5 9.4
Provision (benefit) for income
taxes........................ 3.7 (2.4) 4.1 2.3 3.8
-------- -------- -------- ------ ------
Net income (loss).............. 4.9% (5.7)% 5.5% 3.2% 5.6%
======== ======== ======== ====== ======
</TABLE>
18
<PAGE>
FISCAL QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL QUARTER ENDED
SEPTEMBER 30, 1997
Revenues
Total revenues increased by $2.0 million to $8.1 million in the fiscal
quarter ended September 30, 1998 from $6.1 million in the fiscal quarter ended
September 30, 1997, an increase of 33%.
Software Licenses. Software license fees increased by $1.9 million to $3.5
million in the fiscal quarter ended September 30, 1998 from $1.6 million in the
fiscal quarter ended September 30, 1997, an increase of 119%. Software licenses
fees represented 43% of total revenues in the fiscal quarter ended September
30, 1998 compared to 26% of total revenues for the fiscal quarter ended
September 30, 1997. The increase in software license fees was due primarily to
growing market acceptance of PayBase/32/ and the delivery of software to the
Federal Reserve System.
Service and Maintenance. Service and maintenance fees increased by $300,000
to $2.2 million in the fiscal quarter ended September 30, 1998 from $1.9
million in the fiscal quarter ended September 30, 1997, an increase of 16%.
Service and maintenance fees represented 27% of total revenues in the fiscal
quarter ended September 30, 1998 compared to 31% of total revenues in the
fiscal quarter ended September 30, 1997. The increase in service and
maintenance fees was due primarily to an increase in the number of sales of
software licenses, which resulted in increased orders for services and sales of
software maintenance and technical support.
Equipment and Supplies. Equipment and supplies sales decreased by $200,000 to
$2.4 million in the fiscal quarter ended September 30, 1998 from $2.6 million
in the fiscal quarter ended September 30, 1997, a decrease of 8%. Equipment and
supplies sales represented 30% of total revenues in the fiscal quarter ended
September 30, 1998 compared to 43% of total revenues in the fiscal quarter
ended September 30, 1997. The decrease in equipment and supplies sales was due
primarily to a reduction in sales of printer accessories.
Cost of Revenues
Software Licenses. Software license costs consist of expenses incurred by the
Company to manufacture, package and distribute its software products and
related documentation and costs of licensing third-party software incorporated
into its products. Software license costs increased by $75,000 to $123,000 in
the fiscal quarter ended September 30, 1998 from $48,000 in the fiscal quarter
ended September 30, 1997, an increase of 156%. Software license costs were 4%
of software revenues in the fiscal quarter ended September 30, 1998 compared to
3% of software revenues in the fiscal quarter ended September 30, 1997. The
increase in software license costs was due primarily to royalty payments made
in connection with the software delivered to the Federal Reserve System.
Service and Maintenance. Service and maintenance costs include salary expense
and other related costs for the Company's customer service, maintenance and
telephone support staffs, as well as third-party contractor expenses. Service
and maintenance costs increased by $249,000 to $1.1 million in the fiscal
quarter ended September 30, 1998 from $851,000 in the fiscal quarter ended
September 30, 1997, an increase of 29%. Service and maintenance costs were 50%
of service and maintenance revenues in the fiscal quarter ended September 30,
1998 compared to 45% of service and maintenance revenues in the fiscal quarter
ended September 30, 1997.
Equipment and Supplies. Equipment and supplies costs increased by $100,000 to
$1.7 million in the fiscal quarter ended September 30, 1998 from $1.6 million
in the fiscal quarter ended September 30, 1997, an increase of 6%. Equipment
and supplies costs were 71% of equipment and supply revenues in the fiscal
quarter ended September 30, 1998 compared to 62% of equipment and supplies
sales in the fiscal quarter ended September 30, 1997.
19
<PAGE>
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other related costs for sales and marketing personnel, sales
commissions, travel, public relations and marketing materials and trade shows.
Sales and marketing expenses increased by $600,000 to $2.2 million in the
fiscal quarter ended September 30, 1998 from $1.6 million in the fiscal quarter
ended September 30, 1997, an increase of 38%. Sales and marketing expenses were
27% of total revenues in the fiscal quarter ended September 30, 1998 compared
to 26% of total revenues in the fiscal quarter ended September 30, 1997. The
dollar increase was due primarily to increases in staffing.
Product Development and Engineering. Product development and engineering
expenses consist primarily of personnel costs to support product development.
Product development and engineering expenses increased by $258,000 to $928,000
in the fiscal quarter ended September 30, 1998 from $670,000 in the fiscal
quarter ended September 30, 1997, an increase of 39%. Product development and
engineering expenses remained constant at 11% of total revenues in the fiscal
quarters ended September 30, 1998 and September 30, 1997. The dollar increase
was due primarily to increases in staffing.
General and Administrative. General and administrative expenses consist
primarily of salaries and other related costs for operations and finance
employees, legal and accounting services and certain facilities-related
expenses. General and administrative expenses increased by $368,000 to $1.3
million in the fiscal quarter ended September 30, 1998 from $932,000 in the
fiscal quarter ended September 30, 1997, an increase of 39%. General and
administrative expenses were 16% of total revenues in the fiscal quarter ended
September 30, 1998 compared to 15% of total revenues in the fiscal quarter
ended September 30, 1997. The increase was due primarily to increased
personnel, facility and information system expenses necessary to support the
Company's expanding operations.
Interest Income (Expense), Net. Interest income (expense), net consists of
interest income and interest expense. Interest income (expense), net increased
by $37,000 to $15,000 in the fiscal quarter ended September 30, 1998 from
($22,000) in the fiscal quarter ended September 30, 1997. The increase was due
to lower average balances outstanding under the Company's revolving credit
agreement and higher cash balances on hand.
Provision (Benefit) for Income Taxes. The provision (benefit) for income
taxes increased by $163,000 to $305,000 in the fiscal quarter ended September
30, 1998 from $142,000 in the fiscal quarter ended September 30, 1997. The
effective tax rate in the fiscal quarter ended September 30, 1998 was 40%
compared to 42% in the fiscal quarter ended September 30, 1997. The effective
tax rates in the fiscal quarters ended September 30, 1998 and September 30,
1997 differed from the federal statutory rate due principally to the effect of
state income taxes.
Net Income. Net income increased by $263,000 to $457,000 in the fiscal
quarter ended September 30, 1998 from $194,000 in the fiscal quarter ended
September 30, 1997.
20
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Revenues
Total revenues increased by $6.9 million to $29.0 million in the fiscal year
ended June 30, 1998 from $22.1 million in the fiscal year ended June 30, 1997,
an increase of 31%. The increase was primarily attributable to the addition of
new clients to the Company's customer base, resulting in substantial growth in
software license fees and related services and maintenance fees.
Software Licenses. Software license fees increased by $3.5 million to $9.9
million in the fiscal year ended June 30, 1998 from $6.4 million in the fiscal
year ended June 30, 1997, an increase of 55%. Software licenses fees
represented 34% of total revenues in the fiscal year ended June 30, 1998
compared to 29% of total revenues in the fiscal year ended June 30, 1997. The
increase in software license fees was due primarily to a higher average license
price and an increase in the number of customers as a result of growing market
acceptance of PayBase/32/, which the Company released in February 1997.
Service and Maintenance. Service and maintenance fees increased by $3.0
million to $9.7 million in the fiscal year ended June 30, 1998 from $6.7
million in the fiscal year ended June 30, 1997, an increase of 45%. Service and
maintenance fees represented 33% of total revenues in the fiscal year ended
June 30, 1998 compared to 30% of total revenues in the fiscal year ended June
30, 1997. The increase in service and maintenance fees was due primarily to an
increase in the number of customers and sales of software licenses, which
resulted in increased orders for services and sales of software maintenance and
technical support.
Equipment and Supplies. Equipment and supplies sales increased by $400,000 to
$9.4 million in the fiscal year ended June 30, 1998 from $9.0 million in the
fiscal year ended June 30, 1997, an increase of 4%. Equipment and supplies
sales represented 33% of total revenues in the fiscal year ended June 30, 1998
compared to 41% of total revenues in the fiscal year ended June 30, 1997. The
increase in equipment and supplies sales was due primarily to increased sales
of MICR toners and check stock.
Cost of Revenues
Software Licenses. Software license costs increased by $55,000 to $215,000 in
the fiscal year ended June 30, 1998 from $160,000 in the fiscal year ended June
30, 1997, an increase of 34%. Software license costs were 2% of software
revenues in the fiscal year ended June 30, 1998 compared to 3% of software
revenues in the fiscal year ended June 30, 1997.
Service and Maintenance. Service and maintenance costs increased by $100,000
to $4.3 million in the fiscal year ended June 30, 1998 from $4.2 million in the
fiscal year ended June 30, 1997, an increase of 2%. Service and maintenance
costs were 44% of service and maintenance revenues in the fiscal year ended
June 30, 1998 compared to 63% of service and maintenance revenues in the fiscal
year ended June 30, 1997. Service and maintenance costs as a percentage of
service and maintenance revenues were significantly higher in the fiscal year
ended June 30, 1997 as a result of increased maintenance costs and charges
incurred in fiscal year 1997 by the Company due to a problem with a third-party
printer that the Company had been reselling.
Equipment and Supplies. Equipment and supplies costs increased by $100,000 to
$6.5 million in the fiscal year ended June 30, 1998 from $6.4 million in the
fiscal year ended June 30, 1997, an increase of 2%. Equipment and supplies
costs were 69% of equipment and supplies sales in the fiscal year ended June
30, 1998 compared to 71% in the fiscal year ended June 30, 1997. The decrease
in equipment and supplies costs as a percentage of equipment and supplies sales
was due primarily to a higher provision for inventory obsolescence recognized
during fiscal year 1997 related to a third-party printer that the Company had
been reselling.
21
<PAGE>
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $1.1 million
to $7.7 million in the fiscal year ended June 30, 1998 from $6.6 million in the
fiscal year ended June 30, 1997, an increase of 17%. Sales and marketing
expenses were 26% of total revenues in the fiscal year ended June 30, 1998
compared to 30% of total revenues in the fiscal year ended June 30, 1997. The
dollar increase was due primarily to an increase in sales and marketing
personnel and increased marketing expenditures relating to the introduction of
PayBase/32/.
Product Development and Engineering. Product development and engineering
expenses increased by $1.0 million to $3.2 million in the fiscal year ended
June 30, 1998 from $2.2 million in the fiscal year ended June 30, 1997, an
increase of 45%. Product development and engineering expenses were 11% of total
revenues in the fiscal year ended June 30, 1998 compared to 10% of total
revenues in the fiscal year ended June 30, 1997. The dollar increase was due
primarily to the hiring of additional personnel to develop new software
products.
General and Administrative. General and administrative expenses increased by
$100,000 to $4.4 million in the fiscal year ended June 30, 1998 from $4.3
million in the fiscal year ended June 30, 1997, an increase of 2%. General and
administrative expenses were 15% of total revenues in the fiscal year ended
June 30, 1998 compared to 19% of total revenues in the fiscal year ended June
30, 1997. The dollar increase was due primarily to increased personnel and
facility expenses necessary to support the Company's expanding operations.
Interest Income (Expense), Net. Interest income (expense), net decreased by
$6,000 to ($50,000) in the fiscal year ended June 30, 1998 from ($56,000) in
the fiscal year ended June 30, 1997. The decrease was due to lower prevailing
interest rates and lower borrowings in fiscal year 1998 compared to fiscal year
1997.
Provision (Benefit) for Income Taxes. The provision (benefit) for income
taxes increased by $1.7 million to $1.2 million in the fiscal year ended June
30, 1998 from ($536,000) in the fiscal year ended June 30, 1997. The effective
tax rate in the fiscal year ended June 30, 1998 was 42% compared to (30.0%) in
the fiscal year ended June 30, 1997. The effective tax rate in the fiscal year
ended June 30, 1998 differed from the federal statutory rate due principally to
the effect of state income taxes and reduced levels of available research and
development credits. The effective tax rate in the fiscal year ended June 30,
1997 differed from the federal statutory rate due principally to the effect of
non-deductible expenses associated principally with the Company's CertiSoft
acquisition, which were offset partially by research and development credits.
Net Income (Loss). Net income (loss) increased by $2.9 million to $1.6
million in the fiscal year ended June 30, 1998 from ($1.3) million in the
fiscal year ended June 30, 1997.
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Revenues
Total revenues increased by $4.0 million to $22.1 million in the fiscal year
ended June 30, 1997 from $18.1 million in the fiscal year ended June 30, 1996,
an increase of 22%. This increase was primarily attributable to the addition of
new clients to the Company's customer base, resulting in substantial growth in
software license fees and related services and maintenance fees. Revenues were
adversely affected in fiscal year 1997 due to a problem with a third-party
printer that the Company had been reselling.
Software Licenses. Software license fees increased by $1.7 million to $6.4
million in the fiscal year ended June 30, 1997 from $4.7 million in the fiscal
year ended June 30, 1996, an increase of 36%. Software license fees represented
29% of total revenues in the fiscal year ended June 30, 1997 compared to 26% of
total revenues in the fiscal year ended June 30, 1996. The increase in software
license fees was due primarily to a higher average license price, an increase
in customers as a result of growing market acceptance of LaserCheck
22
<PAGE>
and the Company's introduction of PayBase. Software license fees were adversely
affected in fiscal year 1997 due to a decrease in orders from both new and
existing customers as a result of a problem with a third-party printer that the
Company had been reselling, which reduced sales productivity.
Service and Maintenance. Service and maintenance fees increased by $2.1
million to $6.7 million in the fiscal year ended June 30, 1997 from $4.6
million in the fiscal year ended June 30, 1996, an increase of 46%. Service and
maintenance fees represented 30% of total revenues in the fiscal year ended
June 30, 1997 compared to 25% of total revenues in the fiscal year ended June
30, 1996. The increase in service and maintenance fees was due primarily to an
increase in the number of customers and sales of software licenses, which
resulted in increased orders for professional services and sales of software
maintenance and technical support.
Equipment and Supplies. Equipment and supplies sales increased by $200,000 to
$9.0 million in the fiscal year ended June 30, 1997 from $8.8 million in the
fiscal year ended June 30, 1996, an increase of 2%. Equipment and supplies
sales represented 41% of total revenues in the fiscal year ended June 30, 1997
compared to 49% of total revenues in the fiscal year ended June 30, 1996. The
increase in equipment and supplies sales was due primarily to increased sales
of MICR toners and check stock.
Cost of Revenues
Software Licenses. Software license costs increased by $133,000 to $160,000
in the fiscal year ended June 30, 1997 from $27,000 in the fiscal year ended
June 30, 1996, an increase of 493%. Software license costs represented 3% of
software license revenues in the fiscal year ended June 30, 1997 compared to 1%
of software license revenues in the fiscal year ended June 30, 1996. Software
license costs increased primarily because the Company converted from diskette
to CD-ROM media for packaging its software.
Service and Maintenance. Service and maintenance costs increased by $1.5
million to $4.2 million in the fiscal year ended June 30, 1997 from $2.7
million in the fiscal year ended June 30, 1996, an increase of 56%. Service and
maintenance costs represented 63% of service and maintenance revenues in the
fiscal year ended June 30, 1997 compared to 58% of service and maintenance
revenues in the fiscal year ended June 30, 1996. The increase was primarily due
to expansion of the Company's customer services organization and higher than
expected charges incurred in fiscal year 1997 by the Company related to a
problem with a third-party printer that the Company had been reselling.
Equipment and Supplies. Equipment and supplies costs increased by $1.0
million to $6.4 million in the fiscal year ended June 30, 1997 from $5.4
million in the fiscal year ended June 30, 1996, an increase of 19%. Equipment
and supplies costs represented 71% of equipment and supplies sales in the
fiscal year ended June 30, 1997 compared to 61% of equipment and supplies sales
in the fiscal year ended June 30, 1996. This increase was due primarily to
inventory write-offs and higher provisions for printer inventory obsolescence
recognized during fiscal year 1997 due to a problem with a third-party printer
that the Company had been reselling.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $2.4 million
to $6.6 million in the fiscal year ended June 30, 1997 from $4.2 million in the
fiscal year ended June 30, 1996, an increase of 57%. Sales and marketing
expenses represented 30% of total revenues in the fiscal year ended June 30,
1997 compared to 23% of total revenues in the fiscal year ended June 30, 1996.
The increase was due to a significant increase in sales and marketing personnel
and increased marketing program expenditures to launch PayBase products and to
increased sales of the Company's LaserCheck software.
Product Development and Engineering. Product development and engineering
expenses increased by $1.0 million to $2.2 million in the fiscal year ended
June 30, 1997 from $1.2 million in the fiscal year ended
23
<PAGE>
June 30, 1996, an increase of 83%. Product development and engineering expenses
represented 10% of total revenues in the fiscal year ended June 30, 1997
compared to 7% of total revenues in the fiscal year ended June 30, 1996. The
increase was due primarily to additional amortization of certain acquired
software costs charged to operations and increases in staffing to support
development of PayBase.
General and Administrative. General and administrative expenses increased by
$1.3 million to $4.3 million in the fiscal year ended June 30, 1997 from $3.0
million in the fiscal year ended June 30, 1996, an increase of 43%. General and
administrative expenses represented 19% of total revenues in the fiscal year
ended June 30, 1997 compared to 17% of total revenues in the fiscal year ended
June 30, 1996. The increase was due to increased personnel and facility
expenses necessary to support the Company's expanding operations and to
complete the conversion to a new accounting system.
Interest Income (Expense), Net. Interest income (expense), net increased by
$50,000 to ($56,000) in the fiscal year ended June 30, 1997 from ($6,000) in
the fiscal year ended June 30, 1996, an increase of 833%. The increase was due
primarily to increased borrowings under the Company's revolving credit
agreement in fiscal year 1997.
Provision (Benefit) for Income Taxes. The provision (benefit) for income
taxes decreased by $1.2 million to ($536,000) in the fiscal year ended June 30,
1997 from $664,000 in the fiscal year ended June 30, 1996. The effective tax
rate in the fiscal year ended June 30, 1997 was (30%) compared to 43% in the
fiscal year ended June 30, 1996. The effective tax rate in the fiscal year
ended June 30, 1997 differed from the federal statutory rate due principally to
non-deductible expenses associated with the Company's CertiSoft acquisition and
research and development tax credits. The effective tax rate in the fiscal year
ended June 30, 1996 differed from the federal statutory rate due principally to
the effect of state income taxes and non-deductible expenses associated with
the Company's CertiSoft acquisition.
Net Income (Loss). Net income (loss) decreased by $2.2 million to ($1.3)
million in the fiscal year ended June 30, 1997 from $883,000 in the fiscal year
ended June 30, 1996.
24
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly results of
operations of Bottomline for each of the nine quarters ended September 30,
1998. In management's opinion, this unaudited information has been prepared on
the same basis as the audited Financial Statements appearing elsewhere in this
prospectus and includes all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited quarterly results when
read in conjunction with the audited Financial Statements and Notes thereto
included elsewhere in this prospectus. The results of operations for any
quarter are not necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1996 1996 1997 1997 1997 1997 1998 1998 1998
--------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses...... $1,415 $1,510 $1,458 $2,009 $1,591 $2,844 $2,506 $2,946 $3,477
Service and
maintenance.......... 1,340 1,716 1,788 1,885 1,937 2,534 2,280 2,950 2,254
Equipment and
supplies............. 2,041 2,426 2,244 2,294 2,536 2,106 2,675 2,132 2,374
------ ------ ------ ------ ------ ------ ------ ------ ------
Total revenues........ 4,796 5,652 5,490 6,188 6,064 7,484 7,461 8,028 8,105
Cost of revenues:
Software licenses...... 36 44 30 50 48 70 44 53 123
Service and
maintenance.......... 892 1,251 1,015 1,048 851 1,178 1,060 1,172 1,106
Equipment and
supplies............. 1,380 1,904 1,546 1,580 1,648 1,528 1,828 1,522 1,682
------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost of
revenues............ 2,308 3,199 2,591 2,678 2,547 2,776 2,932 2,747 2,911
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,488 2,453 2,899 3,510 3,517 4,708 4,529 5,281 5,194
Operating expenses:
Sales and marketing.... 1,338 1,594 1,665 2,034 1,557 2,033 1,879 2,206 2,242
Product development and
engineering.......... 408 338 501 938 670 822 811 855 928
General and
administrative....... 1,026 1,123 1,036 1,081 932 1,074 1,152 1,214 1,277
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 2,772 3,055 3,202 4,053 3,159 3,929 3,842 4,275 4,447
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations............ (284) (602) (303) (543) 358 779 687 1,006 747
Interest income
(expense), net........ 7 (24) (34) (5) (22) (28) (10) 10 15
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
provision (benefit)
for income taxes...... (277) (626) (337) (548) 336 751 677 1,016 762
Provision (benefit) for
income taxes.......... (109) (247) (133) (47) 142 318 287 430 305
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ (168) $ (379) $ (204) $ (501) $ 194 $ 433 $ 390 $ 586 $ 457
====== ====== ====== ====== ====== ====== ====== ====== ======
Earnings (loss) per
share
available to common
stockholders(1)(2):
Basic.................. $(0.10) $(0.20) $(0.12) $(0.25) $ 0.08 $ 0.19 $ 0.17 $ 0.27 $ 0.20
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted................ $(0.10) $(0.20) $(0.12) $(0.25) $ 0.07 $ 0.17 $ 0.15 $ 0.23 $ 0.17
====== ====== ====== ====== ====== ====== ====== ====== ======
Shares used in computing
earnings
(loss) per share
available to
common stockholders(2):
Basic.................. 1,957 1,968 1,969 2,087 2,102 2,102 2,104 2,110 2,120
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted................ 1,957 1,968 1,969 2,087 2,432 2,435 2,436 2,454 2,485
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
(1) Earnings (loss) per share available to common stockholders reflects the
reduction from net income of accretion attributable to the redeemable
common stock.
(2) Shares used in computing diluted earnings (loss) per share available to
common stockholders reflect the dilutive effect of all redeemable common
stock.
25
<PAGE>
The following table sets forth unaudited quarterly results of operations as a
percentage of revenues for each of the nine quarters ended September 30, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 30, JUNE 30, SEPT. 30, DEC. 31, MAR. 30, JUNE 30, SEPT. 30,
1996 1996 1997 1997 1997 1997 1998 1998 1998
--------- -------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses...... 29.5% 26.7% 26.5% 32.5% 26.3% 38.0% 33.6% 36.7% 42.9%
Service and
maintenance.......... 27.9 30.4 32.6 30.4 31.9 33.9 30.5 36.7 27.8
Equipment and
supplies............. 42.6 42.9 40.9 37.1 41.8 28.1 35.9 26.6 29.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses...... 0.7 0.8 0.5 0.8 0.8 0.9 0.6 0.6 1.5
Service and
maintenance.......... 18.6 22.1 18.5 17.0 14.0 15.8 14.2 14.6 13.6
Equipment and supplies
..................... 28.8 33.7 28.2 25.5 27.2 20.4 24.5 19.0 20.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............ 48.1 56.6 47.2 43.3 42.0 37.1 39.3 34.2 35.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 51.9 43.4 52.8 56.7 58.0 62.9 60.7 65.8 64.1
Operating expenses:
Sales and marketing.... 27.9 28.2 30.3 32.9 25.7 27.2 25.2 27.5 27.7
Product development and
engineering.......... 8.5 6.0 9.1 15.1 11.0 11.0 10.9 10.7 11.4
General and
administrative....... 21.4 19.9 18.9 17.5 15.4 14.3 15.4 15.0 15.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............ 57.8 54.1 58.3 65.5 52.1 52.5 51.5 53.2 54.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............ (5.9) (10.7) (5.5) (8.8) 5.9 10.4 9.2 12.6 9.2
Interest income
(expense), net........ 0.1 (0.4) (0.6) (0.1) (0.4) (0.4) (0.1) 0.1 0.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision (benefit)
for income taxes...... (5.8) (11.1) (6.1) (8.9) 5.5 10.0 9.1 12.7 9.4
Provision (benefit) for
income taxes.......... (2.3) (4.4) (2.4) (0.8) 2.3 4.2 3.9 5.4 3.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (3.5)% (6.7)% (3.7)% (8.1)% 3.2% 5.8% 5.2% 7.3% 5.6%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Revenues
The Company has experienced year-to-year growth with seasonal fluctuations in
revenues and earnings. During the Company's second fiscal quarter ended
December 31, revenues have typically increased as customers on a calendar-based
fiscal year completed their capital spending plans. During the Company's third
fiscal quarter ended March 31, revenues have typically declined as customers
focus internal resources on statutory and regulatory reporting requirements.
The Company's fourth fiscal quarter ended June 30, generally has the largest
revenues as customers complete projects before summer, when activity in many
corporate financial departments tends to slow, which can result in a difference
between fourth and first quarter revenues.
Revenues decreased by $100,000 to $6.1 million during the fiscal quarter
ended September 30, 1997 from $6.2 million during the fiscal quarter ended June
30, 1997. The decrease was consistent with seasonal trends for revenues.
Equipment and supplies sales increased by $200,000 to $2.5 million during the
fiscal quarter ended September 30, 1997 from $2.3 million during the fiscal
quarter ended June 30, 1997. The increase was due primarily to orders for new
third-party printers and related toners. Equipment and supplies sales as a
percent of total revenues decreased in subsequent quarters as printer orders
stabilized.
Cost of Revenues
During the four quarters of fiscal year 1997, the Company experienced a
significant problem with a third-party printer it had been reselling. The
printer problem had a material adverse effect on operating results, including:
(i) increased customer support expenses incurred in receiving, investigating
and responding to printer-related issues, (ii) increased service, maintenance
and supply expenses incurred in repairing and, in some cases, replacing the
defective printers, (iii) a decrease in orders from both new and existing
customers as
26
<PAGE>
printer problems adversely affected sales productivity and (iv) inventory
write-offs of $217,000 related to the defective printers. The Company has since
established a product qualification process and periodic quality inspections.
In addition, the Company has revised and enhanced its quality assurance
programs.
Operating Expenses
Sales and marketing expenses increased by $300,000 to $2.0 million in the
fiscal quarter ended June 30, 1997 from $1.7 million in the fiscal quarter
ended March 31, 1997. The increase was due primarily to commission expenses
generated from increased sales of PayBase and related services, which had a
higher average commission payment rate. Additionally, marketing expenses
increased as the Company promoted a new third-party laser printer.
Product development and engineering expenses increased by $437,000 to
$938,000 in the fiscal quarter ended June 30, 1997 from $501,000 in the fiscal
quarter ended March 31, 1997. The increase was due primarily to additional
amortization of certain acquired software costs charged to operations.
Sales and marketing expenses increased by $400,000 to $2.0 million in the
fiscal quarter ended December 31, 1997 from $1.6 million in the fiscal quarter
ended September 30, 1997. The increase was due primarily to commission expenses
generated from increased sales of PayBase and related professional services,
which carried higher commission payment rates.
In addition to seasonal fluctuations, the Company's quarterly results of
operations may be subject to significant fluctuations due to several factors,
including the size, timing and number of customer orders; product and price
competition; the loss of key employees and the time required to train new
hires, particularly sales and engineering personnel; timing of new product
introductions and enhancements; sales, implementation and budget cycles of the
Company's customers; the number of business days in a particular period; market
acceptance of new products or product enhancements by either the Company or its
competitors; the incurrence of costs relating to possible acquisitions of
technology or businesses; the Company's ability to address new and related
market opportunities; the mix of license and maintenance revenue in any period;
general economic conditions; and other factors. The Company anticipates that
its operating expenses will continue to increase significantly. If the
Company's sales in any quarter do not increase correspondingly, the Company's
results of operations for that quarter would be materially adversely affected.
For the foregoing reasons, the Company believes that quarter-to-quarter
comparisons of the Company's results of operations are not necessarily
meaningful and that the Company's results of operations in any particular
quarter should not be relied upon as necessarily indicative of future
performance. Moreover, for the foregoing reasons, there can be no assurance
that the profitability attained in the last fiscal year will continue.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily from cash provided by
operating activities, the sale of common stock and bank credit facilities for
leasehold improvements and working capital. The Company had net working capital
of $4.1 million at September 30, 1998, including cash and cash equivalents
totaling $1.5 million.
Net cash provided by operating activities was $588,000 in the fiscal quarter
ended September 30, 1998. Net cash provided by operating activities during the
fiscal quarter ended September 30, 1998 was primarily the result of net income
and increases in accounts payable and accrued expenses, partially offset by
increases in accounts receivable and prepaid expenses. Net cash provided by
(used in) operating activities was $2.6 million in the fiscal year ended June
30, 1998, ($668,000) in the fiscal year ended June 30, 1997 and $820,000 in the
fiscal year ended June 30, 1996. Net cash provided by operating activities
during the fiscal year ended June 30, 1998 and the fiscal year ended June 30,
1996 was primarily the result of net income and increases in deferred revenues
partially offset by increases in accounts receivable. During the fiscal year
ended June 30, 1997, net cash used in operations was primarily the result of
net losses, an increase in accounts receivable and refundable income taxes
partially offset by increases in deferred revenues, accounts payable and
accrued expenses.
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Net cash used in investing activities was $434,000 in the fiscal quarter
ended September 30, 1998. Cash was used during this period to acquire computer
equipment and software for internal use. Net cash used in investing activities
was $993,000 in the fiscal year ended June 30, 1998, $694,000 in the fiscal
year ended June 30, 1997 and $469,000 in the fiscal year ended June 30, 1996.
Cash was used during these periods to acquire property and equipment and for
software development costs. The Company currently has no significant capital
spending or purchase commitments, but expects to continue to engage in capital
spending in the ordinary course of business. During fiscal year 1998, the
Company expensed as incurred all software development costs.
Net cash provided by (used in) financing activities was ($1.1) million in the
fiscal year ended June 30, 1998, $1.1 million in the fiscal year ended June 30,
1997 and $98,000 in the fiscal year ended June 30, 1996. Net cash used in
financing activities during the fiscal year ended June 30, 1998 primarily
represented repayment of indebtedness. Net cash provided by financing
activities during the fiscal year ended June 30, 1997 primarily represented
borrowings under the Company's revolving credit agreement.
In December 1997, the Company renewed its revolving credit agreement with a
bank which provides for borrowings of up to $4.0 million. Borrowings under the
Company's revolving credit agreement bear interest at the bank's prime rate,
are due on demand and are secured by substantially all of the Company's assets.
As of September 30, 1998, the Company had no outstanding balances under its
revolving credit agreement, which expires on December 30, 1998.
The Company believes that the proceeds generated by the sale of common stock
by the Company in this offering, cash generated from operations and cash and
cash equivalents on hand, will be sufficient to meet the Company's working
capital requirements for the foreseeable future.
YEAR 2000 CONSIDERATIONS
The Company has assessed its internal systems and its currently supported
products, including tools, equipment and software provided by others, for
possible problems in processing, reporting, displaying, functioning with and
otherwise handling date data containing the year 2000 and beyond. The Company
is in the process of formulating contingency plans in the event that it is
unsuccessful in implementing its plans to make all of its systems, facilities
and currently supported products Year 2000 ready. The Company believes that all
of its products installed after February 1997 were Year 2000 ready at the time
of installation. The Company has expensed amounts incurred as of June 30, 1998
to make its products Year 2000 ready. Such amounts have not been material. The
additional costs to make all such remaining systems and products Year 2000
ready by mid-1999 will be expensed as incurred and are not expected to be
material.
Notwithstanding Bottomline's efforts, any of its internal systems and
facilities and any of the products the Company supplies to customers could have
undetected Year 2000 problems. In addition, customers using previous
generations of Bottomline's products may assert claims against the Company
because of the failure of its products to meet Year 2000 requirements. Any
failure by the Company to make Year 2000 ready its internal systems and
facilities could cause significant operational problems for the Company.
Further, Bottomline's failure to timely provide adequate resources to correct
identified Year 2000 problems in its currently supported products could result
in claims by or liability to customers, which may have a material adverse
effect on Bottomline's business, operating results and financial condition.
Failure of third-party software and equipment incorporated in the Company's
currently supported products to be Year 2000 ready could require Bottomline to
incur unanticipated expenses to remedy Year 2000 problems, which could have a
material adverse effect on the Company's business, operating results and
financial condition. Furthermore, the purchasing patterns of Bottomline's
customers or potential customers may be affected by Year 2000 issues because
they may be required to expend significant resources on Year 2000 compliance,
rather than investing in new software solutions or services such as those
offered by the Company, which could have a material adverse effect on
Bottomline's business, operating results and financial condition.
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RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the ACSEC of the American Institute of Certified Public
Accountants issued SOP 97-2, which the Company adopted on July 1, 1998. SOP 97-
2 requires, among other things, that revenue should be recognized when there is
persuasive evidence of an existing agreement, delivery has occurred, the fees
charged are fixed or determinable and collectibility is probable. Additionally,
SOP 97-2 provides that for those arrangements which consist of multiple
elements such as services, software, software upgrades, enhancements and post-
contract support, the fees charged must be allocated to each element of the
arrangement based upon vendor-specific objective evidence of fair value, which
is to be determined based upon the price charged when the element is sold
separately or the price for the element established by management with relevant
authority. The Company believes that SOP 97-2 will not have a material adverse
effect on its future operating results.
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BUSINESS
The Company is a leading provider of enterprise-wide payment solutions. Our
software and services enable organizations to transition from the traditional
paper check process to electronic payments and to facilitate electronic
commerce. We provide a single platform to control, manage and issue all
payments. Our software complements and integrates with existing corporate
payment applications, such as accounts payable, payroll, travel and
entertainment expense, insurance claims and commissions. Our products provide
Internet capability and run on Windows NT technology. Today, we have more than
2,000 customers, representing every major industry-sector, including The
Charles Schwab Corporation, Dow Jones & Company, Inc., Harvard University,
Microsoft Corporation and Nissan Motor Acceptance Corporation.
INDUSTRY BACKGROUND
Most enterprises today still rely on pre-printed, paper checks to generate
and receive payments. It is estimated that in 1997, United States businesses
issued or received paper checks in approximately 73 billion transactions. With
the significant growth of the Internet and electronic commerce, many
enterprises are seeking to implement a cost-effective, secure, electronic
payment system. NACHA estimates that the cost of a business-to-business
electronic payment averages $3.00 per payment compared to $8.33 for a
similar paper-based payment. NACHA estimates that approximately 4.4 billion ACH
payments were made in 1997, an increase of approximately 430% since 1991.
Paper Payment Process
Traditional Check Printing. Most businesses today rely primarily on checks to
make and receive payments. They typically use pre-printed checks, which are
blank, legally negotiable instruments that must be securely stored, controlled
and accounted for with physical audits. These checks are either manually
completed or, more frequently, mechanically generated in batches and put
through an impact printer. The checks are then: (i) signed by a signing machine
that contains the company's signature plates, (ii) sorted by a decolator
machine, which separates the checks from their copies and (iii) run through a
burster machine, which separates batch run checks along their perforated lines.
After they are manually or mechanically stuffed into envelopes for mailing, the
copies are collated and delivered to the appropriate departments for filing and
record updating. Breakdowns along the processing line can be costly and time
consuming. Damaged checks must be voided, filed and recorded for auditing
purposes and replacements must be issued.
When an enterprise receives a check, either through a lockbox (a third party
depositing service) or directly, the check must often be physically separated
from the check stub. The stub, which contains detailed payment information, is
forwarded to accounts receivable for data entry and payment record
reconciliation. Because many payments cover multiple invoices or billings that
may contain discounts, offsets or other adjustments, the reconciliation process
is labor intensive and often results in many internal and external payment
inquiries. After reconciliation, the check is processed as part of a bank
deposit and continues through the banking system to the payor's bank. NACHA
estimates that as many as 10 sets of hands touch each paper check that enters
the banking system.
Laser Check Printing. The inefficiencies and opportunity for fraud inherent
in traditional check printing has caused many enterprises to acquire software-
based laser check printing systems to generate checks. As with printed checks,
the process begins with the creation of initial payment information, including
payee, payment amount and invoice reference. The software takes that
information, merges it with permanently stored data used to create printed
checks, such as bank information, check design and layout, signatures and
logos, and automatically generates checks on a high-speed laser printer. The
system can also include a MICR line on the checks to facilitate their
subsequent processing. A laser-printed check is manually or mechanically
stuffed into an envelope for mailing and then continues through the same
receipt and disbursement process as a pre-printed check.
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Electronic Payment Process
The electronic payment process also begins with the creation of payment data.
The most basic electronic payment, an ACH transaction, such as a direct deposit
payroll transaction, consists of NACHA formatted data that includes the
necessary information to effect the transfer of funds from one account to
another, such as the payor and payee's bank accounts, settlement date and
dollar amount. Basic ACH transactions do not include financial EDI, which
consists of payment-related details about the purpose of the payment, such as a
listing of all the invoices to be credited in connection with the payment. The
batched ACH and financial EDI transactions are then transmitted to the payor's
bank. The data is then merged with other electronic payment transactions and
sent through the Federal Reserve System's ACH system, ultimately arriving at
the payee bank, where appropriate credits are made electronically to the
payee's accounts. The receiving bank then transmits payment notification and
remittance information to the payee. The Federal Reserve System and
participating banks maintain the computer and network infrastructure needed to
transmit these electronic payments.
The following graphic depicts the traditional check process, laser check
process and electronic payment process:
[THIS GRAPHIC DEPICTS AND COMPARES THE PROCESS OF ISSUING A PAYMENT
USING TRADITIONAL PRE-PRINTED CHECK STOCK, LASER PRINTED CHECKS AND ELECTRONIC
PAYMENTS. FOR EACH PROCESS, ICONS DEPICT THE PAYMENT PROCESS STEPS IN
CHRONOLOGICAL ORDER.]
Comparison of Payment Processes
Laser-printed checks are less expensive to generate than pre-printed checks
due to reduced printing, processing and labor costs. Electronic payments
further reduce printing, processing and labor costs as well as costs associated
with mailing, "float" (the time between issuance and clearance of a check),
fraud, error and paper-related payment inquiries. Electronic payments provide
enterprises with the opportunity for improved cash management, the flexibility
to make instantaneous payments and the ability to distribute and make payments
at remote offices.
The competitive benefits of electronic payments as well as government and
trading partner mandates are accelerating the transition to electronic payments
from paper-based payments. The United States Treasury
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conducted a study comparing electronic payments to paper payments sent by the
government and found that 58% of the 857 million payments made by the federal
government in 1997 were electronic payment transfers. Results of the study also
showed the following:
. the average cost per transaction was 22.5 times less for electronic
payments than for paper-based payments;
. the payment inquiry rate was 32 times less for electronic payments
than for paper-based payments and the average time to resolve an
inquiry for an electronic payment was 24 hours, compared to 14 days
for paper-based payments; and
. there were no incidences of forgery involving electronic payments
while 63,000 incidences of forgery were reported involving paper-based
payments.
CURRENT INDUSTRY TRENDS AND DEVELOPMENTS
Growth of the Internet and electronic commerce. The Internet and electronic
commerce are expanding dramatically. Forrester Research, Inc. estimates the
total value of goods and services traded between companies over the Internet
will increase from $8 billion in 1997 to $327 billion in 2002. This growth has
created a need for secure, electronic payment management solutions that can
support the conduct of commerce without resorting to the use of paper at the
most critical stage--generating and evidencing payments. NACHA estimates that
the number of electronic payments processed through the ACH network grew by
approximately 600% during the six-year period from 1991 to 1997.
Increase in cost-based competition. Enterprises are increasingly seeking
cost-based solutions in all facets of their organizations in order to remain
competitive. Laser-printed checks reduce an enterprise's printing, processing
and labor costs and electronic payments provide additional cost savings and
operational efficiencies through reduced costs associated with mailing, float,
fraud, error and paper-related inquiries. NACHA estimates that the costs of a
business-to-business electronic payment average $3.00 per payment compared to
$8.33 for a similar paper-based payment.
Ongoing changes in regulation of payments. Enterprises are increasingly
subject to both federal and state regulation mandating the use of electronic
payments. The Debt Collection Improvement Act of 1996 ("EFT '99") requires
federal agencies to convert federal payments (other than payments under the
Internal Revenue Code of 1986) made by paper checks to electronic payments by
January 1, 1999. The Internal Revenue Service has indicated that by January 1,
1999, it plans to have phased-in a requirement that certain companies owing
federal depository taxes in excess of $50,000 prior to 1997 pay such taxes
electronically. Recently, NACHA required financial EDI capabilities for the
12,000 banks participating in its network. In addition, as of September 1998,
47 of the 50 states had programs in place to accept electronic payments.
Adoption of third-party, enterprise-wide solutions. Enterprises are
increasingly seeking integrated, enterprise-wide solutions that provide
competitive advantages through increased data access and automation. This trend
has been accelerated by the shortage of qualified technical personnel,
increased allocation of staff resources to Year 2000 problems and the
competitive need to rapidly adopt new technologies. This trend is illustrated
by widespread adoption in recent years of enterprise resource planning ("ERP")
systems offered by companies such as SAP and Baan to manage operations across
enterprises. To expand from a department level to an enterprise-wide solution,
enterprises are increasingly looking to third-party suppliers with expertise in
replacing and/or integrating their aging payment management systems.
Migration to distributed computing. In recent years, enterprises have adopted
distributed computing systems that offer computing power and business solutions
at the point of need, as well as remote access capabilities such as through the
Internet and intranets. These systems have been deployed to enable individual
users to access enterprise databases. Advances in network management
technologies, such as Windows NT, have further accelerated this trend.
Companies purchasing distributed computing software systems require that
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they conform to corporate computing standards, including databases such as
Microsoft SQL Server, Oracle, Sybase, IBM DB2 and Informix.
Need for increased security. Advances in scanner, copier and desktop
publishing technology have resulted in increased check forgery, counterfeiting
and misappropriation and an increased demand for secure payment solutions.
Enterprises are seeking to lower the estimated $12 billion annual cost of both
internal and external check fraud through implementation of process and data
security and audit functions. In particular, enterprises are demanding
centralized control over the form, initiation and authorization of their
payments throughout a distributed environment.
MARKET OPPORTUNITY
Enterprises are seeking a third-party payment management solution that
enables them to cost-effectively respond to the significant growth in
electronic commerce, increased fraud and on-going changes in the regulation of
payments and migrate to distributed computing. Traditional paper-based payment
systems lack the flexibility to cost-effectively handle the growth in
electronic commerce and the ability to integrate disparate payment and paper-
related management functions. Most companies, even those with ERP systems, have
multiple payment issuing systems in different departments and, therefore, lack
a single view of all payment activity. Although laser-printing check systems
provide some flexibility improvements and cost savings, they cannot match the
transmission and receipt advantages of electronic payment solutions.
Increasingly, enterprises are seeking to implement a cost-effective, secure,
scaleable, electronic-payments platform that accommodates electronic and paper-
based payments across an enterprise.
THE BOTTOMLINE SOLUTION
Our PayBase product suite is designed to provide a single platform to
control, manage and issue all payments, whether paper-based or electronic,
across an enterprise. Our software modules permit customers to leverage the
flexibility of the Internet while increasing security and fraud avoidance. Our
technology complements our customers' existing information systems and payment
applications. We provide multiple options for delivery of detailed payment or
remittance information including via the Internet. Our LaserCheck offering is a
cost-effective, software-based, laser-printing system that allows an enterprise
to streamline its paper payment process and to generate checks at the point of
need. We also offer consulting services and related equipment and supplies to
help customers plan, design and implement the transition from paper to
electronic payments.
The Company's PayBase product suite offers customers the following benefits:
. Internet/intranets remote access capability. Bottomline's PayBase product
suite provides users with a secure, convenient means to remotely access and
transmit payment information. PayBase enables enterprises to manage and
control payments through the Internet and intranets. PayBase provides users
with a secure, convenient means to remotely access and transmit payment
information.
. Flexible, dual payment process. Bottomline's PayBase product suite has been
designed to provide customers with a single platform that permits both
paper and electronic payments. PayBase's dual payment capacity gives
enterprises the flexibility to manage the transition to electronic payments
at a pace compatible with the needs of their customers and business
partners as they evolve in response to market demands and government
mandates. Bottomline has one allowed United States patent application
relating to certain security aspects of its dual payment process.
. Enterprise-wide payment control. Bottomline's PayBase product suite offers
enterprises a centralized payment control and management system while
allowing users to make payments at the point of need. PayBase records all
payments, transactions and events in a central database, which improves
cash management, control of disbursement and receipt functions and audit
capabilities. In addition, Bottomline's PayBase payment control
capabilities permit enterprises to readily outsource payment management
functions to banks or other third-party suppliers.
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. Cost-effective payment solution. Bottomline's PayBase product suite
provides operational efficiencies that reduce staffing, mailing, processing
and auditing costs as well as costs associated with float, risk of error,
fraud and fraud related inquiries. PayBase is designed to be easy to use
and implement and requires only limited commitment of an enterprise's
resources to achieve operational efficiencies.
. Open and scaleable technology. Bottomline's PayBase product suite runs on
one or more application servers using industry standard Unix or Windows NT
operating systems and database servers such as Microsoft SQL Server,
Oracle, Sybase, IBM DB2 Universal Server and Informix. PayBase's flexible
design provides an enterprise with a scaleable solution to meet growing
needs and to manage the migration from a department-wide to an enterprise-
wide, distributed network payment system.
. Enhanced security and fraud protection. Bottomline's PayBase product suite
reduces the risk of fraud through a secure, encrypted database and control
of all payment and operator activity. In addition, PayBase can
automatically send a file of all checks issued instantaneously to the
payor's bank, enabling banks to quickly isolate fraudulent or incorrect
checks and to evaluate questionable payments. For its laser-printing
process, LaserCheck uses blank paper that is non-negotiable until it is
printed and can use specialized MICR printers for additional security.
STRATEGY
Bottomline's objective is to be the leading provider of comprehensive,
enterprise-wide payment management solutions. Key elements of Bottomline's
strategy include the following:
. Further penetrate customer base. The Company intends to further penetrate
its customer base, which the Company believes is only in the early stages
of implementing electronic payment solutions. Additional sales
opportunities to Bottomline's existing customers include: (i) expanding
department level installations to encompass an enterprise's entire payment
system, (ii) selling complementary payment capabilities through sales of
additional software modules (such as electronic payment and receipt
creation or check fraud avoidance), (iii) introducing software upgrades and
(iv) marketing new products. The Company also seeks to generate additional
revenues from its customer base by providing maintenance and support
services and sales of supplies.
. Expand customer base. The Company intends to expand its broad customer base
through: (i) enhancing its direct sales force to market to large
enterprises, (ii) increasing indirect sales channels, (iii) targeting sales
opportunities with financial institutions by leveraging its experience and
industry recognition as the developer of FedEDI, the Federal Reserve
System's financial EDI software solution, (iv) developing additional
marketing partnerships and (v) pursuing strategic acquisitions.
. Expand and leverage strategic relationships. Bottomline intends to expand
and leverage its relationships with business partners who play a key role
in the sales, marketing and distribution of its products. The Company plans
to expand sales through strategic alliances with technology providers and
financial institutions, and through existing reseller relationships with
companies such as Moore Corporation and John H. Harland Company. Bottomline
also intends to expand its relationships with enterprise resource planning
and accounting system vendors, such as Oracle and SAP, and with consulting
firms that assist companies with the implementation of Bottomline's
products. For example, Bottomline recently entered into a working agreement
with Arthur Andersen LLP under which Arthur Andersen LLP will work with the
Company to develop a marketing program and to utilize the enterprise
consulting experience of Arthur Andersen LLP to demonstrate the benefits of
migrating to Bottomline's enterprise-wide PayBase/32/ payment solution.
. Develop new products and technologies. Bottomline intends to develop new
products and technologies which leverage its existing offerings and
customer base. To capitalize on the growth of the Internet and electronic
commerce and changes in payment technologies and practices, Bottomline
employs professionals who are skilled in the complex environments of
electronic commerce, financial EDI and banking and payment systems.
Furthermore, Bottomline's technical staff is experienced in the latest
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database, networking and software development tools, technologies and
methodologies. Bottomline intends to leverage this combination of business
expertise and technical knowledge to deliver new products and technologies.
. Expand international capabilities. Bottomline intends to enhance its
products with additional functionality to expand their use in international
markets. Bottomline believes that this will enable it to better accommodate
existing and future customer needs. Current initiatives include extending
check-printing capabilities to accommodate multiple language print output,
multiple currency print requirements, and international MICR fonts.
. Pursue strategic acquisitions. Bottomline intends to pursue strategic
acquisitions that would provide additional product or service offerings,
additional industry expertise, a broader client base or an expanded
geographic presence.
PRODUCTS AND SERVICES
Bottomline's suite of fully integrated modular software products enable
enterprises to control, manage and issue all payments, whether paper-based or
electronic across an enterprise. Bottomline's products operate on four server
platforms to correspond to customer needs and infrastructure requirements:
PayBase/32/ Workstation Server, PayBase/32/ Enterprise Server, PayBase/16/
Workstation Server and PayBase/16/ Enterprise Server. The PayBase/32/ and
PayBase/16/ Workstation servers operate in a departmental environment and the
PayBase/32/ and PayBase/16/ Enterprise servers operate in an enterprise-wide
environment. Bottomline also offers complementary add-on functionality software
products that customers can select according to their specific needs, as well
as hardware to complement its software product offerings. The Company's
software solutions are further enhanced by a comprehensive and experienced
consulting service and support system. These consultants help customers to
plan, design, implement and manage an enterprise's transition from paper to
electronic payments and to enhance operational productivity and customer
satisfaction.
The following graph depicts the different payment options for PayBase:
[THIS GRAPHIC IS A HORIZONTAL FLOW CHART WHICH SHOWS THE FUNDAMENTAL
PAYMENT FUNCTIONS THE PAYBASE/32/ PRODUCT SUITE CAN PERFORM. ON THE LEFT
SIDE OF THE GRAPHIC ARE THE VARIOUS ENTERPRISE APPLICATIONS WHICH GENERATE
PAYMENTS, INCLUDING PAYROLL, TRAVEL AND ENTERTAINMENT, PAYABLES AND COMMISSIONS.
STARTING WITH THE ENTERPRISE APPLICATION WHICH GENERATES THE PAYMENT, THE GRAPH
SHOWS THE ALTERNATE ROUTES THE PAYMENT COULD TAKE TO COMPLETION, EITHER A LASER
GENERATED PAPER CHECK WITH PAPER REMITTANCE ADVICE, OR AN ELECTRONIC PAYMENT, IN
VARYING FORMATS, WITH REMITTANCE ADVISE BY MAIL, FAX OR INTERNET.]
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PAYBASE/32/ PRODUCTS
Bottomline's PayBase/32/ provides a single platform to control, manage and
issue all payments across an enterprise. PayBase/32/ supports the following:
Electronically Sent Payments ("ESP") Module. The Company's PayBase/32/ ESP
module allows users to create electronic payments, facilitating the transition
from paper checks to electronic funds transfers. This module permits users to
create standard files that meet NACHA standards and other financial EDI
protocols, and to transmit those files to their banks. The PayBase ESP module
can also create electronic tax payments in the formats designated by federal
and state governments. With the PayBase ESP module, users can process payment
instructions received from an external database, such as payroll or accounts
receivable. When installed with Bottomline's LaserCheck printing software
module, PayBase can create both electronic payments and checks during the same
payment run.
Bottomline also offers electronic payment receipt functionality as part of
the ESP module. This functionality allows users to automatically post financial
EDI remittance information to the user's accounts receivable system. Electronic
payment receipt functionality eliminates the need for manually entering
information into accounting ledgers, saving time and preventing mistakes.
Electronic Remittance Advice Delivery System ("ERADS") Module. The Company's
PayBase/32/ ERADS module allows an enterprise to convert to electronic payments
immediately and to deliver the remittance detail by fax, e-mail, value-added
network or the Internet, depending on the technology capabilities of its
payees. This module can be used for payments to individuals (e.g., travel
reimbursements) and to enterprises (e.g., vendor payments). In an ERADS
implementation, payments are sent via PayBase's ESP module through the secure
ACH network. Bottomline's ERADS module automatically channels the remittance
details to each payee by the appropriate media and the payee receives an
electronic payment directly deposited into its bank account. Enterprises can
realize cost efficiencies through reduced check printing or processing and the
lower cost of transmitting remittance information electronically.
LaserCheck Module. Bottomline's PayBase/32/ LaserCheck module allows users to
print checks (including all variable data, such as the microline, logos and
signatures) on blank paper using a laser printer. This module can be deployed
over the user's network or the Internet wherever it is needed, whether in a
centralized printing facility, the controlling department (e.g., payroll) or in
a remote location. With LaserCheck's CheckSort feature, users can sort checks
to lower postage rates and produce copies in a specified order to simplify
filing. LaserCheck also provides password protection, as well as hardware and
software security features, and initiates printing of all checks, confirmation
notices and reports.
Check Fraud Avoidance Module. The Company's Check Fraud Avoidance module
allows users to automatically send a digital file of all checks issued to their
bank. Most commercial banks employ a "Positive Pay" system that determines,
when the check is presented to the bank, whether a bank customer has in fact
issued it. A number of banks will only reimburse customers for check fraud
losses if the customer uses Positive Pay. This module protects the user from
having altered or unissued checks paid from their account and protects banks
from fraudulent checks it receives from other institutions. The Check Fraud
Avoidance software receives its data input from PayBase, but can also receive
input from a non-PayBase system that uses printed checks.
Additional Key Features Included in PayBase/32/. The Company's PayBase/32/
also features the Report Generator, which gives users access to the PayBase/32/
audit database and creates personalized screens and print reports. These
reports can be run automatically at the conclusion of an application run or at
the request of the user and can satisfy certain auditing and record
requirements. In addition, the Company's PayBase/32/ features DesignerPlus,
which allows users to set up and integrate PayBase/32/ into their existing
payment environment.
Complementary Add-On Functionality for PayBase/32/
Internet/intranet Access. The Internet or an intranet can be used to access
the PayBase/32/ relational database. Accessing PayBase/32/ through the Internet
or an intranet decreases inquiries to an enterprise's payment
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department support, which is a major expense for an enterprise, improves
customer service and provides access capabilities 24 hours a day, 365 days per
year.
Internet Manual Payment Entry ("IMPE"). Bottomline offers IMPE functionality,
which allows businesses to use the Internet or an intranet to request payments
from remote sites, including remote locations that are not linked together by a
corporate network. IMPE uses a web browser to activate an applet, which
provides a data entry screen for entry of the payment information. The payment
request is then transmitted over the Internet or an intranet to the corporate
PayBase/32/ system. If the payment is in check form, PayBase/32/ can create an
encrypted print stream and send it over the Internet or an intranet to the
originating location where the authorized user can release the file to a local
printer.
PayBase/32/ for Value Added Banks. Bottomline's PayBase/32/ enables companies
to outsource payment processing to banks. The PayBase/32/ software can be
installed at either the company or the bank. When installed at the company,
PayBase/32/ formats and transmits payment information according to the bank's
requirements. The bank uses its systems to create checks or electronic
payments. When installed at the bank, the company transmits unformatted payment
information to the bank, where PayBase/32/ reformats the data into checks and
electronic payments.
PAYBASE/16/ PRODUCTS
PayBase/16/ is designed as a payment solution for the 16-bit desktop
environment. It operates on the Windows 3.X, Windows 95, Windows 98 and Windows
NT operating systems. The primary application development language is Visual
C++ and the software has been developed using object-oriented techniques.
PayBase/16/ supports the following modules: LaserCheck, Check Fraud Avoidance
and Electronically Sent Payments. LaserCheck and Check Fraud Avoidance
functions are controlled through a comprehensive set of security options.
Transactions and payments are logged in the audit file accessible through a
report generator that is part of the product suite. The LaserCheck module
allows printing to locally attached printers. The optional Check Fraud
Avoidance module stores check information in a MS-Access database and includes
bundled communication software for transmitting positive pay files to the
customer's bank. The ESP module is accessed through a tool bar on the
PayBase/16/ main menu. The ESP module features independent security and audit
tables as well as a separate report generator. File transmission can be
executed with most third-party communication software packages.
PROFESSIONAL SERVICES
Bottomline's team of service professionals draws on extensive experience in
electronic commerce and payment technologies to provide consulting services,
project implementation and training services to Bottomline's clients.
Consulting service professionals are available to review clients' current
payment methods and processes, report findings, and recommend changes and
solutions. Project implementation professionals are available to coordinate
system installation, including check and electronic payment design, payment
reporting format and delivery, bank data and communication requirements,
signature and authority set up and security, audit and control procedures. The
Company offers training services to all customer personnel involved in the
payment cycle, including management, users and information technology personnel
involved in the transition from paper-based payment methods to electronic
payments. Bottomline maintains a fee-based Payment Technology Institute, which
provides classes on trends in the payment industry, payment technology
strategies and the Company's products.
EQUIPMENT AND SUPPLIES
Bottomline offers consumable products needed for payment disbursements and
check printing, including MICR toner and blank-paper check stock. The Company
also provides printers and printer-related equipment, primarily through drop-
ship arrangements with its hardware vendors, to enhance its software product
offerings. Bottomline has reseller agreements with the two leading secure MICR
printer manufacturers in the country, Troy Systems (using Hewlett Packard
printers) and Source Technology (using Lexmark printers).
37
<PAGE>
TECHNOLOGY
The Company's technology focus is on its advanced 32-bit payment processing
software. PayBase/32/ has been designed using a client server architecture. The
server platform supports open database connectivity (ODBC) compliant Unix and
Windows NT databases. The server platform is the warehouse for information
relating to the customer's payment solution including security tables,
application form parameters and audit tables. The client workstation houses the
PayBase/32/ executable programs. This design enables PayBase/32/ to be highly
scaleable for both distributed and high volume centralized check printing, as
well as electronic payment origination. The client workstation interacts with
the database to ascertain authority, to retrieve information to create the form
and to update the audit tables with transaction information and payment result
information. Print output can be sent to any addressable network printer. The
ESP and Check Fraud Avoidance modules are bundled with communication software
that allows scripting of the data transmission. Transmission can be executed
from any client workstation.
PayBase/32/ is designed to be network independent and can be implemented in
leading network architectures, including Novell, Windows NT and TCP/IP. The
product design creates predictable low volume network traffic in order to
minimize the implementation concerns for corporate information technology.
Installation of the product is highly automated using InstallShield. PayBase32
has been submitted and approved for the "Designed for BackOffice" logo from
Microsoft, indicating it conforms to Microsoft standards for design and
operation.
PayBase/32/ was developed as a high end Windows NT 32-bit application.
Development methods conform to the latest Microsoft development specifications,
including extensive use of MFC (Microsoft Foundation Classes) and the DCOM/COM
((Distributed) Component Object Model) standards. Components are designed as
OLE (Object Linking and Embedding) Automation Servers for ease of future
development and enhancement as well as interoperability. Web enabled components
are written as ActiveX controls. The primary development tool is Visual C++.
The PayBase/32/ suite also includes PayBase/32/ DesignerPlus, a sophisticated
proprietary data mapping and design tool. This tool is used to create
sophisticated payment applications using multiple form designs and multiple
payment methods, including all forms of electronic payments. It provides a
proprietary mapping tool to transform any type of host data file into the
format needed for efficient payment creation. The forms design function allows
easy creation of paper output formats from checks to W-2 forms and includes
design wizards to further automate the process. The data mapping and design are
securely linked to the desired business payment process.
PRODUCT DEVELOPMENT AND ENGINEERING
Bottomline's product development and engineering organization includes 41
persons. There are three primary development groups: software engineering,
quality assurance and technical support. The Company spent $1.2 million in
fiscal year 1996, $2.2 million in fiscal year 1997 and $3.2 million in fiscal
year 1998 on product development and engineering costs.
The software engineering team averages over nine years of development
experience per person and over seven years experience per person in payment
systems design. The software engineers have substantial experience in 32-bit
object-oriented development techniques as well as the complex processes of
business payment systems. Members of the group have extensive experience in all
areas of software design, including user interface standards, component object
model standards and client server architecture. Bottomline engineers actively
participate in the Microsoft Developer Network programs and maintain extensive
knowledge of software development trends.
The quality assurance engineers have both extensive knowledge of Bottomline's
products and expertise in software quality assurance techniques. Members of the
quality assurance group make extensive use of
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<PAGE>
automated software testing tools to facilitate comprehensive and timely testing
of products. The quality assurance group members participate on all beta
release teams and provide initial training materials for customer support and
service.
The technical support group provides all product documentation as well as
technical support for released products. Members of the technical group include
experienced technical writers, Bottomline business analysts and network
analysts. The technical writers are versed in current document technology and
work closely with the software engineers to ensure documentation is clear,
current and complete. The technical support engineers are responsible for the
analysis of reported software problems and work closely with customers and
customer support staff. The group's broad knowledge of Bottomline products,
operating systems, communications, and printers allows them to rapidly respond
to software configuration needs.
CUSTOMERS
Bottomline's customer base includes over 2,000 companies in industries such
as financial services, health care, communications, education, media,
manufacturing and government. A partial list of Bottomline's customers follows:
<TABLE>
<S> <C>
ABM Industries Great Lakes Higher Services
Corporation
North Carolina Office
Aetna Inc. of the State
American HomePatient, Inc. Harvard University Controller
Arthur Andersen LLP Hillsborough County Paradigm Health
The Bank of New York Tax Collector's Office Corporation
Company, Inc. Kaiser Permanente PMA Reinsurance
Bankers Trust Corporation Lands' End, Inc. Corporation
Bestfoods Liberty Corporation The Rouse Company
The Charles Schwab CorporationMicrosoft Corporation Spencer Gifts, Inc.
Dow Jones & Company, Inc. Nissan Motor Acceptance TeleBank
Federal Reserve System Corporation The University of
Chicago Operator of
</TABLE> Argonne National
Laboratory
CASE STUDIES
Harvard University. Harvard University's accounts payable department began
using Bottomline's LaserCheck system in 1992. In 1998, Harvard wanted to
upgrade to an automated, electronic-payment system that could manage its
account payables, which included vendor payments and staff reimbursements.
Harvard upgraded to Bottomline's PayBase/32/ Enterprise Server in order (i) to
port its existing Oracle financials applications, (ii) to provide an electronic
path for both payments and remittance information from Concur Technologies'
expense management software and (iii) to offer paper-based payments for
recipients requesting them. Harvard uses the ESP module to send electronic
expense reimbursement payments and uses the ERADS module to transmit remittance
information by e-mail. As a result, Harvard has reduced its typical transaction
cycle by several days while significantly reducing banking fees.
Federal Reserve System. EFT '99 requires federal agencies to convert federal
payments (other than payments under the Internal Revenue Code of 1986) made by
paper checks to electronic payments by January 1, 1999. The payments must be
made using the financial EDI format. In early 1997, it was determined that
fewer than 1,000 of the 12,000 banks in the United States could process
financial EDI transactions. In response, the Federal Reserve System published a
request for a proposal seeking a solution that would allow banks to process
financial EDI transactions. In March of 1998, the Federal Reserve System chose
Bottomline to provide the necessary financial EDI translation software. This
software, named FedEDI, is PC-based and available in both DOS and Windows NT
versions. FedEDI supplements FedLine, the Federal Reserve System's electronic
payment connection that processes all incoming and outgoing ACH files. FedEDI
enables an increased number of banks and their customers to receive financial
EDI formatted payments.
39
<PAGE>
Nissan Motor Acceptance Corporation ("NMAC"). NMAC and its Infiniti Financial
Services division provide $15 billion in consumer lease and loan financing for
its customers, as well as wholesale inventory, mortgage, equipment and working
capital financing for Nissan and Infiniti retailers. NMAC was seeking a payment
platform that would: (i) be seamlessly integrated into its current GEAC
Accounts Payable application; (ii) require minimum training efforts and be easy
to use; (iii) be implemented quickly; (iv) provide a distributed check printing
solution and a pathway to electronic payments capability; and (v) offer a
secure Year 2000-compliant solution. In May 1998, NMAC implemented PayBase/32/
Enterprise Server to meet these requirements. The multi-site system
installation enhanced competitiveness, allowing higher levels of service and
responsiveness at the point of need. PayBase/32/ improved payment methods to
customers for refunds, vendors for accounts payables and retailers for
commissions.
Bestfoods. Bestfoods, with annual sales of approximately $8.4 billion,
markets a broad array of leading consumer food brands, including Arnold,
Entenmann's, Hellmann's, Knorr, Mazola, Skippy and Thomas'. Bestfoods operates
approximately 115 plants world-wide and employs approximately 47,000 people.
Bestfoods' payroll system for its 14,000 North American employees was outdated,
expensive and error-prone. In 1996, Bestfoods originally selected Bottomline's
PayBase/16/ Enterprise Server to manage and control its entire North American
payroll process. In 1998, Bestfoods upgraded to the more powerful PayBase/32/
Enterprise Server to achieve better control, enhance back-office efficiencies
and gain an even more efficient, reliable, employee payroll process. Bestfoods'
corporate headquarters uses the PeopleSoft HRMS System to prepare the check
data for payment. The LaserCheck system secures the check data, distributes it
to 32 remote printer locations and prints nearly 20,000 payroll checks per
month, complete with signatures, logos, custom forms and MICR lines.
SALES AND MARKETING
Sales
Bottomline employs 37 systems trained sales executives, 30 of whom are
divided among six geographical markets and focus on sales to large and medium
sized enterprises and seven of which focus exclusively on sales to large banks
and financial institutions. Bottomline's systems trained sales executives are
supported by eight systems engineers. In addition, a dedicated telephone-sales
team markets new applications, software upgrades and additional services to
Bottomline's existing customers. The Company also sells its products through
reseller relationships with companies such as Moore Corporation and John H.
Harland Company.
Marketing
Bottomline promotes its products and services through conferences, seminars,
direct marketing and trade publications, as well as through relationships with
enterprise resource planning and accounting system vendors, such as Oracle and
SAP, and implementation consultants. Bottomline's marketing partners sponsor
joint mailings and seminars and issue joint press releases with Bottomline, as
well as advertising Bottomline on their web sites. Bottomline also maintains
membership in key industry organizations such as Financial Services Technology
Consortium, Microsoft Value Chain Initiative, American Bankers Association and
various NACHA operating committees. In addition, the Company participates in
industry conferences such as Treasury Management, NACHA, Payments, American
Payroll Congress and National User Conferences of Software Partners. Bottomline
also promotes brand awareness through its public relations program and by
advertising in respected buying guides.
Arthur Andersen LLP Working Agreement
The Company recently entered into a working agreement with Arthur Andersen
LLP. Under the working agreement, Arthur Andersen LLP will work with the
Company to introduce the Company's PayBase/32/ solution to enterprises that
would likely benefit from anticipated cost efficiencies and enhanced internal
controls realized from PayBase/32/. The Company plans to utilize the enterprise
consulting experience of Arthur Andersen LLP to
40
<PAGE>
demonstrate to the users of the Company's departmental payment products the
benefits of migrating to the Company's PayBase/32/ enterprise-wide payment
solution. In October 1998, Arthur Andersen LLP also made an investment in the
Company's common stock.
COMPETITION
The Company competes primarily with companies that offer a broad suite of
electronic data interchange products, such as Sterling Commerce, companies that
provide a broad spectrum of electronic payments solutions, such as CheckFree,
and companies that offer laser check printing software and services. Bottomline
competes to a lesser extent with providers of enterprise resource planning
solutions, such as SAP and PeopleSoft, and providers of traditional payments
products, including check stock and check printing software and services, such
as Standard Register. In addition, the Company also experiences competition
from its customers and potential customers who develop, implement and maintain
their own payment solutions.
Bottomline believes it competes on a number of factors, including: (i) scope,
quality and cost-effectiveness of its payment solutions, (ii) industry
knowledge and expertise, (iii) interoperability of solutions with existing
information technology and payments infrastructure, (iv) product performance
and technical features, (v) patented and proprietary technologies and (vi)
customer service and support. Although a number of the Company's competitors
may be better positioned to compete in certain segments of the payments
industry, the Company believes that its market position is enhanced by: (i) its
ability to provide a single, scalable, open, dual payment platform that gives
customers the flexibility to transition to electronic payments solutions while
maintaining the ability to make paper-based payments using laser-printed
checks, (ii) its relationships with its strategic partners, (iii) its large
customer base and (iv) the level of payments-industry expertise of its
development, sales and customer service and support professionals. Although
Bottomline believes that it competes favorably in its industry, the market for
payment management software is intensely competitive and characterized by rapid
technological change and a number of factors could adversely affect the
Company's ability to compete in the future. See "Risk Factors--Competition."
PROPRIETARY RIGHTS
Bottomline has one allowed United States patent application relating to
certain security aspects of its dual payment process. However, there can be no
assurance that the Company's allowed patent, or any other patents that may be
issued in the future, will be of sufficient scope and strength to provide
meaningful protection of the Company's technology or any commercial advantage
to the Company, or that the patents will not be challenged, invalidated or
circumvented. In addition, Bottomline relies upon a combination of copyright
and trademark laws and non-disclosure and other intellectual property
contractual arrangements to protect its proprietary rights. Bottomline owns
registered trademarks to "Bottomline Technologies," "CheckGard," "LaserCheck"
and "PayBase." The Company also enters into agreements with its employees and
clients, that seek to limit and protect the distribution of proprietary
information. There can be no assurance that the steps Bottomline has taken to
protect its property rights, however, will be adequate to deter
misappropriation of proprietary information, and Bottomline may not be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
proprietary rights. Although Bottomline believes that its products and services
do not infringe upon the intellectual property rights of others and that it has
all rights necessary to utilize the intellectual property employed in its
business, Bottomline is subject to the risk of claims alleging infringement of
third-party intellectual property rights. Any such claims could require
Bottomline to spend significant sums in litigation, pay damages, delay product
installments, develop non-infringing intellectual property or acquire licenses
to intellectual property that is the subject of any such infringement.
Therefore, such claims could have a material adverse effect on Bottomline's
business, operating results and financial condition. See "Risk Factors--
Intellectual Property Rights."
GOVERNMENT REGULATION
Although the Company's operations have not been subject to any material
industry-specific governmental regulation, some of the Company's existing and
potential customers are subject to extensive federal and state
41
<PAGE>
governmental regulations. In addition, governmental regulation in the financial
services industry is evolving, particularly with respect to payment technology,
and the Company's customers may become subject to increased regulation in the
future. Accordingly, the Company's products and services must be designed to
work within the regulatory constraints under which its customers operate.
EFT '99 requires that all federal payments (other than payments under the
Internal Revenue Code of 1986) made after January 1, 1999, must be made
electronically. EFT '99 requires that the conversion from checks to electronic
payments be made in two phases. During the first phase, recipients who became
eligible to receive federal payments on or after July 26, 1996, were required
to receive payments electronically unless they certified in writing that they
did not have an account with a financial institution or an authorized payment
agent. The second phase will begin on January 2, 1999. Beginning on that date,
all federal payments, except payments under the Internal Revenue Code, must be
made electronically.
In support of EFT '99, NACHA now requires that, upon the request of the
receiver of an electronic payment, its bank must provide to each receiver all
payment-related information contained within the transmitted remittance
information. Banks must provide this information to their receivers by the
opening of business on the second banking day following the settlement date of
the entry.
Current treasury regulations require that a business that paid more than
$50,000 in annual employment or other depository taxes in 1995, 1996 or 1997
begin to make such payments electronically on or before January 1, 1999,
depending on the year in which the business first paid more than $50,000 in
depository taxes. Non-complying taxpayers may be subject to a 10% penalty. In
addition, state and local taxing authorities have been implementing electronic
solutions for collecting tax payments. The electronic payment of certain taxes
is required by law in states such as New York, California, Connecticut and
Arkansas.
EMPLOYEES
As of September 30, 1998, Bottomline had a total of 235 employees. None of
Bottomline's employees is represented by a labor union. Bottomline has not
experienced any work stoppages and considers relations with its employees to be
good.
FACILITIES
Bottomline currently leases approximately 32,000 square feet of space at its
headquarters in Portsmouth, New Hampshire under a lease that expires in May
2002. The Company also maintains field sales offices in San Francisco,
California; Chicago, Illinois; Englewood, Colorado; and New York, New York.
REPORTS TO STOCKHOLDERS
Upon the effective date of the registration statement, of which this
prospectus is a part, Bottomline will become a reporting company. Thereafter,
Bottomline intends to distribute to its stockholders annual reports containing
audited financial statements.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company and their
respective ages as of September 30, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Daniel M. McGurl*......... 62 Chairman of the Board, President and Chief
Executive Officer
Joseph L. Mullen*......... 46 Executive Vice President, Operations and
Director
Robert A. Eberle*......... 37 Executive Vice President, Chief Financial
Officer and Treasurer
James L. Loomis........... 48 Senior Executive Advisor and Director
Joseph L. Barry, Jr. (1).. 65 Director
Bruce E. Elmblad (1)(2)... 70 Director
James W. Zilinski (1)..... 54 Director
Leonard J. DiIuro, Jr..... 51 Executive Vice President, Sales
John C. Insko............. 36 Vice President, Electronic Commerce and Finance
Division
Jonathan L. Smolowe....... 42 Vice President, Sales
Philip P. Grannan......... 55 Vice President, Marketing
Cleo A. O'Donnell III..... 44 Vice President, Development
James V. McMullen, Jr..... 55 Vice President, Customer Support and Services
Mark A. Attarian.......... 40 Vice President, Finance
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
* Executive Officer.
Daniel M. McGurl co-founded Bottomline in May 1989, and has served as
Chairman of the Board of Directors, President and Chief Executive Officer of
Bottomline since May 1989. From 1987 to 1989, Mr. McGurl served as Senior Vice
President of State Street Bank and Trust Company. Prior to 1987, Mr. McGurl
held a variety of positions at IBM Corporation, including Director of Marketing
Planning and Director of Far East Operations.
Joseph L. Mullen has served as a director of Bottomline and Executive Vice
President of Operations since July 1996, and served as Vice President of Sales
and Marketing from July 1991 to July 1996. From 1977 to 1989, Mr. Mullen held a
variety of positions at IBM Corporation, including Marketing Manager and
Northeast Area Market Planning Manager.
Robert A. Eberle has served as Executive Vice President, Chief Financial
Officer and Treasurer of Bottomline since September 1998. From December 1996 to
September 1998, Mr. Eberle served as Executive Vice President of Telxon
Corporation, a mobile computing and wireless data company, with primary
responsibility for its Technical Subsidiaries Group. From August 1994 to
December 1996, Mr. Eberle served as Executive Vice President and Chief
Operating Officer of Itronix Corporation, a designer and manufacturer of
notebook and hand-held computers and then a subsidiary of Texlon Corporation,
with primary responsibility for management of the company. From August 1993 to
August 1994, Mr. Eberle served as Vice President of Corporate Development of
Telxon Corporation, with primary responsibility for acquisitions, strategic
relationships and its investment portfolio.
James L. Loomis co-founded Bottomline in May 1989, and has served as a
director of Bottomline since May 1989. Since August 1998, Mr. Loomis has served
as Senior Executive Advisor of Bottomline. From July 1996 to August 1998, Mr.
Loomis served as Executive Vice President of Bottomline and from May 1989 to
July 1996 Mr. Loomis served as Vice President and Treasurer. Prior to 1989, Mr.
Loomis held a variety of positions with the Nashua Corporation, a manufacturer
of imaging supply products, including Director of International Finance and
treasurer of a foreign subsidiary.
43
<PAGE>
Joseph L. Barry, Jr. has served as a director of Bottomline since June 1990.
Since 1990, Mr. Barry has served as President of Hallmark Mechanical Corp., a
machinery service company, and since 1956 as President of Hallamore Corp., a
transportation and rigging company. Since 1975, Mr. Barry has served as
Chairman of Northeast Concrete Products and since 1978 as Co-Chairman of New
England Teamsters Pension Fund.
Bruce E. Elmblad has served as a director of Bottomline since August 1996.
Since April 1994, Mr. Elmblad has served as President of Venture Investment
Advisors, a venture capital advisory firm. From April 1990 to April 1994, Mr.
Elmblad served as President of SED Management Co., Inc., an international
venture capital management company. Mr. Elmblad is also a director of Antex
Biologics Inc., a biopharmaceutical company.
James W. Zilinski has served as a director of Bottomline since August 1994.
Since July 1995, Mr. Zilinski has served as President and Chief Executive
Officer and a director of Berkshire Life Insurance Company, a life insurance
company. From January 1994 to July 1995, Mr. Zilinski served as President of
The BISYS Group, Inc., a provider of outsourcing services to financial
institutions. From August 1993 to January 1994, Mr. Zilinski served as
President of the Investment Services Group of The BISYS Group, Inc. Prior to
1993, Mr. Zilinski served as Executive Vice President and Chief Marketing
Officer of New England Mutual Life Insurance Company.
Leonard J. DiIuro, Jr. has served as Executive Vice President of Sales of
Bottomline since July 1998, and served as Vice President of Business
Development from July 1996 to July 1998. From July 1994 to July 1996, Mr.
DiIuro served as Vice President of Strategic Alliances and Area Manager of
Bottomline and from May 1993 to July 1994 as Vice President of Strategic
Alliances. Prior to 1993, Mr. DiIuro held a variety of positions at IBM
Corporation, including Business Unit Executive, Branch Manager and Area
Marketing Planning Manager.
John C. Insko has served as Vice President of Electronic Commerce and Finance
Division of Bottomline since July 1998. From May 1996 to July 1998, Mr. Insko
served as Vice President of Marketing of Electronic Commerce of Bottomline.
From July 1994 to May 1996, Mr. Insko served as Vice President of Marketing of
CertiSoft Solutions, Inc., a developer of software applications which
Bottomline acquired in 1996. From November 1984 to July 1994, Mr. Insko held a
variety of positions at Colorado National Bank, including Assistant Vice
President and Manager of Cash Management and Operations. From January 1993 to
October 1998, Mr. Insko served as a director of NACHA and since 1993 as a
President of the Board of Directors of Rocky Mountain Automated Clearing House
Association.
Jonathan L. Smolowe has served as Vice President of Sales of Bottomline since
July 1991. From July 1990 to July 1991, Mr. Smolowe served as Account Executive
for Bottomline. Prior to 1990, Mr. Smolowe held various executive level
positions at IBM, including Location Branch Manager and International Executive
Briefing Center Manager.
Philip P. Grannan has served as Vice President of Marketing of Bottomline
since May 1994. From June 1993 to May 1994, Mr. Grannan served as Manager of
the Electronic Payment Software Division. From September 1992 to June 1993, Mr.
Grannan served as Northeast Area Manager of the Company. Prior to 1992, Mr.
Grannan served as an Account Executive of Bottomline.
Cleo A. O'Donnell III has served as Vice President of Development of
Bottomline since June 1996. From October 1989 to June 1996, Mr. O'Donnell
served as Manager of Information Technology of Arbella Mutual Insurance
Company, a life insurance company, with primary responsibility for application
development and network management. Prior to 1989, Mr. O'Donnell served as
Project Manager of Blue Cross and Blue Shield of Massachusetts.
James V. McMullen, Jr. has served as Vice President of Customer Support and
Services of Bottomline since July 1998. From September 1997 to July 1998, Mr.
McMullen worked as an independent consultant to
44
<PAGE>
the Company with primary responsibility for customer service and support. From
November 1995 to September 1997, Mr. McMullen served as Vice President of
Americas Customer Support for Lotus Development Corporation, a subsidiary of
IBM Corporation, with primary responsibility for all post-sales technical
support. From October 1989 to October 1995, Mr. McMullen served as the Director
of Customer Support at Lotus Development Corporation with primary
responsibility for technical support. Prior to 1989, Mr. McMullen held a
variety of positions at IBM Corporation, including Systems Engineer Manager and
Manager of Marketing and Support.
Mark A. Attarian has served as Vice President of Finance of Bottomline since
September 1998. From February 1997 to September 1998, Mr. Attarian served as
Vice President, Chief Financial Officer and Treasurer of Bottomline. From
October 1996 to January 1997, Mr. Attarian served as an independent financial
consultant. From July 1994 to September 1996, Mr. Attarian served as Chief
Financial Officer and Vice President of Diatide, Inc., a biopharmaceutical
company. From October 1993 to June 1994, Mr. Attarian served as an independent
financial consultant.
BOARD OF DIRECTORS
Pursuant to the First Amendment and Restatement of Stock Rights and Voting
Agreement, as amended, dated as of March 31, 1992 among the Company and certain
stockholders of the Company, such stockholders were granted the right (which
terminates upon the closing of this offering) to designate representatives on
the Company's Board of Directors. Under this agreement, Messrs. McGurl, Loomis
and Barry were elected to the Board of Directors.
Following this offering, the Board of Directors of Bottomline will be divided
into three staggered classes, each of whose members will serve for a three-year
term. The Board will consist of two Class I Directors (Messrs. Barry and
Elmblad), two Class II Directors (Messrs. Mullen and Zilinski) and two Class
III Directors (Messrs. McGurl and Loomis). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The
terms of the Class I Directors, Class II Directors and Class III Directors will
expire upon the election and qualification of successor directors at the annual
meeting of stockholders to be held during calendar years 1999, 2000 and 2001,
respectively.
Each officer serves at the discretion of the Board of Directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. There are no family relationships among any of
the directors or executive officers of Bottomline.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee composed of Messrs. Barry
and Elmblad, which makes recommendations concerning salaries and incentive
compensation for employees of Bottomline and administers and grants stock
options under Bottomline's stock option plans. The Board also has an Audit
Committee composed of Messrs. Elmblad and Zilinski, which reviews the results
and scope of the audit and other services provided by Bottomline's independent
public auditors.
DIRECTOR COMPENSATION
All of the directors are reimbursed for expenses incurred to attend Board of
Directors and committee meetings. In addition, non-employee directors of
Bottomline receive stock options under Bottomline's 1998 Director Stock Option
Plan. See "Stock Plans--1998 Director Stock Option Plan."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for the
fiscal year ended June 30, 1998 for each person who was serving as an executive
officer of Bottomline on June 30, 1998 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------
SECURITIES ALL OTHER
NAME AND SALARY UNDERLYING COMPENSATION
PRINCIPAL POSITION ($) BONUS ($) OPTIONS (1) ($)(2)
------------------ ---------- ----------------------- ------------
<S> <C> <C> <C> <C>
Daniel M. McGurl
Chairman of the Board,
President and Chief
Executive Officer.......... $ 172,333 $ 50,000 10,000 $1,680
Joseph L. Mullen
Executive Vice President,
Operations................. 144,375 62,966 10,000 2,158
Mark A. Attarian
Vice President, Chief
Financial Officer and
Treasurer(3)............... 125,000 20,000 -- 1,706
</TABLE>
- --------
(1) The number of shares covered by options to purchase shares of Bottomline's
common stock granted during the fiscal year ended June 30, 1998.
(2) Consists of amount paid by the Company to the Named Executive Officer's
account in the Company's 401(k) Plan.
(3) Mr. Attarian served in these positions until September 30, 1998, at which
time he became Vice President of Finance.
OPTION GRANTS DURING FISCAL 1998
The following table sets forth grants of stock options to each of the Named
Executive Officers during the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel M. McGurl........ 10,000 5.0% $26.40 4/23/03 $ 42,308 $ 122,522
Joseph L. Mullen........ 10,000 5.0 24.00 4/23/08 150,935 382,498
Mark A. Attarian........ -- -- -- -- -- --
</TABLE>
- --------
(1) Amounts that may be realized upon exercise of the options immediately
before the expiration of their term, assuming the specified compound rates
of appreciation (5% and 10%) on the market value of the common stock on the
date of option grant over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect Bottomline's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and common stock
holdings are dependent on the timing of exercise and the future performance
of the common stock. There can be no assurance that the rates of
appreciation assumed in this table can be achieved or that the amounts
reflected will be received by the individuals.
46
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
June 30, 1998. None of the Named Executive Officers exercised stock options in
the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END FISCAL YEAR-END (1)
--------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel M. McGurl.......... -- 10,000 -- --
Joseph L. Mullen.......... -- 10,000 -- --
Mark A. Attarian.......... 5,882 19,118 $41,174 $133,826
</TABLE>
- --------
(1) Represents the difference between the exercise price and the fair market
value of the common stock of $24.00 per share at fiscal year-end as
determined by the Board of Directors of Bottomline.
STOCK PLANS
1998 Director Stock Option Plan
The Board of Directors adopted Bottomline's 1998 Non-Employee Director Stock
Option Plan (the "Director Plan") in November 1998, subject to stockholder
approval. Under the Plan, directors of Bottomline who are not employees of
Bottomline or any subsidiary of Bottomline receive non-statutory options to
purchase shares of common stock. A total of 100,000 shares of common stock may
be issued upon the exercise of options granted under the Director Plan.
Pursuant to the Director Plan, each non-employee director who first becomes a
non-employee director after the closing of this offering will be granted an
option to purchase 5,000 shares of common stock on the date of his or her
initial election to the Board of Directors, which will vest ratably over four
years on each anniversary of the date of grant. In addition, each non-employee
director will receive an option to purchase 2,500 shares of common stock on the
date of each annual meeting of stockholders commencing with the 1999 Annual
Meeting of Stockholders (other than a director who was initially elected to the
board of directors at any such annual meeting or, if previously, at any time
after the prior year's annual meeting). The options granted annually vest upon
the earlier of one year from the date of grant or the date immediately
preceding the next annual meeting of stockholders, so long as the optionee
remains a director of Bottomline. The exercise price per share of all such
options will be the fair market value of a share of common stock on the date of
grant.
1989 Stock Option Plan and 1997 Stock Incentive Plan
Bottomline's 1989 Stock Option Plan (as amended, the "1989 Plan"), was
adopted by the Board of Directors and approved by the stockholders of
Bottomline in 1989. As of September 30, 1998, options to purchase an aggregate
of 110,000 shares of common stock at a weighted average exercise price of
$16.64 per share were outstanding under the 1989 Plan. No additional option
grants will be made under the 1989 Plan.
Bottomline's 1997 Stock Incentive Plan (the "Incentive Plan") was adopted by
the Board of Directors and the stockholders of Bottomline in August 1997. An
amendment to the Incentive Plan in November 1998 increased the number of
authorized shares, subject to stockholder approval, under the Incentive Plan to
900,000 shares of common stock. As of September 30, 1998, an aggregate of
261,000 shares of common stock at a weighted average exercise price of $25.43
per share were outstanding under the Incentive Plan and an aggregate of 639,000
shares of common stock were reserved for issuance for future option grants.
The Incentive Plan provides for the grant of incentive stock options intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), non-statutory stock options, restricted stock awards and other
stock-based awards (collectively, "Awards").
47
<PAGE>
All officers, employees, directors, consultants and advisors of Bottomline
and its subsidiaries are eligible to receive Awards under the Incentive Plan.
Under present law, however, incentive stock options may only be granted to
employees. No participant may receive an Award for more than 100,000 shares in
any calendar year.
The Company may grant options at an exercise price less than, equal to or
greater than the fair market value of the common stock on the date of grant.
Under present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the common
stock on the date of grant (or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power of Bottomline). The Incentive Plan permits the Board of
Directors to determine how optionees may pay the exercise price of their
options, including by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to Bottomline of shares of common stock, by
delivery to Bottomline of a promissory note, or by any combination of the
permitted forms of payment.
The Board of Directors administers the Incentive Plan. The Board of Directors
has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the Incentive Plan and to interpret its
provisions. It may delegate authority under the Incentive Plan to one or more
committees of the Board of Directors and, subject to certain limitations, to
one or more executive officers of Bottomline. The Board of Directors has
authorized the Compensation Committee to administer the Incentive Plan,
including the granting of options to executive officers. Subject to any
applicable limitations contained in the Incentive Plan, the Board of Directors,
the Compensation Committee or any other committee or executive officer to whom
the Board of Directors delegates authority, as the case may be, selects the
recipients of Awards and determines (i) the number of shares of common stock
covered by options and the dates upon which such options become exercisable,
(ii) the exercise price of options, (iii) the duration of options, and (iv) the
number of shares of common stock subject to any restricted stock or other
stock-based Awards and the terms and conditions of such Awards, including the
conditions for repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other Acquisition Event (as defined
in the Incentive Plan), the Board of Directors is authorized to provide for
outstanding options or other stock-based Awards to be assumed or substituted
for by the acquiror and to take certain other actions, including accelerating
the vesting schedule of Awards.
No Award may be granted under the Incentive Plan after August 2007, but the
vesting and effectiveness of Awards previously granted may extend beyond that
date. The Board of Directors may at any time amend, suspend or terminate the
Incentive Plan, except that no Award granted after an amendment of the
Incentive Plan and designated as subject to Section 162(m) of the Code by the
Board of Directors shall become exercisable, realizable or vested (to the
extent such amendment was required to grant such Award) unless and until such
amendment is approved by Bottomline's stockholders.
1998 Employee Stock Purchase Plan
The Board of Directors adopted Bottomline's 1998 Employee Stock Purchase Plan
(the "Purchase Plan") in November 1998, subject to stockholder approval. The
Purchase Plan authorizes the issuance of up to a total of 250,000 shares of
common stock to participating employees.
All employees of Bottomline, including directors of Bottomline who are
employees, and all employees of any participating subsidiaries, whose customary
employment is more than 20 hours per week for more than five months in any
calendar year, are eligible to participate in the Purchase Plan. Employees who
would immediately after the grant own 5% or more of the total combined voting
power or value of the stock of Bottomline or any subsidiary are not eligible to
participate. As of September 30, 1998, approximately 226 of Bottomline's
employees would have been eligible to participate in the Purchase Plan.
On the first day of a designated payroll deduction period (the "Offering
Period"), Bottomline will grant to each eligible employee who has elected to
participate in the Purchase Plan an option to purchase shares of
48
<PAGE>
common stock as follows: the employee may authorize an amount (a whole
percentage from 1% to 10% of such employee's base pay) to be deducted by
Bottomline from such employee's base pay during the Offering Period. On the
last day of the Offering Period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the Purchase Plan, the option price is an amount
equal to 85% of the average market price (as defined) per share of the common
stock on either the first day or the last day of the Offering Period, whichever
is lower. In no event may an employee purchase in any one Offering Period a
number of shares which exceeds the number of shares determined by dividing (a)
the product of $2,083 and the number of whole months in the Offering Period by
(b) the closing price of a share of common stock on the commencement date of
the Offering Period. The Compensation Committee may, in its discretion, choose
an Offering Period of 12 months or less for each Offering and may choose a
different Offering Period for each Offering.
An employee who is not a participant on the last day of the Offering Period
is not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the Purchase Plan
terminate upon voluntary withdrawal from the Purchase Plan at any time, or when
the employee ceases employment for any reason, except that upon termination of
employment because of death, the employee's beneficiary has certain rights to
elect to exercise the option to purchase the shares that the accumulated
payroll deductions in the participant's account would purchase at the date of
death.
Because participation in the Purchase Plan is voluntary, Bottomline cannot
now determine the number of shares of common stock to be purchased by any
particular current executive officer, by all current executive officers as a
group or by non-executive employees as a group.
401(K) PLAN
Bottomline has a 401(k) salary reduction plan (the "401(k) Plan"), which is
intended to qualify under Sections 401(a) and 401(k) of the Code. Generally,
all employees are eligible to participate in the 401(k) Plan after they have
completed three months of service.
Eligible employees electing to participate in the 401(k) Plan may defer a
portion of their compensation, on a pre-tax basis, by making a contribution to
the 401(k) Plan. The maximum contribution is fixed in Section 401(k) of the
Code. The contribution limit for calendar year 1998 was $10,000. The Company
may contribute a discretionary matching contribution, annually equal to 25% of
each such participant's deferred compensation up to 5% of their annual
compensation (in 1996, up to 20% of the first 3% for eligible employees'
contributions). Eligible employees who elect to participate in the 401(k) Plan
are generally vested in Bottomline's matching contribution according to the
following schedule: three years of service--20%; four years of service--40%;
five years of service--60%; six years of service--80%; seven years of service--
100%. The Company contributed an aggregate of $14,000 in fiscal 1996, $26,000
in fiscal 1997 and $98,000 in fiscal 1998 to the 401(k) Plan.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with each of Messrs. McGurl,
Mullen and Eberle (the "Executive Agreements"). The provisions of each
Executive Agreement are substantially the same. The term of each Executive
Agreement is the greater of 36 months or 24 months after a Change in Control of
the Company (as defined). If the employee's employment is terminated either by
the employee as a result of an Involuntary Termination (as defined) or by the
Company without Cause (as defined), then all outstanding options held by the
employee would become immediately exercisable in full (this provision does not
become effective until November 2000 with respect to Messrs. McGurl and Mullen)
and the employee would be entitled to receive a lump sum payment and
continuation of benefits for a period of 12 months, in the case of Messrs.
Eberle and Mullen, and for a period of 24 months in the case of Mr. McGurl. In
the case of Messrs. Mullen and Eberle, the lump sum payment would equal one
year's salary plus the maximum amount of bonus they were eligible to earn in
the then current year. In the case of Mr. McGurl, the lump sum payment would
49
<PAGE>
equal two times the sum of his then annual salary plus the maximum amount of
bonus he was eligible to earn in the then current year. If the employee's
employment is terminated upon or after a Potential Change in Control of the
Company (as defined) by the employee as a result of an Involuntary Termination
or by the Company without Cause, all then outstanding options held by the
employee would become immediately exercisable (this provision does not become
effective until November 2000 with respect to Messrs. McGurl and Mullen) in
full and the employee would be entitled to receive a lump sum payment and
continuation of benefits for a period of 24 months. In the case of each of
Messrs. Mullen and Eberle, the lump sum payment would equal two times the sum
of his then annual salary plus the maximum amount of bonus he was eligible to
earn in the then current year. In the case of Mr. McGurl, the lump sum payment
would equal three times the sum of his then annual salary plus the maximum
amount of bonus he was eligible to earn in the then current year. Each of the
Executive Agreements provides that, in the event of a Change in Control, the
Company would pay any excise tax which the employee would be liable for under
Section 4999 of the Code as a result of having received the severance benefits.
Mr. McGurl's agreement provides that, during the first year of the agreement,
he will be paid an annual base salary of $185,000 and will have the opportunity
to earn a bonus of up to $55,000. Under their agreements, each of Messrs.
Mullen and Eberle will be paid an annual base salary of $175,000 and will each
have the opportunity to earn a bonus of up to $50,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors
are Messrs. Barry and Elmblad. No executive officer of Bottomline has served as
a director or member of the compensation committee (or other committee serving
an equivalent function) of any other entity whose executive officers served as
a director or member of the Compensation Committee. From August 1997 to
November 1998, Mr. McGurl served as a member of the Compensation Committee of
the Board of Directors. Mr. McGurl is President and Chief Executive Officer of
Bottomline.
50
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership
of the common stock of Bottomline as of September 30, 1998, and as adjusted to
reflect the sale of the shares of common stock in the offering, for: (i) each
person or entity known to Bottomline to own beneficially more than 5% of
Bottomline's common stock, (ii) each of the directors of Bottomline, (iii) each
of the Named Executive Officers, (iv) all directors and executive officers as a
group and (v) each of the other selling stockholders. Except as indicated
below, none of these persons or entities has a relationship with Bottomline or,
to the knowledge of Bottomline, any of the Underwriters or their respective
affiliates. Unless otherwise indicated, each person or entity named in the
table has sole voting power and investment power (or shares such power with his
or her spouse) with respect to all shares of capital stock listed as owned by
such person or entity. The address of each of the officers and directors of
Bottomline is c/o Bottomline Technologies (de), Inc., 155 Fleet Street,
Portsmouth, NH 03801.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED NUMBER BENEFICIALLY OWNED
PRIOR TO OFFERING (1) OF AFTER OFFERING (1)(2)
------------------------- SHARES ------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ ------------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Daniel M. McGurl........ 625,000 25.7%
James L. Loomis......... 625,000 25.7
John H. Harland Compa-
ny..................... 193,798 8.0
Charles P. O'Leary...... 170,000 7.0
Joseph L. Barry,
Jr.(3)................. 58,125 2.4
Bruce E. Elmblad(4)..... 15,000 *
Joseph L. Mullen........ 90,202 3.7
James W. Zilinski(5).... 15,000 *
Robert A. Eberle........ 5,000 *
All executive officers
and directors as a
group (7 persons)(6)... 1,433,327 58.4
</TABLE>
- --------
* Less than 1%
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days after September
30, 1998 through the exercise of any stock option or other right. The
inclusion herein of such shares, however, does not constitute an admission
that the named stockholder is a direct or indirect beneficial owner of such
shares.
(2) In the event that the over-allotment option is exercised in full, [
].
(3) Includes an aggregate of 5,000 shares of common stock subject to options
which are exercisable within 60 days after September 30, 1998.
(4) Includes an aggregate of 5,000 shares of common stock subject to options
which are exercisable within 60 days after September 30, 1998.
(5) Consists of an aggregate of 15,000 shares of common stock subject to
options which are exercisable within 60 days after September 30, 1998.
(6) Includes an aggregate of 25,000 shares of common stock subject to options
which are exercisable within 60 days after September 30, 1998.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After this offering, the authorized capital stock of Bottomline will consist
of 50,000,000 shares of common stock, $.001 par value per share, and 4,000,000
shares of preferred stock, $.001 par value per share. As of September 30, 1998,
there were outstanding (i) 2,428,709 shares of common stock held by 44
stockholders of record and (ii) options to purchase an aggregate of 371,000
shares of common stock.
The following summary of certain provisions of Bottomline's common stock,
preferred stock, Restated Certificate of Incorporation and Amended and Restated
By-laws (the "By-laws") is not intended to be complete and is qualified by
reference to the provisions of applicable law and to Bottomline's Restated
Certificate of Incorporation and By-laws included as exhibits to the
Registration Statement of which this prospectus is a part. See "Additional
Filings and Company Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any such dividends declared by the Board of Directors, subject
to any preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of Bottomline, the holders of common
stock are entitled to receive ratably the net assets of Bottomline available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are, and the shares offered by Bottomline in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to
the rights of the holders of shares of any series of preferred stock which
Bottomline may designate and issue in the future. Certain holders of common
stock have the right to require Bottomline to register their shares of common
stock under the Securities Act in certain circumstances. See "Shares Eligible
for Future Sale."
PREFERRED STOCK
Under the terms of the Restated Certificate of Incorporation, the Board of
Directors is authorized to issue such shares of Preferred Stock in one or more
series without stockholder approval. The Board has discretion to determine the
rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences of each series of preferred stock.
The purpose of authorizing the Board of Directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, a majority of the
outstanding voting stock of Bottomline. Bottomline has no present plans to
issue any shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Bottomline is subject to the provisions of Section 203 of the Delaware
General Corporation Law statute. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
52
<PAGE>
The By-laws provide for the division of the Board of Directors into three
classes as nearly equal in size as possible with staggered three-year terms.
See "Management." Under the By-laws, any vacancy on the Board of Directors,
including a vacancy resulting from an enlargement of the Board of Directors,
may only be filled by vote of a majority of the directors then in office. The
classification of the Board of Directors and the limitation on and filling of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, control of Bottomline.
The By-laws also provide that after this offering, any action required or
permitted to be taken by the stockholders of Bottomline at an annual meeting or
special meeting of stockholders may only be taken if it is properly brought
before such meeting and may not be taken by written action in lieu of a
meeting. The By-laws further provide that special meetings of the stockholders
may only be called by the Chairman of the Board, the President or the Board of
Directors. In order for any matter to be considered "properly brought" before a
meeting, a stockholder must comply with certain requirements regarding advance
notice and provide certain information to Bottomline. These provisions could
have the effect of delaying until the next stockholders meeting stockholder
actions which are favored by the holders of a majority of the outstanding
voting securities of Bottomline. These provisions could also discourage a third
party from making a tender offer for the common stock, because even if it
acquired a majority of the outstanding voting securities of Bottomline, would
be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders' meeting, and not by
written consent.
The Delaware General Corporation Law statute provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The By-laws require the affirmative vote of
holders of at least 75% of the votes which all the stockholders would be
entitled to cast in any annual election of directors or class of directors to
amend or repeal any of the provisions described in the prior two paragraphs.
The Restated Certificate of Incorporation contains certain provisions
permitted under the Delaware General Corporation Law statute relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. Further, the Restated Certificate of Incorporation
contains provisions to indemnify Bottomline's directors and officers to the
fullest extent permitted by the Delaware General Corporation Law statute.
Bottomline believes that these provisions will assist Bottomline in attracting
and retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is State Street Bank
and Trust Company.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for the securities of
Bottomline. After completion of this offering, based upon the number of shares
outstanding at September 30, 1998, there will be [ ] shares of common stock
of Bottomline outstanding (assuming no exercise of the Underwriters' over-
allotment option or outstanding options of Bottomline). Of these shares, the
[ ] shares sold in this offering will be freely tradable without restriction
or further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except that any shares purchased by "affiliates" of
Bottomline, as that term is defined in Rule 144 ("Rule 144") under the
Securities Act, may generally only be sold in compliance with the limitations
of Rule 144 described below.
SALES OF RESTRICTED SHARES
All of the shares offered under this prospectus will be freely tradable in
the open market. The remaining [ ] shares of common stock that will be
outstanding after this offering are considered "restricted securities" under
Rules 144 or 701 of the Securities Act. Generally, restricted securities that
have been owned for a period of at least two years may be sold immediately
after the completion of this offering and restricted securities that have been
owned for at least one year may be sold 90 days after the completion of this
offering. Certain of the restricted securities are subject to lock-up
agreements with the Underwriters. Persons subject to lock-up agreements have
agreed not to sell shares of common stock without the prior permission of the
Underwriters for a period of 180 days after the completion of this offering.
The table below sets forth information regarding potential sales of restricted
securities.
. [ ] shares may be sold immediately after completion of this
offering;
. [ ] shares may be sold 90 days after completion of this offering;
and
. [ ] shares may be sold upon the expiration of the lock-up
agreements.
OPTIONS
Shares of common stock may also be issued and sold upon the exercise of
options. After this offering, Bottomline intends to register an aggregate of
1,110,000 shares of common stock, which may be issued under its 1989 Stock
Option Plan, 1997 Stock Incentive Plan and 1998 Director Stock Option Plan.
Shares issued upon the exercise of stock options after the effective date of
the Form S-8 registration statements will be eligible for resale in the public
market without restriction, subject to Rule 144 limitations applicable to
affiliates and the lock-up agreements noted above, if applicable. The table
below sets forth information regarding potential sales of common stock as a
result of the exercise of options outstanding on the date of this prospectus.
. [ ] shares may be sold 90 days after consummation of this offering;
and
. [ ] shares may be sold upon the expiration of the lock-up
agreements.
In addition, Bottomline intends to register an aggregate of 250,000 shares of
common stock reserved for issuance under its 1998 Employee Stock Purchase Plan.
However, no shares will be issuable under the 1998 Employee Stock Purchase Plan
until [ ], 1999.
REGISTRATION RIGHTS
Pursuant to the First Amendment and Restatement of Stock Rights and Voting
Agreement, dated as of March 31, 1992, as amended, among the Company and
certain stockholders (the "First Rightsholders") and the Second Stock Rights
Agreement dated as of March 4, 1994, as amended, among the Company, John H.
54
<PAGE>
Harland Company and certain stockholders, including certain First Rightsholders
(the "Second Rightsholders," and, together with the First Rightsholders, the
"Rightsholders"), the Rightsholders will be entitled following this offering to
certain rights to register under the Securities Act a total of approximately
[ ] shares of common stock (the "Registrable Stock"). The agreements
generally provide that if the Company proposes to register any of its
securities under the Securities Act, the Rightsholders are entitled to include
Registrable Stock in the registration. The managing underwriter of any
underwritten public offering would, however, have the right, for marketing
reasons, to cut-back the number of shares of Registrable Stock included in such
"piggyback" registration, which would be applied initially against the Second
Rightsholders and then against the First Rightsholders. Certain First
Rightsholders have agreed to allocate to John H. Harland Company a portion of
the shares that they may otherwise register if John H. Harland Company's right
to register shares is limited by application of the cut-back.
Certain Rightsholders may, upon the request of holders of Registrable Stock
having an aggregate offering price of at least $2,000,000, require the Company
to prepare and file a registration statement under the Securities Act for their
shares of Registrable Stock at any time after this offering. The Company need
effect only two such demand registrations for the First Rightsholders and one
such demand registration for the Second Rightsholders, and is not required to
file a demand registration statement within 180 days after the effective date
of any other registration statement filed by the Company.
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for the common stock,
and no prediction can be made as to the effect, if any, that market sales of
shares of common stock or the availability of shares for sale will have on the
market price of the common stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of the common stock in the public market
could adversely affect the market price of the common stock and could impair
Bottomline's future ability to raise capital through an offering of its equity
securities.
55
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives, BancBoston Robertson Stephens Inc., BT Alex. Brown
Incorporated and CIBC Oppenheimer Corp. (the "Representatives"), have severally
agreed with Bottomline and certain stockholders of the Company, subject to the
terms and conditions of the underwriting agreement, to purchase from Bottomline
and the selling stockholders the number of shares of common stock set forth
opposite their 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>
BancBoston Robertson Stephens Inc. ................................
BT Alex. Brown Incorporated........................................
CIBC Oppenheimer Corp. ............................................
----
Total.........................................................
====
</TABLE>
The Company and the selling stockholders have been advised by the
Representatives 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 this 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, 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 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 Company will be obligated,
pursuant to the option, to sell shares to the extent the option is exercised.
The Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the shares of common stock offered hereby.
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 representations and warranties contained in the
underwriting agreement.
Each officer and director of the Company and certain other holders of shares
of common stock have agreed, for the lock-up period, subject to certain
exceptions, not to 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 options to purchase any shares of common stock, or any securities
convertible into or exchangeable for shares of common stock owned as of the
date of this prospectus or thereafter acquired directly by such holders or with
respect to which they have the power of disposition, without the prior written
consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson
Stephens Inc. may, in its sole discretion and at any time without notice,
release all or any portion of securities subject to lock-up agreement. There
are no existing agreements between the Representatives and any of the Company's
stockholders providing consent to the sale of shares prior to the expiration of
the lock-up period. In addition, the Company has agreed that during the lock-up
period the Company will not, without the prior written consent of BancBoston
Robertson Stephens Inc., subject to certain exceptions, (i) consent to the
disposition of any shares held by stockholders subject to lock-up agreements
56
<PAGE>
prior to the expiration of the lock-up period or (ii) issue, sell, contract to
sell, or otherwise dispose of, any shares of common stock, any options 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 sale of shares in this offering, the issuance of common stock upon
the exercise of outstanding options, and the Company's issuance of options and
shares under existing stock option and incentive plans. See "Shares Eligible
for Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common stock.
Consequently, the public offering price for the common stock offered by this
prospectus will be determined through negotiations among the Company, the
selling stockholders and the Representatives. Among the factors to be
considered in such negotiations are 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, the present state of the
Company's development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that 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 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 common stock
on behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with this 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
this 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
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by Bottomline hereby will
be passed upon for Bottomline by Hale and Dorr LLP, Boston, Massachusetts, and
for the Underwriters by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The financial statements of Bottomline Technologies (de), Inc. at June 30,
1997 and 1998, and for each of the three years in the period ended June 30,
1998, appearing in this prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
57
<PAGE>
ADDITIONAL FILINGS AND COMPANY INFORMATION
We have filed a Registration Statement on Form S-1 with the Commission. This
prospectus, which is a part of the Registration Statement, does not contain all
of the information included in the Registration Statement. Certain information
is omitted and you should refer to the Registration Statement and its exhibits.
With respect to references made in this prospectus to any contract, agreement
or other document of Bottomline, such references are not necessarily complete
and you should refer to the exhibits attached to the Registration Statement for
copies of the actual contract, agreement or other document. You may review a
copy of the Registration Statement, including exhibits, at the Commission's
public reference room at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 or Seven World Trade Center, 13th Floor, New York, New York 10048 or
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms.
We will also file annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
Commission.
Our Commission filings and the Registration Statement can also be reviewed by
accessing the Commission's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
58
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Balance Sheets as of June 30, 1997 and 1998 and September 30, 1998
(Unaudited)............................................................. F-3
Statements of Operations for the years ended June 30, 1996, 1997 and 1998
and for the three months ended September 30, 1997 and 1998 (Unaudited).. F-4
Statements of Stockholders' Equity for the years ended June 30, 1996, 1997
and 1998 and for the three months ended September 30, 1998 (Unaudited).. F-5
Statements of Cash Flows for the years ended June 30, 1996, 1997 and 1998
and for the three months ended September 30, 1997 and 1998 (Unaudited).. F-6
Notes to Financial Statements ............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Bottomline Technologies (de), Inc.
We have audited the accompanying balance sheets of Bottomline Technologies
(de), Inc. as of June 30, 1997 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period 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 financial position of Bottomline Technologies (de),
Inc. at June 30, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended June 30, 1998, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
August 6, 1998, except for
Note 11 as to which the
date is November 12, 1998
F-2
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- SEPTEMBER 30,
1997 1998 1998
------------ ------------ ------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS (Note 6)
Current assets:
Cash and cash equivalents......... $ 827 $ 1,362 $ 1,491
Accounts receivable, net of
allowances for doubtful
accounts and returns of $644 at
June 30, 1997, $970 at June 30,
1998 and $1,071 at September
30, 1998........................ 5,596 6,997 7,228
Inventory, net.................... 656 174 156
Refundable income taxes........... 905 -- --
Deferred income taxes (Note 10)... 571 724 724
Prepaid expenses and other
current assets.................. 187 89 316
------------ ------------ ------------
Total current assets................ 8,742 9,346 9,915
Property and equipment, net (Note
4)................................ 1,446 1,865 2,109
Capitalized and acquired software
costs, net of accumulated
amortization of $836 in 1997
(Notes 2 and 3)................... 253 -- --
Other assets........................ 40 90 60
------------ ------------ ------------
Total assets........................ $ 10,481 $ 11,301 $ 12,084
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amounts due under revolving
credit arrangement (Note 6)..... $ 1,045 -- --
Accounts payable.................. 2,177 $ 1,177 $ 1,474
Accrued expenses (Note 5)......... 1,696 2,030 2,141
Deferred revenue and deposits..... 1,063 2,121 2,069
Income taxes payable.............. -- 59 54
Current portion of long-term debt
(Note 6)........................ 285 75 50
------------ ------------ ------------
Total current liabilities........... 6,266 5,462 5,788
Deferred income taxes payable (Note
10)............................... 235 118 118
Long-term debt, less current portion
(Note 6).......................... 54 -- --
Commitments and contingent
liabilities (Note 7)..............
Redeemable common stock, at
redemption value (Note 8)
(Authorized, issued and outstanding
shares -- 267 in all periods)..... 1,246 1,353 1,381
Stockholders' equity (Note 8):
Common stock, $.001 par value:
Authorized shares -- 15,000
Issued and outstanding shares--
2,102 at June 30, 1997, 2,120
at June 30, 1998 and 2,162 at
September 30, 1998........... 2 2 2
Additional paid-in-capital........ 1,679 1,871 1,871
Retained earnings................. 999 2,495 2,924
------------ ------------ ------------
Total stockholders' equity.......... 2,680 4,368 4,797
------------ ------------ ------------
Total liabilities and stockholders'
equity............................ $ 10,481 $ 11,301 $ 12,084
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.......... $ 4,689 $ 6,392 $ 9,887 $ 1,591 $ 3,477
Service and maintenance.... 4,580 6,729 9,701 1,937 2,254
Equipment and supplies..... 8,798 9,005 9,449 2,536 2,374
------- ------- ------- --------- ---------
Total revenues............... 18,067 22,126 29,037 6,064 8,105
Cost of revenues:
Software licenses.......... 27 160 215 48 123
Service and maintenance.... 2,655 4,206 4,261 851 1,106
Equipment and supplies..... 5,361 6,410 6,526 1,648 1,682
------- ------- ------- --------- ---------
Total cost of revenues....... 8,043 10,776 11,002 2,547 2,911
------- ------- ------- --------- ---------
Gross profit................. 10,024 11,350 18,035 3,517 5,194
Operating expenses:
Sales and marketing........ 4,190 6,631 7,675 1,557 2,242
Product development and
engineering............... 1,237 2,185 3,158 670 928
General and
administrative............ 3,044 4,266 4,372 932 1,277
------- ------- ------- --------- ---------
Total operating expenses..... 8,471 13,082 15,205 3,159 4,447
------- ------- ------- --------- ---------
Income (loss) from opera-
tions....................... 1,553 (1,732) 2,830 358 747
Interest income.............. 48 53 35 7 17
Interest expense............. (54) (109) (85) (29) (2)
------- ------- ------- --------- ---------
(6) (56) (50) (22) 15
------- ------- ------- --------- ---------
Income (loss) before provi-
sion (benefit) for income
taxes....................... 1,547 (1,788) 2,780 336 762
Provision (benefit) for in-
come taxes (Note 10)........ 664 (536) 1,177 142 305
------- ------- ------- --------- ---------
Net income (loss)............ $ 883 $(1,252) $ 1,603 $ 194 $ 457
======= ======= ======= ========= =========
Earnings (loss) per share
available to common
stockholders (Note 9):
Basic...................... $ 0.42 $ (0.68) $ 0.71 $ .08 $ .20
======= ======= ======= ========= =========
Diluted.................... $ 0.34 $ (0.68) $ 0.61 $ .07 $ .17
======= ======= ======= ========= =========
Shares used in computing
earnings (loss) per share
available to common
stockholders (Note 9):
Basic...................... 1,898 1,995 2,105 2,102 2,120
======= ======= ======= ========= =========
Diluted.................... 2,334 1,995 2,439 2,432 2,485
======= ======= ======= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1997 AND 1998 AND
THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balances at July 1, 1995...... 1,871 $ 2 $ 628 $1,553 $2,183
Issuance of common stock
upon exercise of stock
options (Note 8).......... 47 -- 250 -- 250
Issuance of common stock for
acquisition of the common
stock of CertiSoft (Note
3)........................ 30 -- 480 -- 480
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (88) (88)
Net income.................. -- -- -- 883 883
----- ---- ------ ------ ------
Balances at June 30, 1996..... 1,948 2 1,358 2,348 3,708
Issuance of common stock
upon exercise of stock
options (Note 8).......... 45 -- 297 -- 297
Issuance of common stock
upon exercise of stock
warrants (Note 8)......... 109 -- 24 -- 24
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (97) (97)
Net loss.................... -- -- -- (1,252) (1,252)
----- ---- ------ ------ ------
Balances at June 30, 1997..... 2,102 2 1,679 999 2,680
Issuance of common stock
upon exercise of stock
options (Note 8).......... 18 -- 192 -- 192
Accretion to redemption
value on redeemable common
stock..................... -- -- -- (107) (107)
Net income.................. -- -- -- 1,603 1,603
----- ---- ------ ------ ------
Balances at June 30, 1998..... 2,120 2 1,871 2,495 4,368
Issuance of common stock
upon exercise of stock
warrants (Note 8)
(Unaudited)............... 42 -- -- -- --
Accretion to redemption
value on redeemable common
stock (Unaudited)......... -- -- -- (28) (28)
Net income (Unaudited)...... -- -- -- 457 457
----- ---- ------ ------ ------
Balances at September 30, 1998
(Unaudited)................. 2,162 $ 2 $1,871 $2,924 $4,797
===== ==== ====== ====== ======
</TABLE>
See accompanying notes.
F-5
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE
YEARS ENDED MONTHS ENDED
JUNE 30, SEPTEMBER 30,
------------------------ ---------------
1996 1997 1998 1997 1998
------ ------- ------- ------- ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................. $ 883 $(1,252) $ 1,603 $ 194 $ 457
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization..... 784 1,174 827 216 190
Provision for allowances on
accounts receivable............. 4 487 326 29 28
Provision for allowances for
obsolescence of inventory....... -- 217 -- -- --
Deferred income tax benefit....... (102) (297) (270) -- --
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable..................... (506) (1,452) (1,727) 537 (259)
Decrease (increase) in inventory,
prepaid expenses and other
current assets and other
assets......................... (237) (138) 530 134 (179)
Decrease (increase) in refundable
income taxes................... -- (905) 905 136 --
Increase (decrease) in accounts
payable, accrued expenses and
deferred revenue and deposits.. (343) 1,907 392 (1,080) 356
(Decrease) increase in income
taxes payable.................. 337 (409) 59 -- (5)
------ ------- ------- ------- ------
Net cash provided by (used in)
operating activities............. 820 (668) 2,645 166 588
INVESTING ACTIVITIES
Purchases of property and
equipment, net................... (311) (580) (993) (159) (434)
Increase in capitalized software
costs............................ (158) (114) -- -- --
------ ------- ------- ------- ------
Net cash used in investing
activities....................... (469) (694) (993) (159) (434)
FINANCING ACTIVITIES
Net borrowings (repayments) on
revolving credit arrangement..... -- 1,045 (1,045) (45) --
Repayments on notes payable........ (152) (258) (264) (71) (25)
Proceeds from exercise of stock
options and stock warrants....... 250 321 192 -- --
------ ------- ------- ------- ------
Net cash provided by (used in)
financing activities............. 98 1,108 (1,117) (116) (25)
------ ------- ------- ------- ------
Increase (decrease) in cash and
cash equivalents................. 449 (254) 535 (109) 129
Cash and cash equivalents at
beginning of year................ 632 1,081 827 827 1,362
------ ------- ------- ------- ------
Cash and cash equivalents at end of
year............................. $1,081 $ 827 $ 1,362 $ 718 $1,491
====== ======= ======= ======= ======
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest......................... $ 54 $ 106 $ 85 $ 28 $ 2
Income taxes..................... $ 446 $ 1,017 $ 464 $ 7 $ 141
Non-cash transactions:
Acquisition of the common stock
of CertiSoft for common stock
and assumption of note payable
(Note 3)....................... $ 764 -- -- -- --
</TABLE>
See accompanying notes.
F-6
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1997 AND 1998; THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1998 (UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Bottomline Technologies, Inc. (the predecessor Company) was incorporated in New
Hampshire in 1989 and, on August 25, 1997, the Company was merged with and into
Bottomline Technologies (de), Inc. (the Company), a company incorporated in
Delaware. The Company is a domestic company that develops and markets
proprietary software and complementary products and services. The Company's
products and services are sold to customers operating in many different
industries. The Company does not require collateral on its accounts receivable,
which is in accordance with industry practice.
On May 2, 1996, the Company acquired CertiSoft Solutions, Inc. (CertiSoft).
This entity was previously accounted for as a wholly-owned subsidiary.
Effective January 9, 1997, CertiSoft was merged into the predecessor Company.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consists of demand deposit accounts and an overnight
investment account at a financial institution. The Company considers all highly
liquid instruments with an original maturity of ninety days or less to be cash
equivalents.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets, principally
from 3-7 years. Leasehold improvements are amortized over their useful lives or
the term of the lease, whichever is less.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs were
$62,000, $114,000 and $129,000 for the years ended June 30, 1996, 1997 and
1998, respectively, and $39,000 and $15,000 for the three months ended
September 30, 1997 and 1998, respectively.
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. Estimates include but are not limited to the allowances for doubtful
accounts and returns. Actual results could differ from those estimates.
Income Taxes
Deferred income taxes are provided for differences in bases of assets and
liabilities for financial reporting and income tax purposes. Temporary
differences relate primarily to depreciation, various accruals, and allowances
for doubtful accounts, returns and inventory.
F-7
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. 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.
Capitalized and Acquired Software Costs
Costs incurred to develop software to be sold, leased or otherwise marketed are
capitalized upon attainment of technological feasibility and amortized on a
product-by-product basis over the estimated useful life of the related
software. Such software costs totaled $1,089,000 at June 30, 1997. Also
included in capitalized software costs was $546,000 attributable to acquired
software in connection with the acquisition of CertiSoft (See Note 3).
Capitalized and acquired software costs charged to operations were $423,000,
$631,000 and $253,000 for the years ended June 30, 1996, 1997 and 1998,
respectively, including additional amortization in 1997 on certain acquired
software, and $75,000 and $-0- for the three months ended September 30, 1997
and 1998, respectively. At June 30, 1998, capitalized software costs had been
fully amortized.
The carrying value of intangible assets is periodically reviewed by the Company
based on the expected future undiscounted operating cash flows of the related
asset. If an impairment is indicated, the Company will adjust the carrying
value of the intangible assets.
Revenue Recognition
Revenue for software is recognized when product is shipped and there are no
significant remaining obligations of the Company. Revenue for services is
recognized as the services are provided to the customer. Revenue under software
maintenance agreements is recognized ratably over the term of the agreement,
generally one year. Revenue for hardware is recognized when product is shipped.
Revenue is recognized in accordance with Statement of Position (SOP) 91-1 for
periods prior to July 1, 1998. See Accounting Pronouncements below.
Customer Returns
Customer returns are estimated and accrued for when known based on return
authorizations.
Earnings per Share
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS
128 requires calculation and presentation of basic and diluted earnings per
share. Basic earnings per share is calculated based on the weighted average
number of common shares outstanding and excludes any dilutive effects of
warrants, stock options or other type securities. Diluted earnings per share is
calculated based on the weighted average number of common shares outstanding
and the dilutive effect of stock options, warrants and related securities
calculated using the treasury stock method. Dilutive securities are excluded
from the diluted earnings per share calculation if their effect is
antidilutive.
401(k) Plan
The Company has a 401(k) Profit Sharing Plan (the Plan), whereby eligible
employees may contribute up to 15% (20% in 1997) of their compensation, subject
to limitations established by the Internal Revenue Code. The Company may
contribute a discretionary matching contribution, annually, equal to 25% of
each such
F-8
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
participant's deferred compensation up to 5% of their annual compensation (in
1996, up to 20% of the first 3% for eligible employees' contributions). The
Company charged $14,000, $26,000 and $98,000 to expense in the years ended June
30, 1996, 1997 and 1998, respectively, and $23,000 and $81,000 to expense in
the three months ended September 30, 1997 and 1998, respectively, under the
Plan.
Accounting Pronouncements
In October 1997, the Accounting Standards Executive Committee of the American
Institute (ACSEC) of Certified Public Accountants issued Statement of Position
(SOP) 97-2 "Software Revenue Recognition", which the Company adopted on July 1,
1998. This statement supersedes SOP 91-1, Software Revenue Recognition, and
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions entered into in fiscal years
beginning after December 15, 1997. The Company believes that SOP 97-2 will not
have a material impact on the Company's future operating results.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About
Segments of an Enterprise and Related Information." Both SFAS No. 130 and SFAS
No. 131 are effective for fiscal years beginning after December 15, 1997. The
Company believes that the adoption of these new accounting standards will not
have a material impact on the Company's financial statements.
Interim Financial Information (Unaudited)
The interim financial information at September 30, 1998 and for the three
months ended September 30, 1997 and 1998, all of which is unaudited, was
prepared by the Company on a basis consistent with the audited financial
statements. In management's opinion, such information reflects all adjustments
which are of a normal recurring nature and which are necessary to present
fairly the results of the periods presented.
3. ACQUISITION
On May 2, 1996, the Company, through its newly-formed, wholly-owned subsidiary,
CSI Acquisition, Inc. (Acquisition), acquired CertiSoft Solutions, Inc.
(CertiSoft) by merging with and into CertiSoft. Each share of CertiSoft common
stock outstanding prior to the merger was surrendered and subsequently retired
and each CertiSoft shareholder received 1.61 shares of the Company's common
stock for each CertiSoft share surrendered. The total consideration paid by the
Company to acquire CertiSoft included 30,001 shares of the Company's common
stock, estimated at $480,000, and the assumption of a $250,000 note payable to
the former majority owner of CertiSoft and certain other trade obligations.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of CertiSoft are included in the consolidated financial
statements since the date of acquisition. In connection with the acquisition,
the Company acquired assets with an estimated fair value of $764,000 and
assumed liabilities of $284,000, which includes the $250,000 note payable
described above.
F-9
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------
SEPTEMBER 30,
1997 1998 1998
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Furniture and fixtures......................... $ 387 $ 399 $ 407
Technical equipment............................ 1,979 2,693 2,965
Software....................................... 210 453 586
Leasehold improvements......................... 126 151 172
------ ------ ------
2,702 3,696 4,130
Less: Accumulated depreciation and amortiza-
tion.......................................... 1,256 1,831 2,021
------ ------ ------
$1,446 $1,865 $2,109
====== ====== ======
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------
SEPTEMBER 30,
1997 1998 1998
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Employee compensation and benefits............... $ 799 $1,392 $1,221
Sales taxes...................................... 425 214 151
Other............................................ 472 424 769
------ ------ ------
$1,696 $2,030 $2,141
====== ====== ======
</TABLE>
6. BORROWING ARRANGEMENTS
In December 1997, the Company entered into a revolving credit agreement (the
revolving agreement) with a bank which provides for available borrowings of up
to $4,000,000. Borrowings under the revolving agreement bear interest at the
bank's prime rate (8.5% at June 30, 1998) and are due on demand. The
outstanding balance under the revolving agreement at June 30, 1997 and 1998 and
September 30, 1998 was $1,045,000, $-0- and $-0-, respectively. The revolving
agreement expires on December 30, 1998.
In June 1995, the Company entered into a $500,000 term loan with a bank. The
term loan was due in thirty-six monthly installments of principal and interest
of $16,000. Interest under the term loan was at 8.75%. The balance outstanding
at June 30, 1997 and 1998 and September 30, 1998 was $164,000, $-0- and $-0-,
respectively.
Borrowings under the revolving agreement and the term loan are secured by
substantially all assets of the Company.
In May 1996, in connection with the acquisition of CertiSoft, CertiSoft assumed
a $250,000 promissory note payable to the former majority owner of CertiSoft.
The note is due in 10 equal installments of $25,000, beginning November 1996
and every third month thereafter, plus accrued interest at 8.25% per annum.
This note is guaranteed by the Company. The balance outstanding at June 30,
1997 and 1998 and September 30, 1998 was $175,000, $75,000 and $50,000,
respectively.
F-10
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases its principal office facility under a noncancellable
operating lease expiring in 2002. In addition to the base term, the Company has
two five-year options to extend the term of the lease. Rent payments are fixed
for the initial two years of the lease and may be increased after that during
the initial term of the lease by the Consumer Price Index. In addition, the
Company is obligated to pay certain incremental operating costs over the base
amount.
The Company also leases office space in other cities. All such leases expire in
fiscal years 1999 and 2000.
Future minimum annual rental commitments under this lease at June 30, 1998 are
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1999.......................................................... $ 373
2000.......................................................... 349
2001.......................................................... 307
2002.......................................................... 281
------
$1,310
======
</TABLE>
Rent expense charged to operations for the years ended June 30, 1996, 1997 and
1998 was $286,000, $338,000 and $342,000, respectively, and for the three
months ended September 30, 1997 and 1998 was $85,000 and $107,000,
respectively.
8. CAPITAL TRANSACTIONS
Common Stock
In connection with the sale of its common stock in 1992, the Company and
certain existing stockholders amended previous agreements covering stock rights
and voting arrangements. The amended agreement provides certain stockholders
with preemptive rights and certain registration rights in the event of certain
circumstances.
In connection with the sale of its common stock, the Company has also agreed
with certain stockholders to redeem, at the stockholders' option, 267,000
shares of common stock anytime after June 29, 1995. The initial redemption
value was $3.00 per share and increases each year in accordance with the
agreement. The redemption value was $1,246,000, $1,353,000 and $1,381,000 at
June 30, 1997 and 1998 and September 30, 1998, respectively.
In March 1994, the Company and certain existing stockholders amended the March
31, 1992 stock rights and voting arrangements to provide an additional
stockholder with preemptive rights and certain registration rights in the event
of certain circumstances.
Stock Option Plan
The Company adopted the Bottomline Technologies, Inc. Stock Option Plan, as
amended, (the Plan) on August 1, 1989, which provides for the issuance of
incentive stock options and nonstatutory stock options. The Plan is
administered by the Board of Directors which has the authority to determine to
whom options may be granted, the period of exercise and what other
restrictions, if any, should apply. The Company has reserved up to 480,000
shares of its common stock for issuance under the Plan. Incentive stock options
may be granted to employees at a price of no less than 100% of the fair market
value of the common stock at the date of grant. Options expire a maximum of ten
years from the date of grant.
F-11
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL TRANSACTIONS--(CONTINUED)
On August 21, 1997, Bottomline Technologies, Inc. adopted the 1997 Stock
Incentive Plan (the 1997 Plan), which provides for the issuance of stock
options and nonstatutory stock options. The 1997 Plan is administered by the
Board of Directors which has the authority to determine to whom options may be
granted, the period of exercise and what other restrictions, if any, should
apply. The Company has reserved up to 400,000 shares of its common stock for
issuance under the 1997 Plan to employees at a price of no less than 100% of
the fair market value of the common stock at the date of grant. Options expire
a maximum of ten years from the date of grant.
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 because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, as the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Option valuation models have been developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. Such models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. A summary of
assumptions is as follows:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
---------------------------- --------------
1996 1997 1998 1997 1998
--------- ------ --------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Dividend yield............... 0% 0% 0% 0% 0%
Expected lives of options
(years).................... 4 4 4 4 4
Risk-free interest rate...... 6.18-6.67% 6.02% 5.65-6.20% 6.20% 6.00%
</TABLE>
For purposes of the required pro forma disclosures, the estimated fair value of
the options is amortized over the options' vesting period. Had compensation
cost for the Company's stock option plan been determined based on the fair
value at the grant dates for awards under those plans consistent with the
minimum value method of SFAS 123, the Company's net income (loss) would have
been decreased (increased) by $46,000, $(68,000) and $115,000 for the years
ended June 30, 1996, 1997 and 1998, respectively, and by $13,000 and $98,000
for the three months ended September 30, 1997 and 1998, respectively.
As the provisions of SFAS 123 are effective only for fiscal years beginning
after December 15, 1994, the effects of applying SFAS 123 for pro forma
disclosures are not necessarily representative of the effects on net income
(loss) for future years.
F-12
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL TRANSACTIONS--(CONTINUED)
A summary of option activity is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------------- THREE MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
---------------- ---------------- ---------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- -------- -------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of period............. 118 $ 6.83 93 $ 9.51 113 $15.30 295 $ 20.06
Options granted......... 30 13.00 65 17.53 200 23.74 76 28.82
Options exercised....... (47) 5.36 (45) 6.61 (18) 11.00 -- --
Options expired......... (8) 7.50 -- -- -- -- -- --
--- ------- --- ------ --- ------ ------- ----------
Outstanding, end of
period................ 93 9.51 113 15.30 295 20.06 371 21.85
Exercisable, end of
period................ 55 $ 5.41 25 $11.60 34 $15.59 74 $ 16.25
Weighted average fair
value of options
granted during the
period................ $ 2.78 $ 4.57 $ 4.60 $ 6.15
</TABLE>
As of June 30, 1998, options to purchase 34,000 shares were exercisable at
option prices ranging from $13.00 to $19.00 per share. As of June 30, 1997 and
1998 and September 30, 1998, options to purchase 21,000, 215,000 and 139,000
shares, respectively, were available for grant from the 1997 Plan and the Plan.
The weighted average remaining contractual life of options outstanding at June
30, 1998 is seven and one half years, and the range of exercise prices is from
$13.00 to $26.40 per share.
WARRANTS
In connection with the sale of its common stock in March 1992, the Company
issued warrants for the purchase of an aggregate 215,000 shares of common stock
at exercise prices ranging from $3.00 to $6.00 per share. During 1997, warrants
for 4,000 shares were exercised at a price of $6.00 per share. Additionally,
under the terms of the warrant agreement, certain warrant holders elected a
non-cash exercise under which the Company issued an additional 105,000 shares.
The shares issued, as a result of this non-cash exercise, were based on the
relationship of the exercise price to the fair market value of the Company's
stock at the exercise date, as defined in the original agreement.
At June 30, 1998, there were warrants outstanding for 48,000 shares, at
exercise prices ranging from $3.00--$4.00 per share. The warrants were
exercised on September 30, 1998.
F-13
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------- --------------
1996 1997 1998 1997 1998
-------- --------- -------- ------ ------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)......... $ 883 $ (1,252) $ 1,603 $ 194 $ 457
Accretion to redemption
value on redeemable
common stock............. (88) (97) (107) (27) (28)
-------- --------- -------- ------ ------
Numerator for basic and
diluted earnings (loss) per
share available to common
stockholders............... $ 795 $ (1,349) $ 1,496 $ 167 $ 429
======== ========= ======== ====== ======
Denominator:
Denominator for basic
earnings (loss) per share
available to common
stockholders--weighted-
average shares
outstanding.............. 1,898 1,995 2,105 2,102 2,120
Effect of employee stock
options, warrants and
redeemable common stock.. 436 -- 334 330 365
-------- --------- -------- ------ ------
Denominator for diluted
earnings (loss) per share
available to common
stockholders............... 2,334 1,995 2,439 2,432 2,485
======== ========= ======== ====== ======
Earnings (loss) per share
available to common
stockholders:
Basic..................... $ 0.42 $ (0.68) $ 0.71 $ .08 $ .20
======== ========= ======== ====== ======
Diluted................... $ 0.34 $ (0.68) $ 0.61 $ .07 $ .17
======== ========= ======== ====== ======
</TABLE>
F-14
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109. SFAS No.
109 requires the use of the liability method in which income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------ SEPTEMBER 30,
1997 1998 1998
----- ----- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Allowances..................................... $ 284 $ 572 $ 572
Various accrued expenses....................... 144 115 115
Deferred software maintenance revenue.......... 8 -- --
Inventory...................................... 135 37 37
----- ----- -----
Total deferred tax assets................... 571 724 724
Deferred tax liabilities:
Property, plant and equipment.................. (135) (118) (118)
Capitalized software costs..................... (100) -- --
----- ----- -----
Total deferred tax liabilities.............. (235) (118) (118)
----- ----- -----
Net deferred tax assets (liabilities).......... $ 336 $ 606 $ 606
===== ===== =====
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
----------------------- -------------
1996 1997 1998 1997 1998
------ ------ ------- ------ ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $ 610 $ (247) $ 1,238 $ 121 $ 259
State.............................. 156 8 209 21 46
------ ------ ------- ------ ------
766 (239) 1,447 142 305
Deferred:
Federal............................ (90) (252) (241) -- --
State.............................. (12) (45) (29) -- --
------ ------ ------- ------ ------
(102) (297) (270) -- --
------ ------ ------- ------ ------
$ 664 $ (536) $ 1,177 $ 142 $ 305
====== ====== ======= ====== ======
</TABLE>
F-15
<PAGE>
BOTTOMLINE TECHNOLOGIES (DE), INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
A reconciliation of the federal statutory rate to the effective income tax is
as follows:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------ --------------
1996 1997 1998 1997 1998
------ ------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax (benefit) at federal
statutory rate................ 34.0% (34.0)% 34.0% 34.0% 34.0%
State taxes, net of federal
benefit....................... 6.0 (1.4) 6.5 6.5 6.0
Non-deductible expenses......... 5.6 12.6 .6 -- --
Research and development tax
credits....................... -- (7.2) (3.6) -- --
Other........................... (2.7) -- 4.8 1.8 --
------ ------- ------ ------ ------
42.9% (30.0)% 42.3% 42.3% 40.0%
====== ======= ====== ====== ======
</TABLE>
The principal non-deductible expense for income tax purposes is the
amortization related to the acquired software costs recorded in connection with
the purchase of CertiSoft.
11. SUBSEQUENT EVENTS
On November 12, 1998, the Company's Board of Directors approved various
actions, subject to stockholder approval, including: (1) increasing the
authorized shares of common stock to 50,000,000; (2) authorizing a class of
Preferred Stock with 4,000,000 shares available; (3) the establishment of the
1998 Employee Stock Purchase Plan under which 250,000 shares of common stock
may be issued; (4) the establishment of the 1998 Director Stock Option Plan
under which 100,000 shares of common stock may be issued and (5) increasing the
number of shares reserved for issuance under the Company's 1997 Stock Incentive
Plan to 900,000.
F-16
<PAGE>
[INSIDE BACK COVER]
[This graphic contains the following text:
Centered at the top of the page are the words:
"Payment Management Software and
Services that Enable Organizations to
Manage their Transition from Paper Checks to Electronic
Payments"
Descending from left to right are three slides. The words above the top
slide are:
"Secure Payment Server"
The words in the slide are:
Managing:
> enterprise-wide payments
> point-of-need payments
> all payment information
> reporting
> auditing
> processing
> remittance delivery
The words above the second slide are:
"All Types of Payments"
The words in the slide are:
> Electronic Payments to satisfy EFT '99
> NACHA-compliant ACH payments
> Financial EDI
> LaserCheck
> Check Fraud/Positive Pay
> Electronic Remittance Delivery
> Internet, VAN, VPN compatible
The words above the third slide are:
"Industry Standards"
The words in the slide are:
> Windows NT
> Utilizes full suite of Microsoft's networking and database
tools
> Integrates into current computing environment;
network, protocol, database independent
> Transitions easily as payments needs grow and change
> Certified by Microsoft as "Designed for BackOffice"
"Bottomline Technologies" is in a box on the bottom inside left of the
page]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee.................................................. $
NASD filing fee.......................................................
Nasdaq National Market listing fee....................................
Blue Sky fees and expenses............................................
Transfer Agent and Registrar fees.....................................
Accounting fees and expenses..........................................
Legal fees and expenses...............................................
Printing and mailing expenses.........................................
Miscellaneous.........................................................
-----
Total............................................................... $
=====
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant 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
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant 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
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director
or officer did not meet the applicable standard of conduct required for
indemnification, or if the
II-1
<PAGE>
Registrant fails to make an indemnification payment within 60 days after such
payment is claimed by such person, such person is permitted to petition the
court to make an independent determination as to whether such person is
entitled to indemnification. As a condition precedent to the right of
indemnification, the director or officer must give the Registrant notice of the
action for which indemnity is sought and the Registrant has the right to
participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive,
and provides that in the event that the Delaware General Corporation Law is
amended to expand the indemnification permitted to directors or officers the
Registrant must indemnify those persons to the fullest extent permitted by such
law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.
Under Section 8 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of common
stock issued and options granted by the Registrant since November 1995. Further
included is the consideration, if any, received by the Registrant for such
shares and options and information relating to the section of the Securities
Act of 1933, as amended (the "Securities Act"), or rule of the Securities and
Exchange Commission under which exemption from registration was claimed.
The Registrant's 1989 Stock Option Plan was adopted by the Board of
Directors and approved by the stockholders of the Registrant on August 1, 1989.
The Registrant's 1997 Stock Incentive Plan was originally adopted by the Board
of Directors and approved by the stockholders of the Registrant on August 21,
1997, and was amended by the Board of Directors on November 12, 1998. Since
November 1995, options to purchase 109,167 shares of common stock had been
exercised for an aggregate consideration of $740,000 and as of November 12,
1998 options to purchase 110,000 shares of common stock were outstanding under
the 1989 Stock Option Plan. As of November 12, 1998, no options had been
exercised and options to purchase 261,000 shares of common stock were
outstanding under the 1997 Stock Incentive Plan.
In October 1998, the Registrant issued 35,715 shares of Common Stock to
Arthur Andersen LLP at a purchase price of $28.00 per share for an aggregate
consideration of $1,000,020.
In connection with financing activities in 1992, the Company issued
warrants for the purchase of an aggregate of 214,500 shares of common stock at
exercise prices ranging from $3.00 to $6.00 per share. During 1997, warrants
for 4,000 shares were exercised at a price of $6.00 per share. Additionally, in
1997 and 1998, in accordance with the warrant agreements, the remainder of the
warrant holders elected to exercise their warrants on a cashless basis and, in
connection therewith, the Company issued an additional 147,291 shares.
II-2
<PAGE>
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from the Securities Act registration
requirements set forth in Sections 3(b) and 4(2) of the Securities Act, or any
regulations promulgated thereunder, relating to sales by an issuer not
involving any public offering, or (ii) in the case of certain options to
purchase shares of common stock and shares of common stock issued upon the
exercise of such options, such offers and sales were made in reliance upon an
exemption from registration under Rule 701 of the Securities Act. No
underwriters were involved in the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Certificate of Incorporation of the Registrant,
to be effective immediately prior to the closing of this offering.
3.3 By-Laws of the Registrant.
3.4 Amended and Restated By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.
4.1* Specimen certificate for shares of common stock.
5* Opinion of Hale and Dorr LLP.
10.1 1989 Stock Option Plan, as amended, including form of stock option
agreement for incentive and non-statutory stock options.
10.2 Amended and Restated 1997 Stock Incentive Plan, including form of
stock option agreement for incentive and non-statutory stock options.
10.3 1998 Director Stock Option Plan, including form of non-statutory stock
option agreement.
10.4 1998 Employee Stock Purchase Plan.
10.5 First Amendment and Restatement of Stock Rights and Voting Agreement,
as amended.
10.6 Second Stock Rights Agreement, as amended.
10.7 Lease dated November 28, 1994, between the Registrant and Wenberry
Associates L.L.C.
10.8* Employment Agreement between the Registrant and Mr. McGurl.
10.9* Employment Agreement between the Registrant and Mr. Mullen.
10.10* Employment Agreement between the Registrant and Mr. Eberle.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-6).
27 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS
AND RETURNS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS (CHARGED
BEGINNING OF TO COSTS AND BALANCE AT
YEAR ENDED YEAR EXPENSES) DEDUCTIONS END OF YEAR
---------- ------------ ------------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
June 30, 1996..... $288 4 135 $157
June 30, 1997..... $157 487 $644
June 30, 1998..... $644 326 $970
</TABLE>
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Certificate of Incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted form the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Portsmouth, New Hampshire, on this
13th day of November, 1998.
BOTTOMLINE TECHNOLOGIES (de), INC.
By: /s/ Daniel M. McGurl
-----------------------------------
Daniel M. McGurl, Chairman of the
Board, President and Chief
Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Bottomline Technologies (de),
Inc., hereby severally constitute and appoint Daniel M. McGurl, Robert A.
Eberle and Philip P. Rossetti, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-1 filed herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b), and
generally to do all such things in our names and on our behalf in our
capacities as officers and directors to enable Bottomline Technologies (de),
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Daniel M. McGurl Chairman of the Board, November 13, 1998
______________________________________ President and Chief
DANIEL M. MCGURL Executive Officer
(Principal Executive
Officer)
/s/ Robert A. Eberle Executive Vice President, November 13, 1998
______________________________________ Chief Financial Officer
ROBERT A. EBERLE and Treasurer (Principal
Financial and Accounting
Officer)
/s/ Joseph L. Barry, Jr. Director November 13, 1998
______________________________________
JOSEPH L. BARRY, JR.
/s/ Bruce E. Elmblad Director November 13, 1998
______________________________________
BRUCE E. ELMBLAD
/s/ James L. Loomis Director November 13, 1998
______________________________________
JAMES L. LOOMIS
/s/ Joseph L. Mullen Director November 13, 1998
______________________________________
JOSEPH L. MULLEN
/s/ James W. Zilinski Director November 13, 1998
______________________________________
JAMES W. ZILINSKI
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Certificate of Incorporation of the Registrant,
to be effective immediately prior to the closing of this offering.
3.3 By-Laws of the Registrant.
3.4 Amended and Restated By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.
4.1* Specimen certificate for shares of common stock.
5* Opinion of Hale and Dorr LLP.
10.1 1989 Stock Option Plan, as amended, including form of stock option
agreement for incentive and non-statutory stock options.
10.2 Amended and Restated 1997 Stock Incentive Plan, including form of
stock option agreement for incentive and non-statutory stock options.
10.3 1998 Director Stock Option Plan, including form of non-statutory stock
option agreement.
10.4 1998 Employee Stock Purchase Plan.
10.5 First Amendment and Restatement of Stock Rights and Voting Agreement,
as amended.
10.6 Second Stock Rights Agreement, as amended.
10.7 Lease dated November 28, 1994, between the Registrant and Wenberry
Associates L.L.C.
10.8* Employment Agreement between the Registrant and Mr. McGurl.
10.9* Employment Agreement between the Registrant and Mr. Mullen.
10.10* Employment Agreement between the Registrant and Mr. Eberle.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-6).
27 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BOTTOMLINE TECHNOLOGIES (de), INC.
FIRST. The name of the Corporation is: Bottomline Technologies (de), Inc.
SECOND. The address of its registered office in the state of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is 15,000,000 shares of Common Stock, $.001 par value
per share.
The number of authorized shares of Common 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, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
FIFTH. The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Daniel M. McGurl c/o Bottomline Technologies, Inc.
155 Fleet Street
Portsmouth, NH 03801-4050
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
<PAGE>
SEVENTH. Except to the extent that the General Corporation of Law of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
EIGHTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by or on
behalf of an Indemnitee in connection with such action, suit or proceeding and
any appeal therefrom.
As a condition precedent to his right to be indemnified, the Indemnitee
must notify the Corporation in writing as soon as practicable of any action,
suit, proceeding or investigation involving him for which indemnity will or
could be sought. With respect to any action, suit, proceeding or investigation
of which the Corporation is so notified, the Corporation will be entitled to
participate therein at its own expense and/or to assume the defense thereof at
its own expense, with legal counsel reasonably acceptable to the Indemnitee.
In the event that the Corporation does not assume the defense of any
action, suit, proceeding or investigation of which the Corporation receives
notice under this Article, the Corporation shall pay in advance of the final
disposition of such matter any expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; provided, however, that the payment of
-------- -------
such expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf of
the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article, which undertaking shall be
accepted without reference to the financial ability of the Indemnitee to make
such repayment; and further provided that no such advancement of expenses shall
------- --------
be
-2-
<PAGE>
made if it is determined that the Indemnitee did not act in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
The Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by such Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. In addition, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
All determinations hereunder as to the entitlement of an Indemnitee to
indemnification or advancement of expenses shall be made in each instance by (a)
a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the Corporation), or (d) a court of competent
jurisdiction.
The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which an Indemnitee may be entitled under any
law, agreement or vote of stockholders or disinterested directors or otherwise,
and (ii) shall inure to the benefit of the heirs, executors and administrators
of the Indemnitees. The Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
-3-
<PAGE>
EXECUTED at Portsmouth on August 12, 1997.
/s/ Daniel M. McGurl
-----------------------------------
Daniel M. McGurl, Incorporator
-4-
<PAGE>
Exhibit 3.2
-----------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BOTTOMLINE TECHNOLOGIES (de), INC.
Bottomline Technologies (de), Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of the State of Delaware on August 12, 1997.
2. At a duly called meeting of the Board of Directors of the Corporation
at which a quorum was present at all times, a resolution was duly adopted,
pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, setting forth an Amended and Restated Certificate of Incorporation of
the Corporation and declaring said Amended and Restated Certificate of
Incorporation advisable. The stockholders of the Corporation duly approved said
proposed Amended and Restated Certificate of Incorporation by written consent in
accordance with Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware. The resolution setting forth the Amended and Restated
Certificate of Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation, be and
- -------- hereby is amended and restated in its entirety so that the same
shall read as follows:
FIRST. The name of the Corporation is:
Bottomline Technologies (de), Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
<PAGE>
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 54,000,000 shares, consisting of
(i) 50,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and (ii) 4,000,000 shares of Preferred Stock, $.001 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders
-------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders. There shall be no cumulative
voting.
The number of authorized shares of Common 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, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed
2
<PAGE>
to constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot, except as and
to the extent provided in the By-Laws of the Corporation.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation, except as and to the extent provided in
the By-Laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as
3
<PAGE>
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---------------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the
4
<PAGE>
Indemnitee unless the initiation thereof was approved by the Board of Directors
of the Corporation. Notwithstanding anything to the contrary in this Article,
the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee
is reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---------------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
5
<PAGE>
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
-------------------
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
--------
however, that the payment of such expenses incurred by an Indemnitee in advance
- -------
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
6
<PAGE>
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority
vote of the directors of the Corporation consisting of persons who are not at
that time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
7
<PAGE>
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
8
<PAGE>
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
TENTH. Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.
TWELFTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the Chief Executive Officer,
President or the Board of Directors. Business transacted at any special meeting
of stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting. Notwithstanding any other provision of law,
this Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article TWELFTH.
9
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its Chairman of the Board, President and Chief Executive Officer this
_____ day of ___________, 1999.
BOTTOMLINE TECHNOLOGIES (de), INC.
By:
------------------------------------
Daniel M. McGurl
Chairman of the Board, President and
Chief Executive Officer
10
<PAGE>
EXHIBIT 3.3
BY-LAWS
OF
BOTTOMLINE TECHNOLOGIES (de), INC.
<PAGE>
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Stockholders........................................... 1
1.1 Place of Meetings....................................... 1
-----------------
1.2 Annual Meeting.......................................... 1
--------------
1.3 Special Meetings........................................ 1
----------------
1.4 Notice of Meetings...................................... 1
------------------
1.5 Voting List............................................. 2
-----------
1.6 Quorum.................................................. 2
------
1.7 Adjournments............................................ 2
------------
1.8 Voting and Proxies...................................... 2
------------------
1.9 Action at Meeting....................................... 2
-----------------
1.10 Action without Meeting.................................. 3
----------------------
ARTICLE 2 - Directors.............................................. 3
2.1 General Powers.......................................... 3
--------------
2.2 Number; Election and Qualification...................... 3
----------------------------------
2.3 Enlargement of the Board................................ 3
------------------------
2.4 Tenure.................................................. 3
------
2.5 Vacancies............................................... 4
---------
2.6 Resignation............................................. 4
-----------
2.7 Regular Meetings........................................ 4
----------------
2.8 Special Meetings........................................ 4
----------------
2.9 Notice of Special Meetings.............................. 4
--------------------------
2.10 Meetings by Telephone Conference Calls.................. 4
--------------------------------------
2.11 Quorum.................................................. 5
------
2.12 Action at Meeting....................................... 5
-----------------
2.13 Action by Consent....................................... 5
-----------------
2.14 Removal................................................. 5
-------
2.15 Committees.............................................. 5
----------
2.16 Compensation of Directors............................... 6
-------------------------
ARTICLE 3 - Officers............................................... 6
3.1 Enumeration............................................. 6
-----------
3.2 Election................................................ 6
--------
3.3 Qualification........................................... 6
-------------
3.4 Tenure.................................................. 6
------
3.5 Resignation and Removal................................. 6
-----------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.6 Vacancies............................................... 7
---------
3.7 Chairman of the Board and Vice-Chairman of the Board.... 7
----------------------------------------------------
3.8 President............................................... 7
---------
3.9 Vice Presidents......................................... 7
---------------
3.10 Secretary and Assistant Secretaries..................... 8
-----------------------------------
3.11 Treasurer and Assistant Treasurers...................... 8
----------------------------------
3.12 Salaries................................................ 8
--------
ARTICLE 4 - Capital Stock.......................................... 9
4.1 Issuance of Stock....................................... 9
-----------------
4.2 Certificates of Stock................................... 9
---------------------
4.3 Transfers............................................... 9
---------
4.4 Lost, Stolen or Destroyed Certificates.................. 10
--------------------------------------
4.5 Record Date............................................. 10
-----------
ARTICLE 5 - General Provisions..................................... 11
5.1 Fiscal Year............................................. 11
-----------
5.2 Corporate Seal.......................................... 11
--------------
5.3 Waiver of Notice........................................ 11
----------------
5.4 Voting of Securities.................................... 11
--------------------
5.5 Evidence of Authority................................... 11
---------------------
5.6 Certificate of Incorporation............................ 11
----------------------------
5.7 Transactions with Interested Parties.................... 11
------------------------------------
5.8 Severability............................................ 12
------------
5.9 Pronouns................................................ 12
--------
ARTICLE 6 - Amendments............................................. 12
6.1 By the Board of Directors............................... 12
-------------------------
6.2 By the Stockholders..................................... 12
-------------------
</TABLE>
-iii-
<PAGE>
BY-LAWS
OF
BOTTOMLINE TECHNOLOGIES (de), INC.
ARTICLE 1 - Stockholders
-------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
--------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
----------------
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
-1-
<PAGE>
1.5 Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of shares of stock representing a majority of the votes cast on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of shares of stock of
that class representing a
-2-
<PAGE>
majority of the votes cast on a matter) shall decide any matter to be voted upon
by the stockholders at such meeting, except when a different vote is required by
express provision of law, the Certificate of Incorporation or these By-Laws.
When a quorum is present at any meeting, any election by stockholders shall be
determined by a plurality of the votes cast on the election.
1.10 Action without Meeting. Any action required or permitted to be taken
----------------------
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if a consent m
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased at
------------------------
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual meeting
------
and until his successor is elected and qualified, or until his earlier death,
resignation or removal.
-3-
<PAGE>
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
---------
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or telex,
or delivering written notice by hand, to his last known business or home address
at least 48 hours in advance of the meeting, or (iii) by mailing written notice
to his last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
--------------------------------------
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
-4-
<PAGE>
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
-----------------
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
-----------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Except as otherwise provided by the General Corporation Law
-------
of Delaware, any one or more or all of the 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, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may designate one or more
----------
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, 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
-5-
<PAGE>
to be affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-laws for the Board of
Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
-------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
-6-
<PAGE>
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
---------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
----------------------------------------------------
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
---------
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The
President shall perform such other duties and shall have such other powers as
the Board of Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
-7-
<PAGE>
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
-----------------------------------
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors), shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
-8-
<PAGE>
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
---------------------
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice-Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of each certificate representing shares of such
class or series of stock, provided that in lieu of the foregoing requirements
there may be set forth on the face or back of each certificate representing
shares of such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests a copy of the full
text of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or
-9-
<PAGE>
accompanied by a written assignment or power of attorney properly executed, and
with such proof of authority or the authenticity of signature as the corporation
or its transfer agent may reasonably require. Except as may be otherwise
required by law, by the Certificate of Incorporation or by these By-laws, the
corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect to such stock, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
transferred on the books of the corporation in accordance with the requirements
of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
--------------------------------------
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 10 days after the date of adoption of a
record date for a written consent without a meeting, nor more than 60 days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is properly delivered to the corporation. The record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
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.
-10-
<PAGE>
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated by the
-----------
Board of Directors, the fiscal year of the corporation shall begin on the first
day of July in each year and end on the last day of June in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
----------------
given by law, by the Certificate of Incorporation or by these By-laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the 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 a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
-11-
<PAGE>
(1) The material facts as to his 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 or 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;
(2) The material facts as to his 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
(3) 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 of the Board of Directors, 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.
5.8 Severability. Any determination that any provision of these By-laws
------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be deemed to refer
--------
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These By-laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. These By-laws may be altered, amended or
-------------------
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
-12-
<PAGE>
Exhibit 3.4
-----------
AMENDED AND RESTATED BY-LAWS
OF
BOTTOMLINE TECHNOLOGIES (de), INC.
ARTICLE I. - Stockholders
-------------------------
1. Place of Meetings. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors, the Chairman of the Board or the President or,
if not so designated, at the registered office of the corporation.
2. Annual Meeting. The annual meeting of stockholders for the election
--------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors, the Chairman of the Board or the President (which date shall not be a
legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Board of Directors, the Chairman of the Board or the
President and stated in the notice of the meeting. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as is convenient. If no annual meeting
is held in accordance with the foregoing provisions, a special meeting may be
held in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual meeting of the
stockholders shall be deemed to refer to such special meeting.
3. Special Meetings. Special meetings of stockholders may be called at
----------------
any time only by the Chairman of the Board, the Chief Executive Officer and
President or the Board of Directors. Business transacted at any special meeting
of stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
4. Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
<PAGE>
5. Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
6. Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
7. Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
8. Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by law, the Certificate of Incorporation or these By-Laws. Each stockholder of
record entitled to vote at a meeting of stockholders may vote in person or may
authorize another person or persons to vote or act for him by written proxy
executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.
9. Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express
-2-
<PAGE>
provision of law, the Certificate of Incorporation or these By-Laws. Any
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election.
10. Nomination of Directors. Only persons who are nominated in accordance
-----------------------
with the following procedures shall be eligible for election as directors.
Nomination for election to the Board of Directors of the corporation at a
meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
11. Notice of Business at Annual Meetings. At an annual meeting of the
-------------------------------------
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be
-3-
<PAGE>
properly brought before an annual meeting by a stockholder, if such business
relates to the election of directors of the corporation, the procedures in
Section 10 of Article I must be complied with. If such business relates to any
other matter, the stockholder must have given timely notice thereof in writing
to the Secretary. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first. A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 11 and except that any
stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any
successor provision) promulgated under the Securities Exchange Act of 1934, as
amended, and is to be included in the corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Section 11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
12. Action without Meeting. Stockholders may not take any action by
----------------------
written consent in lieu of a meeting.
13. Organization. The Chairman of the Board, or in his absence the Vice
------------
Chairman of the Board, or the President, in the order named, shall call meetings
of the stockholders to order, and shall act as chairman of such meeting,
provided, however, that the Board of Directors may appoint any stockholder to
- --------
act as chairman of any meeting in the absence of the Chairman of the Board. The
Secretary of the corporation shall act as secretary at all meetings of the
stockholders; but in the absence of the Secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as secretary
of the meeting.
-4-
<PAGE>
ARTICLE II. - Directors
-----------------------
1. General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2. Number; Election and Qualification. The number of directors which
----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the corporation.
3. Classes of Directors. The Board of Directors shall be and is divided
--------------------
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.
4. Terms of Office. Each director shall serve for a term ending on the
---------------
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
--------
serve for a term ending on the date of the annual meeting of stockholders in
1999; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2000, and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2001; and provided further, that the term of each director shall
-------- -------
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of
-5-
<PAGE>
directors so as to ensure that no one class has more than one director more than
any other class. To the extent possible, consistent with the foregoing rule, any
newly created directorships shall be added to those classes whose terms of
office are to expire at the latest dates following such allocation, and any
newly eliminated directorships shall be subtracted from those classes whose
terms of offices are to expire at the earliest dates following such allocation,
unless otherwise provided from time to time by resolution adopted by the Board
of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time in
-------------------------
office shall constitute a quorum for the transaction of business. In the event
one or more of the directors shall be disqualified to vote at any meeting, then
the required quorum shall be reduced by one for each director so disqualified,
provided that in no case shall less than one-third (1/3) of the number of
directors fixed pursuant to Section 2 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the Certificate of
Incorporation or these By-Laws.
7. Vacancies. Any vacancy in the Board of Directors, however occurring,
---------
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
8. Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the Chairman of the
Board or Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.
9. Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
10. Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
-6-
<PAGE>
11. Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy
or telex, electronic mail or delivering written notice by hand, to his last
known business or home address at least 24 hours in advance of the meeting, or
(iii) by mailing written notice to his last known business or home address at
least 72 hours in advance of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
12. Meetings by Telephone Conference Calls. Directors or any members of
--------------------------------------
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone, video
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
13. Action by Consent. Any action required or permitted to be taken at
-----------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
14. Committees. The Board of Directors may designate one or more
----------
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, 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 which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the
-7-
<PAGE>
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-Laws for the Board of
Directors.
15. Compensation of Directors. Directors may be paid such compensation
-------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE III - Officers
----------------------
1. Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
2. Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
4. Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
5. Resignation and Removal. Any officer may resign by delivering his or
-----------------------
her written resignation to the corporation at its principal office or to the
Chairman of the Board, President or Secretary. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other time
or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of
-8-
<PAGE>
such removal, whether his compensation be by the month or by the year or
otherwise, unless such compensation is expressly provided in a duly authorized
written agreement with the corporation.
6. Vacancies. The Board of Directors may fill any vacancy occurring in
---------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
7. Chairman of the Board and Vice Chairman of the Board. The Board of
----------------------------------------------------
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. Unless otherwise provided by the
Board of Directors, he shall preside at all meetings of the stockholders, and if
he is a director, at all meetings of the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him or her by
the Board of Directors. The person designated as the Chief Executive Officer of
the Company shall, subject to the direction of the Board of Directors, have
general charge and supervision of the business of the corporation.
8. President. Unless the Board of Directors has designated the Chairman
---------
of the Board or another officer as Chief Executive Officer, the President shall
be the Chief Executive Officer of the corporation. The President shall perform
such other duties and shall have such other powers as the Chief Executive
Officer or the Board of Directors may from time to time prescribe.
9. Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer, then, in the order determined by the
Board of Directors, the President (if he is not the Chief Executive Officer) and
the Vice President (or if there shall be more than one, the Vice Presidents)
shall perform the duties of the Chief Executive Officer and when so performing
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The Board of Directors may assign to any Vice
President the title of Executive Vice President, Senior Vice President or any
other title selected by the Board of Directors.
10. Secretary and Assistant Secretaries. The Secretary shall perform such
-----------------------------------
duties and shall have such powers as the Board of Directors or the Chief
Executive
-9-
<PAGE>
Officer may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Secretary, the Assistant Secretary (or if there shall be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
11. Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him or
her by the Board of Directors or the Chief Executive Officer. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Treasurer, the Assistant Treasurer (or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
12. Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
-10-
<PAGE>
Article IV. - Capital Stock
---------------------------
1. Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
2. Certificates of Stock. Every holder of stock of the corporation shall
---------------------
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him or her in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
any Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
3. Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4. Lost, Stolen or Destroyed Certificates. The corporation may issue a
--------------------------------------
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
-11-
<PAGE>
5. Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
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.
ARTICLE V. - General Provisions
-------------------------------
1. Fiscal Year. Except as from time to time otherwise designated by the
-----------
Board of Directors, the fiscal year of the corporation shall begin on the first
day of July of each year and end on the last day of June of each year.
2. Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
3. Waiver of Notice. Whenever any notice whatsoever is required to be
----------------
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telecopy or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
4. Voting of Securities. Except as the directors may otherwise
--------------------
designate, the Chairman of the Board or Treasurer may waive notice of, and act
as, or appoint any person or persons to act as, proxy or attorney-in-fact for
this corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
-12-
<PAGE>
5. Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6. Certificate of Incorporation. All references in these By-Laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Amended and
Restated Certificate of Incorporation of the corporation, as amended and in
effect from time to time.
7. Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the 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 a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
a. The material facts as to his 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 or 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;
b. The material facts as to his 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
c. 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 of the Board of Directors, 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.
8. Severability. Any determination that any provision of these By-Laws
------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
-13-
<PAGE>
9. Pronouns. All pronouns used in these By-Laws shall be deemed to refer
--------
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE VI. - Amendments
------------------------
1. By the Board of Directors. These By-Laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
2. By the Stockholders. Subject to the following paragraph, these By-
-------------------
Laws may be altered, amended or repealed or new by-laws may be adopted by the
affirmative vote of the holders of a majority of the shares of the capital stock
of the corporation issued and outstanding and entitled to vote at any regular or
special meeting of stockholders, provided notice of such alteration, amendment,
repeal or adoption of new by-laws shall have been stated in the notice of such
regular or special meeting.
3. Certain Provisions. Notwithstanding any other provision of law, the
------------------
Certificate of Incorporation or these By-Laws (including the preceding
paragraph), and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provisions inconsistent with, Sections 2, 3,
10, 11, 12 or 13 of Article I, Article II or Article VI of these By-Laws.
-14-
<PAGE>
Exhibit 10.1
BOTTOMLINE TECHNOLOGIES, INC.
AMENDED AND RESTATED 1989 STOCK OPTION PLAN
-------------------------------------------
THIS STOCK OPTION PLAN (this "Plan"), dated August 1, 1989 (the "Effective
Date") established by and for the benefit of Bottomline Technologies, Inc., a
New Hampshire corporation (the "Company"). This Plan was adopted on the
Effective Date and duly amended on September 27, 1989 and August 24, 1995 by the
Board of Directors (the "Board") and the shareholders of the Company in the
manner specified by New Hampshire Revised Statutes Annotated ("RSA") 293-A:20.
RECITALS:
--------
This Plan is intended to provide employees and directors of the Company
with opportunities to purchase stock in the Company pursuant to options granted
under this Plan. Certain of those options may qualify as "incentive stock
options" ("ISO" or "ISOs") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and certain of those options may not qualify as
ISOs and thereby be treated as non-qualified options ("NQO" or "NQOs"). Both
ISOs and NQOs are referred to in this Plan individually as an "Option" and
collectively as "Options."
1. SHARES SUBJECT TO PLAN. The maximum aggregate number of shares (the
----------------------
"Shares") of the Company's voting common stock, One-tenth Cent ($0.001) par
value per share (the "Stock"), for which Options may be granted under this Plan
is four hundred eighty thousand (480,000) (the "Aggregate Number of Shares"),
subject to adjustment pursuant to the provisions of Section 6(f) below. The
Board shall make such Shares available either from authorized but unissued
shares of Stock or from treasury shares of Stock held by the Company.
2. ELIGIBILITY. The grantees of Options under this Plan shall consist of
-----------
such employees and directors of the Company as may be designated from time to
time by the Board. Such grantees may include employees and/or directors who are
shareholders of the Company and/or who have previously been granted one or more
Options under this Plan.
3. ADMINISTRATION OF PLAN.
----------------------
(a) This Plan shall be supervised and administered by the Board.
Without limiting the generality of the foregoing, the Board shall, subject to
the provisions of this Plan, have the authority to determine:
(i) the particular employees and/or directors of the Company
to whom Options may be granted;
<PAGE>
(ii) the time or times at which Options may be granted;
(iii) the option price of the Shares subject to each Option;
(iv) whether each Option granted shall be an ISO or an NQO;
(v) the time or times when each Option shall be exercisable
and the manner of exercise; and
(vi) what restrictions (including, without limitation,
transferability restrictions), if any, shall be imposed on the Shares
subject to each Option and the nature of any such restrictions.
(b) The Board shall be responsible for interpreting and construing
the provisions of this Plan, and the Board may adapt, amend, and rescind such
rules and regulations for the administration of this Plan as the Board may deem
necessary or desirable.
(c) No member of the Board shall vote on the grant of an Option to
such member or any other decision taken by the Board with respect to any Option
granted to such member; provided, that any such member may (i) be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to any Option granted to such member, and (ii) sign
a unanimous written consent containing such a vote.
(d) All actions taken by the Board in the administration of this Plan
shall be final and binding on all interested parties. Neither the Board nor any
member of the Board shall be liable for any action or determination made in good
faith with respect to this Plan or any Option granted under this Plan.
4. ISO PROVISIONS. ISOs shall only be granted to individuals who, at the
--------------
time of the grant, are "employees" (within the meaning of Section 422 of the
Code) of the Company. To the extent that the following provisions are necessary
in order to qualify an Option as an "incentive stock option" under the Code, and
then only to the extent of such necessity, each Stock Option Agreement (as
defined in Section 5 below) covering an ISO granted by the Company shall be
governed by the following provisions:
(a) Each ISO must be granted within ten (10) years from the Effective
Date.
-2-
<PAGE>
(b) No ISO shall be exercisable after the expiration of ten (10)
years from the date such ISO is granted.
(c) The option price of each Share under each ISO shall not be less
than the Fair Market Value (as defined below) of such Share at the time such ISO
is granted. For purposes hereof, the "Fair Market Value" of a Share shall, if
the Company's Stock is publicly traded, be determined as of the last business
day for which the prices or quotes discussed in this sentence are available
prior to the date such ISO is granted and shall mean (i) the average (on that
date) of the high and low per share prices of the Stock on the principal
national securities exchange on which the Stock is traded, if the Stock is then
traded on a national securities exchange; or (ii) the last reported sale price
per share (on that date) of the Stock on the Nasdaq National Market, if the
Stock is not then traded on a national securities exchange; or (iii) the closing
per share bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Stock is
not reported on the Nasdaq National Market. However, if the Company's Stock is
not publicly traded at the time an Option is granted under this Plan, "Fair
Market Value" shall be deemed to be the per share fair value of the Stock as
determined by the Board after taking into consideration all factors which it
deems appropriate (including, without limitation, any recent sale and offer
prices of the Stock in private transactions negotiated at arm's length).
(d) Notwithstanding the provisions of subsections (b) and (c) above,
in the case of an ISO to be granted to an employee who, applying the rules of
attribution set forth in Section 425(d) of the Code, owns shares of Stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company (or, if applicable, of any parent or subsidiary
corporation of the Company (individually a "Related Corporation" and
collectively the "Related Corporations")), (i) the per-share option price shall
not be less than one hundred ten percent (110%) of the per-share Fair Market
Value of the Stock at the time such ISO is granted, and (ii) the ISO shall not
be exercisable after the expiration of five (5) years from the date such ISO is
granted.
(e) No ISO shall be transferable by the optionee otherwise than by
will or the laws of descent and distribution, and each ISO shall be exercisable,
during the optionee's lifetime, only by the optionee.
(f) The aggregate Fair Market Value (determined at the time an ISO is
granted) of the Shares for which ISOs granted to any employee are exercisable
for the first time by such employee during any calendar year (under all stock
option plans of the Company and its Related Corporations) shall not exceed the
sum of One Hundred Thousand Dollars ($100,000.00).
-3-
<PAGE>
(g) Notwithstanding anything to the contrary set forth in this Plan
or in any Stock Option Agreement, in the event that this Plan is not approved by
the Company's stockholders within twelve (12) months before or after the date
this Plan is adopted by the Board, then any ISO granted by the Board under this
Plan shall automatically be deemed to be, and shall become, an NQO.
5. STOCK OPTION AGREEMENT. The grant of each Option shall be evidenced
----------------------
by the execution and delivery by the Company and the optionee of an option
agreement ("Stock Option Agreement") containing such terms and conditions,
subject to the provisions of this Plan, as may be determined by the Board or by
one or more officers of the Company designated by the Board. Without limiting
the generality of the foregoing:
(a) the provisions of the Stock Option Agreements need not be the
same;
(b) the provisions of Section 4 above shall not prohibit the
inclusion of one or more of the restrictions set forth therein in the Stock
Option Agreement for any NQO (or, in the event that at the time of the grant of
an ISO any such restriction is not required by the Code, for any such ISO); and
(c) the provisions of this Plan shall not prohibit the inclusion of
additional restrictions in the Stock Option Agreement for any Option.
6. ADJUSTMENTS. Upon the occurrence of any of the following events, an
-----------
optionee's rights with respect to any then-unexercised portion of the Option
granted to such optionee under this Plan shall, except as may otherwise be
specifically provided in the Stock Option Agreement relating to such Option, be
adjusted as follows:
(a) If the outstanding shares of the Stock shall be subdivided or
combined into a greater or smaller number of shares or if the Company shall
issue any shares of the Stock as a stock dividend on its outstanding Stock, the
number of Shares of the Stock to be delivered upon the exercise of such Option
shall be proportionately increased or decreased (as the case may be) and
appropriate adjustments shall be made in the option price per Share to reflect
such subdivision, combination, or stock dividend.
(b) In the event of a merger, consolidation, acquisition,
recapitalization, or other reorganization involving the Company pursuant to
which securities of the Company or of another corporation are issued with
respect to the outstanding shares of the Stock, the optionee, upon exercising
such Option, shall be entitled to receive for the option price paid upon such
exercise the securities the
-4-
<PAGE>
optionee would have received if the optionee had exercised such Option
immediately prior to such event.
(c) In the event of the sale of all or substantially all of the
assets of the Company, the dissolution of the Company, or the adoption of a plan
of liquidation of the Company, such Option will terminate immediately prior to
the consummation of the proposed action or at such other time and subject to
such other conditions as shall be determined by the Board.
(d) Except as expressly provided in this Section, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of the Shares subject to any
Options granted under this Plan. Furthermore, no adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(e) No fractional shares shall be issued under this Plan, and the
optionee shall receive from the Company cash in lieu of any such fractional
shares.
(f) Upon the happening of any of the events described in subsections
(a) or (b) above, the Aggregate Number of Shares shall also be appropriately
adjusted.
(g) If any optionee owning restricted Shares obtained by exercise of
an Option granted under this Plan receives additional shares or other securities
in connection with a transaction described in subsections (a) or (b) above as a
result of owning such restricted Shares, then, unless otherwise determined by
the Board, such additional shares or other securities shall be subject to all of
the terms, conditions, and restrictions applicable to the restricted Shares with
respect to which such additional shares or other securities were issued.
7. EMPLOYMENT STATUS. Nothing in this Plan shall be deemed to give any
-----------------
employee-optionee under any Option the right to be retained as an employee of
the Company or any Related Corporation for any period of time.
8. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
----------------------------------
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time, or at any
particular rate of compensation.
9. EXPIRATION OR TERMINATION OF OPTIONS; REPURCHASE OF SHARES COVERED BY
---------------------------------------------------------------------
OPTION. If any Option granted under this Plan shall expire or terminate for any
- ------
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, then the unpurchased Shares subject to such
Option
-5-
<PAGE>
shall again be available for grants of Options under this Plan. If any Shares
purchased by an optionee pursuant to the exercise of an Option are repurchased
by the Company, then the repurchased Shares shall again be available for grants
of Options under this Plan.
10. AMENDMENT, SUSPENSION, TERMINATION, OR WAIVER. The Board may at any
---------------------------------------------
time amend, suspend, or terminate this Plan or waive the benefit of any of the
rights afforded to the Company under any Option granted pursuant to this Plan;
provided, that the Board may not increase the Aggregate Number of Shares unless
such increase is approved by the shareholders of the Company within twelve (12)
months after the Board adopts a resolution authorizing such increase; and,
provided, further, that no such amendment, suspension, or termination shall
adversely affect the rights of any optionee under any then-outstanding Option
unless such optionee gives his or her written consent thereto.
11. CONVERSION OF ISOS. The Board, in its sole discretion following
------------------
receipt of a written request by any optionee, may take such actions as may be
necessary to convert any outstanding ISO (or any remaining installment or other
portion thereof) previously granted to such optionee into an NQO at any time
prior to the expiration of such ISO. Such actions may include, but not be
limited to, extending the exercise period or reducing the exercise price of the
appropriate installment(s) of such Option. At the time of such conversion, the
Board (with the consent of the optionee) may impose such conditions on the
exercise of any resulting NQO as the Board in its discretion may determine, so
long as such conditions are not inconsistent with this Plan. Except as set
forth in Section 4(g) above, nothing in this Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into NQOs, and no such
conversion shall occur unless and until the Board takes appropriate action.
12. TAX CONSEQUENCES. This Section summarizes current provisions of
----------------
federal income tax law. For this purpose, these provisions distinguish between
capital gain and ordinary income tax items, given that such distinction is made
under current federal law. The Company advises and recommends that each
optionee consult with his or her own tax advisors to discuss the extent to which
the federal tax law provisions summarized below are in force and effect on the
date of the grant of an Option to such optionee and, in general, the
applicability of federal, state, and local tax laws on the optionee and such
Option:
(a) NQOs. No taxable income will be realized by an optionee upon the
----
grant of an NQO. However, upon exercise of an NQO, the optionee will realize
ordinary income in an amount measured by the excess of the fair market value of
the shares on the date of exercise over the option price, and the Company will
be entitled to a corresponding deduction. In the case of an optionee subject to
Section 16(b) of the Securities Exchange Act of 1934, unless the optionee elects
otherwise, the amount
-6-
<PAGE>
and timing of such income (and deduction by the Company) will instead be based
on the fair market value of the shares on the date the Section 16(b) restriction
lapses as to such shares. Upon a subsequent disposition of the shares, the
optionee will realize short-term or long-term capital gain or loss. The Company
will not be entitled to any further deduction at that time.
(b) ISOs. An optionee who receives an ISO will not be treated as
----
receiving taxable income upon the grant of the ISO or upon the exercise of the
ISO. However, any appreciation in share value after the date of grant will be an
item of tax preference at the time of exercise in determining liability for the
alternative minimum tax. If stock acquired pursuant to an ISO is not sold or
otherwise disposed of within two (2) years from the date of grant nor within one
(1) year after the date of exercise, any gain or loss resulting from disposition
of the stock will be treated as long-term capital gain or loss. If stock
acquired upon exercise of an ISO is disposed of in a Disqualifying Disposition
(as defined in Section 12(a) below), the optionee will realize ordinary income
in the year of such disposition in an amount equal to the excess of the fair
market value of the stock on the date of exercise over the exercise price. Any
gain in excess of that ordinary income amount generally will be taxed at capital
gains rates. However, under a special rule, the ordinary income realized upon a
Disqualifying Disposition will not exceed the amount of the optionee's gain.
The Company will not be entitled to any deduction as a result of the grant or
exercise of an incentive stock option, or on a later disposition of the stock
received, except that in the event of a Disqualifying Disposition the Company
will be entitled to a deduction equal to the amount of ordinary income realized
by the optionee.
13. DISQUALIFYING DISPOSITIONS.
--------------------------
(a) As used in this Plan, a "Disqualifying Disposition" shall mean
any sale or other disposition of any Shares acquired by an employee-optionee
pursuant to the exercise of an ISO within the time periods described in Section
422 of the Code (i.e., currently described as the later of two (2) years from
the date of the granting of the Option or one (1) year after the transfer of
such Shares to the employee-optionee); provided, that a Disqualifying
Disposition shall not include a disposition of any Shares after the death of the
employee-optionee.
(b) Each employee-optionee to whom an ISO is granted must notify the
Company in writing immediately after the employee-optionee makes a Disqualifying
Disposition of any Shares acquired pursuant to the exercise of such ISO. Any
such employee-optionee must also provide the Company with any additional
information which the Company requests concerning any such Disqualifying
Disposition.
-7-
<PAGE>
(c) The execution of a Stock Option Agreement covering an ISO shall
be deemed to be an acknowledgment by the employee-optionee that the employee-
optionee will forfeit any favorable income tax treatment otherwise available
with respect to the exercise of the ISO and purchase of Shares thereunder if the
employee-optionee subsequently makes a Disqualifying Disposition of such Shares.
14. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of an NQO
--------------------------------------
or the making of a Disqualifying Disposition with respect to Shares acquired
pursuant to the exercise of an ISO, additional federal, state, and/or local
withholding taxes in respect of the amount that is considered compensation and
is includible in the optionee's gross income may be required to be withheld by
the Company. In such event the Company may either (a) withhold from the
optionee's wages the appropriate amount of any such additional withholding
taxes, or (b) require the optionee to pay any such additional withholding taxes
to the Company. In addition, the Board, in its discretion, may condition the
exercise of an NQO on the optionee's payment of such additional withholding
taxes.
15. APPLICATION OF FUNDS. The proceeds received by the Company from the
--------------------
sale of Shares pursuant to Options granted under this Plan shall be used for the
Company's general corporate purposes.
16. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
-----------------------
Shares under this Plan or under any Stock Option Agreement is subject to the
Company obtaining all required approvals of all governmental authorities having
jurisdiction over the authorization, issuance, or sale of such Shares.
17. GOVERNING LAW. This Plan, and all Stock Option Agreements executed
-------------
and delivered pursuant hereto, shall be governed by and construed in accordance
with the laws of the State of New Hampshire.
18. DURATION OF PLAN. This Plan shall terminate at the expiration of ten
----------------
(10) years from the Effective Date unless this Plan is sooner terminated by the
Board. Any Option outstanding under this Plan at the time of the termination or
suspension of this Plan shall remain in effect until such Option shall have been
exercised or shall have expired in accordance with the terms and conditions of
the Stock Option Agreement relating to such Option.
-8-
<PAGE>
BOTTOMLINE TECHNOLOGIES, INC.
STOCK OPTION PLAN
STOCK OPTION AGREEMENT (INCENTIVE)
----------------------------------
THIS STOCK OPTION AGREEMENT (this "Agreement"), made as of ____________,
19__ (the "Effective Date"), by and between Bottomline Technologies, Inc., a New
Hampshire corporation with a principal place of business at 155 Fleet Street,
Portsmouth, New Hampshire 03801 (the "Company"); and ___________________ (the
"Employee").
RECITALS:
--------
The Company has established a certain Stock Option Plan dated August 1,
1989, as amended (the "Plan"), authorizing the Board of Directors of the Company
(the "Board") to grant options to certain persons, whereby such persons shall be
entitled to purchase shares of the Company's capital stock, One Dollar ($1.00)
par value (the "Stock"). The Plan provides for the issuance of "incentive stock
options" ("ISO" or "ISOs") to employees of the Company pursuant to Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and also for the
issuance of options which do not qualify as ISOs ("NQO" or "NQOs"). Pursuant to
the Plan, the Board has granted to the Employee an option to purchase certain
shares of Stock, and the Employee desires to accept said grant, subject to the
terms and conditions of the Plan and of this Agreement. It is intended that the
option covered by this Agreement qualify as an ISO.
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee do hereby covenant and agree as
follows:
1. Grant of Option. The Company hereby gives and grants to the Employee,
---------------
subject to the terms and conditions of the Plan (including, without limitation,
the adjustment provisions of Section 6 of the Plan) and of this Agreement, an
option (the "Option") to purchase the following number of shares of Stock (the
"Shares") at the following purchase price (the "Purchase Price") per Share:
Number of Shares Purchase Price per Share
---------------- ------------------------
$
-9-
<PAGE>
2. Exercise Period(s).
-------------------
(a) The Option shall be exercisable by the Employee during the period(s)
and for the number of Shares set forth below:
<TABLE>
<CAPTION>
Exercise Period(s)
------------------
Begin Date End Date Number of Shares
---------- -------- ----------------
<S> <C> <C>
</TABLE>
(b) Each "Begin Date" and "End Date" set forth in subsection (a) above
specifies an applicable period of time (an "Exercise Period") during which the
Employee is entitled to exercise the Option and the number of Shares as to which
the Option may be exercised during such Exercise Period.
(c) Notwithstanding the "Begin Date" and "End Date" specifications in
subsection (a) above, each such specified "Begin Date" and "End Date" is subject
to acceleration as set forth in Section 3 below.
3. Acceleration of Exercise Period(s).
----------------------------------
(a) Stock Reorganization. Notwithstanding anything to the contrary set
--------------------
forth in this Agreement, in anticipation of the occurrence of a merger,
consolidation, acquisition, recapitalization, or other reorganization involving
the Company pursuant to which securities of another corporation are exchanged
for the then-outstanding shares of Stock, with or without a similar exchange
involving any other shares of the Company of any other class (a "Stock
Reorganization"), the Board shall have the right to accelerate the "End Date"
for any Exercise Period as to which the Shares covered thereby have not been
fully exercised, as follows:
(i) Such accelerated date (the "Accelerated End Date") shall be the
first business day prior to the date on which the anticipated Stock
Reorganization is expected to close (the "Expected Closing Date"). Written
notice of the Accelerated End Date and the anticipated Stock Reorganization
shall be given by the Company to the Employee not less than thirty (30)
days prior to the Accelerated End Date.
(ii) With respect to any Exercise Period for which the "Begin Date"
has not yet occurred, the "End Date" may not be accelerated unless the
"Begin Date" for such Exercise Period is also accelerated to a date not
less than thirty (30) days prior to the Accelerated End Date.
-10-
<PAGE>
(iii) Any such acceleration of the "Begin Date" or "End Date" for any
Exercise Period is hereby made expressly conditional on the closing of such
Stock Reorganization. If such Stock Reorganization does not close, either
on the Expected Closing Date or on any subsequent closing date as to which
the Company has agreed, the original "Begin Date" and "End Date" for such
Exercise Period will automatically be reinstated and any exercise of the
Option with respect to the Shares covered by such Exercise Period prior to
the original "Begin Date" will be null and void and of no force or effect.
(b) Asset Sale. The parties agree that, in the event of a sale of all or
----------
substantially all of the Company's assets to a third party (an "Asset Sale"),
the Employee's exercise of any then-remaining unexercised Shares shall be
governed by the following provisions:
(i) If, during the term of the Option, the Company intends to make
an Asset Sale, then the Company shall provide the Employee with written
notice of the Asset Sale and the expected date on which the closing of such
Asset Sale will take place (the "Expected Closing Date") at least thirty
(30) days prior to the Expected Closing Date. If the "End Date" for such
Exercise Period occurs on or after the Expected Closing Date, then it will
automatically be accelerated to be the first business day prior to the
Expected Closing Date. If the "Begin Date" for such Exercise Period does
not occur on or before thirty (30) days prior to the Expected Closing Date,
then it will automatically be accelerated to the date that is thirty (30)
days prior to the Expected Closing Date.
(ii) Any such acceleration of the "Begin Date" or "End Date" for any
Exercise Period is hereby made expressly conditional on the closing of such
Asset Sale. If such Asset Sale does not close, either on the Expected
Closing Date or on any subsequent closing date as to which the Company has
agreed, the original "Begin Date" and "End Date" for such Exercise Period
will automatically be reinstated and any exercise of the Option with
respect to the Shares covered by such Exercise Period prior to the original
"Begin Date" will be null and void and of no force or effect.
(c) Other Applicable Terms and Conditions. Notwithstanding the provisions
-------------------------------------
of subsections (a) and (b) above, any exercise of the Option during any
accelerated Exercise Period remains subject to all of the terms and conditions
set forth in Section 4 below. Further, in order to effect the purposes of
subsections (a) and (b) above, the Employee's written notice of exercise and
payment for Shares under Section 4(a) below and the stock certificate(s) issued
by the Company representing such Shares shall be held in escrow by the Company's
attorney or other third party specified by the Company until either (i) the
closing on the Stock Reorganization or
-11-
<PAGE>
Asset Sale, as the case may be, occurs (in which event the Employee's purchase
of Shares shall be deemed to have occurred immediately prior to such closing),
or (ii) the Company notifies the escrow agent that such closing will not occur
(in which event the escrow agent shall return the written notice and payment to
the Employee and the stock certificate(s) to the Company).
4. Exercise of Option; Conditions.
------------------------------
(a) The Option shall be exercisable by the Employee in accordance with the
terms and conditions of the Plan and the following terms and conditions:
(i) With respect to the number of Shares as to which the Option may
be exercised by the Employee during any Exercise Period (the "Exercisable
Shares"), the Employee may only exercise the Option as to all or any
portion of the Exercisable Shares if the Employee has been in the
continuous employ of the Company from the date of this Agreement to the
date of exercise.
(ii) Exercise of the Option shall be made by the Employee's
completion, execution, and delivery to the Company of a Notice of Exercise
in the form attached hereto as Exhibit A (the "Notice of Exercise") on or
---------
after the "Begin Date" for the Exercise Period and on or before the "End
Date" for the Exercise Period. The Notice of Exercise shall include (A) a
statement identifying the applicable Exercise Period and the number of the
Exercisable Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and (B) a confirmation of the truth and accuracy, as
of the date of exercise, of the Employee's representations and warranties
as set forth in Section 6 of this Agreement. The Notice of Exercise shall
also be accompanied by (1) a copy of this Agreement, and (2) full payment
for the Exercised Shares, in cash, by bank, cashier's, or certified check,
or in such other form as may be acceptable to the Company.
(iii) Upon exercise of the Option, the Employee shall execute and
deliver to the Company a Stock Restriction Agreement in the form attached
hereto as Exhibit B (the "Stock Restriction Agreement"). The Stock
---------
Restriction Agreement shall apply both to the number of Shares in respect
of which the Option is being exercised, as well as to all additional Shares
thereafter acquired by the Employee.
(b) The Employee's failure to exercise the Option during any Exercise
Period for the entire number of Exercisable Shares covered by such Exercise
Period shall be deemed to be a waiver by the Employee of all rights to purchase
any Exercisable Shares not so purchased during such Exercise Period and,
thereafter, the Employee shall have no further rights of purchase with respect
to any such Exercisable Shares not so purchased. Such a failure by the Employee
shall not,
-12-
<PAGE>
however, affect the Employee's rights hereunder to purchase Exercisable Shares
in any unexpired Exercise Period.
(c) There is no requirement that the Employee either exercise or not
exercise the Option, in whole or in part.
(d) The Company shall not be obligated to issue any Shares under this
Agreement until such time as such Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and all applicable
state securities laws or until the Company receives an opinion of counsel
satisfactory (both as to opinion and counsel) to the Company that such issuance
is exempt from registration under said laws.
(e) The Employee shall not be deemed to be a holder of any of the Shares
unless and until certificates for such Shares are issued by the Company.
(f) The proceeds received by the Company from any exercise of the Option
may be used for any of the Company's general corporate purposes.
5. Stock Certificates; Transfer Restrictions. Upon exercise of the
-----------------------------------------
Option in accordance with the terms and conditions of the Plan and of this
Agreement, a certificate representing the Shares purchased will be issued by the
Company in the name of (and, upon written request by the Employee, delivered to)
the Employee. All Shares purchased pursuant to this Agreement and the Plan shall
be issued subject to the terms and conditions of this Agreement, the Plan, the
Articles of Incorporation of the Company (the "Articles of Incorporation"), the
Bylaws of the Company (the "Bylaws"), the Stock Restriction Agreement, and all
applicable federal and state laws and regulations (the "Laws"), all as from time
to time amended. The certificate(s) representing the Shares shall bear any
legend or legends required to be set forth thereon by this Agreement, the Plan,
the Articles of Incorporation, the Bylaws, the Stock Restriction Agreement, and
the Laws.
6. Representations and Warranties. The Employee represents and warrants
------------------------------
to the Company, upon which representations and warranties the Company is relying
in entering into this Agreement, as follows:
(a) The Employee has been afforded the opportunity by the Company to ask
questions and request information to acquire detailed knowledge and information
concerning the business affairs and operations of the Company and its financial
condition and prospects. As a result of such opportunity to ask questions and
review information, and also as the result of the Employee's employment by the
Company and the business background, training, and expertise of the Employee
(and/or of the advisors with whom the Employee has consulted), the Employee is
capable of evaluating the merits and risks of an investment in the Shares and is
in a position to
-13-
<PAGE>
comprehend, weigh, and assess such knowledge and information in a meaningful
fashion. The Employee acknowledges that the Employee has reviewed and has
received copies of the Plan, the Articles of Incorporation, and the Bylaws.
(b) The Employee acknowledges and agrees that, in entering into this
Agreement and in exercising the Option, the Employee is not relying upon, and
will not rely upon, any statements, representations, or warranties, whether oral
or written, made by any shareholder, officer, director, representative, agent,
or employee of the Company, or any affiliate thereof, except for those set forth
in any historic financial statements provided to Employee by the Company.
Further, the Employee acknowledges and agrees that any business and financial
projections of the Company that may be provided by the Company are solely for
purposes of describing the Company's future business and financial goals and are
not intended to be, nor are they, representations or guaranties of the Company's
future performance. Accordingly, the Employee is not relying upon, and will not
rely upon, any such projections in entering into this Agreement or in exercising
the Option.
(c) The address set forth above is the true and correct residence of the
Employee, and the Employee has no present intention of becoming a resident of
any other state or jurisdiction.
(d) The Employee understands that neither the Option nor the Shares have
been registered under the Securities Act or any state securities laws and that
there is no present intention to so register them.
(e) The Option is being acquired by the Employee solely for the Employee's
own account, for investment, and not with a view to or for the resale,
distribution, subdivision, or fractionalization of the Shares that are permitted
to be acquired by the Employee thereunder. At such times as the Employee may
exercise the Option, the Shares so acquired will be acquired solely for the
Employee's own account, for investment, and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof.
(f) The Employee acknowledges and is aware that (i) there are substantial
restrictions on the transferability of the Shares (including the restrictions
set forth in the Stock Restriction Agreement), (ii) the Shares will not be, and
the Employee has no rights to require that the Shares be, registered under the
Securities Act or any state securities laws, and (iii) there will be no public
market for the Shares and, accordingly, if the Option is exercised, the Employee
may have to hold the Shares indefinitely without the possibility of liquidating
the Employee's investment in the Company.
(g) As of the date of this Agreement and at such time(s) as the Employee
may exercise the Option, the Employee has and will have (i) adequate means of
-14-
<PAGE>
providing for the Employee's needs and possible personal and family
contingencies, (ii) no need for liquidity in the Employee's investment, and
(iii) the ability to bear the economic risk of an investment in the Shares.
(h) The Employee has entered into this Agreement and is participating in
the Plan voluntarily.
7. Inspection Rights. The Company hereby agrees that, until the
-----------------
expiration of the Exercise Period(s) specified in Section 2 above, all pertinent
documents, information, records, and books relative to an investment in the
Shares will be made available for inspection by the Employee and the Employee's
attorney, accountant, and/or other advisors, upon reasonable notice and at
reasonable hours at the Company's principal place of business.
8. Nontransferability of Option; Death.
-----------------------------------
(a) Except as otherwise specifically set forth in subsection (b) below,
the Option may not be assigned or transferred by the Employee, in whole or in
part, and the Option may be exercised only during the lifetime of the Employee
and only by the Employee. The Option shall not be subject to the claims of the
Employee's creditors, nor shall the Option be liable to attachment, execution,
or other process of law.
(b) If the Employee dies at a time when the Employee would otherwise have
been entitled to exercise the Option, then, at any time or times within the
Beneficiary Exercise Period (as defined below), the Option may be exercised, as
to all or any of the Shares which the Employee was entitled to purchase
immediately prior to the Employee's death, by the Employee's executor or
administrator or the person or persons to whom the Option is transferred by will
or the applicable laws of descent and distribution (the "Employee's
Beneficiary"). Any Shares so purchased shall be subject to any repurchase
rights of the Company under the Articles of Incorporation, the Bylaws, the Stock
Restriction Agreement, or the Laws. Payment of the Purchase Price for any
Shares being purchased and that will be repurchased by the Company may, at the
election of the Employee's Beneficiary, be made via a set off against the
repurchase price payable by the Company to the Employee's Beneficiary. Except as
so exercised, the Option shall expire at the end of the Beneficiary Exercise
Period. For purposes of this subsection (b), the "Beneficiary Exercise Period"
shall mean the period beginning on the date of the Employee's death and ending
three (3) months following the date of the Employee's death.
9. Non-Marketability of Shares. No representations or promises have been
---------------------------
made to the Employee concerning the present or future marketability or value of
the Shares. The Employee agrees that, because the Shares will not be registered
under the Securities Act or relevant state securities laws, the Shares cannot be
resold or
-15-
<PAGE>
transferred unless (a) they are subsequently registered thereunder or exemptions
from such registrations are available, (b) the Company receives an opinion of
counsel satisfactory (both as to counsel and opinion) to the Company that such
transfer complies with federal and state securities laws, and (c) the applicable
restrictions on transfer as contained in this Agreement, the Articles of
Incorporation, the Bylaws, and the Stock Restriction Agreement have been
complied with. Neither the Company nor any of its officers, directors, or
shareholders has agreed or represented to the Employee that the Shares acquired
pursuant to the Option will be purchased or redeemed from the Employee at any
time in the future. Further, there have been no representations, promises, or
agreements that the Shares so acquired will be registered under the Securities
Act or relevant state securities laws at any time in the future or otherwise
qualified for sale under applicable securities laws. The Company does not intend
to make available to the public information concerning itself so as to permit
shareholders to use Rule 144 of the Rules and Regulations under the Securities
Act for transfer of Shares.
10. Special Tax Provisions.
----------------------
(a) If the Employee makes a Disqualifying Disposition (as defined in
subsection (d) below), the Employee agrees to provide the Company with written
notice thereof immediately following such Disqualifying Disposition. The
Employee also agrees to provide the Company with any additional information
which the Company requests concerning any such Disqualifying Disposition. The
Employee acknowledges that the Employee will forfeit any favorable income tax
treatment otherwise available to the Employee with respect to the exercise of
the Option and purchase of Shares if the Employee subsequently makes a
Disqualifying Disposition of such Shares.
(b) If the Company in its discretion determines that it is obligated to
withhold tax with respect to a Disqualifying Disposition of any Shares, the
Employee hereby agrees that the Company may withhold from the Employee's wages
the appropriate amount of any federal, state, and/or local withholding taxes
attributable to such Disqualifying Disposition. The Employee further agrees
that, if the Company does not, or is unable for any reason to, withhold an
amount from the Employee's wages sufficient to satisfy the Company's withholding
obligation, the Employee will reimburse the Company on demand, in cash, for the
amount of the deficiency.
(c) While it is intended that the Option qualify as an ISO for purposes of
the Code, the Company does not represent or warrant to the Employee that the
Option will have such ISO status. The Company hereby advises the Employee to
consult with his or her own tax advisors with respect to the tax treatment that
will be accorded the Option. The Employee hereby releases the Company from any
claim pertaining to any tax liabilities incurred by the Employee resulting from
the granting
-16-
<PAGE>
of the Option by the Company, the exercise of the Option by the Employee, or any
disposition of Shares.
(d) As used in this Agreement, a "Disqualifying Disposition" shall mean
any sale or other disposition by the Employee of any of the Shares within the
time periods described in Section 422(a)(1) of the Code (i.e., currently
described as the later of two (2) years from the date of the granting of the
Option or one (1) year after the transfer of such Shares to the Employee);
provided, that a Disqualifying Disposition shall not include a disposition of
any Shares after the death of the Employee.
11. Incorporation of Plan. All of the terms, conditions, and provisions
---------------------
of the Plan, except to the extent that the same pertain solely to NQOs, are
hereby incorporated into and considered to be a part of this Agreement as if
said terms, conditions, and provisions were set forth herein in their entirety.
12. Indemnification. The Employee acknowledges that the Employee
---------------
understands the meaning and legal consequences of the representations,
warranties, acknowledgments, and covenants set forth in this Agreement, and that
the Company has relied and will rely upon such representations, warranties,
acknowledgments, and covenants in entering into this Agreement and issuing any
Shares purchased pursuant to the Option. Accordingly, the Employee hereby
agrees to indemnify and hold harmless the Company and its officers, directors,
shareholders, representatives, agents, and employees, from and against any and
all loss, damage, or liability, together with all costs and expenses (including
attorneys' fees and disbursements), which any of them may incur by reason of any
breach of any representation, warranty, acknowledgment, covenant, or agreement
of the Employee contained in this Agreement. All representations, warranties,
and covenants contained in this Agreement, and the indemnification contained in
this Section, shall survive the execution of this Agreement, any exercise of the
Option, and the issuance of any certificate or certificates for any Shares
covered by any such exercise.
13. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or any breach or default under this Agreement, shall, with
respect to all actions at law pertaining to such controversy, claim, breach, or
default (excepting herefrom any action for equitable relief with respect
thereto), be settled by arbitration in the City of Manchester, State of New
Hampshire before a single arbitrator in accordance with the then-prevailing
Rules of Commercial Arbitration of the American Arbitration Association. The
arbitrator shall not contravene or vary in any respect any of the terms or
provisions of this Agreement. The award of the arbitrator shall be final and
binding upon the parties hereto, and judgment upon such award may be entered in
any court having jurisdiction thereof.
-17-
<PAGE>
14. Authorization. The Company represents that it is authorized to enter
-------------
into this Agreement by virtue of resolution(s) duly adopted (i) at properly
called meeting(s) of its Board of Directors, or (ii) by unanimous written
consent(s) of its Directors.
15. Further Assurances. The Employee and the Company each agree to
------------------
execute any additional documents or instruments and to perform any acts which
may be reasonably requested by the other and necessary or proper to carry out
the purposes of this Agreement.
16. Survival of Representations and Warranties. The representations,
------------------------------------------
warranties, acknowledgments, and covenants of the Employee contained herein
shall survive any purchase of the Shares and any purchase or repurchase of the
same by the Company or any other party.
17. Miscellaneous.
-------------
(a) Notices. Any notice required or permitted to be given hereunder by
-------
either party shall be hand-delivered or sent by registered or certified mail,
return receipt requested, to the other party: (i) if to the Company, at its
address first set forth above; or (ii) if to the Employee, at the Employee's
address first set forth above; or to such other address as to which either party
shall notify the other by like notice.
(b) Entire Agreement. This Agreement (together with the Plan) constitutes
----------------
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, covenants, understandings,
representations, warranties, and undertakings, whether written or oral, between
the Employee and the Company regarding such matters.
(c) Amendment of Agreement. This Agreement may be altered or amended in
----------------------
whole or in part at any time, but only by a written instrument setting forth
such changes and executed by both of the parties hereto or their respective
successors or permitted assigns.
(d) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New Hampshire.
(e) Counterparts. This Agreement may be executed in two (2) or more
------------
counterpart copies. Each of such counterpart copies shall be deemed an
original, but all of such copies together shall constitute one and the same
agreement. One counterpart copy shall be delivered to each party hereto.
-18-
<PAGE>
(f) Severability. If any provision of this Agreement shall be held invalid
------------
or unenforceable according to law, then the remaining provisions hereof shall
not be affected thereby and shall continue in full force and effect.
(g) Holidays. Any period of notice or other time limitation in this
--------
Agreement which, but for this provision, would expire on a Saturday, Sunday, or
legal holiday, shall be extended to the next succeeding weekday which is not a
legal holiday, but this provision shall not thereby extend subsequent periods of
notice or time limitations based upon the first such period of notice or time
limitation, except to the extent that the latter expires on a Saturday, Sunday,
or legal holiday.
(h) Headings. The descriptive headings of the Sections and subsections of
--------
this Agreement are inserted for convenience and reference only and shall not
control or affect the meaning or construction of any of the provisions hereof.
(i) Pronouns; Plurals. All pronouns and any variations thereof shall be
-----------------
deemed to include the masculine, feminine, neuter, singular, and plural thereof
as the context may require. In addition, all nouns shall be deemed to include
the singular and plural thereof as the context may require.
(j) Binding Agreement. Except as otherwise specifically set forth herein,
-----------------
this Agreement and all of the terms, conditions, rights, and covenants contained
herein shall be binding upon and shall inure to the benefit of the parties
hereto, their spouses, heirs, legatees, executors, administrators, legal
representatives, successors, and permitted assigns, to the same extent and with
the same legal effect as if all of said parties had executed this Agreement and
had expressly agreed to be bound hereby.
-19-
<PAGE>
================================================================================
BEFORE SIGNING THIS AGREEMENT AND BEFORE ANY EXERCISE OF THE OPTION, THE
EMPLOYEE SHOULD READ THIS ENTIRE AGREEMENT (INCLUDING EXHIBITS A AND B ATTACHED
HERETO), THE PLAN, THE ARTICLES OF INCORPORATION, THE BYLAWS, AND THE OTHER
AGREEMENTS, DOCUMENTS, AND INFORMATION REFERRED TO IN THIS AGREEMENT. ANY
INVESTMENT IN THE STOCK OF A CORPORATION INVOLVES CERTAIN INHERENT RISKS, AND
THE EMPLOYEE SHOULD BE AWARE THAT SUCH RISKS (INCLUDING THE POSSIBILITY OF THE
COMPANY'S STOCK BECOMING WORTHLESS) ARE INVOLVED IN ANY INVESTMENT IN THE
SHARES. THE COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH
RESPECT TO THE ECONOMIC RETURN OF AN INVESTMENT IN THE SHARES. THE EMPLOYEE
SHOULD CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANT, AND/OR BUSINESS ADVISORS AS
TO THE TAX AND OTHER CONSEQUENCES OF EXERCISING THE OPTION. THERE ARE
SUBSTANTIAL LIMITATIONS ON THE LIQUIDITY, TRANSFERABILITY, AND MARKETABILITY OF
THE SHARES WHICH ARE REFERRED TO IN THIS AGREEMENT AND WHICH SHOULD BE REVIEWED
THOROUGHLY BY THE EMPLOYEE.
================================================================================
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement all as of the date first above written.
Company:
-------
Bottomline Technologies, Inc.
_________________________ By:_________________________
Witness Signature and Title
Employee:
---------
_________________________ ____________________________
Witness Name
-20-
<PAGE>
EXHIBIT A
TO
BOTTOMLINE TECHNOLOGIES, INC.
STOCK OPTION PLAN
STOCK OPTION AGREEMENT (INCENTIVE)
NOTICE OF EXERCISE
------------------
The undersigned (the "Employee"), being an employee of Bottomline
Technologies, Inc. (the "Company") and the holder of a stock option (the
"Option") granted pursuant to a Stock Option Agreement dated_______________
(the "Agreement") by and between the Company and the Employee (a copy of the
Agreement being attached hereto), hereby, pursuant to Section 4 of the
Agreement, gives written notice to the Company that the Employee is exercising
the Option, as follows:
1. Exercise Period:
---------------
Begin Date:
End Date:
2. Number of Shares:
----------------
3. Purchase Price:
--------------
4. The Employee hereby (a) confirms the truth and accuracy, as of the
date hereof, of the Employee's representations and warranties as set forth in
Section 6 of the Agreement, and (b) tenders to the Company the full amount of
the purchase price for the number of Shares being exercised, all as set forth
above.
Dated: __________, 19__ _______________________________
Signature of EMPLOYEE
Type/print name and address:
---------------------------
-1-
<PAGE>
Bottomline Technologies, Inc. hereby confirms that the Employee has
exercised the Option in accordance with the provisions of Section 4 of the
Agreement and that the Employee has made payment in full of the purchase price
for the number of Shares being exercised by this Notice of Exercise.
Bottomline Technologies, Inc.
Dated: __________, 19__ By:_____________________________
Signature and Title
-2-
<PAGE>
EXHIBIT B
TO
BOTTOMLINE TECHNOLOGIES, INC.
STOCK OPTION PLAN
STOCK OPTION AGREEMENT (INCENTIVE)
STOCK RESTRICTION AGREEMENT
---------------------------
THIS STOCK RESTRICTION AGREEMENT, made as of _______________, by and
between BOTTOMLINE TECHNOLOGIES, INC., a New Hampshire corporation having a
principal place of business at 155 Fleet Street, Portsmouth, New Hampshire 03801
(the "Corporation"); and _____________________ (the "Shareholder").
Recitals:
--------
The Shareholder has exercised a certain stock option granted to the
Shareholder by the Corporation pursuant to that certain Stock Option Agreement
dated August 22, 1996 (the "Stock Option Agreement"). As the result of such
exercise, the Shareholder is acquiring certain shares of the stock of the
Corporation. Under the Stock Option Agreement, the Shareholder's exercise of
the option granted thereunder is conditioned upon the execution and delivery of
this agreement by the Corporation and the Shareholder.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
promises and undertakings set forth herein, the parties hereby agree as follows:
1. Definitions. For purposes of this agreement, the following terms
-----------
shall have the following meanings:
(a) Accountant: Such independent accounting firm as shall be designated by
----------
the Corporation.
(b) Board: The Board of Directors of the Corporation.
-----
(c) Bona Fide Offer: An offer submitted in writing to the Shareholder to
---------------
purchase or acquire all or any portion of the Shares (as hereinafter defined)
owned by the Shareholder, signed by the offeror and setting forth all of the
terms and conditions of such offer (including, without limitation, the method of
payment and the name and address of the offeror). In no event shall an offer to
purchase any Shares be considered a Bona Fide Offer unless (i) it is accompanied
by a bank, certified, or cashier's check in an amount not less than ten percent
(10%) of the purchase price for the Shares (such amount to serve as earnest
money in connection therewith), and (ii) it and said accompanying check are
delivered in escrow to the Corporation's attorney or to such other person, bank,
or company as shall be satisfactory to the Board.
<PAGE>
(d) Fair Value: Such value per Share as is determined by the Accountant,
----------
using a reasonable valuation method adopted in good faith by the Accountant, as
of the date on which the Purchase Event, as defined below, in question has
occurred. The value so determined by the Accountant shall be pro rated by the
Accountant among all of the outstanding shares of the stock of the Corporation,
and the value thereof may vary by class of stock if there are outstanding shares
of stock from more than one class of stock at the time of the valuation. The
value so determined by the Accountant shall be final and binding on the
Corporation and the Shareholder and the Shareholder's heirs, personal
representatives, and assigns. The fees charged by the Accountant for
determining Fair Value shall be paid by the Corporation.
(e) Involuntary Transfer: The occurrence of any one or more of the
--------------------
following events:
(i) either (A) the taking of any share of Shares by foreclosure or
under attachment, by execution, or otherwise by court order, (B) the
subjecting of any share of Shares to any lien or encumbrance by operation
of law or otherwise, (C) any transfer of legal or equitable ownership of
any share of Shares by court order or by operation of law (excluding
transfers resulting from the death of a Shareholder), or (D) any other
proceeding or action which results in the involuntary loss of legal or
equitable ownership of any share of Shares; or
(ii) the filing of a voluntary or involuntary petition in bankruptcy
or the initiation of voluntary or involuntary receivership, consolidation,
or insolvency proceedings by, against, or with respect to the Shareholder
under the laws of the United States or of any state (and, in the case of an
involuntary petition or proceeding, the failure to cause the same to be
discharged or discontinued within sixty (60) days from the date of the
filing or initiation thereof).
(f) Purchase Event: The occurrence of an event which, under the provisions
--------------
of this agreement, gives rise to an option or obligation to purchase and sell
Shares, whether as the result of (i) the Shareholder's death or Withdrawal, as
defined below, or (ii) a Voluntary Transfer or an Involuntary Transfer, as
defined below, of any Shares.
(g) Share: Any share of any present or future class of stock of the
-----
Corporation owned by the Shareholder as of the date of the Purchase Event in
question, whether such Share is presently owned by the Shareholder or is
hereafter acquired by the Shareholder.
-2-
<PAGE>
(h) Voluntary Transfer: Any voluntary disposition or assignment by the
------------------
Shareholder during the Shareholder's lifetime, with or without consideration, of
any legal or equitable interest in any Shares (including, without limitation, a
sale, gift, exchange, pledge, assignment, mortgage, hypothecation, encumbrance,
transfer in trust, or contract or option with respect to any of the foregoing).
(i) Withdrawal: Either (i) any termination of the Corporation's employment
----------
of the Shareholder for any reason (excluding only death), whether with or
without cause or whether by the Corporation or by the Shareholder, or (ii) any
attempted transfer of any Shares in violation of the terms and conditions of
this agreement.
2. Restrictions on Voluntary Transfers.
-----------------------------------
(a) No Voluntary Transfer of any Shares shall be made unless (i) the
Shareholder proposes to transfer said Shares (the "Affected Shares") pursuant to
a Bona Fide Offer, and (ii) the Shareholder provides the Board with written
notice of the proposed Voluntary Transfer, including a photostatic copy of the
Bona Fide Offer. For a period of sixty (60) days from the Board's receipt of
said written notice (the "Option Period"), the Corporation shall have an option
(the "Voluntary Transfer Option") to purchase the Affected Shares pursuant to
the provisions of Section 4 below; and, for purposes of Sections 4 and 5 below,
the "Purchase Price" shall be equal to the price per share set forth in or
determined by the Bona Fide Offer.
(b) In the event that the Voluntary Transfer Option is not exercised as to
all of the Affected Shares, then any partial exercise of the Voluntary Transfer
Option shall be deemed null and void and the Shareholder shall be entitled, for
a period of sixty (60) days thereafter, to make the proposed Voluntary Transfer
of all, but not less than all, of the Affected Shares on the terms and
conditions and to the transferee identified in the Bona Fide Offer. Any such
transferred Affected Shares and the transferee thereof shall be governed by and
subject to the provisions of this agreement with respect to any further sale,
disposition, or other transfer of all or any portion of all or any portion
thereof.
3. Death; Withdrawal; Involuntary Transfers.
----------------------------------------
(a) In the event of the death of the Shareholder, the Corporation shall
have an option (the "Death Option") to purchase all of the Shares then owned by
the Shareholder (the "Affected Shares") pursuant to the provisions of Section 4
below for a period (the "Option Period") ending one hundred twenty (120) days
following the date of the Shareholder's death; and, for purposes of Sections 4
and 5 below, the "Purchase Price" shall be equal to the Fair Value. In the
event that the Death Option is not exercised as to all of the Affected Shares,
then the Affected Shares not so purchased shall be transferred according to the
Shareholder's will or by the laws of
-3-
<PAGE>
intestate succession, as the case may be, and such transferred Affected Shares
and the transferee thereof shall be governed by and subject to the provisions of
this agreement with respect to any further sale, disposition, or other transfer
of all or any portion thereof.
(b) In the event of the Withdrawal of the Shareholder, the Corporation
shall have an option (the "Withdrawal Option") to purchase all of the Shares
then owned by the Shareholder (the "Affected Shares") pursuant to the provisions
of Section 4 below for a period (the "Option Period") ending ninety (90) days
following the later of (i) the date of the Corporation's discovery of said
Withdrawal, or (ii) the effective date of said Withdrawal; and, for purposes of
Sections 4 and 5 below, the "Purchase Price" shall be equal to the Fair Value.
In the event that the Withdrawal Option is not exercised as to all of the
Affected Shares, then the Affected Shares not so purchased and the Shareholder
shall continue to be governed by and subject to the provisions of this agreement
with respect to any further sale, disposition, or other transfer of all or any
portion thereof.
(c) In the event of an Involuntary Transfer of any or all of the Shares,
the Corporation shall have an option (the "Involuntary Transfer Option") to
purchase any or all of said involuntarily transferred shares of Shares (the
"Affected Shares") pursuant to the provisions of Section 4 below for a period
(the "Option Period") of ninety (90) days from and after the date of the
Corporation's discovery of said Involuntary Transfer; and, for purposes of
Sections 4 and 5 below, the "Purchase Price" shall be equal to the Fair Value.
In the event that the Involuntary Transfer Option is not exercised as to all of
the Affected Shares, then the Affected Shares not so purchased shall be
transferred according to the terms of the Involuntary Transfer and such
transferred Affected Shares and the transferee thereof shall be governed by and
subject to the provisions of this agreement with respect to any further sale,
disposition, or other transfer of all or any portion thereof.
4. Option to Corporation.
---------------------
(a) Upon the occurrence of an event giving rise to an option to the
Corporation to purchase Affected Shares pursuant to Sections 2 or 3 above, a
meeting of the Board shall be held pursuant to the notice requirements of the
Bylaws of the Corporation within the Option Period.
(b) At such meeting, all of the Affected Shares shall be subject to an
option by the Corporation (which shall be assignable by the Corporation in whole
or in part) to purchase, redeem, or retire all or any portion of the Affected
Shares at the Purchase Price. Said option shall be exercised, if at all, during
the course of such meeting by majority vote of the directors of the Corporation.
-4-
<PAGE>
(c) In the event of the exercise of the foregoing option, the Corporation
shall give written notice of such exercise to the Shareholder, to all other
stockholders, and to any third party ordering or benefitted by an Involuntary
Transfer of the Affected Shares. Said written notice shall (i) state the total
number of shares of the Affected Shares to be purchased at the Purchase Price,
and (ii) set forth the total Purchase Price for the shares of the Affected
Shares to be purchased by the exercise of said option.
(d) The purchase options given to the Corporation in this agreement may be
waived by the Corporation at a duly called meeting of the Board.
5. Payment and Delivery.
--------------------
(a) In the event of any purchase, redemption, or retirement of any shares
of Shares pursuant to this agreement, the closing with respect thereto shall be
held:
(i) if the Purchase Event giving rise thereto is the death of the
Shareholder, then at the principal office of the Corporation at 10:00 a.m.
on (A) the one hundred eightieth (180th) day following appointment of the
executor or administrator for the deceased stockholder's estate, or (B) on
such earlier date following such appointment as to which the Board shall
give not less than ten (10) days' prior written notice;
(ii) if the Purchase Event giving rise thereto is a proposed Voluntary
Transfer pursuant to a Bona Fide Offer, then on the terms and conditions
set forth in the Bona Fide Offer; or
(iii) if the Purchase Event giving rise thereto is an Involuntary
Transfer or a Withdrawal, then at the principal office of the Corporation
at 10:00 a.m. on (A) the sixtieth (60th) day following the date of the
meeting of the Board referred to in Section 4(a) above, or (B) on such
earlier date as to which the Board shall give not less than ten (10) days'
prior written notice;
or at such other date, time, and/or place as the parties may agree.
(b) If all of the shares of the Shares owned by the Shareholder are being
purchased at the closing, then (i) any Shares being sold other than to the
Corporation shall first be purchased and paid for, and (ii) any Shares being
purchased by the Corporation shall then be purchased and paid for, so that the
Corporation's purchase, redemption, or retirement shall effect a complete
termination of the Shareholder's ownership of the Shares.
(c) If the closing is held with respect to a proposed Voluntary Transfer
pursuant to a Bona Fide Offer, then the Purchase Price for the Affected Shares
shall be paid in accordance with the terms of the Bona Fide Offer. Otherwise,
the Purchase Price for the Affected Shares shall be paid as follows:
-5-
<PAGE>
(i) that portion of the Purchase Price, if any, which is funded by
insurance proceeds shall be paid on the closing date by the purchaser in
cash or by bank, certified, or cashier's check; and
(ii) that portion of the Purchase Price which is not funded by
insurance proceeds shall be paid on the closing date by the purchaser, at
the purchaser's option, either (A) in cash or by bank, certified, or
cashier's check, and/or (B) by the execution and delivery of the
purchaser's promissory note, as specified below; provided, that the
principal amount of any such promissory note shall not exceed ninety
percent (90%) of the Purchase Price.
Any promissory note delivered pursuant to subsection (c)(ii) above shall permit
prepayment without penalty and shall provide for the payment of the principal
balance thereof, with interest thereon at a rate per annum equal to the "prime"
or "base" rate (or, if both, then the lower thereof) in effect on the closing
date for the bank with which the Corporation then maintains its primary banking
relationship, in twenty (20) equal, consecutive quarterly installments,
commencing three (3) months from the closing date.
(d) At the closing, the original certificate(s) for all shares of the
Affected Shares being purchased shall be transferred, assigned, and delivered
(either duly endorsed or accompanied by appropriate stock transfer powers duly
executed) to the purchaser free and clear of all liens and encumbrances
whatsoever, except as specifically set forth in this agreement.
6. Endorsement of Stock Certificates. All certificates evidencing any
---------------------------------
shares of Shares shall have the following legend endorsed thereon as evidence of
the transfer restrictions set forth in this agreement:
"The shares of stock represented by this certificate are subject to and are
transferable only upon compliance with the provisions of the Articles of
Incorporation and the Bylaws of the Corporation and a certain Stock
Restriction Agreement dated ____________________ by and between the
Corporation and the holder hereof restricting the transfer of said shares,
copies of which are filed with the Secretary of the Corporation. The
shares of stock represented by the within certificate are not registered
under the Securities Act of 1933, the State of New Hampshire Uniform
Securities Act (RSA Chapter 421-B), or any other state securities acts.
Said shares may not be transferred until they are registered under said
acts, except upon delivery to the Corporation of (a) an opinion of counsel
satisfactory to the Corporation that registration under said acts is not
required for such transfer, or (b) such other evidence as may be
satisfactory to the Corporation that such transfer is not in violation of
said acts or any regulations or rules promulgated thereunder."
-6-
<PAGE>
7. Specific Performance. The Shareholder hereby stipulates that it would
--------------------
be impossible to measure in money the damages which would be suffered by the
Corporation in the event of a breach of this agreement. Therefore, if the
Corporation shall institute any action to enforce this agreement, it is agreed
that the claim or defense that the Corporation may have an adequate remedy at
law is hereby waived, and the Corporation shall have the right to specific
performance of this agreement. Such right shall be in addition to any other
legal or equitable rights and remedies that may be available to the Corporation.
8. Further Assurances. The Shareholder and the Corporation agree to
------------------
execute any additional documents or instruments and to perform any acts which
may be necessary or proper to carry out the purposes of this agreement.
9. Governing Law; Jurisdiction. This agreement and all rights, remedies,
---------------------------
and obligations under this agreement, including matters of construction,
validity, and performance, shall be governed exclusively by the laws of the
State of New Hampshire. This agreement shall be enforceable in any state or
federal court of competent jurisdiction; provided, that each party specifically
consents to, and agrees that such party is subject to, the jurisdiction of the
state and federal courts of the State of New Hampshire with respect to any
actions for enforcement of or breach of this agreement.
10. Counterparts. This agreement may be executed in such number of
------------
counterpart copies as there shall be parties and successor parties hereto from
time to time. Each of such counterpart copies shall be deemed an original, but
all of such copies together shall constitute one and the same agreement. One
counterpart copy shall be delivered to each party hereto.
11. Severability. Each term, condition, and provision of this agreement
------------
shall be valid and enforced to the fullest extent permitted by law. If there is
any conflict between any term, condition, or provision of this agreement and any
statute, law, ordinance, order, rule, or regulation, the latter shall prevail;
provided, that any such conflicting term, condition, or provision shall be
curtailed and limited only to the extent necessary to bring it within the legal
requirements and the remainder of this agreement shall not be affected thereby.
12. Notices. Any demand, notice, or other communication required or
-------
permitted to be given by a party under this agreement shall be in writing and,
with respect to each other party to whom the demand, notice, or other
communication is to be given, shall be given to such party either:
-7-
<PAGE>
(a) by being hand-delivered to such party, or
(b) by being deposited in the mail (registered or certified) or delivered
to a private express company, postage or freight prepaid, return receipt
requested, addressed to such party at such party's Address, as defined below.
As used in this Section, a party's "Address" shall mean the address of such
party set forth at the beginning of this agreement. Each party may change such
party's Address from time to time by giving the other party or parties notice of
the change in accordance with the provisions of this Section.
13. Holidays. Any period of notice or other time limitation in this
--------
agreement which, but for this provision, would expire on a Saturday, Sunday, or
legal holiday, shall be extended to the next succeeding weekday which is not a
legal holiday; provided, that this provision shall not be effective to thereby
extend subsequent periods of notice or time limitations based upon the first
such period of notice or time limitation, except to the extent that the latter
expires on a Saturday, Sunday, or legal holiday.
14. Headings. The descriptive headings of the Sections of this agreement
--------
are inserted for convenience and reference only and shall not control or affect
the meaning or construction of any of the provisions hereof.
15. Pronouns; Plurals. All pronouns and any variations thereof shall be
-----------------
deemed to include the masculine, feminine, neuter, singular, and plural thereof
as the context may require. In addition, all nouns shall be deemed to include
the singular and plural thereof as the context may require.
16. Entire Agreement; Amendment. Except as otherwise specifically set
---------------------------
forth in this agreement, this agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, supersedes any and all
prior oral and/or written understandings of the parties hereto, and may not be
modified or amended (in whole or in part) except by an instrument in writing
signed by each of the parties hereto.
17. Binding Effect. This agreement and all of the terms, conditions,
--------------
rights, and covenants contained herein shall be binding upon and for the benefit
of the parties hereto, and their respective spouses, heirs, legatees, executors,
administrators, legal representatives, and permitted successors, permitted
assigns, and permitted transferees hereunder, to the same extent and with the
same legal effect as if all of said parties had executed this agreement and had
expressly agreed to be bound hereby. Any successor assignee or transferee to
whom any Shares may be transferred pursuant to the terms of this agreement shall
agree in writing to the terms and conditions of this agreement prior to the
transfer or issuance of a certificate evidencing said Shares to said assignee or
transferee, such agreement to be in such form as shall be satisfactory to the
Corporation.
-8-
<PAGE>
18. Securities Laws. Notwithstanding anything to the contrary set forth
---------------
in this agreement, no Shares shall be sold or otherwise transferred until the
Corporation shall have received an opinion of counsel, satisfactory (both as to
counsel and opinion) to the Corporation, to the effect that the proposed sale or
transfer does not violate any federal or state securities laws, rules, or
regulations.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement all as
of the date first above written.
CORPORATION:
-----------
Bottomline Technologies, Inc.
By:
- --------------------------------- ---------------------------------
Witness Signature and Title
SHAREHOLDER:
-----------
- --------------------------------- -----------------------------------
Witness Name
<PAGE>
BOTTOMLINE TECHNOLOGIES, INC.
Form of Nonstatutory Stock Option Agreement
Granted Under 1989 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Bottomline Technologies, Inc., a New
Hampshire corporation (the "Company") on _______________ to _________________, a
director of the Company (the "Participant"), of an option to purchase, in whole
or in part, on the terms provided herein and in the Company's 1989 Stock
Incentive Plan (the "Plan"), a total of _____ shares of common stock, $.001 par
value per share, of the Company ("Common Stock") (the "Shares") at $_____ per
Share. Unless earlier terminated, this option shall expire on _______________
(the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option shall be exercisable ("vest") as to 100% of the original number
of Shares on the first anniversary of the date of grant of the option (the
"Grant Date"). This option shall expire upon, and will not be exercisable after,
the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
-1-
<PAGE>
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then the right to exercise
this option shall terminate one year after such cessation (but in no event after
the Final Exercise Date), provided that this option shall be exercisable only to
-------- ----
the extent that the Participant was entitled to exercise this option on the date
of such cessation. Notwithstanding the foregoing, if the Participant, prior to
the Final Exercise Date, violates the non-competition or confidentiality
provisions of any employment contract, confidentiality and nondisclosure
agreement or other agreement between the Participant and the Company, the right
to exercise this option shall terminate immediately upon written notice to the
Participant from the Company describing such violation.
4. Right of First Refusal.
----------------------
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant proposes
to transfer (the "Offered Shares"), the price per share and all other material
terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; provided that if the
-------- ----
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required to be
delivered to the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on account of
such Shares or permit the Participant to exercise any of the privileges or
rights of a stockholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.
-2-
<PAGE>
(d) If the Company does not elect to acquire all of the Offered Shares, the
Participant may, within the 30-day period following the expiration of the option
granted to the Company under subsection (b) above, transfer the Offered Shares
to the proposed transferee, provided that such transfer shall not be on terms
-------- ----
and conditions more favorable to the transferee than those contained in the
Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
(e) The following transactions shall be exempt from the provisions of this
Section 4:
(1) any transfer of Shares to or for the benefit of any spouse, child
or grandchild of the Participant, or to a trust for their benefit;
(2) any transfer pursuant to an effective registration statement filed
by the Company under the Securities Act of 1933, as amended (the "Securities
Act"); and
(3) any transfer of the Shares pursuant to the sale of all or
substantially all of the business of the Company;
provided, however, that in the case of a transfer pursuant to clause (1) above,
- -------- -------
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 4 to one or more persons or entities.
(g) The provisions of this Section 4 shall terminate upon the earlier of
the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise.
(h) The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Section 4, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
<PAGE>
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
BOTTOMLINE TECHNOLOGIES, INC.
Dated: _______________ By:
--------------------------------------------
Print Name:
------------------------------------
Title:
-----------------------------------------
-4-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1989 Stock Incentive Plan.
PARTICIPANT:
-----------------------------------
Address: _________________________
_________________________
_________________________
-6-
<PAGE>
EXHIBIT 10.2
BOTTOMLINE TECHNOLOGIES (DE), INC.
AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN
----------------------------------------------
1. Purpose
-------
The purpose of this 1997 Stock Incentive Plan (the "Plan") of Bottomline
Technologies (de), Inc., a Delaware corporation (the "Company"), is to advance
the interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of Bottomline Technologies, Inc.,
as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder (the "Code").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other stock-
based awards (each, an "Award") under the Plan. Any person who has been granted
an Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
--------------------------
(a) Administration by Board of Directors. The Plan will be administered by
------------------------------------
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
<PAGE>
(c) Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the
common stock, $.001 par value per share, of the Company (the "Common Stock") is
registered under the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall appoint one such Committee of not less than two members, each member
of which shall be an "outside director" within the meaning of Section 162(m) of
the Code and a "non-employee director" as defined in Rule 16b-3 promulgated
under the Exchange Act." All references in the Plan to the "Board" shall mean
the Board or a Committee of the Board or the executive officer referred to in
Section 3(b) to the extent that the Board's powers or authority under the Plan
have been delegated to such Committee or executive officer.
4. Stock Available for Awards
--------------------------
(a) Number of Shares. Subject to adjustment under Section 4(c), Awards may
----------------
be made under the Plan for up to 900,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as defined below), to any limitation required under
the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c), for
---------------------
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 100,000 per calendar year. The per-
participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code.
(c) Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option (as defined below), (iii) the
repurchase price per security subject to each outstanding Restricted Stock Award
(as defined below), and (iv) the terms of each other outstanding stock-based
Award shall be appropriately adjusted by the Company (or substituted Awards may
be made, if applicable) to the extent the Board shall determine, in good faith,
that such an adjustment (or substitution) is necessary
-2-
<PAGE>
and appropriate. If this Section 4(c) applies and Section 8(e)(i) also applies
to any event, Section 8(e)(i) shall be applicable to such event, and this
Section 4(c) shall not be applicable.
5. Stock Options
-------------
(a) General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as defined below) shall be designated a "Nonstatutory Stock
Option."
(b) Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
--------------
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised only by delivery to the
------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
---------------------
Option granted under the Plan shall be paid for as follows:
(i) in cash or by check, payable to the order of the Company;
(ii) except as the Board may otherwise provide in an option agreement,
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or delivery by the Participant to the Company of a copy of irrevocable
-3-
<PAGE>
and unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;
(iii) to the extent permitted by the Board and explicitly provided in
an option agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or
(iv) any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
(a) Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
-4-
<PAGE>
8. General Provisions Applicable to Awards
---------------------------------------
(a) Transferability of Awards. Except as the Board may otherwise determine
-------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each type
----------------
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or designated beneficiary may exercise
rights under the Award.
(e) Acquisition Events
------------------
(i) Consequences of Acquisition Events. Upon the occurrence of an
----------------------------------
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Awards: (A)
provide that outstanding Options shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code; (B) upon written notice to the Participants, provide that
all then unexercised Options will become exercisable in full as of a specified
time (the "Acceleration Time") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants between the Acceleration Time and the
consummation of such Acquisition Event; (C) in the event of an Acquisition Event
under the terms of which holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock surrendered pursuant to
such Acquisition Event (the "Acquisition Price"), provide that all outstanding
Options shall terminate upon consummation of such Acquisition
-5-
<PAGE>
Event and each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (I) the Acquisition Price multiplied by
the number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (II) the aggregate exercise price of
such Options; (D) provide that all Restricted Stock Awards then outstanding
shall become free of all restrictions prior to the consummation of the
Acquisition Event; and (E) provide that any other stock-based Awards outstanding
(I) shall become exercisable, realizable or vested in full, or shall be free of
all conditions or restrictions, as applicable to each such Award, prior to the
consummation of the Acquisition Event, or (II), if applicable, shall be assumed,
or equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof).
(ii) An "Acquisition Event" shall mean: (A) any merger or
consolidation which results in the voting securities of the Company outstanding
immediately prior thereto representing immediately thereafter (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (B) any sale of all
or substantially all of the assets of the Company; or (C) the complete
liquidation of the Company.
(iii) Assumption of Options Upon Certain Events. The Board may grant
-----------------------------------------
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) Withholding. Each Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board
-6-
<PAGE>
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(h) Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(i) Acceleration. The Board may at any time provide that any Options shall
------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. Miscellaneous
-------------
(a) No Right To Employment or Other Status. No person shall have any claim
--------------------------------------
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company's stockholders, but Awards previously granted may extend beyond
that date.
-7-
<PAGE>
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time.
(e) Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
-8-
<PAGE>
BOTTOMLINE TECHNOLOGIES (de), INC.
Incentive Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Bottomline Technologies (de), Inc., a
Delaware corporation (the "Company") on ___________, 199_ to
__________________________, an employee of the Company (the "Participant"), of
an option to purchase, in whole or in part, on the terms provided herein and in
the Company's 199_ Stock Incentive Plan (the "Plan"), a total of
__________________ shares of common stock, ____ par value per share, of the
Company ("Common Stock") (the "Shares") at $__________ per Share. Unless earlier
terminated, this option shall expire on _______ (the "Final Exercise Date" ).
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to [_]% of the original
number of Shares on each of the __, __, __ and __ anniversary of the date of the
grant of the option (the "Grant Date"). This option shall expire upon, and will
not be exercisable after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered
-1-
<PAGE>
hereby, provided that no partial exercise of this option may be for any
fractional share or for fewer than ten whole shares.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
-------- ----
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition or confidentiality provisions
of any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Participant from
the Company describing such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant by the
Participant, provided that this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for "Cause" if the Company determines, within
30 days after the Participant's resignation, that discharge for cause was
warranted.
-2-
<PAGE>
4. Right of First Refusal.
----------------------
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant proposes
to transfer (the "Offered Shares"), the price per share and all other material
terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; provided that if the
-------- ----
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required to be
delivered to the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on account of
such Shares or permit the Participant to exercise any of the privileges or
rights of a stockholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered Shares,
the Participant may, within the 30-day period following the expiration of the
option granted to the Company under subsection (b) above, transfer the Offered
Shares to the proposed transferee, provided that such transfer shall not be on
-------- ----
terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
-3-
<PAGE>
(e) The following transactions shall be exempt from the provisions of this
Section 4:
(i) any transfer of Shares to or for the benefit of any spouse,
child or grandchild of the Participant, or to a trust for their benefit;
(ii) any transfer pursuant to an effective registration statement
filed by the Company under the Securities Act of 1933, as amended (the
"Securities Act"); and
(iii) any transfer of the Shares pursuant to the sale of all or
substantially all of the business of the Company;
provided, however, that in the case of a transfer pursuant to clause (1) above,
- -------- -------
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 4 to one or more persons or entities.
(g) The provisions of this Section 4 shall terminate upon the earlier of
the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise.
(h) The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Section 4, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the
-4-
<PAGE>
Participant (other than those shares included in the offering) without the prior
written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the date of grant of the option or one year after such
Shares were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
9. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
BOTTOMLINE TECHNOLOGIES (de), INC.
Dated: _________ By:__________________________________
Name:____________________________
Title:___________________________
-5-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1997 Stock Incentive Plan.
PARTICIPANT:
___________________________
Address: _____________________
_______________________
-6-
<PAGE>
BOTTOMLINE TECHNOLOGIES (de), INC.
Nonstatutory Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Bottomline Technologies (de), Inc., a
Delaware corporation (the "Company") on ___________, 199_ to
__________________________, an [employee], [consultant], [director] of the
Company (the "Participant"), of an option to purchase, in whole or in part, on
the terms provided herein and in the Company's 1997 Stock Incentive Plan (the
"Plan"), a total of __________________ shares of common stock, __ par value per
share, of the Company ("Common Stock") (the "Shares") at $__________ per Share.
Unless earlier terminated, this option shall expire on _______ (the "Final
Exercise Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to [25]% of the original
number of Shares each on the first, second, third and fourth anniversary of the
date of the grant of the option (the "Grant Date"). This option shall expire
upon, and will not be exercisable after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered
-1-
<PAGE>
hereby, provided that no partial exercise of this option may be for any
fractional share.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
---------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
[THREE] months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
-------- ----
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition or confidentiality provisions
of any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Participant from
the Company describing such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant; provided that this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for "Cause" if the Company determines, within
30 days after the Participant's resignation, that discharge for cause was
warranted.
-2-
<PAGE>
4. Right of First Refusal.
----------------------
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant proposes
to transfer (the "Offered Shares"), the price per share and all other material
terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; provided that if the
-------- ----
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required to be
delivered to the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on account of
such Shares or permit the Participant to exercise any of the privileges or
rights of a stockholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered Shares, the
Participant may, within the 30-day period following the expiration of the option
granted to the Company under subsection (b) above, transfer the Offered Shares
to the proposed transferee; provided that such transfer shall not be on terms
-------- ----
and conditions more favorable to the transferee than those contained in the
Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
-3-
<PAGE>
(e) The following transactions shall be exempt from the provisions of this
Section 4:
(i) any transfer of Shares to or for the benefit of
any spouse, child or grandchild of the Participant, or to a trust for their
benefit;
(ii) any transfer pursuant to an effective registration
statement filed by the Company under the Securities Act of 1933, as amended (the
"Securities Act"); and
(iii) any transfer of the Shares pursuant to the sale of
all or substantially all of the business of the Company;
provided; however, that in the case of a transfer pursuant to clause (1) above,
- -------- -------
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 4 to one or more persons or entities.
(g) The provisions of this Section 4 shall terminate upon the earlier of
the following events:
(i) the closing of the sale of shares of Common Stock
in an underwritten public offering pursuant to an effective registration
statement filed by the Company under the Securities Act; or
(ii) the sale of all or substantially all of the
capital stock, assets or business of the Company, by merger, consolidation, sale
of assets or otherwise.
(h) The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Section 4, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the
-4-
<PAGE>
Securities Act, (i) not to sell, make short sale of, loan, grant any options for
the purchase of, or otherwise dispose of any shares of Common Stock held by the
Participant (other than those shares included in the offering) without the prior
written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
BOTTOMLINE TECHNOLOGIES (de), INC.
Dated: _________
By: ________________________________
Name: ____________________________
Title: _____________________________
-5-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1997 Stock Incentive Plan.
PARTICIPANT:
___________________________
Address: _____________________
_____________________
-6-
<PAGE>
EXHIBIT 10.3
BOTTOMLINE TECHNOLOGIES (de), INC.
1998 DIRECTOR STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this 1998 Director Stock Option Plan (the "Plan") of
Bottomline Technologies (de), Inc. (the "Company") is to encourage ownership in
the Company by non-employee directors of the Company whose continued services
are considered essential to the Company's future progress and to provide them
with a further incentive to remain as directors of the Company.
2. Administration.
--------------
The Board of Directors (the "Board") shall supervise and administer the
Plan. All questions concerning interpretation of the Plan or any options granted
under it shall be resolved by the Board and such resolution shall be final and
binding upon all persons having an interest in the Plan. The Board may, to the
full extent permitted by or consistent with applicable laws or regulations,
delegate any or all of its powers under the Plan to a committee appointed by the
Board, and if a committee is so appointed, all references to the Board in the
Plan shall mean and relate to such committee.
3. Participation in the Plan.
-------------------------
Directors of the Company who are not employees of the Company or any
subsidiary of the Company ("non-employee directors") shall be eligible to
receive options under the Plan.
4. Stock Subject to the Plan.
-------------------------
(a) The maximum number of shares of the Company's Common Stock, par value
$.001 per share ("Common Stock"), which may be issued under the Plan shall be
100,000 shares, subject to adjustment as provided in Section 7.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.
<PAGE>
(c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
(d) Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
5. Terms, Conditions and Form of Options.
-------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(a)(i) Automatic Option Grant Dates. Options shall automatically be
----------------------------
granted to all non-employee directors as follows:
(x) each person who first becomes a non-employee director after the
closing date (the "Closing Date") of the Company's initial public offering of
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, shall be granted an option to purchase 5,000
shares of Common Stock on the date of his or her initial election to the Board;
and
(y) each non-employee director shall be granted an option to
purchase 2,500 shares of Common Stock on the date of each Annual Meeting of
Stockholders of the Company following the Closing Date commencing with the 1999
Annual Meeting of Stockholders (other than a director who was initially elected
to the Board at any such Annual Meeting or, if previously, at any time after the
prior year's Annual Meeting of Stockholders), provided that he or she is serving
as a director immediately following the date of such Annual Meeting.
(ii) Periodic Grants of Options. Subject to execution by the non-employee
--------------------------
director of an appropriate option agreement, the Board may grant additional
options to purchase a number of shares to be determined by the Board in
recognition of services provided by a non-employee director in his or her
capacity as a director, provided that such grants are in compliance with the
requirements of Rule 16b-3, as promulgated under the Securities Exchange Act of
1934, as amended from time to time ("Rule 16b-3").
Each date of grant of an option pursuant to this Section 5(a) is hereinafter
referred to as an "Option Grant Date."
(b) Option Exercise Price. The option exercise price per share for each
---------------------
option granted under the Plan shall equal (i) the closing price on any national
securities exchange on which the Common Stock is listed, (ii) the closing price
of the
-2-
<PAGE>
Common Stock on the Nasdaq National Market or (iii) the average of the closing
bid and asked prices in the over-the-counter market, whichever is applicable, as
published in The Wall Street Journal, on the Option Grant Date. If no sales of
-----------------------
Common Stock were made on the Option Grant Date, the price of the Common Stock
for purposes of clauses (i) and (ii) above shall be the reported price for the
next preceding day on which sales were made.
(c) Transferability of Options. Except as the Board may otherwise
--------------------------
determine or provide in an option granted under the Plan, any option granted
under the Plan to an optionee shall not be transferable by the optionee other
than by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, and shall be
exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative. References to an optionee, to the
extent relevant in the context, shall include references to authorized
transferees.
(d) Vesting Period.
--------------
(i) General. Each option granted under the Plan pursuant to Section
-------
5(a)(i)(x) above shall become exercisable (vest) in four equal annual
installments beginning on the first anniversary of such Option Grant Date. Each
option granted under the Plan pursuant to Section 5(a)(i)(y) above shall become
exercisable in full upon the earlier of one year from the Option Grant Date or
the date immediately preceding the next Annual Meeting of Stockholders. No
further vesting shall occur with respect to an option granted pursuant to
Section 5(a)(i)(x) or 5(a)(i)(y) after the optionee ceases to be a non-employee
director of the Company. Each option granted under the Plan pursuant to Section
5(a)(ii) above shall become exercisable on such terms as shall be determined by
the Board and set forth in the option agreement with the respective optionee.
(ii) Acceleration Upon Acquisition Event. Notwithstanding the
-----------------------------------
foregoing, each outstanding option granted under the Plan shall immediately
become exercisable in full upon the occurrence of an Acquisition Event (as
defined in Section 8) with respect to the Company.
(iii) Right to Receive Restricted Stock. Notwithstanding the
---------------------------------
provisions of Section 5(d)(i) above, the Board shall have the authority to grant
options (including options granted pursuant to Section 5(a)(i) above) which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of stock acquired by the optionee on exercise of an option in
the event such optionee's service as a director terminates for any reason.
-3-
<PAGE>
(e) Termination. Each option shall terminate, and may no longer be
-----------
exercised, on the earlier of (i) the date ten years after the Option Grant Date
of such option or (ii) the first anniversary of the date on which the optionee
ceases to serve as a director of the Company.
(f) Exercise Procedure. An option may be exercised only by written notice
------------------
to the Company at its principal office accompanied by (i) payment in cash or by
certified or bank check of the full consideration for the shares as to which
they are exercised, (ii) delivery of outstanding shares of Common Stock (which
have been outstanding for at least six months) having a fair market value on the
last business day preceding the date of exercise equal to the option exercise
price, or (iii) an irrevocable undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of irrevocable instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price.
(g) Exercise by Representative Following Death of Director. An optionee,
------------------------------------------------------
by written notice to the Company, may designate one or more persons (and from
time to time change such designation), including his or her legal
representative, who, by reason of the optionee's death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.
6. Limitation of Rights.
--------------------
(a) No Right to Continue as a Director. Neither the Plan, nor the granting
----------------------------------
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain the optionee as a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
-----------------------------------
as a stockholder with respect to the shares covered by his or her option until
the date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is
issued.
(c) Compliance with Securities Laws. Each option shall be subject to the
-------------------------------
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be
-4-
<PAGE>
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
7. Adjustment Provisions for Mergers, Recapitalizations and Related
----------------------------------------------------------------
Transactions.
------------
If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are exchanged for a different number or kind of securities of the Company or of
another entity, or (ii) additional shares or new or different shares or other
securities of the Company or of another entity are distributed with respect to
such shares of Common Stock, the Board shall make an appropriate and
proportionate adjustment in (x) the maximum number and kind of shares reserved
for issuance under the Plan, (y) the number and kind of shares or other
securities subject to then outstanding options under the Plan, and (z) the price
for each share subject to any then outstanding options under the Plan (without
changing the aggregate purchase price for such options), to the end that each
option shall be exercisable, for the same aggregate exercise price, for such
securities as such optionholder would have held immediately following such event
if he had exercised such option immediately prior to such event. No fractional
shares will be issued under the Plan on account of any such adjustments.
8. Acquisition Event.
-----------------
For purposes of the Plan, an "Acquisition Event" shall be deemed to have
occurred only if any of the following events occurs: (i) any merger or
consolidation which results in the voting securities of the Company outstanding
immediately prior thereto representing immediately thereafter (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (ii) any sale of all
or substantially all of the assets of the Company; or (iii) the complete
liquidation of the Company.
9. Termination and Amendment of the Plan.
-------------------------------------
The Board may suspend or terminate the Plan or amend it in any respect
whatsoever.
-5-
<PAGE>
10. Notice.
------
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
11. Governing Law.
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the internal laws of the State of Delaware (without regard
to any applicable conflicts of laws or principles).
12. Effective Date.
--------------
The Plan shall take effect upon the closing of the Company's initial public
offering of Common Stock.
Adopted by the Board of Directors on
November 12, 1998
-6-
<PAGE>
BOTTOMLINE TECHNOLOGIES (de), INC.
Nonstatutory Stock Option Agreement
Granted Under 1998 Director Stock Option Plan
---------------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Bottomline Technologies (de), Inc., a
Delaware corporation (the "Company"), on ___________, 199______ (the "Grant
Date") to _________________, a director of the Company (the "Participant"), of
an option to purchase, in whole or in part, on the terms provided herein and in
the Company's 1998 Director Stock Option Plan (the "Plan"), a total of
__________________ shares (the "Shares") of common stock, $.001 par value per
share, of the Company ("Common Stock") at $__________ per Share. Unless
earlier terminated, this option shall expire on _______ (the "Final Exercise
Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable in accordance with the following
schedule:_______ This option shall expire upon, and will not be exercisable
after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
-1-
<PAGE>
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceased to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
twelve months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
-------- ----
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition or confidentiality provisions
of any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Participant from
the Company describing such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant, provided that this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
4. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Provisions of the Plan.
----------------------
-2-
<PAGE>
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
Bottomline Technologies (de), Inc.
Dated: _________ By:_________________________________
Name:____________________________
Title:___________________________
-3-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1998 Stock Option Plan.
PARTICIPANT:
___________________________
Address: _____________________
_____________________
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<PAGE>
EXHIBIT 10.4
BOTTOMLINE TECHNOLOGIES (de), INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Bottomline
Technologies (de), Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.001 par value
per share (the "Common Stock"). Two Hundred Fifty Thousand (250,000) shares of
Common Stock in the aggregate have been approved for this purpose.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
-----------
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), other than employees of the Company or any Designated Subsidiary
who are "highly compensated" within the meaning of Section 414(q) of the Code,
are eligible to participate in any one or more of the offerings of Options (as
defined in Section 9) to purchase Common Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall
<PAGE>
apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
---------
to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board from time to time (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a 6-
month period (a "Plan Period") during which payroll deductions will be made and
held for the purchase of Common Stock at the end of the Plan Period. The Board
or the Committee may, at its discretion, choose a different Plan Period of
twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 14 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction equal to any whole number
percentage (up to a maximum of 10%) of the Compensation he or she receives
during the Plan Period or such shorter period during which deductions from
payroll are made.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
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<PAGE>
6. Deduction Changes. An employee may decrease or discontinue his
-----------------
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close
-------------------
of business on the fourth business day prior to the end of a Plan Period and for
any reason permanently draw out the balance accumulated in the employee's
account and thereby withdraw from participation in an Offering. Partial
withdrawals are not permitted. The employee may not begin participation again
during the remainder of the Plan Period. The employee may participate in any
subsequent Offering in accordance with terms and conditions established by the
Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by dividing (a) the product
of $2,083 and the number of whole months in such Plan Period by (b) the closing
price (as defined below) on the Offering Commencement Date of such Plan Period
or such other number as may be determined by the Board prior to the Offering
Commencement Date.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
- -----------------------
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date
-3-
<PAGE>
and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. No employee shall have any rights as a
--------------------------
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Option until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who is deemed to have exercised an Option between
the record
-4-
<PAGE>
date and the distribution date for such stock dividend shall be entitled to
receive, on the distribution date, the stock dividend with respect to the shares
of Common Stock acquired upon such Option exercise, notwithstanding the fact
that such shares were not outstanding as of the close of business on the record
date for such stock dividend.
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, the
number of shares subject to any outstanding Option and the purchase price
thereof shall be adjusted proportionately, and such other adjustment shall be
made as may be deemed equitable by the Board or the Committee. In the event of
any other change affecting the Common Stock, such adjustment shall be made as
may be deemed equitable by the Board or the Committee to give proper effect to
such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 50%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, all outstanding Options shall be
cancelled by the Board or the Committee as of the effective date of any such
transaction, provided that notice of such cancellation shall be given to each
holder of an Option, and each holder of an Option shall have the right to
exercise such Option in full based on payroll
-5-
<PAGE>
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
-------------
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased or
one year after the date of exercise of the Option.
24. Effective Date and Approval of Stockholders. The Plan shall take
-------------------------------------------
effect upon the closing of the Company's initial public offering of Common
Stock, subject to approval by the stockholders of the Company as required by
Section 423 of the Code,
-6-
<PAGE>
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors
on November 12, 1998
Approved by the stockholders on
___________, 1998
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<PAGE>
EXHIBIT 10.5
FIRST AMENDMENT AND RESTATEMENT
OF
BOTTOMLINE TECHNOLOGIES, INC.
STOCK RIGHTS AND VOTING AGREEMENT
---------------------------------
THIS FIRST AMENDMENT AND RESTATEMENT OF STOCK RIGHTS AND VOTING AGREEMENT
(this "Agreement"), made as of March 31, 1992 (the "Effective Date"), by and
between BOTTOMLINE TECHNOLOGIES, INC., a New Hampshire corporation (the
"Corporation"); and the shareholders of the Corporation listed on Exhibit A
attached hereto (collectively the "Shareholders" or "Holders").
Recitals:
--------
The Corporation, Daniel McGurl ("McGurl"), James Loomis ("Loomis"), Charles
P. O'Leary ("O'Leary"), Joseph Leo Barry, Jr. ("Leo Barry"), and Dennis E. Barry
("Dennis Barry") (collectively, the "Existing Shareholders") are parties to that
certain Stock Rights and Voting Agreement dated June 29, 1990 (the "Existing
Stock Rights Agreement"). The remaining Shareholders (collectively the "New
Shareholders") and the Corporation are parties to a certain Stock Purchase
Agreement of even date (the "Stock Purchase Agreement"), pursuant to which the
New Shareholders have agreed to purchase certain shares of the Corporation's
common stock, One-tenth Cent ($0.001) par value (the "Stock") and warrants for
certain shares of Stock. The purpose of this Agreement is to provide the
Shareholders (including the Existing Shareholders and the New Shareholders) with
certain stock and voting rights, all as more particularly set forth in this
Agreement. It is intended that this Agreement supersede and replace the Existing
Stock Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and representations set forth in this Agreement, the parties hereby
agree that the provisions of the Existing Stock Rights Agreement be and the same
hereby are deleted in their entirety and that the same hereby are superseded and
replaced by the following provisions:
1. Preemptive Rights. The rights set forth in this Section 1 are given
-----------------
to O'Leary, Leo Barry, Dennis Barry, and the New Shareholders only (collectively
the "Purchasers"), and not to McGurl or Loomis:
(a) Subject to the exclusions set forth in subsection (f) below, if the
Corporation proposes to issue (a "Proposed Issuance") any unissued or treasury
shares of Stock or any bonds, certificates of indebtedness, debentures,
warrants, options, or other securities, rights, or obligations convertible into
any shares of Stock or carrying any right to subscribe to or acquire any shares
of Stock, then the Corporation shall give each of the Shareholders other than
McGurl and Loomis (individually a "Purchaser" and collectively the
"Purchasers"), a written notice (the "Notice") describing the Proposed Issuance
(including the identification of the
<PAGE>
securities to be issued, the price payable for such securities, and any other
terms and conditions applicable to the Proposed Issuance).
(b) Each Purchaser shall have the right (the "Preemptive Right") to
subscribe to or acquire all or a portion of such Purchaser's respective
Proportionate Share (as defined below) of the Proposed Issuance. Each Purchaser
shall be entitled to exercise such Purchaser's Preemptive Right in the manner
set forth in the Notice and on terms and conditions that are no less favorable
than the terms and conditions established by the Corporation to govern the
Proposed Issuance.
(c) If any Purchaser fails to exercise such Purchaser's Preemptive Right
within thirty (30) days following such Purchaser's receipt of the Notice, then
such Purchaser's Preemptive Right shall be deemed to have been waived with
respect to the Proposed Issuance, and, for a period of ninety (90) days
thereafter, the Corporation shall be entitled to effect the Proposed Issuance,
in whole or in part, free and clear of such Purchaser's Preemptive Right, at the
price specified in the Notice and upon other terms and conditions no more
favorable to the acquiror(s) of the Proposed Issuance than the terms and
conditions specified in the Notice.
(d) Any Purchaser may waive such Purchaser's Preemptive Right with respect
to any Proposed Issuance by a writing filed with the Board of Directors or the
Secretary of the Corporation.
(e) For purposes of this Section, a Purchaser's "Proportionate Share"
shall mean, as of the date on which a Notice is given, a fraction:
(i) the numerator of which is equal to the number of shares of Stock
owned by such Purchaser as of the Effective Date, including all shares of
Stock being purchased as of the Effective Date by such Purchaser pursuant
to the Stock Purchase Agreement; and
(ii) the denominator of which is equal to the sum of (A) such number
of shares of Stock as are outstanding as of the Effective Date, including
all shares of Stock being purchased as of the Effective Date pursuant to
the Stock Purchase Agreement, plus (B) such number of shares of Stock as
have then been issued pursuant to the exercise of stock options which have
been granted under the Corporation's August 1, 1989 Stock Option Plan, as
amended (the "Stock Option Plan"), plus (C) such number of shares of Stock
as are subject to then-outstanding stock options which have been granted
under the Stock Option Plan.
-2-
<PAGE>
Notwithstanding the above, if the outstanding shares of Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Stock as a stock dividend on its
outstanding Stock, or if a
Purchaser shall transfer any of such Purchaser's Stock (other than to a Related
Transferee as defined in subsection (g) below] of such Purchaser), then the
numbers set forth in subsection (i), and, in the case of a subdivision,
combination, or stock dividend, in subsection (ii) (A) above shall be
proportionately increased or decreased (as the case may be).
(f) Notwithstanding the foregoing provisions of this Section, the
Purchasers' Preemptive Rights shall not apply to:
(i) any Proposed Issuance of stock options under the Stock Option
Plan (or of any shares of Stock pursuant to the exercise of any such stock
option) to an employee of the Corporation (excluding McGurl and Loomis and
their respective Affiliates [as defined in subsection (g) below]);
provided, that any Proposed Issuance to McGurl or to Loomis, or to the
respective Affiliates of either of them, shall be subject to the
Purchasers' Preemptive Rights;
(ii) any stock dividend or subdivision of shares of Stock, provided
that the securities issued pursuant to such stock dividend or subdivision
are limited to additional shares of Stock;
(iii) any securities issued solely in consideration for the
acquisition (whether by merger of otherwise) by the Corporation or any of
its subsidiaries of all or substantially all of the stock or assets of any
other entity;
(iv) any securities issued pursuant to an underwritten public
offering; or
(v) any Stock issued pursuant to warrants held by the Purchasers or
their Related Transferees.
(g) As used in this Agreement:
(i) an "Affiliate" shall mean a third party which either (A) is
owned by the Corporation or is under common control with the Corporation,
(B) is a trust or other entity in which McGurl or Loomis has a beneficial
interest, or (C) is (or is owned or controlled by) a person who is the
spouse, child, or parent of McGurl or Loomis; and
(ii) a "Related Transferee" of a Shareholder shall mean a parent,
spouse, or child of such Shareholder, or a trust for the exclusive benefit
of such
-3-
<PAGE>
Shareholder and/or the parents, spouse, or children of such Shareholder, to
whom shares of Stock owned by such Shareholder have been transferred.
(h) The provisions of this Section 1 are personal to each Purchaser and
may only be exercised by such Purchaser, while such Purchaser, or a Related
Transferee of such Purchaser (such Related Transferee being deemed a Purchaser
for purposes of this Section 1), owns Stock of the Corporation which was
purchased prior to or effective as of the Effective Date.
2. Piggvback Rights. The rights set forth in this Section 2 are given to
----------------
each of the Shareholders:
(a) If the Corporation proposes to register, either for its own account or
for the account of any Shareholder, under the Securities Act of 1933, as
amended, any shares of Stock for sale for cash or other consideration to the
public (other than a registration relating solely to either a transaction under
Rule 145 of the Securities and Exchange Commission or an employee benefit plan)
(a "Registration"), the Corporation shall notify the Shareholders in writing and
shall afford the Shareholders the opportunity to include in the Registration all
or any portion of the shares of Stock owned by them; provided, that the
inclusion of such shares of Stock in the Registration shall be subject to:
(i) compliance with the terms and conditions of any underwriting
agreement covering the Registration;
(ii) if and to the extent that the managing underwriter determines
that marketing factors require a limitation of the number of shares of
Stock to be underwritten, then, with respect to the total number of shares
of Stock of the Shareholders so determined as being available for inclusion
in the Registration, each Shareholder (subject to the provisions of
subsection (g) below governing Related Transferees) shall be entitled to
include such Shareholder's Percentage (as defined in Section 3(a)(i) below)
of such total number of shares so determined as being available for
inclusion in the Registration; provided, further, that if all of the shares
proposed to be included in the Registration by a particular Shareholder are
thereby included, then any remaining shares which the managing underwriter
determines are available for inclusion in the Registration shall be split
between the other Shareholders (proportionate to their respective
Percentages) unless all of the shares proposed to be included by one or
more of those Shareholders are thereby included, in which event any
remaining shares available for inclusion shall be available to the
remaining such Shareholder(s) (proportionate to their respective
Percentages); and
-4-
<PAGE>
(iii) prohibition from inclusion if, in the judgment of the managing
underwriter, such prohibition is required.
(b) In connection with the inclusion of any shares of Stock of the
Shareholders in a Registration, the Corporation will use its best efforts to
register or qualify the shares of Stock covered by such registration statement
under the securities or "blue sky" laws of such jurisdictions as the
Shareholders or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request; provided, however, that the Corporation
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction.
(c) The Corporation and not the Shareholders, shall be responsible for the
payment of all fees and expenses (including, without limitation, registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Corporation, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, and costs of insurance)
incurred by the Corporation in connection with the Registration and the
inclusion of any shares of Stock by the Shareholders therein; provided, that
each Shareholder, and not the Corporation, shall be responsible for all
underwriting discounts and selling commissions applicable to the sale of any of
such Shareholder's shares of Stock.
(d) In connection with any Registration where shares of Stock of a
Shareholder are also registered pursuant to the provisions of this Section:
(i) the Corporation will indemnify and hold harmless such Shareholder
against any losses, claims, damages, or liabilities, joint or several, to
which such Shareholder may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof):
(A) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact relating to the
Corporation and contained in (1) the registration statement under
which such shares were registered under the Securities Act, (2) the
final prospectus therefor, or (3) any amendment or supplement thereof,
or
(B) arise out of or are based upon the omission or alleged
omission to state therein a material fact relating to the Corporation
that is (1) required to be stated therein, or (2) necessary to make
the statements therein not misleading;
-5-
<PAGE>
(ii) the Corporation will reimburse such Shareholder for any legal or
other expenses reasonably incurred by him in connection with investigating
or defending any such loss, claim, damage, liability, or action covered by
the provisions of subparagraph (i) above; provided, however, that the
Corporation will not be liable in any such case if and to the extent that
any such loss, claim, damage, or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such
Shareholder in writing specifically for use in such registration statement,
prospectus, or amendment thereof;
(iii) such Shareholder will indemnify and hold harmless the
Corporation, each other Shareholder participating in the Registration, each
officer of the Corporation who signs the registration statement, and each
director of the Corporation against all losses, claims, damages, or
liabilities, joint or several, to which the Corporation or such other
Shareholder, officer, or director may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof):
(A) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact relating to such
Shareholder and contained in (1) the registration statement under
which such Restricted Stock was registered under the Securities Act,
(2) the final prospectus therefor, or (3) any amendment or supplement
thereof, or
(B) arise out of or are based upon the omission or alleged
omission to state therein a material fact relating to such Shareholder
that is (1) required to be stated therein, or (2) necessary to make
the statements therein not misleading; and
(iv) such Shareholder will reimburse the Corporation and each other
Shareholder, officer, and director for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that
such Shareholder will not be liable in any such case if and to the extent
that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made notwithstanding the Corporation's prior receipt of a written
notice from such Shareholder of the error in the statement or of the
omission.
(e) In connection with any Registration where shares Stock of a
Shareholder are also registered pursuant to the provisions of this Section, such
Shareholder will cooperate with the Corporation and each underwriter (if the
method of disposition
-6-
<PAGE>
shall be an underwritten public offering) and will take all such actions and
execute and deliver all such instruments, agreements, and documents as the
Corporation or any such underwriter reasonably may request, including, but not
limited to:
(i) furnishing to the Corporation in writing such information with
respect to such Shareholder and the proposed distribution by him as
reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws, and
(ii) immediately notifying the Corporation, each other Shareholder
participating in the Registration, and the managing underwriter (if the
method of disposition shall be an underwritten public offering), at any
time when a prospectus relating to such Registration is required to be
delivered under the Securities Act, of the happening of any event of which
such Shareholder has knowledge as a result of which the prospectus
contained 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 light of the circumstances then existing.
(f) The rights set forth in this Section 2 are personal to each
Shareholder and may be exercised by such Shareholder only while such Shareholder
or such Shareholder's Related Transferee(s) owns Stock of the Corporation.
(g) For purposes of effecting the rights granted to the Shareholders
pursuant to this Section 2, a Shareholder who is a Related Transferee of another
Shareholder (a "Transferor Shareholder") shall, to the extent of the shares of
Stock transferred by the Transferor Shareholder to such Related Transferee (the
"Previously Transferred Shares"), be deemed to be the Transferor Shareholder.
In particular, with respect to the limitation on the number of shares of Stock
which the Transferor Shareholder and such Related Transferee may include in the
Registration under this Section 2, the Previously Transferred Shares shall be
considered to be owned by the Transferor Shareholder. Unless otherwise agreed
between the Transferor Shareholder and such Related Transferee, any permitted
inclusion in the Registration of some, but not all, of the shares of Stock owned
by the Transferor Shareholder and of the Previously Transferred Shares shall be
allocated between the Transferor Shareholder and such Related Transferee pro
rata based on the respective number of such shares of Stock owned by the
Transferor Shareholder and of such Previously Transferred Shares.
3. Take-Along Rights. The rights set forth in this Section 3 are given
-----------------
to each of the Shareholders:
-7-
<PAGE>
(a) If any Shareholder (the "Selling Shareholder") shall propose to
transfer (a "Proposed Transfer") to any person (the "Proposed Transferee"),
other than (1) another Shareholder, (2) a Related Transferee, or (3) the
Corporation, any shares of Stock (including any shares issued as the result of
the exercise of warrants therefor) (the "Transfer Shares"), then each remaining
Shareholder (subject to the provisions of subsection (f) below governing Related
Transferees) shall have:
(i) the right to transfer, in place of certain of the Transfer
Shares, such number of such remaining Shareholder's shares of Stock
(including any shares issued as the result of the exercise of warrants
therefor) as is equal to the following percentage ("Percentage") of the
number of Transfer Shares:
(A) for McGurl, 25.9537%,
(B) for Loomis, 25.9537%,
(C) for O'Leary, 25.9537%,
(D) for Leo Barry, 6.6022%,
(E) for Dennis Barry, 6.6022%, and
(F) for each New Shareholder, .0535% for each Unit (as defined
in the Stock Purchase Agreement) purchased pursuant to the
Stock Purchase Agreement; or
(ii) if the Proposed Transferee is unwilling to purchase shares of any
remaining Shareholder as part of the Proposed Transfer, then the right to
have the Selling Shareholder purchase, out of the proceeds of the sale of
the Transfer Shares to the Proposed Transferee, such number of such
remaining Shareholder's shares of Stock (including any shares issued as the
result of the exercise of warrants therefor) as is equal to his Percentage
of the number of Transfer Shares;
all upon and subject to the additional terms and conditions set forth in this
Section. Transfers of shares of Stock between Shareholders shall not be subject
to the provisions of this Section.
(b) In the event of a Proposed Transfer, the Selling Shareholder shall
give written notice (the "Transfer Notice") to the remaining Shareholder(s) of
the Proposed Transfer, including the number of shares of Stock proposed to be
transferred, the price and general terms and conditions governing the Proposed
Transfer, and the identity of the Proposed Transferee.
-8-
<PAGE>
(c) Upon receipt of the Transfer Notice, each remaining Shareholder shall
be entitled to exercise his rights under subsection (a) above by giving the
Selling Shareholder written notice (the "Participation Notice") thereof within
thirty (30) days following his receipt of the Transfer Notice. If no such
Participation Notice is given by such remaining Shareholder, then his rights
under subsection (a) above shall automatically terminate with respect to the
Proposed Transfer.
(d) In the event that any remaining Shareholder exercises his rights under
subsection (a) above, then any transfer of shares of Stock by such remaining
Shareholder shall be subject to the same terms and conditions that govern the
Selling Shareholder under the Proposed Transfer.
(e) The rights of any Shareholder under this Section may be waived as to
any Proposed Transfer by his delivering a writing to that effect to the
Corporation and the other Shareholders.
(f) For purposes of effecting the rights granted to the Shareholders
pursuant to this Section 3, a Shareholder who is a Related Transferee of another
Shareholder (a "Transferor Shareholder") shall, to the extent of the shares of
Stock transferred by the Transferor Shareholder to such Related Transferee (the
"Previously Transferred Shares"), be deemed to be the Transferor Shareholder.
In particular, with respect to the limitation on the number of shares of Stock
which the Transferor Shareholder and such Related Transferee may include in the
Proposed Transfer under this Section 3, the Previously Transferred Shares shall
be considered to be owned by the Transferor Shareholder. Unless otherwise
agreed between the Transferor Shareholder and such Related Transferee, any
permitted inclusion in the Proposed Transfer of some, but not all, of the shares
of Stock owned by the Transferor Shareholder and of the Previously Transferred
Shares shall be allocated between the Transferor Shareholder and such Related
Transferee pro rata based on the respective number of such shares of Stock owned
by the Transferor Shareholder and of such Previously Transferred Shares.
4. Redemption Option. The rights set forth in this Section 4 are given
-----------------
to Leo Barry, Dennis Barry, and the New Shareholders only (collectively, the
"Redeeming Shareholders"), and not to McGurl, Loomis, or O'Leary:
(a) Each of the Redeeming Shareholders, or their Related Transferees, as
the case may be, shall have the right, at any time after June 29, 1995, to have
all, but not less than all, of such Redeeming Shareholder's respective shares of
Purchase Stock [as defined in subsection (d) below] redeemed by the Corporation
by delivering written notice requesting the same to the Corporation at least
thirty (30) days prior to the date upon which such redemption is being requested
(the "Redemption Date").
-9-
<PAGE>
(b) The redemption price to be paid by the Corporation for any Purchase
Stock shall be Three Dollars ($3.00) per share, together with accrued interest
thereon from the date on which such Redeeming Shareholder purchased such
Purchase Stock (the "Purchase Date") to the Redemption Date at a variable rate
which shall be the "Base Rate" (or its equivalent) of the Bank of Boston,
Boston, Massachusetts, as in effect on each annual anniversary of the Purchase
Date (each such date being hereinafter referred to as an "Anniversary Date"),
which interest shall accrue at such rate for the annual period then ending and
be compounded annually upon each such Anniversary Date, and said interest rate
to be set with respect to any portion of any annual period in which a redemption
of Purchase Stock occurs hereunder as of the Redemption Date.
(c) The redemption price shall be payable in cash to a Redeeming
Shareholder on the Redemption Date.
(d) The term "Purchase Stock" as used in this Agreement shall mean the
Stock purchased by a Redeeming Shareholder pursuant to his Stock Purchase
Agreement, whether then held by such Redeeming Shareholder, or his Related
Transferees, as the case may be, increased or decreased by any stock dividend,
subdivision, or combination, but not including any stock purchased pursuant to
warrants for any Stock of the Corporation.
5. Demand Registration Rights. The rights set forth in this Section 5
--------------------------
are given to the New Shareholders only, and not to the Existing Shareholders:
5.1. Definitions. As used in this Section, the following terms shall have
-----------
the following meanings:
(a) "Registrable Securities" shall mean shares of Stock owned by a New
Shareholder.
(b) "Registration Expenses" shall mean all expenses incurred by the
Corporation in registering any Registrable Securities under applicable federal
and state securities laws in accordance with the provisions of this Section 5
(including all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Corporation,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, and costs of insurance), but excluding any Selling Expenses.
(c) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to any sale of Registrable Securities.
-10-
<PAGE>
(d) "Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
(e) "Securities Act" shall mean the United States Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder.
5.2. Request for Registration.
------------------------
(a) At any time after six (6) months following any registration statement
covering a public offering of securities of the Corporation under the Securities
Act, the holders of Registrable Securities which both:
(i) constitutes at least a majority of the total shares of
Registrable Securities then outstanding, and
(ii) is reasonably anticipated to sell to the public in a public
offering for an aggregate price at least equal to Two Million Dollars
($2,000,000.00),
may request the Corporation to register under the Securities Act (a "Demand
Registration") all of the shares of Registrable Securities held by such
requesting holder or holders (or such lesser portion of such shares of
Registrable Securities may be requested to be registered if the reasonably
anticipated aggregate price to the public of such public offering would be at
least Two Million Dollars ($2,000,000.00)).
(b) The request described in subsection (a) above shall be set forth in a
written notice (the "Demand Registration Notice") given by the requesting holder
or holders to the Corporation. The Demand Registration Notice shall specify the
number of shares of Registrable Securities requested to be registered (the
"Requested Shares") and the manner in which the Requested Shares are to be sold.
(c) Following its receipt of any Demand Registration Notice, the
Corporation shall immediately notify (the "Participation Notice") all non-
requesting holders of Registrable Securities that the Corporation has received
the Demand Registration Notice, and a copy of the Demand Registration Notice
shall be included with the Participation Notice. Each such non-requesting
holder shall be entitled to include in the Demand Registration, for sale in
accordance with the method of disposition specified in the Demand Registration
Notice, all or any lesser portion of the shares of Registrable Securities of
such holder by giving the Corporation, within fifteen (15) days following the
giving of the Participation Notice, written notice of such holder's election to
participate in the Demand Registration (including a statement of the number of
Registrable Securities of such holder which should be included in the Demand
Registration).
-11-
<PAGE>
(d) The Corporation shall use its best efforts to register under the
Securities Act, and to qualify under such state securities laws as the
requesting holders may reasonably request, for public sale in accordance with
the method of disposition specified in the Demand Registration Notice, the
number of shares of Registrable Securities specified in the Demand Registration
Notice (and, in all notices received by the Corporation from the other non-
requesting holders, within fifteen (15) days after the giving of the
Participation Notice); provided, however, that the Corporation shall not be
-------- -------
obligated to take any action to effect any such registration pursuant to this
Section 5.2 in any particular jurisdiction in which the Corporation would be
required to (a) qualify generally to transact business as a foreign corporation
in such jurisdiction if it is not so qualified, or (b) execute a general consent
to service of process in effecting such registration unless the Corporation is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(e) The following provisions shall be applicable if the requested method
of disposition shall be an underwritten public offering:
(i) The Corporation shall designate the managing underwriter for
the offering, subject to the approval of the holders of a majority of the
shares of Registrable Securities to be registered in the Demand
Registration (which approval shall not be unreasonably withheld or
delayed). In the event such managing underwriter is not so approved, the
Corporation shall designate another managing underwriter as soon as
practicable.
(ii) The right of any holder to registration pursuant to this
Section 5.2 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in
the underwriting to the extent requested (unless otherwise mutually agreed
by a majority in interest of the holders, to the extent provided herein).
The Corporation shall (together with all holders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter.
(iii) Notwithstanding any other provision of this Section 5.2 to the
contrary, if the managing underwriter advises the Corporation in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the number of shares that may be included in the
registration and underwriting shall be allocated among all holders
requesting inclusion in the registration in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by
such holders at the time of the filing of the registration statement. No
Registrable Securities excluded from the underwriting by reason of the
managing underwriter's marketing limitation shall be included in such
registration.
-12-
<PAGE>
(iv) If any holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Corporation, the managing underwriter, and the other
holders. The Registrable Securities so withdrawn shall also be withdrawn
from registration; provided, however, that if by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by
other holders may be included in such registration (up to the maximum of
any limitation imposed by the managing underwriter), then the Corporation
shall offer to all holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities in the
same proportion used in determining the underwriter limitation in this
Section 5.2(e). If the registration does not become effective due to the
withdrawal of Registrable Securities, then either (A) the holders
requesting registration shall reimburse the Corporation for expenses
incurred in complying with the request, or (B) the aborted registration
shall be treated as effected for purposes of Section 5.2(h) below.
(f) The Corporation shall be entitled to include in the Demand
Registration, for sale in accordance with the method of disposition specified in
the Demand Registration Notice, both:
(i) shares of Stock to be sold by the Corporation for its own
account, and
(ii) shares of Stock owned by any other stockholder or stockholders
of the Corporation, except that the number of shares of Stock to be
included by any such other stockholder shall not exceed two percent (2%) of
the then outstanding shares of Stock;
provided, however, that, if in the opinion of the managing underwriter (if such
- -------- -------
method of disposition involves, in whole or in part, an underwritten public
offering), the inclusion of such shares of Stock in the underwriting would have
a material adverse effect on the marketing of the Registrable Securities to be
sold thereby, then the number of such shares of Stock of the Corporation to be
included in the underwriting shall be reduced to such extent (including the
possible exclusion of all of such shares) as the managing underwriter determines
will no longer have a material adverse effect on the marketing of the
Registrable Securities to be sold thereby.
(g) In the case of each registration effected by the Corporation pursuant
to this Section 5.2, the Corporation will keep each holder advised in writing as
to the initiation of each registration and as to the completion thereof. At its
expense the Corporation will:
-13-
<PAGE>
(i) keep such registration effective for a period of one hundred
twenty (120) days or until the holder or holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; and
(ii) furnish such number of prospectuses and other documents
incident thereto as a holder from time to time may reasonably request.
(h) Notwithstanding anything to the contrary contained in this Section
5.2:
(i) no Demand Registration Notice may be given within one (1) year
after the effective date of a registration statement filed by the
Corporation covering an underwritten public offering in which the holders
of Registrable Securities shall have been entitled to join pursuant to
Section 2 above and in which there shall have been effectively registered
all shares of Registrable Securities as to which registration shall have
been requested; and
(ii) the Corporation shall be obligated to register Registrable
Securities pursuant to this Section 5.2 on two (2) occasions only;
provided, however, that such obligation shall be deemed satisfied only when
a registration statement covering all shares of Registrable Securities
specified in notices received as aforesaid, for sale in accordance with the
method of disposition specified in the Demand Registration Notice, shall
have become effective.
5.3. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Section 5.2 above shall be borne by
the Corporation. All Selling Expenses relating to the shares of Stock so
registered by the holders shall be borne by the holders of such shares pro rata
based on the number of shares so registered.
5.4. Registration on Form S-3.
------------------------
(a) In addition to the rights set forth in Section 5.2 above, if a holder
or holders request by written notice to the Corporation that the Corporation
file a registration statement on Form S-3 (or any successor thereto) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would exceed One Million
Dollars ($1,000,000.00), and the Corporation is a registrant entitled to use
Form S-3 to register securities for such an offering, the Corporation shall use
its best efforts to cause such shares to be registered for the offering on such
form (or any successor thereto).
(b) All Registration and Selling Expenses incurred in connection with a
registration pursuant to this Section 5.4 shall be borne by the holder or
holders
-14-
<PAGE>
participating in the registration on Form S-3 pro rata according to the number
of Registrable Securities so registered.
(c) Notwithstanding anything to the contrary set forth in this Section
5.4, the Corporation shall be obligated to register Registrable Securities
pursuant to this Section 5.4 on two (2) occasions only; provided, however, that
-------- -------
such obligation shall be deemed satisfied only when a registration statement
covering all shares of Registrable Securities specified in the notice(s)
received as aforesaid, for sale in accordance with the method of disposition
specified in the Demand Registration Notice, shall have become effective.
5.5. Termination of Registration Rights. The registration rights granted
----------------------------------
pursuant to this Agreement shall terminate as to each New Shareholder at such
time as all Registrable Securities held by such New Shareholder can be sold
within a given three-month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144 or other applicable
exemption supported by a written opinion of legal counsel for the Corporation
which shall be reasonably satisfactory in form and substance to legal counsel
for such New Shareholder.
6. Voting Agreement.
----------------
(a) Each of the Shareholders hereby agrees and consents for himself and
his Related Transferees to vote all shares of the voting Stock of the
Corporation as may from time to time be owned by him or his Related Transferees
for the election and re-election of the following individuals as members of the
Board of Directors of the Corporation (the "Board"):
(i) McGurl;
(ii) Loomis;
(iii) O'Leary; and
(iv) one of either Leo Barry or Dennis Barry.
The foregoing voting agreement shall pertain to all shares of Stock of each of
the Shareholders, whether held in the name of such Shareholder or held in the
name of or for the benefit of any Related Transferee of such Shareholder.
(b) Each of the Existing Shareholders agrees that his right to be elected
to the Board pursuant to the voting agreement in subsection (a) above will
terminate as to such Shareholder and that he will be deemed to have resigned and
will cease to be a member of the Board in the event that:
-15-
<PAGE>
(i) in the case of either McGurl, Loomis, or O'Leary, he and his
respective Related Transferees, do not own in the aggregate two hundred
thousand (200,000) shares of the Stock (subject to adjustment in the event
of any stock dividend, subdivision, or combination affecting all of the
outstanding Stock of the Corporation); or
(ii) in the case of Leo Barry and Dennis Barry, they and their
Related Transferees, do not own in the aggregate one hundred thousand
(100,000) shares of the Stock (subject to adjustment in the event of any
stock dividend, subdivision, or combination affecting all of the
outstanding Stock of the Corporation).
(c) The provisions of this Section 5 shall in no manner be deemed to limit
the right of the Shareholders of the Corporation to increase the number of
members of the Board at any time hereafter. Notwithstanding any increase of the
number of members of the Board at any time during which O'Leary and Leo and
Dennis Barry have the right to be elected as members of the Board of Directors
pursuant to subsections (a) and (b) above, the Shareholders agree that no
increase in the salary or compensation of either McGurl and/or Loomis, nor any
capital expenditure by the Corporation in excess of Twenty-five Thousand Dollars
($25,000.00), may be authorized by the Board without the affirmative vote of one
of either:
(i) O'Leary;
(ii) Leo or Dennis Barry (whoever is then serving on the
Corporation's Board of Directors); or
(iii) a representative appointed by the New Shareholders, who, until
changed by the New Shareholders with notice to the Corporation, shall be
Hambrecht & Quist Venture Investors, L.P.
7. Stock Transfer Restrictions. The Corporation and each of the
---------------------------
Shareholders agree that neither the Articles nor the Bylaws will be amended to
restrict the transferability of any share of Stock owned by any Shareholder
unless such Shareholder agrees in writing to the restriction; provided, that the
foregoing shall not prohibit such an amendment which refers to restrictions
under applicable law (e.g., compliance with federal and state securities laws,
rules, and regulations).
8. Miscellaneous Provisions.
------------------------
(a) Amendment. This Agreement may not be amended, in whole or in part,
---------
except by an instrument in writing signed by each of the parties hereto;
provided, that with respect to an amendment affecting the rights of the New
Shareholders (including their Related Transferees), an instrument in writing
signed
-16-
<PAGE>
by two-thirds (2/3) or more in interest of the New Shareholders or their Related
Transferees shall be binding on all of the New Shareholders (including their
Related Transferees).
(b) Binding Effect. This Agreement shall be binding on and for the benefit
--------------
of the parties hereto and their respective heirs, personal and legal
representatives, successors, and assigns; provided, that no Shareholder shall be
entitled to assign or delegate any of his rights or obligations under this
Agreement without the prior written consent of the Corporation.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterpart copies, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(d) Entire Agreement. Any oral or written statements, understandings,
----------------
correspondence, or agreements previously made by any party with respect to the
subject matter of this Agreement are superseded by this Agreement, which alone
fully and completely expresses the parties' respective obligations. This
Agreement is entered into by each party after opportunity for investigation, and
each party represents that such party is not relying upon any statements,
understandings, correspondence, or agreements not embodied in this Agreement and
made by any other party or on any other party's behalf. Without limiting the
generality of the foregoing, the provisions of this Agreement specifically
supersede (i) the provisions of the Existing Stock Rights Agreement, and (ii)
the provisions of Sections 8, 10.1, 10.2, 10.4 and 10.6 of that certain Stock
Purchase Agreement dated September 27, 1989 (the "O'Leary Stock Purchase
Agreement") between the Corporation, McGurl, Loomis, and O'Leary (which
provisions were declared to be null and void and of no further force or effect
pursuant to the Existing Stock Rights Agreement). It is acknowledged that the
remaining provisions of the O'Leary Stock Purchase Agreement shall continue in
full force and effect (including, but not limited to, Section 10.3 thereof).
(e) Governing Law; Jurisdiction. This Agreement and all rights, remedies,
---------------------------
and obligations under this Agreement, including matters of construction,
validity, and performance, shall be governed exclusively by the laws of the
State of New Hampshire. This Agreement shall be enforceable in any state or
federal court of competent jurisdiction; provided, that each party specifically
consents to, and agrees that such party is subject to, the jurisdiction of the
state and federal courts of the State of New Hampshire with respect to any
actions for enforcement of or breach of this Agreement.
(f) Headings. The article, section, and subsection headings used in this
--------
Agreement are for convenience and reference only, and the words contained
therein
-17-
<PAGE>
shall not be held to explain, modify, amplify, or aid in the interpretation,
construction, or meaning of any of the provisions of this Agreement.
(g) Notices. Any demand, notice, or other communication required or
-------
permitted to be given by a party under this Agreement shall be in writing and,
with respect to each other party to whom the demand, notice, or other
communication is to be given, shall be given to such party either:
(i) by being hand-delivered to such party,
(ii) by being telecopied to such party's Telecopy Number (as defined
below), with a copy of the telecopy being mailed by first class mail,
postage prepaid, to such party's Address (as defined below), or
(iii) by being deposited in the mail (registered or certified) or
delivered to a private express company, postage or freight prepaid, return
receipt requested, addressed to such party at such party's Address.
As used in this Section, a party's "Address" shall mean the address of such
party set forth in this Agreement underneath such party's signature line, and a
party's a "Telecopy Number" shall mean the telephone number of such party set
forth in this Agreement underneath such party's signature line. Each party may
change such party's Address or Telecopy Number from time to time by giving the
other party or parties notice of the change in accordance with the provisions of
this Section.
(h) Severability. Each term, condition, and provision of this Agreement
------------
shall be valid and enforced to the fullest extent permitted by law. If there is
any conflict between any term, condition, or provision of this Agreement and any
statute, law, ordinance, order, rule, or regulation, the latter shall prevail;
provided, that any such conflicting term, condition, or provision shall be
curtailed and limited only to the extent necessary to bring it within the legal
requirements and the remainder of this Agreement shall not be affected thereby.
(i) Waiver. No waiver by any party of any breach or default by any other
------
party of any of such other party's obligations under this Agreement shall be
deemed to be a waiver of any other breach or default of the same or any other
nature. No failure by any party on any one or more occasions to exercise any
right or remedy provided in this Agreement shall preclude the exercise of such
right or remedy on any other occasion.
(j) Pronouns; Plurals. All pronouns and any variations thereof shall be
-----------------
deemed to include the masculine, feminine, neuter, singular, and plural thereof
as the context may require. In addition, all nouns shall be deemed to include
the singular and plural thereof as the context may require.
-18-
<PAGE>
9. Additional Parties. The parties hereto acknowledge that, effective as
------------------
of the Effective Date, the Corporation has issued certain warrants to third
parties and that, in the warrant purchase agreements for said warrants, the
Corporation and each such third party warrantholder have agreed that such third
party warrantholder will, without further action, become a party to this
Agreement as a New Shareholder upon exercise of the such warrant. Each of the
Shareholders hereby consents to such third party warrantholders so becoming a
New Shareholders for purposes of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement all as of
the date first above-written.
Corporation:
-----------
Bottomline Technologies, Inc.
/s/ By: /s/ James Loomis
- ------------------------ -------------------------------
Witness James Loomis, Vice President
Address: One Court Street
Exeter, New Hampshire 03833
Telecopy Number: 603-778-3975
Holder:
------
/s/ /s/ Dan McGurl
---------------------- ---------------------------------
Witness Signature
Name: Dan McGurl
---------------------------------
Address: 116 Pepperell Way
---------------------------------
York, ME 03909
---------------------------------
Telecopy Number: (603) 778-3975
---------------------------------
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<PAGE>
Holder:
------
/s/ /s/ James L. Loomis
- ---------------------- ---------------------------------
Witness Signature
Name: James L. Loomis
---------------------------------
Address: 10 Junkins Lane
---------------------------------
Amherst, NH 03031
---------------------------------
Telecopy Number: (603) 778-3975
---------------------------------
Holder:
------
/s/ Joseph L. Barry, Jr.
_______________________ ---------------------------------
Witness Signature
Name: Joseph L. Barry, Jr.
---------------------------------
Address: 307 Windy Row
---------------------------------
Peterborough, NH 03458
---------------------------------
Telecopy Number: (603) 924-7575
---------------------------------
Holder:
------
/s/ /s/ Dennis E. Barry, Sr.
- ----------------------- ---------------------------------
Witness Signature
Name: Dennis E. Barry, Sr.
---------------------------------
Address: 538 Bedford Street
---------------------------------
Lakeville, MA 02347
---------------------------------
Telecopy Number: (508) 947-5024
---------------------------------
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<PAGE>
Holder:
------
/s/ /s/
- ----------------------- ---------------------------------
Witness Signature
Name: Hambrect & Quist Venture
---------------------------------
Investors L.P.
---------------------------------
Address: One Bush Street
---------------------------------
San Francisco, CA 94104
---------------------------------
Telecopy Number: 415-576-3624
---------------------------------
Holder:
------
/s/
- ----------------------- _________________________________
Witness Signature
Name: Mr. Daniel H. Case III
---------------------------------
Address: Hambrecht & Quist
---------------------------------
One Bush Street
---------------------------------
San Francisco, CA 94104
---------------------------------
Telecopy Number: 415-576-3624
---------------------------------
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<PAGE>
Holder:
------
/s/ /s/ Daniel H. Case, Sr.
- ------------------------ ---------------------------------
Witness Daniel H. Case, Sr.
/s/ /s/ Carol H. Case
- ----------------------- ---------------------------------
Witness Carol H. Case
Name: Daniel H. Case, Sr. and
Carol H. Case, as JTWROS
Address: 737 Bishop Street, Suite 2600
Honolulu, HI 96813
Telecopy Number: (808) 523-1920
Number of Units:
Purchase Price:
Holder:
------
/s/ Lionel P. Boissiere,Jr.
_______________________ ---------------------------------
Witness Signature
Name: Case Children's 1991 Irrevocable
---------------------------------
Trust, Lionel P. Boissiere, Jr.,
---------------------------------
Trustee
---------------------------------
Address: Hambrecht & Quist
---------------------------------
One Bush Street
---------------------------------
San Francisco, CA 94104
---------------------------------
Telecopy Number: 415-576-3624
---------------------------------
-22-
<PAGE>
Holder:
------
/s/ /s/ Lionel P. Boissiere, Jr.
---------------------- ---------------------------------
Witness Signature
Name: Lionl P. Boissiere, Jr.
---------------------------------
Address: Hambrecht & Quist
---------------------------------
One Bush Street
---------------------------------
San Francisco, CA 94104
---------------------------------
Telecopy Number: 415-576-3624
---------------------------------
Holder:
------
/s/ /s/ William R. Timken
- ----------------------- ---------------------------------
Witness Signature
Name: William R. Timken
---------------------------------
Address: One Bush Street
---------------------------------
San Francisco, CA 94104
---------------------------------
Telecopy Number: 415-576-3370
---------------------------------
Holder:
------
/s/ /s/ Robert or Martha Cohn
- ----------------------- ---------------------------------
Witness Signature
Name: Robert or Martha Cohn Trustees
---------------------------------
Address: 20292 Calle Montalro
---------------------------------
Saratoga, CA 95070
---------------------------------
Telecopy Number: _________________________________
-23-
<PAGE>
Holder:
------
/s/ Patricia Thompson /s/ Alan Kessman
- ----------------------- ---------------------------------
Witness Signature
Name: Alan Kessman
---------------------------------
Address: 6 Thorndal Circle
---------------------------------
Darien, CT 06820
---------------------------------
Telecopy Number: _________________________________
Holder:
------
/s/ /s/ Vinod Gupta
- ----------------------- ---------------------------------
Witness Signature
Name: Mr. Vinod Gupta
---------------------------------
Address: 5711 South 86h Circle
---------------------------------
Omaha, NE 68127
---------------------------------
Telecopy Number: 402-339-0265
---------------------------------
Holder:
------
/s/ /s/ John Hoffmaster
- ----------------------- ---------------------------------
Witness Signature
Name: John Hoffmaster
---------------------------------
Address: 5711 South 86h Circle
---------------------------------
Omaha, NE 68127
---------------------------------
Telecopy Number: _________________________________
-24-
<PAGE>
Holder:
------
/s/ /s/ Howard B. Hillman,
- ----------------------- ---------------------------------
Witness Signature
Name: Venhill Limited Partnership
---------------------------------
Address: 158 Main Street
---------------------------------
New Canaan, CT 06840
---------------------------------
Telecopy Number: 203-972-0673
---------------------------------
Holder:
------
/s/ /s/ Donald Dixon
- ---------------------- ---------------------------------
Witness Signature
Name: Mr. Donald R. Dixon
---------------------------------
Address: 101 California Street, Suite 3150
---------------------------------
San Francisco, CA 94111
---------------------------------
Telecopy Number: _________________________________
Holder:
------
/s/ /s/ Stanley S. Shuman
- ----------------------- ---------------------------------
Witness Signature
Name: Stanley S. Shuman
---------------------------------
Address: 7 Fifth Avenue
---------------------------------
New York, NY 10002
---------------------------------
Telecopy Number: 202-830-8023
---------------------------------
-25-
<PAGE>
Holder:
------
/s/ /s/ Nathanael B. Greene, Jr.
- ----------------------- ---------------------------------
Witness Signature
Name: Mr. Nathanael B. Greene, Jr.
---------------------------------
Address: 494 Windy Row
---------------------------------
Peterborough, NH 03485
---------------------------------
Telecopy Number: _________________________________
Holder:
------
/s/ /s/ William E. Mayer
- ----------------------- ---------------------------------
Witness Signature
Name: Mr. William E. Mayer
---------------------------------
Address: University of Rochester
---------------------------------
Rochester, NY 14627
---------------------------------
Telecopy Number: _________________________________
-26-
<PAGE>
EXHIBIT A
TO
FIRST AMENDMENT AND RESTATEMENT
OF
BOTTOMLINE TECHNOLOGIES, INC.
STOCK RIGHTS AND VOTING AGREEMENT
Shareholders
------------
Existing Shareholders:
- ---------------------
Daniel McGurl
James Loomis
Charles P. O'Leary
Joseph Leo Barry, Jr.
Dennis E. Barry
New Shareholders:
- ----------------
Hambrecht & Quist Venture Investors, L.P.
Daniel H. Case III
Daniel H. Case and Carol H. Case, as JTWROS
Case Children's 1991 Irrevocable Trust,
Lionel P. Boissiere, Jr., Trustee
Lionel P. Boissiere, Jr.
William R. Timken
The Wellington Trust under trust
agreement dated 1/30/86, Robert
or Martha Cohn, Trustees
Alan Kessman
Vinod Gupta
Jon Hoffmaster
Venhill Limited Partnership
Donald R. Dixon
Stanley S. Shuman
Nathanael B. Greene, Jr.
William E. Mayer
-27-
<PAGE>
AMENDMENT TO
THE FIRST AMENDMENT AND RESTATEMENT
OF BOTTOMLINE TECHNOLOGIES, INC.
STOCK RIGHTS AND VOTING AGREEMENT
WHEREAS, the undersigned is a Shareholder, as defined in the First
Amendment and Restatement of Bottomline Technologies, Inc. Stock Rights and
Voting Agreement, dated as of March 31, 1992 (the "Stock Rights and Voting
Agreement"); and
WHEREAS, Charles P. O'Leary ("O'Leary"), also a Shareholder as
defined in the stock Rights and Voting Agreement, desires to sell up to 25,000
shares of Common Stock (the "Stock") of Bottomline Technologies, Inc. (the
"Company") to John H. Harland Company ("Harland"); and
WHEREAS, such sale by O'Leary to Harland would result in O'Leary owning
less than 200,000 shares of Stock;
NOW THEREFORE, the undersigned Shareholder hereby agrees to amend Section
6(b) of the Stock Rights and Voting Agreement to delete the following:
"(i) in the case of either McGurl, Loomis, or O'Leary, he and his
respective Related Transferees, do not own in the aggregate two
hundred thousand (200,000) shares of the Stock (subject to adjustment
in the event of any stock dividend, subdivision, or combination
affecting all of the outstanding Stock of the Corporation); or"
and to replace such subsection (i) of Section 6(b) with the following:
"(i) in the case of: (A) either McGurl or Loomis, he and his
respective Related Transferees, do not own in the aggregate two
hundred thousand (200,000) shares of the Stock (B) O'Leary, he and his
respective Related Transferees do not own in the aggregate one hundred
eighty five thousand (185,000) shares of the Stock (subject to
adjustment in the event of any stock dividend, subdivision, or
combination affecting all of the outstanding Stock of the
Corporation); or"
-1-
<PAGE>
WAIVER AND AMENDMENT
WHEREAS, Mr. Charles P. O'Leary ("O'Leary") has proposed to transfer 10,000
shares of common stock, $.001 par value per share (the "Transfer Shares") of
Bottomline Technologies, Inc. ("Bottomline") at a per share purchase price of
$14.75 (the "Sale") to Mr. Bruce E. Elmblad ("Elmblad"); and
WHEREAS, Bottomline and the undersigned Shareholder, as defined in the
First Amendment and Restatement of Bottomline Technologies, Inc. Stock Rights
and Voting Agreement, dated as of March 31, 1992, as amended, (the "Agreement")
believe it is in the best interest of Bottomline and the Shareholder to allow
O'Leary to sell the Transfer Shares to Elmblad and to amend the Agreement;
NOW THEREFORE:
1. The undersigned Shareholder hereby waives any and all Take-Along-
Rights which the undersigned may have with respect to the Transfer Shares
pursuant to Section 3 of the Agreement, provided such shares are sold only to
Elmblad or his assigns and such sale is effected on or prior to October 1, 1996,
and the undersigned hereby waives any rights to notice with respect to such
transfer by O'Leary.
2. Bottomline and the undersigned Shareholder hereby agree to amend
Section 3 of the Agreement to add the following as Subsection 3(g):
"(g) Notwithstanding any provision to the contrary, this Section 3 shall
not apply to the sale by O'Leary of up to 10,000 shares of Common Stock of the
Corporation to Mr. Bruce Elmblad or his assigns; provided such sale shall take
place on or prior to October 1, 1996."
3. Bottomline and the undersigned Shareholder hereby agree to amend
Section 3(a)(i)(C) of the Agreement, effective upon consummation of the Sale, to
change the percentage listed therein next to O'Leary's name from 25.9537% to
22.7095%.
4. Bottomline and the undersigned Shareholder hereby agree to amend and
restate Section 6 of the Agreement in its entirety, effective upon consummation
of the Sale, such that it shall read in its entirety as follows:
"6. Voting Agreement.
----------------
(a) Each of the Shareholders hereby agrees and consents for himself and
his Related Transferees to vote all shares of the voting Stock of the
Corporation as may be from time to time owned by him or his Related Transferees
for the election and re-
-1-
<PAGE>
election of the following individuals as members of the Board of Directors of
the Corporation (the "Board"):
(i) McGurl;
(ii) Loomis; and
(iii) one of either Leo Barry or Dennis Barry.
The foregoing voting agreement shall pertain to all shares of Stock of each of
the Shareholders, whether held in the name of such Shareholder or held in the
name or for the benefit of any Related Transferee of such Shareholder.
(b) Each of the Existing Shareholders agrees that his right to be elected
to the Board pursuant to the voting agreement in subsection (a) above will
terminate as to such Shareholder and that he will be deemed to have resigned and
will cease to be a member of the Board in the event that:
(i) in the case of either McGurl or Loomis, he and his respective
Related Transferees, do not own in the aggregate two hundred thousand
(200,000) shares of the Stock (subject to adjustment in the event of any
stock dividend, subdivision, or combination affecting all of the
outstanding Stock of the Corporation); or
(ii) in the case of Leo Barry and Dennis Barry, they and their Related
Transferees, do not own in the aggregate one hundred thousand (100,000)
shares of the Stock (subject to adjustment in the event of any stock
dividend, subdivision, or combination affecting all of the outstanding
Stock of the Corporation).
(c) The provisions of this Section 5 shall in no manner be deemed to limit
the right of the Shareholders of the Corporation to increase the number of
members of the Board at any time hereafter. Notwithstanding any increase of the
number of members of the Board at any time during which Leo and Dennis Barry
have the right to be elected as members of the Board of Directors pursuant to
subsections (a) and (b) above, the Shareholders agree that no increase in the
salary or compensation of either McGurl and/or Loomis, nor any capital
expenditure by the Corporation in excess of Twenty-five Thousand Dollars
($25,000), may be authorized by the Board without the affirmative vote of one of
either:
(i) Leo or Dennis Barry (whoever is then serving on the Corporation's
Board of Directors); or
-2-
<PAGE>
(ii) a representative appointed by the New Shareholders, who, until
changed by the New Shareholders with notice to the Corporation, shall be
Hambrecht & Quist Venture Investors, L.P."
Capitalized terms not otherwise defined herein have the respective meaning
ascribed to them in the Agreement.
This Waiver and Amendment may be signed in one or more counterparts.
IN WITNESS WHEREOF, this Waiver and Amendment has been executed by
Bottomline and the undersigned Shareholder on or before August 10, 1996 with the
intent that it become effective, except as otherwise provided herein, as of and
on August 10, 1996.
-3-
<PAGE>
AMENDMENT NO.2
WHEREAS, Bottomline Technologies, Inc. a New Hampshire corporation (Bottom
line NH), and the undersigned are named parties to the First Amendment and
Restatement of Bottom line Technologies, Inc. Stock Rights and Voting Agreement,
dated as of March 31, 1992, as amended (the "Agreement"); and
WHEREAS, Bottom line NH was merged with and into Bottomline Technologies
(de), Inc., a Delaware corporation ("Bottomline DE"), on August 25, 1997 (the
"Merger"); and
WHEREAS, as a result of the Merger, Bottomline DE is a successor party to
the Agreement; and
WHEREAS, Charles P. O'Leary is proposing to sell 5,000 shares of common
stock, $.001 par value per share, of Bottomline DE to Mr. Robert A. Eberle at a
per share purchase price of $24.00 (the "Sale"); and
WHEREAS, the parties to Agreement believe that it is in the best interest
of the parties thereto to make certain amendments to the Agreement;
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the undersigned hereby agree to amend the
Agreement, in accordance with the provisions of Section 8(a) thereof, as set
forth below:
1. Commencing after the date of the Merger, all references to the
"Corporation" shall mean Bottom line DE.
2. Section 1(f)(1) is amended to read in its entirety as follows:
"(i) any Proposed Issuance of stock options under (A) the Stock Option
Plan or (B) any other stock option plan which is adopted at any time
after the Effective Date by the Board of Directors of the Corporation;
3. Section 3 is amended to add the following as Subsection 3(h):
"(h) Notwithstanding any provision to the contrary, this Section 3
shall not apply to the sale by O'Leary of up to 5,000 shares of Common
Stock of the Corporation to Mr. Robert A. Eberle or his assigns;"
-1-
<PAGE>
4. To amend clauses (A) through (F) of Section 3(a)(i) of the Agreement,
effective upon consummation of the Sale as set forth below:
"(A) for McGurl, 27.3183%
(B) for Loomis, 27.3183%
(C) for O'Leary, 22.0606%
(D) for Leo Barry, 6.9493%
(E) for Dennis Barry, 6.9493%
(F) for each New Shareholder, .0563% for each Unit
(as defined in the Stock Purchase Agreement) purchased pursuant to
the Stock Purchase Agreement; or"
-2-
<PAGE>
AMENDMENT NO. 3 TO THE FIRST AMENDMENT
AND RESTATEMENT OF BOTTOMLINE TECHNOLOGIES, INC.
STOCK RIGHTS AND VOTING AGREEMENT
AMENDMENT No. 3, dated as of the 12th day of October, 1998, to the First
Amendment and Restatement of Bottomline Technologies, Inc. Stock Rights and
Voting Agreement dated as of March 31, 1992 (the "Stock Rights Agreement") by
and between Bottomline Technologies (de), Inc., a Delaware corporation (formerly
Bottomline Technologies, Inc. (the "Company")) and the shareholders of the
Company listed on Exhibit A attached thereto (collectively, the "Holders").
---------
WHEREAS, the Company and the Holders are parties to the Stock Rights
Agreement;
WHEREAS, the Company and the Holders desire to amend the Stock Rights
Agreement so that the rights set forth in Section 1 of the Stock Rights
Agreement relating to "preemptive rights" shall not apply to the sale by the
Company of shares of common stock, $.001 par value per share ("Common Stock"),
to Arthur Andersen LLP;
WHEREAS, the Company and the Holders desire to amend the Stock Rights
Agreement so that the provisions set forth in Section 3 of the Stock Rights
Agreement relating to certain "take-along" rights shall not apply to a sale or
transfer of certain securities of the Company from Hambrecht & Quist Liquidating
Trust to Hambrecht & Quist California;
WHEREAS, the Holders, owning at least two-thirds (2/3) of the interests in
the Company held by all New Shareholders (as defined in the Stock Rights
Agreement) and each of the other parties to the Stock Rights Agreement, have
executed this Amendment No. 3.
NOW THEREFORE, the parties hereto, in consideration of the premises and the
agreements herein contained and intending to be legally bound hereby, agree as
follows:
1. Section 1 of the Stock Rights Agreement is hereby amended by adding the
following paragraph 1(i) to Section 1, which shall read as follows:
"(i) The rights set forth in this Section 1 shall not apply to the sale by
the Company occurring on or prior to November 30, 1998 of up to
35,715 shares of Stock to Arthur Andersen LLP at a sale price of at
least $28.00 per share."
-1-
<PAGE>
2. Section 3 of the Stock Rights Agreement is hereby amended by adding the
following paragraph 3(g) to Section 3, which shall read as follows:
"(g) The rights set forth in this Section 3 shall not apply to a transfer
of 9,081 shares of Stock, a Warrant for 7,000 shares of Stock and the
Stock issuable upon exercise thereof and a Warrant for 9,625 shares
of Stock and the Stock issuable upon exercise thereof from Hambrecht
& Quist Liquidating Trust to Hambrecht & Quist California."
3. Except as modified hereby, the Stock Rights Agreement shall continue in
full force and effect.
4. This Amendment No. 3 may be signed in counterparts, each of which taken
together shall constitute one agreement.
5. All capitalized terms used in this Amendment No. 3 shall have the meaning
assigned to them in the Stock Rights Agreement.
-2-
<PAGE>
AMENDMENT NO. 4
TO
FIRST AMENDMENT AND RESTATEMENT OF
STOCK RIGHTS AND VOTING AGREEMENT
WHEREAS, Bottomline Technologies (de), Inc. and certain other persons are
parties to certain First Amendment and Restatement of Stock Rights and Voting
Agreement, dated as of March 31, 1992, as amended (the "Agreement"); and
WHEREAS, this amendment to the Agreement has been approved in accordance with
the provisions of Section 8(a) of the Agreement;
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Agreement is hereby amended:
1. To add a new Section 10, as set forth below:
"Termination of Agreement. This Agreement shall terminate, except with
------------------------
respect to Sections 2 and 5, upon the closing of the Corporation's initial
public offering of Stock pursuant to an effective registration statement under
the Securities Act, resulting in at least $10,000,000 of gross proceeds to the
Corporation."
2. To add a new Section 2(a)(iv), as set froth below:
"(iv) notwithstanding any other provision of the Section2, the rights of
the Shareholders to include shares of stock in the Registration for the
Corporation's initial underwritten public offering at Stock shall be deemed to
be satisfied if the Corporation offers each Shareholder the right to include in
such Registration the same percentage of their then current holdings of shares
of Stock; and further any Stockholder who has not irrevocably agreed to include
shares of Stock in such Registration or has not executed, completed and
delivered all other documents required by the Corporation and/or the
underwriters in order to include shares of Stock in such Registration or has
executed, completed and delivered all other documents required by the
Corporation and/or the underwriters in order to include shares of Stock in such
Registration within 5 days of having been sent or given written notice by the
Corporation of the price or range of prices at which shares of Stock will be
offered pursuant to such Registration, shall be deemed to have waived any right
to include shares of Stock in such Registration."
3. To delete the word "and" at the end of Section 2(a)(ii).
4. To change the punctuation at the end of Section 2(a)(iii) from a
period to a semicolon and to add the word "and" after the newly
inserted semicolon.
<PAGE>
Exhibit 10.6
SECOND STOCK RIGHTS AGREEMENT OF
BOTTOMLINE TECHNOLOGIES, INC.
THIS SECOND STOCK RIGHTS AGREEMENT OF BOTTOMLINE TECHNOLOGIES, INC. (this
"Agreement") made as of March 4, 1994 (the "Effective Date"), by and between
BOTTOMLINE TECHNOLOGIES, INC., a New Hampshire corporation (the "Corporation"),
the shareholders of the Corporation listed on Exhibit A attached hereto (the
"Existing Shareholders") and John H. Harland Company ("Harland"). Harland and
the Existing Shareholders are collectively referred to as the "Shareholders" or
"Holders".
Recitals:
--------
The Corporation and certain shareholders, including James L. Loomis
("Loomis"), Daniel M. McGurl ("McGurl") and Charles P. O'Leary ("O'Leary")
(Loomis, McGurl and O'Leary are hereinafter collectively referred to as the
"Principal Shareholders"), entered into the First Amendment and Restatement of
Bottomline Technologies, Inc. Stock Rights and Voting Agreement dated as of
March 31, 1992 (the "First Stock Rights and Voting Agreement") which superceded
and replaced that certain Stock Rights and Voting Agreement dated June 29, 1990.
This Agreement shall operate independently of, and shall not affect the parties
to, the First Stock Rights and Voting Agreement with respect to any rights or
obligations any such party may have or be bound by under such agreement. The
Existing Shareholders and Harland are parties to a certain Stock Purchase
Agreement of even date (the "Stock Purchase Agreement"), pursuant to which
Harland has agreed to purchase common stock, $0.001 par value per share, of the
Corporation (the "Common Stock"). Of the Common Stock purchased from the
Existing Shareholders, an aggregate of 175,000 shares were purchased from the
Principal Shareholders (the "Principal Shares"). The purpose of this Agreement
is to provide Harland and the Principal Shareholders (collectively the
"Rightsholders") with certain stock rights, all as more particularly set forth
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and representations set forth in this Agreement, the parties hereby
agree as follows:
1. Preemptive Rights.
-----------------
(a) Subject to the exclusions set forth in subsection (f) below, if the
Corporation proposes to issue (a "Proposed Issuance") any unissued or treasury
shares of Common Stock or any bonds, certificates of indebtedness, debentures,
warrants, options, or other securities, rights, or obligations convertible into
any shares of Common Stock or carrying any right to subscribe to or acquire any
shares of
1
<PAGE>
Common Stock, then the Corporation shall give Harland a written notice (the
"Notice") describing the Proposed Issuance (including the identification of the
securities to be issued, the price payable for such securities, and any other
terms and conditions applicable to the Proposed Issuance).
(b) Harland shall have the right (the "Preemptive Right") to subscribe to
or acquire all or a portion of Harland's respective Proportionate Share (as
defined below) of the Proposed Issuance. Harland shall be entitled to exercise
its Preemptive Right in the manner set forth in the Notice and on terms and
conditions that are no less favorable than the terms and conditions established
by the Corporation to govern the Proposed Issuance.
(c) If Harland fails to exercise its Preemptive Right within thirty (30)
days following receipt of the Notice, then Harland's Preemptive Right shall be
deemed to have been waived with respect to the Proposed Issuance, and, for a
period of ninety (90) days thereafter, the Corporation shall be entitled to
effect the Proposed Issuance, in whole or in part, free and clear of Harland's
Preemptive Right, at the price specified in the Notice and upon other terms and
conditions no more favorable to the acquiror(s) of the Proposed Issuance than
the terms and conditions specified in the Notice.
(d) Harland may waive its Preemptive Right with respect to any Proposed
Issuance by a writing filed with the Board of Directors or the Secretary of the
Corporation.
(e) For purposes of this Section, Harland's "Proportionate Share" shall
mean, as of the date on which a Notice is given, a fraction:
(i) the numerator of which is equal to the number of shares of Common
Stock owned by Harland as of the Effective Date, including all shares of
Common Stock being purchased as of the Effective Date by Harland pursuant
to the Stock Purchase Agreement; and
(ii) the denominator of which is equal to the sum of such number of
shares of Common Stock as are outstanding as of the Effective Date plus
such number of shares of Common Stock as are subject to then-outstanding
(on the date of Notice) stock options which have been granted under the
Corporation's 1989 Stock Option Plan (the "Stock Option Plan").
Notwithstanding the above, if the outstanding shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or if Harland shall transfer any Common Stock (other
than to a Related Transferee, as defined in subsection (g) below, then the
numbers set
2
<PAGE>
forth in subsection (i), and, in the case of a subdivision, combination, or
stock dividend, in subsection (ii) above shall be proportionately increased or
decreased (as the case may be).
(f) Notwithstanding the foregoing provisions of this Section, Harland's
Preemptive Rights shall not apply to:
(i) any Proposed Issuance of stock options under the Stock Option
Plan, as amended, (or of any shares of Common Stock pursuant to the
exercise of any such stock option) to an employee of the Corporation
(excluding McGurl and Loomis and their respective Affiliates as defined in
subsection (g) below); provided, that any Proposed Issuance to McGurl or to
Loomis, or to the respective Affiliates of either of them, shall be subject
to Harland's Preemptive Rights;
(ii) any stock dividend or subdivision of shares of Stock, provided
that the securities issued pursuant to such stock dividend or subdivision
are limited to additional shares of Common Stock;
(iii) any securities issued solely in consideration for the
acquisition (whether by merger of otherwise) by the Corporation or any of
its subsidiaries of all or substantially all of the stock or assets of any
other entity;
(iv) any securities issued pursuant to an underwritten public
offering; or
(v) any Common Stock issued pursuant to warrants held by those
persons defined in the First Stock Rights and Voting Agreement or any of
the Affiliate Purchasers or their Related Transferees.
(g) As used in this Agreement:
(i) an "Affiliate" shall mean a third party which either (A) is
owned by the Corporation or is under common control with the Corporation,
(B) is owned by Harland or is under common control with Harland, (C) is a
trust or other entity in which McGurl or Loomis has a beneficial interest,
or (D) is (or is owned or controlled by) a person who is the spouse, child,
or parent of McGurl or Loomis; and
(ii) a "Related Transferee" of a Shareholder shall mean a parent,
spouse, or child of such Shareholder, or a trust for the exclusive benefit
of such Shareholder and/or the parents, spouse, children or Affiliate of
such Shareholder, to whom shares of Common Stock owned by such Shareholder
have been transferred.
3
<PAGE>
(h) The provisions of this Section 1 are personal to Harland and may only
be exercised by Harland while Harland, or a Related Transferee of Harland (such
Related Transferee being deemed to be Harland for purposes of this Section 1),
owns Common Stock of the Corporation which was purchased pursuant to the Stock
Purchase Agreement.
2. Piggyback Rights.
----------------
(a) If the Corporation proposes to register for its own account, under the
Securities Act of 1933, as amended, (the "Securities Act") any shares of Stock
for sale for cash or other consideration to the public (other than a
registration relating solely to either a transaction under Rule 145 of the
Securities and Exchange Commission or an employee benefit plan) (a
"Registration"), the Corporation shall notify Harland in writing and shall
afford Harland the opportunity to include in the Registration all or any portion
of the shares of Common Stock owned by Harland; provided, that the inclusion of
such shares of Common Stock in the Registration shall be subject to:
(i) the rights of the Shareholders, as defined in the First Stock
Rights and Voting Agreement, other than certain rights., as described
herein, of the Principal Shareholders;
(ii) compliance with the terms and conditions of any underwriting
agreement covering the Registration;
(iii) if and to the extent that the managing underwriter determines
that marketing factors require a limitation of the number of shares of
Common Stock to be underwritten, then, with respect to the total number of
shares of Common Stock of shareholders so determined as being available for
inclusion in the Registration, Harland (subject to clause (a)(i) of this
Section 2 and the provisions of subsection (g) below governing Related
Transferees) shall be entitled to include Harland's Inclusion Amount (as
defined in subsection (h) below) in the Registration by shareholders.
(iv) prohibition from inclusion if, in the judgment of the managing
underwriter, such prohibition is required.
(b) In connection with the inclusion of any shares of Common Stock of
Harland in a Registration, the Corporation will use its best efforts to register
or qualify the shares of Common Stock covered by such registration statement
under the securities or "blue sky" laws of such jurisdictions as Harland or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request; provided, however, that the Corporation shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such
4
<PAGE>
jurisdiction.
(c) The Corporation and not Harland, shall be responsible for the payment
of all fees and expenses (including, without limitation, registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Corporation, fees and expenses (including counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, and costs of insurance) incurred
by the Corporation in connection with the Registration and the inclusion of any
shares of Common Stock by Harland therein; provided, that Harland, and not the
Corporation, shall be responsible for all underwriting discounts and selling
commissions applicable to the sale of any of Harland's shares of Common Stock.
(d) In connection with any Registration where shares of Common Stock of
Harland are registered pursuant to the provisions of this Section:
(i) the Corporation will indemnify and hold harmless Harland
against any losses, claims, damages, or liabilities, joint or several,
to which Harland may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof):
(A) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact relating to the
Corporation and contained in (1) the registration statement under
which such shares were registered under the Securities Act, (2)
the final prospectus therefor, or (3) any amendment or supplement
thereof, or
(B) arise out of or are based upon the omission or alleged
omission to state therein a material fact relating to the
Corporation that is (1) required to be stated therein, or (2)
necessary to make the statements therein not misleading;
(ii) the Corporation will reimburse Harland for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
such loss, claim, damage, liability, or action covered by the provisions of
subparagraph (i) above; provided, however, that the Corporation will not be
liable in any such case if and to the extent that any such loss, claim,
damage, or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Harland in writing specifically
for use in such registration statement, prospectus, or amendment thereof;
5
<PAGE>
(iii) Harland will indemnify and hold harmless the Corporation, each
other shareholder participating in the Registration, each officer of
the Corporation who signs the registration statement, and each
director of the Corporation against all losses, claims, damages, or
liabilities, joint or several, to which the Corporation or such other
shareholder, officer, or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof):
(A) arise our of or are based upon any untrue statement or
alleged untrue statement of any material fact relating to
Harland and contained in (1) the registration statement under
which such Common Stock was registered under the Securities
Act, (2) the final prospectus therefor, or (3) any amendment or
supplement thereof, or
(B) arise out of or are based upon the omission or alleged
omission to state therein a material fact relating to Harland
that is (1) required to be stated therein, or (2) necessary to
make the statements therein not misleading; and
(iv) Harland will reimburse the Corporation and each other shareholder,
officer, and director for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that Harland will not be
liable in any such case if and to the extent that any such loss, claim,
damage, or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made
notwithstanding the Corporation's prior receipt of a written notice from
Harland of the error in the statement or of the omission.
(e) In connection with any Registration where shares of Common Stock of
Harland are registered pursuant to the provisions of this Section, Harland will
cooperate with the Corporation and each underwriter (if the method of
disposition shall be an underwritten public offering) and will take all such
actions and execute and deliver all such instruments, agreements, and documents
as the Corporation or any such underwriter reasonably may request, including,
but not limited to:
(i) furnishing to the Corporation in writing such information with
respect to Harland and the proposed distribution by it as reasonably
shall be necessary in order to assure compliance with federal and
applicable state securities laws, and
(ii) immediately notifying the Corporation, each other shareholder
6
<PAGE>
participating in the Registration, and the managing underwriter (if
the method of disposition shall be an underwritten public offering),
at any time when a prospectus relating to such Registration is
required to be delivered under the Securities Act, of the happening of
any event of which Harland has knowledge as a result of which the
prospectus contained 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 light of the
circumstances then existing.
(f) The rights set forth in this Section 2 are personal to Harland and may
be exercised by Harland only while Harland or an affiliate of Harland owns
Common Stock.
(g) For purposes of effecting the rights granted to Harland pursuant to
this Section 2, a Related Transferee of Harland shall, to the extent of the
shares of Common Stock transferred by Harland to such Related Transferee (the
"Previously Transferred Shares"), be deemed to be Harland. In particular, with
respect to the limitation on the number of shares of Common Stock which Harland
and such Related Transferee may include in the Registration under this Section
2, the Previously Transferred Shares shall be considered to be owned by Harland.
Unless otherwise agreed between Harland and such Related Transferee, any
permitted inclusion in the Registration of some, but not all, of the shares of
Common Stock owned by Harland and of the Previously Transferred Shares shall be
allocated between Harland and such Related Transferee pro rata based on the
respective number of such shares of Common Stock owned by Harland and of such
Previously Transferred Shares.
(h) To the extent that Harland's rights are limited pursuant to clause
(a)(i) of this Section 2, each of the Principal Shareholders agree to allocate
to Harland for inclusion in the Registration the right to include in such
Registration that number of shares, out of the allotment of shares which the
Principal Shareholders would be entitled to include in the Registration pursuant
to Section 2(a)(ii) of the First Stock Rights and Voting Agreement, which
Harland would be entitled to include in such Registration if Harland were a
Shareholder under the First Stock Rights and Voting Agreement and its
Percentage, as defined therein, was equal to 10.368193% ("Harland's Inclusion
Amount"). The percentage of Harland's Inclusion Amount to be allocated by each
of the Principal Shareholders shall be as follows:
(A) Loomis, 42.857143%
(B) McGurl, 42.857143%
(C) O'Leary 14.285714%
3. Take-Along Rights. The rights set forth in this Section 3 are given
-----------------
to
7
<PAGE>
each of the Rightsholders:
(a) If any Rightsholder (the "Selling Shareholder") shall propose to
transfer (a "Proposed Transfer") to any person (the "Proposed Transferee"),
other than (1) another Rightsholder, (2) with respect to a Proposed Transfer by
any of the Principal Shareholders, a Shareholder, as defined in the First Stock
Rights and Voting Agreement, (3) a Related Transferee, or (4) the Corporation,
any shares of Common Stock (the "Transfer Shares"), then Harland, with respect
to Proposed Transfers by each of the Principal Shareholders and each of the
Principal Shareholders with respect to Proposed Transfers by Harland of any of
the Principal Shares (subject to the provisions of subsection (f) below
governing Related Transferees) shall have:
(i) the right to transfer, in place of certain of the Transfer
Shares, such number of such shares of Common Stock as is equal to the
following percentage ("Percentage") of the number of Transfer Shares:
(A) for McGurl, 38.759690%,
(B) for Loomis, 38.759690%,
(C) for O'Leary, 11.627907%, and
(D) for Harland, 10.852713%,
(ii) if the Proposed Transferee is unwilling to purchase shares of any
eligible Rightsholder(s) as part of the Proposed Transfer, then the
right to have the Selling Shareholder purchase, out of the proceeds of
the sale of the Transfer Shares to the Proposed Transferee, such
number of such eligible Rightsholder(s)' shares of Common Stock as is
equal to his Percentage of the number of Transfer Shares;
all upon and subject to the additional terms and conditions set forth in this
Section. Transfers of shares of Common Stock between Rightsholders shall not be
subject to the provisions of this Section.
(b) In the event of a Proposed Transfer, the Selling Shareholder shall
give written notice (the "Transfer Notice") to (A) in the case of a Proposed
Transfer by Harland, each of the Principal Shareholders, (B) in the case of a
Proposed Transfer by a Principal Shareholder, Harland of the Proposed Transfer,
including the number of shares of Common Stock proposed to be transferred, the
price and general terms and conditions governing the Proposed Transfer, and the
identity of the Proposed Transferee.
(c) Upon receipt of the Transfer Notice, each eligible Rightsholder shall
be
8
<PAGE>
entitled to exercise his rights under subsection (a) above by giving the Selling
Shareholder written notice (the "Participation Notice") thereof within thirty
(30) days following his receipt of the Transfer Notice. If no such Participation
Notice is given by such eligible Rightsholder(s), then his rights under
subsection (a) above shall automatically terminate with respect to the Proposed
Transfer.
(d) In the event that any eligible Rightsholder exercises his rights under
subsection (a) above, then any transfer of shares of Common Stock by such
remaining Rightsholder(s) shall be subject to the same terms and conditions that
govern the Selling Shareholder under the Proposed Transfer.
(e) The rights of any Rightsholder under' this Section may be waived as to
any Proposed Transfer by delivery of a writing to that effect to the Corporation
and the Selling Shareholder.
(f) For purposes of effecting the rights granted to the Rightsholders
pursuant to this Section 3, a shareholder who is a Related Transferee of a
Rightsholder shall, to the extent of the shares of Common Stock transferred by a
Rightsholder to such Related Transferee (the "Previously Transferred Shares"),
be deemed to be-the Rightsholder. In particular, with respect to the limitation
on the number of shares of Common Stock which the Rightsholder and such Related
Transferee may include in the Proposed Transfer under this Section 3, the
Previously Transferred Shares shall be considered to be owned by the
Rightsholder. Unless otherwise agreed between the Rightsholder and such Related
Transferee, any permitted inclusion in the Proposed Transfer of some, but not
all, of the shares of Common Stock owned by the Rightsholder and of the
Previously Transferred Shares shall be allocated between the Rightsholder and
such Related Transferee pro rata based on the respective number of such shares
of Common Stock owned by the Rightsholder and of such Previously Transferred
Shares.
4. Demand Registration Rights.
--------------------------
4.1 Definitions. As used in this Section, the following terms shall have
-----------
the following meanings:
(a) "Registrable Securities" shall mean Registrable Securities as defined
in Section 5 of the First Stock Rights and Voting Agreement and shares of Common
Stock owned by Harland.
(b) "Registration Expenses" shall mean all expenses incurred by the
Corporation in registering any Registrable Securities under applicable federal
and state securities laws in accordance with the provisions of this Section 4
(including all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Corporation,
fees and expenses (including
9
<PAGE>
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, and costs of insurance),
but excluding any Selling Expenses.
(c) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to any sale of Registrable Securities.
(d) "Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
(e) "Securities Act" shall mean the United States Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder.
4.2. Request for Registration.
------------------------
(a) At any time after six (6) months following any registration statement
covering a public offering of securities of the Corporation under the Securities
Act, Harland may request the Corporation to register under the Securities Act (a
"Demand Registration") all of the shares of Common Stock held by it (or such
lesser portion of such shares of Common Stock as Harland may request to register
if the reasonably anticipated aggregate price to the public of such public
offering would be at least Two Million Dollars ($2,000,000.00)).
(b) The request described in subsection (a) above shall be set forth in a
written notice (the "Demand Registration Notice") given by Harland to the
Corporation. The Demand Registration Notice shall specify the number of shares
of Common Stock requested to be registered (the "Requested Shares") and the
manner in which the Requested Shares are to be sold.
(c) Following its receipt of any Demand Registration Notice, the
Corporation shall immediately notify (the "Participation Notice") other holders
of Registrable Securities that the Corporation has received the Demand
Registration Notice, and a copy of the Demand Registration Notice shall be
included with the Participation Notice. Each other holder shall be entitled to
include in the Demand Registration, for sale in accordance with the method of
disposition specified in the Demand Registration Notice, all or any lesser
portion of the shares of Registrable Securities of such holder by giving the
Corporation, within fifteen (15) days following the giving of the Participation
Notice, written notice of such holder's election to participate in the Demand
Registration (including a statement of the number of Registrable Securities of
such holder which should be included in the Demand Registration).
(d) The Corporation shall use its best efforts to register under the
Securities
10
<PAGE>
Act, and to qualify under such state securities laws as Harland may
reasonably request, for public sale in accordance with the method of disposition
specified in the Demand Registration Notice, the number of Requested Shares
specified in the Demand Registration Notice; provided, however, that the
-----------------
Corporation shall not be obligated to take any action to effect any such
registration pursuant to this Section 4.2 in any particular jurisdiction in
which the Corporation would be required to (a) qualify generally to transact
business as a foreign corporation in such jurisdiction if it is not so
qualified, or (b) execute a general consent to service of process in effecting
such registration unless the Corporation is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(e) The following provisions shall be applicable if the requested method
of disposition shall be an underwritten public offering:
(i) The Corporation shall designate the managing underwriter for the
offering, subject to the approval of Harland to be registered in the
Demand Registration (which approval shall not be unreasonably withheld
or delayed). In the event such managing underwriter is not so
approved, the Corporation shall designate another managing underwriter
as soon as practicable.
(ii) The right of any holder to registration pursuant to this Section
4.2 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities
in the underwriting to the extent requested (unless otherwise mutually
agreed by a majority in interest of the holders, to the extent
provided herein). The Corporation shall (together with all holders
proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the
managing underwriter.
(iii) Notwithstanding any other provision of this Section 4.2 to the
contrary, if the managing underwriter advises the Corporation in
writing that marketing factors require a limitation of the number of
shares to be underwritten, then the number of shares that may be
included in the registration and underwriting shall be allocated first
to the Requested Shares, second to shares to be sold pursuant to
subsection (f) and then among all other holders requesting inclusion
in the registration in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such holders at
the time of the filing of the registration statement. No Requested
Shares or Registrable Securities excluded from the underwriting by
reason of the managing underwriter's marketing limitation shall be
included in such registration.
11
<PAGE>
(iv) If Harland or any holder of Registrable Securities disapproves of
the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Corporation, the managing
underwriter, and the other holders. The Requested Shares or
Registrable Securities so withdrawn shall also be withdrawn from
registration; provided, however, that if by the withdrawal of such
Requested Shares or Registrable Securities a greater number of
Registrable Securities held by other holders may be included in such
Registration (up to the maximum of any limitation imposed by the
managing underwriter), then the Corporation shall offer to all holders
who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion
used in determining the underwriter limitation in this Section 4.2(e).
If the registration does not become effective due to the withdrawal of
Requested Shares, then either (A) Harland shall reimburse the
Corporation for expenses incurred in complying with the request, or
(B) the aborted registration shall be treated as effected for purposes
of Section 4.2(h) below.
(f) The Corporation shall be entitled to include in the Demand
Registration, for sale in accordance with the method of disposition specified in
the Demand Registration Notice, both:
(i) shares of Common Stock to be sold by the Corporation for its own
account, and
(ii) shares of Common Stock owned by any other stockholder or
stockholders of the Corporation, except that the number of shares of
Common Stock to be included by any such other stockholder shall not
exceed two percent (2%) of the then outstanding shares of Common
Stock;
provided, however, that, if in the opinion of the managing underwriter (if such
- -----------------
method of disposition involves, in whole or in part, an underwritten public
offering), the inclusion of such shares of Common Stock in the underwriting
would have a material adverse affect on the marketing of the Requested Shares to
be sold thereby, then the number of such shares of Common Stock of the
Corporation to be included in the underwriting shall be reduced to such extent
(including the possible exclusion of all of such shares) as the managing
underwriter determines will no longer have a material adverse affect on the
marketing of the Requested Shares to be sold thereby.
(g) In the case of each registration effected by the Corporation pursuant
to this Section 4.2, the Corporation will keep each holder advised in writing as
to the initiation of each registration and as to the completion thereof. At its
expense the Corporation will:
12
<PAGE>
(i) keep such registration effective for a period of one hundred
twenty (120) days or until the holder or holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; and
(ii) furnish such number of prospectuses and other documents incident
thereto as a holder from time to time may reasonably request.
(h) Notwithstanding anything to the contrary contained in this Section
4.2:
(i) no Demand Registration Notice may be given within one (1) year
after the effective date of a registration statement filed by the
Corporation covering an underwritten public offering in which Harland
shall have been entitled to join pursuant to Section 2 above and in
which there shall have been effectively registered all shares of
Common Stock as to which registration shall have been requested by
Harland; and
(ii) the Corporation shall be obligated to register Registrable
Securities pursuant to this Section 4.2 on one occasion only;
provided, however, that such obligation shall be deemed satisfied only
-----------------
when a registration statement covering all Requested Shares shall have
become effective.
4.3. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Section 4.2 above shall be borne by
the Corporation. All Selling Expenses relating to the shares of Stock so
registered by the holders shall be borne by the holders of such shares pro rata
based on the number of shares so registered.
4.4. Registration on Form S-3.
------------------------
(a) In addition to the rights set forth in Section 4.2 above, if Harland
requests by written notice to the Corporation that the Corporation file a
registration statement on Form S-3 (or any successor thereto) for a public
offering of its shares the reasonably anticipated aggregate price to the public
of which would exceed One Million Dollars ($1,000,000.00), and the Corporation
is a registrant entitled to use Form S-3 to register securities for such an
offering, the Corporation shall use its best efforts to cause such shares to be
registered for the offering on such form (or any successor thereto).
(b) All Registration and Selling Expenses incurred in connection with a
registration pursuant to this Section 4.4 shall be borne by the holder or
holders participating in the registration on Form S-3 pro rata according to the
number of
13
<PAGE>
Registrable Securities so registered.
(c) Notwithstanding anything to the contrary set forth in this Section
4.4, the Corporation shall be obligated to register Registrable Securities
pursuant to this Section 4.4 on one occasion only; provided, however, that such
-----------------
obligation shall be deemed satisfied only when a registration statement covering
all Requested Shares specified in the notice(s) received as aforesaid, for sale
in accordance with the method of disposition specified in the Demand
Registration Notice, shall have become effective.
4.5. Termination of Registration Rights. The registration rights granted
----------------------------------
pursuant to this Agreement shall terminate at such time as Harland can publicly
sell Common Stock without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 or other applicable exemption supported by a
written opinion of legal counsel for the Corporation which shall be reasonably
satisfactory in form and substance to legal counsel for Harland.
5. Attendance at Board Meetings.
----------------------------
The Existing Shareholders shall take all requisite action to ensure that
Harland is afforded the opportunity to have a representative present at all
meetings of the Board of Directors of the Corporation and to receive the same
prior notice of such meetings as is received by the members of the Board of
Directors and to obtain any informational distributions made in advance of and
in connection with those meetings as if such representative were a member of the
Board of Directors.
6. Miscellaneous Provisions.
------------------------
(a) Amendment. This Agreement may not be amended, in whole or in part,
---------
except by an instrument in writing signed by each of the parties hereto.
(b) Binding Effect. This Agreement shall be binding on and for the benefit
--------------
of the parties hereto and their respective heirs, personal and legal
representatives, successors, and assigns; provided, that no Shareholder shall be
entitled to assign or delegate any of his rights or obligations under this
Agreement without the prior written consent of the Corporation.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterpart copies, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(d) Entire Agreement. Any oral or written statements, understandings,
----------------
correspondence, or agreements previously made by any party with respect to the
subject matter of this Agreement are superseded by this Agreement, which alone
14
<PAGE>
fully and completely expresses the parties' respective obligations. This
Agreement is entered into by each party after opportunity for investigation, and
each party represents that such party is not relying upon any statements,
understandings, correspondence, or agreements not embodied in this Agreement and
made by any other party or on any other party's behalf.
(e) Governing Law; Jurisdiction. This Agreement and all rights, remedies,
---------------------------
and obligations under this Agreement, including matters of construction,
validity, and performance, shall be governed exclusively by the laws of the
State of New Hampshire. This Agreement shall be enforceable in any state or
federal court of competent jurisdiction; provided, that each party specifically
consents to, and agrees that such party is subject to, the jurisdiction of the
state and federal courts of the State of New Hampshire with respect to any
actions for enforcement of or breach of this Agreement.
(f) Headings. The article, section, and subsection headings used in this
--------
Agreement are for convenience and reference only, and the words contained
therein shall not be held to explain, modify, amplify, or aid in the
interpretation, construction, or meaning of any of the provisions of this
Agreement.
(g) Notices. Any demand, notice, or other communication required or
-------
permitted to be given by a party under this Agreement shall be in writing and,
with respect to each other party to whom -the demand, notice, or other
communication is to be given, shall be given to such party either:
(i) by being hand-delivered to such party,
(ii) by being telecopied to such party's Telecopy Number (as defined
below), with a copy of the telecopy being mailed by first class
mail, postage prepaid, to such party's Address (as defined
below), or
(iii) by being deposited in the mail (registered or certified) or
delivered to a private express company, postage or freight
prepaid, return receipt requested, addressed to such party at
such party's Address.
As used in this Section, a party's "Address" shall mean the address of such
party set forth in this Agreement underneath such party's signature line, and a
party's "Telecopy Number" shall mean the telephone number of such party set
forth in this Agreement underneath such party's signature line. Each party may
change such party's Address or Telecopy Number from time to time by giving the
other party or parties notice of the change in accordance with the provisions of
this Section.
15
<PAGE>
(h) Severability. Each term, condition, and provision of this Agreement
------------
shall be valid and enforced to the fullest extent permitted by law. If there is
any conflict between any term, condition, or provision of this Agreement and any
statute, law, ordinance, order, rule, or regulation, the latter shall prevail;
provided, that any such conflicting term, condition, or provision shall be
curtailed and limited only to the extent necessary to bring it within the legal
requirements and the remainder of this Agreement shall not be affected thereby.
(i) Waiver. No waiver by any party of any breach or default by any other
------
party of any of such other party's obligations under this Agreement shall be
deemed to be a waiver of any other breach or default of the same or any other
nature. No failure by any party on any one or more occasions to exercise any
right or remedy provided in this Agreement shall preclude the exercise of such
right or remedy on any other occasion.
(j) Pronouns; Plurals. All pronouns and any variations thereof shall be
-----------------
deemed to include the masculine, feminine, neuter, singular, and plural thereof
as the context may require. In addition, all nouns shall be deemed to include
the singular and plural thereof as the context may require.
(k) Termination of Agreement. This Agreement shall terminate, except with
------------------------
respect to Sections 2 and 4, on the earliest of (a) the tenth anniversary of the
date of this Agreement, or (b) the closing of the Corporation's initial public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act, resulting in at least $10,000,000 of gross proceeds to the
Corporation at a minimum price of $10.00 per share (subject to appropriate
adjustment for stock splits, stock dividends, recapitalizations and other
similar events).
IN WITNESS WHEREOF, the undersigned have executed this Agreement all as of
the date first above-written.
Corporation:
------------
Bottomline Technologies, Inc.
____________________________ By: _________________________________
Witness James L. Loomis, Vice President
Address: One Court Street
Exeter, New Hampshire 03833
Telecopy Number: 603-778-3975
16
<PAGE>
Corporation:
------------
/s/Helmar B. Herman*
------------------------------------
Helmar B. Herman
Address: ____________________________________
____________________________________
Telecopy Number: ____________________________________
/s/James L. Loomis*
------------------------------------
James L. Loomis_____________
Address: ____________________________________
____________________________________
Telecopy Number: ____________________________________
/s/Daniel M. McGurl*
------------------------------------
Daniel M. McGurl
Address: ____________________________________
____________________________________
Telecopy Number: ____________________________________
/s/Joseph L. Mullen*
------------------------------------
Joseph L. Mullen
Address:
____________________________________
____________________________________
Telecopy Number: ____________________________________
/s/Charles P. O'Leary*
------------------------------------
Charles P. O'Leary
Address:
____________________________________
____________________________________
Telecopy Number: ____________________________________
17
<PAGE>
Corporation:
------------
/s/Jeanette Roberts*
------------------------------------
Jeanette Roberts
Address: ____________________________________
____________________________________
Telecopy Number: ____________________________________
JOHN H. HARLAND COMPANY
____________________________ By:_________________________________
Witness Its: Chairman, President and C.E.O.
--------------------------------
2939 Miller Road
Address: ------------------------------------
Decatur, Georgia 30035
------------------------------------
Telecopy Number: (404) 593-5619
------------------------------------
____________________________
Witness By:_________________________________
Attorney-in-Fact
One Court Street
Address: ------------------------------------
Exeter, New Hampshire 03883
------------------------------------
Telecopy Number: (603) 778-3975
------------------------------------
18
<PAGE>
EXHIBIT A
TO
SECOND STOCK RIGHTS AGREEMENT OF
BOTTOMLINE TECHNOLOGIES, INC.
Shareholders
- ------------
Helmar B. Herman
James L. Loomis
Daniel M. McGurl
Joseph L. Mullen
Charles P. O'Leary
Jeanette Roberts
19
<PAGE>
WAIVER AND AMENDMENT
WHEREAS, Mr. Charles P. O'Leary ("O'Leary") has proposed to transfer 10,000
shares of common stock, $.001 par value per share (the "Transfer Shares") of
Bottomline Technologies, Inc. ("Bottomline") at a per share purchase price of
$14.75 (the "Sale") to Mr. Bruce E. Elmblad ("Elmblad"); and
WHEREAS, Bottomline and the undersigned Shareholder, as defined in the
Second Stock Rights Agreement, dated as of March 4, 1994, as amended, (the
"Agreement") believe it is in the best interest of Bottomline and the
Shareholder to allow O'Leary to sell the Transfer Shares to Elmblad and to amend
the Agreement;
NOW, THEREFORE:
1. The undersigned Shareholder hereby waives any and all Take-Along-
Rights which the undersigned may have with respect to the Transfer Shares
pursuant to Section 3 of the Agreement, provided such shares are sold only to
Elmblad or his assigns and such sale is effected on or prior to October 1, 1996,
and the undersigned hereby waives any rights to notice with respect to such
transfer by O'Leary.
2. Bottomline and the undersigned Shareholder hereby agree to amend
Section 3(a)(i)(C) of the Agreement, effective upon consummation of the Sale, to
change the percentage listed therein next to O'Leary's name from 11.627907% to
10.999371%.
Capitalized terms not otherwise defined herein have the respective meaning
ascribed to them in the Agreement.
This Waiver and Amendment may be signed in one or more counterparts.
IN WITNESS WHEREOF, this Waiver and Amendment has been executed by
Bottomline and the undersigned Shareholder on or before August 10, 1996 with the
intent that it become effective, except as otherwise provided herein, as of and
on August 10, 1996.
1
<PAGE>
Exhibit 10.7
LEASE AGREEMENT
BETWEEN
WENBERRY ASSOCIATES L.L.C.
AND
BOTTOMLINE TECHNOLOGIES, INC.
PORTSMOUTH, NEW HAMPSHIRE
This lease is made by Wenberry Associates, L.L.C. of 40 Pleasant Street,
Portsmouth, New Hampshire (hereinafter referred to as Owner) and Bottomline
Technologies, Inc. of One Court Street, Exeter, New Hampshire (hereinafter
referred to as Tenant).
In consideration of the mutual covenants contained herein and the
considerations referred to hereafter, the parties agree as follows:
1. Premises: The Owner does hereby lease to the Tenant the entire first,
--------
second and third floors fronting on Fleet Street in the building known as 155
Fleet Street in Portsmouth, New Hampshire, initially comprising approximately
24,000 square feet and shown on the floor plans attached hereto as Exhibits A-1,
A-2 and A-3.
Within one (1) month of the occupancy of the building by Tenant, Tenant
agrees to lease an additional 8,000 square feet of space located to the rear of
the third floor Fleet Street location and shown on the floor plan attached
hereto as Exhibit A-4. Except as set forth in Section 3, all lease terms for
this additional 8,000 square feet of space shall be consistent with and
coterminous with the original space including without limitation Section 18.c.
2. Lease Period: The initial lease term shall be seven years commencing
------------
upon Tenant's occupancy which shall further be known as the commencement date.
In addition, the Tenant shall have two five year options to extend the term
of this lease. To exercise this option, Tenant must give written notice of its
intent to Owner at least 90 days before the expiration of the initial, lease
term or extended term, as the case may be.
3. Base Rent: For the space provided, the Tenant covenants with the
---------
Owner that it will pay the Owner base rent in the following amounts for the
periods described:
a. For the first two years of the initial lease term, Tenant shall
pay $9.50 per square foot, plus all utilities.
<PAGE>
b. With respect to the additional 8000 square feet referred to in
the second paragraph of Section 1, Tenant's obligation to pay rent there for
shall commence on the later of substantial completion, as defined in Section 24,
or
i. for the first 2000 square feet thereof, three (3) months
after substantial completion, as defined in Section 24, of the initial 24,000
square feet;
ii. for the second 2000 square feet thereof, three (3) months
after the date specified in (i) above;
iii. for the third 2000 square feet thereof, three (3) months
after the date specified in (ii) above; and
iv. for the remainder, three (3) months after the date specified
in (iii) above.
c. For the third year, rent shall be the base rent of the previous
year, plus any increase in the rate of the National Consumer Price Index for the
previous year, applicable to base rent, minus real estate taxes. In addition,
Tenant shall pay all utilities and any increase in property tax from the
previous year.
d. For the fourth through the seventh year rent shall be the base
rent of the previous year plus any increase in the National Consumer Price Index
for the previous year, but said increase shall not exceed five percent in any
one year.
e. During the extension terms the rent shall be 95% of the fair
market rent but not less than the rent during the seventh year or the twelfth
year, as the case may be.
In addition, the Tenant shall pay all utilities and any increase in property tax
from the previous year. In calculating Tenant's obligation to pay increases in
property taxes, Tenant's share of such increases shall be a fraction, the
numerator of which is the number of square feet of the leased premises and the
denominator of which is the number of square feet of the building for which the
tax bill is issued.
f. Annual rent shall be made in monthly installments due on the
first day of the month. In the event owner has not received Tenant's rent by
the seventh (7th) day of the month, an additional late charge of 5% of the
monthly payment shall be imposed.
4. Security Deposit: Upon the execution of this Lease Agreement, Tenant
----------------
shall pay to the Owner the sum of $19,000.00 as a security deposit. The
security deposit will be returned to Tenant, less damages and other lawful
deductions, within thirty (30) days of the termination of the tenancy.
-2-
<PAGE>
The Security Deposit shall be held by Owner as security for the faithful
performance by Tenant of all the terms, covenants, conditions and provisions of
this Lease to be kept and performed or observed by Tenant. If Tenant defaults
with respect to any provision of this Lease, including, but not limited to, the
provisions relating to the payment of Rent or any other monetary sums due
herewith, Owner may (but shall not be required to) use, apply or retain all or
any part of the Security Deposit for the payment of any Rent or other monetary
sums due herewith and/or for the payment of any other amount which Owner may
spend or become obligated by reason of Tenant's default, or to compensate Owner
for any other loss or damage which Owner may suffer thereby. If any portion of
the Security Deposit is so used or applied, Tenant shall, within ten (10) days
after demand therefore, deposit cash with Owner in an amount sufficient to
restore the Security Deposit to the full amount thereof and Tenant's failure to
do so shall be a material breach of this Lease.
Furthermore, whenever the Base Rent increases, Tenant shall deposit
additional cash with Owner so that the amount of the Security Deposit is always
at least one full months rent for the entire Leased Premises. Owner shall keep
the Security Deposit separate from its general accounts and in accordance with
provisions of New Hampshire law. If Tenant shall fully and faithfully perform
all of its obligations hereunder, the Security Deposit, or any balance thereof
that has not theretofore been applied by Owner, shall be returned to Tenant,
after any lawful deductions, within thirty (30) days of the Termination of
Tenancy.
5. Use of Property:
----------------
a. The property shall be used only as commercial office space and
accessory purposes. The Tenant may display items outside of the leased
premises, but only in those locations approved by the Owner and approved by the
City of Portsmouth and State of New Hampshire. The Tenant shall not store or
otherwise keep any items outside of the leased premises without the permission
of the Owner. Tenant acknowledges that no trade or occupation shall be conducted
in the leased premises or use made thereof which would be unlawful, improper,
noisy or offensive, or contrary to any law or ordinance in force in the City of
Portsmouth or State of New Hampshire. Owner represents and warrants that the
leasehold property is currently zoned as commercial property and use of the
leasehold as office space is permitted by the City of Portsmouth.
b. Owner shall at its sole cost and expense comply with all
applicable covenants, conditions and restrictions now or hereafter affecting the
Premises, or the Building, or the Property, with all laws, rules, ordinances,
regulations, directives and requirements of all federal, state, county and
municipal authorities having jurisdiction over the Premises, or the Building, or
the Property ("Laws"), including without limitation those relating to health,
safety, noise,
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<PAGE>
environmental protection, waste disposal, water and air quality, and other
environmental matters, and the use, storage and disposal of Hazardous Materials,
as such term is defined in Section 5.d. below, and with the certificate of
occupancy for the Premises or the Building. Tenant shall not permit anything to
be done on the Premises in violation thereof. Upon written demand, Tenant shall
discontinue any use of the Premises in violation of any covenants, conditions
and restrictions, or of any Law or of the certificate of occupancy. Owner shall
be responsible for changes required in the building for handicap access.
c. Tenant shall not do or permit anything to be done in, or about
the Premises, or the Building, or the Property which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building, or
injure or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on, or about the Premises or the Building, or the
Property nor use or permit to be used any loudspeaker, or other device, system
or apparatus which can be heard outside the premises without the prior written
consent of Owner. Tenant shall not commit or suffer to be committed any waste
in or upon the Premises, the Building, or the Property.
d. Tenant shall at all times and in all respects comply with all
federal, state and local laws, ordinances and regulations (collectively
"Hazardous Materials Laws") relating to industrial hygiene, environmental
protection or the use, analysis, generation, manufacture, storage, disposal, or
transportation of any oil, gasoline and related products, flammable substance or
explosives, asbestos, radioactive materials or waste, or other hazardous, toxic
contaminated or polluting materials, substances, chemicals, wastes or related
injurious materials, whether injurious by themselves or in combination with
other materials including, without limitation, any "hazardous substances,"
"hazardous wastes," "hazardous materials," or "toxic substances" under any such
Laws, any toxic or hazardous substance, material or waste listed in the United
States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as a hazardous substance (40 CFR, Part 302) and
amendments thereto, or such substances, materials and wastes which are or become
regulated or listed as toxic under any applicable local, state or federal law)
(collectively, "Hazardous Materials").
6. Assignment: The Tenant shall not assign or sublet the whole or any
----------
part of the leased premises without Owner's prior written consent, which consent
shall not unreasonably be withheld or delayed. Notwithstanding such consent,
Tenant shall remain fully liable to Owner for the payment of all rent and
expenses and for the full performance of the covenants and conditions of this
lease. If there is an assignment of this Lease by Tenant or a subletting of the
whole of the leased premises by Tenant at a rent which, in either case, exceeds
the rent payable hereunder by Tenant, or if there is a subletting of a portion
of the leased premises by
-4-
<PAGE>
Tenant at a rent in excess of the subleased portion's pro-rata share of the rent
payable hereunder by Tenant, Tenant shall pay to Landlord, as additional rent,
fifty percent (50%) of such excess rent net of all reasonable expenses of the
assignment or subletting.
7. Fire Insurance: The Tenant shall not permit any use of the leased
--------------
premises which will make voidable any insurance on the property, which the
leased premises are a part, or on the contents of said property or which shall
be contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The Tenant shall on demand reimburse the Owner and all other Tenants,
all extra insurance premiums caused by Tenant's use of the premises if they
exceed more than Two Hundred ($200.00) Dollars per year for other than normal
office use.
8. Maintenance of Premises: The Tenant agrees to maintain the leased
-----------------------
premises in the same condition as they are at the commencement of the term,
reasonable wear and tear, damage by fire and other casualty and eminent domain
only excepted, and whenever necessary to replace plate glass and other glass
therein, if damaged by Tenant's negligence. The Tenant shall not permit the
leased premises to be overloaded, damaged, stripped or defaced, nor suffer any
waste. Tenant shall obtain written consent of Owner before erecting any sign on
the premises.
9. Alterations -- Additions: Tenant may make non-structural alterations,
------------------------
provided the Owner consents thereto in writing if the cost of the alteration
will exceed $10,000, which consent shall not be unreasonably withheld or
delayed. All such allowed alterations shall be at Tenant's expense and shall be
of workmanlike quality. Tenant shall not permit any mechanic's liens, or
similar liens to remain upon the leased premises for labor and material
furnished to Tenant or claimed to have been furnished to Tenant in connection
with work of any character performed or claimed to have been performed at the
direction of the Tenant and shall cause any such lien to be released of record
forthwith without cost to the Owner. Any alterations or improvements made by
the Tenant shall become the property of the Owner at the termination of
occupancy as provided herein.
10. Government required alterations: Tenant shall have no obligation to
-------------------------------
make any alterations or changes in the Premises to meet regulations and
standards promulgated and established under the Occupational Safety and Health
Act of 1970, Americans with Disabilities Act, Environmental Law/Environmental
Matter, or any other statute or regulation. Owner shall comply with all such
statutes and regulations and make any necessary alterations or changes in order
to comply with same on the Premises. Tenant shall notify Owner immediately of
any alleged violation or claim based upon an alleged failure to comply with any
citation or order issued under the Occupational Safety and Health Act of 1970,
Americans with Disabilities Act, Environmental Matter/ Environmental Law and of
any other statute of similar import. The provisions of this section shall
survive the termination of this Lease.
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<PAGE>
11. Subordination: The lease shall be subject and subordinate to any and
-------------
all mortgages, deeds of trust and other instruments in the nature of a mortgage,
now or at any time hereafter, a lien or liens on the property of which the
leased premises are a part provided the mortgagee agrees to recognize all of
Tenant's rights hereunder in the event of a foreclosure and the Tenant shall,
when requested, promptly execute and deliver such written instruments as shall
be necessary to show the subordination of this lease to said mortgages, deeds of
trust or other such instruments in the nature of a mortgage.
12. Owner's Access: The Owner or agents of the Owner may, at reasonable
--------------
times, after reasonable notice, enter to view and inspect the leased premises
and may make repairs as Owner should elect to do and may show the leased
premises to others, and at any time within three (3) months before the
expiration of the term, may affix to any suitable part of the leased premises a
notice of letting or selling the leased premises or property of which the leased
premises are a part and keep the same so affixed without hindrance or
molestation.
13. Care of Demised Premises:
------------------------
a. Tenant shall act with care in its use and occupancy of the
Premises and the fixtures (and all Tenant's improvements and fixtures) therein
and, at Tenant's sole cost and expense and to the satisfaction of the Owner,
shall make all repairs and replacements to the Premises and the fixtures and the
Building, structural or otherwise, necessitated or occasioned by the acts,
omissions, carelessness, negligence of other cause of Tenant, its servants,
employees, agents, visitors or licensees or any person claiming through or under
Tenant or by the use or occupancy or manner of use or occupancy of the Premises
by Tenant or any such person. Ordinary maintenance items on the Premises shall
be maintained or repaired as the need arises at the expense of the owner.
Tenant, at Tenant's sole cost and expense, shall make all repairs and
replacements to Tenant's special installations, if any. All such aforesaid
repairs, restoration and replacements shall be in quality and class equal to the
original work or installation. Regarding the Tenant's need to make repairs or
replacements to any Structural, Mechanical, Electrical, HVAC, or surface
treatment of walls, floors, and ceilings, Tenant shall notify Owner, who
reserves the right to perform such work and charge back the Tenant.
b. Except as otherwise provided in paragraph (a) of this Article,
Owner shall make the following repairs as and when necessary; (i) major
structural repairs to the Premises and Building; (ii) repairs required in order
to provide the elevator, plumbing, electrical, heating and air conditioning
services to be furnished by
-6-
<PAGE>
Owner pursuant to this Lease; and (iii) repairs to exterior portions of the
Building, including the 2nd and 3rd story windows and roof thereof.
c. All personal property of the Tenant or special installations in
the Premises or in the Building shall be at the sole risk of the Tenant and the
Tenant shall, through the term of this Lease, keep same insured against all loss
or damage by fire or other casualty. The Owner shall not be liable for any
injury or damage to Tenant or its employees, invitees, occupants or persons in
or on the Premises or to the property of Tenant resulting from the use of the
heating, cooling, electrical or plumbing apparatus or any other cause, and Owner
shall not, in any event, be liable for damages or injury resulting from water,
steam or other causes, except in the case of Owner's negligence or willful
misconduct. Tenant hereby expressly releases Owner from any liability incurred
or claimed by reason of such damage or injury.
d. The Owner assumes no liability or responsibility whatsoever with
respect to the conduct and operation of the business to be conducted in the
Premises. The Owner shall not be liable for any accident or injury to any person
or persons or property in or about the Premises which are caused by the conduct
and operation of said business or by virtue of equipment or property of the
Tenant in said Premises. The Tenant agrees to defend and hold the Owner harmless
against all such claims.
e. The Owner agrees to keep all common areas of the leasehold
Premises reasonably clean and free from debris at its expense.
14. Locks: The Tenant shall not change any locks on the leased premises
-----
without approval of the Owner, which consent shall not be unreasonably withheld.
15. Risk of Loss: The Tenants assume the risk of damage, theft or
------------
destruction of its personal property and that of its guests on the Premises,
unless directly caused by the negligence of the Owner.
16. Dangerous Conditions: The Tenant shall notify the Owner of dangerous
--------------------
conditions on the Premises or need for repairs as soon as possible after the
Tenant has knowledge of same.
17. Damage by Fire: In the event that the leased premises are damaged or
--------------
destroyed by fire to the extent of fifty (50) percent or more of the Premises,
the Tenant shall have the option of terminating this lease. If all or a portion
of the Premises are made unusable by reason of damage by fire or other casualty,
the rent shall equitably abated for any period said Premises are not usable.
In case of destruction or injury to the demised premises, the Owner shall
restore said demised premises reasonably to the same condition as originally
leased, and during such restoration period, the rental shall be prorated and
returned to the
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<PAGE>
Tenant proportionate to available use; provided however, if the destruction or
injury shall exceed fifty (50) percent of the replacement cost, the Owner and/or
Tenant shall have the option of terminating this Agreement, and the rental shall
be prorated and returned to the Tenant as of the date of destruction.
In the event that a mutually selected contractor estimates the period of
restoration will exceed 120 days, the Tenant shall have the right to terminate
this Lease. In the event the estimated period of restoration is less than 120
days, but the actual period of restoration exceeds 120 days, this Lease shall
not terminate, but rent shall continue to be prorated as provided herein.
In the event said Premises shall be taken under eminent domain proceedings
in whole or to the extent that they are not functional for the Tenant, then this
Agreement shall be terminated, and the rental shall be prorated and returned to
the Tenant as of the date of such taking.
18. Owner's Responsibilities:
------------------------
a. The Owner agrees to pay all property taxes for the leased
premises for the first two years of the lease term. Thereafter, the Owner shall
pay to the City of Portsmouth an amount equal to the second year tax obligation,
with the Tenant paying any increase in property taxes provided in Section 3.
b. Owner shall, throughout the term of this lease, at its expense,
keep the building insured against all loss or damage by fire with extended
coverage in an amount equal to its full replacement cost.
c. Owner shall deliver the leased premises to Tenant in accordance
with the final renovation plan as agreed by the parties, which shall be attached
hereto and specifically incorporated into this Lease Agreement, which shall
include, but not necessarily be limited to:
- properly designed HVAC for office use
- executive type lobby, reception area and elevator
- building atrium
- satisfactory carpeting, ceiling and painting
- construction and for renovating of internal offices and bathrooms
consistent with Tenant's space requirements
- a new facade on Fleet Street with opening windows to meet
Portsmouth Historical District approval
The parties shall cooperate together and use best efforts to prepare and
agree on a renovation plan for the initial premises containing 24,000 square
feet including drawings and specifications for the work within four (4) weeks of
the date of this
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<PAGE>
Lease, and to agree on a renovation plan for the additional premises containing
8000 square feet within three (3) weeks after the date of this Lease. Attached
hereto as Exhibit B is a Description of Tenant Fit-Up Work which the parties
agree shall be used as a guideline for developing the renovation plans for the
premises.
d. Owner shall replace the carpet throughout the entire leased
premises with carpet of equal or better quality no later than the end of the
seventh lease year.
19. Default by Tenant: If the Tenant fails to pay any rental due
-----------------
hereunder or if the Tenant defaults in fulfilling any of the other covenants of
this Lease, the Owner may give the Tenant notice thereof in writing. If such
default is not remedied within ten (10) days for monetary default following such
notice and thirty (30) days for all other defaults following such notice, the
Owner shall have all of the rights enumerated in Section 20 hereof, and the
Tenant shall continue to be liable under this lease for the payment of rent and
all other sums due hereunder.
If at any time during the Term there shall be filed by or against the
Tenant or any successor Tenant then in possession, in any Court pursuant to any
statute either of the United States or any State, a petition (a) in bankruptcy,
(b) alleging insolvency, (c) for reorganization, (d) for the appointment of a
receiver, or (e) for an arrangement under the Bankruptcy Acts, or if a similar
type of proceeding shall be filed, the Owner may terminate the Tenant's rights
under this lease by notice in writing to the Tenant under the applicable laws of
the State of New Hampshire.
20. Owner's Rights on Default: If the Tenant shall not have cured its
-------------------------
default in the manner provided in Section 19 hereof, and the lease is
terminated, the Owner shall be entitled to apply the security deposit specified
in Section 4 toward any damages suffered by Owner and the Owner may immediately,
or at any time thereafter, re-enter the leased premises and remove all persons
and all or any property therefrom, by any suitable action or proceeding at law,
pursuant to NH RSA 540 or otherwise, without being liable for any prosecution
therefore or damages resulting therefrom, and repossess and enjoy the leased
premises, together with all additions, alterations and improvements. Owner may,
at its option, repair, alter, remodel and/or change the character of the leased
premises as it may deem fit, and/or at any time relet the leased premises or any
part or parts thereof. The exercise by the Owner of any right granted in this
section shall not relieve the Tenant from the obligation to make all rental
payments, and to fulfill all other covenants required by this Lease at the time
and in the manner provided herein, and if the Owner so desires all current rent
and other current monetary obligations shall become due and payable. The Owner
shall not be required to exercise any other right granted to the Owner
hereunder. If the Owner attempts to relet the premises, the Owner shall be the
sole judge as to whether or not a proposed tenant is suitable, which judgment
shall be reasonable.
-9-
<PAGE>
In the event of a breach by the Tenant of any of the covenants or
provisions hereof, the Owner shall have, in addition to any other remedies which
it may have, the right to invoke any remedy allowed at law or in equity to
enforce Lessor's rights or any of them, as if re-entry and other remedies were
not herein provided.
21. Expenses: If either party shall be in default under the terms of this
--------
lease and the other party is required to seek legal recourse, the losing party
shall pay to the prevailing party all reasonable attorney's fees in the
discretion of the Justice or Master then presiding, as well as court costs as
allowed by statute.
22. Right of First Refusal: Tenant shall have the right of first refusal
----------------------
to lease any contiguous or adjacent space that becomes available during its
initial term or option periods. Tenant shall notify Owner within thirty (30)
days of its receipt of notice of space availability and accept or decline the
additional space.
Tenant shall also nave the right of first refusal to purchase the leased
premises if the property is being sold to a third party. This right shall not
preclude the Owner from syndicating the property. Tenant shall communicate its
intent to purchase within thirty (30) days of its receipt of notice by Owner of
intent to sell.
23. Indemnity: Owner shall not be liable to Tenant and Tenant waives all
---------
claims against Owner for any injury to or death of any person or for loss of use
of, damage to, or destruction of property in or about the Premises, the
Building, or the Property by or from any cause whatsoever, including without
limitation, earthquake or earth movement, gas, fire, oil, electricity or leakage
from the roof, walls, basement or other portion of the Premises or the Building,
unless caused by the negligence or willful misconduct of Owner, its agents, or
employees. Tenant agrees to hold Owner harmless and Owner agrees to hold Tenant
harmless from and to indemnify and defend each other against all claims,
liability, damage or loss and against all costs and expenses, including, without
limitation, attorneys' and paralegal fees and costs and court costs in
connection therewith, arising out of any injury or death of any person or damage
to or destruction of property (i) occurring in, on or about the Premises, unless
caused solely by the negligence or willful misconduct of each other, its agents
or employees; or (ii) occurring in, on or about any facilities (including
without limitation elevators, stairways, passageways or hallways) the use of
which Tenant has in common with other lessees, or elsewhere in or about the
Property or the Building other than the Premises, when such claim, injury or
damage is caused in whole or in part by the act, neglect, default, or omission
of any duty by each other, its agents, employees, contractors, invitees, or
subtenants or otherwise by any conduct of any of said persons in or about the
Premises, the Building or the Property including failure of each other to
observe or perform any of its obligations under the Lease.
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<PAGE>
The provisions of this Section 23 shall survive the termination of this
Lease with respect to any claims or liability occurring prior to such
termination.
24. Completion of Owner's Work:
--------------------------
Owner shall Substantially Complete the initial premises no later than six
(6) months after the date of this Lease and the additional 8000 square feet of
the leased premises within seven (7) months after the date of this Lease.
"Substantially Complete" means:
i. Owner and Tenant agree that the improvements described in
the renovation plans referred to in Section 18.c. have been substantially
completed in compliance with the terms of this Lease and all Legal Requirements
so that Tenant can use the leased premises for their intended purposes without
material interference to Tenant conducting its ordinary business activities;
ii. The only incomplete items are minor or insubstantial details
of construction, mechanical adjustments or finishing touches like touch-up
plastering or painting as identified on a punchlist prepared by Tenant;
iii. Owner has secured a permanent certificate of occupancy from
the City of Portsmouth, permitting the building, the common areas and the leased
premises to be occupied by Tenant in accordance with all legal requirements;
iv. Tenant, its employees, agents and invitees, having ready
access to and egress from the building and leased premises through the common
areas which shall be clean, free of construction equipment and materials and in
good working order;
v. All major building systems, including the electrical,
heating, ventilation and air conditioning systems, plumbing, utilities, and
elevators are installed and are in good working order; and
vi. The leased premises are broom clean.
Prior to the commencement date the Tenant shall inspect the leased premises
and Owner shall demonstrate all building systems. If the leased premises are
acceptable to Tenant, with the exception of minor items, Owner and Tenant shall
prepare and execute a Punchlist. The Punchlist shall list incomplete, minor and
insubstantial details of construction, necessary mechanical adjustments, and
needed finishing touches. Owner shall complete the items set forth in the
Punchlist within thirty (30) days after the commencement date. Owner will
promptly correct any latent defects as they become known to Owner or within
thirty (30) days after Tenant notifies Owner in writing of the defect. If Owner
fails to complete the punchlist
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<PAGE>
items or known latent defects, Owner shall pay Tenant, as liquidated damages,
the sum of $100.00 per day. Tenant, if it so elects, shall have the option to
withhold the liquidated damages from its monthly rent. Owner shall keep all
contractor's and manufacturer's warranties and guarantees on file and shall make
same available for inspection by Tenant upon request.
25. Delays: It the Premises are not Substantially Complete on or prior to
------
six months after the execution of this Lease, Owner shall notify Tenant.
Commencing with the date which is six (6) months after the date of this Lease
and continuing until the leased premises are Substantially Complete, Owner shall
reimburse Tenant for any amount of rent in excess of the base rent in this Lease
which Tenant must pay for temporary or alternate premises, or for Tenant's
continued occupancy in Tenant's present location.
This paragraph shall not apply to damage or delay caused by fire, flood,
earthquake or other natural disaster, or war, riots, labor strike or civil
unrest.
26. Common Areas: Owner shall keep sidewalks, corridors, stairwells,
------------
elevators and all other means of egress and ingress for the leased premises and
all common areas of the property in good repair and clean and safe condition,
free of any accumulation of debris, snow or ice.
27. Interruption of Services: If service essential to Tenant's use and
------------------------
enjoyment of the leased premises, including but not limited to electricity,
heating and air-conditioning, is discontinued and is not restored by Owner
within three (3) business days, the base rent shall be abated for the period of
time Tenant is without such service.
This paragraph shall not apply to damage or delay caused by fire, flood,
earthquake or other natural disaster, or war, riots, labor strike or civil
unrest.
28. Compliance with Legal Requirements: Owner represents and warrants
----------------------------------
that the building and the leased premises do now and on the commencement date
will comply with all applicable Legal Requirements and that Tenant's use thereof
in accordance with the provisions of this Lease is permitted by such Legal
Requirements. Owner, at its sole cost and expense, shall cause the building and
the leased premises to comply with all applicable future Legal Requirements
throughout the Term of this Lease. Owner will indemnify Tenant for any damages
due to noncompliance of any Legal Requirement by Owner. Tenant shall comply
with all present and future Legal Requirements governing the conduct of Tenant's
business in the leased premises.
Legal Requirements shall mean: all federal, state, county, municipal and
other governmental statutes, laws, rules, regulations, and ordinances affecting
the building
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<PAGE>
or the use thereof, including the Local and/or National Board of Fire
Underwriters or its equivalent, whether now or hereafter enacted and in force,
including without limitation any which may require repairs, modifications or
alterations (structural or otherwise) in or to the land, building or the lease
premises, and all permits, licenses, authorizations and regulations relating
thereto; any which deal with environmental matters and/or Hazardous Substances;
the Americans with Disabilities Act of 1990 (the "ADA"), and all covenants,
agreements, restrictions and encumbrances affecting the building.
29. Owner's Indemnity: Owner covenants to defend with counsel first
-----------------
reasonably approved by Tenant, save harmless, and indemnify Tenant, from any
liability for injury, loss, accident or damage to any person or property, and
from any claims, actions, proceedings and expenses and costs in connection
therewith (including without limitation reasonable counsel fees), (i) arising
from (a) the omission, fault, willful act, negligence or other misconduct of
Owner, its employees or agents, or (b) from any use made or thing done or
occurring on the Property, Building and its Common Areas not due to the
omission, fault, willful act, negligence or other misconduct of Tenant, its
agents or employees.
30. Tenant Modifications: Notwithstanding anything in this. Lease to the
--------------------
contrary, Tenant shall not be obligated to make any repairs, alterations,
modifications or additions to the Premises of a structural nature, or to make
any changes, modifications or additions to the mechanical, or life-safety
systems or electrical wiring serving the Premises, or a change, modification or
addition which would properly be capitalized in accordance with generally
accepted accounting principles.
31. Default by Owner: If Owner shall fail to perform any of Owner's
----------------
obligations pursuant to this Lease ("Owner Default") and such failure shall
continue for thirty (30) days or more after notice thereof from Tenant, Tenant
may, but shall not be obligated to, cure such Owner Default and deduct all costs
and expenses of such curing from the payments of Rent which become due
thereafter, provided that if such Owner Default cannot reasonably be cured
within such period and Owner shall have commenced the curing thereof within such
period and shall thereafter diligently pursue such curing, Tenant shall, except
as provided in the next sentence, have no rights pursuant to this paragraph so
long as Owner diligently pursues such cure. If an Owner Default shall continue
for ninety (90) days or more after notice thereof from Tenant, Tenant may, but
shall not be obligated to, by written notice to Owner, terminate this Lease.
32. Hazardous Substances: Owner represents and warrants to Tenant that
--------------------
the Property does not and will not, other than as a result of Tenant's actions,
contain asbestos, or any other dangerous, hazardous, noxious or toxic materials,
chemicals, substances, pollutants or wastes which pose a hazard to the health
and safety of the occupants of the Building as the same may be defined from time
to time by any
-13-
<PAGE>
Governmental Authority ("Hazardous Substances"). The term Hazardous Substances
shall not include incidental quantities of substances which are commonly used in
offices, such as copier fluid, typewriter, corrections fluids and ordinary
cleaning solvents, provided that such are at all times used, kept and stored in
a manner which complies with all Legal Requirements. If the Premises contains
Hazardous Substances, prior to Owner's delivering possession of the Premises to
Tenant, Owner shall at Owner's sole cost and expense, remove, contain or abate
all Hazardous Substances. Removal, containment or abatement of Hazardous
Substances shall be done in compliance with (a) all applicable Legal
Requirements; and (b) the performance prescribed by a contractor licensed and
certified in the jurisdiction in which the Premises is located to remove,
contain or abate such Hazardous Substances. If at any time during the Term the
removal, containment or abatement of any Hazardous Substances located on or in
the property is required by any applicable Legal Requirements, Owner shall
proceed to remove, contain or abate the Hazardous Substances as required by the
applicable Legal Requirements.
33. Waiver of Subrogation: Any insurance carried by either party with
---------------------
respect to the Premises or property therein or occurrences thereon shall include
a clause or endorsement denying to the insurer rights of subrogation against the
other party to the extent rights have been waived by the insured prior to
occurrence of injury or loss. Each party, notwithstanding any provisions of
this Lease to the contrary, hereby waives any rights of recovery against the
other for injury or loss due to hazards covered by such insurance to the extent
of the indemnification received thereunder.
34. Legal Notice: Legal notices to the Tenant shall be deemed properly
------------
delivered if mailed by registered or certified mail, return receipt requested to
the address of the Tenant at One Court Street, Exeter New Hampshire 03833.
Legal notices to the Owner shall be deemed properly delivered if mailed by
registered or certified mail, return receipt requested to Owner's address at 40
Pleasant Street, Portsmouth, New Hampshire 03801. Either party may change such
notice address by notice given to the other in like fashion. Notices shall be
deemed given three (3) days after mailed.
35. Notice of Lease: Neither party shall record this Lease. At the
----------------
request of either party, the parties shall execute and record a notice of lease
complying with NH RSA 477:7-a.
36. Brokers: Each party represents to the other that it has dealt with no
-------
real estate broker in connection with this Lease except Thomas Farrelly of
Cushman & Wakefield, whose commission shall be paid by Landlord pursuant to a
separate agreement.
-14-
<PAGE>
Signed this 24th day of November, 1994.
WITNESS: OWNER:
WENBERRY ASSOCIATES, L.L.C.
/s/ Daniel Jones By: /s/ James Kenny
- ------------------------- ---------------------------
printed name:
title:
TENANT:
BOTTOMLINE TECHNOLOGIES, INC.
/s/ Phillip D. Stevenson By: /s/ James L. Loomis
- ------------------------- ---------------------------
printed name: James L. Loomis
title: Vice President
-15-
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated August 6, 1998,
except for Note 11 as to which the date is November 12, 1998, in the
Registration Statement (Form S-1) and related Prospectus of Bottomline
Technologies (de), Inc. for the registration of its common stock.
Our audits also included the financial statement schedule of Bottomline
Technologies (de), Inc. included in the 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.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 12, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements, and notes thereto, included in the Company's
registration statement, to which this schedule is an exhibit, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1999
<PERIOD-START> JUL-01-1997 JUL-01-1998
<PERIOD-END> JUN-30-1998 SEP-30-1998
<CASH> 1,362 1,491
<SECURITIES> 0 0
<RECEIVABLES> 7,967 8,229
<ALLOWANCES> 970 1,071
<INVENTORY> 174 156
<CURRENT-ASSETS> 9,346 9,915
<PP&E> 3,696 4,130
<DEPRECIATION> 1,831 2,021
<TOTAL-ASSETS> 11,301 12,084
<CURRENT-LIABILITIES> 5,462 5,788
<BONDS> 0 0
1,353 1,381
0 0
<COMMON> 2 2
<OTHER-SE> 4,366 4,795
<TOTAL-LIABILITY-AND-EQUITY> 11,301 12,084
<SALES> 9,449 2,374
<TOTAL-REVENUES> 29,037 8,105
<CGS> 6,526 1,682
<TOTAL-COSTS> 11,002 2,911
<OTHER-EXPENSES> 15,205 4,447
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 85 2
<INCOME-PRETAX> 2,780 762
<INCOME-TAX> 1,177 305
<INCOME-CONTINUING> 1,603 457
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,603 457
<EPS-PRIMARY> .71 .20
<EPS-DILUTED> .61 .17
</TABLE>
