- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number 000-28187
OFFICIAL PAYMENTS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-2190781
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Three Landmark Square
Stamford, CT 06901-2501
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(Address of principal executive offices) (Zip Code)
(203) 356-4200
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(Registrant's telephone number, including area code)
2333 San Ramon Valley Boulevard, Suite 450, San Ramon, CA 94583
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No___
As of May 4, 2000, 21,337,820 shares of the registrant's common
stock were issued and outstanding.
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OFFICIAL PAYMENTS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
ITEM PAGE NUMBER
- ---------- -----------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.................................. 3
Condensed Balance Sheets as of March 31, 2000
December 31, 1999................................... 3
Condensed Statements of Operations for the three-
month periods ended March 31, 2000 and 1999......... 4
Condensed Statements of Cash Flows for the three-month
periods ended March 31, 2000 and 1999............... 5
Notes to the Condensed Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................... 17
PART II: OTHER INFORMATION
Item 1. Legal Proceedings..................................... 18
Item 2. Changes in Securities and Use of Proceeds............. 18
Item 3. Defaults Upon Senior Securities....................... 18
Item 4. Submission of Matters to a Vote of Security
Holders............................................... 18
Item 5. Other Information..................................... 18
Item 6. Exhibits and Reports on Form 8-K...................... 19
Signatures.......................................................... 20
Index to Exhibits
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OFFICIAL PAYMENTS CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash ............................................. $ 1,613 $ 1,643
Short-term investments............................ 72,230 78,871
Accounts receivable, net.......................... 1,014 1,135
Prepaid expenses.................................. 1,135 465
Other current assets.............................. 395 384
-------- ---------
Total current assets............................ 76,387 82,498
Property and equipment, net......................... 4,261 1,802
Other assets........................................ 289 -
--------- ---------
Total assets.................................... $ 80,937 $ 84,300
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 479 $ 176
Accrued expenses.................................. 2,854 1,901
Deferred revenue.................................. 89 65
Current portion of notes payable and capital lease
obligations.................................... 218 206
--------- ---------
Total current liabilities....................... 3,640 2,348
Notes payable and capital lease obligations......... 372 391
--------- ---------
Total liabilities............................... 4,012 2,739
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 150,000,000 shares
authorized; 21,337,820 and 21,262,820 shares
issued and outstanding as of March 31, 2000
and December 31, 1999, respectively............. 213 213
Additional paid-in capital........................ 128,823 127,707
Deferred stock-based compensation................. (31,767) (34,964)
Accumulated deficit............................... (20,344) (11,395)
--------- ---------
Stockholders' equity...................... 76,925 81,561
--------- ---------
Total liabilities and stockholders' equity.... $ 80,937 $ 84,300
========= =========
See accompanying notes to condensed financial statements.
</TABLE>
OFFICIAL PAYMENTS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
---------- ----------
Revenues:
<S> <C> <C>
Transaction fees.................................. $ 1,656 $ 728
Other revenues.................................... 168 102
--------- ---------
Total revenues................................ 1,824 830
--------- ---------
Cost of revenues:
Cost of transaction fees.......................... 946 181
Cost of transaction fees to related party......... 487 206
Cost of other revenues............................ 77 19
--------- ---------
Total cost of revenues........................ 1,510 406
--------- ---------
Gross profit........................................ 314 424
--------- ---------
Operating expenses:
Sales and marketing............................... 4,446 175
Development costs................................. 482 140
General and administrative........................ 5,234 196
Depreciation and amortization..................... 190 37
Allocated expenses from related party............. 45 -
--------- ---------
Total operating expenses...................... 10,397 548
--------- ---------
Loss from operations................................ (10,083) (124)
Other income, net................................... 1,134 3
---------- ---------
Net loss............................................ $ (8,949) $ (121)
========== ==========
Basic and diluted net loss per share................ $ (0.42) $ (0.01)
========== ==========
Shares used in computing basic and diluted
net loss per share............................... 21,303 15,000
========== ==========
See accompanying notes to condensed financial statements.
</TABLE>
OFFICIAL PAYMENTS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
---------- ----------
Cash flow used in operating activities:
<S> <C> <C>
Net loss.......................................... $ (8,949) $ (121)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization................ 190 37
Amortization of deferred stock-based
compensation................................. 3,197 -
Changes in operating assets and liabilities
Accounts receivable, net..................... 121 105
Prepaid expenses and other current assets.... (970) (20)
Accounts payable and accrued expenses........ 1,256 (333)
Deferred revenue............................. 24 (7)
---------- ----------
Net cash used in operating activities...... (5,131) (339)
---------- ----------
Cash flows provided by (used in) investing activities:
Proceeds from sale of short-term investments...... 6,641 -
Capital expenditures.............................. (2,619) (135)
---------- -----------
Net cash provided by (used in) investing
activities.............................. 4,022 (135)
---------- -----------
Cash flow provided by (used in) financing activities:
Proceeds from exercise of stock options........... 1,116 -
Repayment of notes payable and capital leases..... (37) (32)
---------- -----------
Net cash provided by (used in) financing
activities.............................. 1,079 (32)
---------- -----------
Net decrease in cash................................ (30) (506)
Cash at the beginning of the period................. 1,643 631
---------- -----------
Cash at the end of the period....................... $ 1,613 $ 125
Supplement disclosure of noncash activity:
Cash paid for interest.............................. $ 6 $ 11
========== ===========
Assets acquired through capital leases.............. $ 30 $ 13
========== ============
Cash paid for income taxes.......................... $ 83 $ -
========== ============
See accompanying notes to condensed financial statements.
</TABLE>
OFFICIAL PAYMENTS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Official Payments Corporation was formed as U.S. Audiotex, LLC, a
California limited liability company (the "LLC"), on June 26, 1996. U.S.
Audiotex Corporation, a Delaware corporation (the "Company"), was formed on
August 24, 1999. Effective September 30, 1999, the LLC merged with and into
the Company. On October 20, 1999, the Company changed its name to "Official
Payments Corporation". The Company provides credit card payment options for
consumers to pay personal federal and state income taxes, sales and use
taxes, property taxes and fines for traffic violations and parking
citations.
The Company's business model is unproven and evolving and it is
difficult to evaluate the Company's business. The use of credit cards to
make payments to government agencies is relatively new and evolving.
Because the Company has only a limited operating history, it is difficult
to evaluate its business and prospects and the risks, expenses and
difficulties that the Company may face in implementing its business model.
The Company's success will depend on maintaining its relationship with the
Internal Revenue Services (IRS) and on developing additional relationships
with state and local government agencies. There are no assurances that the
Company will be able to develop new relationships or maintain existing
relationships, and the failure to do so could have a material and adverse
effect on the business, operating results and financial condition of the
Company.
BASIS OF PRESENTATION
The accompanying condensed financial statements as of March 31, 2000
and December 31, 1999, and the three months ended March 31, 2000 and 1999,
are unaudited. The unaudited interim condensed financial statements have
been prepared on the same basis as the annual financial statements, and in
the opinion of management, reflect all adjustments necessary to present
fairly the Company's financial position, results of operations and cash
flows as of March 31, 2000 and for the three months ended March 31, 2000
and 1999. These adjustments are of a normal, recurring nature. These
condensed financial statements and notes thereto are unaudited and should
be read in conjunction with the Company's audited financial statements and
related notes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999. The results for the three months ended March
31, 2000 are not necessarily indicative of the expected results for the
year ending December 31, 2000. Certain prior period balances have been
reclassified to conform to the current period presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported results of operations during the
reporting period. Actual results could differ from those estimates.
INVESTMENTS
As of March 31, 2000, the Company had short-term investments of $72.2
million. The Company classifies its short-term investments as
"available-for-sale." Financial instruments classified as short-term
investments include government securities and commercial paper, with
maturity dates of less than three months at the date of acquisition. Such
short-term investments are recorded at fair value based on quoted market
prices, with unrealized gains and losses recorded as other comprehensive
income (loss) until realized. At March 31, 2000, no comprehensive income
(loss) was reported, as the fair value of the Company's short-term
investments equaled the quoted market prices.
COMPREHENSIVE INCOME (LOSS)
The Company has no components of other comprehensive income (loss).
STOCK-BASED COMPENSATION
The Company uses the intrinsic value method to account for all of its
employee stock-based compensation plans. Expense associated with
stock-based compensation is being amortized on a straight-line basis over
the vesting period of the individual award consistent with the method
described in Accounting Principles Board (APB) Opinion No. 25.
REVENUE RECOGNITION
Transaction fees are derived from convenience fees paid by consumers
for credit card payment services provided by the Company. Convenience fees
are charged based on the amount of the payment processed and the type of
payment. Transaction fees are recognized in the month the services are
provided.
Other revenues consist of the sale of customized systems which include
software licenses, implementation services, training and post contract
support related to these system sales. As vendor specific objective
evidence does not exist for each element of the contract, revenues are
recognized, under the completed contract method, upon customer acceptance
of the software which occurs after installation of the system and the
completion of training. Maintenance revenues are deferred based on vendor
specific objective evidence and recognized ratably over the contractual
term of the maintenance agreement, generally one year.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. Such costs are
included in sales and marketing expense and totaled approximately $3.2
million and $7,000 for the three months ended March 31, 2000 and 1999,
respectively.
Note 2. NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number
of outstanding shares of common stock. Diluted net loss per share is
computed using the weighted-average number of shares of common stock
outstanding and, when dilutive, potential common shares from options to
purchase common stock using the treasury stock method.
The following table presents the calculation of basic and diluted net
loss per share (in thousands, except share and per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
-------- --------
<S> <C> <C>
Net loss......................................... $ ( 8,949) $ (121)
------------ ------------
Weighted-average shares used in computing basic
and diluted net loss per common share.......... 21,303,000 15,000,000
============ ============
Basic and diluted net loss per common share...... $ (0.42) $ (0.01)
============ ============
</TABLE>
Basic and diluted net loss per share are computed using the
weighted-average number of outstanding shares of common stock. Net loss per
share for the three months ended March 31, 2000 does not include the effect
of approximately 6,495,000 stock options with a weighted-average exercise
price of $6.94 per share because their effects are anti-dilutive. There
were no common stock equivalents outstanding as of March 31, 1999.
Note 3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-----------------------------------
2000 1999
-------- --------
<S> <C> <C>
Computer equipment.............................. $ 4,430 $ 1,836
Furniture and fixtures.......................... 540 485
--------- ---------
4,970 2,321
Less accumulated depreciation and amortization.. 709 519
--------- ---------
$ 4,261 $ 1,802
========= =========
</TABLE>
Note 4. AMORTIZATION OF DEFERRED STOCK-BASED COMPENSATION
Amortization of deferred stock-based compensation consists of the
following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
-------- --------
<S> <C> <C>
Sales and marketing............................. $ 249 $ -
Development costs............................... - -
General and administrative...................... 2,948 -
--------- ---------
$ 3,197 $ -
========= =========
</TABLE>
Note 5. OTHER INCOME, NET
Other income, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
-------- --------
<S> <C> <C>
Interest income................................. $ 1,140 $ 4
Interest expense................................ (12) (11)
Other income, net .............................. 6 10
--------- ---------
$ 1,134 $ 3
========= =========
</TABLE>
Note 6. SEGMENT INFORMATION
The Company adopted the provisions of SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information, in fiscal 1999. SFAS No.
131 supercedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, and establishes standards for reporting information about
operating segments, products and services, geographic areas, and major
customers. The method for determining which information to report is based
on the way that management organizes the operating segments within the
Company for making operating decisions and assessing financial performance.
The Company operates in a single operating segment. The Chief
Executive Officer (CEO) has been identified as the Chief Operating Decision
Maker because he has final authority over resource allocation decisions and
performance assessment. The CEO reviews financial information by
disaggregated information about revenues by product for purposes of making
operating decisions and assessing financial performance. The financial
information reviewed by the CEO is consistent with the information
presented in the accompanying statements of operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
-------- --------
Revenues by product are Transaction fees:
<S> <C> <C>
Federal.................................... $ 522 $ 114
State...................................... 283 22
Local...................................... 851 592
Other revenues............................. 168 102
-------- --------
Total revenues............................. $ 1,824 $ 830
======== ========
</TABLE>
Note 7. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial
statements. In March 2000, the SEC issued Staff Accounting Bulletin No.
101A (SAB 101A), Amendment: Revenue Recognition in Financial Statements.
SAB 101A delays the implementation date of SAB 101 for registrants with
fiscal years that begin between December 16, 1999 and March 15, 2000. The
Company will adopt SAB 101 as required in the second quarter of 2000 and is
evaluating the effect that such adoption may have on its results of
operations and financial position.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25 (FIN 44). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of
applying APB Opinion No. 25; the criteria for determining whether a plan
qualifies as a noncompensatory plan; the accounting consequences of various
modifications to the terms of previously fixed stock options or awards; and
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions in
FIN 44 cover specific events that occurred after either December 15, 1998
or January 12, 2000. The Company will adopt FIN 44 as required in the second
quarter of 2000 and is evaluating the effect that such adoption may have on
its results of operations and financial position.
Note 8. SUBSEQUENT EVENTS
In April 2000, the Company entered into a sale-leaseback agreement for
$1 million in interactive voice response telephone system (IVR) equipment.
The sale-leaseback transaction did not result in any profit or loss for the
Company because the selling price of the equipment was equal to the cost on
the closing date of the agreement. The leased equipment will be accounted
for as a capital lease, in accordance with SFAS No. 13, Accounting for
Leases.
In April 2000, after discussion by the Company's board of directors,
Brian W. Nocco, the Company's Chief Financial Officer left the Company to
pursue other opportunities. In accordance with the terms of Mr. Nocco's
employment agreement, the Company is required to accelerate the vesting of
Mr. Nocco's stock options granted in August, September, and November of
1999. As a result, the Company expects to incur a one-time non-cash
compensation expense of approximately $3.7 million during the second
quarter of 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information in this report contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and section 21E of the Securities Exchange Act of 1934, as
amended. Any statements contained herein that are not statements of
historical facts may be deemed to be forward-looking statements. For
example, words such as "may", "will", "should", "estimates", "predicts",
"potential", "continue", "strategy", "believes", "anticipates", "plans",
"expects", "intends", and similar expressions are intended to identify
forward-looking statements. Such statements are based upon the current
economic environment and current expectations that involve risks and
uncertainties, including, but not limited to statements regarding the
Company's competitive position, expected operating and financial
performance, business model and expected growth of electronic payments to
government entities. All forward-looking statements included in this report
are based upon information available to the Company as of the date hereof.
You are cautioned that these statements are not guarantees of future
performance. The Company's actual results and the timing of certain events
may differ significantly than those anticipated in, or caused by, any
forward-looking statements as a result of certain risks and uncertainties,
including, without limitation, the general economic and business
conditions, major systems failures, constraints in capacity, rapid
technological changes, ability to retain existing government contracts and
enter into new government contracts, competitive nature of the market in
which the Company competes, the early stages of development of the
Company's products, and the lack of widespread market acceptance of the
Company's products. A more complete description of these and other risks
and uncertainties associated with the Company's business can be found in
the Company's filings with the United States Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended
December 31, 1999. The Company does not undertake any obligation to update
publicly any forward-looking statement, whether as a result of new
information, future events or otherwise.
Overview
Official Payments Corporation is the leading provider of electronic
payment options to government entities enabling consumers to use their
credit cards to pay, by internet or the telephone, personal federal and
state income taxes, sales and use taxes, property taxes and fines for
traffic violations and parking citations. The Company's interactive
toll-free telephone number, 1-888-2PAY-TAXSM, allows customers to make
payments and receive certain customer service information. The Company's
website, at www.8882paytax.comSMand at www.officialpayments.comSM,
currently allow consumers to make certain payments through the Internet.
The Company's revenues consist primarily of convenience fees, which
are transaction fees paid by consumers for using our credit card payment
services. For processing personal federal and state income tax payments and
property tax payments, the convenience fee charged is a percentage of the
payment amount. For processing fines for traffic violations and parking
citations, a fixed amount is charged per ticket. The Company also derives a
small amount of other revenues from sales of its systems to government
entities and other miscellaneous fees such as for maintenance and
consulting. In these cases, revenues for software systems sales are
recognized upon installation based on vendor-specific objective evidence
and revenues for maintenance are recognized ratably over the service period
based on vendor-specific objective evidence. Consulting revenues are
recognized as the services are performed.
The Company's contract with the IRS currently accounts for a
significant portion of the Company's revenue. As of January 2000, the
Company offered its services for the balance-due and extension payment of
personal federal income taxes due on April 17, 2000 and estimated tax
payments for the 2000 tax year. In the three months ended March 31, 2000,
convenience fees from tax payments to the IRS accounted for approximately
29% of the Company's total revenues. The Company expects that percentage to
increase significantly during the second quarter and throughout fiscal year
2000. The IRS has selected the Company to provide electronic payment
services with respect to balance-due and extension tax payments for the
2000 tax year, as well as estimated tax payments for the 2001 tax year
(with the IRS having the option to renew the Company's services for an
additional year). If the IRS does not continue to select the Company to
perform this service in subsequent years, the business, operating results
and financial position of the Company would be materially and adversely
affected.
The Company's primary cost of revenues are the merchant discount fee
paid to its credit card processors, which is a certain percentage of the
total amount paid by the consumer, depending on the credit card used and
the type of transaction. The Company also incurs telecommunications costs
through its telephone conduit. Although there are no telecommunications
costs associated with payments made through the Internet conduit, the
Company pays a third party license fee per completed transaction for
certain technology used in the Internet conduit.
Processing fines for traffic violations and parking citations produces
a higher gross margin than processing income tax and property tax payments
because the convenience fee as a percentage of fines processed is
significantly higher.
Operating expenses include sales and marketing expenses, development
costs, general and administrative expenses, depreciation and amortization,
and allocated expenses from a related party. One of the largest components
of these expenses was the amortization of deferred stock-based
compensation, which amounted to $3.2 million in the quarter ending March
31, 2000. Sales and marketing expenses consist primarily of advertising
expenses and salaries and commissions for sales and marketing personnel.
Development costs consist primarily of salaries for engineering personnel
and development cost for the Company's customer service application.
General and administrative expenses consist primarily of salaries for
executive, finance, customer service and administrative personnel.
The Company has incurred significant losses since inception and
expects to continue to incur losses for the foreseeable future. As of March
31, 2000, the Company had an accumulated deficit of approximately $20.3
million. The Company recorded on its balance sheet a deferred stock-based
compensation expense totaling $42.9 million in the third and fourth
quarters of 1999. This deferred charge consists of an amount of $10.0
million, representing the guaranteed value of options granted to Thomas R.
Evans, the Company's Chairman and Chief Executive Officer, and an amount of
$32.9 million, representing the estimated value of the common stock
underlying options granted to certain other officers and employees of the
Company in August, September and November of 1999 in excess of the exercise
price of those options. The $10.0 million deferred charge related to Mr.
Evans' options and $28.4 million of deferred charges related to new options
granted to other officers and employees is being amortized, on a
straight-line basis, over a three-year vesting period, beginning in the
third quarter of 1999. $4.5 million of expenses related to options granted
to other officers and employees of the Company were expensed upon
completion of its initial public offering on November 29, 1999. See Note 4
to the Company's December 31, 1999 audited financial statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods illustrated, certain
statements of operations data expressed as a percentage of total revenues.
The data has been derived from the unaudited financial statements contained
in this report, which in management's opinion, have been prepared on
substantially the same basis as the audited financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information for the
periods presented. The operating results for any period should not be
considered indicative of the results for any future period. This
information should be read in conjunction with the financial statements
included in this report, as well as the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
-------- --------
STATEMENT OF OPERATIONS DATA:
Revenues:
<S> <C> <C>
Transaction fees................................... 91% 88%
Other revenues..................................... 9 12
------ ------
Total revenues................................. 100 100
------ ------
Cost of revenues:
Cost of transaction fees........................... 52 22
Cost of transaction fees to related party.......... 27 25
Cost of other revenues............................. 4 2
------ ------
Total cost of revenues......................... 83 49
------ ------
Gross profit......................................... 17 51
------ ------
Operating expenses:
Sales and marketing................................ 244 21
Development costs.................................. 26 17
General and administrative......................... 287 24
Depreciation and amortization...................... 11 4
Allocated expenses from related party.............. 2 -
------ -------
Total operating expenses....................... 570 66
------ -------
Income (loss) from operations........................ (553) (15)
Other income (expense), net.......................... 62 0
------ -------
Net income (loss).................................... (491)% (15)%
======= =======
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUES
Total Revenues. Total revenues increased $994,000 to $1.8 million for
the three months ended March 31, 2000 from $830,000 for the three
months ended March 31, 1999, an increase of 120%. This increase is
primarily attributable to increases in revenues generated from
processing personal federal and state income tax payments and property
tax payments.
Federal Transaction Fees. Revenues from processing federal payments
are solely related to federal income tax payments for balance-due,
extension, and estimated payments. Federal transaction fees increased
$408,000 to $522,000 for the three months ended March 31, 2000 from
$114,000 for the three months ended March 31, 1999, an increase of
358%. For the three months ended March 31, 2000, the Company processed
approximately 10,700 transactions totaling $18.4 million, compared to
approximately 3,300 transactions totaling $4.4 million for the three
months ended March 31, 1999. The Company believes the increase in
revenue from the comparable period in 1999 is primarily the result of
increased advertising by the Company, the IRS, and participating
credit card companies, as well as the new processing of extension and
estimated federal tax payments. On average, the Company charged a 2.8%
convenience fee based upon the dollar amount of the IRS payment for
processing personal federal income taxes during the three months ended
March 31, 2000, as compared to a 2.6% convenience fee in the three
months ended March 31, 1999. Federal transaction fees represented 29%
of total revenues for the three months ended March 31, 2000 compared
to 14% of total revenues for the three months ended March 31, 1999.
State Transaction Fees. Revenues from processing state payments are
related to state income tax payments for balance-due, estimated and
extension personal taxes and sales and use taxes to the states of
California, New Jersey, Illinois, Connecticut, Oklahoma, Minnesota and
the District of Columbia. State revenues increased $261,000 to
$283,000 for the three months ended March 31, 2000 from $22,000 for
the three months ended March 31, 1999, an increase of 1,186%. For the
three months ended March 31, 2000, we processed approximately 7,600
transactions totaling $9.6 million, compared to approximately 1,000
transactions totaling $782,000 for the three months ended March 31,
1999. The increase in revenues is primarily related to additional
state contracts and additional payment services and options provided
to existing state contracts. The Company only processed tax payments
for the state of California during the three months ended March 31,
1999. On average, the Company charged a 2.9% convenience fee based
upon the dollar amount of the payment for processing state income and
sales and use taxes during the three months ended March 31, 2000, as
compared to a 2.8% convenience fee in the three months ended March 31,
1999. State transaction fees represented 15% of total revenues for the
three months ended March 31, 2000 compared to 3% of total revenues for
the three months ended March 31, 1999.
Local Transaction Fees. Revenues from processing local payments
consist of property taxes, traffic violations, parking citations, fax
filing, and utility payments. Local revenues increased $259,000 to
$851,000 for the three months ended March 31, 2000 from $592,000 for
the three months ended March 31, 1999, an increase of 44%. For the
three months ended March 31, 2000, we processed approximately 106,400
transactions totaling $23.2 million, compared to approximately 75,800
transactions totaling $16.9 million for the three months ended March
31, 1999. Revenues from processing property tax payments increased
$165,000 to $322,000 for the three months ended March 31, 2000 from
$157,000 for the three months ended March 31, 1999, an increase of
105%. Revenues from processing fines for traffic violations increased
$42,000 to $320,000 for the three months ended March 31, 2000 from
$278,000 for the three months ended March 31, 1999, an increase of
15%. Revenues from processing fines for parking citations increased
$35,000 to $99,000 for the three months ended March 31, 2000 from
$64,000 for the three months ended March 31, 1999, an increase of 55%.
Revenues from other transaction fees increased $17,000 to $110,000 for
the three months ended March 31, 2000 from $93,000 for the three
months ended March 31, 1999, an increase of 18%. The increase in local
transaction fees is primarily attributable to the increase in property
tax, moving violation, and parking citation clients subsequent to
March 31, 1999. Local transaction fees represented 47% of total
revenues for the three months ended March 31, 2000 compared to 71% of
total revenues for the three months ended March 31, 1999.
Other Revenues. Other revenues consist of system sales, maintenance,
and consulting revenues. Other revenues increased $66,000 to $168,000
for the three months ended March 31, 2000 from $102,000 for the three
months ended March 31, 1999. Other revenues represented 9% of total
revenues for the three months ended March 31, 2000 compared to 12% of
total revenues for the three months ended March 31, 1999.
COST OF REVENUES
Cost of Transaction Fees. Cost of transaction fees increased $1.0
million to $1.4 million for the three months ended March 31, 2000 from
$387,000 for the three months ended March 31, 1999, an increase of
270%. The largest component of cost of transaction fees, merchant
discount fees, increased $651,000 to $982,000 for the three months
ended March 31, 2000 from $331,000 for the three months ended March
31, 1999, an increase of 197%. The cost of telecommunication charges
for the Company's toll-free interactive telephone system increased
$349,000 to $395,000 for the three months ended March 31, 2000 from
$46,000 for the three months ended March 31, 1999, an increase of
759%. Other cost of transaction fees increased $46,000 to $56,000 for
the three months ended March 31, 2000 from $10,000 for the three
months ended March 31, 1999. Cost of transaction fees was 79% of total
revenues for the three months ended March 31, 2000, compared to 47%
for the three months ended March 31, 1999. The increase in cost of
transaction fees is due to primarily one-time telecommunication costs
incurred during the recent period in preparation for the anticipated
higher volume of federal and state tax payments during the first two
weeks in April 2000 and higher volume of federal income tax payments
processed, which has a lower gross profit margin than other services
provided.
Cost of Other Revenues. Cost of other revenues increased $58,000 to
$77,000 for the three months ended March 31, 2000 from $19,000 for the
three months ended March 31, 1999. The increase in other revenues is
primarily attributable to the equipment cost of the sold systems in
the three months ended March 31, 2000.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased $4.3
million to $4.4 million for the three months ended March 31, 2000 from
$175,000 for the three months ended March 31, 1999. This increase is
primarily attributable to a $3.2 million advertising campaign to
promote the Company's federal tax payment services and increase brand
awareness. The increase is also attributable to amortization of
$249,000 for deferred stock-based compensation for options to purchase
shares of the Company's common stock at exercise prices below their
fair market value at the date of grant which were granted to the
Company's sales and marketing employees in August, September, and
November 1999. The increase in sales and marketing personnel from
March 31, 1999 to March 31, 2000 and sales commission payables also
contributed to the increase in sales and marketing expenses. Sales and
marketing expenses represented 244% of total revenues for the three
months ended March 31, 2000 compared to 21% for the three months ended
March 31, 1999.
Development Costs. Development costs increased $342,000 to $482,000
for the three months ended March 31, 2000 from $140,000 for the three
months ended March 31, 1999. The increase is primarily attributable
the increase in engineering personnel from March 31, 1999 to March 31,
2000 and additional consultants contracted during the recent quarter
to develop the Company's customer service application. Development
costs represented 26% of total revenues for the three months ended
March 31, 2000 compared to 17% for the three months ended March 31,
1999.
General and Administrative. General and administrative expenses
increased $5.0 million to $5.2 million for the three months ended
March 31, 2000 from $196,000 for the three months ended March 31,
1999. This increase is primarily attributable to amortization expense
of $2.9 million for deferred stock-based compensation for options to
purchase shares of the Company's common stock at exercise prices below
their fair market value at the date of grant which were granted to the
Company's general and administrative employees in August, September,
and November 1999. The increase is also attributable to the increase
in customer service activities in preparation for the anticipated
higher volume of federal and state tax payments during the first two
weeks of April 2000. Salary and travel expenses for the Company's
general and administrative employees also increased due to the
increase in headcount from March 31, 1999 to March 31, 2000. General
and administrative expenses represented 287% of total revenues for the
three months ended March 31, 2000 compared to 24% for the three months
ended March 31, 1999.
Depreciation and Amortization. Depreciation and amortization increased
$153,000 to $190,000 for the three months ended March 31, 2000 from
$37,000 for the three months ended March 31, 1999. The increase is
primarily related to an increase in IVR equipment purchased during the
recent period in preparation for the anticipated higher volume of
federal and state tax payments during the first two weeks of April
2000. During the Company's peak processing period in April 2000, the
Company's maximum utilization of its IVR system capacity was
approximately 10%, and acccordingly, the Company believes that its IVR
system capacity is sufficient to meet its transactional requirements
for the foreseeable future and accommodate the expected growth in its
business. Depreciation and amortization represented 11% of total
revenues for the three months ended March 31, 2000 compared to 4% for
the three months ended March 31, 1999.
Allocated Expenses from Related Party. Related party expense was
$45,000 for the three months ended March 31, 2000. Imperial Bank, a
California chartered bank and wholly owned subsidiary of Imperial
Bancorp, is the beneficial owner of approximately 56% of the
outstanding stock of the Company and charges the Company for human
resource and other services, including payroll processing and benefits
administration. The Company did not utilize Imperial Bank's services
during the three months ended March 31, 1999.
OTHER INCOME, NET
Other income, net consists of interest income, interest expense and
other non-operating expenses. Other income, net increased to $1.1 million
for the three months ended March 31, 2000 from $3,000 for the three months
ended March 31, 1999. This increase is directly related to higher interest
income resulting from higher average cash balances during the recent
period, as compared to the first quarter of fiscal year 1999.
INCOME TAXES
The Company incurred operating losses during the period of its
incorporation from September 30, 1999 through March 31, 2000. The Company
has recorded a valuation allowance for the full amount of net deferred tax
assets, as the future realization of the tax benefit is not currently
likely. During 1998, Official Payments was a California limited liability
company. Therefore, all tax operating losses were used by the members of
the limited liability company on their respective corporate tax returns.
LIQUIDITY AND CAPITAL RESOURCES
In November 1999, the Company completed the initial public offering of
its common stock and realized net proceeds from the offering of
approximately $78.7 million. Prior to the offering the Company had financed
its operations through private sales of common stock, with net proceeds of
$1.2 million, and through bank and shareholder loans. As of March 31, 2000,
the Company had $73.8 million in cash and investments, and $72.7 million in
working capital.
Net cash used in operating activities was $5.1 million and $339,000 for
the three months ended March 31, 2000 and 1999, respectively. The cash used
in operating activities for the three months ended March 31, 2000 was
primarily the result of the Company's net loss offset by non-cash operating
expenses (such as amortization of deferred stock-based compensation and
depreciation) and an increase in accounts payable and accrued expenses. The
cash used in operating activities for the three months ended March 31, 1999
was primarily the result of the Company's net loss and a decrease in
accounts payable and accrued expenses.
Net cash provided from investing activities was $4.0 million for the
three months ended March 31, 2000. Cash provided from investing activities
primarily reflects the sale of short-term investments, offset by property
and equipment purchases during that period. Net cash used in investing
activities was $135,000 for the three months ended March 31, 1999. Cash
used in investing activities primarily reflects purchases of property and
equipment during that period.
Net cash provided by financing activities was $1.1 million for the three
months ended March 31, 2000. The cash generated in the recent period was
primarily related to the exercise of stock options by one of the Company's
directors (although the shares of the Company's common stock so purchased
remain subject to a right of repurchase by the Company in accordance with
the terms of the Company's 1999 Stock Incentive Plan). Net cash used in
financing activities was $32,000 for the three months ended March 31, 1999.
The cash used in the three months ended March 31, 1999, was primarily
related to the repayment of notes payable and capital lease obligations.
The Company expects to experience growth in its operating costs for the
foreseeable future in order to execute its business plan, particularly in
the areas of web development costs and sales and marketing. The Company
also expects to incur expenses to enhance and staff the new corporate
headquarters in Stamford, Connecticut. As a result, the Company estimates
that these operating costs, as well as other planned expenditures, will
constitute a significant use of cash. The Company believes that the current
cash resources will be sufficient to meet its working capital and capital
expenditures for the foreseeable future.
YEAR 2000 IMPACT
As of the date of this filing, the Company has not incurred any
significant business disruptions as a result of Year 2000 issues. However,
while no such occurrence has developed, Year 2000 issues that may arise
related to key suppliers and service providers may not become apparent
immediately. We have received assurances of Year 2000 compliance from key
suppliers. The Company has received assurances from key service providers
such as financial institutions and Imperial Bank (which provides
transaction processing services and various employee benefits services for
the Company) as to their Year 2000 readiness. The Company will continue to
monitor its own systems and business partners to identify and address any
potential risk situations related to the Year 2000. No assurance can be
provided that the Company will not be adversely affected by these suppliers
and service providers due to noncompliance in the future.
SEASONALITY AND FLUCTUATION OF QUARTERLY RESULTS
The Company has generally experienced fiscal quarter over fiscal quarter
revenue growth with some seasonal fluctuations, primarily in the second and
fourth quarters. This fiscal quarter-over-fiscal quarter revenue growth is
due to an increase in the number of government clients and payment services
and an increase in utilization rates. The fluctuations in the second and
fourth quarter relate primarily to an increase in convenience fees from
processing property tax payments, which are generally collected twice a
year - in April and December. The sharp increase in revenues in the second
quarter is due to processing personal federal and state income tax payments
in the month of April. We expect that results for the second quarter of
future years will continue to be impacted by the April 15th deadline for
paying personal federal and state income taxes.
Since the Company does not process balance-due and extension personal
federal income tax payments in the third quarter, revenues in that quarter
are expected to be lower than in the second quarter.
The Company anticipates that its operating expenses will continue to
increase due to the expansion of its sales force in order to obtain
additional state and municipal clients and the continuous marketing
campaign to make consumer users aware of its electronic payment option. If
revenues in any quarter do not increase correspondingly with increases in
expenses, the Company's results for that quarter would be materially and
adversely affected. In addition, as of March 31, 2000, the Company had
$31.8 million in deferred stock-based compensation. The Company intends to
amortize this amount on a straight-line basis over the remaining of the
three-year vesting period.
For the foregoing reasons, the Company believes that comparisons of
its quarterly operating results are not necessarily meaningful and that its
operating results in any particular quarter should not be relied upon as
necessarily indicative of future performance. In addition, it is possible
that in some future quarters the Company's operating results will be below
the expectations of research analyst and investors, and in that case, the
price of the Company's common stock is likely to decline.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company does
not use derivative financial instruments in its investment portfolio. The
primary objective of the Company's investment activities is to preserve
principal while maximizing yields without significantly increasing risk.
This is accomplished by investing in widely diversified investments,
consisting primarily of investment grade securities. Due to the nature of
the Company's investments, the Company believes that there is no material
risk exposure. All investments are carried at market value, which
approximates cost.
The table below represents principal amounts and related
weighted-average interest rates by year of maturity for the Company's
investment portfolio.
<TABLE>
<CAPTION>
FY2000 FY2001 FY2002 FY2003 FY2004 Thereafter Total
------ ------ ------ ------ ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Money market fund
and cash $ 1,613 $ - $ - $ - $ - $ - $ 1,613
Average interest
Rate 5.05% 0.00% 0.00% 0.00% 0.00% 0.00%
Investments $ 72,230 $ - $ - $ - $ - $ - $ 72,230
Average interest
rate 6.10% 0.00% 0.00% 0.00% 0.00% 0.00%
-------- ------- ------- ------- ------- -------- --------
Total cash and
investments $ 73,843 $ - $ - $ - $ - $ - $ 73,843
======== ======= ====== ======= ======= ======== ========
</TABLE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently is not involved in any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 29, 1999, the Company completed the initial public offering
of its common stock. The managing underwriters in the offering were
Donaldson, Lufkin, & Jenrette, CIBC World Markets and DLJdirect Inc. The
shares of the common stock sold in the offering were registered under the
Securities Act of 1933, as amended, on a Registration Statement on Form S-1
(No. 333-87325). The Securities and Exchange Commission declared the
Registration Statement effective on November 22, 1999.
The offering commenced on November 23, 1999 and was completed on
November 29, 1999 after the Company had sold all of the 5,750,000 shares of
common stock registered under the Registration Statement (including 750,000
shares sold in connection with the exercise of the underwriters'
over-allotment option). The initial public offering price was $15.00 per
share, resulting in gross proceeds from the initial public offering of
$86.2 million.
The Company paid a total of $6.0 million in underwriting discounts and
commissions and approximately $1.5 million has been incurred for costs and
expenses related to the offering. None of the costs and expenses related to
the offering were paid directly or indirectly to any director or officer of
the Company or their associates, persons owning 10 percent or more of any
class of equity securities of the Company or an affiliate of the Company.
After deducting the underwriting discounts and commissions and the
offering expenses, the estimated net proceeds to the Company from the
offering were approximately $78.7 million. The net offering proceeds have
been used to make the following payments: approximately $2.9 million for
the purchase and installation of computer equipment to expand transaction
processing capabilities; approximately $3.2 million for direct marketing
and promotional activities; approximately $100,000 for the build-out of the
Company's new headquarters offices in Stamford, Connecticut; and
approximately $200,000 for general corporate purposes. None of these costs
or expenses were paid directly or indirectly to any director or officer of
the Company or their associates, persons owning 10 percent or more of any
class of equity securities of the Company or an affiliate of the Company.
In the future, the Company may also use a portion of its net proceeds to
acquire or invest in businesses, technologies, products or services (which
amount has not been specifically allocated as of the date hereof). Unused
proceeds are invested in short-term investments.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended March 31, 2000, there were no matters
submitted to a vote of security holders through a solicitation of proxies
or otherwise.
ITEM 5. OTHER INFORMATION
On April 25, 2000, the Company's board of directors approved an
amendment to the Company's 1999 Stock Incentive Plan (the "Plan") which
permits the Compensation Committee of the board of directors to grant
options to purchase the Company's common stock to consultants and other
independent advisors to the Company, in addition to the Company's key
employees and directors (who were the only potential option recipients
previously provided for under the Plan). The board of directors determined
that it is in the best interest of the Company and its stockholders to have
another tool, if necessary, to strengthen the mutuality of interests
between the Company and important independent advisors to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Contract between Internal Revenue Service and the Company,
dated as of March 3, 2000.
10.2 1999 Stock Incentive Plan, as amended
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No current reports on Form 8-K were filed during the quarter
covered by this report.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
OFFICIAL PAYMENTS CORPORATION
May 12, 2000 By: /s/ Thomas R. Evans
----------------------------
Thomas R. Evans
Chairman of the Board and Chief
Executive Officer
May 12, 2000 By: /s/ Hyunjin F. Lerner
-----------------------------
Hyunjin F. Lerner
Controller (Chief Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- -------- -----------
10.1 Contract between Internal Revenue Service and the
Company, dated as of March 3, 2000
10.2 1999 Stock Incentive Plan, as amended
27.1 Financial Data Schedule
<TABLE>
<S> <C> <C>
=================================================================================================================================
SOLICITATION/CONTRACT/ORDER FOR COMMERCIAL ITEMS 1. REQUISITION NUMBER PAGE 1 OF I
OFFEROR TO COMPLETE BLOCKS 12, 17, 23, 24, & 30 O-O-N8-07-07-A07 001
2. CONTRACT NO. 3. AWARDS/EFFECTIVE 4. ORDER NUMBER 5. SOLICITATION NUMBER 6. SOLICITATION ISSUE
TIRNO-00-C-0010 DATE 03/03/00 DATE
7. FOR SOLICITATION a. NAME b. TELEPHONE NUMBER (No collect 8. OFFER DUE DATE/
INFORMATION CALL: calls) LOCAL TIME
- ---------------------------------------------------------------------------------------------------------------------------------
9. ISSUED BY CODE irs0088 10. THIS ACQUISITION IS 11. DELIVERY FOR 12. DISCOUNT TERMS
FOB DESTINATION Discount 0%
INTERNAL REVENUE SERVICE [ ]UNRESTRIC1ED UNLESS BLOCK IS Days: 0
SERVICE [ ]SET ASIDE: % FOR MARKED Net due: 30
A/C PROCUREMENT Suite 700 [ ]SMALL BUSINESS [ ]SEE SCHEDULE
6009 OXON HILL ROAD [ ]SMALL DISAV. BUSINESS ------------------------------------------------
OXON HILL, MD 20745 [ ]8(A) [ ] 13a. THIS CONTRACT IS A RATED
SIC: ORDER UNDER DPAS (15 CFR 700)
SIZE STANDARD: ------------------------------------------------
13b. RATING
------------------------------------------------
14. METHOD OF SOLICITATION
[ ]RFQ [ ]IFB [ ]RFP
- ---------------------------------------------------------------------------------------------------------------------------------
15. DELIVER TO CODE lRS0088 16. ADMINISTERED BY CODE IRS0088
INTERNAL REVENUE SERVICE INTERNAL REVENUE SERVICE
A/C PROCUREMENT Suite 700 A/C PROCUREMENT Suite 700
6009 OXON HILL ROAD 6009 OXON HILL ROAD
OXON Hill, MD 20745 OXON HILL, MD 20745
- ---------------------------------------------------------------------------------------------------------------------------------
17a. CONTRACTOR/ CODE 00051397 FACILITY 18. PAYMENT WILL BE MADE BY CODE INV0830
OFFEROR code
OFFICIAL PAYMENTS CORPORATION IRS/IRS ADMINISTRAT1VE SERV1CES CENTER
2333 SAN RAMON VALLEY BLVD. #450 PO BOX E
SAN RAMON, CA 94553 TELEPHONE # (304) 256-6000
BECKLEY, WV 25802
TELEPHONE NO.
- ---------------------------------------------------------------------------------------------------------------------------------
[ ]17b. CHECK IF REMITTANCE IS DIFFERENT AND 18b. SUBMIT INVOICES TO ADDRESS SHOWN IN BLOCK 18a UNLESS BLOCK BELOW
PUT SUCH ADDRESS IN OFFER IS CHECKED
[ ]SEE ADDENDUM
- ---------------------------------------------------------------------------------------------------------------------------------
19. 20. 21. 22. 23. 24.
ITEM NO. SCHEDULE OF SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
See attached schedule
(Attach Additional Sheets as Necessary)
- ---------------------------------------------------------------------------------------------------------------------------------
25. ACCOUNTING AND APPROPRIATION DATA 26. TOTAL AWARD AMOUNT (For Govt. Use Only)
See Commodity Lines 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
[ ]27a. SOLICITATION INCORPORATED BY REFERENCE FAR 52.212-1, 52.212-4. FAR 52.212-3
AND 52.212-5 ARE ATTACHED. ADDENDA [ ]ARE [ ]ARE NOT ATTACHED
[ ]27b. CONTRACT/PURCHASE ORDER INCORPORATES BY REFERENCE FAR 52.212-4,
FAR 52.212-5 IS ATTACHED. ADDENDA [X]ARE [ ]ARE NOT ATTACHED
- ---------------------------------------------------------------------------------------------------------------------------------
28. CONTRACTOR IS REQUIRED TO SIGN THIS DOCUMENT AND RETURN 2 COPIES 29. AWARD OF CONTRACT: REFERENCE _______________ OFFER
[X] TO ISSUING OFFICE. CONTRACTOR AGREES TO FURNISH AND DELIVER ALL ITEMS [ ] DATED _________. YOUR OFFER ON SOLICITATION
SET FORTH OR OTHERWISE IDENTIFIED ABOVE AND ON ANY ADDITIONAL SHEETS (BLOCK 5), INCLUDING ANY ADDITIONS OR CHANGES
SUBJECT TO THE TERMS AND CONDITIONS SPECIFIED HEREIN. WHICH ARE SET FORTH HEREIN, IS ACCEPTED AS TO
ITEMS:
- ----------------------------------------------------------------------------------------------------------------------------------
30a. SIGNATURE OF OFFEROR/CONTRACTOR 31a. UNITED STATES OF AMERICA(SIGNATURE OF CONTRACTING
OFFICER)
/s/ THOMAS R. EVANS /s/ MICHELLE A. LANE
- ---------------------------------------------------------------------------------------------------------------------------------
30b. NAME AND TITLE OF SIGNER (Type of print) 30c. DATE SIGNED 31b. NAME OF CONTRACTING 31c. DATE SIGNED
OFFICER (Type of print)
THOMAS R. EVANS 3/3/2000 MICHELLE A. LANE 202-283-1281 3/3/2000
CHAIRMAN & CEO
- ---------------------------------------------------------------------------------------------------------------------------------
32a. QUANTITY IN COLUMN 21 HAS BEEN 33. SHIP NUMBER 34. VOUCHER NUMBER 35. AMOUNT VERIFIED
CORRECT FOR
[ ]RECEIVED [ ]INSPECTED [ ]ACCEPTED, AND CONFORMS TO THE [ ]PARTIAL [ ]FINAL
CONTRACT, EXCEPT AS NOTED
- ---------------------------------------------------------------------------------------------------------------------------------
36. PAYMENT 37. CHECK NUMBER
32b. SIGNATURE OF AUTHORIZED GOVT. 32c. DATE [ ]COMPLETE [ ]PARTIAL [ ]FINAL
REPRESENTATIVE
38. S/R ACCOUNT NUMBER 39. S/R VOUCHER NUMBER 40. PAID BY
- ---------------------------------------------------------------------------------------------------------------------------------
41a. I CERTIFY THIS ACCOUNT IS CORRECT AND PROPER FOR PAYMENT 42a. RECEIVED BY (Print)
------------------------------------------
41b. SIGNATURE AND TITLE OF CERTIFYING OFFICER 41c. DATE 42b. RECEIVED AT (Location)
------------------------------------------
42c. DATE REC'D 42d. TOTAL CONTAINERS
(YY/MM/DD)
=================================================================================================================================
AUTHORIZED FOR LOCATION REPRODUCTION STANDARD FORM 1449(10-95)
Presented by GSA-FAR(48CFR)53.212
=================================================================================================================================
</TABLE>
SECTION B - CONTRACT TYPE
B.1 CONTRACT TYPE
This is a FIRM FIXED PRICE CONTRACT for the requirements identified and
described in Section C - Contract Terms and Conditions.
B.2 CONTRACT PRICING
CONTRACT LINE ITEM NUMBERS (CLINs)
CLIN DESCRIPTION FIRM FIXED PRICE
- ---- ----------- ----------------
1001 ETA ALTERNATIVE PAYMENT METHODS
PILOT CONTRACT BASE PERIOD OR
PERFORMANCE FOR FILING SEASON 2001 $0
1002 ETA ALTERNATIVE PAYMENT METHODS
PILOT CONTRACT OPTION 1 PERIOD OF
PERFORMANCE FOR FILING SEASON 2002 $0
TOTAL CONTRACT PRICE $0
SECTION C - CONTRACT TERMS AND CONDITIONS
C.1 CONTRACT TERMS AND CONDITIONS -- COMMERCIAL
ITEMS FAR 52.212-4 (MAR 1999)..........................Page 5
C.2 STATEMENT OF WORK - ADDENDUM TO FAR 52.212-4..............Page 9
C.2.1 INTRODUCTION......................................Page 9
C.2.2 GENERAL REQUIREMENTS..............................Page 9
C.2.3 DUTIES AND RESPONSIBILITIES OF THE CONTRACTOR.....Page 9
C.2.4 DUTIES AND RESPONSIBILITIES OF THE GOVERNMENT.....Page 12
C.2.5 DELIVERABLES......................................Page 13
C.2.5.1 FINDINGS REPORT..........................Page 13
C.2.5.2 MARKETING REPORT........................Page 14
C.2.5.3 MONTHLY DEVELOPMENT STATUS REPORT........Page 14
C.2.5.4 DAILY AND MONTHLY PRODUCTION REPORTS.....Page 15
C.2.5.5 CHARGEBACK REPORTS.......................Page 15
C.2.6 SUCCESS DETERMINATION............................ Page 16
C.2.7 SCHEDULE OF PERFORMANCE...........................Page 17
C.2.8 PERFORMANCE REQUIREMENTS..........................Page 17
C.3 AUTHORITY - CONTRACTING OFFICER, CONTRACTING
OFFICER'S TECHNICAL REPRESENTATIVE AND
CONTRACTOR'S PROJECT MANAGER............................Page 18
C.3.1 ADMINISTRATIVE CONTRACTING OFFICER................Page 18
C.3.2 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE....Page 18
C.3.3 PROJECT MANAGER...................................Page 19
C.4 CONTRACT CORRESPONDENCE...................................Page 19
C.5 DISCLOSURE OF INFORMATION--SAFEGUARDS (IRSAP
1052.224-9000)(JAN 1998)................................Page 20
C.6 DISCLOSURE OF "OFFICIAL USE ONLY" INFORMATION
SAFEGUARDS (IRSAP 1052.224-70(d)) (DEC 1988).............Page 20
C.7 DISCLOSURE OF INFORMATION--CRIMINAL/CIVIL
SANCTIONS (IRSAP 1052.224-71(a)) (JAN 1998)............Page 20
C.8 DISCLOSURE OF INFORMATION--OFFICIAL USE
ONLY (IRSAP 1052.224-71(b)) (DEC 1988).................Page 21
C.9 DISCLOSURE OF INFORMATION--INSPECTION
(IRSAP 1052.224-72) (DEC 1988)..........................Page 22
C.10 PUBLIC RELEASE OF INFORMATION............................Page 22
C.11 IRSAP 1052.239-9002 - YEAR 2000 WARRANTY -
COMMERCIAL SUPPLY PRODUCTS.............................Page 23
C.12 ADDENDUM 1.............................................. Page 24
C.12.1 FAR CLAUSES INCORPORATED BY REFERENCE............Page 24
C.12.2 TERM OF CONTRACT.................................Page 24
C.12.3 OPTION TO EXTEND THE TERM OF THE CONTRACT........Page 24
C.13 CONTRACT TERMS AND CONDITIONS REQUIRED TO
IMPLEMENT STATUTES OR EXECUTIVE ORDERS --
COMMERCIAL ITEMS, FAR 52.212-5 (AUG1996) ..............Page 25
SECTION C - CONTRACT TERMS AND CONDITIONS
C.1 CONTRACT TERMS AND CONDITIONS -- COMMERCIAL ITEMS FAR 52.212-4
(MAY 1999)(TAILORED)
As prescribed in 12.301(b)(3), insert the following clause:
Contract Terms and Conditions--Commercial Items (May 1999)
(a) Inspection/Acceptance. The Contractor shall only tender for
acceptance those items that conform to the requirements of this contract.
The Government reserves the right to inspect or test any supplies or
services that have been tendered for acceptance. The Government may require
repair or replacement of nonconforming supplies or reperformance of
nonconforming services at no increase in contract price. The Government
must exercise its post-acceptance rights--
(1) Within a reasonable time after the defect was
discovered or should have been discovered; and
(2) Before any substantial change occurs in the condition of
the item, unless the change is due to the defect in the item.
(b) Assignment. The Contractor or its assignee's rights to be paid
amounts due as a result of performance of this contract, may be assigned to
a bank, trust company, or other financing institution, including any
Federal lending agency in accordance with the Assignment of Claims Act (31
U.S.C. 3727).
(c) Changes. Changes in the terms and conditions of this contract may
be made only by written agreement of the parties.
(d) Disputes. This contract is subject to the Contract Disputes Act
of 1978, as amended (41 U.S.C. 601-613). Failure of the parties to this
contract to reach agreement on any request for equitable adjustment, claim,
appeal or action arising under or relating to this contract shall be a
dispute to be resolved in accordance with the clause at FAR 52.233-1,
Disputes, which is incorporated herein by reference. The Contractor shall
proceed diligently with performance of this contract, pending final
resolution of any dispute arising under the contract.
(e) Definitions. The clause at FAR 52.202-1, Definitions, is
incorporated herein by reference.
(f) Excusable delays. The Contractor shall be liable for default
unless nonperformance is caused by an occurrence beyond the reasonable
control of the Contractor and without its fault or negligence such as, acts
of God or the public enemy, acts of the Government in either its sovereign
or contractual capacity, fires, floods, epidemics, quarantine restrictions,
strikes, unusually severe weather, and delays of common carriers. The
Contractor shall notify the Contracting Officer in writing as soon as it is
reasonably possible after the commencement of any excusable delay, setting
forth the full particulars in connection therewith, shall remedy such
occurrence with all reasonable dispatch, and shall promptly give written
notice to the Contracting Officer of the cessation of such occurrence.
(g) Invoice. The Contractor shall submit an original invoice and three
copies (or electronic invoice, if authorized,) to the address designated in
the contract to receive invoices. An invoice must include--
(1) Name and address of the Contractor;
(2) Invoice date;
(3) Contract number, contract line item number and, if
applicable, the order number;
(4) Description, quantity, unit of measure, unit price and
extended price of the items delivered;
(5) Shipping number and date of shipment including the bill of
lading number and weight of shipment if shipped on Government bill of
lading;
(6) Terms of any prompt payment discount offered;
(7) Name and address of official to whom payment is to be
sent; and
(8) Name, title, and phone number of person to be notified in
event of defective invoice.
Invoices will be handled in accordance with the Prompt Payment Act (31
U.S.C. 3903) and Office of Management and Budget (OMB) Circular A-125,
Prompt Payment. Contractors are encouraged to assign an identification
number to each invoice.
(h) Patent indemnity. The Contractor shall indemnify the Government
and its officers, employees and agents against liability, including costs,
for actual or alleged direct or contributory infringement of, or inducement
to infringe, any United States or foreign patent, trademark or copyright,
arising out of the performance of this contract, provided the Contractor is
reasonably notified of such claims and proceedings.
(i) Payment. Payment shall be made for items accepted by the
Government that have been delivered to the delivery destinations set forth
in this contract. The Government will make payment in accordance with the
Prompt Payment Act (31 U.S.C. 3903) and Office of Management and Budget
(OMB) Circular A-125, Prompt Payment. If the Government makes payment by
Electronic Funds Transfer (EFT), see 52.212-5(b) for the appropriate EFT
clause. In connection with any discount offered for early payment, time
shall be computed from the date of the invoice. For the purpose of
computing the discount earned, payment shall be considered to have been
made on the date which appears on the payment check or the specified
payment date if an electronic funds transfer payment is made.
(j) Risk of loss. Unless the contract specifically provides
otherwise, risk of loss or damage to the supplies provided under this
contract shall remain with the Contractor until, and shall pass to the
Government upon:
(1) Delivery of the supplies to a carrier, if transportation is
f.o.b. origin; or
(2) Delivery of the supplies to the Government at the
destination specified in the contract, if transportation is f.o.b.
destination.
(k) Taxes. The contract price includes all applicable Federal, State,
and local taxes and duties.
(l) Termination for the Government's convenience. The Government
reserves the right to terminate this contract, or any part hereof, for its
sole convenience. In the event of such termination, the Contractor shall
immediately stop all work hereunder and shall immediately cause any and all
of its suppliers and subcontractors to cease work. Subject to the terms of
this contract, the Contractor shall be paid a percentage of the contract
price reflecting the percentage of the work performed prior to the notice
of termination, plus reasonable charges the Contractor can demonstrate to
the satisfaction of the Government using its standard record keeping
system, have resulted from the termination. The Contractor shall not be
required to comply with the cost accounting standards or contract cost
principles for this purpose. This paragraph does not give the Government
any right to audit the Contractor's records. The Contractor shall not be
paid for any work performed or costs incurred which reasonably could have
been avoided.
(m) Termination for cause. The Government may terminate this
contract, or any part hereof, for cause in the event of any default by the
Contractor, or if the Contractor fails to comply with any contract terms
and conditions, or fails to provide the Government, upon request, with
adequate assurances of future performance. In the event of termination for
cause, the Government shall not be liable to the Contractor for any amount
for supplies or services not accepted, and the Contractor shall be liable
to the Government for any and all rights and remedies provided by law. If
it is determined that the Government improperly terminated this contract
for default, such termination shall be deemed a termination for
convenience.
(n) Title. Unless specified elsewhere in this contract, title to
items furnished under this contract shall pass to the Government upon
acceptance, regardless of when or where the Government takes physical
possession.
(o) Warranty. The Contractor warrants and implies that the items
delivered hereunder are merchantable and fit for use for the particular
purpose described in this contract.
(p) Limitation of liability. Except as otherwise provided by an
express or implied warranty, the Contractor will not be liable to the
Government for consequential damages resulting from any defect or
deficiencies in accepted items.
(q) Other compliances. The Contractor shall comply with all
applicable Federal, State and local laws, executive orders, rules and
regulations applicable to its performance under this contract.
(r) Compliance with laws unique to Government contracts. The
Contractor agrees to comply with 31 U.S.C. 1352 relating to limitations on
the use of appropriated funds to influence certain Federal contracts; 18
U.S.C. 431 relating to officials not to benefit; 40 U.S.C. 327, et seq.,
Contract Work Hours and Safety Standards Act; 41 U.S.C. 51-58,
Anti-Kickback Act of 1986; 41 U.S.C. 265 and 10 U.S.C. 2409 relating to
whistleblower protections; 49 U.S.C. 40118, Fly American; and 41 U.S.C. 423
relating to procurement integrity.
(s) Order of precedence. Any inconsistencies in this solicitation or
contract shall be resolved by giving precedence in the following order:
(1) The schedule of supplies/services.
(2) The Assignments, Disputes, Payments, Invoice, Other
Compliances, and Compliance with Laws Unique to Government Contracts
paragraphs of this clause.
(3) The clause at 52.212-5.
(4) Addenda to this solicitation or contract, including any
license agreements for computer software.
(5) Solicitation provisions if this is a solicitation.
(6) Other paragraphs of this clause.
(7) The Standard Form 1449.
(8) Other documents, exhibits, and attachments.
(9) The specification.
(End of clause)
C.2 STATEMENT OF WORK - ADDENDUM TO FAR 52.212-4
C.2.1 INTRODUCTION
With passage of the Taxpayer Relief Act of 1997, the federal
government can accept tax payments via any commercially acceptable means.
The purpose of this contract is to implement a convenient
method for taxpayers to electronically pay income taxes owed, which will
also reduce governmental costs and improve cash flow to the federal
government.
C.2.2 GENERAL REQUIREMENTS
This is a "commercial item" acquisition, as that term is
defined in the Federal Acquisition Regulations (FAR) 2.101.
The Contractor shall provide an electronic credit card
authorization system and shall conduct a program that allows taxpayers to
make federal tax payments by means of an interactive voice response (IVR)
system and Internet application, respectively, using American Express Card,
Discover Card, and MasterCard cards. The Contractor shall enable payment
with up to a sixteen digit credit card number and four or six digit
expiration date. The Contractor shall ensure that certain edits are
performed to confirm the validity of the credit card number and expiration
date. The Contractor shall provide an electronic confirmation number as
acknowledgement of the completed payment to the taxpayer.
The Contractor may charge taxpayers a traditional "merchant
fee" for the convenience of having an electronic payment authorized and
made. On average, the convenience fee, which may include the Contractor's
credit card transaction fee, shall not exceed 3% of the tax payment. The
Contractor shall collect and disburse all such fees from the cardholder and
post all charges to the cardholder's account.
C.2.3 DUTIES AND RESPONSIBILITIES OF THE CONTRACTOR
The Contractor's duties and responsibilities during the term of
this contract are to:
1. Provide individual federal taxpayers access to the credit
card transaction processing networks employed by the Contractor, beginning
on January 12, 2001 and ending on January 23, 2002, at a rate equal to or
exceeding 95% availability (total number of customers accessing the
Contractor's credit card transaction network on the first attempt/total
number of attempts).
2. Provide a system that accepts tax year 2000, 1040 balance
due payments beginning January 12, 2001 through October 15, 2001.
3. Provide a system that accepts tax year 2000, 4868 balance
due payments beginning January 12, 2001 through April 16, 2001.
4. Provide a system that accepts tax year 2001, 1040ES payments
beginning March 1, 2001 through January 23, 2002.
5. Provide documentation to the Government (with "limited
rights" as defined in the "Rights in Data" clause in Section C.12.1),
before the program commences, of the transaction processing networks
employed in the program and the networks' interfaces. Networks and
interfaces shall be included within functional schematics/specifications
describing work processes and data flow from payment initiation, and credit
authorization/denial to payment confirmation or rejection. IVR scripts and
Internet screens shall be provided to document respective front-end
systems' functionality. Configuration control and management shall be
exercised and documented as system/functionality changes occur.
6. Provide documentation to the Government (with "limited
rights" as defined in the "Rights in Data" clause in Section C.12.1),
before the program commences, of capacity analysis; a disaster recovery
plan; a security and privacy plan; an application test plan and test
reports/certification.
7. Provide necessary systems and data accesses to the
Government's representative performing independent verification and
validation testing of system's readiness (including, but not limited to,
applications testing, stress testing, vulnerability testing and security
testing).
8. Provide an accuracy rate of 99% or higher for all
transmitted transaction data as provided by the taxpayer. This includes
accuracy of electronic payment data resulting from intermediate actions
taken by the Contractor necessary for coding, applying, and transmitting
payment data.
9. Notify taxpayers of the dollar amounts of all fees to be
charged to their credit card and obtain taxpayers' acknowledgements of
charges prior to initiating credit authorizations. The Government shall be
notified of the method of obtaining taxpayers' acknowledgement before the
program commences.
10. Provide taxpayers with confirmation of payment transactions
electronically through the payment means (IVR or Internet) used to complete
the payment.
11. Provide taxpayers, upon request, with IRS general
information in an easily accessible, readable and print-ready form by way
of the Contractor's Web site.
12. Provide incident reports of any material network outages,
work stoppages, or other payment processing problems. This includes but is
not limited to systemic problems related to authorizing credit on-line and
human errors that result in duplicate payments or non-payment. The
Contractor shall inform the Contracting Officer's Technical Representative
(COTR) of all incidents within 24 hours of occurrence or awareness, and
shall provide an incident report within 5 business days. Incident reports
shall include a description of the incident, the cause, number of taxpayers
impacted, duration of the incident, and actions taken by the Contractor to
remedy the incident. The Contractor shall comply with the EFTPS Credit Card
Bulk Filer Requirements and provide all reports (EDI .X.12) as stated
therein. No additional "bulk filer" reports are required.
13. Make reasonable efforts to make any necessary modifications
to software, systems, and services in accordance with its commercial
business practices to conform to the provisions of IRS regulations
promulgated under U.S.C. 6311(d)(1). This contract is considered modified
automatically to incorporate by reference the current provisions of such
IRS regulations during the life of this contract.
14. Retain credit card authorization logs for 72 months from
the date of each transaction. The information in such logs shall include,
transaction type, date and time, card member account number and expiration
date, amount of transaction, and approval code. This requirement shall
survive the life of this contract, and the Government shall have the right
to inspect such logs upon reasonable notice to the Contractor.
15. Convert credit card transactions to ACH debit
authorizations and settle funds to the Government's designated Treasury
Financial Agent (TFA). Any adjustments necessary because of failure to
correctly verify and validate credit information shall be the
responsibility of the Contractor. The TFA shall initiate one bulk daily
debit to the account established for this purpose.
16. Settle all credit card payment transactions in accordance
with the following standard timeframes for settlement for each credit card
as stated in the applicable merchant agreement: MasterCard funds will be
deposited on the 2nd business day after the date of authorization of the
transaction. American Express and DiscoverCard funds shall be deposited on
the 3rd business day after the date of authorization of the transaction.
Any funds held overnight from one business day to the next business day
shall be subject to U.S. Treasury penalties and interest. Provide settled
credit card payments where the authorization date is less than 11 days
prior to the settlement date. American Express and DiscoverCard payments
shall be forwarded to the TFA one business day prior to settlement.
17. Forward settlement files to the TFA one business day prior to
funds settlement.
18. Provide only guaranteed payments to the Government for taxes
owed.
19. Maintain the confidentiality of any information relating to
credit card transactions with absolutely no disclosure or use except to the
extent authorized by written procedures promulgated by the IRS pursuant to
25 U.S.C. 6311(e)(3).
20. Maintain the confidentiality of any information relating to
Federal/State credit card payments completed in a single transaction. This
includes absolutely no disclosure or use of information collected during
this transaction for any purpose other than processing the transaction to
the U.S. Treasury or appropriate State. Information collected during this
transaction shall not be disclosed or used for any purpose prohibited by
Section 6311 of the Internal Revenue Code.
21. Pay all credit card discount fees and other transaction fees.
22. Provide a merchant descriptor on the taxpayer's credit card
statement indicating the tax payment amount as a unique line item entitled
"U S Treasury Tax Payment."
23. Provide a merchant descriptor on the taxpayer's credit card
statement indicating the convenience fee amount as a unique line item.
24. Provide Marketing Plan and deliverables that support and
facilitate public awareness of IRS e-file and electronic payments. This
shall include (1) IRS e-file key messages and/or logo; (2) measures for
success; (3) method for tracking the number of unique taxpayers that pay
electronically as a result of deliverables, and (4) marketing reports (as
described in Section C.2.5.2). Also, refer to C.10 regarding public release
of information.
C.2.4 DUTIES AND RESPONSIBILITIES OF THE GOVERNMENT
The Government's, that is, the Internal Revenue Service's, duties and
responsibilities during the term of this contract are to:
1. Provide electronic record specifications necessary for funds
settlement and posting of tax data related to the credit card payments.
2. Provide no consideration to the Contractor for credit card
related transactions.
3. Designate Treasury Financial Agent(s) to act on the
Government's behalf for settlement of funds in payment of individual taxes
owed. The TFA(s) will have no authority to access accounts, use
information, or place requirements on any person or organization to use the
taxpayer's credit card to collect any amount beyond what has been
authorized by the taxpayer.
4. Provide an electronic copy of General Information for
Taxpayers which is required to be made available to taxpayers via electronic
means.
5. Provide required reporting formats.
6. Process chargeback actions in accordance with its written
procedures. This shall include reimbursing the Contractor for unauthorized
charges that are substantiated by the cardholder and approved by the
Contractor's duly authorized management representative. The Contractor must
have completed and delivered the appropriate IRS chargeback form and
supporting documentation to the IRS as described in IRS chargeback
procedures. Such chargeback requests shall be processed based on the
Contractor's determination of the appropriateness of this action as
signified by its authorized claimant's signature.
7. Provide a hyperlink from the IRS Digital Daily Web Site to
the Contractor's Web Site.
C.2.5 DELIVERABLES
The Contractor shall submit the following deliverables in
accordance with the schedule outlined in Section C.2.7.
C.2.5.1 FINDINGS REPORT
The Contractor shall provide an initial and supplemental
findings report. A copy of the report shall be provided to the IRS
Contracting Officer (CO)(one copy), the Contracting Officer's Technical
Representative (COTR) (one copy), and the IRS Program Manager (three
copies). The report shall describe:
1. the program features,
2. the conduct and findings of the program as they relate to the
Contractor's and any subcontractor's performance (including a summary of all
payment transactions, any problems, changes made during the filing season and
lessons learned)
3. recommendations for improvement including changes to the
Contractor's and/or IRS processes, and
4. practitioner and/or client feedback including customer
satisfaction survey results.
The initial report will include activity occurring between January and
April. The supplemental report will include a summary of the initial
report's findings and activity from May through October.
C.2.5.2 MARKETING REPORTS
The Contractor shall provide an initial and supplemental
marketing report in conjunction with the Findings Reports described above.
The reports shall contain a narrative description of (1) accomplishments;
(2) the number of unique visits to and from the Contractor's Web site by
way of a hyperlink established with the IRS; (3) measurement of success
(for example, number of unique taxpayers that electronically pay as a
result of the marketing campaign); and (4) difficulties/ barriers. The
initial report shall include activity occurring between January and April
2001. The supplemental report shall include a summary of the initial report
findings and marketing activity from May through October 2001. These
reports are subject to inspection, verification and approval by the IRS.
C.2.5.3 MONTHLY DEVELOPMENT STATUS REPORTS
The Contractor shall provide monthly status reports on the 10th
day of each month through the implementation date of the program. The
report shall cover the overall progress of the program's development.
Copies of the report shall be provided to the IRS Contracting Officer (CO)
(one copy) and the Contracting Officer's Technical Representative (COTR)
(one copy) and the IRS Program Manager (one copy). The report shall contain
the following information:
1. date of report,
2. project manager name,
3. project manager telephone number, fax number and e-mail
address,
4. a brief description of the work accomplished, emphasizing the
progress made since the last reporting period,
5. a description of any unresolved and/or anticipated problems,
if any (include schedule impacts),
6. an estimate of the percent of work accomplished to date; and
a statement on the status of the program as it relates to the work
breakdown schedule, either confirming that the task is on schedule or
explaining the nature and extent of the pending delay.
C.2.5.4 DAILY AND MONTHLY PRODUCTION REPORTS
The Contractor shall provide daily and cumulative monthly
transaction reports. The reports shall cover the post-implementation
progress of the program. Daily reports shall be provided no later than 9:00
am Eastern Time and should include all prior day transactions and
cumulative volumes. Monthly reports shall be provided by the 10th day of
each month and include all prior month transactions and reconcile any
adjustments made during that month. Copies of the reports shall be provided
to the IRS Contracting Officer (CO)(one copy), the Contracting Officer's
Technical Representative (COTR) (one copy) and the Program Manager (one
copy) or his/her designee. The report shall contain the following
information:
1. date of report,
2. period covered,
3. total number of transactions,
4. dollar amount of transactions,
5. total number of successful attempts,
6. dollar amount of successful attempts,
7. average payment amount,
8. total number of failed attempts,
9. dollar amount of failed attempts,
10. reasons for failed attempts, and
11. customer service activity.
Aggregate and cumulative payment volumes as well as counts by payment type
shall be provided daily. A report of the number of rejected entities shall
also be provided daily.
12. report of 4868 payment entities (primary and secondary) for
those taxpayers who indicate a supplemental filing (Form 709) is needed.
C.2.5.5 CHARGEBACK REPORTS
The Contractor shall provide weekly reports of all chargeback
actions identifying the transaction date, dollar amount, action request
date, and reason for action. These actions shall be in conformance with
chargeback procedures issued by the IRS and meet the definition of
chargebacks provided by the Contractor and agreed to by the IRS. These
reports shall be delivered to the designated IRS point of contact by close
of business each Friday.
C.2.6 SUCCESS DETERMINATION
The Contractor shall provide a satisfaction survey for a select
number of taxpayers participating in the program. Non-users may also be
surveyed to determine reasons for non-use and ways to attract additional
users. The Contractor will provide this data in their Findings Report (see
C.2.5.1).
Based on the results of the Year 2001 program and/or findings
obtained in the Contractor's survey(s), any survey conducted by the
Government and the Contractor's Findings Report, the IRS will (1) determine
whether it will exercise an option year to extend the term of the Contract
(see C.12.3) and have the Contractor conduct the program for the subsequent
tax filing season and (2) negotiate any changes for this option year.
C.2.7 SCHEDULE OF PERFORMANCE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
RESPONSIBLE
PARTY EVENT DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
IRS Provide Report Formats March 24, 2000
- -----------------------------------------------------------------------------------------------
Contractor Provide draft project schedule (including requirements, April 19, 2000
development, testing and implementation phases)ect
schedule (including requirements, development, testing
and implementation phases)
- -----------------------------------------------------------------------------------------------
IRS Provide comments on draft Project Schedule May 2, 2000
- -----------------------------------------------------------------------------------------------
Contractor Provide baselined project schedule June 5, 2000
- -----------------------------------------------------------------------------------------------
Contractor Provide marketing plan July 31, 2000
- -----------------------------------------------------------------------------------------------
IRS Provide comments on marketing plan August 24, 2000
- -----------------------------------------------------------------------------------------------
IRS Provide General Information for Taxpayers September 29, 2000
- -----------------------------------------------------------------------------------------------
Contractor Obtain signed contracts with other participating credit September, 29, 2000
card companies, if applicable
- -----------------------------------------------------------------------------------------------
IRS Provide revised chargeback procedures October 23, 2000
- -----------------------------------------------------------------------------------------------
Contractor Begin internal feature testing August 1, 2000
- -----------------------------------------------------------------------------------------------
Contractor Obtain bulk filer certification November 15, 2000
- -----------------------------------------------------------------------------------------------
Contractor Complete internal feature testing December 1, 2000
- -----------------------------------------------------------------------------------------------
Contractor Complete full circle integrated test with IRS/TFA December 15, 2000
- -----------------------------------------------------------------------------------------------
Contractor Begin Program (1040 and 4868 payment option January 12, 2001
- -----------------------------------------------------------------------------------------------
IRS Provide hyperlink from the Digital Daily January 12, 2001
Contractor's Web page (which includes 2001 updates)
- -----------------------------------------------------------------------------------------------
Contractor Begin 1040ES payment options March 1, 2001
- -----------------------------------------------------------------------------------------------
Contractor End 4868 payment option April 16, 2001
- -----------------------------------------------------------------------------------------------
Contractor Deliver Initial Findings Report June 30, 2001
- -----------------------------------------------------------------------------------------------
IRS Exercise Option Year Decision July 1, 2001
- -----------------------------------------------------------------------------------------------
Contractor End 1040 payment option October 15, 2001
- -----------------------------------------------------------------------------------------------
Contractor Deliver Supplemental Findings Report November 16, 2001
- -----------------------------------------------------------------------------------------------
Contractor End 1040 ES payment option January 23, 2002
- -----------------------------------------------------------------------------------------------
</TABLE>
C.2.8 PERFORMANCE REQUIREMENTS
1. The required data fields for each tax payment include: (1)
The primary taxpayer's identification number [(first social security number
as shown on the tax return for the year for which the payment applies) and
secondary SSN if the tax type is 4868 and the taxpayer indicates a
supplemental filing is needed]; (2) The first four characters of the last
name of the primary taxpayer; (3) The payment type; (4) The tax period (six
character date field); (5) The payment amount; (6) The payment or credit
authorization date; (7) Daytime telephone number; (8) Unique identification
number (such as confirmation number); and (9) Bank account number, if
applicable.
3. The Contractor shall comply with the Electronic Federal Tax
Payment System (EFTPS) Credit Card Bulk filer Requirements dated May 17,
1999 and Payment by Credit card and Debit Card Temporary Regulations,
Section 6311 of the Internal Revenue Code (IRC) and any subsequent updates
and revisions.
C.3 AUTHORITY - CONTRACTING OFFICER, CONTRACTING OFFICER'S
TECHNICAL REPRESENTATIVE AND CONTRACTOR'S PROJECT MANAGER
C.3.1 ADMINISTRATIVE CONTRACTING OFFICER
The IRS Contracting Officer designated for administering this
contract is:
Carol Ransom
VOICE: (202) 283-1163
FAX: (202) 283-1099
email: [email protected]
The Contracting Officer, in accordance with Subpart 1.6 of the
Federal Acquisition Regulation, is the only person authorized to make or
approve any changes in any of the requirements of this contract, and
notwithstanding any clauses contained elsewhere in this contract, the said
authority remains solely with the Contracting Officer. In the event the
Contractor makes any changes at the direction of any person other than the
Contracting Officer, the change will be considered to have been made
without authority and not binding on the Government.
C.3.2 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE
The Contracting Officer's Technical Representative (COTR)
designated for this contract is:
Linda Rickard
VOICE: (202) 283-6852
FAX: (202) 283-4786
email: [email protected]
The COTR will represent the Contracting Officer in the
administration of technical details within the scope of this contract. The
COTR is also responsible for the final inspection and acceptance of all
reports, and such other responsibilities as may be specified in the
contract. The COTR is not otherwise authorized to make any representations
or commitments of any kind on behalf of the Contracting Officer or the
Government.
The COTR does not have authority to alter the Contractor's
obligations or to change the contract specifications, price, terms or
conditions. If, as a result of technical discussions, it is desirable to
modify contract obligations or the statement of work, changes will be
issued in writing and signed by the Contracting Officer.
The COTR assignment for this contract may be changed at any
time by the Government without prior notice to the Contractor. The
Contractor will be notified of the change.
C.3.3 PROJECT MANAGER
The Contractor's designated Project Manager for this contract
is:
Steven R. Johnson
VOICE: 925-855-5040
FAX: 925-820-0571
Email: [email protected]
The Contractor shall provide a Project Manager for this
contract who shall have the authority to make any no-cost contract,
technical, hiring and dismissal decisions, or special arrangements
regarding this contract. The Project Manager shall be responsible for the
overall management and coordination of this contract and shall act as the
central point of contact with the Government. The Project Manager shall
have full authority to act for the Contractor in the performance of the
required services. The Project Manager, or a designated representative,
shall meet with the COTR to discuss problem areas as they occur. The
Project Manager, or designated representative, shall respond within four
work hours after notification of the existence of a problem. The Project
Manager shall be able to fluently read, write, and speak the English
language.
C.4 CONTRACT CORRESPONDENCE
Notwithstanding the Contractor's responsibility for total
management during the performance of this contract, the administration of
the contract will require maximum coordination between the Government and
the Contractor. To promote timely and effective administration, all
correspondence pertaining to contractual or administrative matters under
the contract shall be addressed to the assigned Administrative Contracting
Officer.
C.5 DISCLOSURE OF INFORMATION-SAFEGUARDS (IRSAP 1052.224-
9000a) (JANUARY 1998)
In performance of this contract, the contractor agrees to
comply and assume responsibility for compliance by his/her employees with
the following requirements:
(1) All work shall be performed under the supervision of the
contractor or the contractor's responsible employees.
(2) Any return or return information made available shall be
used only for the purpose of carrying out the provisions of this
contract. Information contained in such material shall be treated as
confidential and shall not be divulged or made known in any manner to
any person except as may be necessary in the performance of the
contract. Inspection by or disclosure to anyone other than an officer
or employee of the contractor shall require prior written approval of
the Internal Revenue Service. Requests to make such inspections or
disclosures should be addressed to the IRS Contracting Officer
(3) Should a person (contractor or subcontractor) or one of
his/her employees make any unauthorized inspection(s) or
disclosure(s) of confidential tax information, the terms of the
Default clause (FAR 52.2498), incorporated herein by reference, may
be invoked, and the person (contractor or subcontractor) will be
considered to be in breach of this contract.
C.6 DISCLOSURE OF "OFFICIAL USE ONLY " INFORMATION
SAFEGUARDS (IRSAP 1052.224-9000d) (DECEMBER 1988)
Any Treasury Department Information made available or to which access is
provided, and which is marked or should be marked "Official Use Only",
shall be used only for the purpose of carrying out the provisions of this
contract and shall not be divulged or made known in any manner to any
person except as may be necessary in the performance of the contract.
Disclosure to anyone other than an officer or employee of the contractor or
subcontractor at any tier shall require prior written approval of the IRS.
Requests to make such disclosure should be addressed to the IRS Contracting
Officer.
C.7 DISCLOSURE OF INFORMATION--CRIMINAL/CIVIL SANCTIONS
(IRSAP 1052.224-9001a) (JANUARY 1998)
(1) Each officer or employee of any person (contractor or
subcontractor) at any tier to whom returns or return information is
or may be disclosed shall be notified in writing by the person
(contractor or subcontractor) that returns or return information
disclosed to such officer or employee can be used only for a purpose
and to the extent authorized herein, and that further disclosure of
any such returns or return information for a purpose or to an extent
unauthorized herein constitutes a felony punishable upon conviction
by a fine of as much as $5,000 or imprisonment for as long as five
years, or both, together with the costs of prosecution. Such person
(contractor or subcontractor) shall also notify each such officer and
employee that any such unauthorized future disclosure of returns or
return information may also result in an award of civil damages
against the officer or employee in an amount not less than $1,000
with respect to each instance of unauthorized disclosure plus in the
case of willful disclosure or a disclosure which is the result of
gross negligence, punitive damages, plus the cost of the action.
These penalties are prescribed by IRC Sections 7213 and 7431 and set
forth at 26 CFR 301.6103(n).
(2) Each officer or employee of any person (contractor or
subcontractor) to whom returns or return information is or may be
disclosed shall be notified in writing by such person that any return
or return information made available in any format shall be used only
for the purpose of carrying out the provisions of this contract and
that inspection of any such returns or return information for a
purpose or to an extent not authorized herein constitutes a criminal
misdemeanor punishable upon conviction by a fine of as much as
$1,000.00 or imprisonment for as long as 1 year, or both, together
with the costs of prosecution. Such person (contractor or
subcontractor) shall also notify each such officer and employee that
any such unauthorized inspection of returns or return information may
also result in an award of civil damages against the officer or
employee in an amount equal to the sum of the greater of $1,000.00
for each act of unauthorized inspection with respect to which such
defendant is found liable or the sum of the actual damages sustained
by the plaintiff as a result of such unauthorized inspection plus in
the case of a willful inspection or an inspection which is the result
of gross negligence, punitive damages, plus the costs of the action.
The penalties are prescribed by IRC Sections 7213A and 7431.
(3) Additionally, it is incumbent upon the contractor to inform
its officers and employees of the penalties for improper disclosure
imposed by the Privacy Act of 1974, 5 U.S.C. 552a. Specifically, 5
U.S.C. 552a(I)(1), which is made applicable to contractors by 5
U.S.C. 552a(m)(1), provides that any officer or employee of a
contractor, who by virtue of his/her employment or official position,
has possession of or access to agency records which contain
individually identifiable information, the disclosure of which is
prohibited by the Privacy Act or regulations established thereunder,
and who knowing that disclosure of the specific material is so
prohibited, willfully discloses the material in any manner to any
person or agency not entitled to receive it, shall be guilty of a
misdemeanor and fined not more than $5,000.
C.8 DISCLOSURE OF INFORMATION-OFFICIAL USE ONLY (IRSAP
1052.224-9001b) (DECEMBER 1988)
Each officer or employee of the contractor or subcontractor at
any tier to whom "Official Use Only" information may be made available or
disclosed shall be notified in writing by the contractor that "Official Use
Only" information disclosed to such officer or employee can be used only
for a purpose and to the extent authorized herein, and that further
disclosure of any such "Official Use Only" information, by any means, for a
purpose or to an extent unauthorized herein, may subject the offender to
criminal sanctions imposed by 18 U.S.C. Sections 641and 3571. Section 641
of 18 U.S.C. provides, in pertinent part, that whoever knowingly converts
to his use or the use of another, or without authority sells, conveys, or
disposes of any record of the United States or whoever receives the same
with the intent to convert it to his use or gain, knowing it to have been
converted, shall be quilt y of a crime punishable by a fine or imprisoned
up to ten years or both.
C.9 DISCLOSURE OF INFORMATION-INSPECTION (IRSAP 1052.224-9002)
(DECEMBER 1988)
The Internal Revenue Service shall have the right to send its
officers and employees into the offices and plants of the contractor for
inspection of the facilities and operations provided for the performance of
any work under this contract. On the basis of such inspection, the
Contracting Officer may require specific measures in cases where the
contractor is found to be noncompliant with contract safeguards.
C.10 PUBLIC RELEASE OF INFORMATION
1. The Contractor shall obtain the written permission of the
IRS Program Manager or COTR before releasing or using any information
regarding work on the contract. Information including, but not limited to,
advertisements, unclassified speeches, articles, press releases,
presentations, displays or demonstrations developed or proposed for release
to the public must be submitted in their entirety to the Contracting
Officer. The Contractor shall request, in writing, permission to release
information describing the scope of the information to be released and the
purpose for its release. This clause does not affect the Contractor's
rights with regard to patents, which are governed by the patent clauses of
this contract.
2. In the event of a termination for the convenience of the
Government, the Government shall be responsible for press releases, jointly
prepared with the Contractor, declaring the termination of the program by
the Government. The Government shall consider the contractor's reasonable
request for the news media to receive such releases. The Government shall
also consider the contractor's reasonable request that it not issue a
public release or public announcement of the termination of the contract
for the Government's convenience.
C.11 IRSAP 1052.239-9002-YEAR 2000 WARRANTY-COMMERCIAL
SUPPLY PRODUCTS (JULY 1997)
1. The contractor warrants that each hardware, software, and
firmware product provided under this contract and described in (2) and (3)
below shall be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into, and between
the twentieth and twenty-first centuries, including leap year calculations,
when used in accordance with the product documentation provided by the
contractor, provided that all listed or unlisted products (e.g. hardware,
software, firmware) used in combination with such listed product properly
exchange date data with it. If the contract requires that specific listed
products must perform as a system in accordance with the foregoing
warranty, then that warranty shall apply to those listed products as a
system. The duration of this warranty and the remedies available to the
Government for breach of this warranty shall be as defined in, and subject
to, the terms and limitations of the contractor's standard commercial
warranty or warranties contained in this contract, provided that
notwithstanding any provision to the contrary in such commercial warranty
or warranties, the remedies available to the Government under this warranty
shall include repair or replacement of any listed product whose
non-compliance is discovered and made known to the contractor in writing
within the time period consistent with this contract's Inspection clause.
Nothing in this warranty shall be construed to limit any rights or remedies
the Government may otherwise have under this contract with respect to
defects other than Year 2000 performance.
C.12 ADDENDUM 1
C.12.1 FAR CLAUSES INCORPORATED BY REFERENCE
52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
As prescribed in 52.107(b), insert the following clause:
Clauses Incorporated By Reference (Feb 1998)
This contract incorporates one or more clauses by reference,
with the same force and effect as if they were given in full text. Upon
request, the Contracting Officer will make their full text available. Also,
the full text of a clause may be accessed electronically at this/these
address(es): http://www.arnet.gov
FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES
INCORPORATED BY REFERENCE
NUMBER TITLE DATE
52.203-3 GRATUITIES APR 1984
52.209-6 PROTECTING THE JUL 1995
GOVERNMENT'S INTEREST
WHEN SUBCONTRACTING WITH
CONTRACTORS DEBARRED,
SUSPENDED, OR PROPOSED FOR
DEBARMENT
52.227-14 RIGHTS IN DATA - GENERAL JUN 1987
(ALT III & IV)
C.12.2 TERM OF CONTRACT
The term of this contract is from the date of award through the end
of month twelve with an option to extend for an additional twelve months
period.
C.12.3 Option to Extend the Term of the Contract 52.217-9 (Nov 1999)
(a) he Government may extend the term of this contract by written
notice to the Contractor within 15 calendar days, provided that the
Government gives the Contractor a preliminary written notice of its intent
to extend at least 60 days before the contract expires. The preliminary
notice does not commit the Government to an extension.
(b) If the Government exercises this option, the extended contract
shall be considered to include this option provision.
(c) The total duration of this contract, including the exercise of
any options under this clause, shall not exceed 24 months.
C.13 CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT
STATUTES OR EXECUTIVE ORDERS -- COMMERCIAL ITEMS, FAR
52.212-5 (MAY 1999)
(a) The Contractor agrees to comply with the following FAR clauses,
which are incorporated in this contract by reference, to implement
provisions of law or executive orders applicable to acquisitions of
commercial items:
(1) 52.222-3, Convict Labor (E.O. 11755); and
(2) 52.233-3, Protest after Award (31 U.S.C 3553).
(b) The Contractor agrees to comply with the FAR clauses in this
paragraph (b) which the contracting officer has indicated as being
incorporated in this contract by reference to implement provisions of law
or executive orders applicable to acquisitions of commercial items or
components:
_X_ (1) 52.203-6, Restrictions on Subcontractor Sales to the
Government, with Alternate I (41 U.S.C. 253g and 10 U.S.C.
2402).
___ (2) 52.219-3, Notice of Total HUBZone Small Business Set-Aside
(Jan 1999).
___ (3) 52.219-4, Notice of Price Evaluation Preference for HUBZone
Small Business Concerns (Jan 1999) (if the offeror elects
to waive the preference, it shall so indicate in its
offer).
___ (4)(i) 52.219-5, Very Small Business Set-Aside (Pub. L. 103-403,
section 304, Small Business Reauthorization and Amendments
Act of 1994). ___ (ii) Alternate I to 52.219-5. ___ (iii)
Alternate II to 52.219-5.
_X_ (5) 52.219-8, Utilization of Small Business Concerns (15 U.S.C.
637 (d)(2) and (3)).
___ (6) 52.219-9, Small Business Subcontracting Plan (15 U.S.C.
637(d)(4)).
___ (7) 52.219-14, Limitations on Subcontracting (15 U.S.C.
637(a)(14)).
___ (8)(i) 52.219-23, Notice of Price Evaluation Adjustment for Small
Disadvantaged Business Concerns (Pub. L. 103-355, section
7102, and 10 U.S.C. 2323) (if the offeror elects to waive
the adjustment, it shall so indicate in its offer). (ii)___
Alternate I of 52.219-23.
___ (9) 52.219-25, Small Disadvantaged Business Participation
Program-- Disadvantaged Status and Reporting (Pub. L.
103-355, section 7102, and 10 U.S.C. 2323).
___ (10) 52.219-26, Small Disadvantaged Business Participation
Program-- Incentive Subcontracting (Pub. L. 103-355,
section 7102, and 10 U.S.C. 2323).
_X_ (11) 52.222-21, Prohibition of Segregated Facilities (Feb 1999)
_X_ (12) 52.222-26, Equal Opportunity (E.O. 11246).
_X_ (13) 52.222-35, Affirmative Action for Disabled Veterans and
Veterans of the Vietnam Era (38 U.S.C. 4212).
_X_ (14) 52.222-36, Affirmative Action for Workers with Disabilities
(29 U.S.C. 793).
_X_ (15) 52.222-37, Employment Reports on Disabled Veterans and
Veterans of the Vietnam Era (38 U.S.C. 4212).
___ (16) 52.225-3, Buy American Act--Supplies (41 U.S.C. 10).
___ (17) 52.225-9, Buy American Act--Trade Agreements Act--Balance
of Payments Program (41 U.S.C. 10, 19 U.S.C. 2501-2582).
___ (18) [Reserved]
___ (19) 52.225-18, European Union Sanction for End Products (E.O.
12849).
___ (20) 52.225-19, European Union Sanction for Services (E.O. 12849).
___ (21)(i) 52.225-21, Buy American Act--North American Free Trade
Agreement Implementation Act--Balance of Payments Program
(41 U.S.C. 10, Pub. L. 103-187). ___ (ii) Alternate I of
52.225-21.
___ (22) 52.232-33, Payment by Electronic Funds Transfer--Central
Contractor Registration (31 U.S.C. 3332).
___ (23) 52.232-34, Payment by Electronic Funds Transfer--Other than
Central Contractor Registration (31 U.S.C. 3332).
___ (24) 52.232-36, Payment by Third Party (31 U.S.C. 3332).
_X_ (25) 52.239-1, Privacy or Security Safeguards (5 U.S.C. 552a).
___ (26) 52.247-64, Preference for Privately Owned U.S.-Flag
Commercial Vessels (46 U.S.C. 1241).
(c) The Contractor agrees to comply with the FAR clauses in this
paragraph (c), applicable to commercial services, which the Contracting
Officer has indicated as being incorporated in this contract by reference
to implement provisions of law or executive orders applicable to
acquisitions of commercial items or components:
[Contracting Officer check as appropriate.]
___ (1) 52.222-41, Service Contract Act of 1965, As Amended (41
U.S.C. 351, et seq.).
___ (2) 52.222-42, Statement of Equivalent Rates for Federal Hires
(29 U.S.C. 206 and 41 U.S.C. 351, et seq.).
___ (3) 52.222-43, Fair Labor Standards Act and Service Contract
Act--Price Adjustment (Multiple Year and Option Contracts)
(29 U.S.C. 206 and 41 U.S.C. 351, et seq.).
___ (4) 52.222-44, Fair Labor Standards Act and Service Contract
Act--Price Adjustment (29 U.S.C. 206 and 41 U.S.C. 351, et
seq.).
___ (5) 52.222-47, SCA Minimum Wages and Fringe Benefits Applicable
to Successor Contract Pursuant to Predecessor Contractor
Collective Bargaining Agreement (CBA) (41 U.S.C. 351, et
seq.).
(d) Comptroller General Examination of Record. The Contractor agrees
to comply with the provisions of this paragraph (d) if this contract was
awarded using other than sealed bid, is in excess of the simplified
acquisition threshold, and does not contain the clause at 52.215-2, Audit
and Records--Negotiation.
(1) The Comptroller General of the United States, or an
authorized representative of the Comptroller General, shall have
access to and right to examine any of the Contractor's directly
pertinent records involving transactions related to this contract.
(2) The Contractor shall make available at its offices at all
reasonable times the records, materials, and other evidence for
examination, audit, or reproduction, until 3 years after final
payment under this contract or for any shorter period specified in
FAR Subpart 4.7, Contractor Records Retention, of the other clauses
of this contract. If this contract is completely or partially
terminated, the records relating to the work terminated shall be made
available for 3 years after any resulting final termination
settlement. Records relating to appeals under the disputes clause or
to litigation or the settlement of claims arising under or relating
to this contract shall be made available until such appeals,
litigation, or claims are finally resolved.
(3) As used in this clause, records include books, documents,
accounting procedures and practices, and other data, regardless of
type and regardless of form. This does not require the Contractor to
create or maintain any record that the Contractor does not maintain
in the ordinary course of business or pursuant to a provision of law.
(e) Notwithstanding the requirements of the clauses in paragraphs
(a), (b), (c) or (d) of this clause, the Contractor is not required to
include any FAR clause, other than those listed below (and as may be
required by an addenda to this paragraph to establish the reasonableness of
prices under Part 15), in a subcontract for commercial items or commercial
components--
(1) 52.222-26, Equal Opportunity (E.O. 11246);
(2) 52.222-35, Affirmative Action for Disabled Veterans
and Veterans of the Vietnam Era (38 U.S.C. 4212);
(3) 52.222-36, Affirmative Action for Workers with
Disabilities (29 U.S.C. 793); and
(4) 52.247-64, Preference for Privately-Owned U.S. Flag
Commercial Vessels (46 U.S.C. 1241) (flow down not required for
subcontracts awarded beginning May 1, 1996).
(End of clause)
OFFICIAL PAYMENTS CORPORATION
1999 STOCK INCENTIVE PLAN
(AS AMENDED EFFECTIVE AS OF APRIL 25, 2000)
SECTION 1. PURPOSE.
The purpose of the Official Payments Corporation 1999 Stock
Incentive Plan (the "Plan") is to enable Official Payments Corporation (the
"Company") to attract, retain and reward certain persons providing valuable
service to the Company to strengthen the existing mutuality of interests
between such individuals and the Company's stockholders by offering to such
eligible persons an equity interest in the Company through the grant of
options ("Options" or "Stock Options") to purchase shares of the Company's
common stock, par value $.01 per share ("Common Stock") at a specified
price per share ("Exercise Price").
SECTION 2. TYPES OF OPTIONS.
2.1 The Plan provides for the grant of Incentive Stock Options and
Non-Qualified Stock Options. An "Incentive Stock Option" is a Stock Option
that is intended to qualify as an "incentive stock option" under Section
422 of the Internal Revenue Code of 1986 (the "Code"). A "Non-Qualified
Stock Option" is a Stock Option that that does not qualify as an "incentive
stock option" under Section 422 of the Code.
2.2 Incentive Stock Options and Non-Qualified Stock Options may be
granted to key employees of the Company. Outside Directors (as defined
below) and Consultants (as defined below) may only be granted Non-Qualified
Stock Options under this Plan. For purposes of this Plan, the term
"Outside Director" shall mean a director of the Company who is not an
officer or employee of the Company, Imperial Bank or U.S. Audiotex, Inc.,
or any affiliated companies thereof; provided, however, that George L.
Graziadio, Jr. shall be deemed to be an Outside Director. For purposes of
this Plan, the term "Consultant" shall mean a consultant or other
independent advisor to the Company.
SECTION 3. ADMINISTRATION.
3.1 The Plan shall be administered by the Company's Board of
Directors ("Board" or the "Board of Directors") and a committee composed of
two or more Outside Directors of the Board as the Board shall designate
(the "Committee"); provided, however, the Plan shall be administered by the
Board of Directors with respect to all Stock Options granted to Outside
Directors. The members of the Committee shall serve at the pleasure of the
Board.
3.2 For purposes of this Plan, the term "Granting Authority" shall
mean: (i) the Board of Directors, with respect to Stock Options granted to
Outside Directors and (ii) the Committee, with respect to Stock Options
granted to key employees and Consultants. The Granting Authority shall
have the following authority with respect to Options granted under this
Plan: to grant Stock Options to persons eligible to receive them under the
Plan; to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall deem advisable; to interpret the
terms and provisions of the Plan and any Options granted by it under the
Plan; and to otherwise supervise the administration of the Plan. In
particular, and without limiting its authority and powers, the Granting
Authority shall have full authority and discretion to make the following
determinations with respect to the Options granted under this Plan:
(a) to determine whether and to what extent Incentive Stock
Options and/or Non-Qualified Stock Options will be granted to an
eligible key employee hereunder;
(b) to select the key employees, Consultants and Outside
Directors to whom Options will be granted;
(c) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder (subject to the limitations
contained in the Plan);
(d) to determine the Exercise Price, vesting schedule and all
other terms and conditions of any Stock Option granted hereunder;
(e) to determine the "Fair Market Value" of a share of Common
Stock on a given date. For purposes of this Plan and all Options
granted hereunder, the term "Fair Market Value" shall mean: (i) the
average of the highest and lowest reported sales prices 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) as reported in the
principal consolidated reporting system with respect to securities
listed or admitted to trading on the principal United States securities
exchange on which the shares of Common Stock are listed or admitted to
trading; or (ii) if the Common Stock is not listed or admitted to
trading on any such exchange, the average of the bid and offered prices
quoted with respect to a share of Common Stock on such date on the
National Association of Securities Dealers Automated Quotations System,
or, if no such quotation is provided, on another similar system,
selected by the Granting Authority, then in use; or (iii) if neither
Section 3.2(e)(i) or (ii) is applicable, the Fair Market Value of a
share of Common Stock shall be determined by the Granting Authority in
such manner as it shall deem appropriate;
(f) to provide that the shares of Common Stock received upon
the exercise of a Stock Option shall be subject to a Right of First
Refusal (described in Section 8 hereof) pursuant to which the option
holder shall be required to offer to the Company any shares that the
option holder wishes to sell, subject to such terms and conditions as
the Granting Authority may specify; and
(g) to amend the terms of any Option, prospectively or
retroactively; provided, however, that no amendment shall impair the
rights of the option holder without his or her written consent.
3.3 The Committee shall grant and administer all Options under the
Plan in a manner designed to preserve the deductibility of the compensation
resulting from such Options in accordance with Section 162(m) of the Code.
The Committee shall have discretion to modify the terms of an Option
granted hereunder only to the extent that the exercise of such discretion
would not cause the Option to fail to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to
the provisions of the Plan shall be final and binding on all persons,
including the Company and all participants in the Plan.
SECTION 4. STOCK SUBJECT TO PLAN.
4.1 The total number of shares of Common Stock which may be issued
under the Plan shall be 6,900,000, of which 6,000,000 shall be available
for the grant of Stock Options to key employees and Consultants and 900,000
shall be available for the grant of Stock Options to Outside Directors (all
subject to adjustment as provided below). Such shares may consist of
authorized but unissued shares or treasury shares.
4.2 To the extent an Option granted under this Plan terminates
without the issuance of shares, the shares subject to such Option shall
again be available for grant pursuant to an Option under the Plan. Shares
of Common Stock equal in number to the shares withheld in payment of the
Exercise Price, and shares of Common Stock which are withheld in order to
satisfy federal, state or local tax liabilities, shall not count against
the above limit, and shall again be available for grant pursuant to an
Option under this Plan.
4.3 No key employee shall be granted Stock Options with respect to
more than 1,950,000 shares of Common Stock in any calendar year (subject to
adjustment as provided in Section 4.4).
4.4 In the event of any merger, reorganization, consolidation,
sale of substantially all the Company's assets, recapitalization, stock
dividend, stock split, spin-off split-up, split-off distribution of assets
or other change in the Company's corporate structure affecting the shares
of the Company's Common Stock, a substitution or adjustment, as may be
determined to be appropriate by the Committee in its sole discretion, shall
be made in the aggregate number of shares of Common Stock reserved for
issuance under the Plan, the number of shares as to which Options may be
granted to any individual in any calendar year and the number and type of
shares subject to outstanding Options; provided, however, that no such
adjustment shall increase the aggregate value of any outstanding Option.
SECTION 5. ELIGIBILITY.
5.1 Key employees of the Company, including those key employees
who are officers and/or directors of the Company, are eligible to be
granted Options under the Plan. The Committee, in its sole discretion, may
select the key employees who are granted Options under this Plan.
5.2 Consultants who provide service to the Company are eligible to
be granted Options under the Plan. The Committee, in its sole discretion,
may select the Consultants to be granted Options under the Plan, and the
terms and conditions of the Options to such Consultants.
5.3 All Outside Directors of the Company shall be eligible to be
granted Options under the Plan. The terms and conditions of the Options
granted to Outside Directors shall be determined by the Board of Directors.
SECTION 6. STOCK OPTIONS.
6.1 The Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options within the meaning of Section 422 of the Code
or any successor provision thereto (which may be granted only to key
employees); and (ii) Non-Qualified Stock Options. To the extent that any
Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a Non-Qualified Stock Option.
6.2 The maximum number of shares of Common Stock that may be
issued under Options intended to be Incentive Stock Options shall be
3,000,000 shares.
6.3 All Stock Options granted under this Plan and the terms and
conditions of such Stock Option Options shall be evidenced by a written
stock option agreement ("Stock Option Agreement") between the option
recipient and the Company.
6.4 Each Stock Option shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and
to such other terms and conditions not inconsistent therewith as the
Granting Authority shall determine.
(a) Exercise Price. The Exercise Price of each Stock Option
granted hereunder will be determined by the Granting Authority at the
time of grant and such Exercise Price will be specified in the Stock
Option Agreement. Except as provided in Section 6.5 or Section 11, the
Exercise Price of a Stock Option may be less than the Fair Market Value
of a share of Common Stock subject to the Stock Option on the date of
grant.
(b) Vesting and Exercisability of Stock Option. Unless
otherwise provided by the Granting Authority in the Stock Option
Agreement, a Stock Option granted to a key employee, Consultant or
Outside Director shall become vested and exercisable over a three-year
period as follows:
(i) effective on the first anniversary of the date of
grant, the Stock Option shall first become vested and exercisable with
respect to a maximum of one-third (1/3) of the total shares of Common
Stock subject to the Stock Option when granted; and
(ii) thereafter, effective commencing on the last day of
the first calendar month immediately succeeding the first anniversary of
the Stock Option's date of grant and continuing on the last day of each
of the next immediately succeeding twenty-three (23) calendar months,
the Stock Option shall become vested and exercisable with respect to
one-twenty-fourth (1/24th) of the total number of shares of Common Stock
subject to the Stock Option which did not become vested and exercisable
on the first anniversary of the date of grant;
provided, however, a Stock Option shall immediately become 100% vested
and exercisable upon the option recipient's death or Disability (as
defined below).
(c) Option Term. Subject to the provisions of Section 6.5
applicable to Options that are intended to be Incentive Stock Options,
the period during which a Stock Option granted hereunder may be
exercised shall commence on the date specified by the Granting Authority
in the Stock Option Agreement and shall expire on the date specified in
the Stock Option Agreement; provided, however, that the term of the
Option shall expire on the earliest to occur of:
(i) the close of business on the last day of the three-
month period commencing on the date of the option holder's termination
of employment or service, other than on account of death, Disability, or
a Termination for Cause (as defined below);
(ii) the close of business on the last day of the one-
year period commencing on the date of the option holder's termination of
employment or service due to death or Disability;
(iii) the date and time when the option holder's
employment or service ceases due to a Termination for Cause; and
(iv) the day immediately preceding the tenth anniversary
of the date the Stock Option was granted.
(d) Defined Terms. Unless otherwise provided by the Granting
Authority in the Stock Option Agreement, the following terms shall have
the following meanings for purposes of the Plan:
(i) "Disability" shall mean a condition of total
incapacity, mental or physical, for further performance of duty with the
Company, which the Committee shall have determined, on the basis of
competent medical evidence, is likely to be permanent.
(ii) "Termination for Cause" shall mean with respect to
an employee or Consultant, as the case may be, that the employee's
employment with, or Consultant's service to, the Company has been
terminated as a result of the determination by the Board of Directors
that such employee or Consultant has committed an act of embezzlement,
fraud, dishonesty, or breach of fiduciary duty to the Company, or has
deliberately disregarded the rules of the Company which resulted in
loss, damage, or injury to the Company, or because the employee or
Consultant has made an unauthorized disclosure of any of the secrets or
confidential information of the Company, has induced any client or
customer of the Company to breach any contract with the Company, has
induced any principal for whom the Company acts as agent to terminate
the agency relationship, or has engaged in any conduct that constitutes
unfair competition with the Company. Notwithstanding the foregoing, if
an employee or Consultant is a party to an employment agreement or a
consulting agreement governing the terms of his employment or
consultancy and such agreement contains a definition of "termination for
cause" or a definition of an equivalent term, then for purposes hereof,
the term "termination for cause" shall have the meaning ascribed to it
in such agreement.
(iii) "Termination for Cause" shall mean with respect
to an Outside Director, that the service of such Director on the
Company's Board of Directors has been terminated due to a "removal for
cause" determined in accordance with the Company's By-Laws.
(e) Effect of Termination for Cause. No Stock Option granted
hereunder, whether or not previously exercisable, shall be exercised
after the date and time on which the option holder's employment or
service with the Company is terminated in a Termination for Cause.
(f) Method of Exercise. Stock Options may be exercised in
whole or in part at any time during the Option Term by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the Exercise Price. Unless
otherwise provided by the Granting Authority in the Stock Option
Agreement, payment of the Exercise Price may be made in the following
manner: (i) in United States dollars by certified check, money order or
bank draft made payable to the order of Official Payments Corporation;
(ii) delivery of shares of Common Stock that have been owned by the
optionee for at least six months; (iii) a cashless exercise (which may
be either (A) a broker-assisted cash exercise effected in accordance
with rules adopted by the Granting Authority or (B) a direction to the
Company to withhold shares of Common Stock, otherwise deliverable to the
option holder with respect to the Option, having a Fair Market Value on
the date of exercise equal to the Option's Exercise Price); or (iv) in
any combination of the foregoing.
(g) No Stockholder Rights. An optionee shall not have rights
to dividends or any of the other rights of a stockholder with respect to
shares subject to a Stock Option until the optionee has given written
notice of exercise and has paid the Exercise Price for such shares.
(h) Non-transferability. Unless otherwise provided by the
Granting Authority in a Stock Option Agreement, (i) Stock Options shall
not be transferable by the optionee other than by will or by the laws of
descent and distribution, and (ii) during the optionee's lifetime, all
Stock Options shall be exercisable only by the optionee or by his or her
guardian or legal representative.
6.5 A Stock Option granted to a key employee hereunder that is
designated by the Granting Authority to be an Incentive Stock Option shall
be subject to the following limitations:
(a) A Stock Option granted to a key employee under this Plan
will not be considered an Incentive Stock Option to the extent that such
Stock Option, together with any earlier Stock Option granted to such
employee under this or any other plan of the Company that is intended to
be Incentive Stock Option, permits the exercise for the first time in
any calendar year of shares of Common Stock having a Fair Market Value
in excess of $100,000 (determined at the time of grant);
(b) The Exercise Price of an Incentive Stock Option granted
to a key employee who, at the time the Stock Option is granted, owns
shares of Common Stock comprising more than 10% of the total combined
voting power of all classes of stock of the Company shall not be less
than 110% of the Fair Market Value of a share, and if a Stock Option
designated as an Incentive Stock Option is granted at an Exercise Price
that does not satisfy this requirement, the designated Exercise Price
shall be observed and the Option shall be treated as a Non-Qualified
Stock Option;
(c) The term of an Incentive Stock Option granted to a key
employee who, at the time the Option is granted, owns shares comprising
more than 10% of the total combined voting power of all classes of
Common Stock of the Company, shall expire no later than the fifth
anniversary of the date on which the Stock Option was granted, and if an
Option designated as an Incentive Stock Option shall be granted for an
option term that does not satisfy this requirement, the term of the
Option shall be observed and the Option shall be treated as a Non-
Qualified Stock Option;
(d) An Incentive Stock Option that is exercised during its
designated term but more than:
(i) three (3) months after the termination of employment
with the Company, a parent or a subsidiary (other than on account of
disability within the meaning of Section 22(e)(3) of the Code) of the
key employee to whom it was granted; and
(ii) one (1) year after such individual's termination of
employment with the Company, a parent or a subsidiary due to disability
(within the meaning of Section 22(e)(3) of the Code);
(iii) may be exercised in accordance with the terms
but shall at the time of exercise be treated as a Non-Qualified Stock
Option; and
(e) Unless prior written notice is given to the Committee, no
individual shall dispose of shares acquired pursuant to the exercise of
an Incentive Stock Option until after the later of (i) the second
anniversary of the date on which the Incentive Stock Option was granted,
or (ii) the first anniversary of the date on which the shares of Common
Stock were acquired.
SECTION 7. TAX WITHHOLDING.
7.1 Each key employee who has been granted a Non-Qualified Stock
Option under this Plan shall be required to make arrangements satisfactory
to the Granting Authority regarding payment of, any federal, state, local
or other taxes of any kind required by law to be withheld upon the exercise
of such Option. The obligations of the Company under the Plan shall be
conditioned on such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the employee.
7.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any Options hereunder, satisfied by (i) having the Company
withhold shares of Common Stock otherwise deliverable to such person with
respect to the Option or (ii) delivering to the Company shares of
previously acquired Common Stock that has been owned by the option holder
for at least six months.
7.3 Each Outside Director and Consultant shall be solely
responsible for the payment of all tax obligations resulting from the
exercise of any Non-Qualified Stock Option granted to such Outside Director
or Consultant under this Plan.
SECTION 8. RIGHT OF FIRST REFUSAL.
8.1 In the event that an option recipient who has received shares
of Common Stock through the exercise of a Stock Option granted under this
Plan (hereinafter, a "Selling Stockholder") proposes to sell, pledge or
otherwise transfer to a third party any of such shares, the Company shall
have the Right of First Refusal (as set forth in this Section 8) with
respect to all (and not less than all) of such shares. The Selling
Stockholder shall give a written notice to the Company describing the
proposed transfer which shall include the number of shares proposed to be
transferred, the proposed transfer price, the name and address of the
proposed transferee ("the Transferee") and proof satisfactory to the
Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws (hereinafter such notice shall be referred
to as the "Transfer Notice"). The Transfer Notice shall be signed by both
the Selling Stockholder and the proposed Transferee and must constitute a
binding commitment of both parties to the transfer of the shares. The
Company shall have the right to purchase all, and not less than all, of the
shares of the Company's Common Stock on the terms described in the Transfer
Notice (subject, however, to any change in such terms permitted under
Section 8.2 below) by delivery of a notice of exercise of the Right of
First Refusal within 30 days after the date when the Transfer Notice was
received by the Company. The Company's rights under this Section 8.1 shall
be freely assignable, in whole or in part.
8.2 If the Company fails to exercise its Right of First Refusal
within 30 days after the date when it received the Transfer Notice, the
Selling Stockholder may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the shares subject
to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any
other contractual restrictions to which the Selling Stockholder is bound.
Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed
transfer by the Selling Stockholder, shall again be subject to the Right of
First Refusal and shall require compliance with the procedure described in
Section 8.1 above. If the Company exercises its Right of First Refusal,
the parties shall consummate the sale of the shares on the terms set forth
in the Transfer Notice within 60 days after the date when the Company
received the Transfer Notice (or within such longer period as may have been
specified in the Transfer Notice); provided, however, that in the event the
Transfer Notice provided that payment for the shares was to be made in a
form other than cash or cash equivalents paid at the time of transfer, the
Company shall have the option of paying for the shares with cash or cash
equivalents equal to the present value of the consideration described in
the Transfer Notice.
8.3 In the event of the declaration of a stock dividend, the
declaration of an extraordinary dividend payable in a form other than
stock, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's
outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property which are by reason
of such transaction distributed with respect to any shares subject to this
Section 8 or into which such shares thereby become convertible shall
immediately be subject to this Section 8. Appropriate adjustments to
reflect the distribution of such securities or property shall be made to
the number and/or class of the shares subject to this Section 8.
8.4 In the event that the Company's Common Stock is readily
tradable on an established securities market when the Selling Stockholder
desires to transfer shares, the Company shall have no Right of First
Refusal, and the Selling Stockholder shall have no obligation to comply
with the procedures prescribed by Sections 8.1 and 8.2 above.
SECTION 9. AMENDMENTS AND TERMINATION.
The Board of Directors may discontinue the Plan at any time and may
amend it from time to time No amendment or discontinuation of the Plan
shall adversely affect any Option previously granted without the option
holder's written consent. Amendments may be made without stockholder
approval except as required to satisfy the requirements of Section 422 of
the Code, with respect to Incentive Stock Options, Section 162(m) of the
Code, with respect to performance-based compensation, or the rules and
regulations of any stock exchange on which the shares of the Company's
Common Stock are then currently traded or listed.
SECTION 10. CHANGE OF CONTROL.
10.1 Unless otherwise specified by the Granting Authority in the
Stock Option Agreement, in the event of a Change of Control (as defined
below) all outstanding Stock Options granted under the Plan shall become
fully exercisable.
10.2 "Change of Control" shall be deemed to occur on:
(a) the date on which any "person" within the meaning of
Section 13(d)(3) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Rules promulgated thereunder, other
than Imperial Bank, Imperial Bancorp, Inc., any affiliate or subsidiary
thereof, acquires "beneficial ownership" within the meaning of Rule 13d-
3 of the Exchange Act, directly or indirectly, of securities issued by
the Company representing 35% or more of the total combined voting power
of all classes of the Company's then-outstanding securities;
(b) the date of approval by the stockholders of the Company
of an agreement providing for the merger or consolidation of the Company
with another corporation where either: (i) the stockholders of the
Company, immediately prior to the merger or consolidation, would not
"beneficially own" within the meaning of Rule 13d-3 of the Exchange Act,
immediately after the merger or consolidation, 50% or more of the total
combined voting power of all classes of the Company's then-outstanding
securities or (ii) where the members of the Company's Board of
Directors, immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a majority of
the Company's Board of Directors; or
(c) the date of approval by the stockholders of the Company
of an agreement providing for the sale or other disposition of 50% of
the assets of the Company;
provided, however, in no event shall an underwritten initial public
offering of the shares of the Company's Common Stock registered under the
Securities Act of 1933, as amended, in which the gross proceeds to the
Company exceed $30,000,000 constitute a "Change of Control."
SECTION 11. SPECIAL RULES APPLICABLE TO CERTAIN STOCK OPTIONS.
Prior to the date that the shares of the Company's Common Stock are
listed or traded on a national securities exchange, any grant of a Stock
Option under this Plan to a California resident shall comply with the
requirements of Section 25110 of the California Corporate Securities Law
Code (the "Code") and the regulations promulgated thereunder (or any
successor statutory or regulatory provisions), unless exempt therefrom
pursuant to Section 25102 (or any successor provision) or any other
exemptions provided in the Code, as amended from time to time.
SECTION 12. GENERAL PROVISIONS.
12.1 Each Option under the Plan shall be subject to the requirement
that, if at any time the Granting Authority shall determine that (i) the
listing, registration or qualification of the Common Stock subject or
related thereto upon any securities exchange or under any state or federal
law, or (ii) the consent or approval of any government regulatory body or
(iii) an agreement by the recipient of an Option with respect to the
disposition of Common Stock is necessary or desirable (in connection with
any requirement or interpretation of any federal or state securities law,
rule or regulation) as a condition of, or in connection with, the granting
of such Option or the issuance, purchase or delivery of Common Stock
thereunder, such Option shall not be granted or exercised, in whole or in
part, unless such listing, registration, qualification, consent, approval
or agreement shall have been effected or obtained free of any conditions
not acceptable to the Granting Authority.
12.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the
adoption of the Plan nor any Option hereunder shall confer upon any
employee of the Company any right to continued employment, and no Option
shall confer upon any Outside Director or Consultant any right to continued
service as a director or consultant or other independent advisor to the
Company, as the case may be.
12.3 Determinations by the Granting Authority under the Plan
relating to the form, amount, and terms and conditions of Options need not
be uniform, and may be made selectively among persons who receive or are
eligible to receive Options under the Plan, whether or not such persons are
similarly situated.
12.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee,
shall be personally liable for any action, determination or interpretation
taken or made with respect to the Plan, and all members of the Board or the
Committee and all officers or employees of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
SECTION 13. EFFECTIVE DATE OF PLAN.
13.1 The provisions of the Plan became effective on August 24,
1999, the date that the Plan was adopted by the Company's Board of
Directors and approved by its shareholders.
13.2 No Stock Option may be granted under this Plan after August
24, 2009.
SECTION 14. GOVERNING LAW.
The Plan shall be construed, administered and enforced according to
the laws of the State of California without giving effect to the conflict
of laws principles thereof, except to the extent that such laws are
preempted by federal law.
SECTION 15. EXECUTION.
Execution to record the amendment of this Plan to incorporate
Amendment No. 2 thereto, the Company has caused its authorized officer to
execute the same.
OFFICIAL PAYMENTS CORPORATION
By /s/ Thomas R. Evans
------------------------------------
Thomas R. Evans
Chairman and Chief Executive Officer
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This schedule contains summary financial information
extracted from Official Payment Corporation's quarterly
report on Form 10-Q for the period ended March 31, 2000 and
is qualified in its entirety by reference to such financial
statements.
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<FISCAL-YEAR-END> DEC-31-2000
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<RECEIVABLES> 1,074
<ALLOWANCES> (60)
<INVENTORY> 0
<CURRENT-ASSETS> 76,387
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<DEPRECIATION> (708)
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0
<COMMON> 213
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