<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTERACTIVE INTELLIGENCE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
INDIANA 7372 35-1933097
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
8909 PURDUE ROAD
SUITE 300
INDIANAPOLIS, INDIANA 46268
(317) 872-3000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------------
JOHN R. GIBBS
EXECUTIVE VICE PRESIDENT
8909 PURDUE ROAD
SUITE 300
INDIANAPOLIS, INDIANA 46268
(317) 872-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
JAMES A. ASCHLEMAN MICHAEL A. CAMPBELL
BAKER & DANIELS MAYER, BROWN & PLATT
SUITE 2700 190 SOUTH LASALLE STREET
300 NORTH MERIDIAN STREET CHICAGO, ILLINOIS 60603
INDIANAPOLIS, INDIANA 46204-1782 (312) 782-0600
(317) 237-0300
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as is practicable after the effective date of this registration
statement.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value.............................. $46,000,000 $12,788
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 28, 1999
P_R_O_S_P_E_C_T_U_S
SHARES
[LOGO]
INTERACTIVE INTELLIGENCE, INC.
COMMON STOCK
--------------
This is Interactive Intelligence's initial public offering of common stock.
The underwriters will offer shares. This is a firm commitment
underwriting.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. We have applied to have the
common stock approved for quotation on the Nasdaq National Market under the
symbol "ININ."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
-----------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------- -----
<S> <C> <C>
Public offering price........................................
Underwriting discount........................................
Proceeds, before expenses, to Interactive Intelligence.......
</TABLE>
The underwriters may also purchase up to an additional shares from us
and shares from one of our stockholders at the public offering price,
less the underwriting discount, within 30 days from the date of this prospectus
to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 1999.
------------------
MERRILL LYNCH & CO.
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
------------------
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
[DESCRIPTION OF PHOTOGRAPHS TO COME]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 7
Use of Proceeds............................................................................................ 17
Dividend Policy............................................................................................ 17
Capitalization............................................................................................. 18
Dilution................................................................................................... 19
Selected Consolidated Financial Data....................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 21
Business................................................................................................... 31
Management................................................................................................. 46
Executive Compensation..................................................................................... 50
Certain Transactions....................................................................................... 56
Principal and Selling Stockholders......................................................................... 58
Description of Capital Stock............................................................................... 59
Shares Eligible for Future Sale............................................................................ 63
Underwriting............................................................................................... 65
Legal Matters.............................................................................................. 67
Experts.................................................................................................... 67
Additional Information..................................................................................... 67
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
------------------------
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our views
about future events and financial performance. Forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may
cause our and our industry's actual results, levels of activity, performance,
achievements and prospects to be materially different from those expressed or
implied by those forward-looking statements. These risks, uncertainties,
assumptions and other factors include, among others, those identified under
"Risk Factors" and elsewhere in this prospectus. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus might not occur. In addition, actual results could differ materially
from those suggested by the forward-looking statements, and therefore you should
not place undue reliance on the forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE
UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE
FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS
OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
RISK FACTORS AND THE FINANCIAL STATEMENTS AND RELATED NOTES, BEFORE YOU DECIDE
WHETHER TO INVEST IN OUR COMMON STOCK.
OUR COMPANY
We are a leading developer of communications and interaction management
software that allows our customers to automate critical business processes by
integrating their communications systems with their information technology. When
installed on a Windows NT-Registered Trademark- server, our flagship product,
Enterprise Interaction Center-Registered Trademark- or EIC, provides a single,
enterprise-wide solution capable of processing thousands of interactions per
hour, including telephone calls, e-mails, faxes, voice mail messages, Internet
chat sessions, Web callback requests and voice over Net calls. EIC is a unique
software solution that replaces a variety of traditional devices such as private
branch exchange devices or PBXs, interactive voice response systems or IVRs,
automatic call distributors or ACDs, voice mail systems, fax servers, call
recorders and computer telephony integration or CTI gateways. We began licensing
our products in 1997 and have grown our total revenues from $1.6 million in 1997
to $9.0 million in 1998.
OUR INDUSTRY
Due to a broad combination of factors, including deregulation, consolidation
and advances in technology, organizations are looking to communications
technology to increase efficiency and provide better service. We believe we are
well positioned to take advantage of the following major trends taking place
within many industries.
- GROWTH OF CALL CENTERS. To consolidate customer contact points and focus
on customer service, organizations are frequently implementing formal call
centers. In 1998, H.C. Wainwright estimated that the market for call
center communications products represented approximately 55% of the
approximately $10.0 billion computer telephony industry and was expected
to grow at 25% to 30% annually.
- INCREASING VARIETY AND COMPLEXITY OF COMMUNICATIONS AND INTERACTION
MEDIA. In addition to more traditional communications media such as
telephone, fax and voice mail, the growth of the Internet has expanded the
number and complexity of interaction media to include e-mail, Internet
chat sessions, Web callback requests and voice over Net calls. According
to Aberdeen Group, one-fifth of customer contact will shift from the phone
to the Internet in the next two years.
- INCREASING NEED TO INTEGRATE COMMUNICATIONS SYSTEMS WITH INFORMATION
TECHNOLOGIES. Historically, telecommunications systems and information
systems have been separate and distinct. To more effectively and
efficiently interact, both internally and externally, enterprises need to
seamlessly access and utilize these two systems.
- ENTRANCE OF NEW SERVICE PROVIDERS. The Telecommunications Act of 1996
deregulated many aspects of the communications market and resulted in a
rapid increase in the number and types of organizations seeking to provide
communications and other services. These new service provider entrants
include local exchange carriers, cable companies, Internet service
providers and wireless companies.
We believe the traditional multi-device approach to communications and
interaction by organizations is inadequate to address the needs created by these
trends. We believe the shortcomings of this approach create a significant
opportunity for a single, all-in-one solution based on standard
3
<PAGE>
hardware and software technology that enables organizations to efficiently and
effectively interact with all of their constituents.
OUR SOLUTION
We believe that EIC provides our end-user customers with an all-in-one
communications solution that has the following advantages over the traditional
multi-device approach:
- BROADER FUNCTIONALITY AND ENHANCED FEATURES. Unlike traditional systems
that require end-user customers to purchase separate products to attain
broader functionality, EIC is an all-in-one system that offers a broad
suite of interaction management services.
- REDUCED NEED FOR SYSTEMS INTEGRATION. EIC pre-assembles all the necessary
components into one software solution, allowing end-user customers to
concentrate their efforts on improving business processes.
- OPEN ARCHITECTURE AND BETTER COMPATIBILITY WITH LEADING TECHNOLOGIES. Our
products are built around industry standard hardware and software
components such as Intel microprocessors and the Microsoft Windows
NT-Registered Trademark- operating system.
- LOWER TOTAL COST OF OWNERSHIP. EIC's functionalities reside in a single
Windows NT-Registered Trademark- server, resulting in a lower total cost
of ownership due to the reduced time and expense typically required to
maintain a centralized software-based communications system.
- GREATER ABILITY TO CUSTOMIZE COMMUNICATIONS TO MEET SPECIFIC NEEDS. While
EIC can be deployed quickly with minimal configuration, organizations can
also customize many aspects of their communications processing using EIC's
graphical application generator.
OUR CUSTOMERS
We design our software to meet the needs of end-user customers in three
growing markets: call centers, enterprises and service providers. We license our
products to over 200 end-user customers, including Ameritech Corporation,
BuyItNow, Inc., Deutsche Telekom Berkom Gmbh, Seagate Technology, Inc. and
Toshiba America Consumer Products. We market our software products and services
through an extensive distribution network consisting of over 90 independent
value added resellers in North America, Europe and the Asia/Pacific region. Our
resellers range from relatively small, local organizations to large regional and
national firms, such as Bell South Communication Systems, Inc. We also provide
our end-user customers and resellers with technical support, educational and
professional services.
OUR GROWTH STRATEGY
Our primary business objective is to become the leading vendor of
communications and interaction management software for call centers, enterprises
and service providers. Our strategy for achieving this objective incorporates
the following key elements:
- CONTINUE TO EXPAND OUR LEADING TECHNOLOGY POSITION. We have significant
technical expertise in call center, communications and software
technologies. We intend to use our expertise to add new features to our
products, improve the ability of our current and future products to handle
the needs of larger organizations, and broaden the compatibility of our
products to work with other systems and applications used by our
customers.
- BROADEN OUR PRODUCT OFFERING. We plan to broaden our product offering with
additional products and features for our target markets.
4
<PAGE>
- EXPAND AND OPTIMIZE OUR GLOBAL DISTRIBUTION CHANNEL. We plan to further
expand our existing distribution channel, which currently consists of over
90 resellers in more than 20 countries.
- DEVELOP AND LEVERAGE STRATEGIC BUSINESS RELATIONSHIPS. We have strategic
relationships with leading technology companies, including Microsoft
Corporation, which recently recognized us as the ninth fastest growing
independent software vendor using Microsoft Windows-Registered Trademark-.
In addition to our relationships with technology companies, we intend to
pursue strategic relationships with network equipment vendors as well as
developers of customer relationship management software.
OUR ADDRESS
We are incorporated in Indiana, and our worldwide headquarters are located
at 8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268. Our telephone
number is (317) 872-3000, and our Web site is www.inter-intelli.com. The
information on our Web site is not part of this prospectus.
THE OFFERING
Unless stated otherwise, all financial information and share and per share
data in this prospectus (1) give effect to the -for- stock split that was
effected on , 1999, (2) assume that the underwriters do not exercise
their over-allotment option and (3) do not include shares reserved for issuance
under our stock option plans. See "Executive Compensation--Stock Option Plans"
and "Underwriting."
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock outstanding after the shares(1)
offering...................................
Use of proceeds.............................. For general corporate purposes, including
working capital and potential acquisitions,
and for repayment of indebtedness and payment
of deferred compensation and other
non-interest bearing accounts payable to our
principal stockholder. See "Use of Proceeds."
Risk factors................................. See "Risk Factors" for a discussion of
factors you should carefully consider before
deciding whether to invest in shares of our
common stock.
Proposed Nasdaq National Market symbol....... ININ
</TABLE>
- ------------------------
(1) Includes shares issuable upon the exercise of options outstanding under our
stock option plans. As of April 30, 1999, there were 1,404,490 shares
issuable upon the exercise of outstanding options, of which 274,140 were
exercisable, and 2,564,500 shares available for future awards of options
under these plans. See "Executive Compensation--Stock Option Plans."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THE FOLLOWING TABLE SUMMARIZES THE FINANCIAL INFORMATION FOR INTERACTIVE
INTELLIGENCE. YOU SHOULD READ THIS INFORMATION WITH THE FINANCIAL STATEMENTS AND
NOTES TO THE FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. SEE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
<TABLE>
<CAPTION>
THREE MONTHS
OCTOBER 1, 1994 YEAR ENDED DECEMBER 31, ENDED MARCH 31,
(INCEPTION) TO ------------------------------------------ ----------------------
DECEMBER 31, 1994 1995 1996 1997 1998 1998 1999
------------------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Software...................... $ -- $ -- $ -- $ 1,265 $ 7,662 $ 1,163 $ 2,372
Services...................... -- -- -- 325 1,349 151 647
------ --------- --------- --------- --------- --------- -----------
Total revenues.................. -- -- -- 1,590 9,011 1,314 3,019
Costs and expenses:
Costs of software............. -- -- -- 38 59 8 24
Costs of services............. -- -- -- 1,258 3,381 648 1,068
Sales and marketing........... -- 19 157 2,519 6,623 1,192 2,091
Research and development...... 8 297 987 2,118 4,065 834 1,363
General and administrative.... -- 99 192 742 1,407 296 507
------ --------- --------- --------- --------- --------- -----------
Total costs and expenses........ 8 415 1,336 6,675 15,535 2,978 5,053
------ --------- --------- --------- --------- --------- -----------
Operating loss.................. (8) (415) (1,336) (5,085) (6,524) (1,664) (2,034)
Interest expense, net........... -- 1 43 361 868 184 189
------ --------- --------- --------- --------- --------- -----------
Loss before income taxes........ (8) (416) (1,379) (5,446) (7,392) (1,848) (2,223)
Income taxes.................... -- -- -- -- -- -- --
------ --------- --------- --------- --------- --------- -----------
Net loss........................ $ (8) $ (416) $ (1,379) $ (5,446) $ (7,392) $ (1,848) $ (2,223)
------ --------- --------- --------- --------- --------- -----------
------ --------- --------- --------- --------- --------- -----------
Basic and diluted net loss per
share......................... $ (0.01) $ (0.32) $ (0.49) $ (1.07) $ (1.26) $ (0.34) $ (0.32)
Shares used in per share
computation................... 1,000 1,310 2,811 5,095 5,877 5,449 6,945
<CAPTION>
AT MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................................................... $ 1,401 $
Working capital (deficit)...................................................................... (352)
Total assets................................................................................... 7,278
Long-term debt................................................................................. 8,476 794
Total shareholders' equity (deficit)........................................................... (6,085)
</TABLE>
6
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY OWNERSHIP IN
INTERACTIVE INTELLIGENCE. AS AN INTERACTIVE INTELLIGENCE STOCKHOLDER, YOU MAY BE
SUBJECT TO RISKS INHERENT IN OUR BUSINESS. THE PERFORMANCE OF YOUR SHARES WILL
REFLECT THE PERFORMANCE OF OUR BUSINESS RELATED TO, AMONG OTHER THINGS, OUR
COMPETITION, GENERAL ECONOMIC AND MARKET CONDITIONS AND INDUSTRY CONDITIONS. THE
PRICE OF OUR COMMON STOCK MAY DECLINE AND THE VALUE OF YOUR INVESTMENT COULD
DECREASE. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS WELL AS OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN
SHARES OF OUR COMMON STOCK.
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT
Our limited operating history makes it difficult to forecast our future
operating results. We commenced operations in October 1994, but did not begin
shipping our principal product, Enterprise Interaction Center or EIC, until
March 1997. Accordingly, you should assess our prospects in light of the risks
and difficulties frequently encountered by companies in the early stage of
development, particularly companies in new and rapidly evolving industries.
WE HAVE HISTORICALLY INCURRED LOSSES AND WE MAY NOT ACHIEVE PROFITABILITY
We have not operated profitably to date. We incurred net losses of $7.4
million in 1998 and $2.2 million for the three-month period ended March 31,
1999. At March 31, 1999, we had accumulated losses since inception of $16.9
million. We intend to continue to make significant investments in our research
and development, marketing, services and sales operations. We anticipate that
these expenses could significantly precede any revenues generated by the
increased spending. As a result, we are likely to continue to experience losses
and negative cash flow from operations in future quarters. If we do become
profitable, we may not sustain or increase our profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
FLUCTUATIONS IN QUARTERLY RESULTS COULD AFFECT THE MARKET PRICE OF OUR COMMON
STOCK
Our operating results have varied significantly from quarter to quarter and
may continue to do so in the future depending upon a number of factors described
below and elsewhere in this "Risk Factors" section of this prospectus, including
many that are beyond our control. As a result, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful, and you
should not rely on them as an indication of our future performance. In addition,
our operating results in a future quarter or quarters may fall below
expectations of securities analysts or investors and, as a result, the price of
our common stock may fluctuate.
Because we do not know when our potential end-user customers will place
orders and finalize contracts, we cannot accurately forecast our revenues and
operating results for future quarters. We generally recognize revenues from
orders during the quarter in which they are received. As a result, our quarterly
revenues and operating results depend primarily on the size, quantity and timing
of orders received for our products during each quarter. If a large number of
orders or several large orders do not occur or are deferred or delayed, our
revenues in a quarter could be substantially reduced. Since a large portion of
our operating expenses, including rent and salaries, is fixed and difficult to
reduce or modify, our business, financial condition or results of operations
could be materially adversely affected if revenues do not meet our expectations.
Changes in pricing policies and the timing of the development, announcement
and sale of new or upgraded versions of our products are some of the additional
factors that could cause our revenues and operating results to vary
significantly from quarter to quarter.
7
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WE HAVE A LENGTHY PRODUCT SALES CYCLE, WHICH CONTRIBUTES TO THE
QUARTER-TO-QUARTER VARIABILITY OF OUR REVENUES AND OPERATING RESULTS
We have generally experienced a lengthy product sales cycle, averaging
approximately six to nine months. The lengthy sales cycle is one of the factors
that has caused our software revenues and operating results to vary
significantly from quarter to quarter, and may continue to cause them to do so
in the future. It also makes it difficult for us to forecast product license
revenues. Our prospective end-user customers' decisions to license our products
often require significant investment and executive level decision making. We
believe that many companies currently are not aware of the benefits of
communications and interaction management software or of our products and
capabilities. For this reason, we must provide a significant level of education
to prospective end-user customers about the use and benefits of our products,
which can cause potential end-user customers to take many months to make these
decisions. As a result, sales cycles for end-user customer orders vary
substantially from customer to customer. Excessive delay in product sales could
materially adversely affect our business, financial condition or results of
operations.
The length of the sales cycle for end-user customer orders depends on a
number of other factors over which we have little or no control, including:
- an end-user customer's budgetary constraints;
- the timing of an end-user customer's budget cycles;
- concerns by end-user customers about the introduction of new products by
us or our competitors; and
- potential downturns in general economic conditions, including reductions
in demand for call center services.
To the extent that potential end-user customers divert resources and attention
to issues associated with the Year 2000 problem, our sales cycle could lengthen
further. See "--Year 2000 issues may adversely affect our business." In
addition, the sales cycle for our products in international markets has been,
and is expected to continue to be, longer than the sales cycle in the United
States. The average sales cycle for our products may lengthen as we expand
internationally.
OUR INABILITY TO MANAGE OUR GROWTH SUCCESSFULLY COULD ADVERSELY AFFECT US
If we are not able to manage our growth successfully, we will not grow as
planned and our business could be adversely affected. We have grown revenues
from $1.6 million in 1997 to $9.0 million in 1998, and we intend to continue to
grow our business operations significantly in the future. Our existing
management, operational, financial and human resources and management
information systems and controls may be inadequate to support our future
operations. In addition, as the complexity of our product technology and our
reseller and other third-party relationships has increased, the management of
those relationships and the negotiation of contractual terms sufficient to
protect our rights and limit our potential liabilities has become more
complicated, and we expect this trend to continue in the future. As a result,
our inability to successfully manage these relationships or negotiate sufficient
contractual terms could have a material adverse effect on us.
WE FACE COMPETITIVE PRESSURES, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON US
The market for our software products is highly competitive and, because
there are relatively low barriers to entry in the software market, we expect
competition to increase significantly in the future. Currently, our competition
comes from several different market segments, including computer telephony
platform developers, computer telephony applications software developers and
telecommunications equipment vendors. We cannot assure you that we will be able
to compete
8
<PAGE>
effectively against current and future competitors. In addition, increased
competition or other competitive pressures may result in price reductions,
reduced margins or loss of market share, any of which could have a material
adverse effect on our business, financial condition or results of operations.
See "Business--Competition."
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing, customer
service and other resources, greater name recognition and a larger installed
base of customers than we do. As a result, these competitors may be able to
respond to new or emerging technologies and changes in customer requirements
faster and more effectively than we can, or to devote greater resources to the
development, promotion and sale of products than we can. Current and potential
competitors have established, and may in the future establish, cooperative
relationships among themselves or with third parties, including mergers or
acquisitions, to increase the ability of their products to address the needs of
our current or prospective end-user customers. If these competitors were to
acquire significant market share, it could have a material adverse effect on our
business, financial condition or results of operations.
WE MAY NOT BE ABLE TO GROW OUR BUSINESS AS PLANNED IF WE DO NOT MAINTAIN
SUCCESSFUL RELATIONSHIPS WITH OUR RESELLERS AND CONTINUE TO RECRUIT AND TRAIN
ADDITIONAL RESELLERS
Our ability to achieve revenue growth in the future will depend in part on
our success in maintaining successful relationships with our existing and future
resellers and in recruiting and training additional resellers. We rely primarily
on resellers to market and support our products. We are still developing and
refining our reseller distribution network and may be unable to attract
additional resellers with both voice and data expertise that will be able to
market our products effectively and that will be qualified to provide timely and
cost-effective customer support and service. We generally do not have long-term
or exclusive agreements with our resellers, and the loss of specific larger
resellers or a significant number of resellers could materially adversely affect
our business, financial condition or results of operations.
RAPID TECHNOLOGICAL CHANGE MAY CAUSE US TO INCUR SIGNIFICANT DEVELOPMENT COSTS
AND PREVENT US FROM ATTRACTING NEW CUSTOMERS
The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, uncertain product life
cycles and changing end-user customer demands. The introduction of products
embodying new technologies and the emergence of new industry standards could
render existing products obsolete or unmarketable and cause us to incur
significant development costs.
A DECLINE IN MARKET ACCEPTANCE FOR MICROSOFT CORPORATION TECHNOLOGIES ON WHICH
OUR PRODUCTS RELY COULD HAVE A MATERIAL ADVERSE EFFECT ON US
EIC currently runs only on Microsoft Windows NT-Registered Trademark-
servers. In addition, our products use other Microsoft Corporation technologies,
including Microsoft Exchange Server-Registered Trademark- and Microsoft SQL
Server-Registered Trademark-. Although we believe that Microsoft technologies
will continue to be widely used by businesses, we cannot assure you that
businesses will adopt these technologies as anticipated or will not in the
future migrate to other computing technologies that we do not currently support.
A decline in market acceptance for Microsoft technologies or the increased
acceptance of other server technologies could cause us to incur significant
development costs and could have a material adverse effect on our ability to
market our current products. In addition, our products and technologies must
continue to be compatible with new developments in Microsoft technologies.
9
<PAGE>
OUR FUTURE BUSINESS PROSPECTS DEPEND IN PART ON OUR ABILITY TO MAINTAIN AND
IMPROVE OUR CURRENT PRODUCTS AND DEVELOP NEW PRODUCTS
We believe that our future business prospects depend in large part on our
ability to maintain and improve our current products and to develop new products
on a timely basis. Our products will have to achieve market acceptance, maintain
technological competitiveness and meet an expanding range of end-user customer
requirements. As a result of the complexities inherent in our products, major
new products and product enhancements require long development and testing
periods. We may not be successful in developing and marketing, on a timely and
cost effective basis, product enhancements or new products that respond to
technological change, evolving industry standards or end-user customer
requirements. We may also experience difficulties that could delay or prevent
the successful development, introduction or marketing of product enhancements,
and our new products and product enhancements may not achieve market acceptance.
Significant delays in the general availability of new releases of our products
or significant problems in the installation or implementation of new releases of
our products could have a material adverse effect on our business, financial
condition or results of operations.
DEMAND FOR COMMUNICATIONS AND INTERACTION MANAGEMENT SOFTWARE MAY GROW MORE
SLOWLY THAN WE CURRENTLY ANTICIPATE
All of our revenues have been generated from licenses of our EIC software or
complementary products, and related support, educational and professional
services. We expect these products and services to account for the majority of
our revenues for the foreseeable future. Although we believe demand for the
functions performed by EIC is high, and growth in demand has accelerated in
recent years, particularly among call centers, the market for our products and
services is still emerging. Further, our growth plans require us to successfully
attract end-user customers in our two other target markets, enterprises and
service providers, which have been much slower to adopt software technologies
such as our EIC product. If the demand for communications and interaction
management software does not continue to grow as anticipated within each of our
three targeted markets, our ability to grow our business as planned could be
materially adversely affected.
WE MAY BE UNABLE TO ADAPT OUR SOFTWARE IN A WAY THAT WILL PERMIT US TO SERVE
LARGE, SINGLE-SITE END-USER CUSTOMERS
EIC currently serves small to medium sized call centers and enterprises with
approximately 25 to 300 users at a single location. As these organizations
expand to include multiple locations, EIC can be customized to increase the
number of telephone lines, extensions and users. However, EIC cannot currently
meet the communications needs of organizations with more than 200 users at a
single call center location or 300 users at a single enterprise location. We
will need to adapt our software to serve larger single-site organizations. We
may not be able to adapt our software in a timely or cost effective manner in a
way that will permit us to serve these customers. This inability could have a
material adverse effect on our business, financial condition or results of
operations.
DIALOGIC CORPORATION MAY BECOME UNWILLING OR UNABLE TO CONTINUE TO MANUFACTURE
AND SUPPLY US WITH VOICE PROCESSING BOARDS
Dialogic Corporation is currently our only supplier of the voice processing
boards that are necessary for the operation of EIC. If Dialogic Corporation
becomes unable or unwilling to continue to manufacture and supply these voice
processing boards in the volume, price and technical specifications we require,
then we would have to adapt our products to a substitute supplier. Introducing a
new supplier of voice processing boards could result in unforeseen additional
product development or customization costs and could also introduce hardware and
software operating or compatibility problems. These problems could affect
product shipments, be costly to correct or damage our
10
<PAGE>
reputation in the markets in which we operate, and could have a material adverse
affect on our business, financial condition or results of operations.
In addition, Microsoft Corporation recently purchased a 5% equity stake in
Dialogic Corporation. While Microsoft Corporation does not currently offer a
product that competes with our EIC, Microsoft Corporation could potentially
develop a competitive or superior product or attempt to affect our current
relationship with Dialogic Corporation.
In addition, Dialogic Corporation's CT Media offers some of the
functionality that EIC provides and consequently could make it easier for
competitors or potential competitors to provide products competitive with ours.
If CT Media were to become an industry standard, our failure to adopt it could
disadvantage us in competitive situations. See "Certain
Transactions--Relationship with Dialogic."
WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS ADEQUATELY
We regard our software products as proprietary. In an effort to protect our
proprietary rights, we rely primarily on a combination of copyright, trademark
and trade secret laws, as well as licensing and other agreements with
consultants, suppliers, strategic partners, resellers and end-user customers,
and employee and third-party non-disclosure agreements. These laws and
agreements provide only limited protection of our proprietary rights. In
addition, we have not signed agreements containing these types of protective
provisions in every case, and the contractual provisions that are in place and
the protection they provide vary and may not provide us with adequate protection
in all circumstances. Although we are investigating the feasibility of seeking
patents, we have no patents or patent applications pending for our software, and
we have no registered copyrights. Because our means of protecting our
proprietary rights may not be adequate, it may be possible for a third party to
copy or otherwise obtain and use our technology without authorization. A third
party could also develop similar technology independently. In addition, the laws
of some countries in which we sell our products do not protect our software and
intellectual property rights to the same extent as the laws of the United
States. Unauthorized copying, use or reverse engineering of our products could
materially adversely affect our business, results of operations or financial
condition.
We license technology that is embedded in our products from others. If one
or more of these licenses terminates or cannot be renewed on satisfactory terms,
we would have to modify the affected products to use alternative technology or
eliminate the affected product function, either of which could have a material
adverse effect on us.
INFRINGEMENT CLAIMS COULD ADVERSELY AFFECT US
A third party could claim that our technology infringes its proprietary
rights. As the number of software products in our target markets increases and
the functionality of these products overlap, we believe that software developers
may face infringement claims. For example, various patent rights have been
asserted against interfaces between PBX hardware and computer network systems.
Although we believe that our products do not infringe any of these patents
because, among other reasons, our products are designed to replace PBXs and not
to create such interfaces, if these patents were interpreted broadly, claims of
infringement of these patents could have a material adverse affect on us.
Infringement claims, even if without merit, can be time consuming and
expensive to defend. A third party asserting infringement claims against us or
our customers with respect to our current or future products may require us to
enter into costly royalty arrangements or litigation. See "Business--
Intellectual Property and Other Proprietary Rights."
11
<PAGE>
WE DEPEND ON KEY PERSONNEL AND WILL NEED TO RECRUIT ADDITIONAL SKILLED PERSONNEL
TO CONDUCT AND GROW OUR BUSINESS
Our success depends in large part on the continued service of our key
personnel, particularly Dr. Donald E. Brown, our co-founder, Chief Executive
Officer and principal stockholder, and Dr. Michael D. Gagle, our Chief
Scientist. The loss of the services of either of these individuals or any key
personnel could have a material adverse effect on our business, financial
condition or results of operations. We have a key man life insurance policy on
Dr. Brown in the amount of $3.0 million. Our future success also depends upon
our ability to attract, train, assimilate and retain additional qualified
personnel. Competition for persons with skills in the software industry is
intense, particularly for those with relevant technical experience. We cannot
assure you that we will be able to retain our key employees or that we can
attract, train, assimilate or retain other highly qualified personnel in the
future. See "Management."
WE MAY PURSUE ACQUISITIONS THAT BY THEIR NATURE ARE RISKY AND THAT MAY NOT BE
SUCCESSFUL
In the future we may pursue acquisitions to diversify our product offerings
and customer base or for other strategic purposes. We have no prior history of
making acquisitions and we cannot assure you that any future acquisitions will
be successful. The following are some of the risks associated with acquisitions
that could have a material adverse effect on our business, financial condition
or results of operations:
- We cannot ensure that any acquired businesses will achieve anticipated
revenues, earnings or cash flow.
- We may be unable to integrate acquired businesses successfully and realize
anticipated economic, operational and other benefits in a timely manner,
particularly if we acquire a business in a market in which we have limited
or no current expertise, or with a corporate culture different from our
own. If we are unable to integrate acquired businesses successfully, we
could incur substantial costs and delays or other operational, technical
or financial problems.
- Acquisitions could disrupt our ongoing business, distract management,
divert resources and make it difficult to maintain our current business
standards, controls and procedures.
- We may finance future acquisitions by issuing common stock for some or all
of the purchase price. This could dilute the ownership interests of our
stockholders. We may also incur additional debt or be required to
recognize amortization expense related to goodwill and other intangible
assets purchased in future acquisitions.
- We would be competing with other firms, many of which have greater
financial and other resources, to acquire attractive companies. We believe
this competition will increase, making it more difficult to acquire
suitable companies on acceptable terms.
OUR INTERNATIONAL OPERATIONS AND EXPANSION INVOLVE FINANCIAL AND OPERATIONAL
RISKS
The expansion of our international operations will require significant
management attention and financial resources to establish additional foreign
operations, hire additional personnel and recruit additional international
resellers. International sales accounted for 18% of our total revenues in 1997,
16% of our total revenues in 1998 and 20% of our total revenues in the first
quarter of 1999. We intend to continue to expand our international operations
and enter additional international markets. Revenues from international
expansion may be inadequate to cover the expenses of international expansion. In
addition to the foreign currency risks described below, other risks inherent in
our international business activities generally could include the following:
- economic and political instability;
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<PAGE>
- unexpected changes in foreign regulatory requirements and laws;
- tariffs and other trade barriers;
- timing, cost and potential difficulty of adapting our software products to
the local language in those foreign countries that do not use the alphabet
that English uses;
- lack of acceptance of our products in foreign countries;
- longer sales cycles and accounts receivable payment cycles;
- potentially adverse tax consequences; and
- restrictions on the repatriation of funds.
FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN LOSSES
Our international revenues are generally denominated in U.S. Dollars, but
our international expenses are generally denominated in local foreign
currencies. Although foreign currency translation gains and losses have been
immaterial to date, fluctuations in exchange rates between the U.S. Dollar and
other currencies could have a material adverse effect on our business, financial
condition or results of operations, and particularly on our operating margins.
To date, we have not sought to hedge the risks associated with fluctuations in
exchange rates, but we may undertake to do so in the future. Any hedging
techniques we implement in the future may not be successful. Exchange rate
fluctuations could also make our products more expensive than competitive
products not subject to these fluctuations, which could adversely affect our
revenues and profitability in international markets.
OUR PRODUCTS COULD HAVE DEFECTS FOR WHICH WE ARE POTENTIALLY LIABLE
Our products, including components supplied by others, may contain errors or
defects, especially when first introduced or when new versions are released.
Despite internal product testing, we have in the past discovered software errors
in some of our products after their introduction. Errors in new products or
releases could be found after commencement of commercial shipments, and this
could result in additional development costs, diversion of technical and other
resources from our other development efforts, or the loss of credibility with
current or future end-user customers. This could result in a loss of revenue or
delay in market acceptance of our products, which could have a material adverse
effect upon our business, financial condition or results of operations.
Our license agreements with our end-user customers typically contain
provisions designed to limit our exposure to potential product liability and
some contract claims. However, not all of these agreements contain these types
of provisions and, where present, these provisions vary as to their terms and
may not be effective under the laws of some jurisdictions. A product liability,
warranty, or other claim brought against us could have a material adverse effect
on our business, financial condition or results of operations.
Because our solution consists of our software running on a Windows
NT-Registered Trademark- server and Dialogic Corporation voice processing
boards, it is inherently more prone to performance interruptions for our
end-user customers than traditional non-software based products. Performance
interruptions at our end-user customer sites, most of which currently do not
have back-up systems, could affect demand for our products or give rise to
claims against us.
YEAR 2000 ISSUES MAY ADVERSELY AFFECT OUR BUSINESS
In the course of our business, we test and evaluate our software products
for Year 2000 compliance. Based on this testing and evaluation, we believe that
the current versions of our products are capable of adequately distinguishing
21st century dates from 20th century dates. We have warranted
13
<PAGE>
that all of our current products are Year 2000 compliant. If any of our end-user
customers experience Year 2000 problems as a result of their use of our
products, those end-user customers could assert claims against us for damages
which, if successful, could materially adversely affect our business, financial
condition or results of operations. In addition, many of our products have
third-party technologies embedded in them, and our products at times are
integrated into enterprise systems involving sophisticated hardware and complex
software products. We cannot adequately evaluate these technologies or products
for Year 2000 compliance. We may face claims under our warranties, or otherwise,
based on Year 2000 problems in other companies' products, or issues arising from
the integration of multiple products within an overall system.
We are in the process of testing our internal management information and
other critical business systems to identify any Year 2000 problems. We also have
communicated with our resellers, vendors and key suppliers about their Year 2000
readiness. To date, we are not aware of any significant resellers, vendors or
key suppliers with Year 2000 issues that would materially affect us. However, we
cannot guarantee that the systems of other companies on which our operations
rely will be timely converted or that failure to timely convert would not have a
material adverse effect on us.
We believe that the purchasing patterns of end-user customers and potential
end-user customers may be affected by Year 2000 issues as companies expend
significant resources to correct or upgrade their current software systems for
Year 2000 compliance. These expenditures may reduce the funds available to
license software products such as those we offer. To the extent Year 2000 issues
significantly disrupt decisions to license our products or purchase our
services, our business, financial condition or results of operations could be
materially adversely affected.
For a more detailed description of our Year 2000 assessment, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
WE MAY NOT BE ABLE TO OBTAIN ADEQUATE FINANCING TO IMPLEMENT OUR GROWTH STRATEGY
Successful implementation of our growth strategy will likely require
continued access to capital. If we do not generate sufficient cash from
operations, our growth could be limited unless we are able to obtain capital
through additional debt or equity financings. We cannot assure you that debt or
equity financings will be available as required for acquisitions or other needs.
Even if financing is available, it may not be on terms that are favorable to us
or sufficient for our needs. If we are unable to obtain sufficient financing, we
may be unable to fully implement our growth strategy.
NO PRIOR PUBLIC MARKET HAS EXISTED FOR OUR SHARES
Before this offering, there has been no public market for our common stock.
We cannot assure you that an active trading market will develop or be sustained
after this offering. You may not be able to resell your shares at or above the
initial public offering price. The initial public offering price will be
determined through negotiations between the underwriters and us. See
"Underwriting."
OUR STOCK PRICE COULD BE HIGHLY VOLATILE
Our stock price could be highly volatile due to a number of factors,
including:
- actual or anticipated fluctuations in our operating results;
- announcements by us, our competitors or our end-user customers;
- changes in financial estimates of securities analysts or investors
regarding us, our industry, our competitors or our end-user customers;
- technological innovations by others;
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<PAGE>
- the operating and stock price performance of other comparable companies or
of our competitors or end-user customers; and
- general market or economic conditions.
In addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the trading prices of equity
securities of many technology companies. These price and volume fluctuations
often have been unrelated to the operating performance of the affected
companies. In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. This type of litigation, regardless of the
outcome, could result in substantial costs and a diversion of management's
attention and resources, which could materially and adversely affect our
business, financial condition or results of operations.
AVAILABILITY OF SIGNIFICANT AMOUNTS OF COMMON STOCK FOR SALE IN THE FUTURE COULD
ADVERSELY AFFECT OUR STOCK PRICE
The availability for future sale, or sales, of a substantial number of
shares of our common stock in the public market or otherwise following this
offering could adversely affect the market price for our common stock. Upon
completion of this offering, we will have outstanding shares of common
stock, assuming that the underwriters do not exercise their over-allotment
options and that no participants exercise their outstanding options under our
stock option plans. Of these shares, all of the shares sold in this offering
will be freely tradeable, unless these shares are purchased by our affiliates,
as defined in Rule 144 under the Securities Act of 1933. The remaining
shares of common stock held by those who were stockholders before this offering
will be restricted securities, as defined in Rule 144. Restricted securities may
be sold in the public market if registered or pursuant to exemptions from
registration under Rule 144. This rule would permit the sale of a substantial
number of restricted securities commencing 90 days after this offering. See
"Shares Eligible for Future Sale."
Dialogic Investment Corporation, which held 5.7% of our common stock at
March 31, 1999, and all of our executive officers and directors have agreed not
to sell or otherwise dispose of any shares of our common stock for a period of
at least 180 days after the date of this prospectus without the prior written
approval of Merrill Lynch. Merrill Lynch may, in its sole discretion and at any
time without notice, release all or any portion of these shares for sale in the
public market, which could adversely affect the price of our common stock. See
"Underwriting."
OUR PRINCIPAL STOCKHOLDERS CONTROL US
Immediately after this offering, our executive officers, directors and other
principal stockholders will, in the aggregate, beneficially own approximately
% of our outstanding common stock. Accordingly, these stockholders will be
able to control us through their ability to determine the outcome of the
election of our directors, amend our Restated Articles of Incorporation and
By-Laws and take other actions requiring the vote or consent of stockholders,
including mergers, going private transactions and other extraordinary
transactions, and the terms of any of these transactions. See "Principal and
Selling Stockholders."
ANTITAKEOVER PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND INDIANA LAW MAKE ANY
CHANGE IN CONTROL OF US MORE DIFFICULT
Our Restated Articles of Incorporation and By-Laws contain provisions that
may have the effect of delaying, deferring or preventing a change in control of
us, may discourage bids at a premium over the
15
<PAGE>
market price of our common stock and may adversely affect the market price of
our common stock, and the voting and other rights of the holders of our common
stock. These provisions include:
- the division of our board of directors into three classes serving
staggered three-year terms;
- removal of directors only for cause and only upon a 66 2/3% stockholder
vote;
- prohibiting stockholders from calling a special meeting of stockholders;
- the ability to issue additional shares of our common stock or preferred
stock without stockholder approval; and
- advance notice requirements for raising business or making nominations at
stockholders' meetings.
The Indiana corporation law contains business combination provisions that,
in general, prohibit for five years any business combination with a beneficial
owner of 10% or more of our common stock unless the holder's acquisition of the
stock was approved in advance by our board of directors. The Indiana corporation
law also contains control share acquisition provisions that limit the ability of
certain stockholders to vote their shares unless their control share acquisition
was approved in advance. See "Description of Capital Stock."
WE MAY BE UNABLE TO MANAGE SIGNIFICANT UNALLOCATED NET PROCEEDS FROM THIS
OFFERING EFFECTIVELY
We will have a significant amount of net proceeds from this offering that we
have not allocated to a specific use. The failure of management to apply these
proceeds effectively could materially and adversely affect our business,
financial condition or results of operations and, therefore, the market price of
our common stock. We will use a portion of the net proceeds of this offering to
repay all indebtedness, including accrued interest, and to pay deferred
compensation and other non-interest bearing accounts payable to our principal
stockholder, which totaled approximately $7.7 million as of March 31, 1999. We
have not designated any specific uses for the remaining net proceeds of this
offering. Therefore, we will have broad discretion in how we use the net
proceeds of this offering, which may include general corporate purposes, such as
working capital and potential acquisitions. See "Use of Proceeds."
INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION
The assumed initial public offering price is substantially higher than the
net tangible book value per share of the outstanding common stock immediately
after this offering, which was a deficit of $
per share as of March 31, 1999. If you purchase our common stock in this
offering, you will incur immediate and substantial dilution in the net tangible
book value per share of common stock from the price you pay per share of common
stock. We also have outstanding a large number of stock options to purchase
common stock with exercise prices significantly below the assumed initial public
offering price of the common stock. To the extent these options are exercised,
there will be further dilution. We intend to continue to grant stock options to
our employees as part of our general compensation practices. See "Dilution."
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USE OF PROCEEDS
We expect to receive approximately $ from the sale of the
shares of common stock offered by us at an assumed initial public offering price
of $ per share, after deducting the underwriting discounts of $ and
estimated expenses of $ to be paid by us. We expect to receive an
additional $ of net proceeds if the underwriters exercise their
overallotment options in full. We will not receive any proceeds from the sale of
common stock by the selling stockholder.
We intend to use the net proceeds of this offering (1) for general corporate
purposes, including working capital and potential acquisitions, (2) to repay
indebtedness of approximately $7.2 million, including accrued interest, that we
owe to our principal stockholder, which was advanced for working capital
purposes, has an interest rate of 10% and matures on December 31, 2001, and (3)
to pay approximately $0.5 million in deferred compensation and other
non-interest bearing accounts payable to our principal stockholder. Pending
these uses, we expect to invest the net proceeds from this offering in
short-term investment grade, interest-bearing securities. While we engage in
discussions relating to potential acquisitions from time to time, we have
entered into no agreements with respect to these transactions.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We do not anticipate
that we will pay any cash dividends on our common stock in the foreseeable
future and we plan to retain our earnings to finance operations and future
growth. The declaration and payment of dividends on our common stock will be at
the discretion of our board of directors and must comply with applicable law.
Any decisions to pay dividends in the future will depend on general business
conditions, our financial condition and other factors our board of directors may
in the future consider to be relevant.
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<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of March 31,
1999, and our capitalization as adjusted to reflect our receipt and application
of the estimated net proceeds, at an assumed initial public offering price of
$ per share, from the sale of the shares of common stock offered by us in
this prospectus. You should read this table with the financial statements and
the notes to the financial statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Accounts payable and deferred compensation--stockholder................................ $ 512 $ --
Notes payable and accrued interest--stockholder........................................ 7,170 --
Capital lease obligations.............................................................. 794 794
---------- -----
8,476 794
Stockholders' deficit:
Preferred stock, without par value, 10,000,000 shares authorized, none outstanding,
actual and as adjusted............................................................... -- --
Common stock, $.01 par value; 100,000,000 shares authorized, 7,077,510 shares issued
and outstanding, actual; shares issued and outstanding, as adjusted.......... 10,779
Accumulated deficit.................................................................... (16,864)
---------- -----
Total stockholders' deficit.......................................................... (6,085)
---------- -----
Total capitalization............................................................... $ 2,391
---------- -----
---------- -----
</TABLE>
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DILUTION
As of March 31, 1999, our net tangible book value (deficit) was $(6.1)
million or $ per share of common stock. "Net tangible book value (deficit)"
per share represents the amount of our total tangible assets reduced by the
amount of our total liabilities, divided by the number of shares of common stock
outstanding. As of March 31, 1999, our net tangible book value (deficit), on a
pro forma basis as adjusted for the sale of the shares offered by us in this
offering at an assumed initial public offering price of $ per share and the
application of the estimated net proceeds from that sale of approximately $
million, would have been $ , or approximately $ per share. This
represents an immediate increase of $ per share to existing stockholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Net tangible book value (deficit) per share as of March 31,
1999........................................................ $
Increase per share attributable to new investors..............
---------
Pro forma net tangible book value (deficit) per share after this
offering......................................................
---------
Dilution per share to new investors............................. $
---------
---------
</TABLE>
The following table summarizes as of March 31, 1999 the differences between
the total consideration paid and the average price per share paid by the
existing stockholders and the new investors with respect to the number of shares
of common stock purchased from us assuming an initial public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 7,077,510 $ 10,779,000 $
New investors........................... -- --
Total................................. 100% 100%
</TABLE>
If the underwriters exercise their over-allotment options in full, the
resulting sale of shares by the selling stockholder in this offering would
reduce the number of shares held by existing stockholders to shares, or
approximately % of the total number of shares of common stock to be
outstanding after this offering, and would increase the number of shares held by
new investors to shares, or approximately % of the total number of
shares of common stock to be outstanding after this offering.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide selected consolidated financial data of
Interactive Intelligence. We prepared this information using our unaudited
consolidated financial statements for the period from October 1, 1994
(inception) through December 31, 1994 and the three-month periods ended March
31, 1998 and 1999 and from our audited consolidated financial statements for
each of the years in the four-year period ended December 31, 1998. You should
read this selected consolidated financial data together with our consolidated
financial statements and notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this prospectus. In
our opinion, our selected consolidated financial data for the period from
October 1, 1994 (inception) through December 31, 1994 and the three-month
periods ended March 31, 1998 and 1999 include all adjustments, consisting of
only normal recurring adjustments, necessary for a fair presentation of that
data. The selected consolidated financial data do not necessarily indicate the
results to be expected in the future.
<TABLE>
<CAPTION>
THREE MONTHS
OCTOBER 1, 1994 YEAR ENDED DECEMBER 31, ENDED MARCH 31,
(INCEPTION) TO --------------------------------- ---------------------
DECEMBER 31, 1994 1995 1996 1997 1998 1998 1999
----------------- ------ ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Software......................... $ -- $ -- $ -- $ 1,265 $ 7,662 $ 1,163 $ 2,372
Services......................... -- -- -- 325 1,349 151 647
------ ------ ------- ------- ------- ------- ------------
Total revenues..................... -- -- -- 1,590 9,011 1,314 3,019
Costs and expenses:
Costs of software................ -- -- -- 38 59 8 24
Costs of services................ -- -- -- 1,258 3,381 648 1,068
Sales and marketing.............. -- 19 157 2,519 6,623 1,192 2,091
Research and development......... 8 297 987 2,118 4,065 834 1,363
General and administrative....... -- 99 192 742 1,407 296 507
------ ------ ------- ------- ------- ------- ------------
Total costs and expenses........... 8 415 1,336 6,675 15,535 2,978 5,053
------ ------ ------- ------- ------- ------- ------------
Operating loss..................... (8) (415) (1,336) (5,085) (6,524) (1,664) (2,034)
Interest expense, net.............. -- 1 43 361 868 184 189
------ ------ ------- ------- ------- ------- ------------
Loss before income taxes........... (8) (416) (1,379) (5,446) (7,392) (1,848) (2,223)
Income taxes....................... -- -- -- -- -- -- --
------ ------ ------- ------- ------- ------- ------------
Net loss........................... $ (8) $ (416) $(1,379) $(5,446) $(7,392) $(1,848) $(2,223)
------ ------ ------- ------- ------- ------- ------------
------ ------ ------- ------- ------- ------- ------------
Basic and diluted net loss per
share............................ $(0.01) $(0.32) $ (0.49) $ (1.07) $ (1.26) $ (0.34) $ (0.32)
Shares used in per share
computation...................... 1,000 1,310 2,811 5,095 5,877 5,449 6,945
<CAPTION>
AT DECEMBER 31,
------------------------------------------ AT MARCH 31,
1994 1995 1996 1997 1998 1999
------ ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........ $ 11 $ 51 $ 23 $ 390 $ 2,021 $ 1,401
Working capital (deficit)........ (4) 26 (544) (1,575) 1,731 (352)
Total assets..................... 32 133 438 3,141 8,239 7,278
Long-term debt................... -- -- 593 5,872 9,490 8,476
Total shareholders' equity
(deficit)...................... 18 107 (803) (6,217) (5,154) (6,085)
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section includes a number of forward-looking statements that reflect
our current views with respect to future events and financial performance. See
"Forward-Looking Statements."
OVERVIEW
We are a leading developer of communications and interaction management
software that allows our customers to automate critical business processes by
integrating their communications systems with their information technology. When
installed on a Windows NT-Registered Trademark- server, our flagship product,
Enterprise Interaction Center or EIC, provides a single, enterprise-wide
solution capable of processing thousands of interactions per hour, including
telephone calls, e-mails, faxes, voice mail messages, Internet chat sessions,
Web callback requests and voice over Net calls. EIC is a unique software
solution that replaces a variety of traditional devices such as private branch
exchange devices or PBXs, interactive voice response systems or IVRs, automatic
call distributors or ACDs, voice mail systems, fax servers, call recorders and
computer telephony integration or CTI gateways.
We commenced operations in October 1994. Through the end of 1996, we focused
primarily on research and development activities. EIC was released in March
1997. In 1997 and 1998, we expanded our operations to capitalize on the
increased market demand for communications and interaction management software.
We decided, at the expense of profitability, to continue investing significantly
in research and development, and to accelerate our investments in marketing,
services and sales operations. We had no revenue in 1996, and our revenues
totaled $1.6 million in 1997 and $9.0 million in 1998. Since early 1997, we
have:
- hired more than 120 employees;
- established relationships with over 90 North American and international
resellers;
- located field sales personnel in 16 North American locations to support
and manage our reseller network and entered the European and Asia/Pacific
markets by locating personnel in France, the Netherlands, the United
Kingdom, Japan and Korea.
- released local language versions of EIC in French, German, Italian,
Japanese, Korean and Norwegian;
- released two upgrades to EIC;
- released an additional complementary software product, Interaction
Recorder; and
- developed and currently are testing two additional complementary software
products, Interaction Dialer and Interaction Director.
We believe our investments in research and development and in marketing,
services and sales operations will continue to be critical to our revenue
growth. However, these investments have also significantly increased our
operating expenses, contributing to the net and operating losses that we have
incurred in each fiscal quarter since our formation. We anticipate that our
operating expenses will increase substantially for the foreseeable future as we
continue to expand our research and development, marketing, services and sales
operations. Accordingly, we are likely to continue to experience losses and
negative cash flows from operations in future quarters. We cannot assure you
when or if we will achieve profitability or, if achieved, that we will be able
to sustain profitability. Our operating results have varied significantly from
quarter to quarter and may continue to do so in the future. As a result, we
believe that period-to-period comparisons of our operating results are not
necessarily meaningful, and you should not rely on them as an indication of our
future performance. See "Risk Factors."
21
<PAGE>
SOURCES OF REVENUE AND REVENUE RECOGNITION POLICY
We generate a majority of our revenues from software license fees. Most of
our software license fees originate from the marketing efforts of our resellers,
who are authorized to place software orders with us on behalf of end-user
customers. We share end-user customer software license fees with these resellers
in varying percentages of our list price, according to the terms of their
reseller agreements. In addition to generating software license fees indirectly
through resellers, we also receive some software license fees from end-user
customers that we deal with directly.
In accordance with AICPA Statement of Position (SOP) 97-2 as amended by SOP
98-4 and SOP 98-9, software license revenues can be recognized upon the shipment
of software if (1) persuasive evidence of an arrangement exists, (2) sufficient
vendor-specific objective evidence exists to support allocating the total fee to
all elements of the arrangement, (3) the fee is fixed or determinable, and (4)
collection is probable. As a result, we typically recognize software license
fees only when a reseller places a binding order for our software, which gives
the reseller the right to distribute our products to end-user customers. If the
order includes an acceptance period, we recognize revenues upon the earlier of
order acceptance or the expiration of the acceptance period.
We also generate revenues from services that we provide to our resellers and
end-user customers. Services revenues include product maintenance revenues,
which consist of technical support and product upgrades, educational services
and professional services. Our initial software license generally includes one
year of maintenance. Generally, to continue using our software after this
initial period, our end-user customers must purchase annual ongoing product
maintenance, which is priced at approximately 18% of the current list price of
the licensed product. We share maintenance revenues with those resellers who
provide first-level technical support according to the terms of their reseller
agreements. When these revenues are shared with resellers, we typically receive
between 50% and 70% of the amount charged to the end-user customer. We recognize
product maintenance revenues on a straight-line basis over the term of the
initial software license and each subsequent annual product maintenance
purchase. Revenues from educational services, which consist of training courses
for resellers and end-user customers, and professional services, which include
implementing and customizing our products for an end-user customer, are
typically recognized as the related services are performed.
In 1997, no end-user customer accounted for 10% or more of our revenues,
though one reseller accounted for 17% of our revenues. At December 31, 1997, six
resellers represented approximately 55% of our outstanding accounts receivable
balance. In 1998, no end-user customer or reseller accounted for 10% or more of
our revenues. At December 31, 1998, six resellers represented approximately 41%
of our outstanding accounts receivable balance. For the three months ended March
31, 1999, no end-user customer or reseller accounted for 10% or more of our
revenues. At March 31, 1999, seven resellers represented approximately 42% of
our outstanding accounts receivable balance. See Note 7 of our notes to
consolidated financial statements.
22
<PAGE>
HISTORICAL RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our consolidated
financial information expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Software......................................................... -- 80% 85% 89% 79%
Services......................................................... -- 20 15 11 21
--- --- --- --- ---
Total revenues..................................................... -- 100 100 100 100
Costs and expenses:
Costs of software................................................ -- 2 1 1 1
Costs of services................................................ -- 79 37 49 36
Sales and marketing.............................................. * 159 73 91 69
Research and development......................................... * 133 45 63 45
General and administrative....................................... * 47 16 23 17
--- --- --- --- ---
Total costs and expenses........................................... * 420 172 227 168
--- --- --- --- ---
Operating loss..................................................... * (320) (72) (127) (68)
Interest expense, net.............................................. * 23 10 14 6
--- --- --- --- ---
Loss before income taxes........................................... * (343) (82) (141) (74)
Income taxes....................................................... * -- -- -- --
--- --- --- --- ---
Net loss........................................................... * (343)% (82)% (141)% (74)%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
- ------------------------
* Not a meaningful number because no revenues were recognized in 1996.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1999
REVENUES
Our total revenues increased 131% from $1.3 million for the three months
ended March 31, 1998 to $3.0 million for the three months ended March 31, 1999.
International revenues were $55,000 for the three months ended March 31, 1998
and $600,000 for the three months ended March 31, 1999. The increase in total
revenues resulted primarily from significant increases in the number of software
licenses. We anticipate that software revenues will continue to represent the
majority of our revenues for the foreseeable future.
SOFTWARE. Our software revenues increased 100% from $1.2 million for the
three months ended March 31, 1998 to $2.4 million for the three months ended
March 31, 1999. This increase in software revenues resulted from a significantly
higher number of software licenses as a result of the continued market
acceptance of EIC, the establishment of sales offices in Europe and the
Asia/Pacific region, which led to increasing international demand, and product
enhancements.
SERVICES. Services revenues increased from $151,000 for the three months
ended March 31, 1998 to $647,000 for the three months ended March 31, 1999. This
increase in services revenues resulted primarily from an increase in product
maintenance revenues, which grew significantly due to our expanding installed
base of end-user customers. In addition, demand for training from both existing
and new resellers and, to a lesser extent, end-user customers translated into
increasing education revenues.
23
<PAGE>
COSTS AND EXPENSES
As a percentage of total revenues, our total costs and expenses decreased
from 227% for the three months ended March 31, 1998 to 167% for the three months
ended March 31, 1999. This decrease resulted primarily from revenues increasing
faster than expenses. Our total costs and expenses primarily reflect our
investments in research and development, marketing, sales and services efforts.
Our total costs and expenses increased from $3.0 million for the three months
ended March 31, 1998 to $5.1 million for the three months ended March 31, 1999.
The increase in total costs and expenses resulted from substantial investments
in these efforts.
COSTS OF SOFTWARE. Costs of software consist primarily of product royalties
paid to third-parties for the use of their technologies in our products. Costs
of software increased from $8,000 for the three months ended March 31, 1998 to
$24,000 for the three months ended March 31, 1999, representing 1% of software
revenues in both periods. The increase resulted primarily from an increase in
the number of end-user customers and related software licenses.
COSTS OF SERVICES. Costs of services consist primarily of compensation
expenses for technical support, education and professional services personnel
and other costs associated with supporting our resellers and end-user customers.
Costs of services increased from $648,000 for the three months ended March 31,
1998 to $1.1 million for the three months ended March 31, 1999. This represents
429% of service revenues for the three months ended March 31, 1998 and 165% of
service revenues for the three months ended March 31, 1999. The increase in
amount was due to a concentrated effort to maximize both reseller effectiveness
and end-user customer satisfaction.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
marketing expenses, including trade shows, public relations, telemarketing
campaigns and other promotional expenses, compensation expenses, including
commissions, and travel expenses. Sales and marketing expenses increased from
$1.2 million for the three months ended March 31, 1998 to $2.1 million for the
three months ended March 31, 1999. The increase reflects the hiring of
additional sales and marketing personnel and expanded marketing activities.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of compensation expenses for our developers and, to a lesser extent,
third-party efforts to adapt our products for specific countries. Research and
development expenses increased from $834,000 for the three months ended March
31, 1998 to $1.4 million for the three months ended March 31, 1999. Currently,
all costs related to research and development of our products are charged to
research and development expense as incurred. The increase in research and
development expenses related primarily to the addition of software developers
required to enhance existing products and develop related products, and
third-party efforts to adapt our products for the Japanese and Korean markets.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation for our administrative, financial and information
technology personnel and a number of non-allocable costs, including legal fees,
accounting fees and bad debts. General and administrative expenses increased
from $296,000 for the three months ended March 31, 1998 to $507,000 for the
three months ended March 31, 1999. The increase resulted primarily from the
addition of personnel to support the growth of our business.
INTEREST EXPENSE, NET
Interest expense, net is generated primarily from debt owed to our principal
stockholder and, to a lesser extent, from various commercial lines of credit and
capital lease lines of credit. Interest expense, net was $184,000 for the three
months ended March 31, 1998 and $189,000 for the three months ended March 31,
1999. The amounts were roughly equivalent due to a similar amount of debt
outstanding during both periods.
24
<PAGE>
INCOME TAXES
For the three months ended March 31, 1998, we were an S-corporation. As an
S-corporation, any tax benefit flowed through to our stockholders. We were a
C-corporation during the three months ended March 31, 1999, but we did not
recognize a tax benefit during that period because of the uncertainty of
eventually realizing these benefits. See Note 9 of our notes to consolidated
financial statements.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
REVENUES
Our total revenues increased from none in 1996 to $1.6 million in 1997 and
$9.0 million in 1998. International revenues were $292,000 in 1997 and $1.4
million in 1998. We do not believe that the percentage increases in revenues
achieved in prior periods should be anticipated in future periods. We anticipate
that software revenues will continue to represent a majority of our revenues for
the foreseeable future.
SOFTWARE. Our software revenues increased from none in 1996 to $1.3 million
in 1997 and $7.7 million in 1998. The increase in software revenues from 1996 to
1997 resulted primarily from the release of our first product, EIC, and our
initial North American sales efforts. The increase in software revenues from
1997 to 1998 resulted from a growing market acceptance of EIC, our growing sales
and marketing efforts and product-related functional and performance
enhancements.
SERVICES. Services revenues increased from none in 1996 to $300,000 in 1997
and $1.3 million in 1998. The increase in services revenues from 1996 to 1998
resulted primarily from the growth in maintenance revenues as our installed
customer base increased over the two-year period. In addition, we established
our educational services in 1997 and our professional services in 1998. The
establishment of these services has translated into an increasing amount of
revenues over the two-year period. We expect product maintenance revenues, which
account for a majority of our services revenues, to increase substantially for
the foreseeable future, primarily as a result of our growing installed customer
base. We also expect education and professional revenues to increase, primarily
as a result of increased reseller demand for technical and sales training and
the growth of our internal professional services group.
COSTS AND EXPENSES
As a percentage of total revenues, our costs and expenses decreased from
420% in 1997 to 172% in 1998. This decrease resulted primarily from revenues
increasing faster than expenses. Our total costs and expenses increased from
$1.3 million in 1996 to $6.7 million in 1997 and $15.5 million in 1998,
primarily reflecting substantial increases in investments in our research and
development, marketing, sales and services efforts over the two-year period.
These investments included headcount additions of 48 employees in 1997 and 60
employees in 1998.
COSTS OF SOFTWARE. Costs of software increased from none in 1996 to $38,000
in 1997 and $59,000 in 1998, representing 3% of software revenues in 1997 and 1%
of software revenues in 1998. The increases in amount from 1996 to 1998 resulted
primarily from our growing end-user customer base. We expect product royalties
to grow as software revenues continue to increase and we integrate additional
third-party functions and features into our product offerings.
COSTS OF SERVICES. Costs of services increased from none in 1996 to $1.3
million in 1997 and $3.4 million in 1998. The increases from 1996 to 1998
reflect the hiring of additional technical support, education and field services
personnel in excess of related revenues. We expect to make continued
25
<PAGE>
investments in our service organizations to support our end-user customer base
and resellers. However, we expect that costs of services will increase at a
slower rate than services revenues.
SALES AND MARKETING. Sales and marketing increased from $157,000 in 1996 to
$2.5 million in 1997 and $6.6 million in 1998. The increases in sales and
marketing expenses from 1996 to 1998 resulted primarily from our initial and
ongoing investment in sales and marketing personnel. This investment included
the establishment of the initial North American field sales offices in 1997 and
European and Asian/Pacific region sales offices in 1998. In addition, we
increased our marketing activities, including tradeshows, public relations
activities and advertisements, over the two-year period. We currently plan to
continue investing significantly in sales and marketing efforts.
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$1.0 million in 1996 to $2.1 million in 1997 and $4.1 million in 1998. The
increases in research and development expenses from 1996 to 1998 related
primarily to the increase in software developers and testing personnel to
develop and enhance EIC and related products. We believe that our significant
investment in research and development has been critical to our market
acceptance to date and will continue to be so in the future.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $192,000 in 1996 to $742,000 in 1997 and $1.4 million in 1998. The
increases from 1996 to 1998 were primarily due to additional personnel necessary
to support our growing operations. We believe our general and administrative
expenses will continue to increase as we expand our administrative
infrastructure and incur expenses associated with becoming a public company.
INTEREST EXPENSE, NET
Interest expense, net was $43,000 in 1996, $361,000 in 1997 and $868,000 in
1998. The increases from 1996 to 1998 resulted primarily from significant
increases in debt payable to our principal stockholder, various commercial lines
of credit and the interest portion of capital leases. See Notes 3 and 4 of our
notes to consolidated financial statements.
INCOME TAXES
We were an S-corporation until November 5, 1998. As an S-corporation, any
tax benefit flowed through to our stockholders. As a result, we did not realize
any tax benefit from our net losses through November 5, 1998. We were a
C-corporation for approximately two months in 1998, but we did not recognize a
tax benefit because of the uncertainty of eventually realizing these benefits.
See Note 9 of our notes to consolidated financial statements.
26
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our consolidated
financial information for the last nine quarters expressed in dollars and as a
percentage of total revenues. We prepared this information using our unaudited
interim consolidated financial statements that, in our opinion, have been
prepared on a basis consistent with our annual consolidated financial
statements. We believe that these interim statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of this information when read in conjunction with our consolidated
financial statements and the notes to those financial statements. The operating
results for any quarter do not necessarily indicate the results to be expected
for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998 1998 1998 1998 1999
--------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Software............... $ -- $ 130 $ 246 $ 889 $ 1,163 $ 1,817 $ 2,203 $ 2,479 $ 2,372
Services............... -- 43 132 150 151 256 437 505 647
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Total revenues........... -- 173 378 1,039 1,314 2,073 2,640 2,984 3,019
Costs and expenses:
Costs of software...... -- 4 7 27 8 16 17 18 24
Costs of services...... 151 297 364 446 648 739 937 1,057 1,068
Sales and marketing.... 417 492 667 943 1,192 1,523 1,782 2,126 2,091
Research and
development.......... 436 453 558 671 834 1,003 1,035 1,193 1,363
General and
administrative....... 98 143 224 277 296 294 364 453 507
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Total costs and
expenses................ 1,102 1,389 1,820 2,364 2,978 3,575 4,135 4,847 5,053
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Operating loss........... (1,102) (1,216) (1,442) (1,325) (1,664) (1,502) (1,495) (1,863) (2,034)
Interest expense, net.... 34 70 111 146 184 244 238 202 189
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Loss before income
taxes................... (1,136) (1,286) (1,553) (1,471) (1,848) (1,746) (1,733) (2,065) (2,223)
Income taxes............. -- -- -- -- -- -- -- -- --
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Net loss................. $(1,136) $ (1,286) $ (1,553) $ (1,471) $(1,848) $ (1,746) $ (1,733) $ (2,065) $(2,223)
--------- -------- --------- -------- --------- -------- --------- -------- ---------
--------- -------- --------- -------- --------- -------- --------- -------- ---------
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software............... -- 75% 65% 86% 89% 88% 83% 83% 79%
Services............... -- 25 35 14 11 12 17 17 21
-------- --------- -------- --------- -------- --------- -------- ---------
Total revenues........... 100 100 100 100 100 100 100 100
Costs and expenses:
Costs of software...... -- 2 2 3 1 1 1 1 1
Costs of services...... -- 172 96 43 49 36 35 35 36
Sales and marketing.... * 284 176 91 91 73 68 71 69
Research and
development.......... * 262 148 65 63 48 39 40 45
General and
administrative....... * 83 59 27 23 14 14 15 17
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Total costs and
expenses................ * 803 481 229 227 172 157 162 168
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Operating loss........... * (703) (381) (129) (127) (72) (57) (62) (68)
Interest expense, net.... * 40 29 14 14 12 9 7 6
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Loss before income
taxes................... * (743) (410) (143) (141) (84) (66) (69) (74)
Income taxes............. * -- -- -- -- -- -- -- --
--------- -------- --------- -------- --------- -------- --------- -------- ---------
Net loss................. * (743)% (410)% (143)% (141)% (84)% (66)% (69)% (74)%
--------- -------- --------- -------- --------- -------- --------- -------- ---------
--------- -------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
- ------------------------------
* Not a meaningful number because no revenues were recognized in this quarter.
Quarterly software revenues have generally increased in each of the nine
quarters ended March 31, 1999, due primarily to the increased market acceptance
of EIC and the growth of our reseller network. Quarterly services revenues have
also generally increased in amount in each of these quarters, due
27
<PAGE>
primarily to recognition of product maintenance revenues attributed to our
growing end-user customer base.
Total operating expenses increased in amount in each of these quarters.
Since inception, we have increased our spending in every functional area of the
organization. However, the percentage increases in spending for each quarter
have generally been less than the percentage increases in our revenues for the
corresponding quarter. We anticipate that our operating expenses will increase
substantially for the foreseeable future as we continue to expand our research
and development, marketing, sales and services efforts. We anticipate that these
expenses could significantly precede any revenues generated by the increased
spending. If we do not experience significantly increased revenues from these
efforts, our business, financial condition or results of operations could be
materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have funded our operations primarily through equity
and debt infusions from our principal stockholder, Dr. Brown. We have also
entered into secured and unsecured commercial lines of credit guaranteed by Dr.
Brown, as well as equipment financing guaranteed by Dr. Brown. Through March 31,
1999, Dr. Brown's equity and debt investments totaled $12.1 million. In
addition, on November 5, 1998, Dialogic Investment Corporation made a $5.0
million equity investment by purchasing 400,000 shares of our common stock. As
of March 31, 1999, we had cash and cash equivalents of $1.4 million and a
working capital deficit of $352,000.
Our operating activities resulted in net cash outflows of $1.2 million in
1996, $4.5 million in 1997, $7.1 million in 1998 and $552,000 for the
three-month period ended March 31, 1999. The operating cash outflows for these
periods resulted from significant investments in research and development,
sales, marketing and services, which led to operating losses. To date, our
investing activities have consisted primarily of capital expenditures for
property and equipment, including $391,000 of capital expenditures for the
three-month period ended March 31, 1999. These capital expenditures have
consisted primarily of computer hardware and software for our growing employee
base. At March 31, 1999, we did not have any material commitments for future
capital expenditures. Financing activities have consisted primarily of the
issuance of debt and equity to Dr. Brown, the guaranteed borrowings under
commercial lines of credit, and the equity investment by Dialogic Investment
Corporation. At March 31, 1999, we had no outstanding balances on our line of
credit and were in compliance with all related financial covenants and
restrictions. We currently anticipate that we will continue to experience
significant growth in our operating expenses for the foreseeable future as we
expand our research and development, marketing, sales and services operations.
In connection with this offering, we intend to replace our existing credit
facilities with a new $5.0 million unsecured line of credit from our primary
lender. We have received a commitment letter for this facility. The commitment
letter is subject to the completion of this offering, the negotiation and
execution of definitive documents and other customary conditions. We anticipate
that amounts borrowed under the new credit facility will bear interest at the
lender's prime rate. Dr. Brown will not be required to guarantee the new credit
facility. We anticipate that the new credit facility will contain covenants
that, among other things, will limit our ability to incur additional
indebtedness and pay dividends and will require us to maintain prescribed debt
to equity and fixed charge coverage ratios and minimum net worth levels.
Although we believe we will successfully meet the requirements to obtain this
credit facility, we cannot assure you that we will be able to do so.
We believe that the net proceeds of this offering, together with existing
cash and cash equivalents and amounts available under the new credit facility,
will be sufficient to meet our working capital and capital expenditure
requirements for at least the next 12 months. After that time, we may require
additional funds to support our working capital requirements or for other
corporate purposes and may seek to raise additional funds through public or
private equity or debt financings or from other sources.
28
<PAGE>
We cannot assure you that additional financing will be available at all or that,
if available, will be on terms favorable to us or that any additional financing
will not dilute your ownership interest in Interactive Intelligence. See "Risk
Factors--We may not be able to obtain adequate financing to implement our growth
strategy."
YEAR 2000 COMPLIANCE
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on or before
January 1, 2000, computer systems and software used by many companies and
organizations in a wide variety of industries will produce erroneous results or
fail unless they have been modified or upgraded to process date information
correctly. Significant uncertainty exists in the software industry and other
industries concerning the scope and magnitude of problems associated with the
century change.
We have addressed or are addressing the Year 2000 issues in the following
principal areas:
- our software products, including third-party products we embed or license;
- internal technology systems;
- resellers and key suppliers; and
- end-user customers.
OUR SOFTWARE PRODUCTS
We have warranted that all of our current products are Year 2000 compliant.
We continuously test our newly developed software for Year 2000 compliance, and
as of this date, are not aware of any problems related to Year 2000 compliance
for software products we are currently distributing. However, our products are
sometimes integrated into enterprise systems involving sophisticated hardware
and complex software products developed by third parties. Further, we embed
other parties' software products in our products. We cannot adequately evaluate
third-party products for Year 2000 compliance. We may face claims based on Year
2000 problems in other companies' products, or issues arising from the
integration of multiple products within an overall system.
INTERNAL MANAGEMENT AND INFORMATION SYSTEMS
We use a combination of our own software and other commercially available
software for our internal operations. At this time, we believe that there will
be no significant costs associated with the Year 2000 issue for internal
operations. We are not presently aware of any Year 2000 issues that have been
encountered by a third-party provider whose services are critical to us. We
intend to complete an evaluation of providers with respect to Year 2000
compliance by the end of June 1999. At the completion of the assessment we will
develop a contingency plan, if necessary, to address any Year 2000 issues. We
have also contacted the third parties who control our security systems,
electrical systems, heating and air conditioning systems, and other systems
related to the physical operation of our headquarters buildings that may contain
embedded technology, such as micro-controllers and microchip processors, to
assess whether any of these systems possess a Year 2000 problem that could
adversely affect our operations if a malfunction occurred. We have implemented
procedures to determine whether any of these systems that we acquire or utilize
in the future are also Year 2000 compliant.
RESELLERS AND KEY SUPPLIERS
We are currently contacting our key suppliers and all of our resellers
regarding Year 2000 issues. We are working to identify any key suppliers and
resellers that may have Year 2000 issues that could
29
<PAGE>
have an adverse effect on our ability to deliver our products and services to
customers. We expect to complete this evaluation by the end of June 1999.
END-USER CUSTOMERS
We believe that the purchasing patterns of current and potential end-user
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or upgrade their current software systems for Year 2000
compliance. These expenditures may reduce the funds available to license
software products such as those we offer. To the extent Year 2000 issues
significantly disrupt decisions to license our products or purchase our
services, our business, financial condition or results of operations could be
materially adversely affected.
To date, we have not incurred any material costs directly associated with
our Year 2000 compliance efforts. Our costs to date primarily consist of
compensation expense associated with our employees who have devoted some of
their time to our Year 2000 assessment and remediation efforts. Currently, we do
not expect the total cost of Year 2000 problems to be material to our business,
financial condition or results of operations. However, during the months before
the century change, we will continue to evaluate new versions of our software
products, new software and information systems provided to us by third parties
and any new infrastructure systems that we acquire to determine whether they are
Year 2000 compliant. Despite our current assessment, we may not identify and
correct all significant Year 2000 problems on a timely basis. Year 2000
compliance efforts may involve significant time and expense and unremediated
problems could materially adversely affect our business, financial condition or
results of operations. We currently have no contingency plans to address the
risks associated with unremediated Year 2000 problems. See "Risk Factors--Year
2000 issues may adversely affect our business."
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BUSINESS
OVERVIEW
We are a leading developer of communications and interaction management
software that allows our customers to automate critical business processes by
integrating their communications systems with their information technology. When
installed on a Windows NT-Registered Trademark- server, our flagship product,
Enterprise Interaction Center-Registered Trademark- or EIC, provides a single,
enterprise-wide solution capable of processing thousands of interactions per
hour, including telephone calls, e-mails, faxes, voice mail messages, Internet
chat sessions, Web callback requests and voice over Net calls. EIC is a unique
software solution that replaces a variety of traditional devices such as private
branch exchange devices or PBXs, interactive voice response systems or IVRs,
automatic call distributors or ACDs, voice mail systems, fax servers, call
recorders and computer telephony integration or CTI gateways. We began licensing
our products in 1997 and have grown our revenues from $1.6 million in 1997 to
$9.0 million in 1998.
We believe that EIC provides our end-user customers with an all-in-one
communications solution that has several advantages over the traditional
multi-device approach, including:
- broader functionality and enhanced features;
- reduced need for systems integration;
- open architecture and better compatibility with leading technologies;
- lower total cost of ownership; and
- greater ability to customize communications to meet specific needs.
We design our software to meet the needs of end-user customers in three
growing markets: call centers, enterprises and service providers. We license our
products to over 200 end-user customers, including Ameritech Corporation,
BuyItNow, Inc., Deutsche Telekom Berkom Gmbh, Seagate Technology, Inc. and
Toshiba America Consumer Products. We market our software products and services
through an extensive distribution network consisting of over 90 independent
value added resellers in North America, Europe and the Asia/Pacific region. Our
resellers range from relatively small, local organizations to large regional and
national firms, such as Bell South Communication Systems, Inc. We also provide
our end-user customers and resellers with a variety of related services.
INDUSTRY OVERVIEW
Due to a broad combination of factors, including deregulation, consolidation
and advances in technology, many organizations are looking to communications
technology to increase efficiency and provide better service. As a result, the
communications industry is experiencing significant changes. We believe we are
well positioned to take advantage of the following major trends taking place
within many industries:
GROWTH OF CALL CENTERS
In an increasingly competitive environment, businesses are attempting to
differentiate themselves with their customer service and support. Examples of
these businesses include recently deregulated industries such as financial
services and utilities. To consolidate customer contact points and focus on
customer service, organizations are frequently implementing formal call centers.
Putting a call center into place has traditionally required organizations to
purchase several different communications devices, such as a private branch
exchange or PBX, an interactive voice response system or IVR, an automatic call
distributor or ACD, a predictive dialer and a call logger, and then spend time
and money attempting to integrate these disparate devices. In 1998, H.C.
Wainwright estimated that the market for
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call center communications products represented approximately 55% of the
approximately $10.0 billion computer telephony industry and was expected to grow
at 25% to 30% annually.
INCREASING VARIETY AND COMPLEXITY OF COMMUNICATIONS AND INTERACTION MEDIA
In addition to more traditional communications media such as telephone, fax
and voice mail, the growth of the Internet has expanded the number and
complexity of interaction media to include e-mail, Internet chat sessions, Web
callback requests and voice over Net calls. According to Aberdeen Group,
one-fifth of customer contact will shift from the phone to the Internet in the
next two years. Additionally, most enterprises currently interact through these
media using separate devices, resulting in inefficient communication. These
circumstances are forcing organizations to re-evaluate their systems in order to
address the requirements of a more complex communications environment.
INCREASING NEED TO INTEGRATE COMMUNICATIONS SYSTEMS WITH INFORMATION
TECHNOLOGIES
Historically, telecommunications systems and information systems have been
separate and distinct. To more effectively and efficiently interact, both
internally and externally, enterprises need to seamlessly access and utilize
these two systems. Products, often referred to as middleware, have been designed
to integrate various types of telecommunications devices with information
technology. For example, an application called screen pop makes a window pop up
on an agent's monitor with information about a call at about the same time that
the agent's telephone or headset begins to ring. This allows the agent to see
all the information necessary to assist the customer. With middleware, even
simple applications, such as screen pop, are often difficult and expensive to
implement.
We believe that the traditional approach of using middleware software
products to integrate communications and information technology suffers from a
number of fundamental problems. Implementing this type of solution is both
expensive and time consuming, often requiring many months or even years to
implement, and the total cost of ownership over time is high due to the multiple
points of configuration, administration and maintenance. Modification and
management of a traditional integrated infrastructure are also difficult since
each device is configured independently by different vendors. For instance,
hiring a new agent may require configuring a new extension in the PBX, defining
a new mail box in the voice mail system and creating a new agent entry in the
ACD. This process is not only expensive and time consuming, but may also result
in information being lost or inconsistently entered into each device. We also
believe that this traditional multi-device approach will make it more difficult
for enterprises to interact over the Internet and will require additional
devices and more integration, further complicating the current situation.
We believe a new approach is required that does not attempt to resolve
differences among disparate devices, but rather provides a platform based on
standard hardware and software systems, a unified set of communications and
interaction services and seamless integration with information technology
components such as networks, servers, databases and desktop computers.
ENTRANCE OF NEW SERVICE PROVIDERS
For years, the regional Bell operating companies and other telephone
companies have provided voice mail, caller ID and other communications services
to consumers and small businesses. The Telecommunications Act of 1996
deregulated many aspects of the communications market and resulted in a rapid
increase in the number and types of organizations seeking to provide
communications services. These new service provider entrants include local
exchange carriers, cable companies, Internet service providers and wireless
companies.
Generally, these organizations provide some sort of communications
connection into homes and businesses that they charge for on a regular basis. As
the price for connectivity declines rapidly, we believe that these organizations
may want to differentiate their offerings based on the enhanced
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services they can provide. Examples of these services include unified messaging,
fax, interactive voice response, speech recognition, paging, conferencing, phone
numbers that follow the recipient of the call, and appointment scheduling. A
recent projection by the Pelorus Group states that the number of worldwide
unified messaging mailboxes will grow from an estimated 320,000 at the end of
1997 to more than 15.9 million by 2002. We also expect service providers to
implement Web-based services such as Web callback, Internet chat sessions and
voice over net.
Traditionally, providing a wide range of voice and data interaction services
required service providers to interface different proprietary systems and incur
significant integration fees. We believe this creates the need for a new
platform for service providers that is flexible enough to deliver a variety of
enhanced services under a common administration and design architecture, while
at the same time lowering both the cost of entry and ongoing operation.
In our opinion, the traditional multi-device approach to communications and
interaction by organizations is inadequate to address the needs created by these
trends. We believe that the shortcomings of this approach create a significant
opportunity for a single, all-in-one solution based on standard hardware and
software technology, such as a Windows NT-Registered Trademark- server, that
enables organizations to efficiently and effectively interact with all of their
constituents. We believe that we have developed such a solution.
INTERACTIVE INTELLIGENCE SOLUTION
The Interactive Intelligence solution for call centers, enterprises and
service providers is an open software platform that, when installed on a server
running Windows NT-Registered Trademark-, provides a comprehensive set of
communications and interaction management services and requires little or no
integration. Our flagship product, EIC, is capable of processing thousands of
interactions per hour, including telephone calls, e-mails, faxes, voice mail
messages, Internet chat sessions, Web call-back requests and voice over Net
calls.
We believe that the differentiating characteristics of the Interactive
Intelligence solution allow our end-user customers to more effectively
communicate and interact with their constituencies at a lower total cost of
ownership than through the use of traditional computer telephony integration
products. The strategic advantages of our single system approach are:
BROADER FUNCTIONALITY AND ENHANCED FEATURES. Unlike traditional systems
that require end-user customers to purchase separate products to attain broader
functionality, EIC is an all-in-one system that offers a broad suite of
interaction management services, including telephony, inbound and outbound fax,
e-mail processing, automatic call distribution, interactive voice response,
conferencing, call recording, call monitoring and text chat processing. EIC also
includes facilities that allow supervisors to obtain numerous reports and to
view communications statistics in real time. We believe that, collectively,
these capabilities allow our customers to improve customer service and increase
internal efficiency.
REDUCED NEED FOR SYSTEMS INTEGRATION. Traditional communications systems
generally require significant integration efforts to get their different
components to work together effectively. This integration often involves the
purchase of expensive hardware, middleware and services. EIC pre-assembles all
the necessary components into one software solution, allowing end-user customers
to concentrate their efforts on improving business processes. Alternatively, EIC
can be used to supplement the capabilities of a PBX to provide Web-based
interaction management, unified messaging, IVR or departmental call center
services.
OPEN ARCHITECTURE AND BETTER COMPATIBILITY WITH LEADING
TECHNOLOGIES. Traditional communications devices are based on proprietary,
closed architecture, which often limits the end-user customer's ability to
change or customize the products. Frequently, even simple changes such as adding
a new employee
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or changing an employee's location require intervention by the vendor. Our
products are built around industry standard hardware and software components
such as Intel microprocessors and the Microsoft Windows NT-Registered Trademark-
operating system. Our open architecture allows end-user customers to configure
our system to meet their customized communications needs and to make hardware or
software modifications as necessary. For example, if one of our end-user
customers needs more space for voice mail recordings, it can simply purchase a
larger disk drive on the open market. Our products also interoperate easily with
popular information technology products, including:
- e-mail servers, including Microsoft Exchange Server-Registered Trademark-
and, in our next version, Lotus Notes-Registered Trademark-;
- database systems, including those from Oracle Corp., Sybase, Inc.,
Microsoft Corporation and IBM Corporation;
- mainframe systems, including those that support 3270 and 5250 terminal
emulation;
- Web servers, including Microsoft IIS, Netscape and Apache;
- network management systems, including HP OpenView, IBM Tivoli and CA
Unicenter; and
- customer relationship management systems, including those from Vantive
Corporation, Clarify, Inc., Remedy Corp. and Onyx Software Corp.
LOWER TOTAL COST OF OWNERSHIP. We believe that our all-in-one solution
results in a lower total cost of ownership in comparison to traditional
communication systems with similar functionality, which typically consist of
multiple, disparate add-on components. For example, EIC's functionalities reside
in a single Windows NT-Registered Trademark- server with a software interface
designed for ease of use. As a result, all configuration and maintenance of our
products are confined to a single system. This results in a lower total cost of
ownership due to the reduced time and expense typically required to maintain a
centralized software-based communications system.
GREATER ABILITY TO CUSTOMIZE COMMUNICATIONS TO MEET SPECIFIC NEEDS. While
EIC can be deployed quickly with minimal configuration, organizations can also
customize many aspects of their communications processing using EIC's graphical
application generator. This means that EIC can serve as a platform upon which
organizations can build highly tailored communications processes for their
customers, employees or subscribers. It also means that end-user customers need
to learn only a single tool in order to customize their dial plans, call
distribution rules, interactive voice response menus, fax applications, Web
services, voice mail systems and other communications applications.
GROWTH STRATEGY
Our primary business objective is to become the leading vendor of
communications and interaction management software for call centers, enterprises
and service providers. Our strategy for achieving this objective incorporates
the following key elements:
CONTINUE TO EXPAND OUR LEADING TECHNOLOGY POSITION. We have significant
technical expertise in call center, communications and software technologies. We
intend to use our expertise to add new features to our products to increase
their marketability in our three target markets. We also intend to improve the
ability of our current and future products to handle the needs of larger
organizations. We are currently developing technology that would allow EIC to
work effectively with ATM switches from vendors such as Cisco Systems, Inc. and
Fore Systems, Inc. If we are successful, EIC will be able to meet the needs of
call centers with up to 500 agents per site, enterprises with up to 1,000
employees per site, and service providers with up to 100,000 subscribers. We
also plan to broaden the compatibility of our products to work with other
systems and applications used by our end-user customers. For example, we intend
to add support for the Novell e-mail and directory services products, such as
Groupwise and Novell Directory Services or NDS, to increase our addressable
market.
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BROADEN OUR PRODUCT OFFERING. We plan to broaden our product offering with
additional products and features for our target markets. For the call center
market, we have developed and are currently testing new products, including
Interaction Dialer, which automates outbound calls, and Interaction Director,
which efficiently distributes calls across multiple call centers. We also plan
to create new products and interfaces to third-party products to cover
additional areas such as agent performance evaluation and scheduling. For
enterprises, we plan to add new applications including a multimedia conference
bridge and a speech-enabled personal assistant. For service providers, we intend
to add support for large-scale, Unix-based messaging platforms that will allow
service providers to handle tens of thousands of subscribers for unified
messaging, phone numbers that follow the recipient of the call, and other
enhanced services.
EXPAND AND OPTIMIZE OUR GLOBAL DISTRIBUTION CHANNEL. We plan to further
expand our existing distribution channel, which currently consists of over 90
resellers in more than 20 countries. Our expansion efforts include a significant
focus on broadening our distribution channel in North America and we also plan
to expand our distribution channel in Europe and the Asia/Pacific region.
Currently, we have over 70 resellers and a 22-person field sales force that
manages, supports and develops our distribution channel in North America and
approximately 20 resellers and a four-person field sales force in Europe and the
Asia/Pacific region. We have also signed a reseller in South Africa and have
begun to sign resellers in Central and South America. We intend to continue to
broaden our geographic and market presence through our reseller coverage to
enhance our market share position.
DEVELOP AND LEVERAGE STRATEGIC BUSINESS RELATIONSHIPS. We have strategic
relationships with leading technology companies, including Dialogic Corporation,
Microsoft Corporation and Nuance Communications. As evidence of our commitment
to growth, Microsoft Corporation recently recognized us as the ninth fastest
growing independent software vendor using Microsoft
Windows-Registered Trademark-. In addition to our relationships with technology
companies, we intend to pursue strategic relationships with network equipment
vendors as well as developers of customer relationship management software to
build upon our comprehensive, turnkey solution. EIC complements both types of
products by utilizing the voice delivery capabilities of network devices such as
routers and switches, while providing the call center front-end capabilities
used in conjunction with customer relationship management applications. We also
intend to evaluate strategic acquisitions or investment opportunities for
products and technologies that complement or extend our existing products, offer
access to additional distribution channels or increase our customer base.
PRODUCTS
We currently market and license our flagship product, Enterprise Interaction
Center-Registered Trademark- or EIC, as well as Interaction Recorder-TM-, a
complementary product that allows the user to easily log, record and retrieve
any call. We have also developed and are currently testing two new products,
Interaction Dialer-TM- and Interaction Director-TM-.
ENTERPRISE INTERACTION CENTER-REGISTERED TRADEMARK- (VERSION 1.2)
EIC turns a Windows NT-Registered Trademark- server containing the
appropriate voice processing boards into an all-in-one communications server.
Customers connect their telephone trunk lines, handsets and headsets to the EIC
server and gain an integrated communications system, capable of meeting an
organization's specific interaction processing requirements. We allow our
end-user customers to license all or some specific combinations of the features
of EIC.
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[GRAPHICAL REPRESENTATION OF THE EIC FUNCTIONS]
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EIC provides organizations with a wealth of communications and interaction
processing capabilities, including:
- Telephone system--allows end-users to place and receive telephone calls
just like a private branch exchange or PBX. Analog trunks and digital
trunks, such as T1/E1, ISDN and PRI, from the telephone company can be
connected to an EIC server as well as the twisted pair connections to
desktop phones. In addition to basic hold and transfer operations, EIC
provides text-to-speech, speech recognition and support for conference
calls with up to 32 participants.
- Auto attendant--allows callers to locate specific individuals and
departments and direct their own calls without involving receptionists.
- IVR or interactive voice response--allows organizations to create
self-service applications that their customers can access from their
touch-tone phones. These applications can read and update information
stored in databases and mainframe systems to perform account lookups and
other operations.
- ACD or automatic call distributor--organizes incoming calls into queues
and distributes them to agents as they become available. Calls can be
distributed on a first-come, first-served basis or make use of more
complex methods such as skills-based routing. For example, some
organizations may wish to service calls from important customers before
servicing other calls.
- Call recording--allows end-users to record their own calls and supervisors
to record agent calls. EIC can also automatically record specified calls
according to pre-defined rules--for example, every third call coming into
a particular toll-free number or every call from a customer with a
past-due balance.
- Unified messaging--stores voice mail messages and faxes in Microsoft
Exchange-Registered Trademark- mailboxes, from which end-users can
retrieve them by phone, desktop computer or remotely over the Internet.
This unified messaging capability is popular among our enterprise and
service provider customers. Our next release, EIC Version 1.3, will add
similar support for Lotus Notes-Registered Trademark-messaging system.
- Web services--allows organizations to queue and distribute incoming
Internet text chats as they do with telephone calls. For example, while
browsing a company's Web site, a potential customer can click a button and
use text chat to pose a question to a call center agent. EIC also includes
tools that allow organizations to process incoming e-mail messages, Web
callback requests and voice over Net calls.
- Fax server--provides inbound and outbound fax services for the entire
organization. Automatically detects incoming fax calls and includes
support for fax broadcast, fax on demand, optical character recognition
and other fax applications.
- Graphical application generator--allows organizations to tailor EIC's call
and interaction management functions to meet their specific needs and to
integrate EIC into their information systems. EIC includes a graphical
application generator called Interaction Designer-TM- that can be used to
customize dial plans, call distribution rules, IVR scripts, fax services,
Web interactions and other functions.
EIC also includes software that runs on desktop computers and provides
individuals with the following capabilities:
- A software phone that allows individuals to visually manage calls from
their desktop computer, including dialing, transferring, conferencing and
recording. EIC includes both Win32 and Java versions to support a wide
range of desktop operating systems.
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- On-screen company and department directories that allow individuals to
quickly locate addresses, phone numbers and other employee information.
- Real-time in-out boards that display the status, such as on the phone, at
lunch or in a meeting, of other employees.
- Management windows that allow supervisors to record and monitor calls as
well as view real-time information for every queue, line, user, workgroup
and station.
- Desktop fax support that allows individuals to send and receive faxes from
their desktop computers.
- Screen pops that allow EIC to activate a particular application, such as a
customer relationship management program, whenever an incoming call
arrives. The activated application can display all the call information
collected by EIC and provide call handling options including hold,
transfer and conference.
INTERACTION RECORDER-TM- (VERSION 1.2)
Interaction Recorder is a complementary product that enhances EIC's basic
call recording capabilities by providing recording management for organizations,
such as call centers and banks, that generate large numbers of recordings.
First, Interaction Recorder logs complete information about every recording,
such as customer name, account number and transactions selected, to a database.
Next, it compresses recordings by 87.5% to reduce storage requirements.
Interaction Recorder allows organizations to periodically archive groups of
recordings onto compact discs or other media and provides a user interface from
which supervisors and other employees can later search for particular recordings
and access them at any time.
INTERACTION DIALER-TM- (IN TESTING)
We are currently testing Interaction Dialer, a predictive dialing product
that is complementary to EIC. Predictive dialing is the process of automatically
making outbound calls to a list of phone numbers and quickly connecting to call
center agents any calls answered by a person. We are developing Interaction
Dialer to provide call list management and answering machine detection. We have
created a sophisticated predictive algorithm that decides exactly how many calls
to place and when to make them in order to maximize the probability that an
agent will be available when a person answers a call.
Interaction Dialer builds entirely upon EIC's facilities for automatic call
distribution, reporting and supervision, giving it blended capabilities for call
centers wishing to use agents for both inbound and outbound call processing. A
client-side component will allow end-user customers to create visual call flow
scripts using any Web page editor. When an outbound call connects to an agent,
Interaction Dialer automatically pops a script that can display customer
information and lead the agent through the current call.
INTERACTION DIRECTOR-TM- (IN TESTING)
We are currently testing Interaction Director, a pre-call routing product
designed to efficiently distribute incoming calls across sites for multi-site
call centers. Given a data connection to the EIC server at each call center,
Interaction Director builds an in-memory database of near real-time information,
including current expected hold times at each site, queue lengths, number of
agents available and specific skills available. It then distributes incoming
calls based on this information and customized routing rules.
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Pre-call routing is the process of looking at a call while it is still in
the public switched telephone network and deciding to which location it should
be sent. Interaction Director currently supports the signaling system 7 or SS7
protocol and can thus be notified about new calls before they leave the
telephone network. Interaction Director can examine specific information about a
call and then use the up-to-date information in the in-memory database to decide
to which site to route the call. Once it has chosen a destination site,
Interaction Director signals its choice back to the telephone network. Pre-call
routing allows calls to be distributed efficiently across a collection of sites
and helps make effective use of agent resources. It also allows multi-site
organizations to provide superior customer service by minimizing wait times and
making sure that calls are routed to the sites best able to handle them. As an
example, Interaction Director could route calls from Spanish speaking customers
to a site with Spanish speaking agents. The end-user customer can create the
logic that determines where a given call is routed by using Interaction
Designer. AT&T Corporation has tested Interaction Director and determined that
it is interoperable with AT&T's Intelligent Call Processing Service, which
utilizes SS7. We are currently working to add support for MCI WorldCom Inc. and
other carriers.
In addition to pre-call routing, Interaction Director will also support
post-call routing, which routes a call to another location after it has already
been delivered to a particular call center. For example, after a caller has been
on hold for more than a specified period of time, the end-user customer could
configure its EIC system to ask Interaction Director if another site would be
able to handle the call sooner. If so, the EIC system could then transfer the
call to that other location.
TECHNOLOGY
We have developed a number of innovative technologies that underlie our
family of products, including:
UNIVERSAL INTERACTION ENGINE. At the core of EIC is an event-processing
engine that determines how different types of communications events are handled.
This engine makes use of the Java virtual machine to dispatch events, such as
incoming telephone calls, to software objects that process them. This approach
allows us to maximize our use of a widely used, multi-threaded interpreter to
handle large numbers of communications events under Windows
NT-Registered Trademark-. It also provides an architectural control point around
which we can create new services.
NOTIFIER MESSAGING COMPONENT. We have invented a sophisticated,
publish-subscribe messaging component called Notifier which allows all the
different portions of our products to communicate with each other using the
TCP/IP protocol. Different subsystems and applications register with Notifier
for events in which they are interested. As events flow through Notifier, it
forwards them on to the interested parties. This approach is more efficient than
simpler schemes which broadcast all events to all components. Our Notifier
architecture works especially well in wide area networks where efficient use of
bandwidth is critical. Notifier also allows components to be widely distributed
and to run over any TCP/IP connection, including the Internet. As a result, our
software phone and end-user fax tools can be installed on a work-at-home agent's
home computer and used over an Internet connection.
GRAPHICAL APPLICATION GENERATOR. Underlying our entire suite of products is
a single graphical application generator called Interaction Designer. This
development tool allows users to visually lay out logic that determines how
different types of events are to be processed. Interaction Designer includes a
tool palette of over one hundred objects that can be dragged into a workspace
and linked together. Once the handler for a particular event is complete,
Interaction Designer generates a Java class file, compiles it and executes it in
the universal interaction engine. This means that organizations can change the
ways in which different interactions are processed without restarting devices.
GRAPHICAL ADMINISTRATIVE CONSOLE. A single graphical application called
Interaction Administrator can be used to configure many different aspects of our
products. Supervisors can configure analog or
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digital telephone trunks, change user profiles, define queues, add skills and
perform many other common administrative tasks from simple dialog boxes.
Interaction Administrator automatically sends out change notifications that are
propagated via Notifier to the various components that comprise our products.
Thus, when a new employee is added, his or her name automatically appears on
agent and supervisor screens.
DATABASE AND MAINFRAME CONNECTIVITY. We have written software components
that provide access to information stored in most common relational database
systems, including those from Oracle Corp., Sybase Inc., Informix Corporation,
Microsoft Corporation and IBM Corporation, and mainframe systems supporting 3270
and 5250 emulation. These software components use advanced techniques like
connection caching to handle large numbers of transactions.
PROGRAMMING INTERFACES. We have created interfaces that allow customers to
integrate other software applications with EIC. On the server side, we have DLL
and TCP/IP socket-level interfaces that allow customers to add new functionality
to EIC and to communicate with applications running on other systems. On the
client side, we have both DDE and COM interfaces that make it possible to embed
EIC's capabilities into desktop applications.
MULTI-SITE CALL ROUTING AND SS7 SUPPORT. We are currently testing software
that allows us to communicate directly with public switched telephone networks
using the SS7 protocol. This allows us to receive advance notification from the
phone company of incoming calls and to tell the phone company where each call
should be sent in a multi-site environment. This is especially important for
call centers with multiple sites. If each site is running our EIC product and is
connected to a wide area network, we can collect near real-time information,
including number of calls in queue and number of agents available, and decide
which site is best able to handle new incoming calls.
RESEARCH AND DEVELOPMENT
We believe that strong product development capabilities are essential to our
strategy of building on our position as a technological leader in our industry,
maintaining the competitiveness of our current products and adding new features,
functions and products. Our product development team consists of professionals
with expertise in software, telecommunications and computer hardware, many of
whom have years of experience at industry leading companies in these segments,
such as Microsoft Corporation, Lucent Technologies, Inc. and Nortel Networks
Corporation, formerly known as Northern Telecom Limited. We believe that this
combination of diverse technical and communications expertise contributes to the
highly integrated functionality of our software products and provides us with a
significant competitive advantage.
Currently, we are both a Microsoft Certified Developer as well as a
Microsoft Solutions Provider. These designations give us early access to
Microsoft technology, allowing us to develop products more quickly and make them
interoperate more effectively with Microsoft products.
Research and development expenses for the last three fiscal years were
approximately $1.0 million in 1996, $2.1 million in 1997, and $4.1 million in
1998. Our research and development staff has grown from 15 employees as of
December 31, 1996 to 27 employees as of December 31, 1997, 49 employees as of
December 31, 1998 and 54 employees as of March 31, 1999. We believe that
investment in research and development is important for us to maintain our
position in the industry and, therefore, intend to increase our spending for
research and development in the future.
CUSTOMER SERVICES AND SUPPORT
We recognize the importance of offering quality service and support to our
resellers and end-user customers. Therefore, we provide a wide range of services
and support to both of these groups,
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including technical support for our products, educational services, and
professional services for implementing and customizing our products. These
services include the following:
TECHNICAL SUPPORT SERVICES. Our support services staff provides technical
support for both our resellers and end-user customers 24 hours a day, seven days
a week via phone, fax, e-mail and our Web site. We have support personnel in
Indianapolis and France, and also plan to open a support center in the
Asia/Pacific region. We utilize EIC, integrated with customer relationship
management software, to maximize the effectiveness of our support services.
Customer support services, along with product upgrades, are included in initial
and ongoing maintenance. Initial software license fees generally include one
year of maintenance. Generally, to continue using our software after this
initial period, our end-user customers must purchase annual ongoing product
maintenance.
EDUCATIONAL SERVICES. We place primary emphasis on providing a
comprehensive technical and sales education program to our resellers. We have
formal certification programs covering pre- and post-sales engineering,
installation and trouble shooting, implementation and project management, system
administration and application development. Several credits for our
supplementary or advanced educational offerings are included in our annual
reseller agreement and each subsequent annual renewal. For resellers and
end-user customers who would like additional supplementary or advanced training,
we offer classes that we bill on a per class basis.
PROFESSIONAL SERVICES. Our professional services staff supplements the
implementation and customization personnel of our resellers. We offer a wide
range of professional services for our end-user customers, including project
management, data systems integration and host connectivity. To further expedite
their implementation projects, end-user customers and resellers can select from
several pre-packaged fixed fee offerings. If desired, we also provide our
professional services on a time and materials basis.
SALES AND MARKETING
We distribute our software products primarily through our network of
resellers. We also maintain a field sales force to support our resellers, as
well as engage in limited direct sales efforts. In addition, we engage in a
number of marketing activities to support our sales efforts. As of March 31,
1999, we employed 36 people in sales and marketing.
RESELLERS
We have a network of over 90 resellers that distribute our software products
in North America, Europe and the Asia/Pacific region. Our resellers have a
presence in more than 20 countries and 30 states. We have signed a reseller in
South Africa and have begun to sign resellers in Central and South America. We
intend to continue to broaden our geographic and market presence through our
reseller coverage in order to enhance our market share position.
We believe that the use of a diversified network of resellers offers the
following advantages:
- LARGER MARKET PRESENCE. The use of resellers allows us to have a broad
market presence, by leveraging our resellers' existing sales
infrastructure and other resources, without having to create these
resources.
- ACCELERATED MARKET PENETRATION. Our reseller network has allowed us to
have significant market penetration faster than would have been possible
with an in-house only sales staff.
- INDUSTRY EXPERIENCE/TECHNICAL EDUCATION. Our goal is to recruit resellers
that are highly trained, experienced and knowledgeable with respect to our
specific markets, as well as business communications technologies. To
qualify to be a reseller, an organization must have relevant
41
<PAGE>
telephony or data experience. We provide comprehensive technical and sales
education with respect to our products to our resellers.
- PRODUCT COMPARISON. When a reseller offers its customers a wide range of
communications system options, including our products as well as other
vendors' products, we believe the customer will be able to appreciate the
advantages of our communications and interaction management software
relative to traditional multi-device approaches. As a result, customers
that are initially looking only to upgrade their existing systems may
instead replace their entire system with EIC.
FIELD SALES FORCE
To help our resellers be as productive as possible, we have developed a
field sales force that manages, supports and assists in the development of our
resellers and reseller network. In North America, our field sales force is
located in California, Colorado, Florida, Georgia, Indiana, Minnesota, Missouri,
New Jersey, New York, Texas, Virginia and Wisconsin. Internationally, our field
sales force is located in France, Japan, the Netherlands and the United Kingdom.
Occasionally, our field sales force makes direct sales to end-user customers.
MARKETING
Our marketing programs are designed to:
- build market awareness of our communications and interaction management
software;
- generate qualified end-user customer leads; and
- establish end-user customer preference for our products.
To accomplish these goals, we engage in a variety of marketing activities,
including seminars, tradeshows, direct mailings, public relations activities,
advertisements and Web site marketing.
CUSTOMERS
We license our products to more than 200 end-user customers in North
America, Europe and the Asia/Pacific region, including:
<TABLE>
<S> <C>
Ameritech Corporation E.I. du Pont de Nemours and Company
BMW Financial Services Italia (Italy) Exit Marketing AB (Sweden)
Bob Barker Company, Inc. Fiserv, Inc.
Boxlight Corporation Los Alamos National Laboratory
BuyItNow, Inc. NTS Marketing, Inc.
Caere Corporation Postel Australia (Australia)
Ceridian Corporation Seagate Technology, Inc.
Deutsche Telekom Berkom Gmbh (Germany) Techmar Communications, Inc.
Direct Focus, Inc. Toshiba America Consumer Products
Dongbu Fire & Marine Insurance (Korea)
</TABLE>
No end-user customer or reseller accounted for 10% or more of our revenues in
1998 or for the three months ended March 31, 1999.
The following are examples of call center and enterprise end-user customers
that use our communications and interaction management software:
BUYITNOW, INC. is a Web-based retailer of many consumer-oriented products,
including home electronics, appliances, home decor items and toys. According to
BuyItNow, it prides itself on superior
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customer service driving strong customer satisfaction. BuyItNow, with design and
implementation assistance from one of our resellers, built an integrated phone-
and Web-based call center platform. For phone-based customers, EIC is the PBX,
IVR, ACD and fax server that connects potential and existing customers with
BuyItNow sales and service agents. For customers who prefer Web-based
interactions, BuyItNow has implemented EIC's chat management capabilities to
allow customers to chat with a BuyItNow Web-based agent. The agent can respond
efficiently to an inquiry by typing a short message, selecting a standard reply,
or directing the customer's Web-browser to a specific BuyItNow Web page. Using
EIC, BuyItNow directs both phone calls and chat requests to agents using
skills-based routing rules. According to BuyItNow, it selected EIC over products
from Lucent Technologies, Inc., Aspect and WebLine because EIC met the call
center's telephony needs and also provided the Internet-based interaction
capabilities necessary to attract and retain Web-based customers.
NTS MARKETING, INC. provides outsourced teleservices and fulfillment
services for organizations that do not have the internal infrastructure to
embark on significant marketing campaigns, such as mass advertising, or handle
the volume of inquiries that these campaigns often generate. For these
customers, NTS currently processes a volume of 15,000 to 20,000 calls per day.
According to NTS, after a thorough review of its business objectives, it
selected EIC as its technology centerpiece, because EIC provided a more flexible
communications system than its existing PBX and ACD devices could provide. With
EIC, NTS has gained, and currently uses, the functionality of multiple
telecommunications devices, including PBX, IVR, ACD, fax services, reporting
tools, unified messaging, call filtering/ blocking and recording capabilities.
NTS has also used EIC to create several custom call processing applications,
such as skills-based routing and HotEmails, which immediately send information
back to callers via e-mail while they are still on the phone. According to NTS,
these applications have reduced costs, improved productivity and enhanced
customer service. NTS believes that it would have been expensive and complex to
implement many of the time and money saving enhancements with traditional
telecommunications devices. According to NTS, EIC's open architecture allowed it
to proactively address many challenging and labor-intensive processes that were
having negative financial and competitive effects on its business.
BOXLIGHT CORPORATION is a leading provider of liquid crystal display or LCD
projection products, digital input devices and presentation peripherals,
including slide creation, posters, powerpoint presentations, training and
creative services. Two years ago, Boxlight established a number of customer and
employee related communications objectives that, according to Boxlight, were not
possible to accomplish with its existing communications devices. As a result,
Boxlight implemented EIC in its Washington corporate offices as a complete
campus-wide solution and connected a satellite office in Tennessee to this EIC
system. With EIC, Boxlight has created a variety of enterprise applications. For
example, a remote employee can call an 800 number, enter an access code which is
validated against an authorization database and then place outgoing calls using
Boxlight's phone lines. Also, Boxlight has established a local/remote paging
system. From any phone at either Boxlight location, an employee can dial 01 and
speak a message, which is played over an internal intercom system at the
Washington corporate campus. Alternatively, an employee can dial 02 to speak
over the intercom system at the office in Tennessee. Boxlight has implemented
the chat feature of EIC on its newly designed Web site. This allows its Internet
customers real time access to sales and customer service representatives. EIC's
open architecture allows Boxlight to use its own resources to create these
enterprise communications solutions.
COMPETITION
The market for our software products is highly competitive and, because
there are relatively low barriers to entry in the software market, we expect
competition to increase significantly in the future. We cannot assure you that
we will be able to compete effectively against current and future competitors.
Our competition currently comes from several different market segments,
including
43
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computer telephony platform developers, computer telephony applications software
developers and telecommunications equipment vendors. These competitors include
Apropos Technology, Aspect Telecommunications Corporation, CELLIT, Inc., Cisco
Systems, Inc., Davox Corporation, GeoTel Communications Corporation which
recently agreed to merge with Cisco Systems, Inc., Genesys Telecommunication
Laboratories, Inc., Lucent Technologies, Inc., Quintus Corporation, Nortel
Networks Corporation and Siemens Nixdorf Information Systems AG/FI. We also
compete to a lesser extent with new or recent entrants to the marketplace. Our
competitors vary in size and in the scope and breadth of the products and
services offered. See "Risk Factors--We face competitive pressures, which may
have a material adverse effect on us."
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
To protect our proprietary rights, we rely primarily on a combination of:
- copyright, trade secret and trademark laws;
- confidentiality agreements with employees and third parties; and
- protective contractual provisions such as those contained in license and
other agreements with consultants, suppliers, strategic partners,
resellers and end-user customers.
We have not signed agreements containing protective contractual provisions
in every case and the contractual provisions that are in place and the
protection they provide vary and may not provide us with adequate protection in
all circumstances. Despite our efforts to protect our proprietary rights,
unauthorized parties may copy aspects of our products and obtain and use
information that we regard as proprietary. Other parties may breach
confidentiality agreements and other protective contracts we have entered into,
and we may not become aware of these breaches or have adequate remedies for
them.
We generally require our employees to enter into confidentiality agreements
containing non-disclosure, non-competition and non-solicitation provisions. When
they begin employment, our employees also generally sign offer letters
specifying the basic terms and conditions of their employment.
We currently do not hold any patents. However, we are investigating the
possibility of obtaining patents for our software products. We hold the
registered trademarks for Interactive Intelligence-Registered Trademark- and
Enterprise Interaction Center-Registered Trademark- in the U.S. and have
trademark applications pending in the U.S. for the following marks: Interaction
Client, Interaction Designer, Interaction Administrator, Interaction Recorder,
Interaction Dialer, Interaction Director, Interaction Web, Interaction Mail,
Multimedia Queuing and our logo design mark. In addition, we have trademark
applications pending in several foreign countries for the marks Interactive
Intelligence and Enterprise Interaction Center. All other trademarks and trade
names referred to in this prospectus are the property of their owners.
We license some components of our products from third parties. If we were to
lose those licenses, we believe that we could obtain licenses from other sources
for similar components. However, if one or more of these licenses terminates or
cannot be renewed on satisfactory terms, we would have to modify the affected
products to use alternative components or technology or eliminate the affected
product function, either of which could have a material adverse effect on us.
EMPLOYEES
As of March 31, 1999, we had 145 employees worldwide, including 54 in
research and development, 39 in client services, 36 in sales and marketing and
16 in administration. Our future performance depends in significant part upon
the continued service of our key sales and marketing, technical and senior
management personnel and our continuing ability to attract and retain highly
44
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qualified personnel. Competition for these personnel is intense and we cannot
assure you that we will be successful in attracting or retaining these personnel
in the future.
We believe that we have a unique corporate culture that attracts highly
qualified and motivated employees. We emphasize teamwork, flexible work
arrangements, local decision making and open communications. Every employee has
been granted stock options. None of our employees is represented by a labor
union. We have not experienced any work stoppages and we consider our relations
with our employees to be excellent.
FACILITIES
We lease approximately 37,000 square feet of office space in our
headquarters building in Indianapolis, Indiana. As of March 31, 1999, the lease
required payments of approximately $3.5 million over the remaining term of the
lease, which expires on February 28, 2004. Before April 30, 1999, when we moved
into our current headquarters space, our headquarters were located in other
office buildings in Indianapolis, Indiana. We are continuing to lease some of
that space, which consists of two separate office suites totaling approximately
10,000 square feet, for use as training facilities. The leases under which we
lease both of these office spaces expire on March 1, 2004.
We lease space for our research and development facility in Deerfield Beach,
Florida, which consists of approximately 5,700 square feet. The lease for that
facility ends on April 30, 2003. We also lease space for our various sales,
services and development offices located in Carlsbad, California, Los Angeles,
California, San Francisco, California, Denver, Colorado, Milford, Connecticut,
Norcross, Georgia, Stevensville, Maryland, St. Louis, Missouri, Minneapolis,
Minnesota, Marshalls Creek, Pennsylvania, Rockhill, South Carolina, Reston,
Virginia, France, Japan and Korea. The majority of these leases are short-term
leases.
We believe that our existing facilities are adequate for our current needs
and that additional space will be available as needed.
LEGAL PROCEEDINGS
As of the date of this prospectus, we are not engaged in any legal
proceeding that we expect to have a material adverse effect on our business,
financial condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
The following table sets forth information about our executive officers,
directors and significant employees as of the date of this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Donald E. Brown, M.D................... 43 Chairman of the Board, President and Chief Executive Officer
John R. Gibbs.......................... 48 Executive Vice President of Administration and Corporate
Development, Treasurer and Director
Michael J. Tavlin (1).................. 52 Chief Financial Officer
Jeremiah J. Fleming.................... 41 Vice President of Sales, The Americas
Michael E. Ford........................ 47 Vice President of Operations, Europe, Africa and Middle East
Douglas T. Shinsato.................... 49 Vice President of Operations, Asia/Pacific
Keith A. Midkiff....................... 36 Vice President of Finance and Controller
Joseph M. Adams (2).................... 44 Vice President of Market Communications
Michael D. Gagle, Ph.D. (2)............ 48 Chief Scientist
Robert A. Greising (3)................. 46 Secretary
Robert A. Compton...................... 43 Director
Jon Anton, D.Sc........................ 59 Director
Michael P. Cullinane................... 49 Director
</TABLE>
- ------------------------
(1) We have elected Mr. Tavlin Chief Financial Officer, effective upon the date
he commences employment with us, which we expect to be on or before June 14,
1999.
(2) Significant employees, but not executive officers.
(3) Not an employee or executive officer.
DONALD E. BROWN, M.D. co-founded his third software company, Interactive
Intelligence, in October 1994 and has served as Chief Executive Officer since
April 1995 and President since inception. Dr. Brown also serves as Chairman of
the Board, a position he has held since July 1998. Dr. Brown has been a director
since inception. In March 1988, Dr. Brown co-founded Software Artistry, Inc., a
developer of customer support software that became a public company in March
1995 and was subsequently acquired by IBM Corporation in January 1998. At
Software Artistry, Dr. Brown served as Chief Executive Officer and director from
inception through September 1994. Dr. Brown's first software company was
acquired by Electronic Data Systems, Inc. in September 1987. Dr. Brown graduated
from the Indiana University School of Medicine in 1985. He also holds two
additional degrees from Indiana University, a M.S. in computer science and a
B.S. in physics.
JOHN R. GIBBS co-founded Interactive Intelligence in October 1994 and has
served as Executive Vice President of Administration and Corporate Development
since January 1995 and Treasurer since April 1995. Mr. Gibbs also served as
Secretary from April 1995 to January 1997. Mr. Gibbs has been a director since
April 1995. From March 1992 until October 1994, Mr. Gibbs was an independent
management consultant, serving mostly entrepreneurial and emerging growth
companies. He also has prior experience as an executive for high technology
companies. While a consultant, Mr. Gibbs served as the first Executive Director
of the Indiana Software Association. Mr. Gibbs holds a B.S. degree in business
economics and public policy from Indiana University. He also attended M.B.A.
school at Indiana University.
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<PAGE>
MICHAEL J. TAVLIN has been elected as Chief Financial Officer, effective
upon the date he commences employment with us, which we expect to be on or
before June 14, 1999. From June 1986 to June 1999, Mr. Tavlin served as Vice
President-Treasurer and Secretary of Aliant Communications Inc., a
telecommunications company, which has agreed to be acquired by ALLTEL
Corporation. From January 1979 until June 1986, Mr. Tavlin served as a Senior
Tax Manager with Coopers & Lybrand, which is now known as
PricewaterhouseCoopers, and Touche Ross & Co., which is now known as Deloitte &
Touche. Prior to that time, Mr. Tavlin was engaged in the practice of law. Mr.
Tavlin holds a B.A. degree in education from Oklahoma City University, a J.D.
degree from the University of Nebraska College of Law, and a LL.M. in Taxation
degree from Washington University in St. Louis.
JEREMIAH J. FLEMING has served as Vice President of Sales, The Americas,
since joining Interactive Intelligence in March 1997. From January 1995 to
February 1997, Mr. Fleming served as Vice President, Domestic Sales of Software
Artistry. From 1992 to December 1994, he held sales positions of increasing
responsibility at Software Artistry, including Manager, Central Region Sales
from January 1993 to December 1994. He performed various sales capacities at
Pansophic Systems, Inc., a developer of business software, from 1989 to 1991,
concluding as the Midwest Regional Manager. Mr. Fleming holds both a M.B.A.
degree and a B.A. degree in political science and philosophy from the University
of Missouri.
MICHAEL E. FORD has served as Vice President of Operations, Europe, Africa
and Middle East, since September 1998. Mr. Ford also served as Director of
Sales, Europe, Africa and Middle East from the time he joined Interactive
Intelligence in July 1997 until September 1998. From March 1994 to April 1997,
he served as Vice President of Sales of Enhanced Systems, Inc., a developer of
voice processing software. From March 1993 to March 1994, Mr. Ford served as
Vice President of Sales for Futurus Corporation, a developer of unified
messaging software. Mr. Ford's previous experience also includes establishing
and managing subsidiaries in Europe and Asia for Computer Corporation of America
and serving as Director of International Business for Hayes MicroComputer
Corporation. Mr. Ford holds a Masters in international business degree from the
University of South Carolina and a B.S. in business administration and economics
from the University of Pittsburgh in Kansas.
DOUGLAS T. SHINSATO has served as Vice President of Operations,
Asia/Pacific, since joining Interactive Intelligence in May 1998. From April
1997 until April 1998, Mr. Shinsato served as Vice President of Asia Pacific of
Genesys Telecommunications Laboratories, a developer of computer telephony
integration software. From December 1995 to April 1997, he served as Executive
Vice President-Japan for AT Kearney, a subsidiary of Electronic Data Systems,
Inc., an information technology services and systems integrator. From December
1988 until December 1995, Mr. Shinsato was a senior partner in Deloitte Touche,
Tohmatsu's management consulting operations in Japan. Mr. Shinsato holds a
M.B.A. degree from the University of Southern California and a J.D. degree from
the Stanford Law School.
KEITH A. MIDKIFF has served as Vice President of Finance since March 1999
and as Controller since joining Interactive Intelligence in February 1997. Mr.
Midkiff was Vice President of Finance and Chief Financial Officer of Alta
Analytics, Inc., a developer of data analysis software, from December 1996 to
February 1997. From June 1993 to December 1996, he served as Controller of
Software Artistry, which became a public company in March 1995. Mr. Midkiff
holds a M.B.A. degree from Indiana University and a dual B.S. degree in
accounting and finance from Ohio State University.
JOSEPH M. ADAMS has served as Vice President of Market Communications since
joining Interactive Intelligence in December 1996. In 1988, Mr. Adams co-founded
Software Artistry with Dr. Brown. From 1988 to November 1995, Mr. Adams served
in a number of senior roles at Software Artistry, including Vice President of
Market Communications. From November 1995 to December 1996, Mr. Adams was
retired. He also previously served as a director at Software Artistry and three
separate
47
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Indianapolis based charities. Mr. Adams holds a B.S. degree in business
economics from Indiana University.
MICHAEL D. GAGLE, PH.D. has served as Chief Scientist since March 1998. From
the time Dr. Gagle joined Interactive Intelligence in March 1995 until March
1998, he served as our Principal Software Engineer and Project Leader. Before
joining Interactive Intelligence, Dr. Gagle spent five years working on a
variety of applied projects at AT&T Bell Labs. Dr. Gagle's previous experience
also includes co-founding and serving as Vice President for Research and
Development for Micro Data Base Systems, Inc., a developer of PC database
systems, working on the technical staff of Microsoft Corporation and serving
from January 1994 to September 1994 as a senior developer with the Regenstrief
Institute for Health Care Research. Dr. Gagle holds a Ph.D. in management
information systems and a B.S. in industrial management from Purdue University.
ROBERT A. GREISING has served as Secretary of Interactive Intelligence since
January 1997. He also served as a director from January 1997 to May 1999. Mr.
Greising is a partner in Krieg DeVault Alexander & Capehart, LLP, a law firm
located in Indianapolis, Indiana. He practices in the general corporate,
corporate finance and technology areas and chairs the Technology and Electronic
Commerce Practice Group of the firm. Mr. Greising also has experience with the
purchase and sale of software companies and the licensing of software. Mr.
Greising received his B.A. degree from DePauw University and his J.D. and M.B.A.
degrees from Washington University in St. Louis.
ROBERT A. COMPTON has served as a director of Interactive Intelligence since
April 1995. He also served as Chairman of the Board from August 1995 to July
1998. Mr. Compton is currently President, Neurological Technologies Division of
Medtronic, Inc., a manufacturer of image guided surgery systems and medical
devices. From May 1997 until its acquisition, Mr. Compton was President and
Chief Operating Officer of Sofamor Danek Group, Inc., a publicly held medical
device manufacturer acquired by Medtronic, Inc. in January 1999. From 1988 until
May 1997, he served as general partner of CID Equity Partners, an
Indianapolis-based venture capital firm. From 1985 to 1988, Mr. Compton served
as Investment Manager with First Chicago Venture Capital. Mr. Compton has also
served as director for three publicly held companies, including Software
Artistry and Sofamor Danek Group, Inc., and over twelve privately held
companies. Mr. Compton holds a M.B.A. degree from Harvard University, and
received his undergraduate degree from Principia College.
JON ANTON, D.SC. has served as a director of Interactive Intelligence since
May 1999. Dr. Anton is a researcher in the Purdue Call Center for
Customer-Driven Quality in the Department of Consumer Sciences at Purdue
University, a position he has held since 1993. He specializes in enhancing
customer service strategy through inbound call centers and teleweb centers using
telecommunications and computer technology, as well as the Internet. Dr. Anton
has assisted over 400 companies in the design and implementation of inbound and
outbound call centers. Dr. Anton holds Doctorate of Science and M.S. degrees in
technology from Harvard University, a M.S. degree from the University of
Connecticut and a B.S. degree from the University of Notre Dame. He also
completed the Executive Education program at the Graduate School of Business of
Stanford University.
MICHAEL P. CULLINANE is Executive Vice President and Chief Financial Officer
of PLATINUM TECHNOLOGY, INC., a publicly-held software company. He joined
PLATINUM in 1988 as its Chief Financial Officer. PLATINUM has agreed to be
acquired by Computer Associates International. Mr. Cullinane is also a director
of Platinum Entertainment, a recorded music producer and licensing company,
Vasco Data Security, Inc., a security hardware and software company, and
Made2Manage Systems, Inc., an enterprise software company. Mr. Cullinane holds a
Bachelor's degree in business administration from the University of Notre Dame.
Executive officers of Interactive Intelligence serve at the discretion of
our board of directors. There is no family relationship between any of our
directors or executive officers.
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<PAGE>
BOARD OF DIRECTORS
Our board of directors is divided into three classes that serve staggered
three-year terms. The term of the first class will expire at the annual meeting
of stockholders in 2000, the term of the second class will expire at the annual
meeting of stockholders in 2001, and the term of the third class will expire at
the annual meeting of stockholders in 2002. The terms of our current directors
will expire as follows:
- 2000--Dr. Anton;
- 2001--Mr. Cullinane and Mr. Gibbs; and
- 2002--Dr. Brown and Mr. Compton
COMMITTEES OF THE BOARD OF DIRECTORS
We have an Audit Committee and a Compensation and Stock Option Committee.
The Audit Committee consists of Dr. Anton and Mr. Cullinane. The Compensation
and Stock Option Committee consists of Mr. Compton, Dr. Anton and Mr. Cullinane.
The responsibilities of the Audit Committee are to recommend independent
auditors, review with the independent auditors the scope and results of the
audit engagement, establish and monitor our financial policies and control
procedures, review and monitor the provisions of non-audit services by our
auditors and review all potential conflict of interest situations. See "Certain
Transactions." The responsibilities of the Compensation and Stock Option
Committee are to review, determine and establish the salaries, bonuses and other
compensation of our executive officers and to administer our stock option plans.
COMPENSATION OF DIRECTORS
No compensation was paid during 1998 to any of our directors for services as
a director. We will reimburse all directors for reasonable out-of-pocket
expenses incurred in connection with attending meetings of our board, including
committee meetings, but do not intend to pay them any cash stipends.
Non-employee directors will participate in our Outside Directors Stock Option
Plan. In connection with the election of Dr. Anton and Mr. Cullinane as
directors, we granted each of them an option to purchase 10,000 shares of our
common stock at an exercise price equal to the deemed fair market value of our
common stock on the date of the grant, based upon a determination by our board
of directors. See "Executive Compensation--Stock Option Plans--Outside Directors
Stock Option Plan" and "--Other Option Plans."
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation paid by us for services rendered
in all capacities to us during 1998 to our Chief Executive Officer and to each
of our four other most highly compensated executive officers, based on salary
and bonus earned during 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION -------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION OPTIONS(2)
- --------------------------------------------------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Donald E. Brown, M.D.
Chairman, President and Chief Executive
Officer................................................ $ 100,000(3) $ -- $ -- 45,000
John R. Gibbs
Executive Vice President of Administration and
Corporate Development and Treasurer.................... $ 80,000 $ -- $ 5,535(4) --
Jeremiah J. Fleming
Vice President of Sales, The Americas.................. $ 154,808 $ 106,327 $ -- 7,500
Michael E. Ford
Vice President of Operations, Europe, Africa, Middle
East................................................... $ 91,032 $ 57,026 $ 73,359(5) 20,000
Douglas T. Shinsato
Vice President of Operations, Asia/Pacific............. $ 100,000 $ 66,666 $ 55,077(6) 50,000
</TABLE>
- ------------------------
(1) Reflects bonus earned during 1998, but paid in the following year.
(2) Options to acquire shares of common stock. We have never granted stock
appreciation rights or restricted stock.
(3) Reflects salary earned during 1998, but deferred, without interest, at the
election of Dr. Brown through July 1, 1999. This amount will be paid out of
the net proceeds of this offering.
(4) Reflects medical premiums paid by us while we were an S-corporation, which
are considered taxable income, and related tax gross-up payments.
(5) Reflects relocation expenses.
(6) Reflects housing allowance.
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OPTION GRANTS DURING 1998
The following table sets forth information with respect to options granted
under our stock option plans to the Named Executive Officers during 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR (PER SHARE) DATE 5% 10%
- ------------------------------------- ----------- --------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Brown, M.D................. 45,000(2) 9.2% $ 4.50 09/22/08 $ 127,351 $ 322,733
John R. Gibbs........................ -- -- -- -- -- --
Jeremiah J. Fleming.................. 7,500(3) 1.5% 4.50 08/31/08 21,225 53,789
Michael E. Ford...................... 20,000(3) 4.1% 4.50 08/31/08 56,601 143,437
Douglas T. Shinsato.................. 50,000(3) 10.3% 4.00 05/29/08 125,779 318,748
</TABLE>
- ------------------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the price of our common stock. We did not use an alternative formula
for a grant date valuation, as we are not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors.
(2) Non-qualified stock options to purchase our common stock, granted at 100% of
the deemed fair market value of the common stock on the date of grant, based
upon a determination by our board of directors. The options were immediately
exercisable as of the date of grant.
(3) Incentive stock options to purchase our common stock, granted at 100% of the
deemed fair market value of the common stock on the date of grant, based
upon a determination by our board of directors. The options are exercisable
at the rate of 20% per year, beginning on the first anniversary of the date
of grant.
OPTION EXERCISES DURING 1998 AND YEAR-END OPTION VALUES
The following table sets forth information about the exercise of options to
acquire our common stock by the Named Executive Officers during 1998, and
year-end option amounts and values.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Brown, M.D........... -- $ -- 45,000 -- $ 360,000 $ --
John R. Gibbs.................. 266,500 405,200 139,055 -- 1,710,377 --
Jeremiah J. Fleming............ 15,000 48,000 1,500 73,500 16,800 799,200
Michael E. Ford................ -- -- 4,000 36,000 44,800 339,200
Douglas T. Shinsato............ -- -- -- 50,000 -- 425,000
</TABLE>
- ------------------------
(1) The value is calculated based on the difference between the deemed fair
market value of the common stock on December 31, 1998 of $12.50 per share,
based upon a determination by our board of directors, and the option
exercise price, multiplied by the number of shares underlying the option.
(2) The value is calculated based on the difference between the deemed fair
market value of the common stock on the date of exercise, based upon a
determination by our board of directors, and the option exercise price,
multiplied by the number of shares to which the exercise relates.
51
<PAGE>
STOCK OPTION PLANS
1995 INCENTIVE STOCK OPTION PLAN
On August 14, 1995, the board of directors and the then sole stockholder
adopted, and on November 11, 1997, the board of directors amended, the 1995
Incentive Stock Option Plan. Under the 1995 Incentive Stock Option Plan, we had
authority to award incentive stock options for up to 2,500,000 shares of our
common stock to our employees, including officers.
The 1995 Incentive Stock Option Plan was administered by the board of
directors until November 1997, when it began to be administered by an
administrative committee of the board. Subject to the terms of the 1995
Incentive Stock Option Plan, the board of directors or the administrative
committee had the sole discretion and authority to select those officers and
employees to whom awards were made, to designate the number of shares to be
covered by each award, to establish vesting schedules, to specify all other
terms of the awards, subject to specified restrictions, and to interpret the
1995 Incentive Stock Option Plan.
Options granted under the 1995 Incentive Stock Option Plan generally become
vested 20% per year beginning on the first anniversary of the date of grant or
initial hire. Unvested options expire on the date the grantee's employment
terminates. Generally if the employment of a grantee of stock options under the
1995 Incentive Stock Option Plan terminates for any reason other than death or
disability, that grantee's vested options expire 30 days after the date of
termination. If the termination is on account of death or disability, the vested
options generally expire six months after termination. The 1995 Incentive Stock
Option Plan also provides that the board of directors can accelerate the vesting
of outstanding awards in the event of specified changes in control of our
company.
Upon stockholder approval of the new 1999 Stock Option and Incentive Plan on
April 16, 1999, the board of directors determined that no new options will be
granted under the 1995 Incentive Stock Option Plan. Through April 16, 1999,
options for an aggregate of 1,344,490 shares of common stock were outstanding
under the 1995 Incentive Stock Option Plan.
1995 NONSTATUTORY STOCK OPTION INCENTIVE PLAN
On August 14, 1995, the board of directors and the then sole stockholder
adopted the 1995 Nonstatutory Stock Option Incentive Plan. Under the 1995
Nonstatutory Plan, we had authority to award stock options for up to 250,000
shares of our common stock to our employees, directors and consultants.
The 1995 Nonstatutory Plan was administered by the board of directors.
Subject to the terms of the 1995 Nonstatutory Plan, the board of directors had
the sole discretion and authority to select those individuals to whom awards
were made, to designate the number of shares to be covered by each award, to
establish vesting schedules, to specify all other terms of the awards, subject
to specified restrictions, and to interpret the 1995 Nonstatutory Plan.
Subject to the discretion of the board of directors, generally if the
service of a grantee of stock options terminates for any reason other than death
or disability, that grantee's options expire at the date of termination, other
than options held by a non-employee director. If the termination is on account
of death, the vested options generally expire 12 months after death. If the
termination is on account of disability, the vested options generally expire six
months after termination. The 1995 Nonstatutory Plan also provides that the
board of directors can accelerate the vesting of outstanding awards in the event
of specified changes in control of our company.
Upon stockholder approval of the new 1999 Stock Option and Incentive Plan
and the new Outside Directors Stock Option Plan on April 16, 1999, the board of
directors determined not to issue any further options under the 1995
Nonstatutory Plan. Through that date, options for an aggregate of 9,500 shares
of common stock were outstanding under the 1995 Nonstatutory Plan.
52
<PAGE>
1999 STOCK OPTION AND INCENTIVE PLAN
On April 14, 1999, the board of directors adopted, and on April 16, 1999,
the stockholders approved, the 1999 Stock Option and Incentive Plan (the "1999
Stock Option Plan"). Under the 1999 Stock Option Plan, we may award stock
options and shares of restricted stock to our officers, key employees and
consultants. The aggregate number of shares of common stock that may be awarded
under the 1999 Stock Option Plan is 2,500,000, subject to adjustment in
specified events. No individual participant may receive awards for more than
250,000 shares in any calendar year.
The 1999 Stock Option Plan is administered by the Compensation and Stock
Option Committee (the "Committee"). Subject to the terms of the 1999 Stock
Option Plan, the Committee has the sole discretion and authority to select those
officers, key employees and consultants to whom awards will be made, to
designate the number of shares to be covered by each award, to establish vesting
schedules, to specify all other terms of the awards, subject to specified
restrictions, and to interpret the 1999 Stock Option Plan.
With respect to stock options under the 1999 Stock Option Plan that are
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code, the option price must be at least 100% (or, in the case of a
holder of more than 10% of the common stock, 110%) of the fair market value of a
share of common stock on the date of the grant of the stock option. Incentive
stock options may only be granted to employees. The Committee will establish, at
the time the options are granted, the exercise price of options that do not
qualify as incentive stock options ("non-qualified stock options"). No option
granted under the 1999 Stock Option Plan may be exercised more than ten years
(or, in the case of an incentive stock option granted to a holder of more than
10% of the common stock, five years), or such shorter period as the Committee
may determine, from the date it is granted or a shorter period in the event of
some types of employment terminations. Under the 1999 Stock Option Plan, the
Committee may grant awards of restricted shares, in which case the grantee would
be granted shares of common stock, subject to such forfeiture provisions and
transfer restrictions as the Committee determines. Awards of options and shares
of restricted stock as to which restrictions have not lapsed are not
transferable other than under the laws of descent and distribution.
Subject to the discretion of the Committee, generally if the employment of a
grantee of stock options is terminated for cause, or the employment of a grantee
of restricted shares is terminated for any reason other than death, disability
or retirement, that grantee's options expire and any restricted shares are
forfeited at the date of termination. A portion of a grantee's restricted shares
automatically become vested upon termination by reason of death or disability.
The board of directors may terminate or amend the 1999 Stock Option Plan at any
time; however, subject to certain exceptions, a grantee's consent must be
obtained if the change would impair the rights of that grantee and stockholder
approval must be obtained if required by applicable law or if the change
involves some types of increases in the number of shares subject to the 1999
Stock Option Plan. The 1999 Stock Option Plan also provides for accelerated
vesting of outstanding awards in the event of a change in control of our
company. As of April 30, 1999, options for an aggregate of 35,500 shares of
common stock were outstanding under the 1999 Stock Option Plan. Under the 1999
Stock Option Plan, we may make loans to grantees with respect to the income
taxes payable on restricted stock and the option price and income taxes payable
on the exercise of options.
OUTSIDE DIRECTORS STOCK OPTION PLAN
On April 14, 1999, the board of directors adopted, and on April 16, 1999,
the stockholders approved, an Outside Directors Stock Option Plan (the
"Directors Plan"). The Directors Plan reserves for issuance 100,000 shares of
our common stock, subject to adjustment in certain events. Pursuant to the
Directors Plan, each non-employee director will be automatically granted an
option to purchase 5,000 shares of common stock on June 1 of each year beginning
June 1, 2000. The option exercise price per share will be the fair market value
of one share of our common stock on the date of grant. Each
53
<PAGE>
option becomes exercisable six months following the date of grant and expires
ten years following the date of grant. Subject to some exceptions, options may
be exercised by the holder only if he has been in continuous service on the
board of directors at all times since the grant of the option.
OTHER OPTION PLANS
On September 22, 1998, the board of directors granted an option to purchase
45,000 shares of our common stock to Dr. Brown. The board of directors granted
this option in consideration for guarantees by Dr. Brown of some of our
commercial lines of credit and equipment leases. The exercise price for this
option is 100% of the deemed fair market value of our common stock on the date
of grant, based upon a determination by our board of directors. The option was
immediately exercisable in full as of the date of grant and can be exercised any
time within 10 years from the date of grant.
On May 26, 1999, the board of directors granted an option to purchase 10,000
shares of our common stock to each of Dr. Anton and Mr. Cullinane in
consideration of their agreeing to become directors. The exercise price for
these options is 100% of the deemed fair market value of our common stock on the
date of grant, based upon a determination by our board of directors. Options for
5,000 of the shares become exercisable one year after the date of grant and the
balance becomes exercisable two years after the date of grant. The options
expire ten years after the date of grant.
EMPLOYMENT AND NON-COMPETITION AGREEMENTS
On January 2, 1995, we entered into a Consulting and Employment Agreement
with John R. Gibbs, which was amended on May 14, 1999. Under the agreement, Mr.
Gibbs serves as Executive Vice President of Administration and Corporate
Development. The term of Mr. Gibbs' employment was initially for 18 months
beginning July 1, 1995; however, the agreement provides that the term
automatically renews for successive one-year terms unless either we or Mr. Gibbs
gives notice. The agreement provides that Mr. Gibbs will receive an annual
salary of $60,000, which we may increase at our discretion, and a one-time grant
of incentive stock options to purchase up to 555,555 shares of our common stock.
We have since increased Mr. Gibbs' annual salary. See "--Summary Compensation
Table." Mr. Gibbs is also eligible to participate in employee benefit plans
generally available to our employees. The agreement also contains
non-competition, non-solicitation and non-disclosure provisions, which are in
effect during the term of the agreement. The non-disclosure provisions in Mr.
Gibbs' agreement continue indefinitely after his termination of employment. The
non-compete provisions continue for a period of 12 months after his termination
of employment for any reason, as do the non-solicitation provisions unless he is
terminated by us without cause. If his employment is terminated by us without
cause, or in specified circumstances following a change of control, Mr. Gibbs
will receive severance pay equal to 12 months' salary. Under the agreement, Mr.
Gibbs also served as a consultant to the Company from January 2, 1995 until June
30, 1995.
On June 30, 1997, we entered into an Employment Agreement with Michael E.
Ford. The agreement provides that Mr. Ford will serve as Director of Sales in
Europe, Africa and Middle East. The term of Mr. Ford's employment agreement is
two years; however, the agreement provides that the term automatically renews
for successive one-year terms unless either we or Mr. Ford gives notice. The
agreement provides that Mr. Ford will receive an annual salary of $85,000, which
we may increase or decrease at our discretion with notice, and a one-time grant
of incentive stock options to purchase up to 20,000 shares of our common stock
under our 1995 Incentive Stock Option Plan. We have since increased Mr. Ford's
annual salary. See "--Summary Compensation Table." Mr. Ford also participates in
the bonus compensation program applicable to our sales employees and other
employee benefit plans generally available to our employees. The agreement also
contains non-competition and non-solicitation provisions, which are in effect
during the term of the agreement and for a period of 18 months following his
termination for any reason, and non-disclosure provisions. If his employment is
terminated by us for any reason other than for cause, Mr. Ford will receive
severance pay equal to one month's salary.
54
<PAGE>
On May 1, 1998, we entered into an Employment Agreement with Douglas T.
Shinsato. The agreement provides that Mr. Shinsato will serve as Vice
President-Asia Pacific. The term of Mr. Shinsato's employment agreement is two
years; however, the agreement provides that the term automatically renews for
successive one-year terms unless either we or Mr. Shinsato gives notice. The
agreement provides that Mr. Shinsato will receive an annual salary of $150,000,
which we may increase or decrease at our discretion with notice, and a one-time
grant of incentive stock options to purchase up to 50,000 shares of our common
stock under our 1995 Incentive Stock Option Plan. We have since increased Mr.
Shinsato's annual salary. See "--Summary Compensation Table." Mr. Shinsato also
participates in the bonus compensation program applicable to our sales employees
and other employee benefit plans generally available to our employees. The
agreement also contains non-competition and non-solicitation provisions, which
are in effect during the term of the agreement and for a period of 18 months
following his termination for any reason, and non-disclosure provisions. If his
employment is terminated by us for any reason other than for cause, Mr. Shinsato
will receive severance pay equal to one month's salary.
On March 1, 1997, we entered into an Employment Agreement with Jeremiah J.
Fleming, which was amended on May 14, 1999. The agreement provides that Mr.
Fleming will serve as Vice President of Sales, The Americas. The term of Mr.
Fleming's employment agreement is two years; however, the agreement provides
that the term automatically renews for successive one-year terms unless either
we or Mr. Fleming gives notice. The agreement provides that Mr. Fleming will
receive an annual salary of $125,000, which we may increase or decrease at our
discretion with notice, and a one-time grant of incentive stock options to
purchase up to 75,000 shares of our common stock under our 1995 Incentive Stock
Option Plan. We have since increased Mr. Fleming's annual salary. See "--Summary
Compensation Table." Mr. Fleming also participates in the bonus compensation
program applicable to our sales employees and other employee benefit plans
generally available to our employees. The agreement also contains
non-competition, non-solicitation and non-disclosure provisions, which are in
effect during the term of the agreement. The non-disclosure provisions in Mr.
Fleming's agreement continue indefinitely after termination of his employment.
The non-compete provisions continue for a period of 12 months after termination,
as do the non-solicitation provisions unless he is terminated by us without
cause. If his employment is terminated by us without cause, or in specified
circumstances following a change of control, Mr. Fleming will receive severance
pay equal to one year's total compensation.
We do not have employment or non-competition agreements with any other Named
Executive Officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Donald E. Brown, M.D. and John R. Gibbs served as the only
members of the Administrative Committee, which administered our stock option
plans during 1998. The board of directors had all other responsibilities to
review, determine and establish the salaries, bonuses and other compensation of
our executive officers during 1998. Our board of directors during 1998 consisted
of Messrs. Brown, Compton, Gibbs and Greising. Messrs. Brown and Gibbs continue
to serve as officers and employees of Interactive Intelligence. Mr. Greising is
not an employee, but has been our Secretary since January 1997. Except for Dr.
Brown, none of the members of the Administrative Committee or our board of
directors during 1998 were involved in a relationship requiring disclosure as an
interlocking executive officer or director or under Item 404 of Regulation S-K.
Dr. Brown is a director and 25% stockholder of Intelligent Response, Inc., a
company that provides us with telemarketing and fulfillment services. Dr. Brown
has also loaned funds to us from time to time prior to this offering, has
elected to defer the payment of his salary, and has advanced other non-interest
bearing accounts payable to us. In addition, he has guaranteed our commercial
lines of credit, our equipment leases and two of our office leases. See "Certain
Transactions." Effective April 14, 1999, we no longer have an Administrative
Committee, and the Compensation and Stock Option Committee administers our stock
option plans. See "Management--Committees of the Board of Directors.
55
<PAGE>
CERTAIN TRANSACTIONS
RELATIONSHIP WITH DIALOGIC
Dialogic Investment Corporation owned 5.7% of the shares of our common stock
as of March 31, 1999. We have entered into agreements with Dialogic Corporation,
which is the parent of Dialogic Investment Corporation. Under a Strategic
Relationship Agreement between us and Dialogic Corporation, which commenced on
March 1, 1999, Dialogic Corporation has agreed to provide us with voice
processing boards for our use related to EIC. Dialogic Corporation has also
agreed to provide us with rebate incentives and marketing, sales and technical
support. This agreement is non-exclusive, and Dialogic Corporation is free to
market any of the voice processing boards to other customers, including
companies that may compete with us. In addition, while we have agreed to provide
Dialogic Corporation notice and a reasonable opportunity to meet our current and
future product needs, we are also free to purchase competitive products if
required for our business purposes.
The Strategic Relationship Agreement also provides that, at no cost to us,
Dialogic Corporation will provide us with an inventory of voice processing
boards valued in an amount up to $100,000, to be used exclusively for our
internal developmental and testing purposes. We may not resell this inventory
without written permission from Dialogic Corporation until after the end of the
three-year term of this arrangement. Dialogic Corporation's inventory
obligations under the Strategic Relationship Agreement terminate if we begin to
purchase a substantial portion of competitive products from other vendors. We
have already received all of the voice processing boards that Dialogic
Corporation is obligated to deliver. We believe that the Strategic Relationship
Agreement is on terms at least as favorable as we could obtain from an unrelated
third party.
We are also a party to a Support Services Agreement with Dialogic
Corporation relating to technical and professional support services to be
provided by Dialogic Corporation to us arising from the installation,
configuration, programming and maintenance of specified Dialogic Corporation
products. The annual fee is $50,000, which is waived for one year beginning
March 1, 1999, plus reasonable travel and out-of-pocket expenses. We also incur
additional per hour fees for specified services such as standby coverage,
service calls within the standby period, on-site technical support and
consulting services. The Support Services Agreement also provides that we will
not solicit for employment any Dialogic Corporation personnel performing
services under the agreement. We believe that the Support Services Agreement is
on terms at least as favorable as we could obtain from an unrelated third party.
We paid Dialogic Corporation $2,000 in 1996, $905,000 in 1997 and $871,000
in 1998 for voice processing boards and related technology and services. We
believe that these amounts were no greater than amounts which we would have paid
to unrelated third parties for similar products and services.
TELEMARKETING SERVICES
Dr. Brown is a director and 25% stockholder of Intelligent Response, Inc., a
telemarketing company, and Dr. Brown's brother is the president of that company.
In 1998, Intelligent Response began providing us with telemarketing and
fulfillment services in support of our marketing efforts. We paid Intelligent
Response $111,000 in 1998 for these services. We believe that the amounts paid
to Intelligent Response were no greater than amounts that we would have paid to
unrelated third parties for similar services. We intend to continue to use
Intelligent Response to provide telemarketing and fulfillment services.
INSIDER ADVANCES
From time to time before this offering, Dr. Brown has loaned funds to us.
These loans have an interest rate of 10% and are due on December 31, 2001. All
amounts outstanding under these loans
56
<PAGE>
will be repaid with a portion of the net proceeds from this offering. As of
March 31, 1999, the aggregate amount outstanding under these loans was $7.2
million, including accrued interest. We incurred no interest expense on these
loans in 1996, $228,000 in interest expense in 1997 and $686,000 in interest
expense in 1998. In addition to these loans, Dr. Brown has also elected to
defer, without interest, the payment of all of his salary from July 1, 1996
through June 30, 1999. As of March 31, 1999, we owed Dr. Brown $177,000 in
deferred compensation and $335,000 in other non-interest bearing accounts
payable. All of Dr. Brown's deferred compensation and these other non-interest
bearing accounts payable will be paid with a portion of the net proceeds from
this offering.
GUARANTEES OF OUR OBLIGATIONS
From time to time before this offering, Dr. Brown has guaranteed our
commercial lines of credit and our equipment leases. In consideration for a
portion of these guarantees, we granted an option to purchase 45,000 shares of
our common stock to Dr. Brown on September 22, 1998. The stock option was
granted at 100% of the deemed fair market value of our common stock on the date
of grant, based upon a determination by our board of directors, and the option
was immediately exercisable in full as of the date of grant. In connection with
this offering, we intend to replace our existing credit facilities with a new
unsecured line of credit from our primary lender, which Dr. Brown will not be
required to guarantee. In addition, Dr. Brown has personally guaranteed two of
our office leases. These guarantees and the guarantee of our equipment leases
will continue after this offering.
57
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
John R. Gibbs, the co-founder of Interactive Intelligence and a Named
Executive Officer, has granted the underwriters an option to purchase up to
shares of our common stock to cover over-allotments.
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 1999 by Mr. Gibbs and by the
following individuals or groups:
- each person, or group of affiliated persons, who is known by us to
beneficially own more than 5% of the outstanding shares of our common
stock;
- each director or nominee for director;
- each Named Executive Officer; and
- all directors and executive officers as a group.
Unless otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all shares beneficially owned by
them. Percentage ownership in the following table is based on 7,077,510 shares
of our common stock outstanding as of March 31, 1999 and shares of our
common stock outstanding after this offering, assuming that the underwriters do
not exercise their over-allotment options.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OUTSTANDING
NUMBER OF SHARES --------------------------
BENEFICIALLY BEFORE THIS AFTER THIS
NAME OWNED OFFERING OFFERING
- ----------------------------------------------------------------------- ----------------- ------------- -----------
<S> <C> <C> <C>
Donald E. Brown, M.D.(1)............................................... 5,783,386(2) 81.2%
John R. Gibbs(1)....................................................... 639,264 9.0%
Jeremiah J. Fleming.................................................... 31,500(3) *
Michael E. Ford........................................................ 4,000(4) *
Douglas T. Shinsato.................................................... 10,000(5) *
Jon Anton, D.Sc........................................................ -- --
Robert A. Compton...................................................... 15,000(6) *
Michael P. Cullinane................................................... -- --
Dialogic Investment Corporation(7)..................................... 400,000 5.7%
All directors and executive officers as a group (9 persons)............ 6,493,150(8) %
</TABLE>
- ------------------------
* Less than 1%.
(1) The address for these stockholders is 8909 Purdue Road, Suite 300,
Indianapolis, IN 46268.
(2) Includes 45,000 shares subject to stock options exercisable within 60 days
after March 31, 1999.
(3) Includes 16,500 shares subject to stock options exercisable within 60 days
after March 31, 1999.
(4) Represents 4,000 shares subject to stock options exercisable within 60 days
after March 31, 1999.
(5) Represents 10,000 shares subject to stock options exercisable within 60 days
after March 31, 1999.
(6) Includes 5,000 shares subject to stock options exercisable within 60 days
after March 31, 1999.
(7) The address for this stockholder is 1515 Route Ten, Parsippany, NJ 07054.
(8) Includes 80,500 shares subject to stock options exercisable within 60 days
after March 31, 1999.
58
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock does not purport to be
complete and is subject in all respects to applicable Indiana law and to the
provisions of our Restated Articles of Incorporation and By-Laws, copies of
which have been filed as exhibits to the Registration Statement of which this
prospectus is a part.
Our authorized capital stock consists of 100,000,000 shares of common stock,
$.01 par value per share, and 10,000,000 shares of preferred stock, without par
value. Upon completion of this offering, and assuming that the underwriters do
not exercise their over-allotment options, there will be shares of
common stock issued and outstanding and no shares of preferred stock issued and
outstanding. An additional 1,404,490 shares of common stock will be issuable
upon exercise of outstanding options granted as of April 30, 1999 under our
stock option plans. See "Executive Compensation--Stock Option Plans."
COMMON STOCK
Each holder of common stock is entitled to one vote per share of record on
all matters to be voted upon by the stockholders. Holders do not have cumulative
voting rights in the election of directors or any other matter. Subject to the
preferential rights of the holders of any preferred stock that may at the time
be outstanding, each share of common stock will entitle the holder of that share
to an equal and ratable right to receive dividends when, if and as declared from
time to time by the board of directors out of legally available funds. We do not
anticipate paying cash dividends in the foreseeable future. See "Dividend
Policy."
In the event of our liquidation, dissolution or winding up, the holders of
common stock will be entitled to share ratably in all assets remaining after
payments to creditors and after satisfaction of the liquidation preference, if
any, of the holders of any preferred stock that may at the time be outstanding.
Holders of common stock have no preemptive or redemption rights and will not be
subject to further calls or assessments by us. All of the shares of common stock
to be issued and sold in this offering will be, immediately upon consummation of
this offering, validly issued, fully paid and non-assessable.
PREFERRED STOCK
The authorized preferred stock is available for issuance from time to time
at the discretion of the board of directors without stockholder approval. The
board of directors has the authority to prescribe for each series of preferred
stock it establishes the number of shares in that series, the number of votes,
if any, to which the shares in that series are entitled, the consideration for
the shares in that series, and the designations, powers, preferences and other
rights, qualifications, limitations or restrictions of the shares in that
series. Depending upon the rights prescribed for a series of preferred stock,
the issuance of preferred stock could have an adverse effect on the voting power
of the holders of common stock and could adversely affect holders of common
stock by delaying or preventing a change in control of us, making removal of our
present management more difficult or imposing restrictions upon the payment of
dividends and other distributions to the holders of common stock.
AUTHORIZED BUT UNISSUED SHARES
Indiana law does not require stockholder approval for any issuance of
authorized shares. Authorized but unissued shares may be used for a variety of
corporate purposes, including future public or private offerings to raise
additional capital or to facilitate corporate acquisitions. One of the effects
of the existence of authorized but unissued shares may be to enable the board of
directors to issue shares to persons friendly to current management, which
issuance could render more difficult or discourage an attempt to obtain control
of us by means of a merger, tender offer, proxy contest or
59
<PAGE>
otherwise, and thereby protect the continuity of current management and possibly
deprive the stockholders of opportunities to sell their shares of common stock
at prices higher than prevailing market prices.
CERTAIN PROVISIONS OF RESTATED ARTICLES OF INCORPORATION AND BY-LAWS
Certain provisions of our Restated Articles of Incorporation and By-Laws may
delay or make more difficult unsolicited acquisitions or changes of control of
us. These provisions could have the effect of discouraging third parties from
making proposals involving an unsolicited acquisition or change in control of
us, although these proposals, if made, might be considered desirable by a
majority of our stockholders. These provisions may also have the effect of
making it more difficult for third parties to cause the replacement of the
current management without the concurrence of the board of directors. These
provisions include:
- the division of the board of directors into three classes serving
staggered terms of office of three years (see "Management--Executive
Officers, Directors and Significant Employees");
- the availability of authorized but unissued shares of stock for issuance
from time to time at the discretion of the board of directors (see
"--Authorized But Unissued Shares");
- provisions allowing the removal of directors only for cause and only upon
a 66 2/3% stockholder vote taken at a meeting called for that purpose;
- permitting only the board of directors, the Chairman, the Chief Executive
Officer or the President to call a special meeting of stockholders; and
- requirements for advance notice for raising business or making nominations
at stockholders' meetings.
Our By-Laws establish an advance notice procedure with regard to business to
be brought before an annual or special meeting of stockholders and with regard
to the nomination of candidates for election as directors, other than by or at
the direction of the board of directors. Although our By-Laws do not give the
board of directors any power to approve or disapprove stockholder nominations
for the election of directors or proposals for action, they may have the effect
of precluding a contest for the election of directors or the consideration of
stockholder proposals if the established procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its proposal without
regard to whether consideration of those nominees or proposals might be harmful
or beneficial to us and our stockholders.
CERTAIN PROVISIONS OF INDIANA LAW
The Indiana Business Corporation Law (the "IBCL") applies to us as an
Indiana corporation. Under specified circumstances, the following provisions of
the IBCL may delay, prevent or make more difficult unsolicited acquisition or
changes of control of us. These provisions also may have the effect of
preventing changes in our management. It is possible that these provisions could
make it more difficult to accomplish transactions which stockholders may
otherwise deem to be in their best interests.
CONTROL SHARE ACQUISITIONS. Under Sections 23-1-42-1 to 23-1-42-11 of the
IBCL, an "acquiring person" who makes a "control share acquisition" in an
"issuing public corporation" may not exercise voting rights on any "control
shares" unless these voting rights are conferred by a majority vote of the
disinterested stockholders of the issuing corporation at a special meeting of
those stockholders held upon the request and at the expense of the acquiring
person. If control shares acquired in a control share acquisition are accorded
full voting rights and the acquiring person acquires control shares with a
majority or more of all voting power, all stockholders of the issuing
corporation have dissenters' rights to receive the fair value of their shares.
60
<PAGE>
Under the IBCL, "control shares" means shares acquired by a person that,
when added to all other shares of the issuing public corporation owned by that
person or in respect to which that person may exercise or direct the exercise of
voting power, would otherwise entitle that person to exercise voting power of
the issuing public corporation in the election of directors within any of the
following ranges (a) one-fifth or more but less than one-third; (b) one-third or
more but less than a majority; or (c) a majority or more. "Control share
acquisition" means, subject to specified exceptions, the acquisition, directly
or indirectly, by any person of ownership of, or the power to direct the
exercise of voting power with respect to, issued and outstanding control shares.
Shares acquired within 90 days or under a plan to make a control share
acquisition are considered to have been acquired in the same acquisition.
"Issuing public corporation" means a corporation which is organized in Indiana,
has 100 or more stockholders, its principal place of business, its principal
office or substantial assets within Indiana and either (1) more than 10% of its
stockholders resident in Indiana, (2) more than 10% of its shares owned by
Indiana residents or (3) 10,000 stockholders resident in Indiana.
The above provisions do not apply if, before a control share acquisition is
made, the corporation's articles of incorporation or by-laws, including a board
adopted by-law, provide that they do not apply. Our Restated Articles of
Incorporation and By-Laws do not exclude us from the restrictions imposed by the
above provisions.
CERTAIN BUSINESS COMBINATIONS. Sections 23-1-43-1 to 23-1-43-23 of the IBCL
restrict the ability of a "resident domestic corporation" to engage in any
combinations with an "interested stockholder" for five years after the
interested stockholder's date of acquiring shares unless the combination or the
purchase of shares by the interested stockholder on the interested stockholder's
date of acquiring shares is approved by the board of directors of the resident
domestic corporation before that date. If the combination was not previously
approved, the interested stockholder may effect a combination after the
five-year period only if that stockholder receives approval from a majority of
the disinterested shares or the offer meets specified fair price criteria. For
purposes of the above provisions, "resident domestic corporation" means an
Indiana corporation that has 100 or more stockholders. "Interested stockholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (1) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation or (2) an affiliate or associate of the resident domestic
corporation and at any time within the five-year period immediately before the
date in question was the beneficial owner of 10% or more of the voting power of
the then outstanding shares of the resident domestic corporation. The above
provisions do not apply to corporations that so elect in an amendment to their
articles of incorporation approved by a majority of the disinterested shares.
That amendment, however, would not become effective until 18 months after its
passage and would apply only to stock acquisitions occurring after its effective
date. Our Restated Articles of Incorporation do not exclude us from the
restrictions imposed by the above provisions.
DIRECTORS' DUTIES AND LIABILITY. Under Section 23-1-35-1 of the IBCL,
directors are required to discharge their duties: (1) in good faith; (2) with
the care an ordinarily prudent person in a like position would exercise under
similar circumstances; and (3) in a manner the directors reasonably believe to
be in the best interests of the corporation. However, the IBCL also provides
that a director is not liable for any action taken as a director, or any failure
to act, unless the director has breached or failed to perform the duties of the
director's office and the action or failure to act constitutes willful
misconduct or recklessness. The exoneration from liability under the IBCL does
not affect the liability of directors for violations of the federal securities
laws.
Section 23-1-35-1 of the IBCL also provides that a board of directors, in
discharging its duties, may consider, in its discretion, both the long-term and
short-term best interests of the corporation, taking into account, and weighing
as the directors deem appropriate, the effects of an action on the corporation's
stockholders, employees, suppliers and customers and the communities in which
offices or other facilities of the corporation are located and any other factors
the directors consider pertinent. If
61
<PAGE>
a determination is made with the approval of a majority of the disinterested
directors of the board, that determination is conclusively presumed to be valid
unless it can be demonstrated that the determination was not made in good faith
after reasonable investigation. Once the board has determined that the proposed
action is not in the best interests of the corporation, it has no duty to remove
any barriers to the success of the action, including a rights plan. Section
23-1-35-1 specifically provides that specified judicial decisions in Delaware
and other jurisdictions, which might be looked upon for guidance in interpreting
Indiana law, including decisions that propose a higher or different degree of
scrutiny in response to a proposed acquisition of the corporation, are
inconsistent with the proper application of that section.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Harris Trust and
Savings Bank, Chicago, Illinois.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock and we
cannot make any predictions as to the effect, if any, that market sales of
shares or the availability of shares of our common stock for future sale will
have on the market price of the common stock from time to time. Sales of
substantial amounts of our common stock in the public market following this
offering could adversely affect the market price of our common stock and our
ability to raise additional capital.
Upon completion of this offering, we will have shares of common stock
outstanding assuming that the underwriters do not exercise their over-allotment
options and that no participants exercise their outstanding options under our
stock option plans. The shares of our common stock sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act except for any of those shares that are beneficially owned at any
time by our affiliates, as defined in Rule 144 under the Securities Act, which
sales will be subject to the timing, volume and manner of sale limitations of
Rule 144. The remaining shares of our common stock outstanding after this
offering held by those who were stockholders prior to this offering will be
restricted securities, as defined in Rule 144. These restricted securities may
be sold in the public market if they are registered under the Securities Act or
they are exempted by an exemption from registration, such as the exemptions
provided by Rule 144. As a result of contractual restrictions, the 180-day
lock-up described below and the provisions of Rule 144, additional shares will
be available for sale in the public market as follows:
- restricted securities will be eligible for sale 90 days after the
date of this prospectus;
- restricted securities will be eligible for sale upon the expiration
of the lock-up agreements described below 180 days after the date of this
prospectus; and
- the remainder of the restricted securities will be eligible for sale from
time to time upon expiration of the one-year holding periods applicable to
those shares.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for at
least one year will be entitled to sell, within any three-month period, a number
of shares that does not exceed the greater of 1% of the then outstanding shares
of our common stock, or the average weekly trading volume of our common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain provisions regarding the manner of sale, notice
requirements and the availability of current public information about us. If two
years have elapsed since the date of acquisition of restricted shares of our
common stock from us or any of our affiliates and the holder is not deemed to
have been an affiliate of ours for at least three months prior to a proposed
transaction, such person would be entitled to sell such shares under Rule 144
without regard to the limitations described above.
Through April 30, 1999, we have granted options to purchase 1,404,490 shares
of common stock to specified persons pursuant to our stock option plans, and an
additional 2,564,500 shares of common stock are available for grant of future
options thereunder. See "Executive Compensation--Stock Option Plans." We intend
to file a registration statement on Form S-8 as soon as practicable after the
date of this prospectus to register the shares of common stock that are issuable
upon the exercise of stock options either outstanding or available for grant
pursuant to our stock option plans. Following effectiveness, shares covered by
the registration statement on Form S-8 will be eligible for sale in the public
markets, subject to Rule 144 limitations applicable to affiliates as well as to
the limitations on sale and vesting described above.
We, our directors and executive officers and Dialogic Investment Corporation
have agreed for a period of 180 days after the date of this prospectus not to
(1) directly or indirectly offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise dispose of or transfer any
shares of our common
63
<PAGE>
stock or any securities convertible into or exchangeable or exercisable for our
common stock or file any registration statement under the Securities Act with
respect to any of the foregoing or (2) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of our common stock, whether
any such swap or transaction described in clause (1) or (2) above is to be
settled by delivery of common stock or other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated on behalf of the underwriters. However, these restrictions will not
apply to (1) this offering, (2) any shares of our common stock issued by us upon
the exercise of an outstanding option or the conversion of an outstanding
security or (3) any shares of our common stock issued or options to purchase our
common stock granted pursuant to our existing stock option plans.
64
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Hambrecht & Quist LLC
and U.S. Bancorp Piper Jaffray Inc. are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions set forth in the
Underwriting Agreement among us, our principal stockholder, the selling
stockholder and the underwriters, we have agreed to sell to the underwriters,
and each of the underwriters severally has agreed to purchase from us, the
number of shares of our common stock set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
-----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................................
Hambrecht & Quist LLC..........................................................................
U.S. Bancorp Piper Jaffray Inc.................................................................
-------
Total................................................................................
-------
-------
</TABLE>
In the Underwriting Agreement, the several underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares of
our common stock being sold pursuant to the Underwriting Agreement if any shares
of our common stock are purchased. Under certain circumstances, under the terms
of the Underwriting Agreement, the commitments of the non-defaulting
underwriters may be increased or the Underwriting Agreement may be terminated.
The representatives have advised us that they propose initially to offer the
shares of our common stock to the public at the initial public offering price
set forth on the cover page of this prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of common stock. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of common stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
We have granted the underwriters a 30-day option to purchase up to an
aggregate of additional shares of our common stock, and Mr. Gibbs, the
selling stockholder, has granted to the underwriters a 30-day option to purchase
up to an aggregate of shares of our common stock owned by him, at the
initial public offering price set forth on the cover of this prospectus, less
the underwriting discount. The underwriters may exercise these options to cover
over-allotments, if any, made on the sale of our common stock offered by this
prospectus. The underwriters must first exercise the option to purchase the
shares offered by the selling stockholder before they can exercise the option to
purchase our shares. To the extent that the underwriters exercise either of
these options, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares of our common stock
proportionate to that underwriter's initial amount reflected in the table above.
The following table shows the per share and total underwriting discounts to
be paid by us and the selling stockholder to the underwriters. This information
is presented assuming either no exercise or full exercise by the underwriters of
their over-allotment options.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTIONS OPTIONS
----------- --------- ---------
<S> <C> <C> <C>
Public Offering Price.............................................................
Underwriting Discount.............................................................
Proceeds, before expenses, to us..................................................
Proceeds to the selling stockholder...............................................
</TABLE>
We will not receive any of the proceeds from the sale of any shares sold by
the selling stockholder. The expenses of this offering are estimated at $
and are all payable by us.
65
<PAGE>
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
At our request, the underwriters have reserved up to 5% of the shares of our
common stock offered by this prospectus for sale, at the initial public offering
price, to our employees, directors and other persons with relationships with us.
The number of shares of our common stock available for sale to the general
public in this offering will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered by this prospectus.
We, our directors and executive officers and Dialogic Investment Corporation
have agreed for a period of 180 days after the date of this prospectus not to
(1) directly or indirectly offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise dispose of or transfer any
shares of our common stock or any securities convertible into or exchangeable or
exercisable for our common stock or file any registration statement under the
Securities Act with respect to any of the foregoing or (2) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of our common
stock, whether any such swap or transaction described in clause (1) or (2) above
is to be settled by delivery of common stock or other securities, in cash or
otherwise, without the prior written consent of Merrill Lynch on behalf of the
underwriters. However, these restrictions will not apply to (1) this offering,
(2) any shares of our common stock issued by us upon the exercise of an
outstanding option or the conversion of an outstanding security or (3) any
shares of our common stock issued or options to purchase our common stock
granted pursuant to our existing stock option plans. See "Shares Eligible for
Future Sale."
Prior to this offering, there has been no market for our common stock. The
initial public offering price will be determined through negotiations among us
and the representatives. Among the factors considered in determining the initial
public offering price, in addition to prevailing market conditions, will be the
trading multiples of publicly traded companies that the representatives believe
to be comparable to us, certain of our financial information, the history of,
and the prospects for, us and the industry in which we compete, an assessment of
our management, our past and present operations, the prospects for, and timing
of, our future revenues, the present state of our development, the percentage
interest of our company being sold as compared to the valuation for the entire
company and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours. We cannot
assure you that an active trading market will develop for our common stock or
that our common stock will trade in the public market subsequent to this
offering at or above the initial public offering price.
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "ININ."
The underwriters do not intend to confirm sales of our common stock to any
accounts over which they exercise discretionary authority.
We, our principal stockholder and the selling stockholder have agreed to
indemnify the underwriters against certain liabilities, including certain
liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of those liabilities.
Until the distribution of our common stock is completed, SEC rules may limit
the ability of the underwriters and certain selling group members to bid for and
purchase our common stock. As an exception to these rules, the representatives
are permitted to engage in certain transactions that stabilize the price of our
common stock. Such transactions consist of bids or purchases for the purpose
66
<PAGE>
of pegging, fixing, or maintaining the price of our common stock. If commenced,
such transactions may be discontinued at any time without notice.
If the underwriters create a short position in our common stock in
connection with this offering, that is, if they sell more shares of common stock
than are set forth on the cover pages of this prospectus, the representatives
may reduce that short position by purchasing common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of this offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon by Baker & Daniels, Indianapolis, Indiana. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Mayer,
Brown & Platt, Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at December 31, 1998 and 1997, and for each of
the three years in the period ended December 31, 1998, as set forth in their
reports. We have included our financial statements and schedule in this
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a Registration Statement on Form S-1 under the
Securities Act with respect to our common stock offered hereby. This prospectus
is a part of that Registration Statement, but it does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedule to the Registration Statement. Certain parts of the Registration
Statement are omitted as allowed by the rules and regulations of the SEC. We
refer to the Registration Statement and to the exhibits and schedule to the
Registration Statement for further information with respect to us and our common
stock being offered hereby. Statements contained in this prospectus concerning
the provisions of documents are necessarily summaries of the material provisions
of those documents, and each statement is qualified in its entirety by reference
to the copy of the applicable document filed with the SEC.
Copies of the Registration Statement and the exhibits and schedule to the
Registration Statement are on file at the offices of the SEC and copies may be
obtained upon payment of the prescribed fee
67
<PAGE>
or may be examined without charge at the public reference facilities maintained
by the SEC at its principal office located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The SEC also maintains a World Wide Web
site on the Internet at http://www.sec.gov which contains reports, proxy and
information statements and other information regarding companies that file
electronically with the SEC. Upon approval of the common stock for quotation on
the Nasdaq National Market, those reports, proxy and information statements and
other information also can be inspected at Nasdaq's office at 1735 K Street,
N.W., Washington, D.C. 20006.
68
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Shareholders' Deficit........................................................... F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Interactive Intelligence, Inc.
We have audited the accompanying consolidated balance sheets of Interactive
Intelligence, Inc. as of December 31, 1998 and 1997 and the related consolidated
statements of operations, shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 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 Interactive Intelligence,
Inc. at December 31, 1998 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Indianapolis, IN
February 3, 1999, except as to Note 10,
as to which the date is April 16, 1999
F-2
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- ---------- MARCH 31,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 390 $ 2,021 $ 1,401
Accounts receivable, net of allowance for doubtful accounts of $148 in 1997,
$272 in 1998, and $302 in 1999............................................ 1,353 3,269 2,790
Prepaid expenses............................................................ 148 269 230
Other current assets........................................................ 20 75 114
--------- ---------- -----------
Total current assets.......................................................... 1,911 5,634 4,535
Property and equipment, net................................................... 1,197 2,440 2,539
Other assets, net............................................................. 33 165 204
--------- ---------- -----------
Total assets.................................................................. $ 3,141 $ 8,239 $ 7,278
--------- ---------- -----------
--------- ---------- -----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.................................... $ 785 $ 1,597 $ 1,656
Accrued compensation and related expenses................................... 157 265 482
Lines of credit............................................................. 1,500 -- --
Deferred revenue............................................................ 903 1,500 2,196
Current portion of capital lease obligations................................ 141 541 553
--------- ---------- -----------
Total current liabilities..................................................... 3,486 3,903 4,887
Accounts payable and deferred compensation - shareholder...................... 487 584 512
Notes payable and accrued interest - shareholder.............................. 5,084 7,969 7,170
Capital lease obligations, net of current portion............................. 301 937 794
Shareholders' deficit:
Common stock, no par value; 8,750,000 authorized, 5,161,000 issued and
outstanding at December 31, 1997, 6,717,261 issued and outstanding at
December 31, 1998, 7,077,510 issued and outstanding at March 31, 1999..... 1,032 9,487 10,779
Accumulated deficit......................................................... (7,249) (14,641) (16,864)
--------- ---------- -----------
Total shareholders' deficit................................................... (6,217) (5,154) (6,085)
--------- ---------- -----------
Total liabilities and shareholders' deficit................................... $ 3,141 $ 8,239 $ 7,278
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- --------- THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software............................................ $ -- $ 1,265 $ 7,662 $ 1,163 $ 2,372
Services............................................ -- 325 1,349 151 647
--------- --------- --------- ----------- -----------
Total revenues........................................ -- 1,590 9,011 1,314 3,019
--------- --------- --------- ----------- -----------
Costs and expenses:
Costs of software................................... -- 38 59 8 24
Costs of services................................... -- 1,258 3,381 648 1,068
Sales and marketing................................. 157 2,519 6,623 1,192 2,091
Research and development............................ 987 2,118 4,065 834 1,363
General and administrative.......................... 192 742 1,407 296 507
--------- --------- --------- ----------- -----------
Total costs and expenses.............................. 1,336 6,675 15,535 2,978 5,053
--------- --------- --------- ----------- -----------
Operating loss........................................ (1,336) (5,085) (6,524) (1,664) (2,034)
Interest expense, net................................. 43 361 868 184 189
--------- --------- --------- ----------- -----------
Loss before income taxes.............................. (1,379) (5,446) (7,392) (1,848) (2,223)
Income taxes.......................................... -- -- -- -- --
--------- --------- --------- ----------- -----------
Net loss.............................................. $ (1,379) $ (5,446) $ (7,392) $ (1,848) $ (2,223)
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Net loss per share:
Basic and diluted..................................... $ (0.49) $ (1.07) $ (1.26) $ (0.34) $ (0.32)
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Shares used to compute net loss per share:
Basic and diluted..................................... 2,811 5,095 5,877 5,449 6,945
</TABLE>
See accompanying notes.
F-4
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balances, January 1, 1996............................................ 2,655 $ 531 $ (424) $ 107
Issuances of common stock.......................................... 2,345 469 -- 469
Net loss........................................................... -- -- (1,379) (1,379)
----- --------- ------------ ---------
Balances, December 31, 1996.......................................... 5,000 1,000 (1,803) (803)
Exercise of stock options.......................................... 161 32 -- 32
Net loss........................................................... -- -- (5,446) (5,446)
----- --------- ------------ ---------
Balances, December 31, 1997.......................................... 5,161 1,032 (7,249) (6,217)
Conversion of shareholder debt to equity........................... 667 3,000 -- 3,000
Issuances of common stock.......................................... 472 5,333 -- 5,333
Exercise of stock options.......................................... 417 122 -- 122
Net loss........................................................... -- -- (7,392) (7,392)
----- --------- ------------ ---------
Balances, December 31, 1998.......................................... 6,717 9,487 (14,641) (5,154)
Conversion of shareholder obligations to equity.................... 87 1,084 -- 1,084
Issuances of common stock.......................................... 10 120 -- 120
Exercise of stock options.......................................... 264 88 -- 88
Net loss........................................................... -- -- (2,223) (2,223)
----- --------- ------------ ---------
Balances, March 31, 1999 (unaudited)................................. 7,078 $ 10,779 $ (16,864) $ (6,085)
----- --------- ------------ ---------
----- --------- ------------ ---------
</TABLE>
See accompanying notes.
F-5
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED
------------------------------- MARCH 31,
1996 1997 1998 ------------------------
--------- --------- --------- 1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $ (1,379) $ (5,446) $ (7,392) $ (1,848) $ (2,223)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation......................................... 84 273 774 149 292
Changes in operating assets and liabilities:
Accounts receivable................................ (37) (1,316) (1,916) (699) 479
Prepaid expenses................................... (42) (106) (121) (28) 39
Other current assets............................... -- (18) (55) -- (39)
Accounts payable and accrued liabilities........... 59 674 812 449 59
Accrued compensation and related expenses.......... 75 120 108 (75) 217
Deferred revenue................................... -- 903 597 (37) 696
Accounts payable and deferred compensation -
shareholder...................................... 50 425 97 25 (72)
--------- --------- --------- ----------- -----------
Net cash used by operating activities.................. (1,190) (4,491) (7,096) (2,064) (552)
INVESTING ACTIVITIES
Purchases of property and equipment, net............... (330) (657) (697) -- (391)
Change in other assets................................. (8) (23) (132) (21) (39)
--------- --------- --------- ----------- -----------
Net cash used by investing activities.................. (338) (680) (829) (21) (430)
FINANCING ACTIVITIES
Net borrowings (repayments) under lines of credit...... 500 1,000 (1,500) 51 --
Principal payments on capital lease obligations........ -- (47) (284) (28) (131)
Net borrowings (repayments) under notes payable and
accrued interest - shareholder....................... 531 4,553 5,885 1,689 285
Proceeds from issuances of common stock................ 469 -- 5,333 -- 120
Proceeds from stock options exercised.................. -- 32 122 65 88
--------- --------- --------- ----------- -----------
Net cash provided by financing activities.............. 1,500 5,538 9,556 1,777 362
--------- --------- --------- ----------- -----------
Net increase (decrease) in cash and cash equivalents... (28) 367 1,631 (308) (620)
Cash and cash equivalents, beginning of period......... 51 23 390 390 2,021
--------- --------- --------- ----------- -----------
Cash and cash equivalents, end of period............... $ 23 $ 390 $ 2,021 $ 82 $ 1,401
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Supplemental disclosure of non-cash investing and
financing activities:
Acquisition of property and equipment with capital
lease.............................................. $ -- $ 488 $ 1,320 $ 523 $ --
</TABLE>
See accompanying notes.
F-6
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Interactive Intelligence, Inc. ("I3" or "the Company") develops, markets,
and supports enterprise software that allows its customers to automate critical
business processes by tightly integrating their communications systems with
their information technology. The Company's flagship product, Enterprise
Interaction Center (EIC), is a complete communications solution providing PBX
(private branch exchange), ACD (automated call distributor), IVR (interactive
voice response), unified messaging, and Internet functionality on a single
Windows NT Server. The Company currently derives substantially all of its
revenues from licenses of the Enterprise Interaction Center product and related
services.
Principal operations of the Company commenced during 1997. In 1998, the
Company established a wholly-owned subsidiary in France and a branch office in
Japan. The Company's products are marketed primarily in North America, Europe,
and Asia.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary after elimination of all significant
intercompany accounts and transactions.
REVENUE RECOGNITION
The Company generates software revenues from licensing the rights to use its
software products and also generates service revenues primarily from ongoing
maintenance (post-contract technical support and product upgrades), educational
services, and professional services performed for resellers and end-user
customers. Revenue from software license agreements is recognized upon shipment
of the software if there are no significant post-delivery obligations and
collection is probable. Shipment is further defined in certain contracts as
delivery of the product master or first copy for non-cancelable product
licensing arrangements under which the reseller has certain software
distribution rights. Therefore, software revenues are generally recognized upon
placement of a binding order by a reseller. Revenue from ongoing end-user
customer maintenance is recognized ratably over the post-contract support term,
which is typically twelve months. Revenue from educational services and
professional services is recognized when the services are performed.
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. Despite management's best effort to establish good faith
estimates and assumptions, actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity from
date of purchase of three months or less to be cash equivalents. Cash and cash
equivalents consist primarily of cash on deposit with banks and high quality
money market instruments.
F-7
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The fair value of financial instruments, including cash and cash
equivalents, accounts receivable, and debt approximate the carrying values.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Leasehold improvements are
amortized using the straight-line method over the lesser of the term of the
related lease or the estimated useful life. Depreciation, which includes
amortization on capital leases, is calculated using the straight-line method
over the estimated useful lives of the assets.
RESEARCH AND DEVELOPMENT
Research and development expenditures are generally charged to operations as
incurred. Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant. Through March 31, 1999, all research and development costs have
been expensed.
STOCK OPTIONS
In accordance with Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123), the Company uses the
intrinsic value method to account for stock options, consistent with the
existing rules established by Accounting Principles Board No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES.
LOSS PER SHARE
Basic loss per share is calculated based on the weighted-average number of
outstanding common shares in accordance with Statement of Financial Accounting
Standard No. 128, EARNINGS PER SHARE. Diluted loss per share is calculated based
on the weighted-average number of outstanding common shares plus the effect of
dilutive potential common shares. The Company's calculation of diluted net loss
per share excludes potential common shares as the effect would be antidilutive.
Potential common shares are composed of shares of common stock issuable upon the
exercise of stock options.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1999, and
for the three months ended March 31, 1998 and 1999, have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Article 10 of Regulation S-X of the
Securities Exchange Act of 1934. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of the Company, all adjustments considered necessary to
present fairly the consolidated financial position as of March 31, 1999 and the
consolidated statements of operations,
F-8
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shareholders' deficit and cash flows for the three month periods ended March 31,
1999 and 1998 have been included.
RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS 130). SFAS
130 establishes new rules for the reporting and display of comprehensive income
and its components. Comprehensive income is the same as net income as there are
no applicable adjustments reported in shareholders' deficit. Accordingly, the
adoption of this statement had no impact on the Company's net income or
shareholders' deficit.
Effective January 1, 1998, the Company adopted the Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION (SFAS 131). SFAS 131 requires public business enterprises to
report information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports. The adoption of SFAS 131 did not have a
significant effect on the disclosure of segment information as the Company
continues to consider its business activities as a single segment.
2. PROPERTY AND EQUIPMENT
Property and equipment, including capital leases, are summarized as follows
at December 31 (IN THOUSANDS):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Computer equipment......................................................... $ 1,123 $ 2,550
Furniture & fixtures....................................................... 149 284
Office equipment........................................................... 43 58
Leasehold improvements..................................................... 14 98
Software................................................................... 155 416
Trade show equipment....................................................... 92 187
--------- ---------
1,576 3,593
Less accumulated depreciation.............................................. 379 1,153
--------- ---------
$ 1,197 $ 2,440
--------- ---------
--------- ---------
</TABLE>
3. BANK LINES OF CREDIT
The Company has a line of credit with a bank in the amount of $1,000,000
which bears interest at the bank's prime rate (7.75% at December 31, 1998). As
of December 31, 1998 the Company had no outstanding balance under the line of
credit. The line of credit is guaranteed by the Company's primary shareholder
and expires August 31, 1999.
The Company has a line of credit with a bank in the amount of $500,000 which
bears interest at the bank's prime rate (7.75% at December 31, 1998). As of
December 31, 1998 the Company had no outstanding balance under the line of
credit. The line of credit is guaranteed by the Company's primary shareholder
and expires April 30, 1999.
F-9
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BANK LINES OF CREDIT (CONTINUED)
The Company has a line of credit with a bank in the amount of $4,000,000
which is limited to 80% of the eligible accounts receivable and bears interest
at the bank's prime rate (7.75% at December 31, 1998). As of December 31, 1998,
the Company had no outstanding balance under the line of credit. The line of
credit is secured by certain accounts receivable and is guaranteed by the
Company's primary shareholder. As of December 31, 1998, the Company has
availability of approximately $2,700,000 under this line of credit. This line of
credit expires September 30, 1999.
The Company paid $43,232, $132,704, and $199,433 of interest in 1996, 1997,
and 1998, respectively.
4. RELATED PARTY TRANSACTIONS
At December 31, 1998 the Company had notes payable of $7,056,000 with its
primary shareholder. The notes payable and related interest, accruing at a rate
of 10% per annum ($227,862 and $913,367 at December 31, 1997, and 1998,
respectively), are due December 31, 2001. There was no interest expense on the
notes payable in 1996. Interest expense on the notes payable was $227,862, and
$685,505 in 1997 and 1998, respectively. The notes payable are subordinated to
the outstanding lines of credit.
The Company paid to a minority shareholder $2,000 in 1996, $905,000 in 1997
and $871,000 in 1998 for voice processing boards and related technology and
services.
The Company's primary shareholder is a director and 25% shareholder in a
telemarketing company that provides both telemarketing and fulfillment services
to the Company. In 1998, the Company paid approximately $110,000 for these
services to the telemarketing company.
5. SHAREHOLDERS' EQUITY
COMMON STOCK OPTIONS The Company's Stock Option Plans, adopted in 1995,
authorize the granting of incentive and nonqualified stock options. The Board of
Directors has approved up to an aggregate of 2,750,000 shares for issuance under
these plans. The exercise price of the options must not be less than the fair
market value of the common stock for incentive options, or 85% of the fair
market value for nonqualified options, at the date of grant. Options granted
under the Stock Option Plans generally vest over five years. Options generally
become exercisable in equal installments on each of the first through the fifth
anniversaries of the date of grant. The term of each option is ten years from
the date of grant. However, in the case of an option granted to an employee who,
at the time the option is granted, owns stock representing more than ten percent
of the voting power of all classes of stock of the Company, the term of the
option shall be five years from the date of grant. The plans may be terminated
by the Board of Directors at anytime.
No compensation expense was recognized in 1996, 1997 or 1998. The Company
recognized compensation expense of approximately $12,000 in 1999.
F-10
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SHAREHOLDERS' EQUITY (CONTINUED)
Activity in the Stock Option Plans is summarized as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------------- -------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------ ----------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of year....... 728,055 $ 0.20 1,151,755 $ 0.20 1,554,455 $ 0.58
Options granted.............................. 423,700 0.20 574,700 1.26 487,000 4.70
Options exercised............................ -- -- (161,000) 0.20 (417,520) 0.31
Options canceled............................. -- -- (11,000) 1.30 (58,000) 2.06
------------ ------------- --------------
Options outstanding, end of year............. 1,151,755 $ 0.20 1,554,455 $ 0.58 1,565,935 $ 1.88
------------ ------------- --------------
------------ ------------- --------------
Option price range at end of year............ $ 0.20 $ 0.20-$1.30 $ 0.20-$12.50
Options available for grant at year end...... 1,598,245 1,034,545 605,545
Weighted average fair value of options
granted during the year.................... $ 0.05 $ 0.43 $ 1.74
</TABLE>
The following table summarizes information about the options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------ OPTIONS EXERCISABLE
WEIGHTED -------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT DECEMBER CONTRACTUAL EXERCISE AT DECEMBER EXERCISE
PRICES 31, 1998 LIFE PRICE 31, 1998 PRICE
- ------------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$0.20 626,235 7.3 years $ 0.20 301,595 $ 0.20
$1.30 472,200 8.6 years $ 1.30 62,840 $ 1.30
$4.00-$4.50 441,000 9.6 years $ 4.25 45,000 $ 4.50
$12.50 26,500 10.0 years $ 12.50 -- --
</TABLE>
Pro forma information regarding net income is required by SFAS 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted subsequent to December 31, 1994 under the
fair value method of that Statement. The fair value of these options was
estimated at the date of grant using the minimum value pricing model with the
following weighted-average assumptions for 1996, 1997, and 1998 respectively:
risk-free interest rates of 5.5%, 5.5%, and 5.0%; a dividend yield of 0%; and a
weighted-average expected life of the option of 7.5 years. 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.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (IN THOUSANDS):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net loss............................................ $ (1,388) $ (5,485) $ (7,730)
Pro forma loss per share...................................... $ (0.49) $ (1.08) $ (1.32)
</TABLE>
F-11
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SHAREHOLDERS' EQUITY (CONTINUED)
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, and because the Company's options generally vest over a
5-year period, the pro forma effect of SFAS 123 will not be fully reflected
until future years.
6. LEASE AGREEMENTS
The Company leases its headquarters facilities under non-cancelable
operating lease agreements which expire on various dates through April of 2003.
In September 1998, the Company entered into a five year lease agreement
commencing in March 1999 for 36,797 square feet of office space for its
corporate headquarters in Indianapolis, Indiana.
The Company had $488,297 and $1,809,104 of primarily computer equipment at
December 31, 1997 and 1998, respectively, under a lease line. The lease expires
in December 2000, is secured by the purchased assets and is also guaranteed by
the Company's primary shareholder.
Minimum future lease payments under non-cancelable capital and operating
leases as of December 31, 1998 are summarized as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1999..................................................................... $ 656 $ 818
2000..................................................................... 624 977
2001..................................................................... 394 930
2002..................................................................... -- 942
2003..................................................................... -- 891
Thereafter............................................................... -- 297
--------- -----------
Total minimum lease payments............................................. 1,674 $ 4,855
-----------
-----------
Less: amount representing interest....................................... (196)
---------
Present value of lease payments.......................................... 1,478
Less: current portion.................................................... (541)
---------
Long-term portion........................................................ $ 937
---------
---------
</TABLE>
The Company also rents office space for sales offices under month-to-month
leases and leases with terms generally less than one year. Rent expense was
$88,055, $198,303, and $441,030 for 1996, 1997, and 1998, respectively.
7. CONCENTRATION OF CREDIT RISK
Six resellers represented approximately 55% and 41% of the accounts
receivable balance at December 31, 1997 and 1998, respectively. At March 31,
1999 seven resellers represented approximately 42% of our outstanding accounts
receivable balance (unaudited). One reseller accounted for approximately 17% of
revenues in 1997 and no reseller accounted for 10% or more of revenues in 1998.
The Company evaluates the credit worthiness of its customers on a periodic
basis. The Company generally does not require collateral.
F-12
<PAGE>
INTERACTIVE INTELLIGENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. 401(K) RETIREMENT SAVINGS PLAN
The Company maintains a 401(k) retirement savings plan to provide retirement
benefits for substantially all of its employees. Participants in the plan may
elect to contribute up to 20% of their annual compensation to the plan, limited
to the maximum amount allowed by the Internal Revenue Code. The Company, at its
discretion, may make annual contributions to the plan. The Company has made no
contributions to the plan through December 31, 1998.
9. INCOME TAXES
Effective November 5, 1998, the Company terminated its S-corporation status
for income tax purposes. From that date forward, the taxable income or loss from
operations is includable in the federal and state income tax returns of the
Company.
FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES, requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities. The Company has a net operating loss carryforward of approximately
$1 million at December 31, 1998 available to offset future taxable income for
federal income tax purposes. The carryforward will expire in 2018. Due to the
uncertainty of the realization of the benefits of its favorable tax attributes
in the future, the Company has established a valuation allowance against its
deferred tax assets as of the S-corporation termination date and December 31,
1998. Significant components of the Company's net deferred taxes at December 31
are as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Deferred tax assets:
Accrued shareholder interest payable...................................... $ 356
Net operating loss........................................................ 258
Other..................................................................... 198
---------
Total deferred tax assets................................................... 812
Valuation allowance....................................................... (812)
---------
Net deferred taxes.......................................................... $ --
---------
---------
</TABLE>
The Company did not record any current or deferred federal, state or foreign
income tax provision or benefit for any of the periods presented due to
experiencing operating losses since inception.
10. SUBSEQUENT EVENTS
On April 16, 1999, the Company authorized an increase in the authorized
common stock to 100,000,000 and established a par value of $.01 on the common
stock. At the same time, the Company authorized 10,000,000 shares of no par
value preferred stock.
In addition, on April 16, 1999, the Company adopted the 1999 Stock Option
Plan (the "1999 Plan") and the Directors' Stock Option Plan (the "Directors
Plan"). In conjunction with the adoption of the "1999 Plan" the Company will no
longer issue stock options under the 1995 Stock Option Plans.
F-13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligations to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
SHARES
[LOGO]
INTERACTIVE INTELLIGENCE, INC.
COMMON STOCK
--------------
P R O S P E C T U S
--------------
MERRILL LYNCH & CO.
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred by the
Registrant in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions. All the amounts
shown are estimates, except the Securities and Exchange Commission registration
fee, the Nasdaq National Market listing fee and the NASD filing fee. Items that
are not included will be supplied by amendment.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 12,788
Nasdaq National Market listing fee................................
NASD filing fee...................................................
Blue sky fees and expenses........................................
Accounting fees and expenses......................................
Legal fees and expenses...........................................
Printing and engraving expenses...................................
Transfer Agent and Registrar fees and expenses....................
Miscellaneous expenses............................................
---------
Total........................................................... $
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Indiana Business Corporation Law provides that a corporation, unless
limited by its articles of incorporation, is required to indemnify its directors
and officers against reasonable expenses incurred in the successful defense of
any proceeding arising out of their serving as a director or officer of the
corporation.
As permitted by the Indiana Business Corporation Law, the Registrant's
Restated Articles of Incorporation provide for indemnification of directors,
officers, employees and agents of the Registrant against any and all liability
and reasonable expense that may be incurred by them, arising out of any claim or
action, civil, criminal, administrative or investigative, in which they may
become involved by reason of being or having been a director, officer, employee
or agent. To be entitled to indemnification, those persons must have been wholly
successful in the claim or action or the board of directors must have
determined, based upon a written finding of legal counsel or another independent
referee, or a court of competent jurisdiction must have determined, that such
persons acted in good faith in what they reasonably believed to be the best
interest of the Registrant (or at least not opposed to its best interests) and,
in addition, in any criminal action, had reasonable cause to believe their
conduct was lawful (or had no reasonable cause to believe that their conduct was
unlawful). The Restated Articles of Incorporation authorize the Registrant to
advance funds for expenses to an indemnified person, but only upon receipt of an
undertaking that he or she will repay the same if it is ultimately determined
that such party is not entitled to indemnification.
The rights of indemnification provided by the Restated Articles of
Incorporation are not exhaustive and are in addition to any rights to which a
director or officer may otherwise be entitled by contract or as a matter of law.
Irrespective of the provisions of the Restated Articles of Incorporation, the
Registrant may, at any time and from time to time, indemnify directors,
officers, employees and other persons to the full extent permitted by the
provisions of applicable law at the time in effect, whether on account of past
or future transactions.
The Registrant, Donald E. Brown, M.D., the Registrant's Chairman of the
Board, and John R. Gibbs, the Registrant's Executive Vice President, have agreed
to indemnify the Underwriters, and the Underwriters have agreed to indemnify the
Registrant, Dr. Brown and Mr. Gibbs, against certain civil
S-1
<PAGE>
liabilities, including liabilities under the Securities Act. See the Form of
Underwriting Agreement filed as Exhibit 1 hereto.
In addition, the Registrant is obtaining a directors' and officers'
liability and company reimbursement policy that insures against certain
liabilities under the Securities Act, subject to applicable retentions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished as to securities of the Registrant
sold within the past three years that were not registered under the Securities
Act. All of the information is adjusted for the -for- stock split
effected as a stock dividend on , 1999.
(a) On December 2, 1996, the Registrant issued 1,250,000 shares of common
stock to Donald E. Brown, M.D. for an aggregate purchase price of $250,000.
(b) On December 10, 1996, the Registrant issued 1,095,000 shares of common
stock to Donald E. Brown, M.D. for an aggregate purchase price of $219,000.
(c) From December 10, 1996 through May 1, 1999, the Registrant has issued
promissory notes to Donald E. Brown, M.D. The promissory notes had an aggregate
principal amount of $10,056,000, bear interest at a rate of 10% per annum and
mature on December 31, 2001. Certain amounts of the outstanding principal due
under such promissory notes have been converted into shares of common stock (see
paragraph (d)).
(d) On July 31, 1998, the Registrant issued 666,667 shares of common stock
to Donald E. Brown, M.D., in exchange for the cancellation of $3,000,000 in debt
of the Registrant to Dr. Brown.
(e) On July 31, 1998, the Registrant issued 74,074 shares of common stock to
John R. Gibbs for an aggregate purchase price of $333,333.
(f) On November 5, 1998, the Registrant issued 400,000 shares of common
stock to Dialogic Investment Corporation for an aggregate purchase price of
$5,000,000.
(g) On February 12, 1999, the Registrant issued 86,719 shares of common
stock to Donald E. Brown, M.D., in exchange for the cancellation of
$1,083,987.50 in accrued interest and deferred compensation payable by the
Registrant to Dr. Brown.
(h) On February 12, 1999, the Registrant issued 9,635 shares of common stock
to John R. Gibbs for an aggregate purchase price of $120,443.
(i) From August 1995 through April 16, 1999, the Registrant granted options
for an aggregate of 2,278,705 shares of common stock to 171 officers, directors,
employees and consultants under the Registrant's 1995 Incentive Stock Option
Plan and the Registrant's 1995 Nonstatutory Stock Option Incentive Plan. The per
share exercise price for such options range from $0.20 to $14.00. Through April
30, 1999, 866,915 of such outstanding options were exercised and 87,800 have
been canceled.
(j) On September 22, 1998, the Registrant granted an option to purchase
45,000 shares of common stock to Donald E. Brown, M.D. The exercise price for
such option is $4.50 per share.
(k) From April 16, 1999 through April 30, 1999, the Registrant granted
options for an aggregate of 35,500 shares of common stock to 14 officers and
employees under the Registrant's 1999 Stock Option and Incentive Plan. The
exercise price for such options is $14.00 per share.
(l) On May 26, 1999, the Registrant granted an option to purchase 10,000
shares of common stock to each of two new directors of the Registrant. The
exercise price for these options is $14.00 per share.
(m) On , 1999, all of the Registrant's outstanding
shares of common stock were split on a -for- basis, effected as a
stock dividend.
S-2
<PAGE>
The transactions described in paragraphs (a) through (h) above are exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act. The transactions described in paragraphs (i) through
(l) above are exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act and/or Rule 701 promulgated
thereunder. The transaction described in paragraph (m) above is exempt from the
registration requirements of the Securities Act because it did not involve a
"sale" of a security within the meaning of Section 2(3) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The list of exhibits is incorporated herein by reference to the Index to
Exhibits on page E-1.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore
have been omitted.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, 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 this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis, State of
Indiana, on the 27th day of May, 1999.
<TABLE>
<S> <C> <C>
INTERACTIVE INTELLIGENCE, INC.
By: /s/ DONALD E. BROWN, M.D.
-----------------------------------------
Donald E. Brown, M.D.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby authorizes each of Donald E. Brown, M.D. and John R. Gibbs, each
with full power of substitution, to execute in the name and on behalf of such
person any amendment or any post-effective amendment to this Registration
Statement and any subsequent registration statement filed pursuant to Rule 462
under the Securities Act of 1933 and to file the same, with exhibits thereto,
and other documents in connection therewith, making such changes in this
Registration Statement and any such subsequent registration statement as the
Registrant deems appropriate, and appoints each of Donald E. Brown, M.D. and
John R. Gibbs, each with full power of substitution, attorney-in-fact to sign
any amendment and any post-effective amendment to this Registration Statement
and any such subsequent registration statement and to file same, with exhibits
thereto, and other documents in connection therewith.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates set forth opposite their
names.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman, President, Chief
/s/ DONALD E. BROWN, M.D. Executive Officer and
- ------------------------------ Director (Principal May 27, 1999
Donald E. Brown, M.D. Executive Officer)
/s/ JOHN R. GIBBS Executive Vice President
- ------------------------------ and Director (Principal May 27, 1999
John R. Gibbs Financial Officer)
Vice President of Finance
/s/ KEITH A. MIDKIFF and Controller
- ------------------------------ (Principal Accounting May 27, 1999
Keith A. Midkiff Officer)
/s/ ROBERT A. COMPTON
- ------------------------------ Director May 27, 1999
Robert A. Compton
/s/ JON ANTON, D.SC.
- ------------------------------ Director May 27, 1999
Jon Anton, D.Sc.
/s/ MICHAEL P. CULLINANE
- ------------------------------ Director May 27, 1999
Michael P. Cullinane
</TABLE>
S-4
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
INTERACTIVE INTELLIGENCE, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ------------------------------------- BALANCE AT
BEGINNING CHARGED TO COSTS CHARGED TO OTHER DEDUCTIONS-- END OF
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS--DESCRIBE DESCRIBE PERIOD
- ---------------------------------------- ---------- ---------------- ------------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts..... $ -- -- -- -- $ --
Year ended December 31, 1997
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts..... $ -- 148,000 -- -- $ 148,000
Year ended December 31, 1998
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts..... $ 148,000 188,000 -- 64,000(1) $ 272,000
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1* Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Registrant
3.2 By-Laws of the Registrant, as amended to date
5* Opinion of Baker & Daniels
10.1 1995 Incentive Stock Option Plan
10.2 1995 Nonstatutory Stock Option Incentive Plan
10.3 1999 Stock Option and Incentive Plan
10.4 Outside Directors Stock Option Plan
10.5 Subscription Agreement for Shares of Common Stock between the Registrant and Dialogic Investment
Corporation
10.6 Strategic Relationship Agreement between the Registrant and Dialogic Corporation
10.7 Support Services Agreement between the Registrant and Dialogic Corporation
10.8(i) Consulting and Employment Agreement between the Registrant and John R. Gibbs, dated January 2, 1995
(ii)* Amendment A, dated May 14, 1999, to Consulting and Employment Agreement between the Registrant and
John R. Gibbs, dated January 2, 1995
10.9 Employment Agreement between the Registrant and Michael E. Ford, dated June 30, 1997
10.10 Employment Agreement between the Registrant and Keith A. Midkiff, dated February 10, 1997
10.11 Employment Agreement between the Registrant and Douglas T. Shinsato, dated May 1, 1998
10.12(i)* Employment Agreement between the Registrant and Jeremiah J. Fleming, dated as of March 1, 1997
(ii)* Amendment A, dated May 14, 1999, to Employment Agreement between the Registrant and Jeremiah J.
Fleming, dated as of March 1, 1997
10.13 Letter of Assignment between the Registrant and Michael E. Ford, effective August 1, 1998
10.14 Stock Option Agreement between the Registrant and Donald E. Brown, M.D., dated September 22, 1998
10.15 Variable Rate Commercial Revolving or Draw Note, dated August 27, 1998, made by the Registrant in
favor of People's Bank and Trust Company
10.16 Variable Rate Commercial Revolving or Draw Note, dated October 1, 1998, made by the Registrant in
favor of People's Bank and Trust Company
10.17 Revolving Credit Loan Agreement, dated August 25, 1995, between the Registrant and Society National
Bank (now KeyBank National Association) ("KeyBank"), Revolving Credit Loan Agreement Note made by
the Registrant in favor of Society National Bank, dated August 25, 1995, and Note Modification
Agreements, dated April 29, 1996, May 8, 1996, April 30, 1997 and April 20, 1998, each between the
Registrant and KeyBank
10.18 Consolidated Subordinated Promissory Note made by the Registrant in favor of Donald E. Brown, M.D.,
dated May 1, 1999
10.19 Office Lease, dated September 16, 1998, between the Registrant and College Park Plaza Associates,
Inc.
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Baker & Daniels (contained in Exhibit 5)
23.3 Consent of Michael J. Tavlin
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
E-1
<PAGE>
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
INTERACTIVE INTELLIGENCE, INC.
Interactive Intelligence, Inc. (hereinafter referred to as the
"Corporation"), desiring to amend and restate its Articles of Incorporation, as
amended, effective as of the date Articles of Restatement are submitted to the
Indiana Secretary of State for approval, pursuant to the provisions of the
Indiana Business Corporation Law (hereinafter referred to as the "Corporation
Law"), submits the following Restated Articles of Incorporation:
ARTICLE I
NAME
The name of the Corporation is Interactive Intelligence, Inc.
ARTICLE II
PURPOSES AND POWERS
SECTION 2.1. PURPOSES OF THE CORPORATION. The purposes for which the
Corporation is formed are (a) to engage in the general business of the
development, marketing and support of software products, directly or indirectly
through one or more subsidiaries, and to carry on such activities of every kind
or nature as may be allied or incidental to such general business, and (b) to
engage in the transaction of any or all lawful business for which corporations
may now or hereafter be incorporated under the Corporation Law.
SECTION 2.2. POWERS OF THE CORPORATION. The Corporation shall have
(a) all powers now or hereafter authorized by or vested in corporations pursuant
to the provisions of the Corporation Law, (b) all powers now or hereafter vested
in corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
ARTICLE III
TERM OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
<PAGE>
ARTICLE IV
REGISTERED OFFICE AND AGENT
The street address of the Corporation's registered office at the time
of adoption of these Restated Articles of Incorporation is 2800 One Indiana
Square, Indianapolis, Indiana 46204, and the name of its Resident Agent at such
office at the time of adoption of these Restated Articles of Incorporation is
Robert A. Greising.
ARTICLE V
AUTHORIZED SHARES
SECTION 5.1. AUTHORIZED CLASSES AND NUMBER OF SHARES. The total
number of shares which the Corporation has authority to issue shall be
110,000,000 shares, consisting of 100,000,000 shares of common stock, $0.01 par
value per share (the "Common Stock"), and 10,000,000 shares of preferred stock,
without par value (the "Preferred Stock").
SECTION 5.2. GENERAL TERMS OF ALL SHARES. The Corporation shall have
the power to acquire (by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel, or otherwise dispose of the shares of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Indiana (but such power shall not imply an obligation
on the part of the owner or holder of any share to sell or otherwise transfer
such share to the Corporation), including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or indirectly, and
without pro rata treatment of the owners or holders of any class or series of
shares, unless, after giving effect thereto, the Corporation would not be able
to pay its debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total liabilities (and without
regard to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Stock in the provisions
of these Restated Articles of Incorporation adopted by the Board of Directors
pursuant to Section 5.5 hereof describing the terms of such series). Shares of
the Corporation purchased, redeemed, or otherwise acquired by it shall
constitute authorized but unissued shares, unless prior to any such purchase,
redemption, or other acquisition, or within thirty (30) days thereafter, the
Board of Directors adopts a resolution providing that such shares constitute
authorized and issued but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue, and
sell shares in accordance with, and in such amounts as may be permitted by, the
laws of the State of Indiana and the provisions of these Restated Articles of
Incorporation and for such consideration, at such price or prices, at such time
or times and upon such terms and conditions (including the privilege of
selectively repurchasing the same) as the Board of Directors of the Corporation
shall determine, without the authorization or approval by any shareholders of
the Corporation. Shares may be
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<PAGE>
disposed of, issued, and sold to such persons, firms, or corporations as the
Board of Directors may determine.
The Corporation shall have the power to declare and pay dividends or
other distributions upon the issued and outstanding shares of the Corporation,
subject to the limitation that a dividend or other distribution may not be made
if, after giving it effect, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (and without regard to any
amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Preferred Stock in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 5.5 hereof describing the terms of such series).
Except as otherwise provided in Section 5.4, the Corporation shall have the
power to issue shares of one class or series as a share dividend or other
distribution in respect of that class or series or one or more other classes or
series.
SECTION 5.3. VOTING RIGHTS OF SHARES.
(a) COMMON STOCK. Except as otherwise provided by the Corporation
Law and subject to such shareholder disclosure and recognition procedures (which
may include voting prohibition sanctions) as the Corporation may by action of
its Board of Directors establish, shares of Common Stock have unlimited voting
rights. Shares of Common Stock shall, when validly issued by the Corporation,
entitle the holder thereof to one (1) vote per share on all matters submitted to
a vote of the shareholders of the Corporation. Shares of Common Stock shall not
have cumulative voting rights.
(b) PREFERRED STOCK. Except as required by the Corporation Law or by
the provisions of these Restated Articles of Incorporation adopted by the Board
of Directors pursuant to Section 5.5 hereof describing the terms of the
Preferred Stock or a series thereof, the holders of Preferred Stock shall have
no voting rights or powers. Shares of Preferred Stock shall, when validly
issued by the Corporation, entitle the record holder thereof to vote as and on
such matters, but only as and on such matters, as the holders thereof are
entitled to vote under the Corporation Law or under the provisions of these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 5.5 hereof describing the terms of the Preferred Stock or a series
thereof (which provisions may provide for special, conditional, limited, or
unlimited voting rights, including multiple or fractional votes per share, or
for no right to vote, except to the extent required by the Corporation Law) and
subject to such shareholder disclosure and recognition procedures (which may
include voting prohibition sanctions) as the Corporation may by action of the
Board of Directors establish.
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<PAGE>
SECTION 5.4. OTHER TERMS OF COMMON STOCK.
(a) DISTRIBUTIONS.
(1) Shares of Common Stock shall be equal in every respect
insofar as their relationship to the Corporation is concerned, but
such equality of rights shall not imply equality of treatment as to
redemption or other acquisition of shares by the Corporation.
(2) Subject to the rights of the holders of any outstanding
Preferred Stock issued under Section 5.5 hereof, the holders of Common
Stock shall be entitled to share ratably in such dividends or other
distributions (other than purchases, redemptions, or other
acquisitions of shares by the Corporation), if any, as are declared
and paid from time to time at the discretion of the Board of
Directors.
(3) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntarily or involuntarily, after
payment shall have been made to the holders of the Preferred Stock of
the full amount to which they shall be entitled under this Article V,
the holders of Common Stock shall be entitled, to the exclusion of the
holders of the Preferred Stock of any and all series, to share,
ratably according to the number of shares held by them, in all
remaining assets of the Corporation available for distribution to its
shareholders.
SECTION 5.5. OTHER TERMS OF PREFERRED STOCK.
(a) Preferred Stock may be issued from time to time in one or more
series, each such series to have such distinctive designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Restated Articles of Incorporation. Subject to the requirements
of the Corporation Law and subject to all other provisions of these Restated
Articles of Incorporation, the Board of Directors of the Corporation may create
one or more series of Preferred Stock and may determine the preferences,
limitations, and relative voting and other rights of one or more series of
Preferred Stock before the issuance of any shares of that series by the adoption
of an amendment to these Restated Articles of Incorporation that specifies the
terms of the series of Preferred Stock. All shares of a series of Preferred
Stock must have preferences, limitations, and relative voting and other rights
identical with those of other shares of the same series and, if the description
of the series set forth in these Restated Articles of Incorporation so provides,
no series of Preferred Stock need have preferences, limitations, or relative
voting or other rights identical with those of any other series of Preferred
Stock.
Before issuing any shares of a series of Preferred Stock, the Board of
Directors shall adopt an amendment to these Restated Articles of Incorporation,
which shall be effective without any shareholder approval or other action, that
sets forth the preferences, limitations, and relative voting and other rights of
the series, and authority is hereby expressly vested in the Board of Directors,
by such amendment:
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<PAGE>
(1) To fix the distinctive designation of such series and the
number of shares which shall constitute such series, which number may
be increased or decreased (but not below the number of shares thereof
then outstanding) from time to time by action of the Board of
Directors;
(2) To fix the voting rights of such series, which may consist
of special, conditional, limited, or unlimited voting rights,
including multiple or fractional votes per share, or no right to vote
(except to the extent required by the Corporation Law);
(3) To fix the dividend or distribution rights of such series
and the manner of calculating the amount and time for payment of
dividends or distributions, including, but not limited to:
(A) the dividend rate, if any, of such series;
(B) any limitations, restrictions, or conditions on
the payment of dividends or other distributions, including
whether dividends or other distributions shall be
noncumulative or cumulative or partially cumulative and, if
so, from which date or dates;
(C) the relative rights of priority, if any, of
payment of dividends or other distributions on shares of
that series in relation to Common Stock and shares of any
other series of Preferred Stock; and
(D) the form of dividends or other distributions,
which may be payable at the option of the Corporation, the
shareholder, or another person (and in such case to
prescribe the terms and conditions of exercising such
option), or upon the occurrence of a designated event in
cash, indebtedness, stock or other securities or other
property, or in any combination thereof,
and to make provisions, in the case of dividends or other
distributions payable in stock or other securities, for adjustment of
the dividend or distribution rate in such events as the Board of
Directors shall determine;
(4) To fix the price or prices at which, and the terms and
conditions on which, the shares of such series may be redeemed or
converted, which may be
(A) at the option of the Corporation, the shareholder,
or another person or upon the occurrence of a designated
event;
(B) for cash, indebtedness, securities, or other
property or any combination thereof; and
-5-
<PAGE>
(C) in a designated amount or in an amount determined
in accordance with a designated formula or by reference to
extrinsic data or events;
(5) To fix the amount or amounts payable upon the shares of such
series in the event of any liquidation, dissolution, or winding up of
the Corporation and the relative rights of priority, if any, of
payment upon shares of such series in relation to Common Stock and
shares of any other series of special shares; and to determine whether
or not any such preferential rights upon dissolution need be
considered in determining whether or not the Corporation may make
dividends, repurchases, or other distributions;
(6) To determine whether or not the shares of such series shall
be entitled to the benefit of a sinking fund to be applied to the
purchase or redemption of such series and, if so entitled, the amount
of such fund and the manner of its application;
(7) To determine whether or not the issue of any additional
shares of such series or of any other series in addition to such
series shall be subject to restrictions in addition to restrictions,
if any, on the issue of additional shares imposed in the provisions of
these Restated Articles of Incorporation fixing the terms of any
outstanding series of Preferred Stock theretofore issued pursuant to
this Section 5.5 and, if subject to additional restrictions, the
extent of such additional restrictions; and
(8) Generally to fix the other preferences or rights, and any
qualifications, limitations, or restrictions of such preferences or
rights, of such series to the full extent permitted by the Corporation
Law; provided, however, that no such preferences, rights,
qualifications, limitations, or restrictions shall be in conflict with
these Restated Articles of Incorporation or any amendment hereof.
(b) Shares of Preferred Stock of any series that have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased by
the Corporation, or which, if convertible, have been converted into shares of
the Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Stock, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Stock in accordance with subsection (a) of this Section 5.5.
ARTICLE VI
DIRECTORS
SECTION 6.1. NUMBER. The Board of Directors at the time of adoption
of these Restated Articles of Incorporation is composed of four (4) members,
which number may be changed from time to time in the manner set forth in the
By-Laws. Whenever the By-Laws provide that the number of Directors shall be
three (3) or more, the By-Laws may also provide for staggering the terms of the
members of the Board of Directors by dividing the total number of Directors into
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<PAGE>
three (3) groups (with each group containing one-third (1/3) of the total, as
near as may be) whose terms of office expire at different times.
SECTION 6.2. QUALIFICATIONS. Directors need not be shareholders of
the Corporation or residents of this or any other state in the United States.
SECTION 6.3. VACANCIES. Vacancies occurring in the Board of
Directors shall be filled in the manner provided in the By-Laws or, if the
By-Laws do not provide for the filling of vacancies, in the manner provided by
the Corporation Law. The By-Laws may also provide that in certain circumstances
specified therein, vacancies occurring in the Board of Directors may be filled
by vote of the shareholders at a special meeting called for that purpose or at
the next annual meeting of shareholders.
SECTION 6.4. LIABILITY OF DIRECTORS. A Director's responsibility to
the Corporation shall be limited to discharging his or her duties as a Director,
including his or her duties as a member of any committee of the Board of
Directors upon which he or she may serve, in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner the Director reasonably believes to be in the
best interests of the Corporation, all based on the facts then known to the
Director.
In discharging his or her duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation
whom the Director reasonably believes to be reliable and competent in
the matters presented;
(b) Legal counsel, public accountants, or other persons as to
matters the Director reasonably believes are within such person's
professional or expert competence; or
(c) A committee of the Board of which the Director is not a
member if the Director reasonably believes the Committee merits
confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted.
A Director shall not be liable for any action taken as a Director, or
any failure to take any action, unless (a) the Director has breached or failed
to perform the duties of the Director's office in compliance with this
Section 6.4, and (b) the breach or failure to perform constitutes willful
misconduct or recklessness.
SECTION 6.5. FACTORS TO BE CONSIDERED BY BOARD. In determining
whether to take or refrain from taking any action with respect to any matter,
including making or declining to make any recommendation to shareholders of the
Corporation, the Board of Directors may, in its discretion,
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<PAGE>
consider both the short term and long term best interests of the Corporation
(including the possibility that these interests may be best served by the
continued independence of the Corporation), taking into account, and weighing
as the Directors deem appropriate, the social and economic effects thereof on
the Corporation's present and future employees, suppliers and customers of
the Corporation and its subsidiaries, the communities in which offices or
other facilities of the Corporation are located, and any other factors the
Directors consider pertinent.
SECTION 6.6. REMOVAL OF DIRECTORS. Any or all of the members of the
Board of Directors may be removed, for good cause, only at a meeting of the
shareholders called expressly for that purpose, by the affirmative vote of the
holders of outstanding shares representing at least sixty-six and two-thirds
percent (66-2/3%) of all the votes then entitled to be cast at an election of
Directors. Directors may not be removed in the absence of good cause.
SECTION 6.7. ELECTION OF DIRECTORS BY HOLDERS OF PREFERRED STOCK.
The holders of one (1) or more series of Preferred Stock may be entitled to
elect all or a specified number of Directors, but only to the extent and subject
to limitations as may be set forth in the provisions of these Restated Articles
of Incorporation adopted by the Board of Directors pursuant to Section 5.5
hereof describing the terms of the series of Preferred Stock.
ARTICLE VII
PROVISIONS FOR REGULATION OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
SECTION 7.1. MEETINGS OF SHAREHOLDERS. Meetings of the shareholders
of the Corporation shall be held at such time and at such place, either within
or without the State of Indiana, as may be stated in or fixed in accordance with
the By-Laws of the Corporation and specified in the respective notices or
waivers of notice of any such meetings.
SECTION 7.2. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of
the shareholders, for any purpose or purposes, unless otherwise prescribed by
the Corporation Law, may be called at any time only by the Board of Directors or
the officers authorized to do so by the By-Laws. Shareholders of the
Corporation shall not be authorized to call a special meeting of shareholders.
SECTION 7.3. MEETINGS OF DIRECTORS. Meetings of the Board of
Directors of the Corporation shall be held at such place, either within or
without the State of Indiana, as may be authorized by the By-Laws and specified
in the respective notices or waivers of notice of any such meetings or otherwise
specified by the Board of Directors. Unless the By-Laws provide otherwise,
(a) regular meetings of the Board of Directors may be held without notice of the
date, time, place, or purpose of the meeting and (b) the notice for a special
meeting need not describe the purpose or purposes of the special meeting.
SECTION 7.4. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or shareholders,
or of any committee of such Board, may be taken without a meeting, if the action
is taken by all members of the Board or all shareholders
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<PAGE>
entitled to vote on the action, or by all members of such committee, as the
case may be. The action must be evidenced by one (1) or more written
consents, in one or more counterparts, describing the action taken, signed by
each Director, or all the shareholders entitled to vote on the action, or by
each member of such committee, as the case may be, and, in the case of action
by the Board of Directors or a committee thereof, included in the minutes or
filed with the corporate records reflecting the action taken or, in the case
of action by the shareholders, delivered to the Corporation for inclusion in
the minutes or filing with the corporate records. Action taken under this
Section 7.4 is effective when the last Director, shareholder, or committee
member, as the case may be, signs the consent, unless the consent specifies a
different prior or subsequent effective date, in which case the action is
effective on or as of the specified date. Executed consents returned to the
Corporation by facsimile transmission may be relied upon as, and shall have
the same effect as, originals of such consents. A consent signed under this
Section 7.4 shall have the same effect as a unanimous vote of all members of
the Board, or all shareholders, or all members of the committee, as the case
may be, and may be described as such in any document.
SECTION 7.5. BY-LAWS. The Board of Directors shall have the
exclusive power to make, alter, amend, or repeal, or to waive provisions of, the
By-Laws of the Corporation by the affirmative vote of a majority of the entire
number of Directors at the time, except as expressly provided in Section 6.1
hereof and as provided by the Corporation Law. All provisions for the
regulation of the business and management of the affairs of the Corporation not
stated in these Restated Articles of Incorporation shall be stated in the
By-Laws. The Board of Directors shall not be authorized to adopt Emergency
By-Laws of the Corporation.
SECTION 7.6. INTEREST OF DIRECTORS.
(a) A conflict of interest transaction is a transaction with the
Corporation in which a Director of the Corporation has a direct or indirect
interest. A conflict of interest transaction is not voidable by the Corporation
solely because of the Director's interest in the transaction if any one (1) of
the following is true:
(1) The material facts of the transaction and the Director's
interest were disclosed or known to the Board of Directors or a
committee of the Board of Directors and the Board of Directors or
committee authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the Director's
interest were disclosed or known to the shareholders entitled to vote
and they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.6, a Director of the Corporation
has an indirect interest in a transaction if:
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(1) Another entity in which the Director has a material
financial interest or in which the Director is a general partner is a
party to the transaction; or
(2) Another entity of which the Director is a director, officer,
or trustee is a party to the transaction and the transaction is, or is
required to be, considered by the Board of Directors of the
Corporation.
(c) For purposes of Section 7.6(a)(1), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of a majority of the Directors on the Board of Directors (or on the
committee) who have no direct or indirect interest in the transaction, but a
transaction may not be authorized, approved, or ratified under this section by a
single Director. If a majority of the Directors who have no direct or indirect
interest in the transaction vote to authorize, approve, or ratify the
transaction, a quorum shall be deemed present for the purpose of taking action
under this Section 7.6. The presence of, or a vote cast by, a Director with a
direct or indirect interest in the transaction does not affect the validity of
any action taken under Section 7.6(a)(1), if the transaction is otherwise
authorized, approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.6(a)(2), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of the holders of shares representing a majority of the votes entitled to
be cast. Shares owned by or voted under the control of a Director who has a
direct or indirect interest in the transaction, and shares owned by or voted
under the control of an entity described in Section 7.6(b), may be counted in
such a vote of shareholders.
SECTION 7.7. NONLIABILITY OF SHAREHOLDERS. Shareholders of the
Corporation are not personally liable for the acts or debts of the Corporation,
nor is private property of shareholders subject to the payment of corporate
debts.
SECTION 7.8. INDEMNIFICATION OF OFFICERS, DIRECTORS, AND OTHER
ELIGIBLE PERSONS.
(a) To the extent not inconsistent with applicable law, every
Eligible Person shall be indemnified by the Corporation against all Liability
and reasonable Expense that may be incurred by him in connection with or
resulting from any Claim, (1) if such Eligible Person is Wholly Successful with
respect to the Claim, or (2) if not Wholly Successful, then if such Eligible
Person is determined, as provided in either Section 7.8(f) or 7.8(g), to have
acted in good faith, in what he reasonably believed to be the best interests of
the Corporation or at least not opposed to its best interests and, in addition,
with respect to any criminal claim is determined to have had reasonable cause to
believe that his conduct was lawful or had no reasonable cause to believe that
his conduct was unlawful. The termination of any Claim, by judgment, order,
settlement (whether with or without court approval), or conviction or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that an Eligible Person did not meet the standards of conduct set
forth in clause (2) of this subsection (a). The actions of an Eligible Person
with respect to an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974 shall be deemed to have been taken in what the
Eligible Person reasonably believed to be the best interests
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of the Corporation or at least not opposed to its best interests if the
Eligible Person reasonably believed he was acting in conformity with the
requirements of such Act or he reasonably believed his actions to be in the
interests of the participants in or beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.8 shall include every
pending, threatened, or completed claim, action, suit, or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative, or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(1) by reason of his being or having been an Eligible Person, or
(2) by reason of any action taken or not taken by him in his
capacity as an Eligible Person, whether or not he continued in such
capacity at the time such Liability or Expense shall have been
incurred.
(c) The term "Eligible Person" as used in this Section 7.8 shall mean
every person (and the estate, heirs, and personal representatives of such
person) who is or was a Director, officer, employee, or agent of the Corporation
or is or was serving at the request of the Corporation as a Director, officer,
employee, agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other organization
or entity, whether for profit or not. An Eligible Person shall also be
considered to have been serving an employee benefit plan at the request of the
Corporation if his duties to the Corporation also imposed duties on, or
otherwise involved services by, him to the plan or to participants in or
beneficiaries of the plan.
(d) The terms "Liability" and "Expense" as used in this Section 7.8
shall include, but shall not be limited to, counsel fees and disbursements and
amounts of judgments, fines, or penalties against (including excise taxes
assessed with respect to an employee benefit plan), and amounts paid in
settlement by or on behalf of an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.8 shall
mean (1) termination of any claim against the Eligible Person in question
without any finding of liability or guilt against him, (2) approval by a court,
with knowledge of the indemnity herein provided, of a settlement of any Claim,
or (3) the expiration of a reasonable period of time after the making or
threatened making of any Claim without the institution of the same, without any
payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other
than one who has been Wholly Successful with respect to any Claim) shall be
entitled to indemnification (1) if special independent legal counsel, which may
be regular counsel of the Corporation, or other disinterested person or persons,
in either case selected by the Board of Directors, whether or not a
disinterested quorum exists (such counsel or person or persons being hereinafter
called the "Referee"), shall deliver to the Corporation a written finding that
such Eligible Person has met the standards of conduct set forth in
Section 7.8(a)(2), and (2) if the Board of Directors, acting upon such written
finding, so determines. The Board of Directors shall, if an Eligible Person is
found to
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be entitled to indemnification pursuant to the preceding sentence, also
determine the reasonableness of the Eligible Person's Expenses. The Eligible
Person claiming indemnification shall, if requested, appear before the
Referee, answer questions that the Referee deems relevant and shall be given
ample opportunity to present to the Referee evidence upon which the Eligible
Person relies for indemnification. The Corporation shall, at the request of
the Referee, make available facts, opinions, or other evidence in any way
relevant to the Referee's findings that are within the possession or control
of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to
Section 7.8(f) is found not to be entitled thereto, or if the Board of Directors
fails to select a Referee under Section 7.8(f) within a reasonable amount of
time following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.8(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in Section 7.8(a)(2). If the
court determines that the Eligible Person is entitled to indemnification, the
court shall also determine the reasonableness of the Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.8 shall
be in addition to any rights to which any Eligible Person may otherwise be
entitled. Irrespective of the provisions of this Section 7.8, the Board of
Directors may, at any time and from time to time, (1) approve indemnification of
any Eligible Person to the full extent permitted by the provisions of applicable
law at the time in effect, whether on account of past or future transactions,
and (2) authorize the Corporation to purchase and maintain insurance on behalf
of any Eligible Person against any Liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability.
(i) Expenses incurred by an Eligible Person with respect to any Claim
may be advanced by the Corporation (by action of the Board of Directors, whether
or not a disinterested quorum exists) prior to the final disposition thereof
upon receipt of an undertaking by or on behalf of the Eligible Person to repay
such amount unless he is determined to be entitled to indemnification.
(j) The provisions of this Section 7.8 shall be deemed to be a
contract between the Corporation and each Eligible Person, and an Eligible
Person's rights hereunder shall not be diminished or otherwise adversely
affected by any repeal, amendment, or modification of this Section 7.8 that
occurs subsequent to such person becoming an Eligible Person.
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(k) The provisions of this Section 7.8 shall be applicable to Claims
made or commenced after the adoption hereof, whether arising from acts or
omissions to act occurring before or after the adoption hereof.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1. AMENDMENT OR REPEAL. Except as otherwise expressly
provided for in these Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change,
or repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
SECTION 8.2. REDEMPTION OF SHARES ACQUIRED IN CONTROL SHARE
ACQUISITIONS. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, it is authorized to redeem its securities pursuant to
IC 23-1-42-10.
SECTION 8.3. CAPTIONS. The captions of the Articles and Sections of
these Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe, or describe the
scope or intent of any Article or Section hereof.
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EXHIBIT 3.2
BY-LAWS
OF
INTERACTIVE INTELLIGENCE, INC.
(Effective May 5, 1999)
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETINGS. Annual meetings of the shareholders of
the Corporation shall be held each year commencing in May, 2000, on such date,
at such hour and at such place within or without the State of Indiana as shall
be designated by the Board of Directors. In the absence of designation, the
meeting shall be held at the principal office of the Corporation.
SECTION 1.2. SPECIAL MEETINGS. Special meetings of the shareholders
of the Corporation may be called at any time only by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President. The Board
of Directors, the Chairman of the Board, the Chief Executive Officer or the
President, as the case may be, calling a special meeting of shareholders shall
set the date, time and place of such meeting, which may be held within or
without the State of Indiana.
SECTION 1.3. NOTICES. A written notice, stating the date, time, and
place of any meeting of the shareholders, and, in the case of a special meeting,
the purpose or purposes for which such meeting is called, shall be delivered,
mailed or sent by electronic transmission by the Secretary of the Corporation,
to each shareholder of record of the Corporation entitled to notice of or to
vote at such meeting no fewer than ten (10) nor more than sixty (60) days before
the date of the meeting. Notice of shareholders' meetings, if mailed, shall be
mailed, postage prepaid, to each shareholder at his or her address shown in the
Corporation's current record of shareholders.
Notice of a meeting of shareholders shall be given to shareholders not
entitled to vote, but only if a purpose for the meeting is to vote on any
amendment to the Corporation's Restated Articles of Incorporation, merger, or
share exchange to which the Corporation would be a party, sale of the
Corporation's assets, dissolution of the Corporation, or consideration of voting
rights to be accorded to shares acquired or to be acquired in a "control share
acquisition" (as such term is defined in the Indiana Business Corporation Law).
Except as required by the foregoing sentence or as otherwise required by the
Indiana Business Corporation Law or the Corporation's Restated Articles of
Incorporation, notice of a meeting of shareholders is required to be given only
to shareholders entitled to vote at the meeting.
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A shareholder or his proxy may at any time waive notice of a meeting
if the waiver is in writing and is delivered to the Corporation for inclusion in
the minutes or filing with the Corporation's records. A shareholder's
attendance at a meeting, whether in person or by proxy, (a) waives objection to
lack of notice or defective notice of the meeting, unless the shareholder or his
proxy at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder or his proxy objects to
considering the matter when it is presented. Each shareholder who has, in the
manner above provided, waived notice or objection to notice of a shareholders'
meeting shall be conclusively presumed to have been given due notice of such
meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time, or place is announced at the meeting before
adjournment, unless a new record date is or must be established for the
adjourned meeting.
SECTION 1.4. BUSINESS OF SHAREHOLDER MEETINGS. At each annual
meeting, the shareholders shall elect the directors and shall conduct only such
other business 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 the 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 the meeting by a shareholder of the Corporation who (i) was a shareholder
of record at the time of giving the notice provided for in this Section 1.4,
(ii) is entitled to vote at the meeting and (iii) complied with the notice
procedures set forth in this Section 1.4. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation at the
principal executive office of the Corporation. To be timely, a shareholder's
notice shall be delivered not less than 90 days nor more than 120 days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, notice by
the shareholder, to be timely, must be so delivered not earlier than the 120th
day prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement (as defined herein) of the date of such meeting
is first made.
Such shareholder's notice shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting and any material interest in such
business of such shareholder and the beneficial owner, if any, on whose behalf
the proposal is made; (b) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made (i) the name and
address of such shareholder, as they appear on the Corporation's books, and the
name and address of such beneficial owner, (ii) the class and number of shares
of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner as of the date such notice is given, and
(iii) a representation that such shareholder intends to appear in person or by
proxy at the meeting to propose such business; (c) in
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the event that such business includes a proposal to amend either the Articles
of Incorporation or the By-Laws of the Corporation, the language of the
proposed amendment; and (d) if the shareholder intends to solicit proxies in
support of such shareholder's proposal, a representation to that effect. The
foregoing notice requirements shall be deemed satisfied by a shareholder if
the shareholder has notified the Corporation of his or her intention to
present a proposal at an annual meeting and such shareholder's proposal has
been included in a proxy statement that has been prepared by management of
the Corporation to solicit proxies for such annual meeting; provided,
however, that if such shareholder does not appear or send a qualified
representative to present such proposal at such annual meeting, the
Corporation need not present such proposal for a vote at such meeting,
notwithstanding that proxies in respect of such vote may have been received
by the Corporation. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with this Section 1.4, and the Chairman of the Board or other
person presiding at an annual meeting of shareholders may refuse to permit
any business to be brought before an annual meeting without compliance with
the foregoing procedures or if the shareholder solicits proxies in support of
such shareholder's proposal without such shareholder having made the
representation required by clause (d) of the second preceding sentence.
For the purposes of this Section 1.4, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). In addition to the provisions of this Section 1.4, a shareholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth herein.
Nothing in these By-Laws shall be deemed to affect any rights of the
shareholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 1.5. NOTICE OF SHAREHOLDER NOMINATIONS. Nominations of
persons for election as Directors may be made by the Board of Directors or by
any shareholder who is a shareholder of record at the time of giving the
notice of nomination provided for in this Section 1.5 and who is entitled to
vote in the election of Directors. Any shareholder of record entitled to
vote in the election of Directors at a meeting may nominate a person or
persons for election as Directors only if timely written notice of such
shareholder's intent to make such nomination is given to the Secretary of the
Corporation in accordance with the procedures for bringing business before an
annual meeting set forth in Section 1.4 of these By-Laws. To be timely, a
shareholder's notice shall be delivered (i) with respect to an election to be
held at an annual meeting of shareholders, not less than 90 days nor more
than 120 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the shareholder, to be timely, must be so
delivered not earlier than the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public announcement
(as defined in Section 1.4 of these By-Laws) is first made of the date of
such meeting, and (ii) with respect to an election to be held at a special
meeting of shareholders, not earlier than the 120th day prior to such special
meeting and not later than the close of business on the later of the 90th day
prior to such special meeting or the 10th day
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following the day on which public announcement is first made of the date of
the special meeting and of the nominees to be elected at such meeting.
Such shareholder's notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination, of the person or persons
to be nominated and of the beneficial owner, if any, on whose behalf the
nomination is made; (b) a representation that the shareholder is a holder of
record of stock of the Corporation entitled to vote at such meeting in such
election and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder, any such beneficial
owner, each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; (e) the consent of each nominee to serve as a Director if so elected;
and (f) if the shareholder intends to solicit proxies in support of such
shareholder's nominee(s), a representation to that effect. The chairman of any
meeting of shareholders to elect Directors and the Board of Directors may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedure or if the shareholder solicits proxies in support of such
shareholder's nominee(s) without such shareholder having made the representation
required by clause (f) of the preceding sentence. In addition to the provisions
of this Section 1.5, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth herein.
SECTION 1.6. VOTING. Except as otherwise provided by the Indiana
Business Corporation Law or the Corporation's Restated Articles of
Incorporation, each share of Common Stock of the Corporation that is outstanding
at the record date established for any annual or special meeting of shareholders
and is outstanding at the time of and represented in person or by proxy at the
annual or special meeting, shall entitle the record holder thereof, or his
proxy, to one (1) vote on each matter voted on at the meeting.
SECTION 1.7. QUORUM. Unless the Corporation's Restated Articles of
Incorporation or the Indiana Business Corporation Law provide otherwise, at all
meetings of shareholders, a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
the matter. Action may be taken at a shareholders' meeting only on matters with
respect to which a quorum exists; provided, however, that any meeting of
shareholders, including annual and special meetings and any adjournments
thereof, may be adjourned to a later date although less than a quorum is
present. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
SECTION 1.8. VOTE REQUIRED TO TAKE ACTION. If a quorum exists as to
a matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, except
as the Corporation's Restated Articles of Incorporation or the Indiana Business
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Corporation Law require a greater number of affirmative votes. Directors shall
be elected by a plurality of the votes properly cast.
SECTION 1.9. RECORD DATE. Only such persons shall be entitled to
notice of or to vote, in person or by proxy, at any shareholders' meeting as
shall appear as shareholders upon the books of the Corporation as of such record
date as the Board of Directors shall determine, which date may not be earlier
than the date seventy (70) days immediately preceding the meeting. In the
absence of such determination, the record date shall be the fiftieth (50th) day
immediately preceding the date of such meeting. Unless otherwise provided by
the Board of Directors, shareholders of record shall be determined as of the
close of business on the record date.
SECTION 1.10. PROXIES. A shareholder may vote his shares either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder (including authorizing the proxy to receive, or to waive,
notice of any shareholders' meeting within the effective period of such proxy)
by signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes and is
effective for eleven (11) months unless a longer period is expressly provided in
the appointment form. The proxy's authority may be limited to a particular
meeting or may be general and authorize the proxy to represent the shareholder
at any meeting of shareholders held within the time provided in the appointment
form. Subject to the Indiana Business Corporation Law and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, the Corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
SECTION 1.11. REMOVAL OF DIRECTORS. Any or all of the members of
the Board of Directors may be removed, for good cause, only at a meeting of
the shareholders called expressly for that purpose, by a vote of the holders
of outstanding shares representing at least sixty-six and two-thirds percent
(66-2/3%) of the votes then entitled to be cast at an election of Directors.
Directors may not be removed in the absence of good cause.
SECTION 1.12. WRITTEN CONSENTS. Any action required or permitted
to be taken at a shareholders' meeting may be taken without a meeting if the
action is taken by all the shareholders entitled to vote on the action. The
action must be evidenced by one (1) or more written consents, in one or more
counterparts, describing the action taken, signed by all the shareholders
entitled to vote on the action, and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records reflecting the
action taken. Action taken under this Section 1.12 is effective when the last
shareholder signs the consent, unless the consent specifies a different prior
or subsequent effective date, in which case the action is effective on or as
of the specified date. Executed consents returned to the Corporation by
facsimile transmission may be relied upon as, and shall have the same effect
as, originals of such consents. A consent signed under this Section 1.12
shall have the same effect as a unanimous vote of all shareholders and may be
described as such in any document.
SECTION 1.13. PARTICIPATION OTHER THAN IN PERSON. The Chairman of
the Board or the Board of Directors may permit any or all shareholders to
participate in an annual or special meeting of shareholders by, or through the
use of, any means of communication, such as conference
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telephone, by which all shareholders participating may simultaneously hear
each other during the meeting. A shareholder participating in a meeting by
such means shall be deemed to be present in person at the meeting.
ARTICLE II
DIRECTORS
SECTION 2.1. NUMBER AND TERMS. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors
consisting of at least four (4) Directors, but not more than ten (10) Directors,
with the actual number of Directors being fixed from time to time by resolution
of the Board of Directors, subject to the requirements of the Restated Articles
of Incorporation. The Directors shall be divided into three (3) groups, with
each group consisting of one-third (1/3) of the total Directors, as near as may
be, with the term of office of the first group to expire at the annual meeting
of shareholders in 2000, the term of office of the second group to expire at the
annual meeting of shareholders in 2001, and the term of office of the third
group to expire at the annual meeting of shareholders in 2002; and at each
annual meeting of shareholders, the Directors chosen to succeed those whose
terms then expire shall be identified as being of the same group as the
Directors they succeed and shall be elected for a term expiring at the third
succeeding annual meeting of shareholders.
Despite the expiration of a Director's term, the Director shall
continue to serve until his or her successor is elected and qualified, or until
the earlier of his or her death, resignation, disqualification or removal, or
until there is a decrease in the number of Directors. Any vacancy occurring in
the Board of Directors, from whatever cause arising, shall be filled by
selection of a successor by a majority vote of the remaining members of the
Board of Directors (although less than a quorum); provided, however, that if
such vacancy or vacancies leave the Board of Directors with no members or if the
remaining members of the Board are unable to agree upon a successor or determine
not to select a successor, such vacancy may be filled by a vote of the
shareholders at a special meeting called for that purpose or at the next annual
meeting of shareholders. The term of a Director elected or selected to fill a
vacancy shall expire at the end of the term for which such Director's
predecessor was elected, or if the vacancy arises because of an increase in the
size of the Board of Directors, at the end of the term specified at the time of
election or selection.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board.
SECTION 2.2. QUORUM AND VOTE REQUIRED TO TAKE ACTION. A majority of
the whole Board of Directors shall be necessary to constitute a quorum for the
transaction of any business, except the filling of vacancies. If a quorum is
present when a vote is taken, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors, unless the act of
a greater number is required by the Indiana Business Corporation Law, the
Corporation's Restated Articles of Incorporation or these By-Laws.
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SECTION 2.3. ANNUAL AND REGULAR MEETINGS. The Board of Directors
shall meet annually, without notice, immediately following the annual meeting of
the shareholders, for the purpose of transacting such business as properly may
come before the meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at such times and
at such places as shall be fixed by resolution adopted by the Board of Directors
and specified in a notice of each such regular meeting, or otherwise
communicated to the Directors. The Board of Directors may at any time alter the
date for the next regular meeting of the Board of Directors.
SECTION 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by any member of the Board of Directors upon not less
than twenty-four (24) hours' notice given to each Director of the date, time,
and place of the meeting, which notice need not specify the purpose or purposes
of the special meeting. Such notice may be communicated in person (either in
writing or orally), by telephone, telegraph, teletype, or other form of wire or
wireless communication, or by mail, and shall be effective at the earlier of the
time of its receipt or, if mailed, five (5) days after its mailing. Notice of
any meeting of the Board may be waived in writing at any time if the waiver is
signed by the Director entitled to the notice and is filed with the minutes or
corporate records. A Director's attendance at or participation in a meeting
waives any required notice to the Director of the meeting, unless the Director
at the beginning of the meeting (or promptly upon the Director's arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
SECTION 2.5. WRITTEN CONSENTS. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if the action is taken by all members of the Board. The action must be
evidenced by one (1) or more written consents, in one or more counterparts,
describing the action taken, signed by each Director, and included in the
minutes or filed with the corporate records reflecting the action taken. Action
taken under this Section 2.5 is effective when the last Director signs the
consent, unless the consent specifies a different prior or subsequent effective
date, in which case the action is effective on or as of the specified date.
Executed consents returned to the Corporation by facsimile transmission may be
relied upon as, and shall have the same effect as, originals of such consents.
A consent signed under this Section 2.5 shall have the same effect as a
unanimous vote of all members of the Board and may be described as such in any
document.
SECTION 2.6. PARTICIPATION OTHER THAN IN PERSON. The Board of
Directors may permit any or all Directors to participate in a regular or special
meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A Director participating in a meeting by
such means shall be deemed to be present in person at the meeting.
SECTION 2.7. EXECUTIVE COMMITTEE. The Board of Directors may appoint
three (3) members to an Executive Committee. The Executive Committee shall,
subject to the restrictions of Section 2.11, be authorized to exercise the
authority of the full Board of Directors at any times other than during regular
or special meetings of the Board of Directors. All actions taken by the
Executive
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Committee shall be reported at the first regular meeting of the Board
of Directors following such actions. Members of the Executive Committee shall
serve at the pleasure of the Board of Directors.
SECTION 2.8. COMPENSATION AND STOCK OPTION COMMITTEE. The Board of
Directors may appoint two (2) or more members to a Compensation and Stock Option
Committee. The duties of the Compensation and Stock Option Committee shall be
to (a) consider and recommend to the Board of Directors and management the
overall compensation programs of the Corporation; (b) review and approve the
compensation payable to the senior management personnel of the Corporation;
(c) review and monitor the executive development efforts of the Corporation to
assure development of a pool of management and executive personnel adequate for
orderly management succession; (d) review significant changes in employee
benefit plans and stock related plans; and (e) administer the Corporation's
stock option plans. All actions of the Compensation and Stock Option Committee
shall require the affirmative vote of the majority of the members thereof.
SECTION 2.9. AUDIT COMMITTEE. The Board of Directors may appoint two
(2) or more members to an Audit Committee. The duties of the Audit Committee
shall be to (a) recommend to the Board of Directors the selection of and
engagement arrangements for the independent public accountants and auditors for
each fiscal year; (b) recommend to the Board of Directors as to the advisability
of having the independent public accountants and auditors make specified studies
and reports regarding auditing matters, accounting procedures, tax or other
matters; (c) review the results of the audit for each fiscal year; (d) review
such accounting policies of the Corporation as appropriate; (e) review the
coordination between the independent public accountants and auditors and the
Corporation's chief accounting officer; (f) review the scope and procedures of
the Corporation's internal audit work and the quality and composition of the
Corporation's internal audit staff; and (g) review all related party
transactions.
SECTION 2.10. OTHER COMMITTEES. The Board of Directors may create
one (1) or more committees in addition to any Executive Committee, Compensation
and Stock Option Committee or Audit Committee and appoint members of the Board
of Directors to serve on them, by resolution of the Board of Directors adopted
by a majority of all the Directors in office when the resolution is adopted.
The committee may exercise the authority of the Board of Directors to the extent
specified in the resolution. Each committee may have one (1) or more members,
and all the members of such committee shall serve at the pleasure of the Board
of Directors.
SECTION 2.11. LIMITATIONS ON COMMITTEES; NOTICE, QUORUM AND VOTING.
(a) Neither the Executive Committee, Compensation and Stock Option
Committee or Audit Committee nor any other committee hereafter established may:
(1) authorize dividends or other distributions, except a committee
may authorize or approve a reacquisition of shares if done
according to a formula or method prescribed by the Board of
Directors;
(2) approve or propose to shareholders action that is required to be
approved by shareholders;
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(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) except as permitted under Section 2.11(a)(7) below, amend the
Corporation's Restated Articles of Incorporation under
IC 23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these By-Laws;
(6) approve a plan of merger not requiring shareholder approval; or
(7) authorize or approve the issuance or sale or a contract for sale
of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares,
except the Board of Directors may authorize a committee (or an
executive officer of the Corporation designated by the Board of
Directors) to take the action described in this
Section 2.11(a)(7) within limits prescribed by the Board of
Directors.
(b) Except to the extent inconsistent with the resolutions creating a
committee, Sections 2.1 through 2.6 of these By-Laws, which govern meetings,
action without meetings, notice and waiver of notice, quorum and voting
requirements and participation in meetings of the Board of Directors other than
in person, apply to each committee and its members as well.
ARTICLE III
OFFICERS
SECTION 3.1. DESIGNATION, SELECTION AND TERMS. The officers of the
Corporation shall consist of the Chief Executive Officer, the President, the
Chief Financial Officer, the Chief Accounting Officer, the Treasurer and the
Secretary. The Board of Directors may also elect a Chairman of the Board,
Executive Vice Presidents, Vice Presidents, a Controller, Assistant Secretaries
and Assistant Treasurers, and such other officers or assistant officers as it
may from time to time determine by resolution creating the office and defining
the duties thereof. In addition, the Chairman of the Board, the Chief Executive
Officer or the President may, by a certificate of appointment creating the
office and defining the duties and term thereof delivered to the Secretary for
inclusion with the corporate records, from time to time create and appoint such
assistant officers as they deem desirable. The officers of the Corporation
shall be elected by the Board of Directors (or appointed by the Chairman of the
Board, the Chief Executive Officer or the President as provided above) and need
not be selected from among the members of the Board of Directors, except for the
Chairman of the Board, the Chief Executive Officer and the President who shall
be members of the Board of Directors. Any two (2) or more offices may be held
by the same person. All officers shall serve at the pleasure of the Board of
Directors and, with respect to officers appointed by the Chairman of the Board,
the Chief Executive Officer or the President, also at the pleasure of such
officers. The election or appointment of an officer does not itself create
contract rights.
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SECTION 3.2. REMOVAL. The Board of Directors may remove any officer
at any time with or without cause. An officer appointed by the Chairman of the
Board, the Chief Executive Officer or the President may also be removed at any
time, with or without cause, by any of such officers. Vacancies in such
offices, however occurring, may be filled by the Board of Directors at any
meeting of the Board of Directors (or by appointment by the Chairman of the
Board, the Chief Executive Officer or the President, to the extent provided in
Section 3.1 of these By-Laws).
SECTION 3.3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
any, shall, if present, preside at all meetings of the shareholders and of the
Board of Directors and shall have such powers and perform such duties as are
assigned to him by the Board of Directors.
SECTION 3.4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the chief executive and principal policymaking officer of the
Corporation. Subject to the authority of the Board of Directors, he or she
shall formulate the major policies to be pursued in the administration of the
Corporation's affairs. He or she shall study and make reports and
recommendations to the Board of Directors with respect to major problems and
activities of the Corporation and shall see that the established policies are
placed into effect and carried out. In the absence of the Chairman of the
Board, the Chief Executive Officer shall preside at meetings of the shareholders
and of the Board of Directors.
SECTION 3.5. PRESIDENT. Subject to the provisions of Sections 3.3
and 3.4, the President shall exercise the powers and perform the duties which
ordinarily appertain to such office and shall manage and operate the business
and affairs of the Corporation in conformity with the policies established by
the Board of Directors, the Chairman of the Board and the Chief Executive
Officer, or as may be provided for in these By-Laws. In connection with the
performance of his or her duties, he or she shall keep the Chairman of the Board
and the Chief Executive Officer fully informed as to all phases of the
Corporation's activities. In the absence of the Chairman of the Board and the
Chief Executive Officer, the President shall preside at meetings of the
shareholders and, if he is also a Director, at meetings of the Board of
Directors.
SECTION 3.6. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the chief financial officer of the Corporation and shall perform all of
the duties customary to that office. He or she shall be responsible for all of
the Corporation's financial affairs, subject to the supervision and direction of
the Chief Executive Officer, and shall have and perform such further powers and
duties as the Board of Directors may, from time to time, prescribe and as the
Chief Executive Officer may, from time to time, delegate to him or her.
SECTION 3.7. EXECUTIVE VICE PRESIDENT. Each Executive Vice President
shall have such powers and perform such duties as the Board of Directors may,
from time to time, prescribe and as the Chairman of the Board, the Chief
Executive Officer or the President may, from time to time, delegate to him or
her.
SECTION 3.8. CHIEF ACCOUNTING OFFICER. The Chief Accounting Officer
shall perform all of the duties customary to that office, shall be the chief
accounting officer of the Corporation and shall be responsible for maintaining
the Corporation's accounting books and records and preparing
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its financial statements, subject to the supervision and direction of the
Chief Financial Officer and other superior officers within the Corporation.
He or she shall also be responsible for causing the Corporation to furnish
financial statements to its shareholders pursuant to IC 23-1-53-1.
SECTION 3.9. SECRETARY. The Secretary shall be the custodian of the
books, papers, and records of the Corporation and of its corporate seal, if any,
and shall be responsible for seeing that the Corporation maintains the records
required by IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the biennial report
required by IC 23-1-53-3. The Secretary shall be responsible for preparing
minutes of the meetings of the shareholders and of the Board of Directors and
for authenticating records of the Corporation, and he or she shall perform all
of the other duties usual in the office of Secretary of a corporation.
SECTION 3.10. VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board of Directors may, from time to time,
prescribe and as the Chairman of the Board, the Chief Executive Officer or the
President may, from time to time, delegate to him or her.
SECTION 3.11. TREASURER. The Treasurer, if any, shall be responsible
for the treasury functions of the Corporation, subject to the supervision of the
Chief Executive Officer.
SECTION 3.12. SALARY. The Board of Directors may, at its discretion,
from time to time, fix the salary of any officer by resolution included in the
minute book of the Corporation.
ARTICLE IV
CHECKS
All checks, drafts, or other orders for payment of money shall be
signed in the name of the Corporation by such officers or persons as shall be
designated from time to time by resolution adopted by the Board of Directors and
included in the minute book of the Corporation; and in the absence of such
designation, such checks, drafts, or other orders for payment shall be signed by
the Chairman, the Chief Executive Officer, the President, the Chief Financial
Officer or the Treasurer.
ARTICLE V
LOANS
Such of the officers of the Corporation as shall be designated from
time to time by resolution adopted by the Board of Directors and included in the
minute book of the Corporation shall have the power, with such limitations
thereon as may be fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and papers, to
pledge collateral, and to execute such notes, bonds, debentures, or other
evidences of indebtedness, and such
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mortgages, trust indentures, and other instruments in connection therewith,
as may be authorized from time to time by such Board of Directors.
ARTICLE VI
EXECUTION OF DOCUMENTS
The Chairman of the Board, the Chief Executive Officer, the President
or any other officer authorized by the Board of Directors may, in the
Corporation's name, acting singly, sign all deeds, leases, contracts, or similar
documents unless otherwise directed by the Board of Directors or otherwise
provided herein or in the Corporation's Restated Articles of Incorporation, or
as otherwise required by law. Only one signature is required, unless otherwise
provided by a resolution of the Board of Directors.
ARTICLE VII
STOCK
SECTION 7.1. EXECUTION. Certificates for shares of the Corporation
shall be signed by the Chairman of the Board, the Chief Executive Officer or the
President and by the Secretary or Assistant Secretary and the seal of the
Corporation (or a facsimile thereof), if any, may be thereto affixed. Where any
such certificate is also signed by a transfer agent or a registrar, or both, the
signatures of the officers of the Corporation may be facsimiles. The
Corporation may issue and deliver any such certificate notwithstanding that any
such officer who shall have signed, or whose facsimile signature shall have been
imprinted on, such certificate shall have ceased to be such officer.
SECTION 7.2. CONTENTS. Each certificate issued after the adoption of
these By-Laws shall state on its face the name of the Corporation and that it is
organized under the laws of the State of Indiana, the name of the person to whom
it is issued, and the number and class of shares and the designation of the
series, if any, the certificate represents, and shall state conspicuously on its
front or back that the Corporation will furnish the shareholder, upon his
written request and without charge, a summary of the designations, relative
rights, preferences, and limitations applicable to each class and the variations
in rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future series).
SECTION 7.3. TRANSFERS. Except as otherwise provided by law or by
resolution of the Board of Directors, transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder thereof, in
person or by duly authorized attorney, on payment of all taxes thereon and
surrender for cancellation of the certificate or certificates for such shares
(except as hereinafter provided in the case of loss, destruction, or mutilation
of certificates) properly endorsed by the holder thereof or accompanied by the
proper evidence of succession, assignment, or authority to transfer, and
delivered to the Secretary or an Assistant Secretary.
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SECTION 7.4. STOCK TRANSFER RECORDS. There shall be entered upon the
stock records of the Corporation the number of each certificate issued, the name
and address of the registered holder of such certificate, the number, kind, and
class of shares represented by such certificate, the date of issue, whether the
shares are originally issued or transferred, the registered holder from whom
transferred, and such other information as is commonly required to be shown by
such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints a transfer agent or registrar,
in which case the Corporation shall keep at its principal office a complete and
accurate shareholders' list giving the names and addresses of all shareholders
and the number and class of shares held by each, which shall be updated
periodically as determined by the Secretary, but not less frequently than
quarterly, and which shall be updated as of each record date established with
respect to a meeting of shareholders or other shareholder action. If a transfer
agent is appointed by the Corporation, shareholders shall give written notice of
any changes in their addresses from time to time to the transfer agent.
SECTION 7.5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint one or more transfer agents and one or more registrars and may
require each stock certificate to bear the signature of either or both.
SECTION 7.6. LOSS, DESTRUCTION, OR MUTILATION OF CERTIFICATES. The
holder of any shares of the Corporation shall immediately notify the
Corporation of any loss, destruction, or mutilation of the certificate therefor,
and the Board of Directors may, in its discretion, cause to be issued to him a
new certificate or certificates, upon the surrender of the mutilated
certificate, or, in the case of loss or destruction, upon satisfactory proof of
such loss or destruction. The Board of Directors may, in its discretion,
require the holder of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and in such form, and
with such surety or sureties as it may direct, to indemnify the Corporation, its
transfer agents, and registrars, if any, against any claim that may be made
against them or any of them with respect to the shares represented by the
certificate or certificates alleged to have been lost or destroyed, but the
Board of Directors may, in its discretion, refuse to issue a new certificate or
certificates, save upon the order of a court having jurisdiction in such
matters.
SECTION 7.7. FORM OF CERTIFICATES. The form of the certificates for
shares of the Corporation shall conform to the requirements of Section 7.2 of
these By-Laws and be in such printed form as shall from time to time be approved
by resolution of the Board of Directors.
ARTICLE VIII
SEAL
The corporate seal of the Corporation shall, if the Corporation elects
to have one, be in the form of a disc, with the name of the Corporation and
"INDIANA" on the periphery thereof and the word "SEAL" in the center. The
Corporation shall not be required to have a seal.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. INDIANA BUSINESS CORPORATION LAW. The provisions of the
Indiana Business Corporation law, as amended, applicable to all matters relevant
to, but not specifically covered by, these By-Laws are hereby, by reference,
incorporated in and made a part of these By-Laws.
SECTION 9.2. FISCAL YEAR. The fiscal year of the Corporation shall
end on December 31 of each year.
SECTION 9.3. ELECTION TO BE GOVERNED BY INDIANA CODE SECTION
23-1-43. Effective upon the registration of any class of the Corporation's
shares under Section 12 of the Securities Exchange Act of 1934, as amended, the
Corporation shall be governed by the provisions of IC 23-1-43 regarding business
combinations.
SECTION 9.4. CONTROL SHARE ACQUISITION STATUTE. The provisions of
IC 23-1-42 shall apply to the acquisition of shares of the Corporation.
SECTION 9.5. REDEMPTION OF SHARES ACQUIRED IN CONTROL SHARE
ACQUISITIONS. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, any or all control shares acquired in a control share acquisition
shall be subject to redemption by the Corporation, if either:
(a) no acquiring person statement has been filed with the
Corporation with respect to such control share acquisition in
accordance with IC 23-1-42-6, or
(b) the control shares are not accorded full voting rights by
the Corporation's shareholders as provided in IC 23-1-42-9.
A redemption pursuant to Section 9.5(a) may be made at any time during the
period ending sixty (60) days after the last acquisition of control shares by
the acquiring person. A redemption pursuant to Section 9.5(b) may be made at
any time during the period ending two (2) years after the shareholder vote with
respect to the granting of voting rights to such control shares. Any redemption
pursuant to this Section 9.5 shall be made at the fair value of the control
shares and pursuant to such procedures for such redemption as may be set forth
in these By-Laws or adopted by resolution of the Board of Directors.
As used in this Section 9.5, the terms "control shares," "control
share acquisition," "acquiring person statement," and "acquiring person" shall
have the meanings ascribed to such terms in IC 23-1-42.
SECTION 9.6. AMENDMENTS. These By-Laws may be rescinded, changed, or
amended, and provisions hereof may be waived, at any meeting of the Board of
Directors by the affirmative
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vote of a majority of the entire number of Directors at the time, except as
otherwise required by the Corporation's Restated Articles of Incorporation or
by the Indiana Business Corporation Law.
SECTION 9.7. DEFINITION OF RESTATED ARTICLES OF INCORPORATION. The
term "Restated Articles of Incorporation" as used in these By-Laws means the
articles of incorporation of the Corporation as from time to time are in effect.
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Exhibit 10.1
INTERACTIVE INTELLIGENCE, INC.
1995 INCENTIVE STOCK OPTION PLAN
(Adopted Effective August 14, 1995)
(Restated to reflect Amendment No. 1 adopted by the Board of Directors on
November 11, 1997)
1. PURPOSE OF THE PLAN. The purposes of this Incentive Stock Option
Plan are to attract and retain the best available personnel, to provide
additional incentive to the Employees of Interactive Intelligence, Inc. (the
"Company") and to promote the success of the Company's business.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Interactive Intelligence, Inc., an Indiana
corporation.
(e) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave, military
leave, or any other leave of absence approved by the Company management;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(f) "EMPLOYEE" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(g) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(h) "OPTION" shall mean a stock option granted pursuant to the Plan.
(i) "OPTIONED STOCK" or "Option Shares" shall mean the Common Stock
subject to an Option.
(j) "OPTIONEE" shall mean an Employee who receives an Option.
(k) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(l) "PLAN" shall mean this Incentive Stock Option Plan.
<PAGE>
(m) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(n) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares under the Plan is two
million five hundred thousand (2,500,000) Shares of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock. If any Option should
expire or become unexercisable for any reason without having been exercised in
full, then the unpurchased Shares which were subject thereto shall, unless the
Plan shall have been terminated, become available for future grant or sale under
the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of Directors
of the Company.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options; (ii) to determine, upon review of relevant information and in
accordance with Section 7 of the Plan, the fair market value of the Common Stock
as of the date of the grant of such Options, provided that if pursuant to
Section 11 hereof the date of grant is after the date on which the Board or the
Committee as applicable, has acted to approve the Options, such determination
shall be made by the Board or the Committee, as applicable, on or promptly after
(but as of ) the effective date of grant; (iii) to determine the exercise price
per share of Options to be granted, which exercise price shall be determined in
accordance with Section 7 of the Plan; (iv) to determine the Employees to whom,
and the time or times at which, Options shall be granted and the number of
shares to be represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option; (viii) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option, consistent with the provisions of the Plan; (ix) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Board; (x) to
appoint an administrative committee ("Committee") which is authorized to grant
Options under the Plan to eligible employees and which shall consist of such
number of persons who are members of the Board and shall have other authorities
or be subject to such limitations as the Board in its discretion shall
determine; and (xi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) VESTING OF OPTIONS. Unless otherwise determined by the Board and
set forth in the relevant Option Agreement, Options shall become exercisable for
(i) 20% of the Option Shares on the first anniversary of the date on which the
Participant commenced employment with the Company if granted in connection with
the commencement of employment or the date determined by the Board of the
Committee, as applicable, if granted other than in connection with the
commencement of employment ("Commencement Date"), (ii) 20% of the Option Shares
on the second anniversary of the Commencement Date, (iii) 20% of the Option
Shares on the third anniversary of the Commencement Date, (iv) 20% of the Option
Shares on the fourth anniversary of the Commencement Date, and (v) 20%
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of the Option Shares on the fifth anniversary of the Commencement Date.
(d) ACCELERATED VESTING OF OPTIONS. The Board of Directors reserves the
right, in its sole and absolute discretion, to accelerate the date on which the
Options granted herein shall become vested and exercisable for the entire Option
Shares (to the extent not previously vested or exercised) to the date
immediately prior to the consummation of any of the following events: (i) the
sale or transfer by the Company of all or substantially all of its assets; (ii)
the sale or exchange in one transaction of outstanding shares of the Company
having at least two-thirds (2/3) of the total number of votes that may be cast
for the election of the Board; (iii) any cash tender offer or exchange offer,
contested election, or any combination of the foregoing transactions, as a
result of which the persons who are Directors of the Company before the
transaction shall cease to constitute a majority of the Board or of the board of
directors of any successor to the Company; or (iv) any merger or other business
combination or similar action of the Company in which the Shareholders of the
Company receive less than fifty percent (50%) voting interest in the new
continuing entity. If the Board exercises its rights to accelerate the Options
as provided herein, the Board shall notify each Optionee that the vesting and
exercisability has been accelerated and that the Option is subject to lapse and
termination if not timely exercised, which notice shall be given at least five
(5) days prior to the consummation of the events set forth in subparagraph (i),
(ii), (iii) or (iv) giving rise to such acceleration. In the event and to the
extent that the Board exercises its right to accelerate the vesting of the
Options as provided herein but an Optionee does not exercise an Option upon
occurrence of one of the events described in subparagraphs (i), (ii), (iii) and
(iv) above, then such Option shall lapse and terminate upon consummation of such
event.
(e) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. An
Employee who has been granted an Option may, if such Employee is otherwise
eligible, be granted additional Option(s).
(b) No Incentive Stock Option may be granted to an Employee which, when
aggregated with all other incentive stock options granted to such Employee by
the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available to purchase upon exercise of one or more incentive stock options
during any calendar year.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment by the Company, nor shall it interfere in any way
with his or her right or the Company's right to terminate his or her employment
or services at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 12 of the Plan.
7. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option
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shall be such price as is determined by the Board, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the fair market value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the fair market value per Share on the date
of grant.
(b) The fair market value shall be determined by the Board in its
discretion exercised in good faith; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall be the
mean of the bid and asked prices (or the closing price per share if the Common
Stock is listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System) of the Common Stock for the date of
grant, as reported in the WALL STREET JOURNAL (or, if not so reported, as
otherwise reported by the NASDAQ System) or, in the event the Common Stock is
listed on a stock exchange, the fair market value per Share shall be the closing
price on such exchange on the date of grant of the Option, as reported in the
WALL STREET JOURNAL.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of cash, check, promissory note, other Shares
of Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under the Indiana Business Corporation Law.
8. OPTIONS.
(a) TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. However, in the case of an
Option granted to an Employee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter time as may be
provided in the Stock Option Agreement.
(b) EXERCISE OF OPTION.
(i) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given
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to the Company in accordance with the terms of the Option by the person entitled
to exercise the Option and full payment for the shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination
of an Optionee's Continuous Status as an Employee, the Employee may, but only
within thirty (30) days after the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise the Options to the extent that the Employee was
entitled to exercise the Options at the date of such termination. To the extent
that the Employee was not entitled to exercise the Options at the date of such
termination, or if the Employee does not exercise such Options (which the
Employee was entitled to exercise) within the time specified herein, the Options
shall terminate.
(iii) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
8(b)(ii) above, in the event of termination of an Optionee's Continuous Status
as an Employee as a result of such Employee's total and permanent disability (as
defined in Section 22(e)(3) of the Code), such Employee may, but only within six
(6) months (or such other period of time not exceeding twelve (12) months as is
determined by the Board, with such determination being made at the time of grant
of the Option) from the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent such Employee was entitled to
exercise it at the date of such termination. To the extent such Employee was not
entitled to exercise the Option at the date of termination, or if such Employee
does not exercise such Option (which such Employee was entitled to exercise)
within the time specified herein, the Option shall terminate.
(iv) DEATH OF OPTIONEE. In the event of the death of an Optionee during
the term of the Option who is at the time of his or her death an Employee of the
Company and who shall have been in Continuous Status as an Employee since the
date of grant of the option, the Option may be exercised, at any time within six
(6) months (or such other period of time as is determined by the Board at the
time of grant of the Option) following the date of death (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that would have accrued had the Optionee continued
living and remained in Continuous Status as an Employee six (6) months (or such
other period of time as is determined by the Board at the time of grant of the
Option) after the date of death, subject to the limitation set forth in Section
5(b).
9. NON-TRANSFERABILITY OF OPTIONS. The Options may not be sold,
pledged, assigned,
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hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
the Optionee only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock of the Company or the
payment of a stock dividend with respect to the Common Stock or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive, absent manifest error or willful misconduct. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
11. TIME OF GRANT. The date of grant of an Option shall be, for all
purposes, the later of (i) the date on which the Board or the Committee makes
the determination granting such Option, or (ii) the Commencement Date. Notice of
the determination shall be given to each Employee to whom an Option is so
granted within a reasonable time after the date of such grant.
12. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 16 of the
Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 10 of the Plan;
(ii) any change in the designation of the class of persons eligible to
be granted Options; or
(iii) if the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") at the
time of such revision or amendment, any
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material increase in the benefits accruing to participants under the Plan.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 12(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 16 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Company, which agreement must be in writing and signed by the Optionee and
the Company.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. REPURCHASE OF SHARES AND RESTRICTION ON TRANSFER. The Company shall
have the right upon written notice to an Optionee to buy back any stock
purchased by such Optionee pursuant to the exercise of the Option upon
termination of the Optionee's Continuous Status as an Employee for any reason on
the following terms and conditions:
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(a) The Company's right under this Section shall expire on the earlier
of (i) the effective date of the registration of any of the Common Stock
pursuant to an initial public offering thereof, or (ii) two (2) years after
termination of an Optionee's Continuous Status as an Employee.
(b) The Company may exercise this right as to all or any portion of the
stock purchase by the Optionee pursuant hereto.
(c) The purchase price of any stock acquired pursuant to the exercise
of such right shall be the fair market value of the shares on the date of
exercise, determined pursuant to Section 7(b) of the Plan.
(d) The payment may be made all in cash or other immediately available
funds or part cash with the balance being paid pursuant to the Company's
promissory note, with a maturity selected by the Company of not more than two
(2) years and with interest on either a fixed or floating basis as elected by
the Company at a rate equal to the prime rate as published by the financial
institution selected by the Company as its primary bank. If the Company elects
to utilize a note in the payment of the amounts due hereunder, payment shall be
made thereunder at least annually.
(e) The closing of the transaction shall occur within ten (10) days
after the Company's notice. The Optionee shall deliver to the Company
certificates representing all of the Shares with respect to which the Company
has exercised its rights hereunder, together with such transfer documents as may
be necessary to transfer good and marketable title to such Shares to the
Company, including without limitation, stock powers with signatures guaranteed
and applicable transfer stamps, if any, and shall provide to the Company such
representations and warranties as the Company may reasonably request with
respect to the ownership of such shares and other material matters. All of such
Shares shall be transferred to the Company free and clear of any liens, claims,
pledges, or other encumbrances of any kind.
(f) Until the expiration of the repurchase rights set forth herein, the
Optionee shall not sell, assign, donate, pledge, or otherwise transfer any
interest in any of the Common Shares issued to the Optionee pursuant to the
exercise of the Option, without the prior written consent of the Company. The
Optionee agrees to give to the Company any information regarding the proposed
transfer as the Company may reasonably request. Any attempted transfer shall be
void and of no force or effect, and the Company shall have no obligation to
cause any transfer thereof to be made on its books and records. The Company will
give or withhold its consent in good faith. Any transferee with respect to whom
the Company has given its consent will take such transferred shares subject to
the terms and conditions of the Plan and will execute and deliver to the Company
such confirmations and other documents as the Company might reasonably require.
15. LEGENDS. Certificates for any Shares issued upon exercise of an
Option shall carry a legend indicating that transfer is subject to compliance
with applicable securities laws and that the Shares are subject to a repurchase
right and other restrictions on transfer set forth herein.
16. RESERVATION OF SHARES. The Company, during the terms of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. OPTION AGREEMENTS. Options shall be evidenced by written option
agreements in such
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form as the Board shall approve.
18. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
19. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, immediately prior to the exercise of an Option, a copy of the most
recent annual financial statement of the Company, and copies of all other
information provided to shareholders of the Company at the last most recent
annual meeting held prior to exercise. The Company shall not be required to
provide such information to key employees whose duties in connection with the
Company assure their access to equivalent information.
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Donald E. Brown M.D.
--------------------------------
Donald E. Brown, M.D., President
Adopted by Board - August 14, 1995
Approved by Shareholders - August 14, 1995
Amended by Board - November 11, 1997
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EXHIBIT 10.2
INTERACTIVE INTELLIGENCE, INC.
1995 NONSTATUTORY STOCK OPTION INCENTIVE PLAN
(ADOPTED EFFECTIVE AUGUST 14, 1995)
ARTICLE I
DEFINITIONS
SECTION 1.1. "AFFILIATE" means a corporation in which the Company
owns, directly or indirectly, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock of such corporation.
SECTION 1.2. "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
SECTION 1.3. "CODE" means the Internal Revenue Code of 1986, as
amended.
SECTION 1.4. "COMMON SHARES" or "Shares" means shares of the Common
Stock, without par value, of the Company.
SECTION 1.5. "COMPANY" means Interactive Intelligence, Inc., an
Indiana corporation, and any successor thereto.
SECTION 1.6. "EFFECTIVE DATE" means August 14, 1995.
SECTION 1.7. "ELIGIBLE EMPLOYEE" means any full-time employee of the
Company or an Affiliate.
SECTION 1.8. "ELIGIBLE PERSON" means any Eligible Employee or any
director or consultant of the Company or an Affiliate who is not an Eligible
Employee.
SECTION 1.9. "OPTION" means an option, granted by the Company pursuant
to the Plan, to purchase shares of Common Stock.
SECTION 1.10. "OPTION AGREEMENT" means a written agreement or
agreements as described in Section 4.3 between the Company and an Eligible
Person evidencing an Option.
SECTION 1.11. "OPTION PRICE" means the price for each share of Common
Stock as determined in Section 4.3(a).
SECTION 1.12. "OPTIONEE" means an Eligible Person to whom an Option has
been granted under the Plan.
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SECTION 1.13. "PLAN" means the "Interactive Intelligence, Inc.
Nonstatutory Stock Option Incentive Plan" set forth in this document.
SECTION 1.14. "SEPARATION FROM SERVICE" means, with respect to an
Eligible Employee, any voluntary or involuntary termination of an Eligible
Employee's employment with the Company or an Affiliate for any reason other
than death, but shall not include termination of employment by reason of an
Eligible Employee's transfer of employment between the Company or an
Affiliate, and means, with respect to other Eligible Persons, the cessation
of such person's service on the Board of Directors of the Company or an
Affiliate or cessation of such person's service as a consultant for any
reason other than death or total and permanent disability. The effective
date for Separation from Service shall not include any period for which an
Eligible Persons may receive accrued vacation or severance benefits in any
form for such service.
ARTICLE II
PURPOSE
SECTION 2.1. PURPOSE. The purpose of the Plan is to induce Eligible
Persons to remain affiliated with or in the employ of the Company and to
encourage Eligible Persons to secure or increase, on the terms set forth
herein, their stock ownership in the Company. The Board of Directors has
determined that the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who
are primarily responsible for shaping and carrying out the long-range plans
of the Company and securing its continued growth and financial success.
ARTICLE III
ADMINISTRATION
SECTION 3.1. GENERAL. The Plan shall be administered by the Board of
Directors which, subject to the terms and conditions of the Plan, shall have
the authority to determine, in its sole and absolute discretion, all
questions arising under the Plan, including, but not limited to, the
selection of the Eligible Persons to whom grants of Options shall be made,
the terms and conditions of each such grant, the time at which such grants
shall be made, the number of Common Shares to be optioned under each such
grant, all questions related to the exercisability of Options and all
questions relating to adjustments to be made pursuant to Article VI hereof.
The Board of Directors shall also establish and carry out reasonable
interpretations and applications of the Plan and shall perform or cause to be
performed such further acts as it may deem to be necessary, appropriate or
convenient in the efficient administration of the Plan.
SECTION 3.2. CONFLICTS OF INTEREST. A grant of an Option to a member
of the Board of Directors may be made only after approval of such grant by a
majority of disinterested members of the Board of Directors.
SECTION 3.3. DELEGATION OF POWERS. The Board of Directors may, in its
sole and
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absolute discretion, delegate specified powers and responsibilities given it
under the Plan to a committee, a majority of which shall be members of the
Board of Directors. The Board of Directors shall appoint the members of such
committee, who shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OPTIONS
SECTION 4.1. ELIGIBILITY. The Board of Directors may grant Options to
any person who is an Eligible Person.
SECTION 4.2. NUMBER OF SHARE(S) SUBJECT TO OPTIONS. The aggregate
number of Common Shares which may be issued upon the exercise of all Options
shall not exceed two hundred fifty thousand (250,000) Common Shares; subject,
however, to the provisions of Article VI hereof. The Common Shares issued
upon the exercise of Options may be authorized but unissued Common Shares or
Common Shares issued and subsequently reacquired by the Company. In the
event any Options shall, for any reason, terminate, expire or be surrendered
without having been exercised in full, the Common Shares subject to such
Option (but not purchased thereunder) shall again be available for Options to
be granted.
SECTION 4.3. TERMS AND CONDITIONS OF OPTIONS. Any Option shall be
evidenced by an Option Agreement executed by the Company and the Optionee,
and shall contain such terms and be in such form as the Board of Directors
may from time to time approve subject to the following terms, conditions and
limitations:
(a) OPTION PRICE. The option price per Common Share with respect to
each such Option shall be determined by the Board of Directors at the time of
issuance of the Option but shall be not less than Twenty Cents ($0.20) per
share.
(b) DURATION OF OPTION. Each Option shall expire in accordance with
the provisions of the Plan or, if earlier, the date fixed by the Board of
Directors at the time the Option is granted, which date shall be set forth in
the Option Agreement.
(c) VESTING OF OPTION. The Options shall vest and become exercisable,
as follows:
(i) Unless otherwise determined by the Board of Directors and
set forth in the Option Agreement, Options granted to an
Eligible Employee shall become exercisable for (i) 20% of
the Option shares on the first anniversary of the date of
grant, (ii) 20% of the Option Shares on the second
anniversary of the date of grant, (iii) 20% of the Option
Shares on the third anniversary of the date of grant,
(iv) 20% of the Option Shares on the fourth anniversary of the
date of grant, and (v) 20% of the Option Shares on the fifth
anniversary of the date of grant.
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(ii) Options granted to directors or consultants shall be fully
vested at the time of issuance unless otherwise determined
by the Board of Directors.
(iii) The Board of Directors reserve the right, in its sole and
absolute discretion, to accelerate the date on which the
Options granted herein shall become vested and exercisable
for the entire Option Shares (to the extent not previously
vested or exercised) to that date immediately prior to the
consummation of any of the following events: (i) the sale or
transfer by the Company of all or substantially all of its
assets; (ii) the sale or exchange in one transaction of
outstanding shares of the Company having at least two-thirds
(2/3) of the total number of votes that may be cast for the
election of the Board of Directors of the Company; (iii) any
cash tender offer or exchange offer, contested election, or
any combination of the foregoing transactions, as a result
of which the persons who are Directors of the Company before
the transaction shall cease to constitute a majority of the
Board of Directors of the Company or any successor to the
Company; or (iv) any merger or other business combination or
similar action of the Company in which the Shareholders of
the Company receive less than fifty percent (50%) voting
interest in the new continuing entity. If the Board
exercises its rights to accelerate the Options as provided
herein, the Board shall notify each Optionee that the
vesting and exercisability has been accelerated and that the
Option is subject to lapse and termination if not timely
exercised, which notice shall be given at least five (5)
days prior to the consummation of the events set forth in
subparagraph (i), (ii), (iii) or (iv) giving rise to such
acceleration. In the event and to the extent an Optionee
does not exercise an Option upon occurrence of one of the
events described in subparagraphs (i), (ii), (iii) and (iv)
above, then such Option shall lapse and terminate upon
consummation of such event.
(d) EXERCISE RIGHTS. Each Option shall become exercisable by the
Optionee (or his or her successors if Section 4.3(f) is applicable) only to
the extent the Option is vested. Notwithstanding the foregoing, no Option
granted under the Plan shall be exercisable if the Optionee is in violation
of, or has violated, any noncompete or nondisclosure agreement between the
Optionee and the Company.
(e) EXERCISE OF OPTION. On and after the date any portion of the
Option becomes exercisable pursuant to Section 4.3(d), the Optionee with
respect to such Option may only exercise such Option to the extent vested by
written exercise and subscription agreement which shall:
(i) state the election to exercise the Option, the number of Common
Shares in respect of which it is being exercised, the person(s) in
whose name(s) the stock certificate(s) for such shares is (are) to
be registered, including pertinent address(es) and social security
number(s);
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(ii) contain such representations and agreements, if any, as may be
required by the Company related to the Optionee's investment
intent regarding the acquisition of such Common Shares and other
provisions related to applicable exemptions from Federal or
state securities law registration requirements;
(iii) contain such agreement, if any, as may be required by the
Company related to restrictions on the transferability of such
Common Shares;
(iv) be signed by the Optionee; and
(v) be in writing and delivered in person or by mail to the
President of the Company.
Notwithstanding anything in the Plan to the contrary, no Option shall be
exercised if the issuance of the Common Shares upon such exercise would
constitute a violation of any applicable Federal or state securities laws or
other laws or regulations.
(f) DEATH OF OPTIONEE. If an Optionee dies while in the employ of or
while serving as a director or consultant to the Company or any Affiliate,,
an Option granted to such deceased Optionee may be exercised (to the extent
vested) by the persons representative, executor, or administrator of such
deceased Optionee's estate, or by the person or persons to whom the Option
has been transferred under the Optionee's last will and testament or the
applicable laws of descent and distribution, for a period of twelve (12)
months after the Optionee's death provided, however, such right of exercise
shall not effect the earlier expiration of such Option as provided in the
Plan or the applicable Option Agreement. Options granted to an Optionee
shall automatically expire twelve (12) months after such Optionee's death.
The Company shall be under no obligation to honor any notice of exercise or
to deliver certificates representing the Common Shares purchased pursuant to
any exercise until the Company is satisfied as to the authority of the person
or persons exercising the Option.
(g) DISABILITY OF OPTIONEE. Notwithstanding other terms and provisions
of this Plan, in the event an Optionee ceases to be employed with, or to
serve as a director or consultant to, the Company or any Affiliate, as a
result of such Optionee's total and permanent disability, such Optionee may,
but only within six (6) months (or such other period of time not exceeding
twelve (12) months as is determined by the Board, with such determination
being made, if at all, at the time of grant of the Option) from the date of
such termination (but in no event later than the date of expiration of the
term of such Option as set forth in the Option Agreement), exercise the
Option to the extent such Optionee was entitled to exercise it at the date of
such termination. To the extent such Optionee was not entitled to exercise
the Option at the date of termination, or if such Optionee does not exercise
such Option which such Optionee was entitled to exercise within the time
specified herein, the Option shall terminate.
(h) PAYMENT UPON EXERCISE OF OPTION. Payment of the option price by
the Optionee shall be made in cash or other immediately available funds or by
a check drawn on a United States bank and tendered to the Company on the date
of exercise.
5
<PAGE>
(i) NONTRANSFERABILITY OF OPTIONS. No Option shall be transferable or
assignable, in whole or in part, by an Optionee, except to the extent
exercise is permitted upon the death of the Optionee pursuant to Section
4.3(f) hereof. Each Option shall be exercisable, during the Optionee's
lifetime, only by the Optionee. No Option shall be pledged or hypothecated
in any way and no Option shall be subject to execution, attachment or similar
process or to any claim or interest of a spouse upon divorce from an Optionee
or pursuant to community property laws. Any attempt by an Optionee to
transfer, assign, pledge or hypothecate any Option, or any execution,
attachment or similar process against any such Option, shall cause the
immediate expiration of such Option.
(j) SEPARATION FROM SERVICE. Unless otherwise determined by the Board
of Directors at the time of grant, except for Options issued to an Optionee
who was serving as a non-employee director at the time of the grant, upon an
Optionee's Separation from Service all unexercised Options held by the
Optionee shall expire upon the date of his or her Separation from Service.
(k) OBLIGATION TO MAKE OPTIONS EXERCISABLE. The establishment of the
Plan does not create an obligation which would in any way require the Company
or Board of Directors to engage in any action which would result in the
Options becoming exercisable.
ARTICLE V
AMENDMENT, SUSPENSION OR TERMINATION
SECTION 5.1. GENERAL. The Board of Directors may from time to time
suspend or terminate the Plan or may amend it from time to time in such
respects as the Board of Directors may in its sole and absolute discretion
deem advisable.
SECTION 5.2. EFFECT OF AMENDMENT, SUSPENSION OR TERMINATION OF
EXISTING OPTIONS. Except as provided in the Plan, no amendment, suspension
or termination of the Plan, without an Optionee's consent, shall materially
impair any of the rights or obligations of the Company or the Optionee with
respect to any Option theretofore granted to such Optionee.
SECTION 5.3. AUTOMATIC TERMINATION OF PLAN. The Plan shall
automatically terminate and all Options granted hereunder shall expire on
August 14, 2005.
ARTICLE VI
ADJUSTMENTS
SECTION 6.1. RECAPITALIZATION. In the event that the issued and
outstanding Common Shares are, at any time after the effective date of the
Plan, increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company or an Affiliate
by reason of a recapitalization, reclassification, stock split-up,
combination of shares or dividend or other distribution payable in capital
stock, appropriate adjustment shall be made by
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<PAGE>
the Board of Directors in the number and kind of shares for the purchase of
which Options may be granted under the Plan. In addition, the Board of
Directors shall make the appropriate adjustment in the number and kind of
shares as to which outstanding Options, or portions thereof then unexercised,
shall be exercisable. Such adjustment in outstanding Options shall be made
without change in the total price applicable to the unexercised portion of
the Option and with a corresponding adjustment in the option price per share.
The determination of the Board of Directors with respect to such matters
shall be final, binding and conclusive absent manifest error or willful
misconduct.
SECTION 6.2. DISSOLUTION OR LIQUIDATION. In the event of the
dissolution or complete liquidation of the Company, any Option shall
terminate as of a date to be fixed by the Board of Directors; provided,
however, that written notice of the date so fixed shall be given to each
Optionee not less than the shorter of (i) thirty (30) days, or (ii) the
remaining term of the Plan, and each such Optionee shall have the right
during such period to exercise his or her Option as to all or any part of the
Common Shares covered thereby to the extent vested.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. RESTRICTIONS ON ISSUING COMMON SHARES. The Common Shares
shall not be issued pursuant to the exercise of an Option unless the
transferability of the Common Shares so issued and/or the actual issuance of
the Common Shares comply with all relevant provisions of law, including, but
not limited to, the (i) restrictions, if any, imposed by the Indiana
Securities Law, as amended, (ii) restrictions, if any, imposed by the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the United States
Securities and Exchange Commission thereunder, and (iii) requirements of any
stock exchange upon which the Common Shares may then be listed. The Board of
Directors, shall, in its sole discretion, determine if such restrictions or
such issuance of Common Shares so complies with all relevant provisions of
law.
SECTION 7.2. LEGENDS. Certificates for Common Shares issued upon
exercise of an Option shall carry a legend indicating that transfer is
subject to compliance with applicable securities laws and that the shares are
subject to a repurchase right and other restrictions on transfer set forth
herein.
SECTION 7.3. WITHHOLDING, ETC. Common Shares shall not be issued upon
the exercise of any Option unless and until withholding obligations with
respect to any Federal or state taxes, if any, or other withholding
obligations, if any, imposed by any governmental entity have, in the opinion
of the Board of Directors, have been satisfied by the Company or the Optionee
or provisions for their satisfaction have been made by the Company or the
Optionee.
SECTION 7.4. OTHER RESTRICTIONS. The Board of Directors may, in any
option agreement with an Optionee, or at the time certificates representing
Common Shares are actually issued pursuant to the exercise of an Option,
place such further restrictions on the transferability of any
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<PAGE>
Common Shares to be issued to the Optionee or upon the exercise of the Option
as the Board of Directors may, in its sole and absolute discretion, determine
to be reasonable, appropriate or necessary and may require the Optionee to
agree to certain repurchase rights.
SECTION 7.5. USE OF PROCEEDS. The proceeds received by the Company
from the sale of the Common Shares pursuant to the exercise of Options shall
be added to the Company's general funds and used for general corporate
purposes.
SECTION 7.6. RIGHTS AS A SHAREHOLDER. An Optionee shall have no
rights as a shareholder with respect to Common Shares covered by any Option
until the date of issuance by the Company of the applicable stock
certificates. No adjustment shall be made for cash dividends or other rights
not specifically provided for in the Plan for which the record date is prior
to the date of such issuance of the applicable stock certificates.
SECTION 7.7. INFORMATION TO OPTIONEES. The Company shall provide to
each Optionee, immediately prior to the exercise of an Option, a copy of the
most recent annual financial statement of the Company, and copies of all
other information provided to shareholders of the Company at the last most
recent annual meeting held prior to exercise. The Company shall not be
required to provide such information to key employees whose duties in
connection with the Company assure their access to equivalent information.
SECTION 7.8. REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER. The
Company shall have the right upon written notice to an Optionee to buy back
any stock purchased by such Optionee pursuant to the exercise of the Option
upon an Optionee's Separation of Service for any reason on the following
terms and conditions:
(a) The Company's right under this Section shall expire on the earlier
of (i) the effective date of the registration of any of the Common Shares
pursuant to an initial public offering thereof, or (ii) two (2) years after
an Optionee's Separation of Service.
(b) The Company may exercise this right as to all or any portion of the
stock purchased by the Optionee pursuant hereto.
(c) The purchase price of any stock acquired pursuant to the exercise
of such right shall be the fair market value of the shares on the date of
exercise. The fair market value shall be determined by the Board of Directors
in its discretion exercised in good faith; provided, however, that where
there is a public market for the Common Shares, the fair market value per
share shall be the mean of the bid and asked prices (or the closing price per
share if the Common Shares are listed on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") National Market System) of
the Common Shares for the date of grant, as reported in the WALL STREET
JOURNAL (or if not so reported, as otherwise reported by the NASDAQ System)
or, in the event the Common Shares are listed on a stock exchange, the fair
market value per share shall be the closing price on such exchange on the
date of grant of the Option, as reported in the WALL STREET JOURNAL.
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<PAGE>
(d) The payment may be made all in cash or other immediately available
funds or part cash with the balance being paid pursuant to the Company's
promissory note, with a maturity of not more than two (2) years and with
interest on either a fixed or floating basis as elected by the Company at a
rate equal to the prime rate as published by the financial institution
selected by the Company as its primary bank. If the Company elects to
utilize a note in the payment of the amounts due hereunder, payment shall be
made thereunder at least annually.
(e) The closing of the transaction shall occur within ten (10) days
after the Company's notice. At closing, the Optionee shall deliver to the
Company certificates representing all of the shares with respect to which the
Company has exercised its rights hereunder, together with such transfer
documents as may be necessary to transfer good and marketable title to such
shares to the Company, including without limitation, stock powers with
signatures guaranteed and applicable transfer stamps, if any, and shall
provide to the Company such representations and warranties as the Company may
reasonably request with respect to the ownership of such shares and other
material matters. All of such shares shall be transferred to the Company
free and clear of any liens, claims, pledges, or other encumbrances of any
kind.
(f) Until the expiration of the repurchase rights set forth herein, the
Optionee shall not sell, assign, donate, pledge, or otherwise transfer any
interest in any of the Common Shares issued to the Optionee pursuant to the
exercise of the Option, without the prior written consent of the Company.
The Optionee agrees to give to the Company any information regarding the
proposed transfer as the Company may reasonably request. Any attempted
transfer shall be void and of no force or effect, and the Company shall have
no obligation to cause any transfer thereof to be made on its books and
records other than in compliance herewith and applicable law. The Company
will give or withhold its consent in good faith. Any transferee with respect
to whom the Company has given its consent will take such transferred shares
subject to the terms and conditions of the Plan and will execute and deliver
to the Company such confirmations and other documents as the Company might
reasonably require.
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Robert A. Compton
-----------------------------------
Robert A. Compton, Chairman
By: /s/ Donald E. Brown
-----------------------------------
Donald E. Brown, M.D., President
Adopted by Board August 14, 1995
Approved by Shareholders August 14, 1995
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EXHIBIT 10.3
INTERACTIVE INTELLIGENCE, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
1. PLAN PURPOSE. The purpose of the Plan is to promote the long-term
interests of the Company and its shareholders by providing a means for
attracting and retaining officers and key employees of the Company and its
Affiliates.
2. DEFINITIONS. The following definitions are applicable to the Plan:
"Affiliate"--means any "parent corporation" or "subsidiary
corporation" of the Company as such terms are defined in
Section 424(e) and (f), respectively, of the Code and any other
corporation or other entity (including partnerships, limited liability
companies, and joint ventures) controlled by or under common control
with the Company.
"Award"--means, individually or collectively, the grant by the
Committee of an Incentive Stock Option, a Non-Qualified Stock Option,
or Restricted Stock, or any combination thereof, as provided in the
Plan.
"Board or Board of Directors"--means the Board of Directors of
the Company.
"Cashless Exercise"--means, if there is a public market for the
Shares, the payment of the Exercise Price (a) through a "same day
sale" commitment from the Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased in order to pay the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such
stock to forward the Exercise Price directly to the Company, or
(b) through a "margin" commitment from the Participant and an NASD
Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the
amount of the Exercise Price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise Price
directly to the Company.
"Cause"--means, for purposes of determining whether and when a
Participant has incurred a Termination of Continuous Service for
Cause, any act or failure to act which permits the Company to
terminate the written agreement or arrangement between the Participant
and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement or, in the event there is no such agreement or
<PAGE>
arrangement or the agreement or arrangement does not define the
term "cause," then "Cause" for purposes of the Plan shall mean any act
or failure to act deemed to constitute "cause" under the Company's
established and applied practices, policies or guidelines applicable
to the Participant.
"Change in Control"--means each of the events specified in the
following clauses (i) through (iii): (i) any third person, including
a "group" as defined in Section 13(d)(3) of the Exchange Act shall,
after the date of the adoption of the Plan by the Board, first become
the beneficial owner of Shares of the Company with respect to which
25% or more of the total number of votes for the election of the Board
of Directors of the Company may be cast, (ii) as a result of, or in
connection with, any cash tender offer, exchange offer, merger or
other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the
Company shall cease to constitute a majority of the Board of Directors
of the Company or (iii) the stockholders of the Company shall approve
an agreement providing either for a transaction in which the Company
will cease to be an independent publicly owned entity or for a sale or
other disposition of all or substantially all the assets of the
Company; provided, however, that the occurrence of any of such events
shall not be deemed a Change in Control if, prior to such occurrence,
a resolution specifically approving such occurrence as not
constituting a Change in Control for purposes of the Plan shall have
been adopted by at least a majority of the Board of Directors of the
Company.
"Code"--means the Internal Revenue Code of 1986, as amended.
"Committee"--means the Committee referred to in Section 3 hereof.
"Company"--means Interactive Intelligence, Inc., an Indiana
corporation.
"Continuous Service"--means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate.
Service shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Company
or in the case of any transfer between the Company and an Affiliate or
any successor to the Company.
"Disability"--means a mental or physical illness that entitles
the Participant to receive benefits under the long-term disability
plan of the Company or an Affiliate. Notwithstanding the foregoing, a
Disability shall not qualify under the Plan if it is the result, as
determined by the Committee, of (a) an intentionally self-inflicted
injury or an intentionally self-induced sickness, or (b) an injury or
disease contracted, suffered or incurred while participating in a
criminal offense. The determination of a Disability for purposes of
the Plan shall not be construed to be an admission of a disability for
any other purpose.
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<PAGE>
"Employee"--means any person, including an officer or director,
who is employed by the Company or any Affiliate.
"Exchange Act"--means the Securities Exchange Act of 1934, as
amended.
"Exercise Price"--means the price per Share at which the Shares
subject to an Option may be purchased upon exercise of such Option.
"Incentive Stock Option"--means an option to purchase Shares
granted by the Committee pursuant to the terms of the Plan which is
intended to qualify under Section 422 of the Code.
"Market Value"--means the last reported sale price on the date in
question (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred) of one Share on
the principal exchange on which the Shares are listed for trading, or
if the Shares are not listed for trading on any exchange, on the
NASDAQ National Market System or any similar system then in use, or,
if the Shares are not listed on the NASDAQ National Market System, the
mean between the closing high bid and low asked quotations of one
Share on the date in question as reported by NASDAQ or any similar
system then in use, or, if no such quotations are available, the fair
market value on such date of one Share as the Committee shall
determine.
"NASD Dealer"--means a broker-dealer who is a member of the
National Association of Securities Dealers, Inc.
"Non-Qualified Stock Option"--means an option to purchase Shares
granted by the Committee pursuant to the terms of the Plan, which
option is not intended to qualify under Section 422 of the Code.
"Option"--means an Incentive Stock Option or a Non-Qualified
Stock Option.
"Participant"--means any officer, key employee, or consultant of
the Company or any Affiliate or any other individual who is selected
by the Committee to receive an Award.
"Plan"--means the Interactive Intelligence, Inc. 1999 Stock
Option and Incentive Plan, as set forth in this instrument and as
hereafter amended from time to time.
"Reorganization"--means the liquidation or dissolution of the
Company or any merger, consolidation or combination of the Company
(other than a merger, consolidation or combination in which the Company
is the continuing entity and
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<PAGE>
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any
combination thereof).
"Restricted Period"--means the period of time selected by the
Committee for the purpose of determining when restrictions are in
effect under Section 10 hereof with respect to Restricted Stock
awarded under the Plan.
"Restricted Stock"--means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions
referred to in Section 10 hereof, so long as such restrictions are in
effect.
"Retirement"--means the date on which a Participant attains age
sixty-five (65) or such other "normal retirement age" as the Company
shall specify in its written policies.
"Securities Act"--means the Securities Act of 1933, as amended.
"Shares"--means the common stock, $.01 par value, of the Company
and shall include common stock as it may be changed from time to time
as described in Section 11 hereof.
"Termination of Continuous Service"--means the occurrence of any
act or event or any failure to act whether pursuant to an employment
agreement or otherwise that actually or effectively causes or results
in a Participant ceasing, for whatever reason, to be an Employee of
the Company or an Affiliate, including, but not limited to, death,
Disability, Retirement, termination by the Company or an Affiliate of
the Participant's employment with the Company or an Affiliate (whether
with or without Cause), and voluntary resignation or termination by
the Participant of his or her employment with the Company or an
Affiliate. A Termination of Continuous Service also shall occur with
respect to an Employee who is employed by an Affiliate if the
Affiliate shall cease to be an Affiliate of the Company and the
Participant shall not immediately thereafter become an Employee of the
Company or another Affiliate. For purposes of the Plan, transfers or
changes of employment of a Participant between the Company and an
Affiliate (or between Affiliates) shall not be deemed a Termination of
Continuous Service.
3. ADMINISTRATION. The Plan shall be administered by the Committee,
which shall consist of two or more members of the Board, each of whom shall be a
"non-employee director" as provided under Rule 16b-3 of the Exchange Act, and an
"outside director" as provided under Section 162(m) of the Code. Failure by
the Committee to be so comprised shall not result in the cancellation,
termination, expiration, or lapse of any Award. The members of the Committee
shall be appointed by the Board. Except as limited by the express provisions of
the Plan, the Committee shall have sole and complete authority and discretion to
(a) select Participants and grant Awards; (b) determine the number of Shares to
be subject to and the types of Awards generally, as well as
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<PAGE>
to individual Awards granted under the Plan; (c) determine the terms and
conditions upon which Awards shall be granted under the Plan; (d) prescribe
the form and terms of instruments evidencing such grants; (e) establish
procedures and regulations for the administration of the Plan; (f) construe
and interpret the Plan, any Award agreement executed in connection therewith,
and any other agreements or instruments entered into under the Plan; (g) make
all determinations deemed necessary or advisable for the administration of
the Plan; and (h) establish, amend, or waive rules and regulations for the
administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive, and
binding on all persons, and shall be given the maximum deference permitted by
law. Each Award shall be evidenced by a written agreement between the Company
and the Participant and shall contain such terms and conditions established by
the Committee consistent with the provisions of the Plan. Any notice or
document required to be given to or filed with the Committee will be properly
given or filed if hand delivered (and a delivery receipt is received) or mailed
by certified mail, return receipt requested, postage paid, to the Committee at
8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268.
4. PARTICIPANTS. The Committee may select from time to time Participants
from those officers, key employees and consultants of the Company or its
Affiliates and such other individuals who, in the opinion of the Committee, have
the capacity for contributing in a substantial measure to the successful
performance of the Company or its Affiliates. Neither the Plan nor any Award
agreement executed under the Plan shall constitute a contract of employment
between a Participant and the Company or an Affiliate, and participation in the
Plan shall not give a Participant the right to be rehired by or retained in the
employment of the Company or an Affiliate.
5. SHARES SUBJECT TO PLAN. Subject to adjustment by the operation of
Sections 11 and 12 hereof, the maximum number of Shares with respect to which
Awards may be granted under the Plan is Two Million Five Hundred Thousand
(2,500,000) Shares. The number of Shares which may be granted under the Plan to
any Participant during any calendar year of the Plan, under all forms of Awards,
shall not exceed Two Hundred Fifty Thousand (250,000) Shares. The Shares with
respect to which Awards may be made under the Plan may either be authorized and
unissued Shares or unissued Shares heretofore or hereafter reacquired and held
as treasury Shares. With respect to any Option which terminates or is
surrendered for cancellation or with respect to Restricted Stock which is
forfeited, new Awards may be granted under the Plan with respect to the number
of Shares as to which such termination or forfeiture has occurred.
Subject to the limitations set forth in the Plan, the Committee shall have
full authority to determine the number of Shares available for Awards, and in
its discretion may include (without limitation) as available for distribution
any Shares that have ceased to be subject to an Award, any Shares subject to an
Award that have been previously forfeited, and any Shares under an Award that
otherwise terminates without the issuance of Shares being made to a Participant.
-5-
<PAGE>
Shares issued upon exercise of an Award shall be subject to the terms
and conditions specified herein and to such other terms, conditions and
restrictions as the Committee in its discretion may determine or provide in
the Award agreement. The Company shall not be required to issue or deliver
any certificates for Shares or other property prior to (a) the listing of
such Shares on any stock exchange (or other public market) on which the
Shares may then be listed (or regularly traded); and (b) the completion of
any registration or qualification of such Shares under federal, state, local
or other law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable. The Company may cause any
certificate for any Shares to be delivered hereunder to be properly marked
with a legend or other notation reflecting the limitations on transfer of
such Shares as provided in the Plan or as the Committee may otherwise
require. Participants, or any other persons entitled to benefits under the
Plan, must furnish to the Committee such documents, evidence, data, or other
information as the Committee considers necessary or desirable for the purpose
of administering the Plan. The benefits under the Plan for each Participant,
and each other person who is entitled to benefits hereunder, are to be
provided on the condition that he furnish full, true, and complete data,
evidence, or other information, and that he will promptly sign any document
reasonably related to the administration of the Plan requested by the
Committee. No fractional Shares shall be issued under the Plan; rather,
fractional Shares shall be aggregated and then rounded to the next lower
whole Share.
6. GENERAL TERMS AND CONDITIONS OF OPTIONS. The Committee shall have
full and complete authority and discretion, except as expressly limited by the
Plan, to grant Options and to provide the terms and conditions (which need not
be identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (a) the type of Option; (b) the
Exercise Price; (c) the number of Shares subject to, and the expiration date of,
any Option; (d) the manner, time and rate (cumulative or otherwise) of exercise
of such Option; (e) the restrictions, if any, to be placed upon such Option or
upon Shares which may be issued upon exercise of such Option; and (f) such other
terms and conditions consistent with the Plan as the Committee determines in its
discretion. The Committee may, as a condition of granting any Option, require
that a Participant agree to surrender for cancellation one or more Options
previously granted to such Participant.
7. EXERCISE OF OPTIONS.
(a) RESTRICTION ON EXERCISE. Except as provided in Section 14, all
Options granted under the Plan shall be exercisable during the lifetime of
the Participant to whom such Option was granted only by such Participant, and
except as provided in Section 8, no Option may be exercised unless, at the
time the Participant exercises the Option, the Participant has maintained
Continuous Service since the date of the grant of the Option. Except as
provided in Section 13, or as otherwise determined by the Committee, all
Options granted under the Plan shall vest and become exercisable in
accordance with the following schedule:
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<TABLE>
<CAPTION>
PERCENTAGE OF OPTION
SHARES VESTED AND EXERCISABLE
DATE OF VESTING PERCENT VESTED CUMULATIVE
--------------- -------------- ---------
<S> <C> <C>
First anniversary of date of Option grant 25% 25%
Second anniversary of date of Option grant 25% 50%
Third anniversary of date of Option grant 25% 75%
Fourth anniversary of date of Option grant 25% 100%
</TABLE>
(b) METHOD OF EXERCISE. To exercise an Option under the Plan, the
Participant must give written notice to the Company specifying the number of
Shares with respect to which the Participant elects to exercise the Option
together with full payment of the Exercise Price. The date of exercise shall be
the date on which the notice is received by the Company. Payment may be made
either (i) in cash (including check, bank draft, or money order); (ii) by
tendering Shares already owned by the Participant for more than six months and
having a Market Value on the date of exercise equal to the Exercise Price;
(iii) the delivery of cash by a broker-dealer as a Cashless Exercise; or (iv) by
any other means determined by the Committee in its sole discretion.
(c) RELOAD PROVISION. In the event a Participant exercises an Option and
pays all or a portion of the Exercise Price in Shares, in the manner permitted
by Section 7(b), such Participant may (either pursuant to terms of the Award
agreement or pursuant to the sole discretion of the Committee at the time the
Option is exercised) be issued a new Option to purchase additional Shares equal
to the number of Shares surrendered to the Company in such payment. Such new
Option shall (a) have an Exercise Price equal to the Market Value per Share on
the grant date of the new Option, (b) first be exercisable six (6) months from
such grant date, and (c) expire on the same date as the original Option so
exercised by payment of the Exercise Price in Shares.
8. TERMINATION OF OPTIONS. Unless otherwise specifically provided by the
Committee in the Award agreement between the Participant and the Company, each
Option granted under the Plan shall terminate as provided in this Section 8.
(a) MAXIMUM TERM. Unless sooner terminated under the provisions
of this Section 8, Options shall expire on the earlier of the date
specified by the Committee or the expiration of ten (10) years from
the date of grant.
(b) TERMINATION FOR CAUSE. If the Participant incurs a
Termination of Continuous Service for Cause, all rights under any
Options granted to the Participant shall terminate immediately upon the
Participant's Termination of Continuous Service, and the Participant
shall (if the Committee in its sole discretion exercises its rights
under this Section 8(b) within ten (10) days of such Termination of
Continuous Service) repay to the Company within ten (10) days of the
Committee's demand therefor the amount of any gain realized by the
Participant upon any exercise within
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<PAGE>
the 90-day period prior to the Termination of Continuous Service of any
Options granted to such Participant under the Plan.
(c) TERMINATION DUE TO RETIREMENT OR WITHOUT CAUSE OR VOLUNTARY
TERMINATION. If the Continuous Service of a Participant is terminated
by reason of Retirement, terminated by the Company without Cause, or
by Voluntary Termination, the Participant may exercise outstanding
Options to the extent that the Participant was entitled to exercise
the Options at the date of Termination of Continuous Service, but only
within the period of one (1) month immediately succeeding the
Participant's Termination of Continuous Service, and in no event after
the applicable expiration dates of the Options.
(d) TERMINATION DUE TO DEATH OR DISABILITY. In the event of the
Participant's death or Disability, the Participant or the
Participant's beneficiary, as the case may be, may exercise
outstanding Options to the extent that the Participant was entitled to
exercise the Options at the date of Termination of Continuous Service,
but only within the one (1)-year period immediately succeeding the
Participant's Termination of Continuous Service by reason of death or
Disability, and in no event after the applicable expiration date of
the Options. Provided, however, an Incentive Stock Option shall not
be exercisable (i) more than three (3) months after the Participant's
Termination of Continuous Service for any reason other than
Disability, or (ii) more than one (1) year after the Participant's
Termination of Continuous Service by reason of Disability.
(e) COMMITTEE DISCRETION. Notwithstanding the provisions of the
foregoing paragraphs of this Section 8, the Committee may, in its sole
discretion, establish different terms and conditions pertaining to the
effect of the Termination of Continuous Service, to the extent
permitted by applicable federal and state law.
9. INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only
to Participants who are Employees. Any provisions of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
(10) years from the date the Plan is adopted by the Board of Directors of the
Company and no Incentive Stock Option shall be exercisable more than ten (10)
years from the date such Incentive Stock Option is granted; (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted; (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution and shall be exercisable during such Participant's lifetime only by
such Participant; and (iv) no Incentive Stock Option shall be granted which
would permit a Participant to acquire, through the exercise of Incentive Stock
Options in any calendar year, Shares or Shares of any capital stock of the
Company or any Affiliate thereof having an aggregate Market Value (determined as
of the time any Incentive Stock Option is granted) in excess of One Hundred
Thousand Dollars ($100,000). The foregoing limitation shall be determined by
assuming that the Participant will exercise each Incentive Stock Option on the
date that such Option first becomes exercisable.
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Notwithstanding the foregoing, in the case of any Participant who, at the
date of grant, owns stock possessing more than Ten Percent (10%) of the total
combined voting power of all classes of capital stock of the Company or any
Affiliate, the Exercise Price of any Incentive Stock Option shall not be less
than One Hundred Ten Percent (110%) of the Market Value per Share on the date
such Incentive Stock Option is granted and such Incentive Stock Option shall
not be exercisable more than five (5) years from the date such Incentive
Stock Option is granted.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK. The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (g) of this Section 10, to provide such
other terms and conditions (which need not be identical among Participants) in
respect of such Awards as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 10.
(a) RESTRICTED PERIOD. At the time of an Award of Restricted
Stock, the Committee shall establish for each Participant a Restricted
Period during which, or at the expiration of which, the Shares of
Restricted Stock shall vest. The Committee may also restrict or
prohibit the sale, assignment, transfer, pledge, or other encumbrance
of the Shares of Restricted Stock by the Participant during the
Restricted Period. Except for such restrictions, and subject to
paragraphs (c), (d) and (e) of this Section 10 and Section 11 hereof,
the Participant as owner of such Shares shall have all the rights of a
stockholder, including but not limited to the right to receive all
dividends paid on such Shares and the right to vote such Shares.
Except in the case of grants of Restricted Stock which are intended to
qualify as "performance-based compensation" under Section 162(m) of
the Code, the Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall
lapse with respect to any Shares of Restricted Stock prior to the
expiration of the Restricted Period with respect thereto, or to remove
any or all of such restrictions, whenever it may determine that such
action is appropriate by reason of changes in applicable tax or other
laws or other changes in circumstances occurring after the
commencement of such Restricted Period.
(b) LAPSE AND FORFEITURE. Except as provided in Section 13
hereof, if a Participant incurs a Termination of Continuous Service
for any reason (other than death, Disability or Retirement), unless
the Committee shall otherwise determine, all Shares of Restricted
Stock theretofore awarded to such Participant and which at the time of
such Termination of Continuous Service are subject to the restrictions
imposed by paragraph (a) of this Section 10 shall upon such
Termination of Continuous Service be forfeited and returned to the
Company. If a Participant incurs a Termination of Continuous Service
by reason of death or Disability, then the restrictions with respect
to the Ratable Portion of the Shares of Restricted Stock shall lapse
and such Shares shall be free of restrictions and shall not be
forfeited. The Ratable Portion shall be determined with respect to
each separate Award of Restricted Stock issued and shall be equal to
(i) the number of Shares of Restricted
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Stock awarded to the Participant multiplied by the portion of the
Restricted Period that expired at the date of the Participant's death or
Disability reduced by (ii) the number of Shares of Restricted Stock
awarded with respect to which the restrictions had lapsed as of the date
of the death or Disability of the Participant. Likewise, on the date
set forth in the applicable Award agreement, the Restricted Stock for
which restrictions have not lapsed by the last day of the Restricted
Period shall revert to the Company and thereafter shall be available for
the grant of new Awards under the Plan.
(c) LEGEND ON CERTIFICATES. Each certificate issued in respect
of Shares of Restricted Stock awarded under the Plan shall be
registered in the name of the Participant and deposited by the
Participant, together with a stock power endorsed in blank, with the
Company and shall bear the following (or a similar) legend:
"The sale, pledge or other transfer of the shares of stock
represented by this certificate, whether voluntary,
involuntary or by operation of law is subject to the terms
and conditions (including forfeiture) contained in the
Interactive Intelligence, Inc. 1999 Stock Option and
Incentive Plan and an Award agreement entered into between
the registered owner and Interactive Intelligence, Inc.
Copies of such Plan and Award agreement are on file in the
office of the Secretary of Interactive Intelligence, Inc."
(d) AWARD AGREEMENT. At the time of an Award of Shares of
Restricted Stock, the Participant shall enter into an Agreement with
the Company in a form specified by the Committee, agreeing to the
terms and conditions of the Award, and to such other matters as the
Committee shall in its sole discretion determine.
(e) DIVIDEND RIGHTS. At the time of an Award of Shares of
Restricted Stock, the Committee may, in its discretion, determine that
the payment to the Participant of dividends declared or paid on such
Shares by the Company or a specified portion thereof, shall be
deferred until the earlier to occur of (i) the lapsing of the
restrictions imposed under paragraph (a) of this Section 10, or
(ii) the forfeiture of such Shares under paragraph (b) of this
Section 10, and shall be held by the Company for the account of the
Participant until such time. In the event of such deferral, there
shall be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at
a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends, together with interest accrued thereon
as aforesaid, shall be made upon the earlier to occur of the events
specified in (i) and (ii) of the immediately preceding sentence.
(f) LAPSE OF RESTRICTIONS. At the expiration of the
restrictions imposed by paragraph (a) of this Section 10, the Company
shall redeliver to the Participant (or where the relevant provision of
paragraph (b) of this Section 10 applies in the case
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of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to
paragraph (c) of this Section 10 and the Shares represented by such
certificate(s) shall be free of the restrictions referred to in
paragraph (a) of this Section 10. Notwithstanding any other provision
of this Section 10 and Section 12 to the contrary, in the case of grants
of Restricted Stock that are intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, no Shares of Restricted
Stock shall become vested unless the performance goals with respect to
such Restricted Stock shall have been satisfied. If the vesting of
Shares of Restricted Stock is accelerated after the applicable
performance goals have been met, the amount of Restricted Stock
distributed shall be discounted by the Committee to reasonably reflect
the time value of money in connection with such early vesting.
(g) SECTION 162(m) PERFORMANCE RESTRICTIONS. Notwithstanding
any other provision of this Section 10 to the contrary, for purposes
of qualifying grants of Restricted Stock as "performance-based
compensation" under Section 162(m) of the Code, the Committee shall
establish restrictions based upon the achievement of performance
goals. The specific targets under the performance goals that must be
satisfied for the Restricted Period to lapse or terminate shall be set
by the Committee on or before the latest date permissible to enable
the Restricted Stock to qualify as "performance-based compensation"
under Section 162(m) of the Code. The business criteria for
performance goals under this Section 10 shall be one or more of the
return on equity, total revenues, net earnings, or earnings per share
of the Company as selected by the Committee on, where applicable, a
consolidated basis, for a calendar year calculated in accordance with
generally accepted accounting principles consistently applied. In
granting Restricted Stock that is intended to qualify under
Section 162(m), the Committee shall follow any procedures determined
by it in its sole discretion from time to time to be necessary,
advisable or appropriate to ensure qualification of the Restricted
Stock under Section 162(m) of the Code.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Shares by virtue of any stock dividends, stock splits,
recapitalizations, or reclassifications or any acquisition, merger,
consolidation, share exchange, tender offer, or other combination involving the
Company that does not constitute a Change in Control but that results in the
acquisition of a subsidiary by the Company, or in the event that other stock
shall be substituted for the Shares as the result of any merger, consolidation,
share exchange, or reorganization or any similar transaction which constitutes a
Change in Control of the Company, the Committee shall correspondingly adjust
(a) the number, kind, and class of Shares which may be delivered under the Plan;
(b) the number, kind, class, and price of Shares subject to outstanding Awards
(except for mergers or other combinations in which the Company is the surviving
entity); and (c) the numerical limits of Section 5, all in such manner as the
Committee in its sole discretion shall determine to be advisable or appropriate
to prevent the dilution or diminution of such Awards; provided, however, in no
event shall the One Hundred Thousand Dollar ($100,000) limit on Incentive Stock
Options contained in
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Section 9 be affected by an adjustment under this Section 11. The
Committee's determination in this respect shall be final and conclusive.
12. EFFECT OF REORGANIZATION. Awards will be affected by a Reorganization
as follows:
(a) If the Reorganization is a dissolution or liquidation of the
Company then (i) the restrictions of Section 10(a) on Shares of
Restricted Stock shall lapse, and (ii) each outstanding Option shall
terminate, but each Participant to whom the Option was granted shall
have the right, immediately prior to such dissolution or liquidation
to exercise his Option in full, notwithstanding the provisions of
Section 9, and the Company shall notify each Participant of such right
within a reasonable period of time prior to any such dissolution or
liquidation.
(b) If the Reorganization is a merger or consolidation, other
than a Change in Control subject to Section 13 of this Agreement, upon
the effective date of such Reorganization (i) each Optionee shall be
entitled, upon exercise of his Option in accordance with all of the
terms and conditions of the Plan, to receive in lieu of Shares, Shares
of such stock or other securities or consideration as the holders of
Shares shall be entitled to receive pursuant to the terms of the
Reorganization; and (ii) each holder of Restricted Stock shall receive
Shares of such stock or other securities as the holders of Shares
received which shall be subject to the restrictions set forth in
Section 10(a) unless the Committee accelerates the lapse of such
restrictions and the certificate(s) or other instruments representing
or evidencing such Shares or securities shall be legended and
deposited with the Company in the manner provided in Section 10
hereof.
The adjustments contained in this Section 12 and the manner of application
of such provisions shall be determined solely by the Committee.
13. EFFECT OF CHANGE IN CONTROL. If the Continuous Service of any
Participant of the Company or any Affiliate is involuntarily terminated, for
whatever reason, at any time within twelve (12) months after a Change in
Control, unless the Committee shall have otherwise provided in the agreement
referred to in paragraph (d) of Section 10 hereof, any Restricted Period with
respect to Restricted Stock theretofore awarded to such Participant shall lapse
upon such termination and all Shares awarded as Restricted Stock shall become
fully vested in the Participant to whom such Shares were awarded. If a Change
in Control shall occur, unless the Committee shall have otherwise provided in
the instrument evidencing the grant of an Option, all Options theretofore
granted and not fully exercisable shall (except as otherwise provided in
Section 9) become exercisable in full upon the happening of such Termination of
Continuous Service and shall remain so exercisable in accordance with their
terms; provided, however, that no Option which has previously been exercised or
otherwise terminated shall become exercisable.
14. ASSIGNMENTS AND TRANSFERS. Except as otherwise determined by the
Committee, no Award nor any right or interest of a Participant under the Plan in
any instrument evidencing any
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Award under the Plan may be assigned, encumbered, or transferred except, in
the event of the death of a Participant, by will or the laws of descent and
distribution.
15. EMPLOYEE RIGHTS UNDER PLAN. No officer, Employee or other person
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no officer, Employee or other person
shall have any claim or right to be granted an Award under the Plan or under any
other incentive or similar plan of the Company or any Affiliate. Neither the
Plan nor any action taken thereunder shall be construed as giving any Employee
any right to be retained in the employ of the Company or any Affiliate.
16. DELIVERY AND REGISTRATION OF STOCK. Except with respect to Restricted
Stock as provided in Section 10, no person shall have any rights of a
shareholder (including, but not limited to, voting and dividend rights) as to
Shares subject to an Option until, after proper exercise of the Option or other
action as may be required by the Committee in its discretion, such Shares shall
have been recorded on the Company's official shareholder records (or the records
of its transfer agents or registrars) as having been issued and transferred to
the Participant. Upon exercise of the Option or any portion thereof, the
Company will have a reasonable period in which to issue and transfer the Shares
to the Participant, and the Participant will not be treated as a shareholder for
any purpose whatsoever prior to such issuance and transfer. No payment or
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such Shares are recorded as issued and transferred in
the Company's official shareholder records (or the records of its transfer
agents or registrars), except as provided herein or in an Award agreement. The
Company's obligation to deliver Shares with respect to an Award shall, if the
Committee so determines, be conditioned upon the receipt of a representation as
to the investment intention of the Participant to whom such Shares are to be
delivered, in such form as the Company shall determine to be necessary or
advisable to comply with the provisions of the Securities Act or any other
applicable federal or state securities legislation. It may be provided that any
representation requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such representation under
the Securities Act or other securities legislation. The Company shall not be
required to deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange or system on which Shares may then be
listed, and (ii) the completion of such registration or other qualification of
such Shares under any state or federal law, rule, or regulation, as the Company
shall determine to be necessary or advisable.
17. WITHHOLDING TAX. Upon the termination of the Restricted Period with
respect to any Shares of Restricted Stock or the issuance of Shares pursuant to
the exercise of any Option (or at any such earlier time, if any, that an
election is made by the Participant under Section 83(b) of the Code, or any
successor provision thereto, to include the value of such Shares in income), the
Company may, in lieu of requiring the Participant or other person receiving such
Shares, to pay the Company the amount of any taxes which the Company is required
to withhold with respect to such Shares, retain a sufficient number of Shares
held by it to cover the amount required to be withheld. The Company shall have
the right to deduct from all dividends paid with respect to Shares of Restricted
Stock the amount of any taxes which the Company is required to withhold with
respect to such dividend payments.
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<PAGE>
Where a Participant or other person is entitled to receive Shares pursuant
to the exercise of an Option pursuant to the Plan, the Company may, in lieu of
requiring the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
retain a number of such Shares sufficient to cover the amount required to be
withheld.
18. LOANS.
(a) LOANS AUTHORIZED. The Company may make loans to a Participant in
connection with Restricted Stock or the exercise of Options subject to the
following terms and conditions and such other terms and conditions not
inconsistent with the Plan, including the rate of interest, if any, as the
Company shall impose from time to time.
(b) LIMITATIONS ON LOANS. No loan made under the Plan shall exceed
(i) with respect to Options, the sum of (A) the aggregate option price payable
upon exercise of the Option in relation to which the loan is made, plus (B) the
amount of the reasonably estimated income taxes payable by the Participant, and
(ii) with respect to Restricted Stock, the amount of reasonably estimated income
taxes payable by the Participant. In no event may any such loan exceed the
Market Value of the related Shares at the time of the loan.
(c) MINIMUM TERMS. No loan shall have an initial term exceeding three (3)
years; provided, that loans under the Plan shall be renewable at the discretion
of the Committee; and, provided, further, that the indebtedness under each loan
shall become due and payable on a date no later than (i) one year after
Termination of Continuous Service by the Participant due to death, Disability or
Retirement, or (ii) the day of Termination of Continuous Service by the
Participant for any reason other than death, Disability or Retirement.
(d) PAYMENT OF LOANS. Loans under the Plan may be satisfied by the
Participant, as determined by the Committee, in cash or, with the consent of the
Committee, in whole or in part in Shares at Market Value on the date of such
payment.
(e) COLLATERAL. When a loan shall have been made, Shares having an
aggregate Market Value equal to the amount of the loan may, in the discretion of
the Committee, be required to be pledged by the Participant to the Company as
security for payment of the unpaid balance of the loan. Portions of such Shares
may, in the discretion of the Committee, be released from time to time as it
deems not to be needed as security.
(f) LEGAL REQUIREMENTS. Every loan shall meet all applicable laws,
regulations, and rules of the Federal Reserve Board and any other governmental
agency having jurisdiction.
19. AMENDMENT, SUSPENSION OR TERMINATION. The Board may supplement,
amend, alter, or discontinue the Plan in its sole discretion at any time and
from time to time, but no supplement, amendment, alteration, or discontinuation
shall be made which would impair the rights of a Participant under an Award
theretofore granted without the Participant's consent, except that any
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supplement, amendment, alteration, or discontinuation may be made to (a) avoid a
material charge or expense to the Company or an Affiliate; (b) cause the Plan to
comply with applicable law; or (c) permit the Company or an Affiliate to claim a
tax deduction under applicable law. In addition, subject to the provisions of
this Section 19, the Board, in its sole discretion at any time and from time to
time, may supplement, amend, alter, or discontinue the Plan without the approval
of the Company's shareholders (a) to the extent such approval is not required by
applicable law or the terms of a written agreement; and (b) so long as any such
amendment or alteration does not increase the number of Shares subject to the
Plan (other than pursuant to Section 11) or increase the maximum number of
Options or Shares of Restricted Stock that the Committee may award to an
individual Participant under the Plan. The Committee may supplement, amend,
alter, or discontinue the terms of any Award theretofore granted, prospectively
or retroactively, on the same conditions and limitations (and exceptions to
limitations) as apply to the Board under the foregoing provisions of this
Section 19, and further subject to any approval or limitations the Board may
impose. Notwithstanding any provision of the Plan to the contrary, if any
right, Award or Award agreement under the Plan would cause a transaction of or
acquisition by the Company to be ineligible for "pooling of interest" accounting
treatment that would, but for such right hereunder, otherwise be eligible for
such accounting treatment, the Committee may amend, modify, or adjust the right,
the Award or the Award agreement of a Participant (without the prior consent,
approval, or authorization of the Participant) so that pooling of interest
accounting treatment shall be available with respect to such transaction or
acquisition even if any such amendment, modification, or adjustment would be
detrimental to or impair the rights of a Participant under the Plan.
20. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective upon
its approval by the holders of at least a majority of the outstanding Shares at
a meeting at which approval of the Plan is considered and shall continue in
effect for a term of ten (10) years from the date of adoption unless sooner
terminated under Section 19 hereof.
21. LEGAL CONSTRUCTION.
(a) GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
(b) SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had never been included herein.
(c) REQUIREMENTS OF LAW. The grant of Awards and the issuance of Shares
under the Plan shall be subject to all applicable statutes, laws, rules, and
regulations and to such approvals and requirements as may be required from time
to time by any governmental authorities or any securities exchange or market on
which the Shares are then listed or traded.
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<PAGE>
(d) GOVERNING LAW. Except to the extent preempted by the Federal laws of
the United States of America, the Plan and all Award agreements shall be
construed in accordance with and governed by the laws of the State of Indiana
without giving effect to any choice or conflict of law provisions, principles or
rules (whether of the State of Indiana or any other jurisdiction) that would
cause the application of any laws of any jurisdiction other than the State of
Indiana.
(e) HEADINGS. The descriptive headings, sections, and paragraphs of the
Plan are provided herein for convenience of reference only and shall not serve
as a basis for interpretation or construction of the Plan.
(f) MISTAKE OF FACT. Any mistake of fact or misstatement of facts shall
be corrected when it becomes known by a proper adjustment to an Award or Award
agreement.
(g) EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document, or other information which the person relying
thereon considers pertinent and reliable, and signed, made, or presented by the
proper party or parties.
22. NO EFFECT ON EMPLOYMENT OR SERVICE. Neither the Plan nor the grant of
any Awards or the execution of any Award agreement shall confer upon any
Participant any right to continued employment by the Company or shall interfere
with or limit in any way the right of the Company to terminate any Participant's
employment or service at any time, with or without Cause. Employment with the
Company and its Affiliates is on an at-will basis only, unless otherwise
provided by a written employment or severance agreement, if any, between the
Participant and the Company or an Affiliate, as the case may be. If there is
any conflict between the provisions of the Plan and an employment or severance
agreement between a Participant and the Company, the provisions of such
employment or severance agreement shall control, including, but not limited to,
the vesting and non-forfeiture of any Awards.
23. NO COMPANY OBLIGATION. Unless required by applicable law, the
Company, an Affiliate, the Board of Directors, and the Committee shall not have
any duty or obligation to affirmatively disclose material information to a
record or beneficial holder of Shares or an Award, and such holder shall have no
right to be advised of any material information regarding the Company or any
Affiliate at any time prior to, upon, or in connection with the receipt,
exercise, or distribution of an Award. In addition, the Company, an Affiliate,
the Board of Directors, the Committee, and any attorneys, accountants, advisors,
or agents for any of the foregoing shall not provide any advice, counsel, or
recommendation to any Participant with respect to, without limitation, any
Award, any exercise of an Option, or any tax consequences relating to an Award.
24. PARTICIPATION. No Employee or consultant shall have the right to be
selected to receive an Award under the Plan or, having been selected, to be
selected to receive a future Award. Participation in the Plan will not give any
Participant any right or claim to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of the Plan.
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25. LIABILITY AND INDEMNIFICATION. No member of the Board, the
Committee, or any officer or Employee of the Company or any Affiliate shall
be personally liable for any action, failure to act, decision, or
determination made in good faith in connection with the Plan. By
participating in the Plan, each Participant agrees to release and hold
harmless the Company and its Affiliates (and their respective directors,
officers, and employees) and the Committee from and against any tax
liability, including, but not limited to, interest and penalties, incurred by
the Participant in connection with his receipt of Awards under the Plan and
the payment and exercise thereof. Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from (a) any loss, cost, liability, or
expense (including, but not limited to, attorneys' fees) that may be imposed
upon or reasonably incurred by him in connection with or resulting from any
claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the
Plan or any Award agreement; and (b) any and all amounts paid by him in
settlement thereof, with the Company's prior written approval, or paid by him
in satisfaction of any judgment in any such claim, action, suit, or
proceeding against him; provided, however, that he shall give the Company an
opportunity, at the Company's expense, to handle and defend such claim,
action, suit, or proceeding before he undertakes to handle and defend the
same on his own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-Laws, by
contract, as a matter of law, or otherwise, or under any power that the
Company may have to indemnify them or hold them harmless.
26. SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether or not the existence of such successor is the result of a
Change in Control. The Company shall not, and shall not permit its Affiliates
to, recommend, facilitate, agree, or consent to a transaction or series of
transactions which would result in a Change in Control of the Company unless and
until the person or persons or entity or entities acquiring control of the
Company as a result of such Change in Control agree(s) to be bound by the terms
of the Plan insofar as it pertains to Awards theretofore granted and agrees to
assume and perform the obligations of the Company and its successor.
27. BENEFICIARY DESIGNATIONS. Any Participant may designate, on such
forms as may be provided by the Committee for such purpose, a beneficiary to
whom any vested but unpaid Award shall be paid in the event of the Participant's
death. Each such designation shall revoke all prior designations by the
Participant and shall be effective only if given in a form and manner acceptable
to the Committee. In the absence of any such designation, any vested benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate and, subject to the terms of the Plan and of the applicable Award
agreement, any unexercised vested Award may be exercised by the administrator or
executor of the Participant's estate.
28. MITIGATION OF EXCISE TAX. Subject to any other agreement providing
for the Company's indemnification of the tax liability described herein, if any
payment or right accruing to a Participant under the Plan (without the
application of this Section 28), either alone or together with other payments or
rights accruing to the Participant from the Company or an Affiliate ("Total
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Payments"), would constitute a "parachute payment," as defined in Section 280G
of the Code and regulations thereunder, such payment or right shall be reduced
to the largest amount or greatest right that will result in no portion of the
amount payable or right accruing under the Plan being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction under
Section 280G of the Code. The determination of whether any reduction in the
rights or payments under the Plan is to apply shall be made by the Committee in
good faith after consultation with the Participant, and such determination shall
be conclusive and binding on the Participant. The Participant shall cooperate
in good faith with the Committee in making such determination and providing the
necessary information for this purpose.
29. FUNDING. Benefits payable under the Plan to any person will be paid
by the Company from its general assets. Shares to be distributed hereunder
shall be issued directly by the Company from its authorized but unissued Shares
or acquired by the Company on the open market, or a combination thereof.
Neither the Company nor any of its Affiliates shall be required to segregate on
their books or otherwise establish any funding procedure for any amount to be
used for the payment of benefits under the Plan. The Company or any of its
Affiliates may, however, in their sole discretion, set funds aside in
investments to meet any anticipated obligations under the Plan. Any such action
or set-aside shall not be deemed to create a trust of any kind between the
Company or any of its Affiliates and any Participant or other person entitled to
benefits under the Plan or to constitute the funding of any Plan benefits.
Consequently, any person entitled to a payment under the Plan will have no
rights greater than the rights of any other unsecured general creditor of the
Company or its Affiliates.
ADOPTED BY THE BOARD OF DIRECTORS OF INTERACTIVE
INTELLIGENCE, INC. AS OF APRIL 14, 1999
ADOPTED BY THE SHAREHOLDERS OF INTERACTIVE
INTELLIGENCE, INC. AS OF APRIL 16, 1999
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EXHIBIT 10.4
INTERACTIVE INTELLIGENCE, INC.
OUTSIDE DIRECTORS STOCK OPTION PLAN
1. PLAN PURPOSE. The purpose of the Plan is to advance the
interests of the Company and its stockholders by encouraging increased Common
Stock ownership by members of the Board who are not employees of the Company
or any of its Subsidiaries, in order to promote long-term stockholder value
through the directors' continuing ownership of the Common Stock.
2. DEFINITIONS. Unless the context clearly indicates otherwise, the
following terms, when used in the Plan, shall have the meanings set forth below.
"Board" means the Board of Directors of the Company, as it may from
time to time be constituted.
"Company" means Interactive Intelligence, Inc., and any successor by
merger or consolidation.
"Eligible Director" means a member of the Board who is not at the time
of receipt of an Option an employee of the Company or any of its
Subsidiaries.
"Grantee" means an Eligible Director who has been granted an Option.
"Market Value" means the last sale price on the date in question (or,
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) of one Share on the principal
exchange on which the Shares are listed for trading, or if the Shares
are not listed for trading on any exchange, on the NASDAQ National
Market System or any similar system then in use, or, if the Shares are
not listed on the NASDAQ National Market System, the mean between the
closing high bid and low asked quotations of one Share on the date in
question as reported by NASDAQ or any similar system then in use, or,
if no such quotations are available, the fair market value on such
date of one Share as the Board shall determine.
"Option" means a non-qualified option to purchase Shares.
"Plan" means the Interactive Intelligence, Inc. Outside Directors
Stock Option Plan, as set forth herein and as amended from time to
time.
"Reorganization" has the meaning ascribed thereto in Section 8 hereof.
"Shares" means shares of the common stock, $.01 par value, of the
Company, or in the singular means one of the Shares.
<PAGE>
"Subsidiary" means any corporation at least 50% of whose outstanding
voting stock is owned, directly or indirectly, by the Company.
3. ADMINISTRATION. The Plan shall be administered by the Board.
The Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreements embodying Options. The Board shall,
subject to the provisions of the Plan, grant Options pursuant to the Plan and
shall have the power to construe the Plan, to determine all questions arising
thereunder, and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decision of the Board
in the administration of the Plan, as described herein, shall be final and
conclusive.
4. PARTICIPATION. Each Eligible Director shall be eligible to
receive Option grants in accordance with Sections 6, 7, 8 and 9 herein.
5. SHARES SUBJECT TO PLAN. Subject to adjustment by the operation
of Section 8 herein, the maximum number of Shares with respect to which Options
may be granted under the Plan is 100,000 Shares. The Shares with respect to
which grants may be made under the Plan may either be authorized and unissued
shares or unissued shares heretofore or hereafter reacquired and held as
treasury shares. With respect to any Option which terminates or is surrendered
for cancellation, new grants may be made under the Plan with respect to the
number of Shares as to which such termination or forfeiture has occurred.
6. GRANTS UNDER PLAN. Options may be granted under the Plan,
subject to the terms, conditions and restrictions specified in Sections 7, 8 and
9 herein. Shares of Common Stock that are the subject of an Option but not
purchased prior the expiration of the term of the Option, shall thereafter be
considered unissued for purposes of the maximum number of Shares that may be
issued under the Plan, and may again be the subject of Option grants under the
Plan. If at any time, the Shares remaining available for Option grants are not
sufficient to make all Option grants then required to be made under the Plan, no
Option grants shall be made. An Eligible Director to whom an Option is provided
to be granted or is granted under the Plan (and any person succeeding to such an
Eligible Director's right pursuant to the Plan), shall have no rights as a
stockholder with respect to any shares of Common Stock issuable pursuant to any
such Option until such Option is exercised. Except as provided in Sections 8
and 9 herein, no adjustment shall be made for dividends, distributions or other
rights (whether ordinary or extraordinary, and whether in cash, securities or
other property) for which the record date is prior to the date an Option is
exercised. Except as expressly provided for in the Plan, no Eligible Director
or other person shall have any claim or right to be granted an Option. Neither
the Plan nor any action taken hereunder shall be construed as giving any
Eligible Director any right to be retained in the service of the Company.
7. OPTION GRANTS. On June 1 of each year, commencing June 1, 2000,
each Eligible Director on such date shall be automatically granted an Option to
purchase 1,000 Shares
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(subject to adjustment as provided in Section 8). Each Option shall be
evidenced by an agreement in such form as the Board shall prescribe from time
to time in accordance with the Plan and shall comply with the following terms
and conditions and such additional terms and conditions not inconsistent with
the Plan as may from time to time be prescribed by the Board.
(a) The Option exercise price per share shall be equal to the
Market Value of one Share on the date the Option is granted.
(b) The Option shall not be transferable by the Grantee
otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his lifetime only by him.
(c) The Option shall not be exercisable before the expiration of
six months from the date it is granted or after the expiration of ten
years from the date it is granted.
(d) Payment of the Option exercise price shall be made at the
time the Option is exercised, and shall be made in United States
dollars by cash or check or other form of consideration acceptable to
the Board.
(e) An Option shall not be exercisable unless the person
exercising the Option has been, at all times during the period
beginning with the date of grant of the Option and ending on the date
of such exercise, in continuous service on the Board, except that
(i) if any Grantee of an Option shall die or become
permanently disabled or shall retire with the consent of the
Board, holding an Option that has not expired and has not
been fully exercised, he or his executor, administrators,
heirs or distributees, as the case may be, may, at any time
within one year after the date of such event (but in no
event after the Option has expired under the provisions of
paragraph 7(c)), exercise the Option with respect to any
Shares as to which the Grantee could have exercised the
Option at the time of his death, disability, or retirement;
or
(ii) if a Grantee shall cease to serve as a director of
the Company for any reason other than those set forth in
7(e)(i) above, while holding an Option that has not expired
and has not been fully exercised, the Grantee, at any time
within three months of the date he ceased to be such an
Eligible Director (but in no event after the Option has
expired under the provisions of paragraph 7(c)), may
exercise the Option with respect to any Shares as to which
he could have exercised the Option on the date he ceased to
be such an Eligible Director.
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<PAGE>
(f) Each Grantee shall pay to the Company, or make arrangements
satisfactory to the Board regarding the payment of, any federal, state
or local taxes of any kind required by law to be withheld with respect
to the Shares as to which an Option is being exercised.
8. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in
the outstanding Shares by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares or other similar event ("Reorganization"), the number or
kind of Shares that may be issued under the Plan pursuant to Sections 6 and 7
herein, the number or kind of Shares subject to any outstanding Option, and
the Option price per Share under any outstanding Option, shall be
automatically adjusted so that the proportionate interest of the Eligible
Directors or of the Grantee shall be maintained as before the occurrence of
such event. Any adjustment in outstanding Options shall be made without
change in the total Option exercise price applicable to the unexercised
portion of such Options and with a corresponding adjustment in the Option
exercise price per Share. Any adjustment permitted by this Section 8 shall
be conclusive and binding for all purposes of the Plan. The Board's
determination in this respect shall be final and conclusive.
9. EFFECT OF REORGANIZATION. Awards will be affected by a
Reorganization as follows:
(a) If the Reorganization is a dissolution or liquidation of the Company
then each outstanding Option shall terminate, but each Grantee shall have the
right, immediately prior to such dissolution or liquidation to exercise his
Option in full, notwithstanding the provisions of Section 7(c), and the Company
shall notify each Grantee of such right within a reasonable period of time prior
to any such dissolution or liquidation.
(b) If the Reorganization is a merger or consolidation, each Grantee shall
be entitled, upon exercise of his Option in accordance with all of the terms and
conditions of the Plan (other than the provisions of Section 7(c) which shall
not apply in such circumstances), to receive in lieu of Shares, shares of such
stock or other securities or consideration as the holders of Shares shall be
entitled to receive pursuant to the terms of the Reorganization.
(c) The adjustments contained in this Section 9 and the manner of
application of such provisions shall be determined solely by the Board.
10. MISCELLANEOUS PROVISIONS. (a) An Eligible Director's rights and
interests under the Plan may not be assigned or transferred in whole or in part
either directly or by operation of law or otherwise (except, in the event of a
Grantee's death, by will or the laws of descent and distribution), including,
but not by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no such right or interest of any Eligible
Director in the Plan shall be subject to any obligation or liability of such
Eligible Director.
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<PAGE>
(b) If the Shares that are the subject of an Option are not
registered under the Securities Act of 1933, as amended, pursuant to an
effective registration statement, the Grantee, if the Board shall deem it
advisable, may be required to represent and agree in writing (i) that any
Shares acquired by such Grantee pursuant to the Plan will not be sold except
pursuant to an exemption from registration under said Act and (ii) that such
Grantee is acquiring such Shares for his own account and not with a view to
the distribution thereof. No Shares shall be issued hereunder unless counsel
for the Company shall be satisfied that such issuance will be in compliance
with applicable federal, state and other securities laws. No person shall
have any rights of a shareholder (including, but not limited to, voting and
dividend rights) as to Shares subject to an Option until, after proper
exercise of the Option or other action as may be required by the Board in its
discretion, such Shares shall have been recorded on the Company's official
shareholder records (or the records of its transfer agents or registrars) as
having been issued and transferred to the Grantee. Upon exercise of the
Option or any portion thereof, the Company will have a reasonable period in
which to issue and transfer the Shares to the Grantee, and the Grantee will
not be treated as a shareholder for any purpose whatsoever prior to such
issuance and transfer. No payment or adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date such
Shares are recorded as issued and transferred in the Company's official
shareholder records (or the records of its transfer agents or registrars),
except as provided herein.
(c) By accepting any Options under the Plan, each Grantee and each
person claiming under or through him shall be conclusively deemed to have
indicated his acceptance and ratification of and consent to, the terms and
conditions of the Plan and any action taken under the Plan by the Company or
the Board.
11. AMENDMENT. The Board may at any time and from time to time and
in any respect amend or modify this Plan; provided, however, that any amendments
requiring shareholder approval under any applicable rule of the Securities and
Exchange Commission, any stock exchange, NASDAQ National Market System or other
regulatory body shall be subject to approval by the shareholders of the Company
in the manner required by such rule.
12. TERMINATION. The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) Upon the adoption of a resolution of the Board terminating
the Plan; or
(b) Upon the award or the purchase upon exercise of Options of
all the Shares provided to be the subject of Options under Sections 6
and 7, as adjusted pursuant to Section 8.
No termination of the Plan shall materially and adversely affect any of the
rights or obligations of any Grantee, without his consent, under any Option
theretofore granted under the Plan.
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<PAGE>
13. EFFECTIVE DATE. The Plan shall be effective upon its approval by
the holders of at least a majority of the outstanding Shares at a meeting at
which approval of the Plan is considered and shall continue in effect until
terminated under Section 12 hereof.
Adopted by the Board of Directors of
Interactive Intelligence, Inc. as of April 14, 1999
Adopted by the Shareholders of
Interactive Intelligence, Inc. on April 16, 1999
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<PAGE>
EXHIBIT 10.5
INTERACTIVE INTELLIGENCE, INC.
SUBSCRIPTION AGREEMENT
FOR
SHARES OF COMMON STOCK
THIS SUBSCRIPTION AGREEMENT is made by and between Interactive
Intelligence, Inc., an Indiana corporation (the "Company"), and Dialogic
Investment Corporation, a New Jersey corporation (the "Subscriber").
1. SUBSCRIPTION AND AMOUNT. The Company proposes to authorize, issue and
sell, and the Subscriber hereby subscribes for, Four Hundred Thousand (400,000)
shares ("Shares") of the Common Stock ("Stock") of the Company at a subscription
price of Twelve and 50/100 Dollars ($12.50) per share, for an aggregate
subscription price of Five Million and No/100 Dollars ($5,000,000.00), on the
terms and conditions set forth herein. Concurrently with the execution hereof,
the Company is delivering to the Subscriber certificates representing the
Shares, receipt of which is acknowledged by the Subscriber. Concurrently with
the execution hereof, the Subscriber is delivering to the Company by wire
transfer or by its certified or cashier's check in the amount of Five Million
Dollars ($5,000,000), in payment of the total purchase price of the Shares,
receipt of which is acknowledged by the Company.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. The Subscriber hereby
represents and warrants to the Company and its officers, agents, directors,
counsel and affiliates (collectively, "Representatives"), as follows:
(a) The Subscriber understands the Shares are being issued without
registration under the Securities Act of 1933, as amended (the "Act") or under
any state securities laws, including those of the State of Indiana, in reliance
upon various exemptions from the registration requirements of the Act, including
the private offering exemptions contained in Section 4(2) of the Act, and
Regulation D promulgated thereunder, and such state laws, and that such reliance
is based in part on the information herein supplied. For the foregoing reasons,
and to induce the Company to issue and deliver the Shares to the Subscriber, the
Subscriber makes the representations and warranties contained herein to the
Company and each of the Representatives.
(b) The purchase of the Shares will be solely for the account of the
Subscriber with its own funds, and not for the account of any other person, and
for investment purposes only, and not with a view toward resale, assignment,
fractionalization, or distribution thereof.
(c) The Subscriber understands that (i) there are restrictions on the
transferability of the Shares; (ii) the Subscriber must bear the economic risk
of an investment in the Shares for an indefinite period of time because the
Shares have not been registered under the Act and, therefore, cannot be sold
unless they are subsequently registered under the Act or an exemption from such
registration is available; (iii) the Subscriber has no right to compel
registration under the Act and the Company has no present intention of
registering the Shares under the Act or to take the actions required to
<PAGE>
make Rule 144 under the Act available for resale of the Shares; and (iv)
under no circumstances will the Subscriber be able to sell, transfer, assign,
hypothecate or pledge all or any portion of the Shares without the prior
written consent of the Company.
(d) The Subscriber is a person who is able to bear the economic risk of an
investment in the Shares. In making this statement, consideration has been
given to whether the Subscriber can afford to hold the investment for an
indefinite period of time and whether it can afford a complete loss of its
investment.
(e) Except as set forth in the Due Diligence Information Requested by the
Subscriber ("Company Materials"), a copy of which the Subscriber acknowledges
it has received and carefully reviewed, no representations and warranties, oral
or otherwise, have been made to the Subscriber by the Company, any of the
Representatives or any agent, employee or affiliate of the Company, or any other
person, whether or not associated with this offering, and in entering into this
transaction, the Subscriber is not relying upon any information, other than that
contained in the Company Materials and the results of its own independent
investigation.
(f) The Subscriber has had an opportunity to ask questions of and receive
answers from the Company, or a person or persons acting on their behalf,
concerning the terms and conditions of this investment; and all such questions
have been answered to the full satisfaction of the Subscriber, none of which
answers is in any way inconsistent with the Company Materials.
(g) The Subscriber has sufficient knowledge and experience in business,
real estate, law and financial matters to evaluate and understand the merits and
risks of an investment in the Company.
(h) The Subscriber is a corporation duly organized and in good standing
under the laws of the State of New Jersey and is qualified as a foreign
corporation and in good standing under the laws of any and all other states and
jurisdictions where the nature of its business and operations make such
qualification necessary or appropriate. The Subscriber has the authority and
power to enter into this Agreement, and this Agreement is the legal, valid, and
binding obligation of the Subscriber. The person executing this Agreement is an
officer of the Subscriber with full authority to execute and deliver this
Agreement and to bind the Subscriber to its obligations hereunder.
(i) The Subscriber is aware that the Company has a limited financial and
operating history.
(j) The Taxpayer Identification Number furnished below is correct and the
Subscriber is not subject to the back-up withholding provisions of Section 3406
of the Internal Revenue Code of 1986, as amended.
(k) The information contained herein is true, accurate and complete and
may be relied upon by the Company and each of the Representatives. The
Subscriber will notify the Company immediately if any of such information
becomes inaccurate, incomplete or misleading prior to the acceptance of this
Subscription.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF ACCREDITED INVESTORS. The
Subscriber hereby represents and warrants to the Company and each of the
Representatives, as follows:
(a) All of the representations and warranties contained in paragraph 2 are
true and accurate in all respects as of the date hereof and shall survive
delivery of the Shares.
(b) The Subscriber is an "Accredited Investor" within the meaning of that
phrase as used in subparagraph (a) of Section 501 of Regulation D under the
Securities Act of 1933 by virtue of the fact that the Subscriber is (check all
that apply):
/X/ (i) INSTITUTIONAL TEST. (A) Any bank as defined in Section
3(a)(2) of the Securities Act or any savings and loan association
or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary
capacity; (B) any broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934; (C) an insurance
company as defined in Section 2(13) of the Act; (D) an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that Act; (E) a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; (F) an employee
benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, where the investment
decision is made by a plan fiduciary, as defined in Section 3(21)
of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor,
or where the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with decisions made
solely by persons that are accredited investors; (G) any private
business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940; or (H) any charitable
organization described in Section 501(C)(3) of the Internal
Revenue Code, a corporation, a Massachusetts or similar business
trust, or Company not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000.
/ / (ii) INDIVIDUAL $1,000,000 NET WORTH TEST. Any natural person
whose net worth, or joint net worth with that person's spouse, at
the time of his purchase exceeds $1,000,000.
/ / (iii) INDIVIDUAL $200,000 INCOME TEST. Any natural person who
had an individual income in excess of $200,000 in each of the two
most recent years or a joint income with that person's spouse in
excess of $300,000 in each of those years and who has a
reasonable expectation of reaching the same income level in the
current year.
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/ / (iv) INSIDER TEST. Any person who is a director or executive
officer of the Company.
/ / (v) $5,000,000 TRUST TEST. Any trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed by a
sophisticated person as described in Section 506(b)(2)(ii) of
Regulation D under the Securities Act of 1933.
/X/ (vi) ENTITIES WITH ALL ACCREDITED OWNERS. Any entity in which
all of the equity owners are Accredited Investors under
paragraphs (i), (ii), (iii), (iv) or (v) above.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Subscriber as follows:
4.1 ORGANIZATION. STANDING. ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana, and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. The Company has the requisite corporate power and authority to
issue the Shares and to otherwise perform its obligations under this Agreement.
The copies of the Articles of Incorporation and Bylaws of the Company delivered
to the Purchaser or their agents prior to the execution of this Agreement are
true and complete copies of the duly and legally adopted Articles of
Incorporation and Bylaws of the Company in effect as of the date of this
Agreement
4.2 FINANCIAL STATEMENTS. Attached hereto as Exhibit 1 are (a) a
balance sheet at December 31, 1997, together with the related statements of
operations, stockholders' equity and cash flow for the fiscal year then ended,
and the audit report thereon of Ernst & Young, certified public accountants, and
(b) an unaudited balance sheet at September 30, 1998, (the "Balance Sheet
Date"), and the related income statements for the nine months then ended,
prepared by the Company. Such financial statements (i) are in accordance with
the books and records of the Company, (ii) present fairly the financial
condition of the Company at the balance sheet dates and the results of its
operations for the periods therein specified, and have, in all material
respects, been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods except,
in the case of the unaudited financial statements only, for normal year-end
adjustments and accruals and the lack of notes thereto. Specifically, but not by
way of limitation, the balance sheets or notes thereto disclose all of the
debts, liabilities and obligations of any nature (whether absolute, accrued or
contingent and whether due or to become due) of the Company at December 31, 1997
and at September 30, 1998 which, individually or in the aggregate, are material
and which in accordance with generally accepted accounting principles would be
required to be disclosed in such balance sheets, and the omission of which
would, in the aggregate, have a material adverse impact on the Company. The
balance sheets include appropriate reserves for all taxes and other liabilities
accrued at their
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respective dates but not yet payable.
4.3 TAX RETURNS AND AUDITS. All required federal, state and local
income tax returns or appropriate extension requests of the Company have been
filed, and all federal, state and local income taxes required to be paid with
respect to such returns have been paid or due provision for the payment thereof
has been made. The Company is not delinquent in the payment of any such tax or
in the payment of any assessment or governmental charge. The Company has not
received notice of any tax deficiency proposed or assessed against it, and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax. None of the Company's tax returns has been audited by
governmental authorities in a manner which disclosed material liability of the
Company. The Company does not have any tax liabilities except those incurred in
the ordinary course of business since the Balance Sheet Date.
4.4 LITIGATION; GOVERNMENTAL PROCEEDINGS. There are no legal actions,
suits, arbitrations or other legal, administrative or governmental proceedings
or investigations pending or, to the knowledge of the Company, threatened
against the Company, its properties, assets or business, and the Company is not
aware of any facts which are likely to result in or form the basis for any such
action, suit or other proceeding. The Company is not in default with respect to
any judgment, order or decree of any court or any governmental agency or
instrumentality. The Company has not been threatened with any action or
proceeding under any business or zoning ordinance, law or regulation.
4.5 COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS. The
business and operations of the Company have been and are being conducted in
material compliance with all applicable laws, rules and regulations of all
governmental authorities. Neither the execution nor delivery of, nor the
performance of or compliance with, this Agreement nor the consummation of the
transactions contemplated hereby will conflict with, or, with or without the
giving of notice or passage of time, result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon any
asset or property of the Company pursuant to, any applicable law, administrative
regulation or judgment, order or decree of any court or governmental body, any
agreement or other instrument to which the Company is a party or by which it or
any of its properties, assets or rights is bound or affected, and will not
violate the Articles of Incorporation or Bylaws of the Company. The Company is
not in violation of its Articles of Incorporation or its Bylaws nor in violation
of, or in default under, any lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement in any material respect.
4.6 THE SHARES. The Shares, when issued and paid for pursuant to the
terms of this Agreement, will be duly authorized, validly issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions. The certificates representing the Shares to be
delivered by the Company hereunder will be genuine, and the Company has no
knowledge of any fact which would impair the validity thereof.
4.7 SECURITIES LAWS. No consent, authorization, approval, permit or
order of
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or filing with any governmental or regulatory authority is required under
current laws and regulations in connection with the execution and delivery of
this Agreement or the offer, issuance, sale or delivery of the Shares. The
Company has not, directly or through an agent, offered the Shares or any similar
Securities for sale to, or solicited any offers to acquire such securities from,
persons other than the Subscriber and other accredited investors and the
issuance of ISO or non-qualified stock options under Company Plans. Under the
circumstances contemplated hereby, and in reliance on the representations and
warrantees of Subscriber contained herein, the offer, issuance, sale and
delivery of the Shares will not under current laws and regulations require
compliance with the prospectus delivery or registration requirements of the
Securities Act.
4.8 CAPITAL STOCK. The authorized capital stock of the Company
consists of 8,750,000 common shares, of which 6,295,660 shares are issued and
outstanding. All of the outstanding shares of capital stock of the Company were
duly authorized and validly issued and are fully paid and nonassessable. There
are no outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever, except as otherwise disclosed in Exhibit 2 hereto,
under which the Company is or may be obligated to issue capital stock or other
securities of any kind representing an ownership interest or contingent
ownership interest in the Company. Neither the offer nor the issuance or sale of
the Shares constitutes an event, under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with respect to
the issuance of securities by the Company, which will either increase the number
of shares issuable pursuant to such provisions or decrease the consideration per
share to be received by the Company pursuant to such provisions. Except as
disclosed in Exhibit 2, no holder of any security of the Company is entitled to
any preemptive or similar rights to purchase the Shares from the Company unless
such right has been duly waived. All outstanding securities of the Company have
been issued in full compliance with an exemption or exemptions from the
registration and prospectus delivery requirements of the Securities Act and from
the registration and qualification requirements of all applicable state
securities laws.
4.9 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of the Company, and has
been duly executed and delivered by an authorized officer of the Company. All
corporate action necessary to the authorization, creation, issuance and delivery
of the Shares has been taken on the part of the Company. This Agreement is a
valid and binding agreement of the Company enforceable against it in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific enforcement
and other equitable remedies.
4.10 PATENTS AND OTHER INTANGIBLE RIGHTS. The Company is not, nor has
it received notice with respect to, infringing upon or otherwise acting
adversely to any known right or claimed right of any person under or with
respect to any patents, trademarks, service marks, trade names, copyrights,
licenses or rights with respect to the foregoing.
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4.11 NO BROKERS OR FINDERS. No person, firm or corporation has or will
have, as a result of any act or omission of the Company or the Subscriber, any
right, interest or valid claim against or upon the Company or the Subscriber for
any commission, fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions contemplated by this
Agreement. Each party will indemnify and hold the other harmless against any and
all liability with respect to any such commission, fee or other compensation
which may be payable or determined to be payable in connection with the
transactions contemplated by this Agreement.
4.12 LICENSES. The Company possesses from the appropriate agency,
commission, board and government body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
which (a) are necessary for it to engage in the business currently conducted by
it, and (b) if not possessed by the Company would have a material adverse impact
on the Company's business. The Company has no knowledge that would lead it to
believe that it will not be able to obtain all licenses, permits,
authorizations, approvals, franchises and rights that may be required for any
business the Company proposes to conduct, where failure to obtains such
licenses, permits, authorizations, approvals, franchises and rights would result
in a material adverse impact on the Company's business.
4.13 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
4.14 DISCLOSURE. The Company has not knowingly withheld from the
Subscriber any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule, statement or other document
furnished or to be furnished to the Subscriber pursuant hereto or in connection
with the transactions contemplated hereby or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading. Nothing in this Section 4.14 limits the representations,
warranties or acknowledgments of Subscriber contained herein.
5. INDEMNIFICATION. The Subscriber acknowledges that it understands the
meaning and legal consequences of the representations and warranties contained
in paragraphs 2 and 3 hereof, and the Subscriber hereby agrees to indemnify and
hold harmless the Company, each of the Representatives and their respective
officers, agents, directors, counsel and affiliates, from and against any and
all loss, damage or liability due to or arising out of a breach of any
representation or warranty of the Subscriber contained in this Subscription. The
Company acknowledges that it understands the meaning and legal consequences of
the representations and warranties contained in paragraph 4 hereof, and the
Company hereby agrees to indemnify and hold harmless the Subscriber and its
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officers, agents, directors, counsel and affiliates, from and against any and
all loss, damage or liability due to or arising out of a breach of any
representation or warranty of the Company contained in this Agreement.
6. NO WAIVER. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Subscriber, the Subscriber does
not thereby or in any other manner waive any rights granted to it under federal
or state securities laws.
7. ACCEPTANCE OF SUBSCRIPTION. It is understood that this Subscription is
not binding on the Company until the Company accepts it, which acceptance is at
the sole discretion of the Company, by executing this Subscription where
indicated. This Subscription shall be null and void if the acceptance is not
timely secured, and the Company shall return to the Subscriber, without
interest, any funds tendered by the Subscriber herewith, and the Company and the
Subscriber shall have no further obligation to each other hereunder. The
Subscriber understands that once this subscription has been accepted, the
Subscriber will have no right to cancel it.
8. NON-ASSIGNABILITY. This Subscription is not transferable or
assignable by the Subscriber.
9. NON-DILUTION. Company agrees that, subsequent or simultaneous to the
issuance of shares under this Subscription to Subscriber, it will not, without
Subscriber's consent, which consent shall not be unreasonably withheld,
conditioned or delayed, create any additional classes of stock or issue any
additional shares of common stock at a price below $10 per share (except as
adjusted for any stock splits, stock dividends or other reclassification of the
Company s common stock). Notwithstanding the above, Subscriber's consent shall
not be required in connection with any of the following: (a) the issuance of
options on additional shares of common stock at an exercise price below market
where such options are issued to attract or retain key employees, and such
options and value have been approved by the Company's Board of Directors, (b)
the issuance of additional shares of common stock at a price below $10 per share
but above $7 per share, where the issuance of such additional shares is in the
reasonable business interests of the Company, and (c) the issuance of any shares
of common stock in connection with an underwritten public offering.
10. GOVERNING LAW. This Subscription shall be enforced, governed and
construed in all respects in accordance with the laws of the State of Indiana,
without regard to conflict of law principles.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties shall survive delivery of the Shares.
IN WITNESS WHEREOF, each of the Subscriber and the Company has executed
this Subscription Agreement the day and year set forth below.
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DIALOGIC CORPORATION
Date: November 4, 1998 By: /s/ Thomas G. Amato
-----------------------------------
(Signature)
Printed: Thomas G. Amato
Title: Chief Financial Officer
ADDRESS: 1515 Route Ten
Parsippany, New Jersey 07054
Taxpayer Identification Number: 22-2476114
ACCEPTANCE BY COMPANY
Date Subscription Accepted: November 5, 1998
INTERACTIVE INTELLIGENCE, INC.
By: /s/ John R. Gibbs
-----------------------------------
(Signature)
Printed: John R. Gibbs
Title: Executive Vice President, Treasurer
Address: 3500 DePauw Blvd., Suite 1060
Indianapolis, Indiana 46268
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Exhibit 10.6
DIALOGIC/INTERACTIVE INTELLIGENCE
STRATEGIC RELATIONSHIP AGREEMENT
The following Strategic Relationship Agreement will serve as an agreement
between Dialogic Corporation (Dialogic), with its principal offices at 1515
Route 10, Parsippany, NJ 07054, and Interactive Intelligence, Inc. (Interactive
Intelligence), with its principal offices located at 3500 Depauw Boulevard,
Suite 1060, Indianapolis, IN 46268. This agreement will commence on March 1,
1999.
PRELIMINARY
1. The purpose of this document is to set out the business terms and the
mutual understandings of the parties as a result of their discussions to date.
2. The parties agree that this Strategic Relationship Agreement (the "SRA")
represents the intent of both parties as of the date of this SRA, and may be
modified over the course of time.
3. It is understood and agreed that the terms and conditions contained in
the Strategic Relationship Agreement are incomplete and subject to negotiation,
and that in the course of such negotiations, terms contained in the Strategic
Relationship Agreement SRA may be modified.
OVERVIEW
Under the terms of this agreement, Dialogic will provide to Interactive
Intelligence a series of board level computer telephony components and selected
technology upon which Interactive Intelligence will build and market its
applications. In addition, Dialogic will provide special rebate incentives,
marketing and sales support, technical support, and other incentives such that
Interactive Intelligence will be a preferred customer of Dialogic and Dialogic
will be the preferred provider to Interactive Intelligence.
Interactive Intelligence acknowledges that each of these products sold to
Interactive Intelligence will be part of Dialogic's product line and that,
except as specifically provided in this agreement and the final definitive
agreement, Dialogic will be free to market any of these boards to any other
customer. Dialogic will exclusively own all intellectual property contained in
each of the boards and associated software.
While Interactive Intelligence will give Dialogic notice and a reasonable
opportunity to meet its current and future product needs, Dialogic acknowledges
that Interactive Intelligence will be free to purchase products in a manner most
effective for its business interests. Interactive Intelligence will exclusively
own all applications software and the intellectual property contained in it.
PARTNERING
Dialogic and Interactive Intelligence will enter into a Volume Purchase
Agreement covering sales of products from Dialogic to Interactive Intelligence,
and providing Dialogic's standard terms and conditions of sale, including
warranty.
Dialogic and Interactive Intelligence will have ongoing strategic planning
meetings to optimize the sale of Interactive Intelligence products containing
Dialogic boards, and to ensure that Interactive Intelligence has an opportunity
for input into ongoing Dialogic product evolution.
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Dialogic and Interactive Intelligence will engage in coordinated marketing
activities including Interactive Intelligence's visibility as a Dialogic partner
at industry trade shows.
Dialogic will extend to Interactive Intelligence a credit line to be used
exclusively for inventory related to internal developmental and testing
purposes. The conditions of the credit line are:
1. The credit line will not exceed $100,000.
2. The price of the inventory will be determined based upon the 30,000
port discount level. Should Dialogic change its pricing policies,
this price is subject to change.
3. Interactive Intelligence is forbidden from reselling this inventory
without written permission from Dialogic.
4. The term of this arrangement is three (3) years from the date of this
signed agreement.
5. After the completion of three (3) years, Interactive Intelligence owns
the inventory outright and is not obligated to Dialogic.
6. Dialogic's inventory obligations shall terminate if Interactive
Intelligence begins to purchase a substantial portion of product from
other vendors, where such products compete directly with Dialogic
product.
Dialogic will provide Interactive Intelligence with the Valued Support Plan at
no charge for a period of one year. After that time, this arrangement will be
revisited. The formal Support Services Agreement is documented under a separate
agreement. The exact terms, conditions and deliverables for both parties are
spelled out in Exhibit A "Statement of Work - Valued Support Plan".
In an effort to maximize the usefulness and value of the Value Support Plan
(VSP), Interactive Intelligence and Dialogic agree that the services provided
under the VSP will be reviewed after the first six (6) months, with a follow-up
review after nine (9) months.
Interactive Intelligence will provide feedback in writing to Dialogic, during
both review periods, with the objective of determining the ongoing value of
renewing the VSP.
This agreement does not obligate either party to continue the VSP past the
initial twelve (12) month timeframe.
Interactive Intelligence will provide an advisory board seat for a designated
Dialogic representative (which Dialogic may change from time to time).
Dialogic's representative shall be provided with notice of all Board of
Directors meetings and access to information and materials in the same manner as
a Board member, except where such access is inappropriate due to conflicts of
interest. Dialogic's representative shall not be entitled to vote on any
matters before the Board. Any designated representative for this observer Board
seat shall sign a confidentiality and non-disclosure agreement. This provision
for an observer for the Interactive Intelligence Board of Directors' meetings
shall terminate upon the effective date of an initial public offering, currently
anticipated during the second quarter of 1999.
REBATE PROGRAM:
ASSUMPTIONS
1. Interactive Intelligence prefers to keep out of the hardware assembly
business in order to keep the costs associated with hardware out of your
revenue and profit streams. At the same time, Interactive Intelligence
would like some compensation for the use of Dialogic's hardware that is
sold as a result of their efforts.
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2. In North America, Interactive Intelligence VARs will only purchase boards
or integrated systems through a Dialogic Authorized System Integrator or
Distributor.
3. On occasion there may be instances where Interactive Intelligence is
engaged in the direct assembly of Dialogic's hardware with their software.
This will be for either large Fortune 500 customers, which will purchase
Interactive Intelligence's systems direct from Interactive Intelligence, or
large reseller accounts where cost becomes a dominating factor. In those
instances, Interactive Intelligence would like the ability to purchase
Dialogic components directly from Dialogic.
4. Interactive Intelligence would like a worldwide agreement that would cover
all markets, including EMEA/Asia/Pacific.
5. Interactive Intelligence may choose to utilize Dialogic Professional
Services and onsite Technical Support personnel for support at selected
end-user locations or in conjunction with selected installations. Dialogic
and Interactive Intelligence will work to agree on the simplest and most
cost effective billing mechanism so that these resources are available to
Interactive Intelligence.
REBATE PROGRAM MECHANICS
Dialogic will offer the following model to meet all of the items above, and
whose principal goal is that Interactive Intelligence receives EFFECTIVE OEM
discount levels based on the worldwide volumes of Dialogic hardware driven by
Interactive Intelligence software. The following are the elements of that
proposal:
1. For instances where Interactive Intelligence is required to purchase
Dialogic hardware directly from Dialogic, a 45% discount off of Dialogic's
current OEM list price will be extended.
2. For hardware that Interactive Intelligence selects that will move through
an authorized Interactive Intelligence/Dialogic Systems Integrator,
Dialogic will offer a rebate program that will pay Interactive
Intelligence, on a quarterly basis, the difference between the above quoted
45% discount, and the volume discount negotiated by Dialogic with the
authorized system integrator and/or distributor. Interactive Intelligence
and Dialogic will develop a process, that will allow for the correct
reporting process where rebates are appropriate.
3. Dialogic will work with Interactive Intelligence to identify other system
integrators where Interactive Intelligence VARs can purchase Dialogic
hardware or complete systems. There is no obligation by either party to
conclude a relationship with any system integrator. As of February 1999,
three (3) integrators have been identified: Alliance Systems Technologies;
I-BUS and Intelligent Response.
4. Based upon Interactive Intelligence's request, Dialogic will work towards
signing both a systems integrator and distributor agreement with
Intelligent Response. These agreements will contain separate terms and
conditions, along with the appropriate pricing schedules. The pricing
provided to Interactive Response will be based upon our published pricing
for the respective Dialogic category mentioned above. It is Dialogic's
understanding that Interactive Response will only resell equipment to
Interactive Intelligence VARs and end users. Interactive Response will be
treated as any other Dialogic systems integrator and/or distributor, and as
such, will be subject to audit by Dialogic. Additionally, Interactive
Intelligence will receive the quoted rebate offered in Item 2 above for all
appropriate Intelligent Response sales as outlined in the SRA.
5. In addition, it is agreed that Interactive Response, or other approved
systems integrators and distributors, will be able to provide and sell to
Interactive Intelligence's approved VARs and/or end users Dialogic
board-level product for the express purpose of offering to the end user
and/or VAR spares or upgrades to existing Interactive Intelligence
systems. Interactive Intelligence agrees that this will be offered as a
convenience to its customers and resellers and will not compete with
existing
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Dialogic distributors of board-only product. For such instances, the
pricing that Dialogic will sell to the integrator will be at Dialogic's
existing distributor pricing. The rebate Interactive Intelligence will
receive will be consistent per the terms of Item 2 above.
6. Dialogic will make available to Interactive Intelligence direct,
Interactive Intelligence's system integrators, Interactive Intelligence's
VARs, and Interactive Intelligence's end users our Professional Services.
Interactive Intelligence and Dialogic will agree on a formal escalation
process to provide these services. The goal of this procedure will be to
first and foremost solve a service affecting problem, and put a check and
balance system in place to be sure that the services are duly required when
requested. These services can be selected by Interactive Intelligence at
their option on a Time/Materials/Travel cost basis, and are available on a
global basis.
MISCELLANEOUS
GOVERNING LAW AND DISPUTES
(New York law will govern the interpretation and enforcement of this
Agreement, except that the Federal Arbitration Act, 9 U.S.C. Sections 1 to
15, will govern the arbitrability of all claims.
Dialogic and Interactive Intelligence will seek to resolve between
them, or their employees, agents, or affiliated businesses, any controversy
or dispute, whether based on contract, statute, tort, fraud,
misrepresentation, or other legal theory, related directly or indirectly to
the subject matter of this Agreement, whenever brought, first by
negotiating with each other in good faith. If such negotiations are
unsuccessful, the parties agree to enter arbitration in accordance with the
terms of this paragraph. Both parties reserve the right to obtain an
injunction to prevent the use of either party's products in violation of
this Agreement. The arbitration will be conducted by a single arbitrator
under the then-current rules and supervision of the American Arbitration
Association (AAA). The parties will mutually select the arbitrator from a
panel of persons knowledgeable in business information, electronic data
processing systems, and the nature of the electronic data processing issue
being disputed. The decision and award of the arbitrator will be final and
binding, and may be entered in any court having jurisdiction. The
arbitration will be held, and the award will be made in Morris County, New
Jersey, if commenced by Interactive Intelligence, and in Indiana, if
commenced by Dialogic. The arbitrator will not have authority to award
punitive, exemplary, or other non-compensatory damages to either party.
Dialogic and Interactive Intelligence will each bear its own attorney's
fees associated with the arbitration. Dialogic and Interactive
Intelligence will pay all other costs and expenses of the arbitration as
the rules of the AAA provide. If one party files a court action alleging
claims subject to arbitration under this paragraph, and the other party
successfully stays the court action and/or compels arbitration of the
claims, the party filing the court action will pay the other party's costs
and expense, including attorney fees. Neither Interactive Intelligence or
Dialogic may bring a claim or action, regardless of form, arising out of or
related to this Agreement, including any claim of fraud or
misrepresentation, more than two years after the cause of action accrues,
except that either party may bring a later claim, if either party fails to
timely pay the other part or the injured party cannot reasonably discover
the basic facts supporting the claim within two years.
RELATIONSHIP
The only relationship between Interactive Intelligence and Dialogic that is
intended to be created by this Agreement is that of independent contractor,
and neither party shall be nor represent itself to be an agent, employee,
partner, or joint venture of the other, nor shall either party transact any
business in the name of the other, nor on the other's behalf, nor in any
manner or form make
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promises, representations or warranties, or incur any liability, direct or
indirect, contingent or fixed, for or on behalf of the opposite party.
PARTIES AND ASSIGNMENT
All rights of Dialogic granted under this Agreement may be
exercised by any wholly owned subsidiary of Dialogic agreeing to be bound
by the terms of this Agreement. The provisions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their
successors and assignees; provided, however (except as stated in the first
sentence of this paragraph) neither party may assign this Agreement without
the express written consent of the opposite party, that consent shall not
be unreasonably withheld; and provided further that no assignment of this
Agreement shall operate as a release of either of the parties hereto. This
agreement may be terminated by Dialogic in the event of a change in control
of Interactive Intelligence other than as a result of an underwritten
initial public offering.
ENTIRE AGREEMENT
Each party acknowledges that it has read this Agreement and
agrees to be bound by its terms and that it is the complete and exclusive
agreement and understanding between the parties, which supersedes all
previous understandings, negotiations, and proposals, whether oral or
written, except for the existing Volume Purchase Agreement, Nondisclosure
Agreement, and the Subscription Agreement for Common Stock between the
Interactive Intelligence and Dialogic Investment Corporation, each of which
shall remain in full force and effect. No modification, amendment, waiver,
consent or discharge in connection with this Agreement or any of its
provisions shall be binding upon either party unless in writing and signed
by the party sought to be charged with the same.
PUBLICITY RELEASES
No advertising, publicity release, or similar public information
concerning this Agreement shall be published by either party without prior
written consent of the other, which approval shall not be unreasonably
withheld.
DIALOGIC CORPORATION INTERACTIVE INTELLIGENCE, INC.
By: /s/ John G. Alferi By: /s/ John R. Gibbs
------------------------- ------------------------
Title: President Sales & Services
The Americas Title: Executive Vice President
-------------------------- ------------------------
Date: February 19, 1999 Date: February 24, 1999
-------------------------- ------------------------
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Exhibit 10.7
SUPPORT SERVICES AGREEMENT
DIALOGIC CORPORATION ("DIALOGIC"), a New Jersey corporation with offices at 1515
Route Ten, Parsippany, New Jersey 07054, and INTERACTIVE INTELLIGENCE,
INCORPORATED an Indiana corporation, with offices at 3500 Depauw Blvd.
Indianapolis, Indiana ("Customer") hereby agree that the following terms and
conditions will apply to certain technical and/or professional support services
("Services") provided by DIALOGIC to Customer:
1. COVERAGE
This Agreement will cover Support Services and Delivered Information provided by
DIALOGIC to Customer, as specified in Exhibit A, Statement of Work.
2. TERM
This Agreement will become effective when signed by Customer and accepted in
writing by DIALOGIC and will remain in effect for the period specified in
Exhibit A or until terminated as set forth in Section 11.
3. NOTICES
All notices in connection with this Agreement will be deemed given as of the day
they are deposited in the U.S. Mails, postage prepaid, certified or registered,
return receipt requested, or by facsimile message addressed to the recipient at
the address set forth above, or by electronic mail provided that the receipt of
the electronic mail is confirmed by sender.
4. PRICE AND PAYMENT
A. Services will be provided for the charges specified in Exhibit B, Schedule
of Charges. Prior to acceptance, DIALOGIC may require an advance payment and/or
a form of security acceptable to DIALOGIC.
B. Customer will pay the full amount due on the invoice notwithstanding
restrictive endorsements or other statements on or accompanying checks accepted
by DIALOGIC.
C. Customer agrees to pay taxes, however designated (excluding taxes on
DIALOGIC's net income), imposed or based upon the provision, license or use for
Services unless a tax exemption certificate is provided to DIALOGIC by Customer.
D. Customer agrees to reimburse DIALOGIC for attorneys' fees, interest and any
applicable costs associated with collecting delinquent payments. Delinquent
payments shall bear interest at the lower of one and one half per cent per
month, or the highest rate permitted by law.
E. If DIALOGIC agrees to perform work at Customer's request outside of the
work described in Exhibit A, Customer agrees to pay any additional charges for
such work.
5. USE OF INFORMATION
In order to enable DIALOGIC personnel to perform the Services contemplated by
this Agreement, and in order to enable Customer to satisfy its obligations
hereunder, it may become necessary for each party to receive or have access to
Background Information (such term being defined to include specifications,
designs, plans, drawings, software, data prototypes or other technical or
business information that either existed prior to performance of services
hereunder or is subsequently developed independent of performance of such
services) of the other which is considered proprietary or confidential. In
addition, Delivered Information, as defined in Section 6, which is provided
pursuant to this Agreement is considered by the parties to be proprietary or
confidential. All such Background Information and all Delivered Information
will be collectively referred to in this section as Information.
A. The party receiving the Information will:
1. Hold the Information of the furnishing party in confidence, and
restrict its disclosure solely to those of the receiving party's employees with
a need to know, and not disclose it to third parties; and
2. Advise employees who received the Information of the obligation of
confidentiality hereunder; and
3. Use and require employees to use the same degree of care to protect
the information as is used with the receiving party's information of a similar
nature;
4. Use the Information it receives only in connection with Services it
performs or obligations it fulfills pursuant to this Agreement, or pursuant to
the applicable license granted in Section 6.
B. The receiving party will have no obligation to preserve the confidentiality
or restrict the use of any Information which:
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1. Was previously known to the receiving party free of any obligation to
keep it confidential, or
2. Is or becomes publicly available, by other than unauthorized
disclosure, or
3. Is independently developed by the receiving party, or
4. Is disclosed to third parties by the furnishing party without
restriction,
5. Is lawfully received free of restriction from another source having
the right to so furnish the Information.
C. Upon request, the receiving party will return to the furnishing party all
Background Information received in tangible form.
D. Background Information may be disclosed to non-parties to this Agreement
only upon the prior written authorization of the party furnishing such
Background Information, and only if the non-party to whom the Background
Information is disclosed agrees in writing (a copy of which will be provided to
the party furnishing such information upon request) to the same conditions
respecting such Background Information as are contained in this Section 5.
However, with respect to requests made by formal legal process or by a
government agency, each party receiving Background Information of the other will
use reasonable efforts to safeguard such Background Information using
established legal means (e.g., protective orders, etc.). This obligation may be
satisfied by the receiving party notifying the other party in writing when any
such request has been made and cooperating with the other party's efforts to
protect the Background Information.
E. The terms of confidentiality under this Agreement shall not be construed to
limit either party's right to independently develop products without the use of
the Information. Further, either party shall be free to use for any purpose the
residuals resulting from work with the other party's Information, provided that
the receiving party shall maintain the confidentiality of the Information as
provided herein. The term "residuals" means information in non-tangible form,
which may be retained by persons who have had access to the Information,
including ideas, concepts, know-how or techniques contained therein. Neither
Party shall have any obligation to limit or restrict the assignment of such
persons or to pay royalties for any works resulting from the use of residuals.
6. OWNERSHIP OF INVENTIONS AND DELIVERED INFORMATION
All information (including specifications, designs, plans, drawings, software,
date prototypes or other technical or business information) delivered or made
available by DIALOGIC to Customer in accordance with Exhibit A, Statement of
Work, and the rights to any underlying patent, copyrights, mask work protection
rights and other intellectual property rights, will be designated as "Delivered
Information" and will be treated as follows:
A. In the event that Delivered Information is developed or generated solely by
DIALOGIC employees or jointly by DIALOGIC and Customer's employees, DIALOGIC
will own all right, title and interest therein. DIALOGIC grants to Customer a
non-exclusive, irrevocable, royalty-free license to use such Delivered
Information in the United States for the defined business purposes specified in
Exhibit A.
B. In the event that Delivered Information is generated solely by Customer's
employees, Customer will own all right, title and interest therein. Customer
grants to DIALOGIC a non-exclusive, irrevocable, royalty-free license to use
such Delivered Information for any lawful business purposes.
C. In the event that DIALOGIC Background Information is incorporated in
Delivered Information provided to Customer, DIALOGIC grants to Customer a
non-exclusive, irrevocable, royalty-free license to use such Delivered
Information in the United States for the defined business purposes specified
in Exhibit A.
D. Except as expressly set forth herein, no license is granted by either party
to the other with respect to any technical or business information, or with
respect to rights in any patents, trademarks, copyrights, mask work protection
rights and other intellectual property rights.
7. PERSONNEL
In recognition of the fact that DIALOGIC may perform similar Services from time
to time for others, this Agreement will not prevent DIALOGIC from performing
such similar Services or restrict DIALOGIC from using any personnel which may be
provided to the Customer under this Agreement. DIALOGIC will make a reasonable
effort consistent with sound business practices to honor the specific request of
the Customer with regard to the assignment of its employees; however DIALOGIC
reserves the sole right to determine the assignment of its employees.
8. RIGHTFUL EMPLOYER
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Customer agrees that DIALOGIC is acting as an independent contractor and that
each of the parties will be responsible for all management matters, taxes or
wages, etc., relating to its own employees.
9. NON-SOLICITATION
Customer agrees not to solicit for employment any DIALOGIC personnel performing
Services for Customer under this agreement. Customer agrees to pay DIALOGIC
the amount of $100,000 if a DIALOGIC employee who has performed Services under
this Agreement is employed by Customer within twelve (12) months of the
expiration of this Agreement. Customer agrees that this payment represents a
reasonable estimation of DIALOGIC's actual expenses incurred should Customer
hire a DIALOGIC employee under these conditions.
10. SUBCONTRACTING
DIALOGIC may subcontract any or all of the work to be performed by it under
this Agreement but will retain responsibility for the work subcontracted.
11. TERMINATION
A. Customer may terminate this Agreement, subject to accrued charges, if
DIALOGIC fails to perform or observe any material term or condition of this
Agreement and such failure continues unremedied for thirty (30) days after
DIALOGIC's receipt of written notice thereof from Customer.
B. Customer will be in default of this Agreement if Customer fails to pay any
charge when due or fails to perform or observe any other material term or
condition of this Agreement. DIALOGIC may terminate this Agreement and
exercise any applicable rights, if (i) the failure to pay any charge when due
continues unremedied for ten (10) days or, (ii) for 30 days from receipt of
written notice by DIALOGIC for other breaches. In the event of such
termination by DIALOGIC, Customer shall be liable for any accrued charges.
C. Either party may terminate this Agreement by notice in writing in the event
that the other makes an assignment for the benefit of creditors; or admits in
writing an inability to pay debts as they mature; or a trustee or receiver of
the other or of any substantial part of the other's assets, is appointed by any
court; or a proceeding is instituted under any provision of the Federal
Bankruptcy Act by the other, or against the other, and is acquiesced in or is
not dismissed within 60 days, or results in adjudication in bankruptcy.
12. EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY
A. FOR PURPOSES OF THE EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY SET
FORTH IN THIS SECTION 12, "DIALOGIC" WILL BE DEEMED TO INCLUDE DIALOGIC, ITS
PARENT AND THEIR AFFILIATED ENTITIES AND THE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, REPRESENTATIVES, SUBCONTRACTORS AND SUPPLIERS OF ALL OF THEM; AND
"DAMAGES" WILL BE DEEMED TO REFER COLLECTIVELY TO ALL INJURY, DAMAGE LOSS OR
EXPENSE INCURRED.
B. DIALOGIC'S ENTIRE LIABILITY AND CUSTOMER'S EXCLUSIVE REMEDIES AGAINST
DIALOGIC FOR LOSS OR DAMAGE ARISING FROM THE PERFORMANCE OR NONPERFORMANCE OF
ANY WORK UNDER THIS AGREEMENT REGARDLESS OF THE FORM OF ACTION, WHETHER IN
CONTRACT, TORT INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, WILL BE AS
FOLLOWS:
1. FOR DELAYS IN THE RESPONSE TIMES, AS SPECIFIED IN EXHIBIT A, DIALOGIC
WILL HAVE NO LIABILITY UNLESS DIALOGIC IS CONSISTENTLY UNABLE TO MEET THE
RESPONSE TIME TARGETS FOR REASONS NOT ATTRIBUTABLE EITHER TO CUSTOMER OR TO
FORCE MAJEURE CONDITIONS (AS DEFINED IN SECTION 13), IN WHICH CASE CUSTOMER WILL
HAVE THE RIGHT, AS ITS SOLE REMEDY, TO CANCEL THIS AGREEMENT, SUBJECT TO ANY
ACCRUED CHARGES.
2. FOR CLAIMS OTHER THAN SET FORTH ABOVE, DIALOGIC'S LIABILITY FOR
IMPROPER PERFORMANCE OR NON-PERFORMANCE OF ITS OBLIGATIONS PURSUANT TO, OR IN
ANY OTHER WAY RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, WILL BE LIMITED
TO DIRECT DAMAGES THAT ARE PROVEN OR $100,000 WHICHEVER IS LESS. THE LIMITATION
OF LIABILITY IN THIS SUBPARAGRAPH 12(B)(2) DOES NOT APPLY TO CUSTOMER'S RIGHT TO
RECOVER PROVEN DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY OR FOR
BODILY INJURY OR DEATH PROXIMATELY CAUSED BY DIALOGIC.
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CUSTOMER REPRESENTS THAT IT SHALL NOT USE DIALOGIC'S DELIVERED MATERIALS IN
AVIATION, PROCESS CONTROL, MEDICAL APPLICATIONS OR OTHER ULTRAHAZARDOUS
ACTIVITIES AND ACKNOWLEDGES THAT DIALOGIC SHALL NOT BE RESPONSIBLE FOR ANY
PERSONAL INJURY OR PROPERTY DAMAGE ARISING FROM SUCH ACTIVITIES AND THAT
CUSTOMER WILL INDEMNIFY DIALOGIC FOR ANY COSTS OR EXPENSES, INCLUDING COSTS
OF DEFENSE, RESULTING FROM USE OF DIALOGIC DELIVERED MATERIALS IN SUCH
APPLICATIONS.
3. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, DIALOGIC WILL
NOT BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR
LOST PROFITS, LOST SAVINGS OR LOST REVENUES OF ANY KIND WHATSOEVER, WHETHER OR
NOT DIALOGIC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
4. ANY LEGAL ACTION AGAINST DIALOGIC UNDER OR WITH RESPECT TO THIS
AGREEMENT OR WITH RESPECT TO ANY SERVICE CONTRACTED FOR OR FURNISHED UNDER THIS
AGREEMENT WILL BE BARRED UNLESS IT IS COMMENCED WITHIN TWO (2) YEARS AFTER THE
DATE THE CAUSE OF THE ACTION ARISES.
13. FORCE MAJEURE
DIALOGIC will have no liability for damages due to fire; explosion; lightning;
pest damage; power surges or failures; strikes or labor disputes; water; acts of
God; the elements; war; civil disturbances, acts of civil or military
authorities or the public enemy; inability to secure raw materials, products or
transportation facilities; fuel or energy shortages; acts or omissions of
communications carriers; or other causes beyond DIALOGIC's control, whether or
not similar to the foregoing.
14. WORKMANSHIP
The Services to be provided by DIALOGIC under this Agreement will proceed with
diligence and will be executed in accordance with ordinarily acceptable
practices in the field to which the work pertains, as well as any standards set
forth in Exhibit A.
15. CHANGES
Customer may request changes in the work being performed under this Agreement.
If DIALOGIC agrees to the change, the change must be confirmed in writing and
signed by authorized representatives of both parties. A reasonable adjustment
will be made if any such change affects the time of performance or the cost of
the work to be performed under this Agreement. If Customer delays matters in
the course of the work, a commensurate deferral of the due date and/or an
adjustment in the price will occur.
16. PLANT RULES AND SECURITY REQUIREMENTS
The employees and agents of each party will, while on the premises of the other,
comply with all plant rules and regulations in effect at such premises,
including security requirements.
17. PUBLICITY
Customer will not issue or release for publication any articles or advertising
or publicity matter relating to the work performed hereunder or mentioning or
implying the name of DIALOGIC or any of its affiliates or personnel of the
foregoing, unless prior written consent is granted by DIALOGIC .
18. WARRANTIES
EXCEPT AS SPECIFICALLY MADE HEREIN, DIALOGIC AND ITS AFFILIATED SUBCONTRACTORS
AND SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIM
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
19. GENERAL
A. If any paragraph, or clause thereof, of this Agreement will be held to be
invalid or unenforceable in any jurisdiction in which this Agreement applies,
then the meaning of such paragraph or clause will be construed so as to render
it enforceable to the extent feasible; and if no feasible interpretation would
save such paragraph or clause, it shall be severed from this Agreement and the
remainder will remain in full force and effect. However, in the event such
paragraph or clause is considered an essential element of the Agreement, the
Parties will promptly negotiate a replacement thereof.
B. If either party fails, at any time, to enforce any right or remedy
available to it under this Agreement, that failure will not be construed to be a
waiver of the right or remedy with respect to any other breach or failure by the
other party.
C. The construction, interpretation and performance of this Agreement will be
construed in accordance with and governed by the laws of the State of New
Jersey.
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D. Exhibits A and B are incorporated herein.
E. THIS IS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE
SERVICES PROVIDED HEREUNDER AND SUPERSEDES ALL PRIOR AGREEMENTS, PROPOSALS OR
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL.
DIALOGIC CORPORATION INTERACTIVE INTELLIGENCE, INC.
By:/s/ John G. Alferi By: /s/ John R. Gibbs
---------------------------------- ----------------------------------
Title: President Sales & Services Title: Executive Vice President
The Americas
------------------------------- -------------------------------
Date: February 19, 1999 Date: February 24, 1999
-------------------------------- --------------------------------
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Exhibit 10.8(i)
CONSULTING AND EMPLOYMENT AGREEMENT
THIS CONSULTING AND EMPLOYMENT AGREEMENT ("Agreement"), made and
entered into effective as of the 2nd day of January, 1995, by and between John
R. Gibbs ("Gibbs") and Interactive Intelligence, Inc. ("Company"), an Indiana
corporation.
WITNESSETH:
WHEREAS, Gibbs possesses certain skills which the Company wishes to
utilize in its business, and Gibbs wishes to provide certain services to the
Company upon the terms and conditions set forth in this Agreement; and
WHEREAS, Gibbs is a co-founder of the Company with Dr. Donald E. Brown
and has assisted with the Company since October, 1994.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt, legal adequacy and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. CONSULTING AND EMPLOYMENT. The Company engages Gibbs to
serve the Company, and Gibbs agrees to serve the Company, as a consultant to
provide the services described herein and as an employee in such capacities as
the Board of Directors of the Company may, from time to time, determine, upon
the terms and conditions hereinafter set forth.
SECTION 2. TERM; RENEWAL. (a) The term of Gibbs' service as a
consultant shall commence effective as of January 2, 1995 and end on June 30,
1995.
(b) The term of Gibbs' employment under this Agreement shall be for an
initial term of one (1) year and six (6) months commencing on July 1, 1995 and
ending on December 31, 1996. This Agreement shall automatically renew for
successive one (1) year terms, on the same terms set forth herein, unless either
the Company or Gibbs gives written notice to the other, at least thirty (30)
days prior to the expiration of the initial term or any renewal term, that the
term will not renew.
SECTION 3. TITLE, SERVICES AND DUTIES. (a) During his service as a
consultant, Gibbs shall provide advice and consultation with respect to the
administrative operations and management of the Company for at least twenty (20)
hours per week at such times and locations as may be mutually agreed upon by the
Company and Gibbs. The Company may, but shall not be obligated to, provide
office facilities and support services to Gibbs during his service as a
consultant. Gibbs represents that he has adequate facilities and support
services to fulfill his consulting duties under this Agreement.
(b) During his term of employment hereunder, Gibbs shall serve as
Executive Vice President of Administration and Corporate Development and shall
perform duties and responsibilities normally associated with such a position in
the Company's industry including the
<PAGE>
administrative and corporate affairs management of the Company, and such other
duties that may be delegated to him by the CEO or the Company's Board of
Directors. During such employment Gibbs shall devote substantially all of his
business time, attention, energy and skill to the business of the Company and
shall perform such services in a faithful and diligent manner at the direction
of the CEO and of the Company's Board of Directors. During Gibbs' employment,
the Company shall provide Gibbs with such office facilities and support service
as the Company determines in its business judgment to be appropriate for Gibbs
to perform his duties and responsibilities hereunder.
SECTION 4. CONSULTING FEE. (a) Commencing on January 2, 1995 and ending
on June 30, 1995, the Company shall pay Gibbs a monthly consulting fee of Two
Thousand Five Hundred and No/100 Dollars ($2,500.00). Payment of such monthly
consulting fee shall occur on the last day of each applicable month during such
time period. Gibbs shall be responsible for payment of all applicable local,
state and federal withholding taxes on any consulting fees paid hereunder.
(b) The Company also agrees to reimburse Gibbs for reasonable and
customary expenses incurred by him in the performance of his consulting services
hereunder, up to a maximum of Five Hundred and No/100 Dollars ($500.00) per
month, subject to submission of such receipts or other verification as the
Company may reasonably require. Any expense amount in excess of Five Hundred and
No/100 Dollars ($5 00.00) per month shall have the prior approval of the CEO.
SECTION 5. COMPENSATION AS EMPLOYEE. Commencing on July 1, 1995, and at
all times thereafter during the initial term or any renewal term of this
Agreement, the Company shall pay Gibbs an annual salary of Sixty Thousand
Dollars ($60,000.00) payable at the usual payroll payment dates of the Company.
All amounts paid hereunder by Company to Gibbs shall be subject to all
applicable local, state and federal withholding taxes. The Company may increase
the salary set forth herein from time to time, in its sole discretion, but may
not decrease it below the amount set forth without the consent of Gibbs. The
Company in its discretion may also pay Gibbs bonuses from time to time in such
amounts and upon such terms as the Company determines is appropriate.
SECTION 6. STOCK OPTIONS. The Company agrees to grant to Gibbs
incentive stock options to purchase up to one hundred eleven thousand one
hundred eleven (111,111) shares of its common stock to be exercised upon and
subject to the terms and conditions of an Incentive Stock Option Plan to be
adopted by the Company, and such other terms and conditions as Gibbs and the
Company may agree. The Company in its discretion may also grant to Gibbs
additional options from time to time in such amounts and upon such terms as the
Company determines to be appropriate.
SECTION 7. TERMINATION AND SEVERANCE PAYMENTS. (a) In the event the
consulting services of Gibbs are terminated for any reason, the Company will pay
Gibbs his consulting fee through the effective date of termination.
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(b) In the event that the employment of Gibbs is terminated for cause
or in the event that Gibbs resigns his employment with the Company, Gibbs shall
be paid any salary and any other benefits which have then accrued and to which
he is entitled to at such time through the effective date of such termination.
However, in such event, Gibbs shall not be entitled to any severance
compensation.
(c) In the event that the employment of Gibbs is terminated by the
Company for any reason other than for cause, in addition to receiving all
accrued salary and benefits to which Gibbs is entitled to at such time, the
Company further agrees to pay Gibbs as severance pay three (3) month's salary
(as in effect at such time) for an additional three (3) months from the date of
termination, with payments to be made on the Company's usual payroll payment
dates.
(d) All amounts paid under subsections (b) or (c) shall be subject to
all applicable local, state or federal withholding taxes, if any.
SECTION 8. EMPLOYEE BENEFITS. During the term of Gibbs' employment
hereunder:
(a) Gibbs shall be covered by any life, health, hospitalization or any
other insurance program, or any other pension or benefit plan which the Company
may from time to time provide or make available to the Company's employees or
its senior management and for which Gibbs is eligible and qualified; provided
that if the inclusion of Gibbs under any such program or plan causes or would
cause either such program or plan to be terminated or the Company to incur a
materially disproportionate additional cost, the Company may elect to provide
benefits of a substantially similar nature which avoids such adverse effects.
The Company acknowledges that it is obligated to provide these benefits in any
event.
(b) Gibbs shall be entitled to four (4) weeks of vacation each year,
during which time his compensation shall be paid in full. Any unused vacation
shall lapse at the end of each calendar year and Gibbs shall have no right to
any additional compensation for unused vacation; provided that if because of the
Company's requirements, the Company does not approve Gibbs' requested vacation
schedule and thus prevents Gibbs from fully utilizing all of Gibbs'vacation in
the year earned, the Company and Gibbs shall in good faith make arrangements for
either the carryover of such unused vacation to, the next calendar year or such
other arrangements as are mutually satisfactory.
(c) Gibbs shall be entitled to reimbursement for reasonable expenses
incurred on behalf of the Company according to and in compliance with such
reimbursement policies as the Company adopts from time to time.
SECTION 9. COVENANT NOT TO COMPETE. (a) During Gibbs'service hereunder
as either a consultant or an employee and for a period of twelve (12) months
thereafter, regardless of the reason or method of termination, Gibbs will not,
directly or indirectly:
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(i) solicit in any manner, seek to obtain, or service the
business of any customer of the Company, other than
for the Company, in connection with any transactions,
business plan, project or endeavor which would have
an adverse affect upon the Company or upon the
Company's relations with such customer;
(ii) become an owner of any business, if such business
competes with the Company;
(iii) become employed by or serve as an agent, independent
contractor or representative of any business which
competes with the Company; or
(iv) solicit the employment of any Employee of the
Company, or encourage any Employee to terminate his
or her employment with the Company.
(b) For purposes of this Agreement, a "customer" shall be deemed to be
any person, business, partnership, proprietorship, firm, organization or
corporation which has done business with the Company or which has been solicited
or serviced in any manner, directly or indirectly, by the Company within
eighteen (18) months prior to the date of the termination of Gibbs and the
phrase "service the business of any customer" means the development,
modification, enhancement or improvement of any product or service offered by
the Company or which is reasonably related to the products or services offered
by the Company. Gibbs hereby acknowledges that, by virtue of his position and
access to information whether as a consultant or as an employee, he will have
advantageous familiarity and personal contacts with the Company's customers,
wherever located and that the restrictions contemplated hereby are reasonable
for the protection of the Company's goodwill and customer base, and the
Company's efforts in the development of such customers.
(c) If Gibbs does not comply with the provisions of this Section 9, the
twelve (12) month period of non-competition provided herein shall be tolled and
deemed not to run during any period(s) of noncompliance, the intention of the
parties being to provide twelve (12) full months of non-competition by Gibbs
after the termination or expiration of this Agreement.
SECTION 10. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. (a) The
term "Confidential Information" as used herein shall mean any and all customer
lists, trade secrets and information, know-how, skills, knowledge, ideas,
knowledge of customer's commercial requirements, pricing methods, sales and
marketing techniques, dealer relationships and agreements, financial
information, intellectual property, codes, research, development, research and
development programs, processes, documentation, or devices used in or pertaining
to the Company's business (i) which relate in any way to the Company's business,
products or processes; or (ii) which are discovered, conceived, developed or
reduced to practice by Gibbs,
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either alone or with others either (x) during the term of this Agreement; or (y)
at the Company's expense; or (z) on the Company's premises.
(b) During the course of his services hereunder, whether as a
consultant or an employee, Gibbs may become knowledgeable about, or become in
possession of, Confidential Information. If such Confidential Information were
to be divulged or become known to any competitor of the Company or to any other
person outside the employ of the Company, or if Gibbs were to consent to be
employed by any competitor of the Company or to engage in competition with the
Company, the Company would be harmed. In addition, Gibbs has or may develop
relationships with the Company's customers which could be used to solicit the
business of such customers away from the Company. The parties have entered into
this Agreement to guard against such potential harm.
(c) Gibbs shall not, directly or indirectly, use any Confidential
Information for any purpose other than the benefit of the Company or
communicate, deliver, exhibit or provide any Confidential Information to any
person, firm, partnership, corporation, organization or entity, except other
employees or agents of the Company as required in the normal course of Gibbs'
service as a consultant or as an employee. The covenant contained in this
Section 10 shall be binding upon Gibbs during the term of this Agreement and
following the termination hereof, or the shorter of the period until either (i)
until such Confidential Information becomes obsolete; or (ii) until such
Confidential Information becomes generally known in the Company's trade or
industry by means other than a breach of this covenant.
(d) Gibbs agrees that all Confidential Information and all records,
documents and materials relating to all of such Confidential Information, shall
be and remain the sole and exclusive property of the Company.
SECTION 11. REMEDIES. (a) Gibbs agrees that the Company will suffer
irreparable damage and injury and will not have an adequate remedy at law in the
event of any breach by Gibbs of any provision of Sections 9 or 10 hereof.
Accordingly, in the event of a breach or of a threatened or attempted breach by
Gibbs of Sections 9 or 10 hereof, in addition to all other remedies to which the
Company is entitled under law, in equity, or otherwise, the Company shall be
entitled to a temporary restraining order and permanent injunction (without the
necessity of showing any actual damage) or a decree of specific performance of
the provisions of Sections 9 or 10 hereof and no bond or other security shall be
required in that connection. The Company shall be entitled to recover from
Gibbs, reasonable attorneys' fees and expenses incurred in any action wherein
the Company successfully enforces the provisions of Sections 9 or 10 hereof
against the breach or threatened breach of those provisions by Gibbs.
(b) Gibbs acknowledges and agrees that in the event of termination of
this Agreement for any reason whatsoever, Gibbs can obtain other engagements or
employment of a kind and nature similar to that contemplated herein and that the
issuance of an in unction to enforce the provisions of Sections 9 or 10 hereof
will not prevent him from earning a livelihood.
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(c) The covenants on the part of Gibbs contained in Sections 9 or 10
hereof are essential terms and conditions to the Company entering into this
Agreement, and shall be construed as independent of any other provision in this
Agreement. The existence of any claim or cause of action Gibbs has against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of these covenants.
SECTION 12. INVENTIONS. (a) Gibbs shall disclose fully to the Company
all inventions conceived or discovered by him, whether solely or jointly with
others during the term of this Agreement. Such inventions shall belong solely to
the Company and shall not belong to Gibbs. During the term of this Agreement,
Gibbs shall assign to the Company, exclusively and free from any royalty
obligation or any other legal or equitable title or right of Gibbs, all such
inventions referred to above and all patents, trademarks, copyrights, and
maskworks, and any and all applications and rights pertaining thereto on a
worldwide basis. Gibbs shall assist the Company, during and subsequent to the
term hereof, employment, in every proper way, as reasonably requested by the
Company to fully vest such inventions in the Company for its benefit and
enjoyment, including, but not in limitation thereof, the execution and delivery
of applications for the registration of one or more intellectual property rights
and assignments of the same as may be deemed necessary or desirable by the
Company. The judgment of the Company with respect to the registrability of any
particular item of intellectual property shall be final and conclusive.
(b) Any improvements made upon such inventions by Gibbs subsequent to
the term hereof shall be presumed to have been developed during the term hereof
and by and for the benefit of the Company and accordingly shall be the property
of the Company.
(c) Gibbs agrees to execute such other standard forms relating to the
invention or development of inventions and other intellectual properties as the
Company may require of its consultants and Gibbs generally.
(d) Prior inventions of Gibbs, if any, as listed on Exhibit B attached
hereto, are excluded from the scope of this Agreement.
SECTION 13. SURRENDER OF RECORDS. Upon termination of Gibbs' consulting
services or employment for any reason, Gibbs shall immediately surrender to the
Company any and all records, notes, documents, forms, manuals, photographs,
instructions, lists, drawings, blueprints, programs, diagrams or other written
or printed material (including any and all copies made at any time whatsoever)
in his possession or control which pertain to the business of the Company;
provided that Gibbs may retain a copy of personal time-logs, telephone logs, and
address records prepared by him during the term of this Agreement, personal
notes and other tangible materials which are not "Confidential Information"
within the scope of the covenant contained in Section 10 hereof. Gibbs
acknowledges that the retention of such materials shall not modify or diminish
in any regard any limits on the use thereof imposed by the covenants contained
in Sections 9 and 10 hereof.
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SECTION 14. TERMINATION. (a) The term of Gibbs' service as a consultant
may be terminated at will by either the Company or Gibbs with at least ten (10)
days prior written notice by the terminating party delivered to the other.
(b) During the initial term or any such renewal term, the employment of
Gibbs may be terminated at will for any reason by either the Company or Gibbs,
with at least thirty (30) days prior written notice by the terminating party
delivered to the other setting forth whether such termination was for cause or
without cause to determine whether Gibbs is entitled to any severance payment
pursuant to Section 7 above.
(c) Notwithstanding the foregoing, this Agreement shall be terminated
immediately, without any notice or waiting period, upon Gibbs' death.
(d) This Agreement may be terminated at any time by mutual agreement of
the parties.
SECTION 15. PARTIES BOUND. All provisions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
SECTION 16. EFFECT AND MODIFICATION. This Agreement comprises the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other earlier agreements relating to the subject matter
hereof. No statement or promise, except as herein set forth, has been made with
respect to the subject matter of this Agreement. No modification or amendment
hereof shall be effective unless in writing and signed by Gibbs and an officer
of the Company (other than Gibbs).
SECTION 17. NON-WAIVER. The Company's or Gibbs' failure or refusal to
enforce all or any part of, or the Company's or Gibbs' waiver of any breach of
this Agreement, shall not be a waiver of the Company's or Gibbs' continuing or
subsequent rights under this Agreement, nor shall such failure or refusal or
waiver have any affect on the subsequent enforceability of this Agreement.
SECTION 18. NON-ASSIGN ABILITY. This Agreement contemplates that Gibbs
will personally provide the services described herein, and accordingly, Gibbs
may not assign his rights or obligations hereunder, whether by operation of law
or otherwise, in whole or in part, without the prior written consent of the
Company.
SECTION 19. NOTICE. Any notice, request, instruction or other document
to be given hereunder to any party shall be in writing and delivered by hand,
telegram, registered or certified United States mail return receipt requested,
or other form of receipted delivery, with all expenses of delivery prepaid, as
follows:
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If to Gibbs: John R. Gibbs
1800 Summerlakes Court
Carmel, Indiana 46032
If to the Employer: Interactive Intelligence, Inc.
3500 DePauw Boulevard
Indianapolis, Indiana 46268
Attn: Donald E. Brown, M.D., CEO
SECTION 20. GOVERNING LAW. This Agreement is being delivered in and
shall be governed by the laws of the State of Indiana. All actions or
proceedings shall be tried in the state or federal courts whose venue includes
Marion County or Hamilton County, Indiana.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
/s/ John R. Gibbs
-------------------------------
John R. Gibbs
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Donald E. Brown
-------------------------------
Donald E. Brown, M.D., CEO
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into,
effective as of 30th day of June 1997, by and between Michael E. Ford
("Employee") and Interactive Intelligence, Inc. ("Company"), an Indiana
corporation.
WITNESSETH:
WHEREAS, the Employee possesses certain skills which the Company wishes
to utilize in its business, and the Employee wishes to provide certain
services to the Company upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt, legal adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. EMPLOYMENT. The Company engages the Employee to serve the
Company, and the Employee agrees to serve the Company as an employee in such
capacities as the Board of Directors of the Company may, from time to time,
determine, upon the terms and conditions hereinafter set forth.
SECTION 2. TERM; RENEWAL. The term of the Employee's employment under
this Agreement shall be for an initial term commencing and ending on the
dates set forth on the Addendum attached hereto and incorporated herein by
reference ("Addendum"), which term shall automatically renew for successive
one (1) year terms, on the same terms and conditions set forth herein unless
either the Company or the Employee gives written notice to the other, at
least thirty (30) days prior to the expiration of the initial term or any
renewal term, that the term will not renew.
SECTION 3. TITLE, SERVICES AND DUTIES.
(a) During the term of employment hereunder, the Employee shall serve
in the capacities described on the Addendum and shall perform the duties and
responsibilities described on the Addendum or as are normally associated with
such a position in the Company's industry and as may be delegated to the
Employee by the President or the Company's Board of Directors.
(b) During such employment, the Employee shall devote substantially all
of the Employee's business time, attention, energy and skill to the business
of the Company, and shall perform such services in a faithful, competent and
diligent manner at the direction of the President and of the Company's Board
of Directors.
(c) During the Employee's employment, the Company shall provide the
Employee with such office facilities and support services as the Company
determines in its business judgment to be appropriate for the Employee to
perform the Employee's duties and responsibilities hereunder.
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(d) The Employee shall comply with all policies and procedures adopted
by the Company from time to time, including without limitation, policies
regarding reimbursement for business expenses incurred on behalf of the
Company, and compliance with applicable laws.
SECTION 4. COMPENSATION AS EMPLOYEE. At all times during the initial
term or any renewal term of this Agreement, the Company shall pay the
Employee an annual salary in the amount set forth in the Addendum, payable at
the usual payroll payment dates of the Company, and any other options or
benefits set forth in the Addendum. All amounts paid hereunder by Company to
the Employee shall be subject to all applicable local, state and federal
withholding taxes. The Company may increase or decrease the salary set forth
herein from time to time, in its sole discretion, but any decrease may only
be made upon fifteen (15) days prior notice.
SECTION 5. TERMINATION AND SEVERANCE PAYMENTS
(a) In the event that the employment of the Employee is terminated for
cause or in the event that the Employee resigns his/her employment with the
Company, the Employee shall be paid any salary and any other benefits which
have then accrued and to which the Employee is entitled to at such time.
However, in such event, the Employee shall not be entitled to any severance
compensation as set forth in subparagraph (b) below.
(b) In the event that the employment of the Employee is terminated by
the Company for any reason other than for cause, in addition to receiving all
accrued salary and benefits to which the Employee is entitled to at such
time, the Company further agrees to pay the Employee as severance pay an
amount equal to the Employee's salary as in effect at such time for an
additional one (1) month from the date of termination, with payments to be
made on the Company's usual payroll payment dates.
(c) All amounts paid under Subsections (a) or (b) hereof to the
Employee shall be subject to all applicable local, state or federal
withholding taxes, if any.
SECTION 6. EMPLOYEE BENEFITS.
(a) The Employee shall be limited each calendar year to a vacation
benefit for the amount of time shown in the Addendum (prorated from the date
of commencement to the end of that applicable calendar year). All vacation
benefits must be fully utilized in the calendar year in which accrued,
provided that (i) no vacation may be taken during the first six (6) months of
the initial term hereof without the prior written consent of the Company,
(ii) the Employee must comply with procedures adopted from time to time by
the Company with respect to the scheduling of vacations, and (iii) if because
of the Company's requirements, the Company does not approve the Employee's
requested vacation schedule and thus prevents the Employee from fully
utilizing all of the Employee's vacation in the year earned, the Company and
the Employee shall in good faith make arrangements for either the carryover
of such unused vacation to the next calendar year or such other arrangements
as are mutually satisfactory.
(b) During the term of the Employee's employment hereunder, the
Employee shall be entitled to participate, upon the same terms and conditions
applicable to employees generally in any life,
2
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health, hospitalization or any other insurance program, or any other pension
or benefit plan which the Company may from time to time provide or make
available to the Company's employees and for which the Employee is eligible
and qualified; provided that if the inclusion of the Employee under any such
program or plan causes or would cause either such program or plan to be
terminated or the Company to incur a materially disproportionate additional
cost, the Company may elect to provide benefits of a substantially similar
nature which avoids such adverse effects.
SECTION 7. COVENANT NOT TO COMPETE.
(a) During the Employee's service hereunder and for a period of
eighteen (18) months thereafter, regardless of the reason or method of
termination, the Employee will not, directly or indirectly, for the
Employee's own benefit or the benefit of any other person or entity:
(i) solicit in any manner, seek to obtain, or service the business
of any customer of the Company, other than for the Company;
(ii) become an owner of any business, if such business competes
with the Company;
(iii) become employed by or serve as an agent, independent
contractor or representative of any business which competes with the Company;
(iv) solicit the employment of or hire any employee of the Company,
or encourage any employee to terminate his or her employment with the
Company; or
(v) prepare in any manner to compete with the Company.
(b) For purposes of this Agreement, a "customer" shall be deemed to be
any person, business, partnership, proprietorship, firm, organization or
corporation which has done business with the Company or which has been
solicited or serviced in any manner, directly or indirectly, by the Company
within eighteen (18) months prior to the date of the termination of the
Employee, and the phrase "service the business of any customer" means the
development, modification, enhancement or improvement of any product or
service offered by the Company or which is reasonably related to the products
or services offered by the Company. The Employee hereby acknowledges that, by
virtue of the Employee's position and access to information, the Employee
will have advantageous familiarity and personal contacts with the Company's
customers, wherever located, and that the restrictions contemplated hereby
are reasonable for the protection of the Company's goodwill and customer
base, and the Company's efforts in the development of such customers.
(c) If the Employee does not comply with the provisions of this Section
7, the eighteen (18) month period of non-competition provided herein shall be
tolled and deemed not to run during any period(s) of noncompliance, the
intention of the parties being to provide eighteen (18) full months of
non-competition by the Employee after the termination or expiration of this
Agreement.
SECTION 8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION.
(a) The term "Confidential Information" as used herein shall mean any
and all software programs, customer lists, trade secrets and information,
know-how, skills, knowledge, ideas, knowledge of customer's commercial
requirements, pricing methods, sales and marketing techniques, dealer
relationships and agreements, financial information, intellectual property,
codes, algorithms, research, development, research and development programs,
processes, documentation, inventions, or devices used in or pertaining to the
Company's business (i) which relate in any way
3
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to the Company's business, products or processes; or (ii) which are
discovered, conceived, developed or reduced to practice by the Employee,
either alone or with others either (x) during the term of this Agreement; or
(y) at the Company's expense; or (z) on the Company's premises or with the
Company's equipment.
(b) During the course of his/her services hereunder, the Employee may
become knowledgeable about, or become in possession of, Confidential
Information. If such Confidential Information were to be divulged or become
known to any competitor of the Company or to any other person outside the
employ of the Company, or if the Employee were to consent to be employed by
any competitor of the Company or to engage in competition with the Company,
the Company would be harmed. In addition, the Employee has or may develop
relationships with the Company's customers which could be used to solicit the
business of such customers away from the Company. The parties have entered
into this Agreement to guard against such potential harm.
(c) The Employee shall not, directly or indirectly, use any
Confidential Information for any purpose other than the benefit of the
Company or communicate, deliver, exhibit or provide any Confidential
Information to any person, firm, partnership, corporation, organization or
entity, except other employees or agents of the Company as required in the
normal course of the Employee's service as an employee or except as the
President or any authorized officer of the Company may direct in writing.
The covenant contained in this Section 8 shall be binding upon the Employee
during the term of this Agreement and following the termination hereof, for
the shorter of the period until either (i) until such Confidential
Information becomes obsolete; or (ii) until such Confidential Information
becomes generally known in the Company's trade or industry by means other
than a breach of this covenant.
(d) The Employee agrees that all Confidential Information and all
records, documents and materials relating to all of such Confidential
Information, shall be and remain the sole and exclusive property of the
Company.
SECTION 9. REMEDIES.
(a) The Employee agrees that the Company will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by the Employee of any provision of Sections 7 or 8 hereof.
Accordingly, in the event of a breach or of a threatened or attempted breach
by the Employee of Sections 7 or 8 hereof, in addition to all other remedies
to which the Company is entitled under law, in equity, or otherwise, the
Company shall be entitled to a temporary restraining order and permanent
injunction (without the necessity of showing any actual damage) or a decree
of specific performance of the provisions of Sections 7 or 8 hereof and no
bond or other security shall be required in that connection. The Company
shall be entitled to recover from the Employee, reasonable attorneys' fees
and expenses incurred in any action wherein the Company successfully enforces
the provisions of Sections 7 or 8 hereof against the breach or threatened
breach of those provisions by the Employee.
(b) The Employee acknowledges and agrees that in the event of
termination of this Agreement for any reason whatsoever, the Employee can
obtain other engagements or employment of a kind and nature similar to that
contemplated herein and that the issuance of an injunction to
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enforce the provisions of Sections 7 or 8 hereof will not prevent the
Employee from earning a livelihood.
(c) The covenants on the part of the Employee contained in Sections 7
or 8 hereof are essential terms and conditions to the Company entering into
this Agreement, and shall be construed as independent of any other provision
in this Agreement. The existence of any claim or cause of action the
Employee has against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of these covenants.
SECTION 10. INVENTIONS.
(a) The Employee shall disclose fully to the Company all inventions (as
defined below) conceived or discovered by the Employee, whether solely or
jointly with others during the term of this Agreement. Such inventions shall
belong solely to the Company and shall not belong to the Employee. During
the term of this Agreement, the Employee shall assign to the Company,
exclusively and free from any royalty obligation or any other legal or
equitable title or right of the Employee, all such inventions referred to
above and all patents, trademarks, copyrights, and maskworks, and any and all
applications and rights pertaining thereto on a worldwide basis. The
Employee shall assist the Company, during and subsequent to the term hereof,
in every proper way, but without any further compensation or additional
consideration, to transfer and assign such inventions to and for the
Company's benefit and enjoyment and to cooperate as may be reasonably
requested to perfect the Company's ownership therein and, if requested by the
Company, to prosecute or direct in prosecuting any application for or
registration with respect to any patent or other applicable intellectual
property right, including, but not in limitation thereof, the execution and
delivery of applications for the registration of one or more intellectual
property rights and assignments of the same as may be deemed necessary or
desirable by the Company in any office selected by the Company. The judgment
of the Company with respect to the registrability of any particular item of
intellectual property shall be final and conclusive as between the Employee
and the Company.
(b) Any improvements made upon such inventions by the Employee
subsequent to the term hereof shall be presumed to have been developed during
the term hereof and by and for the benefit of the Company and accordingly
shall be the property of the Company.
(c) The Employee agrees to execute such other standard forms relating
to the invention or development of inventions and other intellectual
properties as the Company may require of its consultants and employees
generally.
(d) Prior inventions of the Employee, if any, as listed on the
Addendum, are excluded from the scope of this Agreement.
(e) For purposes of this Agreement, "inventions" includes all
inventions, creations, developments, software programs, algorithms, routines,
patterns, components, compilations, devices, or improvements of any kind or
nature, whether or not trade secret, patented, patentable, copyrighted or
copyrightable, which the Employee had made or conceived or developed or may
make, conceive or develop, either solely or jointly with others, while in the
employ of the Company or with the use of the Company's time, materials,
equipment or facilities or relating in any way to the Company's
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actual, anticipated, or subsequently arising business, products, services or
activities, or arising out of or suggested by any task assigned to be
performed by the Employee, solely or jointly with others, for or on behalf of
the Company.
SECTION 11. SURRENDER OF RECORDS. Upon termination of the Employee's
employment for any reason, the Employee shall immediately surrender to the
Company any and all records, notes, documents, forms, manuals, photographs,
instructions, lists, drawings, blueprints, programs, diagrams or other
written, printed or electronic material (including any and all copies made at
any time whatsoever) in his or her possession or control which pertain to the
business of the Company.
SECTION 12. TERMINATION. During the initial term or any renewal term,
the employment of the Employee may be terminated at will for any reason by
either the Company or the Employee, with at least ten (10) days prior written
notice by the terminating party delivered to the other setting forth whether
such termination was for cause or without cause to determine whether the
Employee is entitled to any severance payment pursuant to Section 5 above.
Notwithstanding the foregoing, this Agreement shall be terminated
immediately, without any notice or waiting period, upon the Employee's death.
This Agreement may be terminated at any time by mutual agreement of the
parties.
SECTION 13. PARTIES BOUND. All provisions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their heirs,
personal representatives, successors and assigns.
SECTION 14. EFFECT AND MODIFICATION. This Agreement comprises the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all other earlier agreements relating to the subject
matter hereof. No statement or promise, except as herein set forth, has been
made with respect to the subject matter of this Agreement. No modification
or amendment hereof shall be effective unless in writing and signed by the
Employee and an officer of the Company (other than the Employee).
SECTION 15. NON-WAIVER. The Company's or the Employee's failure or
refusal to enforce all or any part of, or the Company's or the Employee's
waiver of any breach of this Agreement, shall not be a waiver of the
Company's or the Employee's continuing or subsequent rights under this
Agreement, nor shall such failure or refusal or waiver have any affect on the
subsequent enforceability of this Agreement.
SECTION 16. NON-ASSIGNABILITY. This Agreement contemplates that the
Employee will personally provide the services described herein, and
accordingly, the Employee may not assign the Employee's rights or obligations
hereunder, whether by operation of law or otherwise, in whole or in part,
without the prior written consent of the Company.
SECTION 17. NOTICE. Any notice, request, instruction or other document
to be given hereunder to any party shall be in writing and delivered by hand,
telegram, registered or certified United States mail return receipt
requested, or other form of receipted delivery, with all expenses of delivery
prepaid, as follows:
If to the Employee: To the most recent address the Company has on
its records.
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Employees most recent address (please fill in):
8675 River Trace
Roswell, Georgia 30076
If to the Company: Interactive Intelligence, Inc.
3500 DePauw Boulevard, Suite 1060
Indianapolis, Indiana 46268
Attn: Donald E. Brown, M.D., President
Any notice to the employee shall also be sufficient, if sent to the most
recent address of the employee on the Company's books and records.
SECTION 18. GOVERNING LAW. This Agreement is being delivered in and
shall be governed by the laws of the State of Indiana. All actions or
proceedings shall be tried in the state or federal courts whose venue
includes Marion County or Hamilton County, Indiana.
SECTION 19. PRIOR AGREEMENTS.
(a) The Employee represents and warrants to the Company that the
Employee is not a party to or otherwise bound by any agreement that would
restrict in any way the performance by the Employee of the Employee's duties,
services and obligations under this Agreement, that the Employee has
disclosed to the Company all employment type agreements to which the Employee
has been bound, including without limitation employment agreements,
consulting agreements, non-compete agreements or covenants, confidentiality
or non-disclosure agreements or covenants, and intellectual property
assignment agreements, and that the Company will not have any liability to
any third party arising out of the Employee entering into this Agreement or
performing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
/s/ Michael E. Ford
---------------------------------------
Printed: Michael E. Ford
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Donald E. Brown
---------------------------------------
Donald E. Brown, M.D., President
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<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
BETWEEN INTERACTIVE INTELLIGENCE, INC.
AND
MICHAEL E. FORD, DATED JUNE 30, 1997
This Addendum relates to the Employment Agreement between Interactive
Intelligence, Inc. and, Michael E. Ford, dated June 30, 1997. This Addendum
is incorporated therein by reference and shall be an integral part of the
Employment Agreement.
<TABLE>
<S> <C>
1. Name of Employee: Michael E. Ford
2. Initial Term: Two (2) Years
3. Date of Commencement: June 30, 1997
4. Date Initial Term Ends: June 29, 1999
5. Title: Director of Sales, Europe, Africa and Middle East
6. Job Description: International Sales Activities
7. Initial Compensation: $85,000 (eighty-five thousand dollars and no
cents) salary per year + compensation plan
8. Stock Options:
- Plan Incentive Stock Option Plan ("Qualified")
- Number 20,000 (twenty thousand) shares
- Exercise Price $1.30 (one dollar and thirty cents) per share
9. Amount of Vacation: Two (2) weeks per calendar year
10. Other Benefits: Medical and Dental Insurance, 401k Plan,
Long Term Disability, Cafeteria 125 Plan
11. Prior Inventions: ________________________________________
</TABLE>
Date: June 30, 1997 DEB MEF
-------- --------
Initials Initials
(#31613 and 40525)
152537
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into,
effective as of February 10, 1997, by and between Keith A. Midkiff and
Interactive Intelligence, Inc. ("Company"), an Indiana corporation.
WITNESSETH:
WHEREAS, the Employee possesses certain skills which the Company wishes
to utilize in its business, and the Employee wishes to provide certain
services to the Company upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt, legal adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. EMPLOYMENT. The Company engages the Employee to serve the
Company, and the Employee agrees to serve the Company as an employee in such
capacities as the Board of Directors of the Company may, from time to time,
determine, upon the terms and conditions hereinafter set forth.
SECTION 2. TERM; RENEWAL. The term of the Employee's employment under
this Agreement shall be for an initial term commencing and ending on the
dates set forth on the Addendum attached hereto and incorporated herein by
reference ("Addendum"), which term shall automatically renew for successive
one (1) year terms, on the same terms and conditions set forth herein unless
either the Company or the Employee gives written notice to the other, at
least thirty (30) days prior to the expiration of the initial term or any
renewal term, that the term will not renew.
SECTION 3. TITLE, SERVICES AND DUTIES.
(a) During the term of employment hereunder, the Employee shall serve
in the capacities described on the Addendum and shall perform the duties and
responsibilities described on the Addendum or as are normally associated with
such a position in the Company's industry and as may be delegated to the
Employee by the President or the Company's Board of Directors.
(b) During such employment, the Employee shall devote substantially all
of the Employee's business time, attention, energy and skill to the business
of the Company, and shall perform such services in a faithful, competent and
diligent manner at the direction of the President and of the Company's Board
of Directors.
(c) During the Employee's employment, the Company shall provide the
Employee with such office facilities and support services as the Company
determines in its business judgment to be appropriate for the Employee to
perform the Employee's duties and responsibilities hereunder.
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<PAGE>
(d) The Employee shall comply with all policies and procedures adopted
by the Company from time to time, including without limitation, policies
regarding reimbursement for business expenses incurred on behalf of the
Company, and compliance with applicable laws.
SECTION 4. COMPENSATION AS EMPLOYEE. At all times during the initial
term or any renewal term of this Agreement, the Company shall pay the
Employee an annual salary in the amount set forth in the Addendum, payable at
the usual payroll payment dates of the Company, and any other options or
benefits set forth in the Addendum. All amounts paid hereunder by Company to
the Employee shall be subject to all applicable local, state and federal
withholding taxes. The Company may increase or decrease the salary set forth
herein from time to time, in its sole discretion, but any decrease may only
be made upon fifteen (15) days prior notice.
SECTION 5. TERMINATION AND SEVERANCE PAYMENTS
(a) In the event that the employment of the Employee is terminated for
cause or in the event that the Employee resigns his/her employment with the
Company, the Employee shall be paid any salary and any other benefits which
have then accrued and to which the Employee is entitled to at such time.
However, in such event, the Employee shall not be entitled to any severance
compensation as set forth in subparagraph (b) below.
(b) In the event that the employment of the Employee is terminated by
the Company for any reason other than for cause, in addition to receiving all
accrued salary and benefits to which the Employee is entitled to at such
time, the Company further agrees to pay the Employee as severance pay an
amount equal to the Employee's salary as in effect at such time for an
additional one (1) month from the date of termination, with payments to be
made on the Company's usual payroll payment dates.
(c) All amounts paid under Subsections (a) or (b) hereof to the
Employee shall be subject to all applicable local, state or federal
withholding taxes, if any.
SECTION 6. EMPLOYEE BENEFITS.
(a) The Employee shall be limited each calendar year to a vacation
benefit for the amount of time shown in the Addendum (prorated from the date
of commencement to the end of that applicable calendar year). All vacation
benefits must be fully utilized in the calendar year in which accrued,
provided that (i) no vacation may be taken during the first six (6) months of
the initial term hereof without the prior written consent of the Company,
(ii) the Employee must comply with procedures adopted from time to time by
the Company with respect to the scheduling of vacations, and (iii) if because
of the Company's requirements, the Company does not approve the Employee's
requested vacation schedule and thus prevents the Employee from fully
utilizing all of the Employee's vacation in the year earned, the Company and
the Employee shall in good faith make arrangements for either the carryover
of such unused vacation to the next calendar year or such other arrangements
as are mutually satisfactory.
(b) During the term of the Employee's employment hereunder, the
Employee shall be entitled to participate, upon the same terms and conditions
applicable to employees generally in any life,
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health, hospitalization or any other insurance program, or any other pension
or benefit plan which the Company may from time to time provide or make
available to the Company's employees and for which the Employee is eligible
and qualified; provided that if the inclusion of the Employee under any such
program or plan causes or would cause either such program or plan to be
terminated or the Company to incur a materially disproportionate additional
cost, the Company may elect to provide benefits of a substantially similar
nature which avoids such adverse effects.
SECTION 7. COVENANT NOT TO COMPETE.
(a) During the Employee's service hereunder and for a period of
eighteen (18) months thereafter, regardless of the reason or method of
termination, the Employee will not, directly or indirectly, for the
Employee's own benefit or the benefit of any other person or entity:
(i) solicit in any manner, seek to obtain, or service the
business of any customer of the Company, other than for the Company;
(ii) become an owner of any business, if such business competes
with the Company;
(iii) become employed by or serve as an agent, independent
contractor or representative of any business which competes with the Company;
(iv) solicit the employment of or hire any employee of the
Company, or encourage any employee to terminate his or her employment with
the Company; or
(v) prepare in any manner to compete with the Company.
(b) For purposes of this Agreement, a "customer" shall be deemed to be
any person, business, partnership, proprietorship, firm, organization or
corporation which has done business with the Company or which has been
solicited or serviced in any manner, directly or indirectly, by the Company
within eighteen (18) months prior to the date of the termination of the
Employee, and the phrase "service the business of any customer" means the
development, modification, enhancement or improvement of any product or
service offered by the Company or which is reasonably related to the products
or services offered by the Company. The Employee hereby acknowledges that, by
virtue of the Employee's position and access to information, the Employee
will have advantageous familiarity and personal contacts with the Company's
customers, wherever located, and that the restrictions contemplated hereby
are reasonable for the protection of the Company's goodwill and customer
base, and the Company's efforts in the development of such customers.
(c) If the Employee does not comply with the provisions of this Section 7,
the eighteen (18) month period of non-competition provided herein shall be
tolled and deemed not to run during any period(s) of noncompliance, the
intention of the parties being to provide eighteen (18) full months of
non-competition by the Employee after the termination or expiration of this
Agreement.
SECTION 8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION.
(a) The term "Confidential Information" as used herein shall mean any
and all software programs, customer lists, trade secrets and information,
know-how, skills, knowledge, ideas, knowledge of customer's commercial
requirements, pricing methods, sales and marketing techniques, dealer
relationships and agreements, financial information, intellectual property,
codes, algorithms, research, development, research and development programs,
processes, documentation, inventions, or devices used in or pertaining to the
Company's business (i) which relate in any way
3
<PAGE>
to the Company's business, products or processes; or (ii) which are
discovered, conceived, developed or reduced to practice by the Employee,
either alone or with others either (x) during the term of this Agreement; or
(y) at the Company's expense; or (z) on the Company's premises or with the
Company's equipment.
(b) During the course of his/her services hereunder, the Employee may
become knowledgeable about, or become in possession of, Confidential
Information. If such Confidential Information were to be divulged or become
known to any competitor of the Company or to any other person outside the
employ of the Company, or if the Employee were to consent to be employed by
any competitor of the Company or to engage in competition with the Company,
the Company would be harmed. In addition, the Employee has or may develop
relationships with the Company's customers which could be used to solicit the
business of such customers away from the Company. The parties have entered
into this Agreement to guard against such potential harm.
(c) The Employee shall not, directly or indirectly, use any
Confidential Information for any purpose other than the benefit of the
Company or communicate, deliver, exhibit or provide any Confidential
Information to any person, firm, partnership, corporation, organization or
entity, except other employees or agents of the Company as required in the
normal course of the Employee's service as an employee or except as the
President or any authorized officer of the Company may direct in writing.
The covenant contained in this Section 8 shall be binding upon the Employee
during the term of this Agreement and following the termination hereof, for
the shorter of the period until either (i) until such Confidential
Information becomes obsolete; or (ii) until such Confidential Information
becomes generally known in the Company's trade or industry by means other
than a breach of this covenant.
(d) The Employee agrees that all Confidential Information and all
records, documents and materials relating to all of such Confidential
Information, shall be and remain the sole and exclusive property of the
Company.
SECTION 9. REMEDIES.
(a) The Employee agrees that the Company will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by the Employee of any provision of Sections 7 or 8 hereof.
Accordingly, in the event of a breach or of a threatened or attempted breach
by the Employee of Sections 7 or 8 hereof, in addition to all other remedies
to which the Company is entitled under law, in equity, or otherwise, the
Company shall be entitled to a temporary restraining order and permanent
injunction (without the necessity of showing any actual damage) or a decree
of specific performance of the provisions of Sections 7 or 8 hereof and no
bond or other security shall be required in that connection. The Company
shall be entitled to recover from the Employee, reasonable attorneys' fees
and expenses incurred in any action wherein the Company successfully enforces
the provisions of Sections 7 or 8 hereof against the breach or threatened
breach of those provisions by the Employee.
(b) The Employee acknowledges and agrees that in the event of
termination of this Agreement for any reason whatsoever, the Employee can
obtain other engagements or employment of a kind and nature similar to that
contemplated herein and that the issuance of an injunction to
4
<PAGE>
enforce the provisions of Sections 7 or 8 hereof will not prevent the
Employee from earning a livelihood.
(c) The covenants on the part of the Employee contained in Sections 7
or 8 hereof are essential terms and conditions to the Company entering into
this Agreement, and shall be construed as independent of any other provision
in this Agreement. The existence of any claim or cause of action the
Employee has against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of these covenants.
SECTION 10. INVENTIONS.
(a) The Employee shall disclose fully to the Company all inventions (as
defined below) conceived or discovered by the Employee, whether solely or
jointly with others during the term of this Agreement. Such inventions shall
belong solely to the Company and shall not belong to the Employee. During
the term of this Agreement, the Employee shall assign to the Company,
exclusively and free from any royalty obligation or any other legal or
equitable title or right of the Employee, all such inventions referred to
above and all patents, trademarks, copyrights, and maskworks, and any and all
applications and rights pertaining thereto on a worldwide basis. The
Employee shall assist the Company, during and subsequent to the term hereof,
in every proper way, but without any further compensation or additional
consideration, to transfer and assign such inventions to and for the
Company's benefit and enjoyment and to cooperate as may be reasonably
requested to perfect the Company's ownership therein and, if requested by the
Company, to prosecute or direct in prosecuting any application for or
registration with respect to any patent or other applicable intellectual
property right, including, but not in limitation thereof, the execution and
delivery of applications for the registration of one or more intellectual
property rights and assignments of the same as may be deemed necessary or
desirable by the Company in any office selected by the Company. The judgment
of the Company with respect to the registrability of any particular item of
intellectual property shall be final and conclusive as between the Employee
and the Company.
(b) Any improvements made upon such inventions by the Employee
subsequent to the term hereof shall be presumed to have been developed during
the term hereof and by and for the benefit of the Company and accordingly
shall be the property of the Company.
(c) The Employee agrees to execute such other standard forms relating
to the invention or development of inventions and other intellectual
properties as the Company may require of its consultants and employees
generally.
(d) Prior inventions of the Employee, if any, as listed on the
Addendum, are excluded from the scope of this Agreement.
(e) For purposes of this Agreement, "inventions" includes all
inventions, creations, developments, software programs, algorithms, routines,
patterns, components, compilations, devices, or improvements of any kind or
nature, whether or not trade secret, patented, patentable, copyrighted or
copyrightable, which the Employee had made or conceived or developed or may
make, conceive or develop, either solely or jointly with others, while in the
employ of the Company or with the use of the Company's time, materials,
equipment or facilities or relating in any way to the Company's
5
<PAGE>
actual, anticipated, or subsequently arising business, products, services or
activities, or arising out of or suggested by any task assigned to be
performed by the Employee, solely or jointly with others, for or on behalf of
the Company.
SECTION 11. SURRENDER OF RECORDS. Upon termination of the Employee's
employment for any reason, the Employee shall immediately surrender to the
Company any and all records, notes, documents, forms, manuals, photographs,
instructions, lists, drawings, blueprints, programs, diagrams or other
written, printed or electronic material (including any and all copies made at
any time whatsoever) in his or her possession or control which pertain to the
business of the Company.
SECTION 12. TERMINATION. During the initial term or any renewal term,
the employment of the Employee may be terminated at will for any reason by
either the Company or the Employee, with at least ten (10) days prior written
notice by the terminating party delivered to the other setting forth whether
such termination was for cause or without cause to determine whether the
Employee is entitled to any severance payment pursuant to Section 5 above.
Notwithstanding the foregoing, this Agreement shall be terminated immediately,
without any notice or waiting period, upon the Employee's death. This
Agreement may be terminated at any time by mutual agreement of the parties.
SECTION 13. PARTIES BOUND. All provisions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their heirs,
personal representatives, successors and assigns.
SECTION 14. EFFECT AND MODIFICATION. This Agreement comprises the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all other earlier agreements relating to the subject
matter hereof. No statement or promise, except as herein set forth, has been
made with respect to the subject matter of this Agreement. No modification
or amendment hereof shall be effective unless in writing and signed by the
Employee and an officer of the Company (other than the Employee).
SECTION 15. NON-WAIVER. The Company's or the Employee's failure or
refusal to enforce all or any part of, or the Company's or the Employee's
waiver of any breach of this Agreement, shall not be a waiver of the
Company's or the Employee's continuing or subsequent rights under this
Agreement, nor shall such failure or refusal or waiver have any affect on the
subsequent enforceability of this Agreement.
SECTION 16. NON-ASSIGNABILITY. This Agreement contemplates that the
Employee will personally provide the services described herein, and
accordingly, the Employee may not assign the Employee's rights or obligations
hereunder, whether by operation of law or otherwise, in whole or in part,
without the prior written consent of the Company.
SECTION 17. NOTICE. Any notice, request, instruction or other document
to be given hereunder to any party shall be in writing and delivered by hand,
telegram, registered or certified United States mail return receipt
requested, or other form of receipted delivery, with all expenses of delivery
prepaid, as follows:
If to the Employee: To the most recent address the Company has on
its records.
6
<PAGE>
EMPLOYEES MOST RECENT ADDRESS (PLEASE FILL IN):
10185 Terri Lane
-----------------------------
Brownsburg, IN 46112
-----------------------------
If to the Company: Interactive Intelligence, Inc.
3500 DePauw Boulevard, Suite 1060
Indianapolis, Indiana 46268
Attn: Donald E. Brown, M.D., President
Any notice to the employee shall also be sufficient, if sent to the most
recent address of the employee on the Company's books and records.
SECTION 18. GOVERNING LAW. This Agreement is being delivered in and
shall be governed by the laws of the State of Indiana. All actions or
proceedings shall be tried in the state or federal courts whose venue
includes Marion County or Hamilton County, Indiana.
SECTION 19. PRIOR AGREEMENTS.
(a) The Employee represents and warrants to the Company that the
Employee is not a party to or otherwise bound by any agreement that would
restrict in any way the performance by the Employee of the Employee's duties,
services and obligations under this Agreement, that the Employee has
disclosed to the Company all employment type agreements to which the Employee
has been bound, including without limitation employment agreements,
consulting agreements, non-compete agreements or covenants, confidentiality
or non-disclosure agreements or covenants, and intellectual property
assignment agreements, and that the Company will not have any liability to
any third party arising out of the Employee entering into this Agreement or
performing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
/s/ Keith A. Midkiff (1/1/98)
-------------------------------------------
Printed: Keith A. Midkiff
-------------------------------------------
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Donald E. Brown
---------------------------------------
Donald E. Brown, M.D., President
7
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
BETWEEN INTERACTIVE INTELLIGENCE, INC.
AND
KEITH A. MIDKIFF, DATED FEBRUARY 10, 1997
This Addendum relates to the Employment Agreement between Interactive
Intelligence, Inc. and, Keith A. Midkiff, dated February 10, 1997. This
Addendum is incorporated therein by reference and shall be an integral part
of the Employment Agreement.
<TABLE>
<S> <C>
1. Name of Employee: Keith A. Midkiff
2. Initial Term: Two (2) Years
3. Date of Commencement: February 10, 1997
4. Date Initial Term Ends: February 9, 1999
5. Title: Controller
6. Job Description: Accounting and Finance Activities and Management
7. Initial Compensation: $75,000 salary per year
8. Stock Options:
- Plan Incentive Stock Option Plan ("Qualified")
- Number 25,000 (twenty-five thousand) shares
- Exercise Price $1.30 (one dollar and thirty cents) per share
9. Amount of Vacation: Two (2) weeks per calendar year
10. Other Benefits: Medical and Dental Insurance, 401k Plan,
11. Prior Inventions: ________________________________________
</TABLE>
Date: February 10, 1997 DEB KAM
-------- --------
Initials Initials
(#31613 and 40525)
RAG/bac/SS-49204-1
8
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into,
effective as of 1st day of May, 1998, by and between Douglas T. Shinsato
("Employee") and Interactive Intelligence, Inc. ("Company"), an Indiana
corporation.
WITNESSETH:
WHEREAS, the Employee possesses certain skills which the Company wishes
to utilize in its business, and the Employee wishes to provide certain
services to the Company upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt, legal adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. EMPLOYMENT. The Company engages the Employee to serve the
Company, and the Employee agrees to serve the Company as an employee in such
capacities as the Board of Directors of the Company may, from time to time,
determine, upon the terms and conditions hereinafter set forth.
SECTION 2. TERM; RENEWAL. The term of the Employee's employment under
this Agreement shall be for an initial term commencing and ending on the
dates set forth on the Addendum attached hereto and incorporated herein by
reference ("Addendum"), which term shall automatically renew for successive
one (1) year terms, on the same terms and conditions set forth herein unless
either the Company or the Employee gives written notice to the other, at
least thirty (30) days prior to the expiration of the initial term or any
renewal term, that the term will not renew.
SECTION 3. TITLE, SERVICES AND DUTIES.
(a) During the term of employment hereunder, the Employee shall serve
in the capacities described on the Addendum and shall perform the duties and
responsibilities described on the Addendum or as are normally associated with
such a position in the Company's industry and as may be delegated to the
Employee by the President or the Company's Board of Directors.
(b) During such employment, the Employee shall devote substantially all
of the Employee's business time, attention, energy and skill to the business
of the Company, and shall perform such services in a faithful, competent and
diligent manner at the direction of the President and of the Company's Board
of Directors.
(c) During the Employee's employment, the Company shall provide the
Employee with such office facilities and support services as the Company
determines in its business judgment to be appropriate for the Employee to
perform the Employee's duties and responsibilities hereunder.
1
<PAGE>
(d) The Employee shall comply with all policies and procedures adopted
by the Company from time to time, including without limitation, policies
regarding reimbursement for business expenses incurred on behalf of the
Company, and compliance with applicable laws.
SECTION 4. COMPENSATION AS EMPLOYEE. At all times during the initial
term or any renewal term of this Agreement, the Company shall pay the
Employee an annual salary in the amount set forth in the Addendum, payable at
the usual payroll payment dates of the Company, and any other options or
benefits set forth in the Addendum. All amounts paid hereunder by Company to
the Employee shall be subject to all applicable local, state and federal
withholding taxes. The Company may increase or decrease the salary set forth
herein from time to time, in its sole discretion, but any decrease may only
be made upon fifteen (15) days prior notice.
SECTION 5. TERMINATION AND SEVERANCE PAYMENTS
(a) In the event that the employment of the Employee is terminated for
cause or in the event that the Employee resigns his/her employment with the
Company, the Employee shall be paid any salary and any other benefits which
have then accrued and to which the Employee is entitled to at such time.
However, in such event, the Employee shall not be entitled to any severance
compensation as set forth in subparagraph (b) below.
(b) In the event that the employment of the Employee is terminated by
the Company for any reason other than for cause, in addition to receiving all
accrued salary and benefits to which the Employee is entitled to at such
time, the Company further agrees to pay the Employee as severance pay an
amount equal to the Employee's salary as in effect at such time for an
additional one (1) month from the date of termination, with payments to be
made on the Company's usual payroll payment dates.
(c) All amounts paid under Subsections (a) or (b) hereof to the
Employee shall be subject to all applicable local, state or federal
withholding taxes, if any.
SECTION 6. EMPLOYEE BENEFITS.
(a) The Employee shall be limited each calendar year to a vacation
benefit for the amount of time shown in the Addendum (prorated from the date
of commencement to the end of that applicable calendar year). All vacation
benefits must be fully utilized in the calendar year in which accrued,
provided that (i) no vacation may be taken during the first six (6) months of
the initial term hereof without the prior written consent of the Company,
(ii) the Employee must comply with procedures adopted from time to time by
the Company with respect to the scheduling of vacations, and (iii) if because
of the Company's requirements, the Company does not approve the Employee's
requested vacation schedule and thus prevents the Employee from fully
utilizing all of the Employee's vacation in the year earned, the Company and
the Employee shall in good faith make arrangements for either the carryover
of such unused vacation to the next calendar year or such other arrangements
as are mutually satisfactory.
(b) During the term of the Employee's employment hereunder, the
Employee shall be entitled to participate, upon the same terms and conditions
applicable to employees generally in any life,
2
<PAGE>
health, hospitalization or any other insurance program, or any other pension
or benefit plan which the Company may from time to time provide or make
available to the Company's employees and for which the Employee is eligible
and qualified; provided that if the inclusion of the Employee under any such
program or plan causes or would cause either such program or plan to be
terminated or the Company to incur a materially disproportionate additional
cost, the Company may elect to provide benefits of a substantially similar
nature which avoids such adverse effects.
SECTION 7. COVENANT NOT TO COMPETE.
(a) During the Employee's service hereunder and for a period of
eighteen (18) months thereafter, regardless of the reason or method of
termination, the Employee will not, directly or indirectly, for the
Employee's own benefit or the benefit of any other person or entity:
(i) solicit in any manner, seek to obtain, or service the
business of any customer of the Company, other than for the Company;
(ii) become an owner of any business, if such business competes
with the Company;
(iii) become employed by or serve as an agent, independent
contractor or representative of any business which competes with the Company;
(iv) solicit the employment of or hire any employee of the
Company, or encourage any employee to terminate his or her employment with
the Company; or
(v) prepare in any manner to compete with the Company.
(b) For purposes of this Agreement, a "customer" shall be deemed to be
any person, business, partnership, proprietorship, firm, organization or
corporation which has done business with the Company or which has been
solicited or serviced in any manner, directly or indirectly, by the Company
within eighteen (18) months prior to the date of the termination of the
Employee, and the phrase "service the business of any customer" means the
development, modification, enhancement or improvement of any product or
service offered by the Company or which is reasonably related to the products
or services offered by the Company. The Employee hereby acknowledges that, by
virtue of the Employee's position and access to information, the Employee
will have advantageous familiarity and personal contacts with the Company's
customers, wherever located, and that the restrictions contemplated hereby
are reasonable for the protection of the Company's goodwill and customer
base, and the Company's efforts in the development of such customers.
(c) If the Employee does not comply with the provisions of this Section 7,
the eighteen (18) month period of non-competition provided herein shall be
tolled and deemed not to run during any period(s) of noncompliance, the
intention of the parties being to provide eighteen (18) full months of
non-competition by the Employee after the termination or expiration of this
Agreement.
SECTION 8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION.
(a) The term "Confidential Information" as used herein shall mean any
and all software programs, customer lists, trade secrets and information,
know-how, skills, knowledge, ideas, knowledge of customer's commercial
requirements, pricing methods, sales and marketing techniques, dealer
relationships and agreements, financial information, intellectual property,
codes, algorithms, research, development, research and development programs,
processes, documentation, inventions, or devices used in or pertaining to the
Company's business (i) which relate in any way
3
<PAGE>
to the Company's business, products or processes; or (ii) which are
discovered, conceived, developed or reduced to practice by the Employee,
either alone or with others either (x) during the term of this Agreement; or
(y) at the Company's expense; or (z) on the Company's premises or with the
Company's equipment.
(b) During the course of his/her services hereunder, the Employee may
become knowledgeable about, or become in possession of, Confidential
Information. If such Confidential Information were to be divulged or become
known to any competitor of the Company or to any other person outside the
employ of the Company, or if the Employee were to consent to be employed by
any competitor of the Company or to engage in competition with the Company,
the Company would be harmed. In addition, the Employee has or may develop
relationships with the Company's customers which could be used to solicit the
business of such customers away from the Company. The parties have entered
into this Agreement to guard against such potential harm.
(c) The Employee shall not, directly or indirectly, use any
Confidential Information for any purpose other than the benefit of the
Company or communicate, deliver, exhibit or provide any Confidential
Information to any person, firm, partnership, corporation, organization or
entity, except other employees or agents of the Company as required in the
normal course of the Employee's service as an employee or except as the
President or any authorized officer of the Company may direct in writing.
The covenant contained in this Section 8 shall be binding upon the Employee
during the term of this Agreement and following the termination hereof, for
the shorter of the period until either (i) until such Confidential
Information becomes obsolete; or (ii) until such Confidential Information
becomes generally known in the Company's trade or industry by means other
than a breach of this covenant.
(d) The Employee agrees that all Confidential Information and all
records, documents and materials relating to all of such Confidential
Information, shall be and remain the sole and exclusive property of the
Company.
SECTION 9. REMEDIES.
(a) The Employee agrees that the Company will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by the Employee of any provision of Sections 7 or 8 hereof.
Accordingly, in the event of a breach or of a threatened or attempted breach
by the Employee of Sections 7 or 8 hereof, in addition to all other remedies
to which the Company is entitled under law, in equity, or otherwise, the
Company shall be entitled to a temporary restraining order and permanent
injunction (without the necessity of showing any actual damage) or a decree
of specific performance of the provisions of Sections 7 or 8 hereof and no
bond or other security shall be required in that connection. The Company
shall be entitled to recover from the Employee, reasonable attorneys' fees
and expenses incurred in any action wherein the Company successfully enforces
the provisions of Sections 7 or 8 hereof against the breach or threatened
breach of those provisions by the Employee.
(b) The Employee acknowledges and agrees that in the event of
termination of this Agreement for any reason whatsoever, the Employee can
obtain other engagements or employment of a kind and nature similar to that
contemplated herein and that the issuance of an injunction to
4
<PAGE>
enforce the provisions of Sections 7 or 8 hereof will not prevent the
Employee from earning a livelihood.
(c) The covenants on the part of the Employee contained in Sections 7
or 8 hereof are essential terms and conditions to the Company entering into
this Agreement, and shall be construed as independent of any other provision
in this Agreement. The existence of any claim or cause of action the
Employee has against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of these covenants.
SECTION 10. INVENTIONS.
(a) The Employee shall disclose fully to the Company all inventions (as
defined below) conceived or discovered by the Employee, whether solely or
jointly with others during the term of this Agreement. Such inventions shall
belong solely to the Company and shall not belong to the Employee. During
the term of this Agreement, the Employee shall assign to the Company,
exclusively and free from any royalty obligation or any other legal or
equitable title or right of the Employee, all such inventions referred to
above and all patents, trademarks, copyrights, and maskworks, and any and all
applications and rights pertaining thereto on a worldwide basis. The
Employee shall assist the Company, during and subsequent to the term hereof,
in every proper way, but without any further compensation or additional
consideration, to transfer and assign such inventions to and for the
Company's benefit and enjoyment and to cooperate as may be reasonably
requested to perfect the Company's ownership therein and, if requested by the
Company, to prosecute or direct in prosecuting any application for or
registration with respect to any patent or other applicable intellectual
property right, including, but not in limitation thereof, the execution and
delivery of applications for the registration of one or more intellectual
property rights and assignments of the same as may be deemed necessary or
desirable by the Company in any office selected by the Company. The judgment
of the Company with respect to the registrability of any particular item of
intellectual property shall be final and conclusive as between the Employee
and the Company.
(b) Any improvements made upon such inventions by the Employee
subsequent to the term hereof shall be presumed to have been developed during
the term hereof and by and for the benefit of the Company and accordingly
shall be the property of the Company.
(c) The Employee agrees to execute such other standard forms relating
to the invention or development of inventions and other intellectual
properties as the Company may require of its consultants and employees
generally.
(d) Prior inventions of the Employee, if any, as listed on the
Addendum, are excluded from the scope of this Agreement.
(e) For purposes of this Agreement, "inventions" includes all
inventions, creations, developments, software programs, algorithms, routines,
patterns, components, compilations, devices, or improvements of any kind or
nature, whether or not trade secret, patented, patentable, copyrighted or
copyrightable, which the Employee had made or conceived or developed or may
make, conceive or develop, either solely or jointly with others, while in the
employ of the Company or with the use of the Company's time, materials,
equipment or facilities or relating in any way to the Company's
5
<PAGE>
actual, anticipated, or subsequently arising business, products, services or
activities, or arising out of or suggested by any task assigned to be
performed by the Employee, solely or jointly with others, for or on behalf of
the Company.
SECTION 11. SURRENDER OF RECORDS. Upon termination of the Employee's
employment for any reason, the Employee shall immediately surrender to the
Company any and all records, notes, documents, forms, manuals, photographs,
instructions, lists, drawings, blueprints, programs, diagrams or other
written, printed or electronic material (including any and all copies made at
any time whatsoever) in his or her possession or control which pertain to the
business of the Company.
SECTION 12. TERMINATION. During the initial term or any renewal term,
the employment of the Employee may be terminated at will for any reason by
either the Company or the Employee, with at least ten (10) days prior written
notice by the terminating party delivered to the other setting forth whether
such termination was for cause or without cause to determine whether the
Employee is entitled to any severance payment pursuant to Section 5 above.
Notwithstanding the foregoing, this Agreement shall be terminated immediately,
without any notice or waiting period, upon the Employee's death. This
Agreement may be terminated at any time by mutual agreement of the parties.
SECTION 13. PARTIES BOUND. All provisions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their heirs,
personal representatives, successors and assigns.
SECTION 14. EFFECT AND MODIFICATION. This Agreement comprises the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all other earlier agreements relating to the subject
matter hereof. No statement or promise, except as herein set forth, has been
made with respect to the subject matter of this Agreement. No modification
or amendment hereof shall be effective unless in writing and signed by the
Employee and an officer of the Company (other than the Employee).
SECTION 15. NON-WAIVER. The Company's or the Employee's failure or
refusal to enforce all or any part of, or the Company's or the Employee's
waiver of any breach of this Agreement, shall not be a waiver of the
Company's or the Employee's continuing or subsequent rights under this
Agreement, nor shall such failure or refusal or waiver have any affect on the
subsequent enforceability of this Agreement.
SECTION 16. NON-ASSIGNABILITY. This Agreement contemplates that the
Employee will personally provide the services described herein, and
accordingly, the Employee may not assign the Employee's rights or obligations
hereunder, whether by operation of law or otherwise, in whole or in part,
without the prior written consent of the Company.
SECTION 17. NOTICE. Any notice, request, instruction or other document
to be given hereunder to any party shall be in writing and delivered by hand,
telegram, registered or certified United States mail return receipt
requested, or other form of receipted delivery, with all expenses of delivery
prepaid, as follows:
If to the Employee: To the most recent address the Company has on
its records.
6
<PAGE>
Employees most recent address (please fill in):
3-5-34-301 Nishi Azabu
Minato - Ku
Tokyo 106 Japan
If to the Company: Interactive Intelligence, Inc.
3500 DePauw Boulevard, Suite 1060
Indianapolis, Indiana 46268
Attn: Donald E. Brown, M.D., President
Any notice to the employee shall also be sufficient, if sent to the most
recent address of the employee on the Company's books and records.
SECTION 18. GOVERNING LAW. This Agreement is being delivered in and
shall be governed by the laws of the State of Indiana. All actions or
proceedings shall be tried in the state or federal courts whose venue
includes Marion County or Hamilton County, Indiana.
SECTION 19. PRIOR AGREEMENTS.
(a) The Employee represents and warrants to the Company that the
Employee is not a party to or otherwise bound by any agreement that would
restrict in any way the performance by the Employee of the Employee's duties,
services and obligations under this Agreement, that the Employee has
disclosed to the Company all employment type agreements to which the Employee
has been bound, including without limitation employment agreements,
consulting agreements, non-compete agreements or covenants, confidentiality
or non-disclosure agreements or covenants, and intellectual property
assignment agreements, and that the Company will not have any liability to
any third party arising out of the Employee entering into this Agreement or
performing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
/s/ Douglas T. Shinsato
-------------------------------------------
Printed: Douglas T. Shinsato
INTERACTIVE INTELLIGENCE, INC.
By: /s/ Donald E. Brown
---------------------------------------
Donald E. Brown, M.D., President
7
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
BETWEEN INTERACTIVE INTELLIGENCE, INC.
AND
DOUGLAS T. SHINSATO, DATED MAY 1, 1998
This Addendum relates to the Employment Agreement between Interactive
Intelligence, Inc. and, Douglas T. Shinsato, dated May 1, 1998. This
Addendum is incorporated therein by reference and shall be an integral part
of the Employment Agreement.
<TABLE>
<S> <C>
1. Name of Employee: Douglas T. Shinsato
2. Initial Term: Two (2) Years
3. Date of Commencement: May 1, 1998
4. Date Initial Term Ends: April 30, 2000
5. Title: Vice President - Asia Pacific
6. Job Description: Overall responsibilities for this geographic
region, including; channel development, sales,
fulfillment, client services, localization,
P&L, etc.
7. Initial Compensation: $150,000 (one hundred fifty thousand dollars and
no cents) salary per year + performance and bonus
program and ex-patriot subsidy. Refer to offer
letter dated April 14, 1998.*
8. Stock Options:
- Plan Incentive Stock Option Plan ("Qualified")
- Number 50,000 (fifty thousand) shares
- Exercise Price $4.00 (four dollars and no cents) per share
9. Amount of Vacation: Two (2) weeks per calendar year
10. Other Benefits: Medical and Dental Insurance, 401k Plan,
Long Term Disability, Cafeteria 125 Plan
11. Prior Inventions: ________________________________________
</TABLE>
Date: May 1, 1998 DEB
--------
Initials Initials
*Board of Advisors, Lubitz & Associates (Venture Fund)- No Pay DTS
Board of Advisors, Emediate (SI Company)- No pay
(#31613 and 40525)
8
<PAGE>
Exhibit 10.13
INTERACTIVE INTELLIGENCE, INC.
LETTER OF ASSIGNMENT
July 24, 1998
Michael E. Ford
Interactive Intelligence, Inc.
8675 River Trace
Roswell, GA 30076
Dear Mike:
This letter of assignment ("Agreement") is to confirm our France relocation
offer to you ("the Employee") as Director, European Sales for Interactive
Intelligence, Inc. ("the Company"), and our mutual understanding concerning
the general terms and conditions applicable in the foregoing capacity. This
assignment shall be in accordance with the following terms and conditions for
the duration of your assignment:
<TABLE>
<S> <C> <C>
1. Employing Company: Interactive Intelligence, Inc.
3500 DePauw Boulevard, Suite 1060
Indianapolis, Indiana 46268
2. Position: Director, European Sales
3. Work Location: Aix-en-Provence, France
4. Point of Origin: Atlanta, Georgia
5. Length of Assignment: Three (3) years
6. Effective Date: August 1, 1998
7. Base Salary: $85,000 annually
</TABLE>
It is our goal to provide you with a compensation package comparable to what you
would receive as an employee based in Atlanta, Georgia. In that regard,
consideration is given to additional living costs which you may reasonably
expect to incur during your international assignment in Aix-en-Provence,
France.
This agreement and the benefits contained herein are contingent upon your being
authorized to work and reside in the Host Country. If you lose your
authorization to work in the Host Country at any time, for any reason during the
life of this agreement, the Company will consider your circumstances, but may,
at its sole discretion, consider all, or any portion of this agreement void.
You understand and agree that the differential payments and adjustments
described below as well as any other allowances or gratuities provided by the
Company to you under this Agreement are, at the election of the Company, in
substitution for the statutory benefits required under the laws of the Host
Country to compensate employees who are not entitled to receive these
contractual benefits.
8. INCOME TAX EQUALIZATION
At the Company's expense, Ernst & Young LLP will advise you as to the filing
requirements in the home and host countries, and will assist you with annual tax
return preparation and filings. Ernst & Young LLP will also prepare the
<PAGE>
Letter of Assignment
Page 2
annual tax equalization calculation. Your income will be equalized (or
theoretically taxed) per the attached Balance Sheet.
9. SHIPMENT OF HOUSEHOLD GOODS AND STORAGE
The Company will provide, at a reasonable cost based on competing quotes,
- - shipment to enable the employee to bring the items necessary to establish
their household at the host location (including one automobile), and
- - shipment of a horse to the host location.
Items not sent to the host location will be retained in storage, at a reasonable
cost based on competing quotes, at the home country at the expense of the
Company.
10. RELOCATION ALLOWANCE
If the shipment expenses (listed above in #9) are $25,000 or less, you will be
provided an additional relocation allowance up to $5,000 for properly documented
one-time expenses. If the shipment expenses listed above in #9 are more than
$25,000, this allowance will be reduced by the amount these shipment expenses
exceed $25,000. This allowance would include items such as electrical appliance
replacement, France work permits and other personal licenses, and other
miscellaneous expenses incurred solely because of the move. This allowance will
be paid directly to you and must be accounted for, with any excess funds
returned, within 90 days of the actual move.
11. HOST COUNTRY HOUSING
You will be provided an allowance for interim suitable housing at the host
location. The Company will pay for rental expense, including utilities, until
your home in the home country is sold. The rent allowance will be paid directly
to the landlord and the utilities will be paid either to the landlord or you.
12. HOME SALE
The Company will reimburse you up to $30,000 for properly documented real estate
commissions and associated personal tax implications on the sale of your home in
Atlanta. For each month beyond 1998 that the Company pays rent in the host
country (see #11 above), this limit will be reduced by the amount of Company
paid host country rent. For each month in 1998 that the Company does not pay
rent in the host country, the $30,000 limit will be raised by the amount of host
country rent the Company saves, up to a maximum of three months.
13. COMPENSATION
Your compensation will be adjusted for a cost of living differential and
automobile differential based on typical costs in Marseilles, France and
Atlanta, Georgia. See the attached "Balance Sheet" for further compensation
detail.
14. SCHOOLING REIMBURSEMENT
The Company will reimburse tuition and other associated fees for your daughter
Maggie while attending the International Bilingual School of Provence during the
typical school year (September through June). This reimbursement may be paid
either to you or directly to the school.
15. HOME LEAVE ALLOWANCE
Each calendar year while located in Aix-en-Provence, you and your family are
eligible for a $3,000 Home Leave Allowance to travel to the home country.
16. LANGUAGE TRAINING
The Company will reimburse you up to $4,000 for properly documented language
training costs for you and your family.
17. BENEFITS
You are entitled to continued participation in the benefits programs similar to
Company-sponsored US programs for medical, dental, vision, and retirement
coverage. If applicable, the Company will either pay directly or reimburse you
for all foreign government social benefits costs. In return, you agree that any
foreign government social benefit made payable to you upon your termination,
severance, or retirement from a foreign subsidiary or affiliate will be payable
to the Company.
<PAGE>
Letter of Assignment
Page 3
18. OTHER CONSIDERATIONS
a) Your assignment is anticipated to last a period of three (3) years.
At the end of this period, assignment extension and renewal options will be
examined in accordance with operational requirements and corporate objectives.
However, you acknowledge that the Company may re-assign you to the Home Country
at any time and terminate the terms of this agreement. Upon either completion of
your assignment or termination of your employment without cause, you will be
eligible for relocation benefits in connection with your transfer back to the
Home Country in accordance with the current relocation guidelines of the
Company.
b) In the event you voluntarily resign from this position, payment
of differentials or relocation allowances will be prorated based on the
length of your assignment term. The Company will direct you concerning the
repayment of money advanced to you or on your behalf. You agree to timely
reimburse the Company as directed in this instance.
c) The terms and conditions of this Agreement shall at all times be
governed by the laws of the United States and the state of Indiana. All issues
relating to the Agreement's validity, construction, performance, and termination
shall be subject to such laws. Notwithstanding the terms and provisions outlined
herein, this agreement is not intended as, nor does it imply, a guarantee of
employment or an employment contract. Employment at Interactive Intelligence,
Inc. is "at will."
d) All other terms and conditions of your assignment not specifically
covered by this Letter of Assignment shall be governed by the general terms and
conditions of your existing employment agreement.
e) We realize that it is difficult to foresee all of the future
problems in connection with this assignment and your return at the conclusion
thereof. While we have tried to cover major known conditions in this letter,
questions may arise regarding other items. We will gladly discuss such items
with you at the proper time, and I am sure that we will be able to arrive at
reasonable solutions.
Please signify your understanding of, and agreement with, the terms of this
agreement by initialing each page and signing the last page of this letter.
Sincerely,
/s/ Donald E. Brown 10/8/98 /s/ Keith A. Midkiff 9/29/98
- ------------------------------- ----------------------------------------
CEO Date Controller Date
I agree to the terms and conditions covering my assignment to
Aix-en-Provence as set forth in the above letter.
/s/ Michael E. Ford Sep. 22, 1998
- -------------------------------------
Director, European Sales Date
<PAGE>
EXHIBIT 10.14
INTERACTIVE INTELLIGENCE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of the 22nd of
September, 1998 ("Option Date"), by and between Interactive Intelligence, Inc.,
an Indiana corporation (the "Company"), and Donald E. Brown, M.D. ("Brown").
WITNESSETH:
WHEREAS, Brown has provided certain financial accommodations to the
Company in the form of guarantees of indebtedness and other financial
obligations of the Company; and
WHEREAS, the Company and Brown have agreed that the Company will grant
to him options to acquire shares of the Company's Common Stock in the ratio of
ten thousand (10,000) shares for every One Million Dollars ($1,000,000.00) of
financial obligations guaranteed by Brown; and
WHEREAS, the Company has increased its capital lease line with Key Bank
by Five Hundred Thousand Dollars ($500,000.00) and has entered into a new line
credit with Peoples Bank for Four Million Dollars ($4,000,000.00), both of which
have been guaranteed by Brown; and
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company for the Company to grant Brown an option
to purchase such shares of the Company's Common Stock pursuant to the terms,
conditions and limitations of this Agreement; and
WHEREAS, Brown desires to have the option to purchase such shares
pursuant to the terms, conditions and limitations of this Agreement; and
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Brown hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Brown the right,
privilege and option to purchase forty-five thousand (45,000) shares of Common
Stock of the Company ("Shares") at the purchase price of Four and 50/100 Dollars
($4.50) per share (the "Option Price"), in the manner and subject to the terms
and conditions provided in this Agreement.
2. VESTING AND EXERCISABILITY OF OPTION. The Option granted herein
vests and is exercisable at any time from the date of execution hereof until the
tenth (10th) anniversary hereof.
3. METHOD OF EXERCISE. Brown may exercise the Option, in whole or in
part, by written notice from Brown directed to the Company in substantially the
form attached hereto as Exhibit "A", accompanied by a check or other
consideration acceptable to the Company in full payment of the
<PAGE>
Option Price for the specified number of Shares purchased. The Company shall
make prompt delivery of the certificate or certificates for such Shares,
provided that if any law or regulation requires the Company to take any action
with respect to the Shares specified in such notice before the issuance thereof,
then the date of delivery of such Shares shall be extended for the period
necessary to take such action. Neither Brown nor any person claiming under or
through him shall have any rights as a shareholder of the Company with respect
to any of the Shares until full payment of the Option Price and delivery to him
of certificates for such Shares as provided herein.
4. DEATH OF BROWN. In the event Brown dies during the term of this
Option Agreement, the Option may be exercised during the term hereof by Brown's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance.
5. RESTRICTIONS ON TRANSFER. Without the prior written consent of the
Company, he Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised during Brown's lifetime only by
Brown.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by the Option, as well as the price per share of Common
Stock covered by the Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock of the Company or the payment of a stock
dividend with respect to the Common Stock or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." No issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to the Option.
7. DURATION OF LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Option will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such instances, declare
that the Option shall terminate as of a date fixed by the Board.
8. CONDITIONS UPON ISSUANCE OF SHARES. (a) Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
-2-
<PAGE>
(b) As a condition to the exercise of an Option, the Company may
require Brown to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
9. RESTRICTIONS ON TRANSFER. The Shares, when issued, will involve
certain risks. Neither the Securities and Exchange Commission nor any other
securities regulatory body, including the Indiana Securities Division, has
passed upon the merits of such Shares. The Shares may not be transferred except
upon registration or pursuant to an exemption from registration. The
certificates representing the Shares will bear a legend to the following effect:
"RESTRICTION ON TRANSFER"
"The shares of common stock of Interactive Intelligence, Inc.
represented by this certificate have not been registered under the
Securities Act of 1933, as amended ("Act"), any state securities laws,
including those of the State of Indiana, or any rules or regulations
promulgated pursuant thereto. These shares may not be transferred by
the holder unless the shares are registered pursuant to the Act and
applicable state securities laws, rules and regulations or unless an
exemption is available and the Company has been provided an opinion of
counsel acceptable to the Company that one or more exemptions from such
registration requirements are available for the transaction pursuant to
which the sale or other transfer will occur."
10. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the parties hereby have caused this Nonstatutory
Stock Option Agreement to be executed as of the day and year first written.
/s/ Donald E. Brown
------------------------------------------
Donald E. Brown, M.D. ("Brown")
INTERACTIVE INTELLIGENCE, INC. ("Company")
By: /s/ John R. Gibbs
------------------------------------------
John R. Gibbs, Executive Vice-President
of Administration and Corporate Development
-3-
<PAGE>
Exhibit 10.15
PEOPLES BANK BORROWER
&Trust Company Interactive Intelligence, Inc. VARIABLE RATE
COMMERCIAL
130 E. Market Street REVOLVING OR
Indianapolis IN 46204 DRAW NOTE
(317) 237-8000
"LENDER"
3500 Depauw Blvd. Suits 1060
Indianapolis, IN 46268
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Officers Interest Rate PRINCIPAL AMOUNT/ Funding Maturity Customer Number LOAN
Initials Variable CREDIT LIMIT Agreement Date Date NUMBER
CRF $1,000,000.00 08/27/98 08/31/99 597473
</TABLE>
PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender indicated above the principal amount of
ONE MILLION And NO/100 DOLLARS
($1,000,000.00 ) or, if less, the aggregate unpaid principal amount of all
loans or advances made by the Lender to the Borrower, plus interest on the
unpaid principal balance and those other charges permitted by applicable law and
authorized pursuant to this Note, all without relief from valuation and
appraisement laws, all at the rate and in the manner described below, until all
amounts owing under this Note are paid in full. All amounts received by Lender
shall be applied first to late payment charges, then to expenses, then to
accrued unpaid interest, and then to unpaid principal or in any other manner as
determined by Lender, in Lender's sole discretion, as permitted by law.
REVOLVING OR DRAW FEATURE.
/X/ This Note possesses a revolving feature. Upon satisfaction of the
conditions set forth in this Note, Borrower shall be entitled to borrow up to
the full principal amount of the note and to repay and reborrow from time to
time during the term of this Note.
/ / This Note possesses a draw feature. Upon satisfaction of the conditions
set forth in this Note, Borrower shall be entitled to make one or more draws Any
repayment may not be reborrowed. The aggregate amount of such draws shall not
exceed the full principal amount of this Note.
Information with regard to any loans or advances under this Note shall be
recorded and maintained by Lender in its internal records and such records shall
be conclusive as to the information set forth therein absent manifest error. The
Lender's failure to record the date and amount of any loan or advance shall not
limit or otherwise affect the obligations of the Borrower under this Note to
repay the principal amount of the loans or advances together with ail interest
accruing thereon. Lender shall not be obligated to provide Borrower with a copy
of the record on a periodic basis. Borrower shall be entitled to inspect or
obtain a copy of the record during Lender's business hours.
CONDITIONS FOR ADVANCES: If there is no default under this Note, Borrower shall
be entitled to borrow monies under this Note (subject to the limitations
described above) under the following conditions:
INTEREST RATE: This Note has a variable rate feature The interest rate on this
Note may change from time to time if the Index Rate identified below changes.
Interest shall be computed on the basis of 360 days and the actual number of
days per year. Interest on this Note shall be calculated and payable at a
variable rate equal to (0.000%) per annum over the Index Rate. The initial
Index Rate is currently percent (8.500%) per annum. The Initial interest rate
on this Note shall be (8.500%) per annum. Any change in the interest rate
resulting from a change in the Index Rate will be effective on: the date the
Index Rate changes.
The minimum interest rate on this Note shall be (5.00%) per annum. The maximum
interest rate on this Note shall not exceed (40.00%) per annum or if less, or
if a maximum rate is not indicated, the maximum interest rate Lender is
permitted to charge by law.
INDEX RATE: The Index Rate for this Note shall be: Peoples Bank & Trust
Company's prime rate.
If the Index Rate is redefined or becomes unavailable, then Lender may select
another Index which is substantially similar.
DEFAULT RATE: In the event of any default under this Note, the Lender may, in
its discretion, increase the interest rate on this Note to 4.00% above the index
rate. or the maximum interest rate Lender is permitted to charge by law,
whichever is less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to the
following schedule:
INTEREST ONLY PAYMENTS BEGINNING SEPTEMBER 30, 1998 and THEREAFTER. A FINAL
PAYMENT OF THE UNPAID PRINCIPAL AND CONTINUING AT MONTHLY TIME INTERVALS BALANCE
PLUS ACCRUED INTEREST IS DUE AND PAYABLE ON AUGUST 31, 1999.
All payments will be made to Lender at any address so designated by Lender and
in lawful currency of the United States of America.
RENEWAL If checked, {X} this Note is a renewal of Loan Number 597473
SECURITY- To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in all of Borrower
rights title and interest in all monies instruments savings checking and
other deposit accounts of Borrower's (excluding IRA, Keogh and trust accounts
and deposits subject to tax penalties if so assigned) that are now or in the
future In Lender's custody or control. / / If checked, the obligations under
this Note are also secured by a lien on and/or security interest in the
property described in the security instruments executed in connection with
this Note as well as an other property described as security for this Note
now or in the future.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. All prepayments will be credited as determined by Lender and as
permitted by law. If this Note is prepaid in full, there will be: {X} No minimum
finance charge or prepayment penalty. / / A minimum finance charge of $
/ / A prepayment penalty of:
LATE PAYMENT CHARGE: If a payment is received more than 10 days late, Borrower
will be charged a late payment charge of / / % of the unpaid late
payment; {X} $ 100.00 or 5.00% of the unpaid late payment, whichever is
{ } greater {X} less
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO THE
TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE SIDE.
BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
DATE: AUGUST 27, 1998
BORROWER: Interactive Intelligence, Inc.
BORROWER:
By: /S/ Donald E. Brown
- -------------------------------- -----------------------------------
Donald E. Brown
BORROWER: BORROWER:
- -------------------------------- -----------------------------------
BORROWER: BORROWER:
- -------------------------------- -----------------------------------
BORROWER: BORROWER:
- -------------------------------- -----------------------------------
<PAGE>
TERMS AND CONDITIONS
1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower, any guarantor or any other third party pledging collateral to secure
this Note-
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Note, any security instrument, or any
other present or future written agreement regarding this or any other
indebtedness of Borrower to Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) sells, conveys, or transfers rights in any collateral securing this
Note without the written approval of Lender, destroys, loses or
damages such collateral in any material respect, or subjects such
collateral to seizure or confiscation;
(e) has a garnishment, judgment, tax levy, attachment or lion entered or
served against Borrower, any guarantor, or any third party pledging
collateral to secure this Note or any of their property;
(f) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, fails to pay debts as they become due, or
becomes the subject of any bankruptcy, insolvency or debtor
rehabilitation proceeding; or
(g) causes Lender to deem itself insecure due to a significant decline in
the value of any real or personal property securing payment of this
Note, or Lender in good faith, believes the prospect of payment or
performance is impaired.
2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note, Lender
will be entitled to exercise one or more of the following remedies without
notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this Note
and all other present and future obligations of Borrower immediately
due and payable in full;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to cease making advances under this Note or any other agreement
between Borrower and Lender;
(d) to take possession of any collateral in any manner permitted by law;
(e) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell. lease or otherwise dispose of any collateral and collect any
deficiency balance with or without resorting to legal process;
(g) to set-off Borrower's obligations against any amounts due to Borrower
including, but not limited to monies, instruments, and deposit
accounts maintained with Lender; and
(h) to exercise all other rights available to Lender under any other
written agreement or applicable law. Upon default in any covenant or agreement
providing for the payment of taxes, the maintenance of insurance, or otherwise
relating to any collateral securing Borrower's obligations to Lender, Lender
may, in its sole discretion, advance such sums and costs and take such other
steps as Lender may deem necessary or advisable to protect any collateral. All
sums so advanced or paid by Lender shall be payable by Borrower to Lender, and
shall be part of Borrower's obligations to Lender. Lender's rights are
cumulative and may be exercised together, separately, and in any order. Lender's
remedies under this paragraph are in addition to those available at common law,
including, but not limited to, the right of set-off.
3. DEMAND FEATURE: / / if checked, this Note contains a demand feature. Lender's
right to demand payment at any time, and from time to time, shall be in Lender's
sole and absolute discretion, whether or not any default has occurred.
4. FINANCIAL INFORMATION: Borrower will at all times keep proper books of record
and account in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will deliver to Lender, within
ninety (90) days after the end of each fiscal year of Borrower, a copy of the
annual financial statements of Borrower relating to such fiscal year, such
statements to include (I) the balance sheet of Borrower as at the end of such
fiscal year and (ii) the related income statement, statement of retained
earnings and statement of changes in the financial position of Borrower for such
fiscal year, prepared by such certified public accountants as may be reasonably
satisfactory to Lender. Borrower also agrees to deliver to Lender within fifteen
(15) days after filing same, a copy of Borrower's income tax returns and also,
from time to time, such other financial information with respect to Borrower as
Lender may request, Borrower shall permit Lender's representatives to inspect
Borrower's properties and its books and records, and to make copies or abstracts
thereof.
5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.
6. SEVERABILITY : If any provision of this Note is invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower in any manner.
8. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
9. APPLICABLE LAW: This Note shall be governed by the laws of the state of
Indiana. Unless applicable law provides otherwise, Borrower consents to the
jurisdiction and venue of any court selected by Lender in its discretion located
in such state in the event of any legal proceeding under this Note.
10. COLLECTION COSTS: To the extent permitted by law, Borrower agrees to 'Pay
collection costs, expenses, and reasonable attorneys fees and costs, incurred by
Lender in collecting any amount due or enforcing any right or remedy under this
Note whether or not suit is brought, including but not limited to, expenses,
fees, and costs incurred for collection, enforcement, realization on collateral,
construction, interpretation, and appearance in collection, bankruptcy,
insolvency, reorganization, post-judgment and appellate proceedings.
11. CHECK PROCESSING FEE: If a check, draft, order, or like instrument for
payment is dishonored or returned to Lender for any reason, Lender will assess a
check processing fee of $22.00 plus an amount equal to the actual charge by the
depository institution returning or dishonoring the instrument.
12. MISCELLANEOUS: This Note and the obligations incurred by Borrower are
commercial obligations to finance income-producing business or activity, and not
for personal, family or household purposes. Borrower and Lender agree that time
is of the essence. Borrower and any person who endorses this Note waives
presentment, demand for payment, notice of dishonor and protest and further
waives any right (if any) to require Lender to proceed against anyone else
before proceeding against Borrower or said person. All references to Borrower in
this Note shall include all of the parties signing this Note, and this Note
shall be binding upon the heirs, successors and assigns of Borrower and Lender.
If there is more than one Borrower their obligations under this Note shall be
joint and several. This Note represents the complete and integrated
understanding between Borrower and Lender regarding the terms hereof.
13. JURY TRIAL WAIVER: LENDER AND BORROWER HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE
COLLATERAL SECURING THIS NOTE.
14. ADDITIONAL TERMS:
Purpose of loan is for working
capital; Unsecured;
<PAGE>
Exhibit 10.16
PEOPLES BANK BORROWER
&Trust Company Interactive Intelligence, Inc. VARIABLE RATE
COMMERCIAL
130 E. Market Street REVOLVING OR
Indianapolis IN 46204 DRAW NOTE
(317) 237-8000
"LENDER"
3500 Depauw Blvd. Suits 1060
Indianapolis, IN 46268
317-872-3000
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Officers Interest Rate PRINCIPAL AMOUNT/ Funding Maturity Customer Number LOAN
Initials Variable CREDIT LIMIT Agreement Date Date NUMBER
CRF $4,000,000.00 10/01/98 09/30/99 611948
</TABLE>
PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender indicated above the principal amount of
FOUR MILLION And NO/100 DOLLARS
($4,000,000.00 ) or, if less, the aggregate unpaid principal amount of all
loans or advances made by the Lender to the Borrower, plus interest on the
unpaid principal balance and those other charges permitted by applicable law and
authorized pursuant to this Note, all without relief from valuation and
appraisement laws, all at the rate and in the manner described below, until all
amounts owing under this Note are paid in full. All amounts received by Lender
shall be applied first to late payment charges, then to expenses, then to
accrued unpaid interest, and then to unpaid principal or in any other manner as
determined by Lender, in Lender's sole discretion, as permitted by law.
REVOLVING OR DRAW FEATURE.
/X/ This Note possesses a revolving feature. Upon satisfaction of the
conditions set forth in this Note, Borrower shall be entitled to borrow up to
the full principal amount of the note and to repay and reborrow from time to
time during the term of this Note. This Note possesses a draw feature. Upon
satisfaction of the conditions set forth in this Note, Borrower shall be
entitled to make one or more draws under this Note. Any repayment may not be
reborrowed. The aggregate amount of such draws shall not exceed the full
principal amount of this Note.
Information with regard to any loans or advances under this Note shall be
recorded and maintained by Lender in its internal records and such records shall
be conclusive as to the information set forth therein absent manifest error. The
Lender's failure to record the date and amount of any loan or advance shall not
limit or otherwise affect the obligations of the Borrower under this Note to
repay the principal amount of the loans or advances together with all interest
accruing thereon. Lender shall not be obligated to provide Borrower with a copy
of the record on a periodic basis. Borrower shall be entitled to inspect or
obtain a copy of the record during Lender's business hours.
CONDITIONS FOR ADVANCES: If there is no default under this Note, Borrower shall
be entitled to borrow monies under this Note (subject to the limitations
described above) under the following conditions:
INTEREST RATE: This Note has a variable rate feature The interest rate on this
Note may change from time to time if the Index Rate identified below changes.
Interest shall be computed on the basis of 360 days and the actual number of
days per year. Interest on this Note shall be calculated and payable at a
variable rate equal to (0.000%) per annum over the Index Rate. The initial
Index Rate is currently percent (8.500%) per annum. The Initial interest rate
on this Note shall be (8.500%) per annum. Any change in the interest rate
resulting from a change in the Index Rate will be effective on: the date the
Index Rate changes.
The minimum interest rate on this Note shall be (n/a%) per annum. The maximum
interest rate on this Note shall not exceed (n/a%) per annum or if less, or
if a maximum rate is not indicated, the maximum interest rate Lender is
permitted to charge by law.
INDEX RATE: The Index Rate for this Note shall be: Lender a Base or Reference
Rate, which Lender may increase or decrease at any time in Lender's
discretion, is publicly available, and which may not necessarily reflect the
rate Lender charges to its other customers which may be lower.
If the Index Rate is redefined or becomes unavailable, then Lender may select
another Index which is substantially similar.
DEFAULT RATE: In the event of any default under this Note, the Lender may, in
its discretion, increase the interest rate on this Note to 4.00% above the index
rate. or the maximum interest rate Lender is permitted to charge by law,
whichever is less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to the
following schedule:
INTEREST ONLY PAYMENTS BEGINNING JANUARY 1, 1999 and CONTINUING AT QUARTERLY
TIME INTERVALS THEREAFTER. A FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE
PLUS ACCRUED INTEREST IS DUE AND PAYABLE ON SEPTEMBER 30, 1999.
All payments will be made to Lender at any address so designated by Lender and
in lawful currency of the United States of America.
RENEWAL If checked, [ ] this Note is a renewal of Loan Number
SECURITY- To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in all of Borrower's
rights, title, and interest, in all monies, instruments, savings, checking and
other deposit accounts of Borrower's (excluding IRA, Keogh and trust accounts
and deposits subject to tax penalties if so assigned) that are now or in the
future In Lender's custody or control. [X] If checked, the obligations under
this Note are also secured by a lien on and/or security interest in the
property described in the security instruments executed in connection with
this Note as well as any other property designated as security for this Note
now or in the future.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. All prepayments will be credited as determined by Lender and as
permitted by law. If this Note is prepaid in full, there will be: {X} No minimum
finance charge or prepayment penalty. / / A minimum finance charge of $
/ / A prepayment penalty of:
LATE PAYMENT CHARGE: If a payment is received more than 10 days late, Borrower
will be charged a late payment charge of / / % of the unpaid late
payment; [X] $ 100.00 or 5.00% of the unpaid late payment, whichever is
[ ] greater [X] less.
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO THE
TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE SIDE.
BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
DATE: OCTOBER 1, 1998
BORROWER: Interactive Intelligence, Inc.
BORROWER:
By: /S/ Donald E. Brown
- -------------------------------- -----------------------------------
Donald E. Brown
President/CEO
BORROWER: BORROWER:
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BORROWER: BORROWER:
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BORROWER: BORROWER:
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<PAGE>
TERMS AND CONDITIONS
1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower, any guarantor or any other third party pledging collateral to secure
this Note-
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Note, any security instrument, or any
other present or future written agreement regarding this or any other
indebtedness of Borrower to Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) sells, conveys, or transfers rights in any collateral securing this
Note without the written approval of Lender, destroys, loses or
damages such collateral in any material respect, or subjects such
collateral to seizure or confiscation;
(e) has a garnishment, judgment, tax levy, attachment or lion entered or
served against Borrower, any guarantor, or any third party pledging
collateral to secure this Note or any of their property;
(f) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, fails to pay debts as they become due, or
becomes the subject of any bankruptcy, insolvency or debtor
rehabilitation proceeding; or
(g) causes Lender to deem itself insecure due to a significant decline in
the value of any real or personal property securing payment of this
Note, or Lender in good faith, believes the prospect of payment or
performance is impaired.
2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note, Lender
will be entitled to exercise one or more of the following remedies without
notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this Note
and all other present and future obligations of Borrower immediately
due and payable in full;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to cease making advances under this Note or any other agreement
between Borrower and Lender;
(d) to take possession of any collateral in any manner permitted by law;
(e) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell, lease or otherwise dispose of any collateral and collect any
deficiency balance with or without resorting to legal process;
(g) to set-off Borrower's obligations against any amounts due to Borrower
including, but not limited to monies, instruments, and deposit
accounts maintained with Lender; and
(h) to exercise all other rights available to Lender under any other
written agreement or applicable law. Upon default in any covenant or
agreement providing for the payment of taxes, the maintenance of
insurance, or otherwise relating to any collateral securing Borrower's
obligations to Lender, Lender may, in its sole discretion, advance
such sums and costs and take such other steps as Lender may deem
necessary or advisable to protect any collateral. All sums so
advanced or paid by Lender shall be payable by Borrower to Lender,
and shall be part of Borrower's obligations to Lender. Lender's
rights are cumulative and may be exercised together, separately,
and in any order. Lender's remedies under this paragraph are in
addition to those available at common law, including, but not limited
to, the right of set-off.
3. DEMAND FEATURE: / / If checked, this Note contains a demand feature.
Lender's right to demand payment at any time, and from time to time, shall be
in Lender's sole and absolute discretion, whether or not any default has
occurred.
4. FINANCIAL INFORMATION: Borrower will at all times keep proper books of record
and account in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will deliver to Lender, within
ninety (90) days after the end of each fiscal year of Borrower, a copy of the
annual financial statements of Borrower relating to such fiscal year, such
statements to include (I) the balance sheet of Borrower as at the end of such
fiscal year and (ii) the related income statement, statement of retained
earnings and statement of changes in the financial position of Borrower for such
fiscal year, prepared by such certified public accountants as may be reasonably
satisfactory to Lender. Borrower also agrees to deliver to Lender within fifteen
(15) days after filing same, a copy of Borrower's income tax returns and also,
from time to time, such other financial information with respect to Borrower as
Lender may request, Borrower shall permit Lender's representatives to inspect
Borrower's properties and its books and records, and to make copies or abstracts
thereof.
5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.
6. SEVERABILITY : If any provision of this Note is invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower in any manner.
8. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
9. APPLICABLE LAW: This Note shall be governed by the laws of the state of
Indiana. Unless applicable law provides otherwise, Borrower consents to the
jurisdiction and venue of any court selected by Lender in its discretion located
in such state in the event of any legal proceeding under this Note.
10. COLLECTION COSTS: To the extent permitted by law, Borrower agrees to 'Pay
collection costs, expenses, and reasonable attorneys fees and costs, incurred by
Lender in collecting any amount due or enforcing any right or remedy under this
Note whether or not suit is brought, including but not limited to, expenses,
fees, and costs incurred for collection, enforcement, realization on collateral,
construction, interpretation, and appearance in collection, bankruptcy,
insolvency, reorganization, post-judgment and appellate proceedings.
11. CHECK PROCESSING FEE: If a check, draft, order, or like instrument for
payment is dishonored or returned to Lender for any reason, Lender will assess a
check processing fee of $22.00 plus an amount equal to the actual charge by the
depository institution returning or dishonoring the instrument.
12. MISCELLANEOUS: This Note and the obligations incurred by Borrower are
commercial obligations to finance income-producing business or activity, and not
for personal, family or household purposes. Borrower and Lender agree that time
is of the essence. Borrower and any person who endorses this Note waives
presentment, demand for payment, notice of dishonor and protest and further
waives any right (if any) to require Lender to proceed against anyone else
before proceeding against Borrower or said person. All references to Borrower in
this Note shall include all of the parties signing this Note, and this Note
shall be binding upon the heirs, successors and assigns of Borrower and Lender.
If there is more than one Borrower their obligations under this Note shall be
joint and several. This Note represents the complete and integrated
understanding between Borrower and Lender regarding the terms hereof.
13. JURY TRIAL WAIVER: LENDER AND BORROWER HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE
COLLATERAL SECURING THIS NOTE.
14. ADDITIONAL TERMS:
PURPOSE FOR INVESTMENT IN RESEARCH AND DEVELOPMENT AND "SERVICES"; SECURED BY
A SECURITY AGREEMENT ON 80% OF ACCOUNTS RECEIVABLE LESS THAN 90 DAYS OLD
DATED 10/01/98; GUARANTEED BY DONALD E. BROWN; BILLING.
<PAGE>
Exhibit 10.17
REVOLVING CREDIT LOAN AGREEMENT
INTERACTIVE INTELLIGENCE, INC. (collectively called "Borrower") hereby applies
to SOCIETY NATIONAL BANK, Indiana, 202 S. Michigan Blvd, South Bend, Indiana
46601 (the "Bank") for revolving credit loans to be evidenced by a Revolving
Credit Loan Agreement Note of even date herewith and attached hereto (the
"Note") subject to the following provisions and such other provisions set forth
in the Note:
In consideration of the mutual covenants contained herein and other good and
valuable consideration, the Borrower and Bank hereby agrees as follows:
1. Commitment For Revolving Credit.
a. The Bank will make loans to the Borrower in whole or In part and from
time to time on and after the date hereof through and including April
30, 1996, (the "Termination Date" ) up to, but not exceeding, an
aggregate principal amount of $300,000.00 outstanding at any one time
(collectively called the "Loans"). The Borrower may borrow, repay, and
reborrow the Loans. All Loans shall be evidenced by the Note, and
shall mature on the Termination Date.
b. The obligation of the Bank to make any Loan is subject to the
conditions that at the date of making such Loan, and after giving
effect thereto, no Event of Default shall have occurred hereunder
and each warranty by Borrower below is true and correct as of such
date as if then made.
2. Warranties. The following warranties by the Borrower shall survive and
continue after execution and delivery of this Agreement and the Bank's
making the Loans:
a. The business operations of the Borrower are organized as a CORPORATION
b. If the Borrower is a corporation, the Borrower is duly organized,
validly existing and in good standing under the laws of Indiana
c. There are no material pending or, to the best of Borrower's knowledge,
threatened actions or proceedings before any court or administrative
agency, Federal or state, except as disclosed in a letter delivered by
the borrower to the Bank at or prior to the execution of this
Agreement.
d. The Borrower has filed all tax returns required to be filed and paid
all taxes due pursuant to such returns or to any assessment received.
The Internal Revenue Service has not asserted any liability for taxes
in excess of those already paid by the Borrower, and its property is
free of any tax liens.
e. The execution and performance of this Agreement, the Note, and the
Related Loan Documents, if any, are within the Borrower's powers, have
been duly authorized by appropriate corporate or partnership action,
are not in contravention of the terms of Borrower's articles of
incorporation, by-laws, regulations, close corporation agreement,
partnership agreement or certificate, or capital stock or any
amendment thereof (such documents herein called "Organization
Documents") and are not in contravention of any law or of any other
agreement to which Borrower is a party or by which it is bound.
f. All financial statements, statements as to ownership, and other
statements heretofore or hereafter given to the Bank in connection
with this Agreement, are or will be accurate and complete in all
material respects, subject to any limitation stated therein, and the
Borrower is the owner of all property in which the Borrower has given
or is giving a security interest to the Bank, free from all claims,
liens, encumbrances and other security Interests. The Borrower will
defend, at its sole expense, all such property against all claims and
demands of all persons, firms and corporations other than the Bank at
any time claiming the same or any interest therein.
g. Borrower's balance sheet and financial statements furnished to Bank
fairly and accurately present Borrower's financial condition and
business operation at said date, and since said date there has been no
material adverse change in its condition or operation.
h. The Borrower manages its business activities, or maintains its
place(s) of business, at the following address(es) 3500 DEPAUW
BOULEVARD, SUITE 2038, INDIANAPOLIS, INDIANA 46268
3. Affirmative Covenants. The Borrower agrees that it will:
a. Repay the Loans with interest thereon in accordance with the term and
conditions set forth In the Note.
b. At the request of the Bank, the Borrower will supply the Bank with a
copy of the Organization Documents.
c. Continue operating in its present business form, and all rights,
privileges and franchises necessary or desirable in the normal conduct
of its business activities, and, if a corporation, continue to be in
good standing in the jurisdiction where it is incorporated.
d. Use the proceeds of the Loans only for the following purpose(s)
GENERAL CORPORATE PURPOSES
e. Furnish to the Bank within 30 days after the close of each Quarter and
Year End an unaudited balance sheet and profit and loss statement for
such period and such other data, financial or otherwise, as the Bank
may request and at all reasonable times permit a representative of the
Bank to inspect the Borrower's business properties and make extracts
from the Borrower's books and records.
f. Pay all taxes, assessments and governmental charges upon the Borrower
or against its properties prior to the date on which penalties are
attached thereto, unless and to the extent only that the same shall be
contested in good faith and by appropriate proceedings by the
Borrower.
g. As security for the Loans and all other obligations and indebtedness
of any Borrower to the Bank, deliver to the Bank the following
collateral or duly executed security agreements, instruments of
guarantee or subordination agreements satisfactory to the Bank:
CONTINUING GUARANTY OF DONALD E. BROWN, MD. DATED AUGUST 25,1995
(herein collectively called the "Related Loan Documents") Borrower
waives the application of Valuation and Appraisement Laws.
h. Maintain adequate fire (including so-called extended coverage) public
liability and other insurance as the Bank may require, in such form
and written by such companies satisfactory to the Bank, and will upon
request of the Bank deliver to It the policies concerned.
i. The Borrower will comply with all requirements of the Employee
Retirement Income Security Act of 1974 ("Erisa") and the provisions of
all pension, profit-sharing, or other employee benefit plans now or
hereafter established or maintained by the Borrower.
j. Pay or reimburse the Bank for all reasonable out-of-pocket expenses of
every nature including, but not limited to bank's attorneys' fees,
legal costs, out-of-pocket expenses and related expenses and fees of
legal assistants which Bank incurs in connection with the collection
of the Loans.
4. Negative Covenants. Without the prior written consent of the Bank, the
Borrower will not at any time:
a. Endorse, guarantee or become surety for the obligations of any person,
corporation or other entity except that the Borrower may endorse
checks or other instruments for deposit or collection in the ordinary
course of business.
b. Permit any lien or security interest to exist except liens: (i) for
taxes and assessments not delinquent or being contested in good faith,
(ii) of mechanics or materialment with respect to obligations not
overdue or being contested in good faith, (iii) resulting from
deposits to secure payments of worker's compensation or other social
security obligations or to secure the performance of bids or contracts
in the ordinary course of business, or (iv) in favor of the Bank or an
affiliate of the Bank.
c. Sell or assign any accounts receivable, with or without recourse;
sell, transfer or assign any other assets, or if the Borrower is an
individual any of its business assets, except in the ordinary course
of business.
d. Enter into any merger or consolidation with any person, firm or
corporation; or alter or amend the Borrower's capital structure or
business form without the prior written consent of the Bank which
shall not be unreasonably withheld.
5. Default The following events shall be "Events of Default" hereunder
a. Default by the Borrower in the payment of any principal of, or
interest, on the Note when and as same shall become due and payable,
whether on maturity, by acceleration, or otherwise; or
b. Default by Borrower in the payment of any of its debt (other than that
evidenced by the Note) when and as same shall become due and payable;
or
c. Any representation or warranty made herein or In any financial
statement or other Information furnished by the Borrower or any
officer or representative of its in connection with the execution and
delivery of this Agreement, the Note or any Related Loan Document, or
in any certificate furnished pursuant hereto shall prove to be false
or erroneous in any material respect when made; or
d. Default by the Borrower in the due performance of any term, provision
or agreement contained herein, in the Note (other than for the payment
of principal or interest) or in any Related Loan Document or other
Instrument of security for the Note to be performed by it and such
default shall continue unremedied for 30 days thereafter, or
e. The Borrower or any endorser, co-maker or guarantor with respect to
the Note, shall become involved in financial difficulties as evidenced
by: (i) an assignment for the benefit of creditors; or commencement of
any similar debtor relief proceeding, whether judicial or otherwise;
(ii) consent to an application for the appointment of a trustee,
interim trustee, custodian or receiver for all or a major portion of
its property; (iii) the commencement of any action or proceeding under
any other federal or state bankruptcy, insolvency, composition, debtor
relief, reorganization or other similar law, or have such a proceeding
commenced against the Borrower or any of them and either have an order
of insolvency or reorganization or other similar law, or have such a
proceeding commenced against the Borrower or any of them and either
have an order of insolvency or reorganization entered against the
Borrower or any of them or have the proceeding remain undismissed or
unstayed for 60 days; (iv) entry or a final judgment for the payment
of money against the Borrower or any of them in excess of $N/A and the
same shall not be discharged within 30 days of its entry, or an appeal
or proceeding for review shall not be taken within said time and a
stay of execution pending such appeal shall not be obtained; or (v)
death, dissolution or suspension of the corporate charter or of the
partnership, insolvency or failure or suspension of the usual business
of the Borrower or any of them: or (vi) the issuance of any
attachment, garnishment, execution, federal tax levy, or other process
or seizure against any of their property; or
f. The failure to pledge or hypothecate hereunder additional security
when and as demanded by the Bank; or
g. Bank shall deem itself insecure, in good faith, believing that the
prospect of payment of the Note or any other indebtedness owed to the
Bank, or performance under this Agreement or any instrument providing
security for the Note, is impaired.
<PAGE>
If any one or more of the foregoing Events of Default shall happen, the Bank
may, at any time, without notice to the Borrower, terminate its commitment to
make any Loan hereunder and declare the unpaid principal of and interest of the
note to be immediately due and payable, and such principal of and interest on
the Note shall thereupon become and be Immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and the Bank may take such additional action
as provided by law.
6 Miscellaneous.
a. Paragraph headings are for reference only and shall otherwise be
disregarded. This Agreement shall be governed by and construed under
the laws of the State of Indiana.
b. No waiver or amendment of any part of this Agreement shall be
effective unless in writing. No delay in exercising any right shall
operate as a waiver thereof. A waiver on any one occasion shall not be
a waiver of any right or remedy on any future occasion. This Agreement
will terminate when all obligations and indebtedness of the Borrower
to the Bank have been paid in full and the Bank shall not be obligated
under any other agreement to advance any additional funds to the
Borrower.
c. Borrower waives the application of valuation and appraisment laws.
d. If any term or provision of the Agreement is held by a court to be
illegal or otherwise unenforceable, the legality and enforceability of
the remainder of this Agreement shall not be affected, and this
Agreement shall be constructed and enforced as if it did not contain
the particular term or provision held to be illegal or otherwise
unenforceable.
e. This Agreement sets forth the full and complete agreement of the
parties hereto on the matters herein expressed.
IN WITNESS WHEREOF and intending to be legally bound hereby, the Borrower and
Bank have executed and delivered this Agreement this 25th day of August, 1995.
Society National Bank, Indiana Interactive Intelligence, Inc.
By /s/ Andrew M. Cardimen, By: /s/ Donald E. Brown
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Andrew M. Cardimen, Assistant Vice President Donald E. Brown, M.D., President
By: /s/ John R. Gibbs
-----------------------------
John R. Gibbs, Treasurer
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT NOTE
(VARIABLE INTEREST RATE)
$ 300,000.00 August 25 1995
On or before April 30 1996 for value received, the undersigned (the
"Borrower") jointly and severally promises to pay to the order of Society
National Bank, Indiana (the "Bank") at its main office, the principal sum of
THREE HUNDRED THOUSAND DOLLARS ($ 300,000.00) or the unpaid balance thereof
shown on any ledger or other record of the Bank, which shall be presumptive
evidence of the principal amount owing and unpaid on this Note, together with
interest (calculated on the basis of a year of 360 days for the actual number of
days elapsed when monies are owed hereunder) on the daily unpaid principal
balance hereof from the date of this Note until maturity, which interest shall
be payable on OCTOBER 1 1995, and continuing on the same day of each Month
thereafter until maturity at a rate ZERO percent (0.00%) per annum in excess of
the Prime Rate of the Bank. In the event of any change in the Prime Rate, the
interest rate on this Note shall be immediately adjusted to correspond with such
change in the Prime Rate. Prior to maturity, for any installment payment of
interest not paid when due, the Borrower shall pay in addition to the
installment payment of interest a late charge of an amount equal to the greater
of $25.00 or 10% of the late installment payment of interest. If this Note is
not fully paid as to principal and interest at maturity, the entire unpaid
balance shall thereafter bear interest, until paid in full, at the per annum
rate of 3% over the interest rate hereof at maturity, which rate will be
immediately and correspondingly adjusted with each change in the Prime Rate. In
no event shall the interest rate hereunder exceed the maximum permitted by law.
The Prime Rate is defined as that interest rate established from time to time by
Bank's Bank's Prime Rate, whether or not such rate is publicly announced. The
Prime Rate may not be the lowest interest rate charged by the Bank for
commercial or other extensions of credit.
This Note is the Note referred to in the Revolving Credit Loan
Agreement, dated AUGUST 25 1995 by and between the Bank and the Borrower and is
subject to the provisions, and entitled to the benefits, thereof; and,
therefore, this Note, among other things, may be declared due and payable in the
manner and with the effect provided in that Revolving Credit Loan Agreement.
The Borrower waives the application of valuation and appraisement laws.
If more than one Borrower signs this Note as maker, the liability
hereunder shall be joint and several.
All parties signing this Note: (a) waive protest, presentment and
demand: (b) waive notice of protest, default, dishonor, acceleration. and of
sales or participations in this Note; and all other notice to which they might
otherwise be entitled; (c) waive all defenses based upon or arising from the
impairment, substitution or release of collateral securing this Note; or from
the full or partial release of any guarantor of this Note, surety on this Note,
or any person liable on this Note; and (d) consent to sales or repurchase of,
and participations in, this Note.
All accommodation parties and indorsers on this Note waive: (a) all
defenses that the Borrower might have on the underlying contract; (b) all
defenses arising from or based upon any extension, modification or renewal of
this Note or the modification of any instrument securing, guarantying or
related to this Note; and (c) all other defenses that they might otherwise have
under suretyship law.
Each party who signs this Note in any capacity, consents to the Bank's
setting off indebtedness the Bank owes such party against indebtedness owed the
Bank under this Note.
The Borrower will promptly reimburse the Bank in full for all
reasonable attorneys' fees, legal costs and other out-of-pocket expenses of
every nature and kind incurred by the Bank in protecting, asserting,
defending or pursuing its rights hereunder or under any document related
hereto. Until reimbursed to the Bank, these expenses will bear interest at
the rate or rates per annum charged hereunder on unpaid principal from the
time these expenses were incurred by the Bank until they are reimbursed
hereunder.
If any term or provision of this Note is held by a court to be illegal
or otherwise unenforceable, the legality and enforceability of the remainder of
this Note shall not be affected, and this Note shall be construed and enforced
as if it did not contain the particular term or provision held to be illegal or
otherwise unenforceable.
The term "maturity" as used herein means both maturity as scheduled
hereunder and maturity by acceleration hereunder.
The Borrower hereby acknowledges that this Note was signed in
Indianapolis Indiana
- -----------------------
(City) (State)
BORROWER:
Interactive Intelligence, Inc.
By: /s/ Donald E. Brown And: /s/ John R. Gibbs
---------------------------- ----------------------------
(Signature)
Donald E. Brown, M.D., President John R.Gibbs, Treasurer
<PAGE>
NOTE MODIFICATION AGREEMENT
This Note Modification Agreement ("Modification") is made and entered
into this 29th day of APRIL 1996 by and between INTERACTIVE INTELLIGENCE, INC.
("Borrower") and KeyBank National Association ("Bank").
RECITALS
A. Borrower has executed and delivered to Bank or to Bank's predecessor in
interest, as the case may be, a certain promissory note dated AUGUST 25,
1995, in the amount of $ 300,000.00 which may, or may not, have been
modified earlier) ("Note").
B. Borrower and Bank wish to modify and restate the Note.
NOWTHEREFORE, in consideration of the covenants and agreements herein
contained and other valuable consideration, the parties hereto agree that the
Recitals above set forth are a part of this Modification for all purposes and
further agree as follows:
1. Modification. The Note is hereby modified in the following respects:
Extend maturity date to May 30, 1996
2. OTHER PROVISIONS AND RESTATEMENT. All of the terms, provisions and conditions
of the Note shall remain in full force and effect to the extent they are not
modified herein; and the Note, as modified hereby, shall continue in full force
and effect.
3. OTHER DOCUMENTS. All security documents securing the payment of the Note and
all loan agreements and other agreements related to the Note (all or some of
which may, or may not, have been modified earlier) are hereby modified to take
into account and incorporate the modifications set forth in section 1. above,
and such security documents, loan agreements and other agreements, as they may,
or may not, have been modified earlier and as modified hereby, are hereby
ratified and confirmed and shall remain in full force and effect.
4. No Waiver. If the signing of this Modification results in the waiver by the
Bank of a default by Borrower, this signing shall not operate to waive, in the
future, the same default by Borrower should it again occur; nor shall this
signing operate, hereafter, to waive any other default by the Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Modification on
the day and year first above written.
BORROWER: BANK
Interactive intelligence, Inc. KeyBank National Association
By /s/ Donald E. Brown By /s/ Andrew M. Cardimen
---------------------------------- ------------------------------
Signature Signature
Donald E. Brown, President
/s/ John R.Gibbs Andrew M. Cardimen Vice President
---------------------------------- ---------------------------------
Typed or Printed Name and Office Typed or Printed Name and Office
John R.Gibbs, Treasurer
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT AND AGREEMENT
on this 29th day of APRlL 1996 the undersigned who is a guarantor, or are
guarantors, of the debt described in the foregoing document, does or do
hereby (a) Waive any and all defenses that he, she or they might have as a
result of the execution of the foregoing document, (b) acknowledge and agree
that his, her or their guaranty is unaffected by the execution of the
foregoing document, and (c) ratify and confirm his, her or their guaranty in
all respects, and agree that it shall continue in full force and effect. This
Acknowledgment and Agreement is entered into by the undersigned to induce
KeyBank National Association to enter into the foregoing agreement.
Guarantor(s):
/s/ Donald E. Brown
---------------------------------- --------------------------------
Signature Signature
Donald E. Brown M.D. an individual
---------------------------------- --------------------------------
Typed or Printed Name Typed or Printed Name
This instrument was prepared, on behalf of KeyBank National Association, by
Denise R. Rowe
10 West Market Street, Suite 900 Indianapolis, IN 46204
- --------------------------------------------------------------------------------
Name and Address
<PAGE>
KEYBANK NOTE MODIFICATION AGREEMENT
This Note Modification Agreement ("Modification") is made and entered
into this 8 day of MAY 1996 by and between INTERACTIVE INTELLIGENCE, INC.
("Borrower") and KeyBank National Association ("Bank").
RECITALS
A. Borrower has executed and delivered to Bank or to Bank's predecessor in
interest, as the case may be, a certain promissory note dated August 25,
1995, in the amount of $ 300,000.00 which may, or may not, have been
modified earlier) ("Note").
B. Borrower and Bank wish to modify and restate the Note.
NOWTHEREFORE, in consideration of the covenants and agreements herein
contained and other valuable consideration, the parties hereto agree that the
Recitals above set forth are a part of this Modification for all purposes and
further agree as follows:
1. Modification. The Note is hereby modified in the following respects:
1. Effective April 30, 1996. the maturity date is extended to April 30,
1997.
2. The principal amount shall increase from $300,000.00 to $500,000.00.
2. OTHER PROVISIONS AND RESTATEMENT. All of the terms, provisions and conditions
of the Note shall remain in full force and effect to the extent they are not
modified herein; and the Note, as modified hereby, shall continue in full force
and effect.
3. OTHER DOCUMENTS. All security documents securing the payment of the Note and
all loan agreements and other agreements related to the Note (all or some of
which may, or may not, have been modified earlier) are hereby modified to take
into account and incorporate the modifications set forth in section 1. above,
and such security documents, loan agreements and other agreements, as they may,
or may not, have been modified earlier and as modified hereby, are hereby
ratified and confirmed and shall remain in full force and effect.
4. No Waiver. If the signing of this Modification results in the waiver by the
Bank of a default by Borrower, this signing shall not operate to waive, in the
future, the same default by Borrower should it again occur; nor shall this
signing operate, hereafter, to waive any other default by the Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Modification on
the day and year first above written.
BORROWER: BANK
Interactive intelligence, Inc. KeyBank National Association
By /s/ Donald E. Brown By /s/ Andrew M. Cardimen
---------------------------------- --------------------------------
Signature Donald E. Brown, President Signature
/s/ John R. Gibbs Andrew M. Cardimen, Vice President
---------------------------------- ----------------------------------
Typed or Printed Name and Office
John R. Gibbs, Treasurer
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT AND AGREEMENT
on this 8 day of MAY 1996 the undersigned who is a guarantor, or are
guarantors, of the debt described in the foregoing document, does or do
hereby (a)waive any and all defenses that he, she or they might have as a
result of the execution of the foregoing document, (b) acknowledge and agree
that his, her or their guaranty is unaffected by the execution of the
foregoing document, and (c) ratify and confirm his, her or their guaranty in
all respects, and agree that it shall continue in full force and effect. This
Acknowledgment and Agreement is entered into by the undersigned to induce
KeyBank National Association to enter into the foregoing agreement.
Guarantor(s):
/X/ /s/ Donald E. Brown M.D. N/A
- ------------------------------------ --------------------------------
Signature Signature
Donald E. Brown M.D Individual N/A
---------------------------------- --------------------------------
Typed or Printed Name Typed or Printed Name
This instrument was prepared, on behalf of KeyBank National Association, by
Leigh D. Purcell. 10 West Market St.
Suite 800, Indianapolis, IN 46204
- --------------------------------------------------------------------------------
Name and Address
<PAGE>
NOTE MODIFICATION AGREEMENT
This Agreement is made by and between Interactive Intelligence, Inc.
("Borrower) and KeyBank National Association ("'Bank") on April 30,1997.
WHEREAS, Borrower has given to Bank or Bank's Predecessor an interest in a
certain Promissory note dated August 25. 1995 In the amount of $300,000.00 which
may or may not have been Previously modified ("Note").
WHEREAS, Borrower and Bank wish to modify the Note.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein and other valuable consideration, Borrower and Bank hereby agree as
follows:
1. Modification. The Note is hereby modified in the following respects;
Maturity date has hereby been extended to April 30, 1998.
2. Effective Date. The modifications described above are effective on April
30, 1997.
3. Conditions. The modifications described above are subject to and
conditioned upon the following: (A) that there is existing no event of
default under the Note or the Loan Documents (as hereinafter defined), nor
any event or condition which with notice or the passage of time would be an
event or default; (B) that Borrower shall deliver a fully executed original
of this Note Modification Agreement to bank; and (C) that Borrower shall
pay all expenses Incurred by Bank in connection with this Note Modification
Agreement.
4. General Provisions- Except as modified herein, all of the terms of the Note
are hereby confirmed and ratified and continue
in full force and effect. All security documents securing the payment of
the Note and all loan agreements and any other documents, including
guarantees, securing, or relating to the Note (the "Loan Documents") are
hereby Modified to take into account and incorporate the modifications set
forth above, and shall continue to secure repayment of the Note as modified
hereby. Borrower warrants and represents to Bank that it has full right,
power and authority to enter into this Note Modification Agreement and to
perform its obligations hereunder, and that all information and materials
submitted to Bank in connection herewith are accurate and complete.
Borrower warrants and represents that no event of default exists under the
Loan Documents. Borrower reaffirms its obligation to pay the Note in full
and reaffirms the validity and enforceability of the LOAN DOCUMENTS WITHOUT
SET-OFF, COUNTERCLAIM OR DEFENSE. THE TERMS HEREOF SHALL BIND THE PARTIES
HERETO AND THEIR ASSIGNS, SUCCESSORS AND TRANSFEREES.
IN WITNESS WHEREOF. Borrower and Bank have caused this Agreement to be executed
by their duly authorized officers on April 30 1997.
BORROWER: BANK
Interactive Intelligence Inc.. KeyBank-National Association
- ---------------------------------- -------------------------------------
BY, /s/ Donald E. Brown
- ---------------------------------- -------------------------------------
Donald E. Brown, M.D., President
By /s/ John R. Gibbs By: /s/ Jackie McNellan, Assistant
Vice President
- ---------------------------------- -------------------------------------
John R. Gibbs, Treasurer
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS
On this 30th day of April, 1997, the undersigned, being guarantor(s) Of the
Indebtedness. obligations, and liabilities of Borrower Pursuant to a certain
guaranty dated August 25, 1995, (1) consent(s) to the preceding Note
Modification Agreement, (2) agree(s) that the provisions of such guaranty are
ratified and confirmed and remain in full force and effect (3) agree(s) and
acknowledge(s) that there has been no act or omission by the Bank that has in
any way modified, waived or discharged the undersigned's liabilities under the
guaranty. and (4) confirm(s) that the undersigned has no claim, set-off or
defense, either legal or equitable, as an individual or as surety or guarantor,
against the Bank In connection with this Agreement the Note or any of the other
Loan Documents.
GUARANTORS
/s/ Donald E. Brown
- ---------------------------------- -------------------------------------
Donald E. Brown. M.D.,
- ---------------------------------- -------------------------------------
<PAGE>
NOTE MODIFICATION AGREEMENT
This Agreement is made by and between Interactive Intelligence
("Borrower") and KeyBank National Association "Bank" on April 20 1998.
WHEREAS, Borrower has given to Bank or Bank's Predecessor an interest
in a certain promissory note dated August 25, 1995 which may or may not have
been previously modified ("Note).
WHEREAS, Borrower and Bank wish to modify the Note
NOW THEREFORE, In consideration of the covenants and agreements
contained herein and other valuable consideration, Borrower and Bank hereby
agree as follows:
1. Modification. The Note is hereby modified In the following respects;
Maturity date has hereby been extended to April 30, 1999.
2. Effective Date: The modifications described above are effective on April
20, 1998.
3. Conditions. The modifications described above are subject to and
conditioned upon the following: (A) that there
is currently existing no event of default under the Note or the Loan
Documents (as hereinafter defined), nor any event or condition which with
notice or the passage Of time would be an event of default; (B) that
Borrower shall deliver a fully executed Original of this Note Modification
Agreement to Bank; and (c) that Borrower shall pay all expenses incurred by
Bank in connection with this Note Modification agreement.
4. General Provisions. Except as modified herein, all of the terms of the Note
are hereby confirmed and ratified and continue in full force and effect.
All security documents securing the payment of the Note and all loan
agreements and any other documents, including guarantees, securing, or
relating to the Note (the "Loan Documents") are hereby modified to take
into account and incorporate the modifications set forth above, and shall
continue to secure repayment of the Note as modified hereby. Borrower
warrants and represents to Bank that it has full right, power and authority
to enter into this Note Modification Agreement and to perform its
obligations hereunder, and that all information and materials submitted to
Bank in connection herewith are accurate and complete. Borrower warrants
and represents that no event of default exists under the Loan Documents.
Borrower reaffirms its obligation to pay the Note in full and reaffirms
the validity and enforceability of the Loan Documents without set-off,
counterclaim or defense. The terms hereof shall bind the parties hereto
and their assigns, successors and transferees.
IN WlTNESS WHEREOF, Borrower and Bank have, caused this Agreement to be executed
by their duly authorized officers on April 20 1998.
BORROWER BANK
Interactive Intelligence Inc. Keybank National Association
- ---------------------------------- ----------------------------------
By: /s/ Donald E. Brown By: /s/ Jackie McNellan, Assistant
Vice President
- ---------------------------------- ----------------------------------
Donald E. Brown. M.D., President
By: /s/ John R. Gibbs
- ---------------------------------- ----------------------------------
John R. Gibbs, Treasurer
ACKNOWLEDGMENT AND AGREEMENT
On this 20th day of April 1998 the undersigned, being guarantor(s) of the
indebtedness, obligations, and liabilities of Borrower Pursuant to a certain
guaranty dated August 25, 1995, (1) consents to the preceding Note Modification
Agreement, (2) agree(s) that the provisions of such guaranty are ratified and
confirmed and remain in full force and effect, (3) agree(s) and acknowledge(s)
that there has been no act or omission by the Bank that has In any way modified,
waived or discharged the undersigned's liabilities under the guaranty, and (4)
confirm(s) that the undersigned has no claim, set-off or defense, either legal
or equitable, as an individual or as surety or guarantor, against the Bank in
connection with this Agreement, the Note or any of the other Loan Documents.
/s/ Donald E. Brown
- ---------------------------------- ----------------------------------
Donald E. Brown. M.D.
- ---------------------------------- ----------------------------------
<PAGE>
Exhibit 10.18
Note No.
Account No.
CONSOLIDATED SUBORDINATED PROMISSORY NOTE
Indianapolis, Indiana
$7,056,000.00 Date: May 1, 1999
Due Date: December 31, 2001
FOR VALUE RECEIVED, INTERACTIVE INTELLIGENCE, INC., an Indiana
corporation (hereinafter referred to as "Borrower"), hereby promises to pay to
the order of DONALD E. BROWN, M.D. (hereinafter referred to as "Lender"), in
lawful money of the United States of America, on or prior to December 31, 2001,
at Lender's address as recorded on the books and records of the Borrower or at
such other place or to such other party as the holder hereof may from time to
time designate by written notice, the principal sum of Seven Million Fifty-six
Thousand and No/100 Dollars ($7,056,000), or as much thereof as may then be
outstanding, and to pay interest on the principal balance of this Note
outstanding from time to time at a per annum rate of ten percent (10%) until
maturity and thereafter at a per annum rate of twelve percent (12%).
This Note evidences the aggregate of principal amounts outstanding on a
consolidated basis from the Lender to the Borrower with respect to various
Subordinated Promissory Notes, in the original face, current balances amounts
and dated as follows ("Prior Note"):
<TABLE>
<CAPTION>
DATE OF NOTE ORIGINAL FACE AMOUNT CURRENT OUTSTANDING BALANCE
------------ -------------------- ---------------------------
<S> <C> <C>
December 10, 1996 $ 531,000.00 $ 531,000.00
January 6, 1998 $ 4,325,000.00 $ 4,856,000.00
July 31, 1998 $ 900,000.00 $ 5,756,000.00
November 13, 1998 $ 1,300,000.00 $ 7,056,000.00
</TABLE>
This Note supercedes and replaces all of the Prior Notes, which shall
be deemed to be merged herein, fully satisfied by replacement with this Note and
no longer outstanding.
Interest shall accrue on the principal amount from the date advanced as
shown above. Interest shall be payable at maturity, at which time the entire
unpaid balance of principal of this Note, together with all accrued but unpaid
interest, costs and expenses, shall be due and payable in full. Interest shall
be calculated on the basis of a three hundred sixty-five (365) or a three
hundred
Page 1 of 4
<PAGE>
sixty-six (366) day year, as the case may be, and shall be based upon actual
principal balances outstanding as of 5:00 p.m. Eastern Standard Time each day.
If any payment of principal or of interest on this Note falls due on a
day which is not a banking day, the due date shall be extended to the next
succeeding banking day and interest will be payable at the applicable rate for
the period of such extension. This Note may be prepaid at any time in whole or
in part without penalty or premium of any kind, provided that any accrued but
unpaid interest with respect to the amount prepaid shall be paid at the time of
pre-payment.
All amounts payable by Borrower to Lender under this Note shall be
without relief from valuation and appraisement laws and with attorneys fees and
costs of collection.
This Note is subordinated to Senior Debt (as defined below) in all
respects. The holder of this Note, by acceptance hereof, (i) acknowledges that
any person who extends indebtedness to the Borrower which qualifies as Senior
Debt, whether now existing or hereafter arising, shall be entitled to rely upon
this subordination without any further action on the part of the holder hereof,
whether by way of consent, confirmation or otherwise, and (ii) agrees to execute
and deliver such certifications, consents, confirmations, subordination
agreements or intercreditor agreements as the Borrower may reasonably request,
or as may be reasonably required by any person which is extending or proposing
to extend Senior Debt, to evidence the subordination contemplated hereby. For
purposes of this Note, "Senior Debt" means any one or more of the following: (1)
indebtedness of any kind or nature which is extended to the Borrower by any
financial institution or other institutional lender and which exceeds One
Hundred Thousand and No/100 Dollars ($100,000.00) in principal, (2) any
obligation to any person arising out of the use of any tangible property
pursuant to a lease or other similar document or agreement which, under
generally accepted accounting principles, the Borrower is entitled to carry on
its financial statements as a capitalized lease, whether or not the Borrower
treats such arrangement as a capitalized lease, and which exceeds One Hundred
Thousand and No/100 Dollars ($100,000.00) in principal, and (3) such other debt
or financial accommodation which (i) the Board of Directors of the Borrower
determines to be appropriate for inclusion in Senior Debt and gives written
notice of such determination to the holder hereof, and (ii) the holder hereof
consents to such debt or other financial accommodation being included in Senior
Debt, which consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, any obligation which falls within any of the
foregoing may by its terms or separate agreement be made subordinate to the
obligations evidenced by this Note. The holder hereof shall not be entitled to
receive, nor shall Borrower be obligated to pay, any payments under this Note at
times when any such payments are expressly prohibited by the terms of the Senior
Debt ("Prohibited Payments") and if any such Prohibited Payments are made on
this Note, such payments shall be held by the holder hereof (or its successors
or assigns) in trust for the benefit of the holder of the Senior Debt, and
promptly paid to such holder for application to the obligations of the obligor
under the Senior Debt.
At the option of the holder hereof, the entire unpaid balance of this
Note, including accrued but unpaid interest, shall become immediately due and
payable (subject to the subordination of these obligations pursuant to the terms
hereof) upon the occurrence of any one or more of the following events of
default: (1) the Borrower fails to pay within ten (10) days of when due any
amount
Page 2 of 4
<PAGE>
payable under this Note, (2) the holder of any Senior Debt declares an event of
default thereunder and accelerates such indebtedness, and such declaration and
acceleration is not withdrawn or rescinded within thirty (30) days from the
occurrence thereof, (3) the Borrower becomes insolvent or declares in writing
its inability to pay its debts as they become due, (4) the Borrower makes an
assignment for the benefit of creditors, consents to the appointment of a
custodian, receiver or trustee for itself or for a substantial part of its
assets, or commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction, (5) a custodian,
receiver or trustee is appointed for the Borrower or for a substantial part of
its assets without its consent and is not removed within ninety (90) days after
the appointment, (6) proceedings are commenced against the Borrower under any
bankruptcy, reorganization, liquidation or similar laws of any jurisdiction and
they remain undismissed for ninety (90) days after commencement, or the Borrower
consents to the commencement of such proceedings, (7) the Borrower dissolves,
liquidates, or otherwise ceases operations on a permanent basis, or (8) the
Borrower merges, consolidates, or otherwise combines with or into any other
entity in a transaction in which the Borrower is not the surviving corporation
and such surviving corporation does not expressly assume in writing the
obligations of the Borrower contemplated by this Note.
The person executing this Note for and on behalf of Borrower hereby
certifies that he has been duly authorized by all necessary action on the part
of Borrower to execute and deliver this Note for and on behalf of Borrower.
The Borrower and each endorser, jointly and severally, waives demand,
presentment for payment, protest, notice of protest and notice of non-payment of
this Note.
The Borrower agrees to pay and save the Lender or any holder hereof
harmless against any liability for the payment of any costs and expenses,
including reasonable attorneys' fees, arising or incurred in connection with the
enforcement by the Lender or any holder hereof of any rights under this Note.
Time is of the essence of this Note. No failure on the part of the
Lender in exercising its option to declare this Note due or to proceed to
collect this Note shall operate as a waiver of the right to do so or preclude
the exercise of such option at any time during the continuance of such default
or the occurrence of a succeeding default. The Lender may renew this Note or
extend time for payment or reduce the payments thereon; and any such renewal,
extension or reduction shall not release the undersigned from any liability
under this Note.
This Note is made under and will be governed by the laws of the State
of Indiana, except to the extent Indiana conflicts of law rules would require
the substantive rules of law of any other jurisdiction to be applied.
Whenever in this Note the term "undersigned" is used, the same shall be
understood as including and meaning any maker, surety, guarantor, and endorser,
jointly and severally.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the day and
year first above written
INTERACTIVE INTELLIGENCE, INC.
By: /s/ John R. Gibbs
-----------------------------------------
John R. Gibbs, Executive Vice President
of Administration and Corporate
Development
Page 4 of 4
<PAGE>
EXHIBIT 10.19
OFFICE LEASE
THIS LEASE, made this 16th day of September, 1998, by and between College
Park Plaza Associates, Inc., an Indiana corporation ("Land lord"), and
Interactive Intelligence, Inc., an Indiana corporation ("Tenant").
WITNESSETH:
ARTICLE I
Lease of Premises
SECTION 1.01. LEASE OF PREMISES. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord certain office space commonly known as Suite
300, in the College Park Plaza building, located in Marion County, Indiana, and
which is situated on the tract of land described in EXHIBIT A attached hereto
(the "Building"), subject to the terms and conditions herein set forth, for the
specific term hereinafter specified. The leased space in the Building is
described in Item A, Section 1.02 hereinafter, and is outlined on EXHIBIT B
attached ("Leased Premises"). In those buildings where they exist, elevators are
not part of the Leased Premises and shall remain in the exclusive control of the
Landlord.
SECTION 1.02. BASIC LEASE PROVISIONS.
(A) BUILDING ADDRESS: 8909 Purdue Road
CITY, STATE: Indianapolis, IN, ZIP CODE: 46268; FLOOR: 3rd; SUITE: 300
(B) RENTABLE AREA: 36,797 Square Feet;
(C) BUILDING PERCENTAGE: 20.44%;
(D) BASIC ANNUAL RENT: Initial 6 months from Commencement Date = $296,250
($49,375 x 6 months)
Remainder of Term $726,740.76 ($60,561.73 x 12 months)
(E) MONTHLY RENTAL INSTALLMENTS: Initial 6 months from Commencement
Date = $49,375
Remainder of Term $60,561.73
(F) LANDLORD'S SHARE OF OPERATING COSTS: $5.25 Per Square Foot Per Year;
(G) TERM: Five (5) Years and Zero (0) Months;
(H) TARGET COMMENCEMENT DATE: March 1, 1999;
(I) CONSTRUCTION DRAWINGS APPROVAL DATE: October 31, 1998;
(J) SECURITY DEPOSIT: $60,561.73;
(K) BROKER: Eaton & Lauth Real Estate Services, Inc. and Meridian Real Estate
Services;
(L) PERMITTED USE: General Office Purposes;
(M) ADDRESS FOR PAYMENTS AND NOTICES AS FOLLOWS:
LANDLORD College Park Plaza Associates, Inc.
c/o Eaton & Lauth Real Estate Services, Inc.
12220 N. Meridian Street, P.O. Box 1999
Carmel, IN 46032
TENANT Interactive Intelligence, Inc.
8909 Purdue Road, Suite 300
Indianapolis, IN 46268
(N) ADDITIONAL PROVISIONS SET FORTH IN ARTICLE 17: Sections 17.01 - 17.07;
MEMORANDUM OF ACTUAL COMMENCEMENT AND EXPIRATION DATES
Commencement Date___________________________ Expiration Date__________________
<PAGE>
ARTICLE 2
Term
SECTION 2.01. TERM. The term of this Lease shall be for the period
specified in Item G of Section 1.02 ("Original Term") ( provided that if the
Commencement Date is other than the first day of a calendar month, the
Expiration Date shall occur on the last day of the 60" full calendar month
thereafter) and shall commence on the first to occur of the (i) Target
Commencement Date specified in Item H of Section 1.02, provided that the
Leased Premises are ready for occupancy on the Target Commencement Date
unless the Leased Premises are not ready for occupancy as a result of
Tenant's delay pursuant to Exhibit "C"; (ii) the day Tenant's personnel first
occupy or take possession of any part of the Leased Premises; (other than for
preparation of the Leased Premises in connection with completion of tenant
improvements and other preparatory steps as contemplated by Section 2.02); or
(iii) the 30th day following Landlord's notice to Tenant pursuant to Section
2.02. The date of commencement defined above ("Commencement Date"), and the
Expiration Date shall be confirmed by Tenant as provided in Section 2.03.
"Lease Term", when used in this Lease shall include the Original Term and any
renewal term. The Commencement Date shall not be earlier than March 1, 1999,
nor later than April 1, 1998, subject to Section 16.15.
SECTION 2.02. CONDITION OF PREMISES. Landlord has agreed to construct or
provide the improvements and additions to the Leased Premises described in
Exhibit C-1 attached to this Lease and contribute toward the cost of the
interior finish and space planning for the Leased Premises as more particularly
described in Exhibit "C" to this Lease ("Landlord's Work"). Landlord agrees to
perform Landlord's Work subject to events and delays due to causes beyond its
reasonable control and shall give Tenant thirty (30) days written notice of the
day on which Landlord's Work shall be completed. From and after receipt of said
notice or earlier with the consent of Landlord, Tenant shall have the right and
privilege of going onto the Leased Premises to complete interior decoration work
and to prepare the Leased Premises for its occupancy, provided, however, that
its schedule in so doing shall be communicated to Landlord and the approval of
Landlord secured so as not to interfere unduly with Landlord's Work being
carried on at the time; and provided further that Landlord shall have no
responsibility or liability whatsoever for any loss or damage to any of Tenant's
leasehold improvements, fixtures, equipment or any other materials installed or
left in the Leased Premises prior to the Commencement Date. Premises prior to
the Commencement Date.
SECTION 2.03. TENANT'S ACCEPTANCE OF THE LEASED PREMISES. Upon delivery of
possession of the Leased Premises to Tenant as hereinbefore provided and
inspection of the Landlord's Work by the Tenant, Tenant shall execute an
Acceptance Letter acknowledging (i) the Commencement Date and Expiration Date of
this Lease, and (ii) that Tenant has accepted the Leased Premises for occupancy
and that the condition of the Leased Premises, including the Tenant finish
improvements constructed thereon, and the Building was at the time satisfactory
and in conformity with the provisions of this Lease in all respects, except for
any defects as to which Tenant shall give written notice to Landlord in the
Acceptance Letter or within thirty (30) days after the Commencement Date.
Landlord shall promptly thereafter correct all such defects at Landlord's
expense. Such Acceptance Letter shall become a part of this Lease. In addition
to executing the Acceptance Letter, Tenant shall confirm the Commencement Date
and the Expiration Date in the Memorandum of Actual Commencement Date and the
Expiration Date on page I of this Lease. If Tenant takes possession of the
Leased Premises, Tenant shall be deemed to have accepted the Leased Premises in
the manner described in this Section 2.03, subject to any defects or
deficiencies in the Acceptance Letter or of which Tenant has given written
notice to the Landlord as provided herein, even though the Acceptance Letter
provided for herein may not have been executed by Tenant.
ARTICLE 3
Occupancy and Use
SECTION 3.01. OCCUPANCY AND USE. Tenant shall use and occupy the Leased
Premises for the purposes as set out in Item L of Section 1.02, and for no other
purposes except with the prior written consent of the Landlord. Tenant shall use
the Leased Premises for no unlawful purpose or act; shall commit or permit no
waste or damage to the Leased Premises; shall comply with and obey the
Landlord's reasonable Rules and Regulations which have been delivered to the
Tenant and which are adopted, changed or modified from time to time hereafter by
Landlord on reasonable notice to Tenant, all of which are and will be a part of
this lease as EXHIBIT D , shall not do or permit anything to be done in or about
the Leased Premises which will in any way unreasonably obstruct or interfere
with the rights of other Tenants or occupants of the Building, injure them or
create a nuisance, and shall not do or knowingly permit anything to be done
which will increase the rate of fire insurance upon the Building.
Tenant, at its expense, shall comply in all material respects with all
applicable laws, rules, regulations, ordinances or orders of Federal, State,
County and Municipal authorities having jurisdiction, and with any lawful
direction of any public officer or officers, which shall impose any duty upon
Landlord or Tenant with respect to the Leased Premises, or the use, occupation
or alteration thereof, provided such duty arises from or results from Tenant's
failure to comply with Tenant's covenants in this Lease or from Tenant's
negligence or from the use of the Leased Premises in a manner contrary to the
purposes for which the same are leased to Tenant. Landlord represents, warrants
and covenants that at the Commencement Date of this Lease the Leased Premises
will be in compliance with all applicable laws, rules, regulations, ordinances,
orders and directions.
2
<PAGE>
SECTION 3.02. LANDLORD'S RIGHTS REGARDING USE. In addition to the rights
specified elsewhere in this Lease, Landlord shall have the following rights
regarding the use of the Leased Premises and common areas by Tenant, its
employees, agents, customers and invitees, which may be exercised without notice
or liability to Tenant (other than as provided herein) to install such signs,
advertisements, notices or Tenant identification information on the directory
board, or Tenant access doors it shall deem appropriate; other window coverings
Tenant may propose for use invisible from the outside of the Leased Premises; to
approve or disapprove of all sign painting and lettering, mineral or drinking
water, beverages, foods, towels, vending machines or toilet supplies used or
consumed in the Building outside of the Leased Premises, including the suppliers
thereof, to grant any person exclusive right to conduct any business or render
service in the Building, provided that such exclusive right shall not operate to
limit Tenant from using the Leased Premises for the permitted use as outlined in
Item L of Section 1.02; and to control the common areas in such a manner as the
Landlord deems necessary and proper including, but not limited to, requiring all
persons entering or leaving the Building to identify themselves to security
guards; excluding or expelling peddlers, solicitors or loud or unruly persons
from the Building, and closing and limiting access to the Building or other part
thereof, including entrances, corridors, doors, elevators, during times of
emergencies, or repairs or after regular business hours (without undue
interference with Tenant's permitted use of the Leased Premises on a 24-hour,
7-day per week basis).
SECTION 3.03. Access to Leased PREMISES. Landlord reserves the right to
enter the Leased Premises in any emergency, and to also inspect the same, to
alter, improve, remodel or repair the Leased Premises or any portion of the real
estate of which the Leased Premises are a part, without abatement of rent and
without incurring any liability to Tenant therefor. Landlord shall also have the
right to enter the Leased Premises during Tenant's normal business hours with
reasonable advance notice to Tenant, and to show the same to prospective
purchasers or mortgagees at any time during the Term and to prospective tenants
during the last 9 months of the Original Term or any renewal term without undue
interference with Tenant's conduct of its business. If representatives of Tenant
shall not be present to open and permit such entry to the Leased Premises at any
time as provided herein, and such entry is necessary or permitted hereunder,
Landlord and its employees and agents may enter the Leased Premises by means of
a master or pass key or otherwise. Landlord shall incur no liability to Tenant
for such entry, nor shall such entry constitute an eviction of Tenant or a
termination of the Lease, or entitle Tenant to any abatement of rent therefor;
provided that any access shall be subject to the confidentiality provisions set
forth in any separate confidentiality letter executed between the Landlord and
the Tenant. In addition, during the final six (6) months of the Original Term or
any renewal term, Landlord may place on the Leased Premises where appropriate
the usual notices "For Lease" or "For Sale" or other similar notices which
Tenant shall permit to remain without molestation.
SECTION 3.04. SURRENDER OF LEASED PREMISES. At the end of the Lease Term or
other sooner termination of this Lease, Tenant will peaceably deliver up to the
Landlord possession of the Leased Premises, together with all improvements or
additions upon or belonging to the same, by whomsoever made, in the same
condition as received, or first installed, ordinary wear and tear and damage by
fire, earthquake, Act of God or the elements alone excepted. Upon the
termination of this Lease, Tenant shall at Tenant's sole cost, remove all
counter, trade fixtures, office furniture and equipment installed by Tenant
unless otherwise agreed to in writing by Landlord. Tenant shall also repair any
damage caused by such removal. Property not so removed shall be deemed abandoned
at the termination of this Lease by Tenant and title to the same shall thereupon
pass to Landlord. Tenant shall indemnify Landlord against any loss or liability
directly caused by delay by Tenant in so surrendering the Leased Premises,
including without limitation, any claims made by any succeeding Tenant founded
on such; provided that Tenant shall have no liability for lost profit, special,
punitive or consequential damages.
SECTION 3.05. HOLDING OVER. In the event Tenant remains in possession of the
Leased Premises or any part thereof without the consent of Landlord after the
expiration or earlier termination of this Lease, Tenant shall be deemed to hold
the Leased Premises as a tenant on a month-to-month basis subject to all of the
terms, conditions, covenants and provisions of this Lease (which shall be
applicable during the holdover period), except that Tenant shall pay to Landlord
200% of the sum of the last current Basic Annual Rent (hereinafter defined) plus
Excess Operating Costs (hereinafter defined), which rent shall be payable to
Landlord on demand. In addition and subject to the limits in Section 3.04,
Tenant shall be liable to Landlord for all damages occasioned by such holding
over. Tenant shall vacate and surrender the Leased Premises to Landlord upon
Tenant's receipt of notice from Landlord to vacate at the expiration of the
Tenn. No holding over by Tenant, whether with or without the consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided herein.
ARTICLE 4
Rent and Deposit
SECTION 4.01. COMPONENTS OF RENT. Tenant hereby agrees to pay to Landlord
as rent for the Leased Premises an amount composed of the aggregate of the
components of rent hereinafter identified and defined as "Basic Annual Rent" and
Tenant's share of "Excess Operating Costs" The aggregate of all such rentals may
be referred to hereinafter as "Rental". The annual Rental shall be due and
payable in installments on the first day of each calendar month during the term
of this Lease. Installments of Annual Rental for the first six (6) months shall
be the amount specified in Item E, Section 1.02 of this Lease. The installments
of annual Rental for the remainder of the Term after the first six (6) months
shall be twelve (I 2) equal installments of the amount specified in Item E,
Section 1.02 of this Lease. Tenant hereby agrees to pay the monthly Rental
installments to Landlord as provided in Item M Section 1.02 of this Lease or at
such other location as Landlord may designate from time to time, in advance
without demand and without any deduction, abatement, counterclaim or set off. In
the event of a partial month at the beginning
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of the term of this Lease, the Rental and any other charges or costs, payable by
Tenant shall be prorated on the basis of a thirty (30) day month. Any portion of
the monthly Rental installments not paid when due bear a delinquency charge
equal to five percent (5%) of the amount of the Rental due and unpaid multiplied
by the number of months or fraction thereof, during which time such Rental
remains overdue. All Rental and other charges payable by Tenant pursuant to the
terms of this Lease shall be payable without relief from valuation and
appraisement laws, and with reasonable attorneys' fees and costs of collection.
SECTION 4.02. BASIC ANNUAL RENT. Tenant hereby agrees to pay Basic Annual
Rent for Leased Premises in the amount specified in Item D, Section 1.02 of this
Lease without a right of set-off, payable in advance in equal consecutive
monthly installments as specified in Item E, Section 1.02 of this Lease, on or
before the first day of each month during the Lease Term.
SECTION 4.03. EXCESS OPERATING COST. Tenant shall pay as additional rental
each calendar year its share of the operating costs that are in excess of
Landlord's Share of Operating Costs as specified in Item F, Section 1.02 of this
Lease ("Excess Operating Costs"). "Landlord's Share of Operating Costs", as that
term is used herein, shall consist of all costs and expenses incurred by
Landlord to maintain all facilities used in the operation of the Building and
its environs as may be reasonably determined by Landlord to be necessary and
which are usual, customary and consistent with sound commercial practices. All
operating costs shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied, and shall be
annualized in new or refurbished structures that commence operation during a
calendar year, by dividing the total costs by the number of months the structure
is in operation, and multiplying that result by twelve (12). Except to the
extent herein otherwise provided, the term Operating Costs" as used herein shall
mean all costs and expenses (but not specific costs which are separately billed
to and paid or reimbursed by specific tenants) of every kind and nature which
Landlord shall pay, become obligated to pay, or would have paid or incurred if
the Building had been ninety-five percent (95%) occupied (or actual occupancy
levels, whichever is greater), because of, or in connection with the ownership
and operation of the Building, including, but not limited to, the following:
(A) Wages, salaries, fringe benefit costs, payroll taxes, unemployment
compensation payments, workmen's compensation insurance premiums and other
related costs of all on-site employees (and those proportionately
allocated costs of off-site employees) engaged in the operation,
maintenance and security of the Building; costs of building employee
uniforms and cleaning thereof, the cost of fair rental value of a Building
Management Office in the Building; and the management fees payable by
Landlord (excluding brokerage commission for leasing) for management of
the Building which fees shall not exceed 4% of gross rentals.
(B) All labor, supplies and materials used in the operation, cleaning and
maintenance of the Building and all of its machinery and equipment.
(C) Cost of all utilities, including water, sewer, gas, steam, electric
fuel adjustment charges, sewer use charges and utility taxes incurred by
Landlord during the operation of the Building.
(D) Cost of all management, maintenance and service agreements of the
Building and the equipment therein, including, without limitation, alarm
service, trash removal and window cleaning and maintenance.
(E) Accounting costs, including the costs of audits by certified public
accountants, pertaining to the management and operation of the Building.
(F) Cost of all insurance, including without limitation, fire, casualty,
liability and rental abatement insurance applicable to the Building and
Landlord's personal property used in connection with the operation and
maintenance of the Building.
(G) Cost of repairs, replacements and general maintenance of the Building
and each part thereof (excluding repairs, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third
parties, and alterations attributable solely to other tenants of the
Building).
(H) Snow removal, landscaping and any and all other common area maintenance
costs related to public areas, including sidewalks and landscaping on the
Building site.
(I) Amortization over the useful life of capital improvements made to the
Building subsequent to the Commencement Date of the Lease which may be
required by governmental authorities, or which may improve the operating
efficiency of the Building from Landlord's efforts to reduce operating
costs.
(J) All taxes, tax appeal costs, expenses and fees, service payments in
lieu of taxes, assessments, excises, levies, fees, or charges, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of
any kind which are assessed, levied, charged, confirmed, or imposed by any
public authority upon the Building, personal property owned or used in
connection with the operation of the Building or upon its operations or
the rent provided for in this Lease and payable during the term of this
Lease, but excluding any income taxes upon Landlord's rental receipts. It
is
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agreed that Tenant will be responsible for the ad valorem taxes on its own
personal property, in or about the Building, and on the value of any
leasehold improvements to the Leased Premises made by Tenant.
SECTION 4.04. ESTIMATED EXCESS OPERATING COST. Landlord shall estimate the
Excess Operating Costs annually, and written notice thereof shall be given to
Tenant prior to, or within a reasonable time after, the beginning of each
calendar year. Tenant shall pay its share of the Estimated Excess Operating
Costs in twelve (12) equal monthly installments payable on the first day of each
month as part of the Rental, which share shall be calculated by multiplying
Tenant's Building Percentage set forth in Item C of Section 1.02 times the
difference of estimated Operating Costs less Landlord's Share of Operating
Costs. On the expiration or earlier termination of the Lease Term, Landlord
shall have the right to adjust the Estimated Excess Operating Cost based on year
to date information, with Tenant to pay Landlord, within fifteen (15) days after
receipt of notice thereof, any increase in the estimate attributable to the
period before the Lease Term expiration. Within a reasonable period of time
after the end of each calendar year, even in cases where the Lease terminated in
the prior year, Landlord shall render to Tenant a statement showing the actual
Excess Operating Cost for Landlord's operation of the Building during the prior
calendar year, setting forth a computation of Tenant's share of the Excess
Operating Cost for the portion of the year covered by the Lease Term. Within
fifteen (15) days after receipt of said statement, Tenant shall pay Landlord, or
Landlord shall credit to Tenant, as the case may be, the difference between the
actual Excess Operating Costs for the preceding calendar year and the Estimated
Excess Operating Costs paid by Tenant during such year; provided that Tenant
shall have the right to audit the Operating Costs. If such audit establishes
that Tenant has been overcharged by more than Five Hundred Dollars ($500.00) or
five percent (5%) of Tenant's share of the Operating Costs, whichever is
greater, then the cost of the audit shall be paid by Landlord. In any other
case, the cost of the audit shall be paid by Tenant. If the Lease shall
commence, expire, or be terminated on any date other than the last date of the
calendar year, then the Excess Operating Costs for such partial year shall be
prorated on the basis of the number of days during the year the Lease was in
effect in relation to the total number of days in such year. If Tenant owes
Landlord, then such payment shall be made in a lump sum. If Landlord owes
Tenant, then Tenant's account shall be credited in the same way Tenant paid its
Estimated Excess Operating Costs, or other payment, at Landlord's sole
discretion; provided that any amounts owing after the expiration of the
applicable Term shall be paid in lump sum to the Tenant.
SECTION 4.05. SECURITY DEPOSIT. Tenant has herewith deposited with Landlord
the sum specified in Item J, of Section 1.02 of this Lease. Said deposit shall
be held by Landlord, without liability for interest, as security for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease, and may be applied by Landlord, in whole or in part for the payment
of any past due rent or other money damage or loss which may be sustained by
Landlord because of a breach of this Lease by Tenant. In the event of any such
application by Landlord, Tenant shall, upon the written demand of Landlord,
forthwith remit to Landlord sufficient funds to restore the security to the
original sum deposited. Said deposit shall be returned to Tenant
upon termination of Tenant's occupancy hereunder, provided Tenant has complied
with all of the terms, covenants and conditions of this Lease, including those
relating to the condition in which the Leased Premises shall be left by Tenant.
Landlord may deliver such deposit to any purchaser of other transferee of
Landlord's interest in the Real Estate, and thereupon Landlord shall be
discharged from any further liability with respect to such deposit. Landlord
shall not be required to hold such security deposit in a separate account, but
may commingle it with Landlord's other funds. The Security Deposit shall be
refunded to Tenant if and when Tenant has achieved a net worth equal to at least
the total amount of the Rental payable through the remaining Term of this Lease.
ARTICLE 5
Utility and Other Building Services
SECTION 5.01. SERVICES TO BE PROVIDED. Provided Tenant is not in default,
Landlord shall furnish to Tenant, except as noted below, the following utilities
and other building services to the extent reasonably necessary for Tenant's
comfortable use and occupancy of the Leased Premises for general office use or
as may be required by law or directed by governmental authority:
(A) Heating, ventilation and air-conditioning between the hours of 7:00
a.m. and 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 p.m. on
Saturday of each week except on legal holidays;
(B) Subject to interruptions beyond Landlord's control, electrical current
of at least seven (7) watts per square foot. At all times Tenant's use of
electric current shall never exceed the capacity of the feeders to the
Building or the risers or wiring installation;
(C) Water in the Common Areas and the Leased Premises;
(D) Automatic elevator service where applicable;
(E) Cleaning and janitorial service, including the supplying and installing
of paper towels, toilet tissue and soap in the Common Areas five (5) days
of each week except legal holidays; provided, however, Tenant shall be
responsible for any expenses of carpet cleaning other than routine
vacuuming;
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(F) Washing of windows at intervals reasonably established by Landlord;
(G) Replacement of all lamps, bulbs, starters and ballasts in Building
standard lighting as required from time to time as a result of normal
usage;
(H) Cleaning and maintenance of the Common Areas, including the removal of
rubbish and snow; and
(I) Repair and maintenance to the extent specified elsewhere in this Lease.
SECTION 5.02. ADDITIONAL SERVICES. If Tenant requests any other utilities
or building services in addition to those identified above or any of the
above utilities or building services in frequency, scope, quality or quantity
substantially greater than those which Landlord determines are normally
required by other tenants in the Building for general office use, then
Landlord shall use reasonable efforts to attempt to furnish Tenant with such
additional utilities or building services. In the event Landlord is able to
and does furnish such additional utilities or building services, the actual
costs thereof shall be home by Tenant, who shall reimburse Landlord monthly
for the same as additional rent at the same time Monthly Rental Installments
and other Rental is due.
If any lights, machines or equipment used by Tenant in the Leased Premises
materially affect the temperature otherwise maintained by the Building's
air-conditioning system or generate substantially more heat in the Leased
Premises than that which would normally be generated by the lights and business
machines typically used by other tenants in the Building or by tenants in
comparable office buildings, then Landlord shall have the right to install any
machinery or equipment, which Landlord considers reasonably necessary in order
to restore the temperature balance between the Leased Premises and the rest of
the Building, including equipment which modifies the Building's air-conditioning
system. All costs expended by Landlord to purchase and install any such
machinery and equipment and any additional costs of operation and maintenance
occasioned thereby shall be borne by Tenant, who shall reimburse Landlord for
the same. At the termination of this Lease, Tenant shall have the right to
remove such machinery or equipment, at which time such machinery or equipment
shall become the sole property of Tenant.
Tenant shall not install furniture, fixtures or equipment that cannot be
supported by the Building structure in Landlord's reasonable judgment without
Landlord's prior written consent. If Landlord determines that the electricity
used by the equipment to be so installed or connected exceeds the designed load
capacity of the Building's electrical system or is in any way incompatible
therewith, then Landlord shall have the right, as a condition to granting its
consent, to make such modifications to the electrical system or other parts of
the Building or Leased Premises, or to require Tenant to make such modifications
to the equipment to be installed or connected, as Landlord considers to be
reasonably necessary before such equipment may be so installed or connected. The
cost of any such modifications shall be home by Tenant, who shall reimburse
Landlord for the same (or any portion thereof paid by Landlord).
SECTION 5.03. INTERRUPTION OF SERVICES. Tenant understands, acknowledges
and agrees that any one or more of the utilities or other building services
identified in Section 5.01 may be interrupted by reason of accident,
emergency or other causes beyond Landlord's control, or may be discontinued
or diminished temporarily by Landlord or other persons until certain repairs,
alterations or improvements can be made; that Landlord does not represent or
warrant that the availability and capacity of such utilities or building
services shall continue uninterrupted and unchanged, and that any such
interruption or change shall not be deemed an eviction or disturbance of
Tenant's right to possession, occupancy and use of the Leased Premises or any
part thereof, or render Landlord liable to Tenant for damages by abatement of
rent or otherwise, or relieve Tenant from the obligation to perform its
covenants under this Lease.
ARTICLE 6
Repairs, Maintenance, Alterations,
Improvements and Fixtures
SECTION 6.01. REPAIR AND MAINTENANCE OF BUILDING. Subject to Section 6.02
and except for any repairs necessitated by the negligence, misuse, or default
of Tenant, its employees, agents, customers and invitees, Landlord shall make
all necessary repairs to the exterior walls, exterior doors, windows,
corridors and other common areas of the Building and shall do so in a
reasonably prompt and good and workmanlike manner, and Landlord shall keep
the building in a safe, clean and neat condition and use reasonable efforts
to keep all equipment used in common with other tenants such as elevators,
plumbing, heating, air conditioning and similar equipment, in good condition
and repair. Except as provided in Article 7 hereof, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the
Leased Premises or in or to any fixtures, appurtenances and equipment therein
or thereon.
SECTION 6.02. REPAIR AND MAINTENANCE OF LEASED PREMISES. Landlord shall keep
and maintain the Leased Premises in good order, condition and repair. Except for
the services specified in Section 5.01 (E), (F) and (G), and except for ordinary
wear and tear and damage which Tenant is not obligated to repair as provided
elsewhere in this Lease, the cost of all repairs and
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maintenance to the Leased Premises shall be borne by Tenant, who shall be
separately billed and shall reimburse Landlord for the same as additional rent.
SECTION 6.03. ALTERATIONS OR IMPROVEMENTS. Upon prior written consent from
Landlord, alterations or improvements may be made to the Leased Premises;
provided however, such alterations or improvements shall be made by Landlord, or
contractors approved by Landlord. All costs attributable to said alterations or
improvements shall be home by Tenant, including, but not limited to all
construction costs, fees, architectural costs, permit fees, and reasonable
attorney fees. Unless otherwise agreed in writing between the Landlord and the
Tenant, any alterations or improvements to the Leased Premises, except movable
office furniture, equipment and trade fixtures, shall become part of the realty,
and be the property of Landlord, and shall not be removed by Tenant.
SECTION 6.04. TRADE FIXTURES. Any trade fixtures installed on the Leased
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, showcases, mirrors and the like, may, and, at the request of Landlord,
shall be removed on the expiration or earlier termination of this Lease,
provided that Tenant is not then in default, that Tenant bears the cost of such
removal, and further that Tenant repairs at its own expense any and all damages
to the Leased Premises resulting from such removal. If Tenant fails to remove
any and all such trade fixtures from the Leased Premises on the expiration or
earlier termination of this Lease, all such trade fixtures shall become the
property of Landlord unless Landlord elects to require their removal, in which
case Tenant shall, at its expense, promptly remove the same and restore the
Leased Premises to their prior condition.
SECTION 6.05. RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING. At any time
after the completion of the Building, Landlord shall have the right to change
the arrangement or location of such of the following as are not contained within
the Leased Premises or any part thereof., entrances, signs, passageways, doors
and doorways, corridors, stairs, toilets and other like public service portions
of the Building; providing, however, that in no event shall Landlord change the
arrangement or location of the elevators serving the Leased Premises, make any
change which shall diminish the area of the Leased Premises, make any change
which shall interfere with the access to the Leased Premises from and through
the Building, or change the character of the Building from that of a first-class
office building.
ARTICLE 7
Fire or Other Casualty; Eminent Domain
SECTION 7.01. SUBSTANTIAL DESTRUCTION OF THE BUILDING OR THE LEASED
PREMISES. If either the Building or the Leased Premises should be substantially
destroyed or damaged (which as used herein, means destruction or material damage
to at least 50% of the Building or 50% of the Leased Premises) by fire or other
casualty, then Landlord or Tenant may, at their respective option, terminate
this Lease by giving written notice of such termination to the other party
within thirty (30) days after the date of such casualty. In such event, Rental
shall cease as of the date of such casualty. If neither party exercises this
option, then the Leased Premises shall be reconstructed and restored, at
Landlord's expense, to substantially the same condition as they were prior to
the casualty; provided however, that Landlord's obligation hereunder shall be
limited to the reconstruction of Landlord's Work; and further provided that if
Tenant has made any additional improvements pursuant to Section 6.03, Tenant
shall reimburse Landlord for the cost of reconstructing the same. In the event
of such reconstruction, rent shall be abated from the date of the casualty until
substantial completion of the reconstruction repairs; and this Lease shall
continue in full force and effect for the balance of the Lease Term.
SECTION 7.02. PARTIAL DESTRUCTION OF THE LEASED PREMISES. If the Leased
Premises should be damaged by fire or other casualty, but not substantially
destroyed or damaged to the extent provided in Section 7.01, then, so long as
sufficient insurance proceeds are available for Landlord's use in reconstruction
and repair, then such damaged part of the Leased Premises shall be reconstructed
and restored, at Landlord's expense, to substantially the same condition as it
was prior to the casualty; provided however, that Landlord's obligation
hereunder shall be limited to the reconstruction of Landlord's Work; and further
provided that if Tenant has made any additional improvements pursuant to Section
6.03, Tenant shall reimburse Landlord for the cost of reconstructing the same.
In such event, if the damage is expected to prevent Tenant from carrying on its
business in the Leased Premises to an extent exceeding 20% of its normal
business activity, Rental shall be abated in the proportion which the
approximate area of the damaged part bears to the total area in the Leased
Premises from the date of the casualty until substantial completion of the
reconstruction repairs; and this Lease shall continue in full force and effect
for the balance of the Lease Term. Landlord shall use reasonable diligence in
completing such reconstruction repairs, but in the event Landlord fails to
complete the same within one hundred eighty (180) days from the date of the
casualty, Tenant may, at its option, terminate this Lease by giving Landlord
written notice of such termination, whereupon both parties shall be released
from all further obligations and liability hereunder.
SECTION 7.03. EMINENT DOMAIN. If the whole or any part of the Leased
Premises shall be taken for public or quasi-public use by a governmental or
other authority having the power of eminent domain or shall be conveyed to
such authority in lieu of such taking, and if such taking or conveyance shall
cause the remaining part of the Leased Premises to be untenantable and
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inadequate for use by Tenant for the purpose for which they were leased, then
either Landlord or Tenant may, at their respective option, terminate this Lease
as of the date Tenant is required to surrender possession of the Leased Premises
by giving written notice of such termination to the other party. If a part of
the Leased Premises shall be taken or conveyed but the remaining part is
tenantable and adequate for Tenant's use, then this Lease shall be terminated as
to the part taken or conveyed as of the date Tenant surrenders possession;
Landlord shall make such repairs, alterations and improvements as may be
necessary to render the part not taken or conveyed tenantable; and Rental shall
be reduced in proportion to the part of the Leased Premises so taken or
conveyed. However, if the compensation awarded (reduced by any application
thereof by Landlord's mortgage to its mortgage is insufficient to restore the
Leased Premises, Landlord shall have the option to terminate this Lease as of
the date Tenant is required to surrender possession of the Leased Premises by
giving Tenant written notice of such termination. All compensation awarded for
such taking or conveyance shall be the property of Landlord without any
deduction therefrom for any present or future estate of Tenant, and Tenant
hereby assigns to Landlord all its right, title and interest in and to any such
award. However, Tenant shall have the right to recover from such authority, but
not from Landlord, such compensation as may be awarded to Tenant on account of
moving and relocation expenses and depreciation to and removal of Tenant's
property.
SECTION 7.04. STANDARDS FOR REPAIR. All repairs and other restoration
contemplated by the Lease which are the obligations of Landlord to perform or
cause to be performed shall be done in a good and workmanlike manner consistent
with quality of original construction.
ARTICLE 8
Insurance
SECTION 8.01. LANDLORD'S INSURANCE. Landlord shall at all times during the
Lease Term carry, at its expense, a policy of insurance which insures the
Building, including the Leased Premises, against loss or damage by fire or other
casualty (namely, the perils against which insurance is afforded by a standard
fire insurance policy and extended coverage endorsement)which policies shall be
in customary amounts and shall be issued by reputable, financially secure
underwriters; provided, however, that Landlord shall not be responsible for, and
shall not be obligated to insure against, any loss of or damage to any personal
property of Tenant or which Tenant may have in the Building or the Leased
Premises or any trade fixtures installed by or paid for by the Tenant on the
Leased Premises or any additional improvements which Tenant may construct on the
Leased Premises, and Landlord shall not be liable for any loss or damage to such
property, regardless of cause, including the negligence of Landlord and its
employees, agents, customer and invitees. If the tenant finish improvements
installed by Landlord in connection with Landlord's Work in excess of the
Building standard tenant finish improvements or any alterations or improvements
made by Tenant pursuant to Section 6.03 result in an increase in the premiums
charged during the Lease Term on the casualty insurance carried by Landlord on
the Building, then the cost of such increase in insurance premiums shall be
borne by Tenant, who shall reimburse Landlord for the same as additional rent
after being separately billed therefor.
SECTION 8.02. LANDLORD'S RESPONSIBILITY. Landlord shall assume the risk of,
be responsible for, have the obligation to insure against, and indemnify Tenant
and hold it harmless from, any and all liability for any loss of or damage or
injury to person (including death resulting therefrom) or property (other than
Tenant's property as provided in Section 8.01.) occurring in, or about the
Common Areas and the land where the Building is located to the extent that such
land is not part of the Common Area, regardless of cause, except for that caused
by the sole negligence of, intentional act or omission or breach of this Lease
by Tenant and its employees, agents, customers and invitees. Landlord's
obligation to indemnify Tenant hereunder shall include the duty to defend
against any claims asserted by reason of such loss, damage or injury and to pay
any judgment, settlements, costs, fees and expenses, including attorneys' fees,
incurred in connection therewith.
SECTION 8.03. TENANT'S INSURANCE. Tenant, in order to enable it to meet its
obligation to insure against the liabilities specified in this Lease, shall at
all times during the Lease Term carry, at its own expense, for the protection of
Tenant, Landlord and Landlord's management agent, as their interest may appear,
one or more policies of general public liability and property damage insurance,
issued by one or more insurance companies acceptable to Landlord, with the
following minimum coverages:
(A) Worker's Compensation - minimum statutory amount.
(B) Comprehensive General Liability Insurance - including not less than
$1,000,000 Blanket, Contractual Liability, Broad Form Property Combined
Single Damage, Personal Injury, Completed Operations, Limit for both
bodily Products Liability & property damage.
(C) Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, for the full cost of replacement of Tenant's
property.
Such insurance policy or policies shall name Landlord and Landlord's
management agent as additional insureds and shall provide that they may not be
canceled on less than thirty (30) days' prior written notice to Landlord. Tenant
shall furnish Landlord with Certificates of Insurance evidencing such coverage.
Should Tenant fail to carry such insurance and furnish
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Landlord with such Certificates of Insurance after a request to do so, Landlord
shall have the right to obtain such insurance and collect the cost thereof from
Tenant as additional rent.
SECTION 8.04. TENANT'S RESPONSIBILITY. Tenant shall assume the risk of, be
responsible for, have the obligation to insure against, and indemnify Landlord
and hold it harmless from any and all liability for any loss of or damage or
injury to any person (including death resulting therefrom) or property occurring
in, or about the Leased Premises, regardless of cause, except for any loss or
damage from fire or other casualty as provided in Section 8.01 and except for
that caused by the sole negligence of Landlord and its employees, agents,
customers and invitees or by the intentional acts or breach of this Lease by
Landlord; and Tenant hereby releases Landlord from any and all liability for the
same. Tenant's obligation to indemnify Landlord hereunder shall include the duty
to defend against any claims asserted by reason of such loss, damage or injury
and to pay any judgment, settlements, costs, fees and expenses, including
attorneys' fees, incurred in connection therewith. Notwithstanding anything
herein to the contrary, Tenant shall bear the risk of any loss or damage to its
property as provided in Section 8.01.
SECTION 8.05. WAIVER OF SUBROGATION. Landlord and Tenant hereby release
each other and each other's employees, agents, customers and invitees from
any and all liability for any loss of or damage or injury to person or
property occurring in, on or about or to the Leased Premises, the Building or
personal property within the Building by reason of fire or other casualty
which could be insured against under a standard fire and extended coverage
insurance policy, regardless of cause, including negligence of Landlord or
Tenant and their respective employees, agents, customers and invitees, and
agree that such insurance carried by either of them shall contain a clause
whereby the insurer waives its right of subrogation against the other party.
Because the provisions of this Section 8.05 are intended to preclude the
assignment of any claim mentioned herein by way of subrogation or otherwise
to an insurer or any other person, each party to this Lease shall give to
each insurance company which has issued to it one or more policies of fire
and extended coverage insurance notice of the provisions of this Section 8.05
and have such insurance policies properly endorsed, if necessary, to prevent
the invalidation of such insurance by reason of the provisions of this
Section 8.05.
ARTICLE 9
Liens
SECTION 9.01. LIENS. If, because of any act or omission of Tenant or any
person claiming by, through, or under Tenant, any mechanic's lien or other lien
shall be filed against the Leased Premises or the Building or against other
property of Landlord (whether or not such lien is valid or enforceable as such),
Tenant shall, at its own expense, cause the same to be discharged of record
within thirty-five (35) days after the date of filing thereof, and shall also
indemnify Landlord and hold it harmless from any and all claims, losses,
damages, judgments, settlements, costs and expenses, including attorneys' fees,
resulting therefrom or by reason thereof Landlord may, but shall not be
obligated to, pay the claim upon which such lien is based so as to have such
lien released of record; and, if Landlord does so, then Tenant shall pay to
Landlord, as additional rent, upon demand, the amount of such claim, plus all
other costs and expenses incurred in connection therewith, plus interest thereon
at the rate per annum of Prime plus 5% until paid.
ARTICLE 10
Rental, Personal Property and Other Taxes
SECTION 10.01. TAXES. Tenant shall pay before delinquency any and all
taxes, assessments, fees or charges, including any sales, gross income, rental,
business occupation or other taxes, levied or imposed upon Tenant's business
operations in the Leased Premises and any personal property or similar taxes
levied or imposed upon Tenant's trade fixtures, leasehold improvements or
personal property located within the Leased Premises. In the event any such
taxes, assessments, fees or charges are charged to the account, of or are levied
or imposed upon the property of Landlord, Tenant shall reimburse Landlord for
the same as additional rent. Notwithstanding the foregoing, Tenant shall have
the right to contest in good faith any such item and to defer payment until
after Tenant's liability therefor is finally determined.
If any tenant finish improvements, trade fixtures, alterations, improvements
or business machines and equipment located in or about the Leased Premises,
regardless of whether they are installed or paid for by Landlord or Tenant and
whether or not they are affixed to and become a part of the realty and the
property of Landlord, are assessed for real property tax purposes at a valuation
higher than that at which other such property in other leased space in the
Building is assessed, then Tenant shall reimburse Landlord as additional rent
for the amount of real property taxes shown on the appropriate county official's
records as having been levied upon the Building or other property of Landlord by
reason of such excess assessed valuation.
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ARTICLE II
Assignment and Subletting
SECTION 11.01. ASSIGNMENT AND SUBLETTING BY TENANT. Tenant may not sell,
assign, or mortgage this Lease or sublet the Leased Premises or any part
thereof, without the prior written consent of Landlord which shall not be
unreasonably withheld, conditioned or delayed; and any attempted assignment or
subletting without such consent shall be invalid. In the event of a permitted
assignment or subletting, Tenant shall nevertheless at all times remain fully
responsible and liable for the payment of rent and the performance and
observance of all of Tenant's other obligations under the terms, conditions and
covenants of this Lease. No assignment or subletting of the Leased Premises or
any part thereof shall be binding upon Landlord unless such assignee or
subtenant shall deliver to Landlord an instrument (in recordable form, if
requested) containing an agreement of assumption of all Tenant's obligations
under this Lease. Upon the occurrence of an event of default, if all or any part
of the Leased Premises are then assigned or sublet, Landlord, in addition to any
other remedies provided by this Lease or by law, may, at its option, collect
directly from the assignee or subtenant all rent becoming due to Landlord by
reason of the assignment or subletting. Any collection by Landlord from the
assignee or subtenant shall not be construed to constitute a waiver or release
of Tenant from the further performance of its obligations under this Lease or
the making of a new lease with such assignee or subtenant.
It shall be reasonable for Landlord to refuse to give its consent to any
proposed assignment or subletting based on, among other things, Landlord's
reasonable determination that its interest in the Lease or the Leased Premises
would be adversely affected by (i) the financial condition, creditworthiness or
business reputation of the proposed assignee or subtenant, (ii) the prevailing
market or quoted rental rates for space in the Building or other comparable
buildings or (iii) the proposed use of the Leased Premises by, or business of,
the proposed assignee or subtenant.
ARTICLE 12
Transfer by Landlord
SECTION 12.01. SALE AND CONVEYANCE OF THE BUILDING. Landlord shall have the
right to sell and convey the Building at any time during the Lease Term, subject
only to the rights of Tenant hereunder and provided that such transaction is a
bona fide transaction then such sale and conveyance shall operate to release
Landlord from liability hereunder after the date of such conveyance as provided
in Section 13.08. Landlord shall not permit any such sale or conveyance to cause
this Lease to be terminated.
SECTION 12.02. SUBORDINATION. Landlord shall have the right to subordinate
this Lease to any mortgage presently existing or hereafter placed upon the
Building by so declaring in such mortgage; and the recording of any such
mortgage shall make it prior and superior to this Lease regardless of the date
of execution or recording of either document but subject to Tenant's right of
quiet enjoyment of the Leased Premises and the applicable Common Areas. Tenant
shall, at Landlord's request, execute and deliver to Landlord, without cost any
instrument which may be deemed necessary or desirable by Landlord to confirm the
subordination of this Lease and an Estoppel Certificate in the form required by
Landlord, and containing accurate information, and as provided in Section 16.14
of this Lease; and, if Tenant fails or refuses to do so, Landlord may accurately
complete and execute such instrument in the name and as the act of Tenant.
Notwithstanding the foregoing, no default by Landlord under any such mortgage
shall affect Tenant's rights hereunder so long as Tenant is not in default under
this Lease. Tenant shall, in the event any proceedings are brought for the
foreclosure of any such mortgage, attorney to the purchaser upon any such
foreclosure and recognize such purchaser as the Landlord under this Lease.
ARTICLE 13
Defaults and Remedies
SECTION 13.01. DEFAULTS BY TENANTS. Each of THE FOLLOWING events shall be
an "Event of Default" hereunder:
(A) Failure of Tenant to pay any installment of rent or any part thereof
(including but not limited to failure to make any deposit required under
the terms of this Lease) or any other payments of money, costs, or
expenses herein agreed to be paid by Tenant for a period of five (5) days
following notice to Tenant of such failure provided however, if Tenant has
failed to pay more than two installments of rent during any twelve (12)
month period when due, Tenant shall be in default for a failure to pay any
installment of rent or any part thereof without any notice to Tenant of
such failure.
(B) Failure to observe or perform one or more of the other terms,
conditions, covenants, or agreements of this Lease and the continuance of
such failure for a period of thirty (30) days, or other such period
provided in this Lease, after written notice by Landlord specifying such
failure (unless such failure requires work to be performed, acts to be
done or conditions to be removed which cannot by their nature reasonably
be performed, done, or removed, as the case may be, within such thirty
(30) day period or other such period required in this Lease, in which case
no default shall be
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deemed to exist so long as Tenant shall have commenced doing the same within
such thirty (30) day or other such period required in this Lease and shall
diligently and continuously prosecute the same to completion);
(C) The filing of an application by Tenant for, or a consent to the
appointment of, a receiver, trustee, or liquidate of itself or of all its
assets;
(D) The filing by Tenant of a voluntary petition in bankruptcy, or the
filing of a pleading in any court of record admitting in writing its
inability to pay its debts as they become due;
(E) The making by Tenant of a general assignment for the benefit of
creditors;
(F) The filing by Tenant of an answer admitting material allegations of or
consenting to or defaulting in answering in petition filed against it in
any bankruptcy proceedings;
(G) The entry of an order, judgment, or decree by any Court of competent
jurisdiction adjudging Tenant a bankrupt or appointing a receiver,
trustee, or liquidator of it, or all of its assets, and such order,
judgment, or decree continuing unstayed and in effect for any period of
sixty (60) consecutive days;
(H) If this Lease or the estate of Tenant hereunder shall be transferred to
or assigned to or subleased to or shall pass to or devolve upon any person
or party, except in a manner herein expressly permitted; or
(I) If a levy under execution or attachment shall be made against Tenant or
its property and such execution or attachment shall not be vacated or
removed by court order, bonding, or otherwise within a period of thirty
(30) days.
SECTION 13.02. REMEDIES OF LANDLORD. Upon THE OCCURRENCE of any event of
default set forth in Section 13.01, Landlord shall have the following rights and
remedies, in addition to those allowed by law, any, or all of which may be
exercised without additional notice or demand upon Tenant.
(A) Landlord may apply the security deposit or any other prepaid funds to
the cost of cure of any default and/or reenter the Leased Premises and
cure any default of Tenant. In such event Tenant shall immediately
reimburse Landlord as additional rental for any such costs, and shall
restore the security deposit, or other prepaid funds used by Landlord to
cure Tenant's default; and Landlord shall not be liable to Tenant for any
loss or damage which Tenant may sustain by reason of Landlord's actions,
whether or not caused by Landlord's negligence.
(B) Landlord may at its option give written notice to Tenant stating that
this Lease and the Lease Term shall expire and terminate on the date
specified in such notice, and upon the date specified in such notice, this
Lease and the term hereby demised, and all rights of Tenant under this
Lease shall expire and terminate, in which event (i) Tenant shall
thereupon quit and surrender the Leased Premises but shall remain liable
as hereinafter provided; (ii) Landlord may without notice, reenter and
repossess the Leased Premises using such force for that purpose as may be
reasonably necessary without being liable to indictment, prosecution, or
damages therefor, and Tenant shall nevertheless remain liable as
hereinafter provided for the remainder of the term hereof, and (iii)
notwithstanding the termination of this Lease, Landlord may declare all
Rental which would have been due under the Lease for the balance of the
Lease Term to be immediately due and payable, and Tenant shall then be
liable for the same to Landlord, together with all loss or damage Landlord
may sustain by reason of such default and termination, it being expressly
agreed and understood that such liabilities and remedies herein specified
shall survive the termination of this Lease.
(C) Landlord may, without terminating this Lease, reenter the Leased
Premises and at its option, repair and alter the Leased Premises in such
manner as Landlord may deem necessary or advisable, and/or let or relet
the Leased Premises or any parts thereof for the whole or any part of the
remainder of the Lease Term hereof or for a longer period, in Landlord's
name or as agent of Tenant, and out of any rental collected or received as
a result of such letting or reletting Landlord shall first, pay to itself
the reasonable cost and expense of retaking, repossessing, repairing
and/or altering the Leased Premises, and the reasonable cost and expense
of removing all personal property therefrom; second, pay to itself the
reasonable cost and expense sustained in securing any new tenants, and if
Landlord shall maintain and operate the Leased Premises, the reasonable
cost and expense of operating and maintaining the Leased Premises; and,
third, pay to itself any balance remaining on account of the liability of
Tenant to Landlord. No reentry by Landlord shall absolve or discharge
Tenant from liability hereunder. Landlord shall in no way be responsible
or liable for any failure to relet the Leased Premises or any part
thereof, or for any failure to collect any rental due on any such
reletting.
(D) Landlord may sue for injunctive relief or to recover damages for any
loss resulting from the breach.
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SECTION 13.03. SUIT PRIOR TO EXPIRATION. Suit or suits for the recovery of
any deficiency or damages, or for a sum equal to any installment or installments
of Rental and other charges hereunder, may be brought by Landlord, from time to
time at Landlord's election, and nothing herein contained shall be deemed to
require Landlord to await the date whereon this Lease or the term hereof would
have expired by its term had there been no such default by Tenant or
termination.
SECTION 13.04. REINSTATEMENT. No receipt of monies by Landlord from Tenant
after termination of this Lease, or after the giving of any notice of
termination of this Lease, shall reinstate, continue, or extend the Lease Term
or affect any notice given to Tenant, or operate as a waiver of the right of
Landlord to enforce the payment of Rental and other sum or sums of money and
other charges herein reserved and agreed to be paid by Tenant then due or
thereafter falling due, or operate as a waiver of the right of Landlord to
recover possession of the Leased Premises by proper remedy, except as herein
otherwise expressly provided, it being agreed that after the service of notice
to terminate this Lease or the commencement of suit or summary proceedings, or
after final order or judgment for the possession of the Leased Premises,
Landlord may demand, receive, and collect any moneys due or thereafter falling
due without in any matter effecting such money collected being deemed payments
on account of the use and occupation of said Leased Premises, or at the election
of Landlord, on account of Tenant's liability hereunder.
SECTION 13.05. NON-WAIVER OF DEFAULTS. The failure or delay by either party
hereto to exercise or enforce at any time any of the rights or remedies or other
provisions of this Lease shall not be construed to be a waiver thereof, nor
affect the validity of any part of this Lease or the right of either party
thereafter to exercise or enforce each and every such right or remedy or other
provision. No waiver of any default and breach of the Lease shall be deemed to
be a waiver of any other default and breach. The receipt by Landlord of less
than the full rent due (other than pursuant to any written agreement to the
contrary) shall not be construed to be other than a payment on account of rent
then due, nor shall any statement on Tenant's check or any letter accompanying
Tenant's check be deemed an accord and satisfaction, and Landlord may accept
such payment without prejudice to Landlord's right to recover the balance of the
rent due or to pursue any other remedies provided in this Lease. No act or
omission by Landlord or its employees or agents during the Lease Term shall be
deemed an acceptance of a surrender of the Leased Premises, and no agreement to
accept such a surrender shall be valid unless in writing and signed by Landlord.
SECTION 13.06. CUMULATIVE REMEDIES. Each right and remedy of the parties
provided for in this Lease shall be cumulative and shall be in addition to every
other right and remedy provided for in this Lease or now or hereafter existing
at law or in equity or by statute or otherwise, and the exercise or beginning of
the exercise by either party of any one or more of the right or remedies
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise shall not preclude the simultaneous or later exercise by
either party of any or all other rights or remedies provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise.
SECTION 13.07. DEFAULT BY LANDLORD AND REMEDIES OF TENANT. It shall be a
default and a breach of this Lease by Landlord if any covenant or obligation
required to be performed or observed by it under this Lease for a period of
thirty (30) days after written notice thereof from Tenant; provided, however,
that if the term, condition, covenant or obligation to be performed by Landlord
is of such nature that the same cannot reasonably be performed within said
thirty (30) day period, such default shall be deemed to have been cured if
Landlord commences such performance within said thirty (30) day period and
thereafter diligently undertakes to complete the same. Upon the occurrence of
any such default, Tenant may sue for injunctive relief or to recover damages for
any loss resulting from the breach, but Tenant shall not be entitled to
terminate this Lease or withhold or abate any rent due hereunder.
SECTION 13.08. LIMITATION OF LANDLORD'S LIABILITY. If Landlord shall fail to
perform or observe any term, condition, covenant or obligation required to be
performed or observed by it under this Lease as provided in Section 13.07 and if
Tenant shall, as a consequence thereof, recover a money judgment against
Landlord, Tenant agrees that it shall look solely to Landlord's right, title and
interest in and to the Building for the collection of such judgment; and Tenant
further agrees that no other assets of Landlord shall be subject to levy,
execution or other process for the satisfaction of Tenant's judgment and that
Landlord shall not be liable for any deficiency.
The references to "Landlord" in this Lease shall be limited to mean and
include only the owner or owners, at the time, of the fee simple interest in the
Building. In the event of a sale or transfer of such interest (except a mortgage
or other transfer as security for a debt), the "Landlord" named herein, or, in
the case of a subsequent transfer, the transferor, shall, after the date of such
transfer, be automatically released from all personal liability for the
performance or observance of any term, condition, covenant or obligation
required to be performed or observed by Landlord hereunder; and the transferee
shall be deemed to have assumed all of such terms, conditions, covenants and
obligations.
SECTION 13.09. TRANSFER UPON TERMINATION. In the event of a termination of
this Lease by reason of default or breach by Tenant hereunder: (i) all unexpired
insurance premiums, all deposits theretofore made by Tenant with utility
companies and all rights of Tenant under all insurance policies shall be deemed
to be assigned to and transferred to Landlord; and (ii) Tenant shall deliver and
assign to Landlord all leases of subtenants, and concession, license, and
occupancy agreements and all security deposits and advance rents then held by
Tenant with respect to any and all subleases upon the assumption by Landlord of
the obligation to apply all such security deposits and advance rents held by
Landlord in accordance with such subleases, and concession, license, and
occupancy agreements.
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SECTION 13.10. TENANT'S PERSONAL PROPERTY. Tenant shall not remove any
personal property, fixtures or equipment from Leased Premises at any time at
which Tenant is in default under this Lease. If Tenant shall not remove all of
Tenant's property from the Leased Premises at any expiration or other
termination of this Lease, Landlord shall have the right, at Landlord's
election, to remove all or part of such property in any manner that Landlord
shall choose and store the same without liability to Tenant for loss thereof,
and Tenant shall be liable to Landlord for all expenses incurred in such removal
and also for the cost of storage of such property.
SECTION 13.11. ATTORNEY'S FEES AND COSTS. In the event either party
defaults in the performance or observance of any of the terms, conditions,
covenants or obligations contained in this Lease and the other party employs
attorneys to enforce all or part of this Lease, to collect any rent due or to
become due or recover possession of the Leased Premises, the defaulting party
agrees to reimburse the non-defaulting party for all reasonable attorneys' fees
incurred thereby, whether or not suit has actually been filed. The defaulting
party shall also pay the non-defaulting party all reasonable costs and expenses,
other than attorneys' fees, incurred in the enforcement of any of the terms,
conditions, covenants or obligations contained in this Lease. All the sums paid
or obligations incurred by the non-defaulting party as aforesaid with interest
and costs shall be paid by the defaulting party to the non-defaulting party five
(5) days after the rendition of any bill or statement therefore.
ARTICLE 14
[Intentionally Omitted)
ARTICLE 15
Notices
SECTION 15.01. NOTICES. All notices and demands which may or are required
to be given by either party to the other hereunder shall be in writing and shall
be sent by United States certified or registered mail, by reputable courier for
receipted delivery, or by hand, with all expenses of delivery being prepaid,
addressed as specified in Item M, Section 1.02 of this Lease or to such other
firm or to such other place as Landlord may from time to time designate in
writing.
SECTION 15.02. PLACE OF PAYMENT. All Rental and other payment required to be
made by Tenant to Landlord shall be delivered, or mailed to Landlord at the
address as Specified in Item M, Section 1.02 of this Lease, and such payments
shall be deemed made when received by Landlord.
ARTICLE 16
Miscellaneous Provisions
SECTION 16.01. CONDITION OF PREMISES. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Leased Premises or the Building or with respect to the
suitability or condition of any part of the Building for the conduct of Tenant's
business except as provided in this Lease.
SECTION 16.02. COMMON AREAS. The term "Common Areas", as used in this Lease,
refers to the areas of the Building and the land described in Exhibit A which
are designed for use in common by all tenants of the Building and their
respective employees, agents, customers, invitees and others, and includes, by
way of illustration and not limitation, entrances and exits, hallways and
stairwells, elevators, restrooms, sidewalks, driveways, parking areas,
landscaped areas and other areas as may be designated by Landlord as part of the
Common Areas of the building. Tenant shall have the non-exclusive right, in
common with others, to the use of the Common Areas, subject to such
non-discriminatory rules and regulations as may be adopted by Landlord including
those set forth in Section 3.02 and Exhibit D of this Lease.
SECTION 16.03. CHOICE OF LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of Indiana
without regard to conflict of law principles.
SECTION 16.04. VENUE. The parties agree that the venue of any action arising
between the parties to this Lease shall be in the County wherein the Leased
Premises are located, and that the federal jurisdiction shall be in the district
wherein the Leased Premises are located, and each party hereby waives any claims
of preferred venue under the Indiana Trial Rules, or any claim of a more
convenient forum.
SECTION 16.05. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
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SECTION 16.06. NAME. Tenant shall not, without the written consent of
Landlord, use the name of Building for any purpose other than as the address of
the business to be conducted by Tenant in the Leased Premises, and in no event
shall Tenant acquire any rights in or to such names.
SECTION 16.07. EXAMINATION OF LEASE. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation of or
option for Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
SECTION 16.08. TIME. Time is of the essence of this Lease and each and all
of its provisions.
SECTION 16.09. DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as the singular. If
more than one person is named as Tenant, the obligations of such persons are
joint and several. The marginal headings and titles to the articles of this
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation any part hereof.
SECTION 16.10. ENTIRE AGREEMENT; AMENDMENTS. This Lease and the Acceptance
Letter executed pursuant to Section 2.03 hereof contain all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement, understanding or representation pertaining to any
such matter shall be effective for any purpose. No provision of this Lease may
be amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
SECTION 16.11. PAYMENT OF AND INDEMNIFICATION FOR LEASING COMMISSIONS. The
parties hereby acknowledge, represent and warrant that the only real estate
broker or brokers involved in the negotiation and execution of this Lease is, or
are, those named in Item K, Section 1.02; that Landlord is obligated to pay to
it or them or for their benefit a leasing commission under its Leasing Agreement
with Eaton & Lauth Real Estate Services, Inc. and that no other broker or person
is entitled to any leasing commission or compensation as a result of the
negotiation or execution of this Lease. Each party shall indemnify the other
party and hold it harmless from any and all liability for the breach of any such
representation and warranty on its part and shall pay any compensation to any
other broker or person who may be deemed or held to be entitled thereto.
SECTION 16.12. SEVERABILITY OF INVALID PROVISIONS. If any provisions of this
Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
SECTION 16.13. DEFINITION OF THE RELATIONSHIP BETWEEN THE PARTIES. Landlord
shall not, by virtue of the execution of this Lease or the leasing of the Leased
Premises to Tenant, become or be deemed a partner of or joint venturer with
Tenant in the conduct of Tenant's business on the Leased Premises or otherwise.
SECTION 16.14. ESTOPPEL CERTIFICATE. Tenant shall, within ten (10) days
following receipt of a written request from Landlord, execute, acknowledge and
deliver to Landlord or to any lender, purchaser or prospective lender or
purchaser designated by Landlord, a statement in such form as Landlord may
reasonably request, certifying (i) that this Lease is in full force and effect
and unmodified (or, if modified, stating the nature of such modification), (ii)
the date to which rent has been paid, and (iii) that there are not, to Tenant's
knowledge, any uncured defaults (or specifying such defaults if any are
claimed). Any such statement may be relied upon by any prospective purchaser or
mortgagee of all or any part of the Building. Tenant's intentional failure to
deliver such statement within such period shall be conclusive upon Tenant that
this Lease is in full force and effect and unmodified, and that there are no
uncured defaults in Landlord's performance hereunder.
SECTION 16.15. FORCE MAJEURE. Landlord shall be excused for the period of
any delay in the performance of any obligation hereunder when such delay is
occasioned by causes beyond its control, including, but not limited to, war,
invasion or hostility; work stoppages, boycotts, slowdowns or strikes; shortages
of materials, equipment, labor or energy; man-made or natural casualties;
unusual weather conditions; acts or omissions of governmental or political
bodies; or civil disturbances or riots.
SECTION 16.16. CORPORATE TENANT. If Tenant is a corporation, partnership, or
limited liability company, the individual, or individuals executing this Lease
warrant their capacity and authority to execute this Lease on behalf of said
corporation, partnership, or limited liability company.
SECTION 16.17. MEMORANDUM OF LEASE. The parties hereto shall not record
this Lease, but each party shall execute upon "memorandum of lease" suitable for
recording.
SECTION 16.18. RECIPROCAL COVENANT ON NOTIFICATION OF ADA VIOLATIONS. Within
ten (I 0) days after receipt, Landlord and Tenant shall advise the other party
in writing and provide the other with copies of (as applicable), any notices
alleging violation of the Americans with Disabilities Act of 1990 ("ADA")
relating to any portion of the Building, Common Areas or the Leased Premises;
any claims made or threatened in writing regarding noncompliance with the ADA
and relating to any portion of the Building, Common Areas or the Leased
Premises; or any governmental or regulatory actions or investigations instituted
or
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threatened regarding noncompliance with the ADA and relating to any portion
of the Building, Common Areas or the Leased Premises.
SECTION 16.19. SORTING AND SEPARATION OF REFUSE AND TRASH. Tenant covenants
and agrees, as its sole cost and expense, to comply with all present and future
laws, orders and regulations of all state, federal, municipal and local
governments, departments, commissions and boards regarding the collection,
sorting, separation and recycling of waste products, garbage, refuse and trash.
Tenant shall sort and separate waste products, garbage, refuse and trash into
such categories as provided by law. Each separately sorted category of waste
products, garbage, refuse and trash shall be placed in separate receptacles
reasonably approved by Landlord. Such separate receptacles may, at Landlord's
option, be removed from the Leased Premises in accordance with a collection
schedule prescribed by law.
Landlord reserves the right to refuse to collect or accept from Tenant any
waste products, garbage, refuse or trash that is not separated and sorted as
required by law, and to require that Tenant arrange for such collection at
Tenant's sole cost and expense, utilizing a contractor satisfactory to Landlord.
Tenant shall pay all costs, expenses, fines, penalties or damages that may be
imposed on Landlord or Tenant by reason of Tenant's failure to comply with the
provisions of this paragraph and, at Tenant's sole cost and expense, shall
indemnify, defend and hold Landlord harmless (including reasonable legal fees
and expenses) from and against any actions, claims and suits arising from such
noncompliance, utilizing counsel reasonably satisfactory to Landlord.
SECTION 16.20. HAZARDOUS WASTE. The term "Hazardous Substances", as used in
this Lease shall mean pollutants, contaminants, toxic or hazardous wastes, or
any other substances, the use and/or the removal of which is required or the use
of 11 which term shall mean any federal, state or local law, which is
restricted, prohibited or penalized by any "Environmental Law , ordinance or
other statute of a governmental or quasi-governmental authority relating to
pollution or protection of the environment. Tenant hereby agrees that (A) no
activity will be conducted on the Leased Premises that will produce any
Hazardous Substance, except for such activities that are part of the ordinary
course of Tenant's business activities (the "Permitted Activities") provided
said Permitted Activities are conducted in accordance with all Environmental
Laws and have been approved in advance in writing by Landlord; Tenant shall be
responsible for obtaining any required permits and paying any fees and providing
any testing required by any governmental agency for the Permitted Activities;
(B) the Leased Premises will not be used in any manner for the storage of any
Hazardous Substances except for the temporary storage of such materials that are
used in the ordinary course of Tenant's business (the "Permitted Materials")
provided such Permitted Materials are properly stored in a manner and location
meeting all Environmental Laws and approved in advance in writing by Landlord;
Tenant shall be responsible for obtaining any required permits and paying any
fees and providing any testing required by any governmental agency in connection
therewith; (C) no portion of the Leased Premises will be used as a landfill or a
dump; (D) Tenant will not install any underground tanks of any type; (E) Tenant
will not cause any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a public
or private nuisance; (F) Tenant will not permit any Hazardous Substances to be
brought onto the Leased Premises, except for the Permitted Materials described
above or those utilized or brought onto the Leased Premises by Landlord or its
agents, and if so brought or found located thereon, the same shall be
immediately removed, with proper disposal, and all required cleanup procedures
shall be diligently undertaken pursuant to all Environmental Laws. Landlord or
Landlord's representative shall have the right but not the obligation to enter
the Leased Premises for the purpose of inspecting the storage, use and disposal
of Permitted Materials to ensure compliance with all Environmental Laws. Should
it be determined, in Landlord's sole opinion, that said Permitted Materials are
being improperly stored, used, or disposed of, then Tenant shall immediately
take such corrective action as requested by Landlord. Should Tenant fail to take
such corrective action within 24 hours, Landlord shall have the right to perform
such work and Tenant shall promptly reimburse Landlord for any and all costs
associated with said work. If at any time during or after the Lease Term, the
Leased Premises are found to be so contaminated or subject to said conditions,
Tenant shall diligently institute proper and thorough cleanup procedures at
Tenant's sole cost, and Tenant agrees to indemnify, defend and hold harmless
Landlord, its lenders, any managing agents and leasing agents of the Leased
Premises, and their respective agents, partners, officers, directors and
employees, from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result of the use of
the Leased Premises by Tenant in violation of any Environmental Laws. The
foregoing indemnification and the responsibilities of Tenant shall survive the
termination or expiration of this Lease.
During the Lease Term, each party shall promptly provide the other with
copies of all summons, citations, directives, information inquiries or requests,
notices of potential responsibility, notices of violation or deficiency, orders
or decrees, claims, complaints, investigations, judgments, letters, notice of
environmental liens, and other communications, written or oral, actual or
threatened, from the United States Environmental Protection Agency, Occupational
Safety and Health Administration, the State of Indiana Environmental Protection
Agency or other federal, state, or local agency or authority, or any other
entity or individual, concerning (i) any Hazardous Substance on the Leased
Premises; (ii) the imposition of any lien on the Leased Premises, or (iii) any
alleged violation of or responsibility under any Environmental Law.
SECTION 16.21. REASONABLENESS. Any consent or approval provided herein
shall not be unreasonably withheld, conditioned or delayed.
15
<PAGE>
ARTICLE 17
Additional Provisions
SECTION 17.01. ADDITIONAL PROVISIONS. Additional Provisions of the Lease,
if any, are set forth and attached as Addenda to this Lease, and are numerically
listed as subsections to this Article in Item N of Section 1.02.
SECTION 17.02. RIGHT OF SECOND REFUSAL. Provided Tenant is not in default
and has performed all of its obligations hereunder, Tenant shall for a period of
36 months beginning on the Actual Commencement Date have the Right of Second
Refusal to lease additional space on the second floor of the Building as shown
on the attached Exhibit B-1. Tenant acknowledges that Landlord has granted a
Right of First Refusal to J.F. Molloy Associates, Inc. ("Molloy"), that Tenant's
Right of Second Refusal is subject to Molloy's Right of First Refusal, and that
Tenant's Right of Second Refusal expires 36 months following the Actual
Commencement Date. Following the expiration of Tenant's Right of Second Refusal,
Tenant acknowledges that Bindley Western Industries, Inc. ("Bindley") shall have
the Right of Second Refusal to lease this space, that Tenant shall then have a
Right of Third Refusal to lease this space, and that Tenant's right of third
refusal shall as a result be subject to Molloy's Right of First Refusal and
Bindley's Right of Second Refusal for remaining term of Tenant's lease.
SECTION 17.03. SIGNAGE. Tenant shall have the right to place a sign at the
top of the Building's exterior facade at Tenant's sole expense. Any and all
maintenance of the sign shall be at Tenant's expense, and Tenant shall be
responsible for removing the sign upon the expiration of the Lease, and shall
repair any and all damage to the building caused by the removal process. Tenant
shall have third choice of placement on the Building behind Bindley Western
Industries and Molloy. The remaining location will be at either the north or
south end of the building, and Tenant's signage shall conform to Landlord's
criteria and local sign ordinances.
SECTION 17.04. OPTION TO RENEW. If Tenant is not in default of the Lease and
Tenant is constructing new premises for its own use that will not be available
for occupancy at the termination of this Lease, Tenant shall have the right to
renew the Lease for one (1) additional term of six (6) months at the then
prevailing market rate for such terms. In order to exercise this Option, Tenant
must notify Landlord in writing not later than nine (9) months prior to the
expiration of the Lease.
SECTION 17.05. PARKING. Tenant shall have four (4) of the thirteen (13)
existing reserved parking spaces located in close proximity to the Building's
main entrance as designated by Landlord and such additional spaces as the
Landlord and Tenant mutually agree. In addition, Tenant shall have the right to
use twenty-one percent (21%) of any additional reserved parking spaces
established by Landlord in the future. Said parking shall be at no cost to
Tenant.
SECTION 17.06. TENANT'S BROKER. Landlord recognizes Tenant's Broker to be
Meridian Real Estate Services and shall pay Broker a real estate commission
payable as provided in the Agreement dated Sept. 16, 1998 by and between
Landlord and HRFC Corporation d/b/a meridian Real Estate Services, Inc.
SECTION 17.07. TENANT RESTRICTIONS. Landlord will not knowingly lease any
portion of the Building to any person or entity that is a direct competitor of
Tenant if Tenant has notified Landlord in writing of the competitor.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first written above.
TENANT: Interactive Intelligence, Inc. LANDLORD: College Park Plaza
Associates Inc.
BY: /s/ John R. Gibbs BY: /s/ Gregory C. Gurnik
---------------------------------- -------------------------------
PRINTED: John R. Gibbs PRINTED: Gregory C. Gurnik
TITLE: Executive Vice President TITLE: Authorized Agent
16
<PAGE>
EXHIBIT A
COLLEGE PARK PLAZA
LEGAL DESCRIPTION
Block 22 in "College Park West", the Plat of which was recorded September 20,
1971 as Instrument No. 71-50458 in the Office of the Recorder of Marion County,
Indiana.
Also a part of Block 251 in College Park West, an Addition in Marion County,
Indiana, as per plat thereof recorded September 20, 1971 as Instrument No.
71-50458, in the Office of the Recorder of Marion County, Indiana, more
particularly described as follows:
Beginning at the Northwest comer of said Block 251, said point being on the
East right of way line of Purdue Road and also on the South line of Block 22
(the "Point of Beginning"); thence South 18 degrees 50 minutes 00 seconds
East along the West line of said Block 251 and East right of way line of
Purdue Road, 74.90 feet; thence North 71 degrees 10 minutes 00 seconds East
219.59 feet, to a point which is the Southeast corner of Block 22 in College
Park West, the Plat of which was recorded September 20, 1971 as Instrument
No. 71-50458, in the Office of the Recorder of Marion County, Indiana; thence
West along the said South line of Block 22 a distance of 232.01 feet to the
Point of Beginning.
17
<PAGE>
EXHIBIT B
COLLEGE PARK PLAZA
LEASED PREMISES
[DIAGRAM]
<PAGE>
EXHIBIT B-1
[DIAGRAM]
<PAGE>
EXHIBIT C
TENANT'S WORK
In addition to Landlord's obligation to complete the Leased Premises as
described in Exhibit C-1, Landlord will provide Tenant an allowance of $21.70
per rentable square foot for the interior finish and space planning of the
Leased Premises (the "Work"). The space planning drawings and the
construction plans and specifications (collectively the "Construction
Drawings") shall be prepared by an architect or engineer selected by Tenant
at Tenant's expense and submitted to Landlord for its approval prior to the
Construction Drawings Approval Date. In addition, Tenant shall notify
Landlord of Tenant's selection for interior finish items such as wall paint,
fixtures and carpeting at least ten (10) days prior to the Construction
Drawings Approval Date. The Construction Drawings shall be prepared in
sufficient detail to permit the completion of the Work and shall include but
not be limited to the location of doors, partitions, reflected ceiling,
electrical fixtures, outlets, switches, telephone outlets, plumbing fixtures,
extraordinary floor loads and special requirements of Tenant and include
architectural, mechanical, electrical and structural engineering drawings for
the Work. The Construction Drawings shall satisfy all statutes, codes and
regulations and comply with applicable insurance requirements for a
fire-resistant building and be in a form satisfactory for filing with the
appropriate government authorities. The Construction Drawings are subject to
Landlord's approval, which approval shall not be unreasonably withheld;
notwithstanding such approval, however, Landlord shall be entitled to rely on
the Construction Drawings in all respects.
The Work shall be completed by Landlord's contractors, but at Tenant's
sole cost and expense to the extent that such cost and expense is greater
than Landlord's allowance. Prior to commencing the Work, Landlord shall submit
to Tenant a written estimate of the cost of the Work after obtaining at least
three (3) bids for each material subcontract. Such estimate shall be made on
an open-book basis that discloses the fees of Landlord's contractor. If
Tenant shall fail to approve Landlord's estimate within seven (7) days after
submission thereof, such failure shall be deemed a disapproval of the
estimate, and Landlord shall proceed with the Work provided that Tenant shall
be liable for the delay and increased cost, if any, in completing the Leased
Premises after disapproval. Tenant also shall be responsible for the design,
function and maintenance of any special improvements, whether or not
installed by Landlord at Tenant's request. Tenant agrees to pay Landlord or
its contractor promptly upon receipt for bills from Landlord or its contractor
for the cost of the Work in excess of Landlord's allowance.
The Commencement Date shall not be delayed by Tenant's failure to approve
or furnish construction drawings by the Construction Drawings Approval Date,
Tenant's request for materials, finishes or installations that require
unreasonably long delivery times, changes in the Construction Drawings after
the approval or submission to Landlord, or a delay in the performance of the
Work as a result of Tenant's failure to approve Landlord's estimate of the
cost of the Work.
19
<PAGE>
EXHIBIT C-1
Ceiling Grid shall be installed (4' x 4'). 4' x 2' tees and Building Standard
acoustical tiles shall be provided by Landlord.
Building Standard window coverings shall be installed by Landlord.
Third Floor main restrooms, men's and women's, shall be finished by Landlord.
Sprinklers heads shall be installed and dropped. Changes shall be by Tenant.
Heat pumps shall be installed. Distribution shall be by Tenant.
Perimeter walls, perimeter columns and window walls shall be drawled, taped and
speckled ready for Tenant to finish.
20
<PAGE>
EXHIBIT D
OFFICE RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress. It is prohibited to smoke in any areas of the
Building (including exterior areas at Building entrances) except Tenant smoking
areas, as approved by Landlord.
2. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Leased Premises
other than Landlord standard blinds without Landlord's prior written approval.
All electric ceiling fixtures hung in offices or spaces along the perimeter of
the Building must be fluorescent, of a quality, type, design and bulb color
approved by Landlord. Neither the interior nor the exterior of any windows shall
be coated or otherwise sunscreened without written consent of Landlord.
3. No sign, advertisement, notice or handbill that can be seen from outside
the Leased Premises shall be exhibited, distributed, painted or affixed by any
tenant on, about or from any part of the Leased Premises or the Building without
the prior written consent of Landlord. In the event of the violation of the
foregoing by any tenant, Landlord may remove or stop same without any liability,
and may charge the expense incurred in such removal or stopping, to the tenant.
Standard interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each tenant by Landlord, at the expense of Landlord, and
shall be of a size, color and style acceptable to Landlord. The directory tablet
will be provided exclusively for the display of the name and location of tenants
only, and Landlord reserves the right to exclude any other names therefrom.
Nothing may be placed on the exterior of corridor walls or corridor doors other
than Landlord's standard lettering.
4. The sashes, sash doors, windows, and doors that reflect or admit light
and air into halls, passageways or other public places in the Building shall not
be covered or obstructed by any tenant, nor shall any bottles, parcels or other
articles be placed on the window sills.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose subtenants, assignees or any of their servants, employees, agents,
visitors or licensees shall have caused the same.
6. No tenant shall mark, paint, drill into, or in any way deface any part
of the Leased Premises or the Building. No boring, cutting or stringing of wires
or laying of linoleum or other similar floor coverings shall be permitted,
except with the prior written consent of Landlord and as Landlord may direct.
7. No bicycles, vehicles, birds or animals of any kind shall be brought
into or kept in or about the Leased Premises. No tenant shall cause or permit
any unusual or objectionable odors to dust, gas, smoke or fumes be produced or
permeate the Leased Premises. Use of a microwave will be permitted.
8. The Leased Premises shall not be used for manufacturing or for the
storage of merchandise except as such storage may be incidental to the permitted
use of the Leased Premises. No tenant shall occupy or permit any portion of the
Leased Premises to be occupied as an office for the manufacture or sale of
liquor, narcotics, or tobacco in any form, or as a barber or manicure shop, or
as an employment bureau without the express written consent of Landlord. The
Leased Premises shall not be used for lodging or sleeping or for any immoral or
illegal purpose. No part of the Leased Premises, Building or Common Areas shall
be used for any purpose or business which is considered dangerous or unsafe.
9. No tenant shall make, or permit to be made any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, unusual noise, or in any other way. No
tenant shall throw anything out of doors, windows or down the passageways.
21
<PAGE>
10. No tenant, subtenant or assignee nor any of its servants, employees,
agents, visitors or licensees, shall at any time bring or keep upon the Leased
Premises any flammable, combustible or explosive fluid, chemical or substance.
11. Tenant shall provide Landlord with a method of opening any lock
installed by Tenant in order to give Landlord access to the Leased Premises as
provided in the Lease. Each tenant must upon the termination of his tenancy,
restore to Landlord all keys of stores, offices, and toilet rooms, either
furnished to, or otherwise procured by, such tenant and in the event of the loss
of keys so furnished, such tenant shall pay to Landlord the cost of replacing
the same or of changing the lock or locks opened by such lost key if Landlord
shall deem it necessary to make such changes.
12. All removals or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during the hours
which Landlord shall reasonably determine from time to time. The moving of safes
or other fixtures or bulky matter of any kind must be done upon previous notice
to the superintendent of the Building and under his supervision, and the persons
employed by any tenant for such work must be acceptable to Landlord. Landlord
reserves the right to inspect all safes, freight or other bulky articles to be
brought into the Building and to exclude from the Building all safes, freight or
other bulky articles which violate any of these Rules and Regulations or the
Lease of which these Rules and Regulations are a part. Landlord reserves the
right to prescribe the weight and position of all safes, which must be placed
upon supports approved by Landlord to distribute the weight.
13. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion tends to impair the reputation of the Building or
its desirability as an office location, and upon written notice from Landlord
any tenant shall refrain from or discontinue such advertising.
14. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 7:00 a.m. and at all hours on Sunday and legal holidays
all persons who do not present a pass to the Building approved by landlord.
Landlord will furnish passes to persons for whom any tenant requests the same in
writing. Each tenant shall be responsible for all persons for whom he requests
passes and shall be liable to Landlord for all acts of such persons. Landlord
shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In case of an
invasion, mob riot, public excitement or other circumstances rendering such
action advisable in Landlord's opinion, Landlord reserves the right without any
abatement of rent to require all persons to vacate the Building and to prevent
access to the Building during the continuance of the same for the safety of the
tenants and the protection of the Building and the property in the Building.
15. Any persons employed by any tenant to do work shall, while in the
Building and outside of the Leased Premises, be subject to and under the control
and direction of the superintendent of the Building (but not as an agent or
servant of said superintendent or of the Landlord), and Tenant shall be
responsible for all acts of such persons.
16. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress.
17. Canvassing, soliciting and peddling in the Building are prohibited, and
each tenant shall report and otherwise cooperate to prevent the same.
18. All office equipment of any electrical or mechanical nature shall be
placed by Tenant in the Leased Premises in settings approved by Landlord to
absorb or prevent any vibration, noise and annoyance.
19. No air conditioning unit or other similar apparatus shall be installed
or used by any tenant without the written consent of Landlord.
20. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or others, any hand trucks except those equipped
with rubber tires and rubber side guards.
21. The scheduling of Tenant move-ins shall be subject to the reasonable
discretion of Landlord. Prior to Tenant moving in or out of the Leased Premises,
Tenant will notify Landlord of its intent and receive approval thereof.
22
<PAGE>
22. Tenant and its employees, agents, customers and invitees shall not park
on public streets outside of the Building and Common Area.
23. No exterior antennas, towers or aerials, including radio or television
transmission or receiving antennas, shall be erected, placed or maintained in
any part of the Building or Common Areas without Landlord's prior written
consent.
23
<PAGE>
EXHIBIT 21
SUBSIDIARIES
NAME JURISDICTION OF ORGANIZATION
Interactive Intelligence France S.A.R.L. France
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 3, 1999 (except Note 10, as to which the date
is April 16, 1999) in the Registration Statement (Form S-1) and the related
Prospectus of Interactive Intelligence, Inc. dated May 28, 1999.
Our audits also included the financial statement schedule of Interactive
Intelligence, Inc. listed in Item 16(b). 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
Indianapolis, Indiana
May 26, 1999
<PAGE>
EXHIBIT 23.3
MICHAEL J. TAVLIN
May 26, 1999
Board of Directors
Interactive Intelligence, Inc.
8909 Purdue Road, Suite 300
Indianapolis, Indiana 46268
Gentlemen:
I have reviewed the Registration Statement on Form S-1 relating to the
Initial Public Offering of Common Stock of Interactive Intelligence, Inc. and
hereby consent to be named as a prospective executive officer of Interactive
Intelligence, Inc. and to the references to me under the heading "Management" in
such Registration Statement.
Very truly yours,
/s/ Michael J. Tavlin
Michael J. Tavlin
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND MARCH 31, 1999 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
AND THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 2,021 1,401
<SECURITIES> 0 0
<RECEIVABLES> 3,541 3,092
<ALLOWANCES> 272 302
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,634 4,535
<PP&E> 3,593 3,983
<DEPRECIATION> 1,153 1,444
<TOTAL-ASSETS> 8,239 7,278
<CURRENT-LIABILITIES> 3,903 4,887
<BONDS> 9,490 8,476
0 0
0 0
<COMMON> 9,487 10,779
<OTHER-SE> (14,641) (16,864)
<TOTAL-LIABILITY-AND-EQUITY> 8,239 7,278
<SALES> 7,662 2,372
<TOTAL-REVENUES> 9,011 3,019
<CGS> 3,440 1,092
<TOTAL-COSTS> 10,688 3,454
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 188 30
<INTEREST-EXPENSE> 868 189
<INCOME-PRETAX> (7,392) (2,223)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,392) (2,223)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,392) (2,223)
<EPS-BASIC> (1.26) (0.32)
<EPS-DILUTED> (1.26) (0.32)
</TABLE>
