U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1995.
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------- ----------
Commission File Number 0-16376
TIMBERLINE SOFTWARE CORPORATION
(Name of small business issuer in its charter)
Oregon 93-0748489
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9600 S.W. Nimbus Avenue, Beaverton, Oregon 97008
(Address of principal executive offices) (Zip code)
(503) 626-6775
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, without par value
(Title of class)
Check whether the issuer (1) 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB, or any
amendment to this Form 10-KSB. [x]
Issuer's revenues for its most recent fiscal year: $24,819,365
At March 8, 1996, 3,459,061 shares of common stock of the registrant were
outstanding. On such date, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $25,577,128.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Registrant's Proxy Statement dated March 15, 1996, prepared in
connection with the Annual Meeting of Shareholders to be held on April 23, 1996
are incorporated by reference into Part III of this Report.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [x]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Timberline (R) Software Corporation (the "Company" or "Timberline") was
incorporated in Oregon in 1979. The Company changed its name from Timberline
Systems, Inc. in 1986.
Timberline develops, markets, and supports accounting and management information
computer software primarily for the construction, property management, and
architects and engineers industries. The software is designed to work on stand
alone microcomputers (commonly referred to as personal computers or "PCs") or in
a network of microcomputers. The Company's software operates in Microsoft(R)'s
DOS, Microsoft's Windows(R), and IBM's OS/2(R) operating environments.
Timberline also provides a range of support services for users of its software,
including annual maintenance and support contracts, classroom training at its
corporate offices and at various sites throughout the United States, and on-site
training and consulting.
SOFTWARE PRODUCTS
The Company maintains four software product lines - construction accounting,
estimating, property management, and architects and engineers.
CONSTRUCTION ACCOUNTING
The construction accounting software is composed of two different levels of
software. The Medallion(R) line of software was first released in 1984 and
operates only in the DOS operating environment. The Medallion line was designed
specifically for the home builder/remodeler and small to medium-sized general
and specialty contractors. The other level of software, Construction Gold (now
called Gold Extended Edition), was released in October 1992, and operates in the
Windows and OS/2 operating environments. This line of software was designed
specifically to handle the accounting and management information needs for
medium to large-sized construction companies and for other users with more
advanced accounting and management information requirements. The Company
believes that it is the first major software company to develop software for
construction companies utilizing the advanced capabilities of the OS/2 and
Windows operating environments.
Both levels of software are designed around a core set of accounting-oriented
applications (such as general ledger, job cost, accounts payable, accounts
receivable and payroll). Additional features were added to the software to meet
the industry-specific needs of construction companies. The various applications
are fully integrated allowing for data entered into one application to be
accessed and entered electronically into another application. The Construction
Gold software has additional features and capabilities for users with more
complex needs, including executive inquiry and customized summary reporting
capabilities.
An equipment management software application for Construction Gold was released
at the end of 1995. This application is critical to equipment- intensive
construction companies. With the release of this application, Timberline
believes it will be able to meet the accounting and management information needs
of the heavy/highway segment of the construction industry.
ESTIMATING
Estimating software allows an estimator to compile a bid on construction
projects based on certain parameters such as the architectural design, building
materials required and material and labor costs. In 1987, Timberline introduced
the Precision Collection(R), a family of integrated estimating software
applications. It is also fully integrated with the Company's Medallion
collection of accounting software products. The Company's estimating software
product has established itself as one of the leading estimating software
packages on the market today.
<PAGE>
Since its introduction, the Company has interfaced its estimating product with
other vendors' software in the computer-aided drafting ("CAD") field. In 1989,
Timberline released software that allows a user to compile an estimate directly
from Autodesk's AutoCAD(R) system. The estimating software is also able to
interface with scheduling software developed by Microsoft and by Primavera
Systems(R).
The Company also sells databases and other software developed by other companies
which complement its estimating software products. The Company pays royalties to
these companies based on quantities of the databases and other software sold.
The Company has integrated its estimating software with software of other CAD
developers and other externally developed databases. The Company intends to
continue to maintain and enhance the estimating product line. In 1994, the
Company released a new feature, called Modeling, for its estimating product
line. This application allows an estimator to make more accurate preliminary
estimates and to reduce the amount of time required to refine the estimate as
more parameters to the project are added or modified.
Timberline is also developing estimating software that will operate in the
Windows environment. This software is currently scheduled for release in 1996.
PROPERTY MANAGEMENT
The Company's property management software is an accounting and management
information system used by managers of residential and commercial properties. It
provides information to the managers regarding revenues and expenses of various
properties and generates financial reports about the properties to the various
owners, as well as reports containing other tenant and lease information about
the properties. The Company's primary software for property managers, Property
Management Gold, was released in 1988. This software was designed for the medium
to large-sized property management companies. The software operates in the OS/2
and Windows NT(TM) operating environments. The Company's other major software
for residential property managers, SitePro, was released in 1992. This software
was designed specifically for on-site managers of residential properties to
enable them to track financial and tenant information. This information can then
be electronically transferred to the home office for compilation and review with
other managed properties.
During the past several years, the Company has enhanced the software and has
developed additional software to complement the core applications of Property
Management Gold. Timberline is currently developing applications of the software
that will operate in the Windows operating environment which will take advantage
of the graphical user interface (GUI) capabilities of that environment. The
Company is no longer developing property management software in the OS/2
environment.
ARCHITECTS AND ENGINEERS
The Company's architects and engineers software is an accounting and management
information system for architectural and engineering firms. The software
provides the basic accounting information along with the capability to generate
billing information on a project basis.
The software, called AEasy and AEasy Plus, was developed by an outside developer
using the Company's software standards and tools. The Company pays royalties to
the developer based on the quantity of software sold. This software was
initially released in 1987.
In 1994, the Company released an architects and engineers software application
called TimeTrax which enhances and streamlines the process of time entry into
systems that track billable time and labor costs. The Company is continuing
development work for its next generation of software for the architectural and
engineering firms, which will take advantage of GUI capabilities.
<PAGE>
In 1994, all Timberline software products were upgraded to comply with Open
Database Connectivity (ODBC), a data exchange methodology developed by Microsoft
that has been accepted as an industry standard. ODBC allows customers to
directly access information stored in Timberline data format by using standard
word processing, spreadsheet and database applications.
CUSTOMER SUPPORT SERVICES
Users of the Company's software may purchase maintenance and support services
from the Company. Maintenance contracts allow the user to obtain program changes
and enhancements as they are released. Support contracts allow the user to
obtain telephone access to the Company's customer support department for
answering application-related questions. In addition, users may pay a fee to
attend classes on the use of the Company's software, to obtain customized
training at the user's place of business and for other consulting services.
These service fees have become a significant percentage of the Company's total
revenue. In 1995 and 1994, service fees comprised 44 and 41 percent,
respectively, of total revenue compared to 23 percent of total revenue in 1988.
The Company is committed to maintaining a high level of quality related to
customer support services. At the end of 1995, 36 percent of the Company's
employees were directly associated with customer support.
SALES/DISTRIBUTION
The Company licenses its software products and sells its services primarily in
the United States. The Company also licenses its software products into Canada,
Australia, New Zealand, and other foreign countries. Revenue from these foreign
countries has not been significant, comprising less than 10 percent of the
Company's total revenue.
Product distribution is primarily handled by value added dealers and
distributors. The Company also maintains a direct sales force to complement its
dealer channel and to handle sales to national accounts and other large
companies.
Timberline maintains a telemarketing staff for selling maintenance and support
service contracts and classroom training to its user base. On-site consulting
fees are generated from requests for services from the users to the Company's
sales and customer support staff. On-site consulting fees are primarily
generated from the Company's national accounts and other large companies
utilizing the Company's software.
Unfilled orders for software products at December 31, 1995 and 1994 were not
significant. The Company typically ships software products within three days of
receipt of the order.
PRODUCTION
The principal materials and components used in the Company's software products
are computer media and user manuals. For each product, the Company prepares
masters of the software on computer diskettes and of the user manuals.
Substantially all copies of the software and user manuals are made by outside
vendors. The Company also relies on outside vendors to provide software assembly
and shipping services.
COMPETITION
The software market is highly competitive and subject to change because of the
rapid technological changes in the computer industry. The number of software
vendors with which the Company competes varies from product to product and from
region to region within the United States. The Company believes that it is the
major supplier of construction accounting and estimating software in the
construction industry and is also one of the leading suppliers of accounting and
management information software in the property management and architect and
engineer industries.
The Company believes that its emphasis on producing high quality software
products that are flexible and user-friendly enables the Company to compete
<PAGE>
effectively. In addition, the Company believes it provides very responsive
customer support service to its end users, which enhances the marketability of
its products.
PRODUCT PROTECTION
The Company regards its software as proprietary and attempts to protect it by
relying upon copyrights, trade secret laws, internal nondisclosure agreements
and transferability restrictions incorporated into its software license
agreements. The Company provides its software products under a perpetual paid-up
license agreement. Title does not transfer to the customer. Program source
listings are not released, which the Company believes further protects
unauthorized transfers of the Company's proprietary information, as well as the
confidentiality of the Company's trade secrets. The Company also uses a
combination of software programming and hardware devices to protect some of its
products from unauthorized use or duplication. Despite these restrictions, it
may be possible for competitors or users to copy aspects of the Company's
products or to obtain information which the Company regards as proprietary. The
Company has no patents. Although the Company's competitive position may be
adversely affected by unauthorized use of its proprietary information, the
Company believes that the rapid pace of technological change in the computer
industry makes intellectual property protection of less significance than such
factors as the knowledge and experience of management personnel and the
Company's ability to develop, enhance, support and market its products.
Third parties may assert infringement or other claims against the Company with
respect to any existing or future products. Litigation to protect the Company's
proprietary information or to determine the validity of any third-party claims
could result in significant expense to the Company and divert the efforts of the
Company's technical and management personnel, whether or not such litigation is
determined in favor of the Company.
RESEARCH AND DEVELOPMENT
Timberline is continually in the process of developing new software and
enhancing its existing software products in order to meet the changing needs of
its current users and the market place. At the end of 1995, over 27 percent of
the Company's employees were directly associated with product development.
Product development expenses were $5,060,000, $4,028,000 and $3,399,000 in 1995,
1994 and 1993, respectively. Of that total, $4,149,000, $3,330,000 and
$2,795,000 were incurred in 1995, 1994 and 1993, respectively, on research and
development on new software products. An additional $70,000, $116,000 and
$105,000, respectively, of product development expenses on new software products
were captitalized in those same years.
EMPLOYEES
At December 31, 1995, the Company had 300 employees, of which 289 were
full-time. None of the employees are represented by unions, or subject to
collective bargaining. Timberline's business is heavily dependent on retaining
and attracting highly skilled employees. As such, the Company has an employee
benefits program that includes group health, dental, disability and life
insurance plans, paid vacations and holidays, leave privileges, and educational
reimbursement. The Company also has a pension plan under the provisions of
section 401(k) of the Internal Revenue Code in which the Company is currently
matching a certain percentage of the employee's contribution to the plan, and an
informal profit sharing plan covering all employees. Additionally, the Company
has stock option and stock incentive plans from which it may grant stock options
and incentives to certain key individuals. The Company believes its relationship
with its employees is good.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases its corporate offices and regional sales offices. The
Company's corporate offices are located in a 51,000 square foot office and
production facility in Beaverton, Oregon. This lease is scheduled to expire in
October 1998. Commencing in 1996, the Company will be leasing additional office
space in Beaverton, Oregon for its estimating division offices. The Company's
regional sales offices are leased under short-term lease arrangements in the
following metropolitan areas: Los Angeles, CA; Denver, CO; Dallas, TX; New York,
NY; and Concord, NC.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this Report, the Company is not a party to any legal proceedings the adverse
outcome of which would, in management's opinion, have a material adverse effect
on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
In May 1995, the Company had a three-for-two common stock split. All information
regarding common stock and per share amounts in this report have been
retroactively restated to reflect this change.
The Company's common stock is traded on the Nasdaq Stock Market under the symbol
TMBS. The table below shows the high and low sales prices as reported in
Nasdaq's monthly Summary of Activity Report. Such quotations reflect interdealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
1995 HIGH LOW
-------------------------------------------------
First quarter $ 7 1/6 $5 5/6
Second quarter 10 3/4 5 5/6
Third quarter 12 1/2 9 1/4
Fourth quarter 10 1/2 8
1994 HIGH LOW
-------------------------------------------------
First quarter $ 6 1/6 $4 1/6
Second quarter 5 1/3 4
Third quarter 5 1/3 4 1/6
Fourth quarter 7 2/3 4 2/3
As of March 8, 1996, there were 262 shareholders of record. Based upon the
number of requests for the Company's proxy materials for its 1996 annual meeting
of shareholders, the Company believes that there were approximately 1,800
beneficial shareholders as of that date.
In October 1994, the Company declared its first quarterly cash dividend of $.02
per share and declared quarterly cash dividends totaling $.11 per share in 1995.
The Company anticipates declaring and paying quarterly cash dividends in the
future.
The Company has been engaged in a program of reacquiring its own common stock
since late 1987. To date, the Company's Board of Directors has authorized
management to reacquire up to 500,000 shares of the Company's common stock on
the open market. As of December 31, 1995, the Company had reacquired 311,750
shares. The cost of stock reacquired by the Company was $160,000 in 1995 and
$140,000 in 1994. No stock was reacquired by the Company in 1993.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
NET REVENUE increased 15 percent to $24,819,000 in 1995 from $21,641,000 in
1994. The two major components of net revenue, computer software sales and
service fees, both increased in 1995. Software sales increased eight percent to
$13,435,000 in 1995 compared to $12,463,000 in 1994, primarily due to the
continued increase in sales of the Company's Construction Gold (now called Gold
Extended Edition) accounting software. Gold Extended software sales increased 35
percent and estimating software sales increased seven percent in 1995 compared
to 1994. Sales of property management software decreased significantly in 1995
compared to 1994 due to a reduction in sales to large property management
companies. The Company in 1995 continued to reduce sales efforts of its high-end
property management software products while developing a property management
product for the Windows environment. Architects and engineers software sales
also decreased in 1995 compared to 1994.
Software sales, as a percentage of net revenue, declined in 1995 to 54 percent
compared to 58 percent in 1994. In terms of revenue mix, construction and
estimating software sales represented 86 percent of software sales in 1995
compared to 79 percent in 1994. Property management software sales decreased as
a percentage of software sales to eight percent in 1995 from 13 percent in 1994.
Architects and engineers software sales decreased to six percent of software
sales in 1995 compared to eight percent in 1994. International software sales
increased slightly in 1995 to six percent of software sales compared to five
percent in 1994.
Service fees from maintenance, support and training increased 24 percent to
$10,927,000 in 1995 compared to $8,809,000 in 1994. As a percentage of net
revenue, service fees increased to 44 percent in 1995 from 41 percent in 1994.
The increase in service fees was due principally to increased maintenance and
support fees resulting from the Company's larger customer base. The Company
anticipates that service fees will continue to represent a significant
percentage of net revenue.
COST OF REVENUE primarily consists of software documentation, assembly and
shipping costs, royalties paid to outside developers, amortization of
capitalized software development costs and training and consulting costs. Cost
of revenue, as a percentage of net revenue, decreased to 11 percent in 1995 from
14 percent in 1994. The decrease was due primarily to service fees representing
a greater percentage of net revenue in 1995, as well as lower costs and
royalties associated with software sales.
OPERATING EXPENSES increased 18 percent to $19,895,000 in 1995 from $16,931,000
in 1994. The largest increases were in the customer support and product
development areas, principally compensation costs related to additional support
and development personnel. Customer support expenses increased 24 percent to
$5,019,000 in 1995 from $4,040,000 in 1994, primarily due to additional
personnel required to handle the increased demand for support, consulting and
training services resulting from increased sales of Gold Extended software. The
Company anticipates continued increases in customer support expenses in order to
meet the demands of its customers and to maintain a high quality level of
service.
Product development expenses increased 26 percent to $5,060,000 in 1995 from
$4,028,000 in 1994, primarily due to additional personnel necessary to maintain
the Company's existing products and to develop and test new software products in
the Windows environment. The Company anticipates that eventually all of its
products will operate in the Windows environment and that additional personnel
will be required in the product development area in 1996.
<PAGE>
Sales and marketing expenses increased nine percent to $5,969,000 in 1995
compared to $5,472,000 in 1994. The increase was primarily due to increased
personnel costs in the sales and telemarketing areas. As a percentage of net
revenue, sales and marketing expenses declined to 24 percent in 1995 from 25
percent in 1994. General and administrative expenses increased 13 percent to
$3,847,000 in 1995 from $3,392,000 in 1994, but remained at approximately 16
percent of net revenue in both years. The increase in dollar amount in 1995 was
due primarily to a $229,000 increase in bad debt expense, most of which resulted
from the write-off of a large amount owed by a Canadian customer that went
bankrupt in 1995.
1994 COMPARED TO 1993
NET REVENUE increased 19 percent to $21,641,000 in 1994 from $18,205,000 in
1993. Computer software sales and service fees both increased in 1994. Software
sales increased 13 percent to $12,463,000 in 1994 compared to $11,009,000 in
1993, primarily due to a significant increase in sales of construction
accounting software, particularly the Company's Gold Extended software. The
increase in software sales was also due to significantly increased sales of
architects and engineers software, offset in part by decreased property
management software sales. The decrease in sales of property management software
was primarily attributable to a reduction in sales to large property management
companies in 1994 compared to 1993. In 1994, the Company reduced sales efforts
related to its high-end property management software products while it
satisfied existing customer commitments and continued to develop a property
management product for the graphical user interface (GUI) environment.
Software sales, as a percentage of net revenue, declined in 1994 to 58 percent
compared to 60 percent in 1993. In terms of revenue mix, construction and
estimating software sales represented 79 percent of software sales in 1994
compared to 74 percent in 1993. Property management software sales decreased as
a percentage of software sales to 13 percent from 20 percent in 1993. Architects
and engineers software sales increased to eight percent of software sales in
1994 compared to five percent in 1993. International software sales decreased in
1994 to five percent of software sales, compared to 10 percent in 1993,
primarily because of two significant sales to Canadian customers in 1993 that
were not repeated in 1994.
Service fees from maintenance, support and training increased 27 percent to
$8,809,000 in 1994 compared to $6,956,000 in 1993. As a percentage of net
revenue, service fees increased to 41 percent in 1994 from 38 percent in 1993.
The increase in service fees was due principally to increased maintenance and
support fees resulting from the Company's larger customer base, an expanded
number of training classes offered by the Company and increased demand for
on-site consulting services.
COST OF REVENUE, as a percentage of net revenue, remained constant at
approximately 14 percent in 1994 and 1993. Assembly and shipping costs, as a
percentage of software sales, declined in 1994 compared to 1993 because of the
outsourcing of these functions to a third party vendor in November 1993.
Royalties and training costs increased in 1994 compared to 1993 due to increases
in software sales.
OPERATING EXPENSES increased 15 percent to $16,931,000 in 1994 from $14,732,000
in 1993. The largest increases were in the customer support and product
development areas, principally compensation costs related to additional support
and development personnel. Customer support expenses increased 16 percent to
$4,040,000 in 1994 from $3,486,000 in 1993, primarily due to additional
personnel required to handle the increased demand for support, consulting and
training services resulting from increased sales of Gold Extended software.
Product development expenses increased 18 percent to $4,028,000 in 1994 from
$3,399,000 in 1993, primarily due to additional personnel necessary to
<PAGE>
maintain the Company's existing products and to develop and test new software
products in the Windows environment. Additional personnel were also needed in
1994 to meet the Company's software development schedule due to the complexity
involved in developing and testing Windows-based software products.
Sales and marketing expenses increased 12 percent to $5,472,000 in 1994 compared
to $4,906,000 in 1993, but declined to 25 percent of net revenue in 1994 from 27
percent of net revenue in 1993. The decrease in sales and marketing expenses as
a percentage of net revenue reflects relatively constant sales expenses in 1994
and 1993. General and administrative expenses increased 15 percent to $3,392,000
in 1994 from $2,941,000 in 1993, but remained at 16 percent of net revenue in
both years. The increase in dollar amount in 1994 was due primarily to increased
personnel costs required to manage the continued growth in net revenue.
OTHER INCOME AND INCOME TAXES
OTHER INCOME (EXPENSE) is composed primarily of investment income on cash, cash
equivalents and temporary cash investments. Investment income increased 109
percent in 1995 compared to 1994 due to increased investable funds provided by
operations. Investment income in 1994 increased 146 percent compared to 1993 due
to increased investable funds provided by operations, higher interest rates and
management's decision to lengthen maturities on temporary cash investments to
achieve higher returns.
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 29 percent, 39
percent and 35 percent in 1995, 1994 and 1993, respectively. The lower rate in
1995 was due primarily to research and development tax credits totaling
$231,000, of which $150,000 were made available from prior years as a result of
a recent change in tax regulations. For further analysis of the provision for
income taxes, see Note 4 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
In 1995, net cash provided by operations was $3,449,000 compared to $4,168,000
and $1,977,000 in 1994 and 1993, respectively. The decrease in 1995 compared to
1994 was primarily due to income tax payments made in 1995 for 1994 taxes and
1995 estimated taxes. Working capital increased to $3,894,000 at December 31,
1995 from $2,070,000 at December 31, 1994, primarily as a result of the increase
in cash and cash equivalents. Cash, cash equivalents and temporary cash
investments, which represented approximately 51 percent of the Company's total
assets at December 31, 1995, increased $2,400,000 since the end of 1994. Net
accounts receivable at the end of 1995 decreased $304,000 from the prior year
end primarily due to a $209,000 write-off with respect to a bankrupt customer.
Net property and equipment and purchased software remained relatively constant
in 1995 compared to 1994 as dispositions, depreciation and amortization offset
equipment purchases and tenant improvement additions. The Company anticipates
that capital expenditures in 1996 will be approximately $1,300,000, primarily
for new telecommunications equipment and for new computer equipment for product
development, customer support and the Company's internal management information
system. Net capitalized software costs decreased $235,000 at December 31, 1995
compared to December 31, 1994, as the amortization of previously capitalized
software costs exceeded the amount of costs capitalized in 1995.
Accrued income taxes decreased $509,000 at December 31, 1995 compared to
December 31, 1994 as a result of the payment of federal income taxes owed for
1994 and estimated income tax payments for 1995. Deferred revenues increased
$823,000 in 1995 primarily due to increased billings for annual maintenance and
support service contracts. Revenue from these billings is recognized monthly
over the term of the contracts. Accrued employee expenses increased
<PAGE>
$172,000 at December 31, 1995 compared to December 31, 1994 primarily due to an
increase in the amount owed to the Company's 401(k) plan for its 1995 matching
contribution and an increase in accrued sales commissions.
The Company repurchased 27,000 shares of its common stock during 1995. The
Company's Board of Directors has authorized management to repurchase an
additional 188,250 shares on the open market. The Company expects that any
repurchase of shares will be funded by cash generated from operations and
existing cash balances.
In April 1995, the Company's Board of Directors approved a three-for-two stock
split effective in May 1995. A cash dividend of $.03 per share had been paid in
the first quarter of 1995 prior to the split. That dividend rate was continued
on a post-split basis for the next three quarterly dividends. Total dividends
for 1995 amounted to $377,000. The Company plans to continue to pay quarterly
cash dividends.
The Company has a $1,000,000 line of credit for working capital purposes that
expires May 1, 1996. At December 31, 1995 there were no outstanding borrowings
under the line of credit. No borrowings under this line of credit are expected
in 1996.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Page
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Independent Auditors' Report 13
Balance Sheets, December 31, 1995 and 1994 14
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 15
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 16
Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993 17
Notes to Financial Statements 18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Timberline Software Corporation
Beaverton, Oregon
We have audited the accompanying balance sheets of Timberline Software
Corporation as of December 31, 1995 and 1994 and the related statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Timberline Software Corporation as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
January 25, 1996
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,856,533 $ 1,411,611
Temporary cash investments 3,439,000 3,484,282
Accounts receivable, less allowance for doubtful accounts
(1995, $225,909; 1994, $251,982) 3,185,737 3,489,521
Other receivables 81,025 84,366
Inventories 326,311 215,655
Other current assets 614,190 515,819
- ------------------------------------------------------------------------------------------------
Total current assets 11,502,796 9,201,254
- ------------------------------------------------------------------------------------------------
Property and equipment:
Tenant improvements 341,265 322,869
Furniture and fixtures 852,046 821,025
Machinery and equipment 4,544,945 4,248,677
- -----------------------------------------------------------------------------------------------
5,738,256 5,392,571
Less accumulated depreciation and amortization 3,374,494 3,039,283
- -----------------------------------------------------------------------------------------------
Property and equipment - net 2,363,762 2,353,288
- -----------------------------------------------------------------------------------------------
Capitalized software costs, less accumulated amortization
(1995, $342,674; 1994, $262,908) 245,669 480,272
Purchased software, less accumulated amortization
(1995, $450,082; 1994, $344,784) 176,151 189,629
Other assets 96,510 126,054
- -----------------------------------------------------------------------------------------------
$14,384,888 $12,350,497
===============================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 562,622 $ 644,545
Accrued commissions/royalties 258,398 166,543
Accrued income taxes 79,427 588,685
Deferred revenues 5,337,973 4,514,684
Accrued employee expenses 1,148,231 975,919
Other current liabilities 222,585 241,091
- -----------------------------------------------------------------------------------------------
Total current liabilities 7,609,236 7,131,467
- -----------------------------------------------------------------------------------------------
Accrued rent expense 56,891 76,979
Deferred income taxes 358,000 398,000
Commitments
Shareholders' equity:
Common stock, without par value
Authorized - 8,000,000 shares
Issued - 1995, 3,459,061 shares; 1994, 3,419,040 shares 345,906 341,904
Additional paid in capital 1,304,997 897,690
Retained earnings 4,709,858 3,504,457
- -----------------------------------------------------------------------------------------------
Total shareholders' equity 6,360,761 4,744,051
- -----------------------------------------------------------------------------------------------
$14,384,888 $12,350,497
===============================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue:
Computer software $ 13,435,099 $ 12,462,576 $ 11,008,953
Service fees 10,927,227 8,809,483 6,955,921
Other 457,039 368,787 239,819
- ------------------------------------------------------------------------------------------------
Net revenue 24,819,365 21,640,846 18,204,693
- ------------------------------------------------------------------------------------------------
Cost and expenses:
Cost of revenue 2,836,423 2,934,875 2,592,056
Customer support 5,018,657 4,039,596 3,485,649
Product development 5,060,385 4,027,529 3,399,315
Sales and marketing 5,968,992 5,472,294 4,906,467
General and administrative 3,846,763 3,391,589 2,940,510
- ------------------------------------------------------------------------------------------------
Total cost and expenses 22,731,220 19,865,883 17,323,997
- ------------------------------------------------------------------------------------------------
Operating income 2,088,145 1,774,963 880,696
Other income (expense):
Interest income and other 359,323 173,659 69,796
Interest expense (725) (3,171) (439)
- ------------------------------------------------------------------------------------------------
Income before income taxes 2,446,743 1,945,451 950,053
Provision for income taxes 714,000 751,000 330,000
- ------------------------------------------------------------------------------------------------
Net income $ 1,732,743 $ 1,194,451 $ 620,053
================================================================================================
Earnings per share (based on average of
3,626,385 shares in 1995; 3,500,709 shares
In 1994; 3,436,778 shares in 1993) $ 0.48 $ 0.34 $ 0.18
================================================================================================
Dividends per share $ 0.11 $ 0.02 $ --
================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,732,743 $ 1,194,451 $ 620,053
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,165,932 1,085,634 932,223
Deferred income taxes 14,000 9,000 125,000
Accrued rent expense (20,088) (20,088) (7,244)
Net change in:
Accounts receivable 303,784 (75,699) (1,363,893)
Other receivables 3,341 147,837 (191,537)
Inventories (110,656) (28,364) 249,483
Accounts payable (81,923) (151,097) 552,489
Accrued commissions/royalties 91,855 (6,717) (24,428)
Accrued income taxes (509,258) 375,284 185,664
Deferred revenues 823,289 1,211,892 602,063
Accrued employee expenses 172,312 360,117 270,886
Other (136,616) 65,613 26,290
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,448,715 4,167,863 1,977,049
- ------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for property and equipment (902,025) (1,328,408) (797,614)
Capitalized software costs (69,671) (178,217) (513,203)
Proceeds from temporary cash investments 5,000,000
Purchase of temporary cash investments (4,954,718) (3,484,282)
Other - net 38,654 (26,813) 4,712
- ------------------------------------------------------------------------------------------------
Net cash used in investing activities (887,760) (5,017,720) (1,306,105)
- ------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (377,455) (68,363)
Common stock issued 421,520 133,360 96,583
Common stock reacquired (160,098) (140,000)
- ------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (116,033) (75,003) 96,583
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,444,922 (924,860) 767,527
Cash and cash equivalents, beginning of the year 1,411,611 2,336,471 1,568,944
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year $ 3,856,533 $ 1,411,611 $ 2,336,471
================================================================================================
Supplemental information:
Cash paid during the year for income taxes $ 1,059,859 $ 356,416 $ 126,336
================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Retained
Shares Issued Amount Capital Earnings Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1993 3,394,290 $ 339,429 $ 681,044 $1,887,494 $2,907,967
Common stock issued 24,450 2,445 94,138 96,583
Net income for the year 620,053 620,053
- ------------------------------------------------------------------------------------------------
Balances, December 31, 1993 3,418,740 341,874 775,182 2,507,547 3,624,603
Common stock issued 30,300 3,030 130,330 133,360
Common stock reacquired (30,000) (3,000) (7,822) (129,178) (140,000)
Dividends declared
($.02 per share) (68,363) (68,363)
Net income for the year 1,194,451 1,194,451
- ------------------------------------------------------------------------------------------------
Balances, December 31, 1994 3,419,040 341,904 897,690 3,504,457 4,744,051
Common stock issued 67,050 6,705 414,815 421,520
Common stock reacquired (27,029) (2,703) (7,508) (149,887) (160,098)
Dividends declared
($.11 per share) (377,455) (377,455)
Net income for the year 1,732,743 1,732,743
- ------------------------------------------------------------------------------------------------
Balances, December 31, 1995 3,459,061 $ 345,906 $1,304,997 $4,709,858 $6,360,761
================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Summary of significant accounting policies and line of business:
LINE OF BUSINESS AND CREDIT RISKS: The Company develops and markets computer
software programs primarily for the construction and property management
industries. The Company sells its products and services primarily to customers
and to authorized dealers throughout the United States. Credit is granted to
certain customers and dealers generally without collateral. An allowance for
credit losses is provided based on historical experience and anticipated losses.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FINANCIAL INSTRUMENTS: The carrying amount reported in the balance sheet for
cash and cash equivalents, temporary cash investments, accounts receivable,
accounts payable and other current assets and liabilities approximates fair
value because of the immediate or short-term maturity of these financial
instruments.
REVENUE RECOGNITION: Revenue from the "license to use" computer software
programs is recognized at the point of shipment. Revenue from service fees is
generated from the sale of computer software maintenance and support contracts,
training classes, consulting, and other support services. Revenue from
maintenance and support contracts is recognized ratably over the period the
service is provided. Revenue from other service fees is recognized at the time
the service is provided.
SOFTWARE DEVELOPMENT COSTS: Costs of developing computer software are
capitalized when technological feasibility has been established for the computer
software product. The Company also capitalizes costs incurred in connection with
perfecting its rights to sell certain software products. These costs are
amortized over a two- to five-year period. Costs capitalized for the development
of computer software were $70,000 in 1995, $116,000 in 1994, and $105,000 in
1993. Costs incurred and capitalized in perfecting its rights to software were
$62,000 in 1994 and $408,000 in 1993.
Amortization of capitalized computer software development costs was $304,000 in
1995, $367,000 in 1994, and $365,000 in 1993. Expenses incurred on research and
development of computer software products were $4,149,000 in 1995, $3,330,000 in
1994, and $2,795,000 in 1993.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand, cash
deposited with banks and financial institutions, money market funds and highly
liquid debt instruments purchased with original maturity dates of three months
or less.
TEMPORARY CASH INVESTMENTS: Temporary cash investments represent investment in
debt securities which are not classified as cash equivalents. In accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," the Company has classified these
securities, which mature in one year or less, as "held to maturity."
Accordingly, temporary cash investments are recorded at amortized cost which
approximates fair value.
INVENTORIES: Inventories consist of marketing literature and of software
components, primarily software manuals and diskettes ready for assembly.
Inventories are stated at lower of average cost or market.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets ranging from two to ten years.
ACCRUED RENT EXPENSE: Rent expense on operating leases with scheduled rent
increases is recognized on a straight-line basis over the lease term. Accrued
rent expense represents the excess of rent charged to expense over the amount of
scheduled rent paid.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
EARNINGS PER SHARE: Earnings per share are based on the weighted average number
of common shares outstanding during the period, after adjusting for the dilutive
effect of outstanding stock options and warrants.
NOTE 2. Short-term borrowings:
The Company has an unsecured line of credit with a bank to borrow up to
$1,000,000. The line of credit expires May 1996 and borrowings under the line of
credit accrue interest at the bank's prime rate (8.50% at December 31, 1995).
There were no short-term borrowings under the line of credit during 1995 or
1994.
NOTE 3. Common stock:
In April 1995, the Company's Board of Directors approved a three-for-two common
stock split effective in May 1995. All prior common stock and per share amounts
have been retroactively adjusted to reflect this change.
The Company has non-qualified stock option plans adopted in 1987 and 1989 for
its officers and key employees. In 1993, the Company's shareholders approved a
stock incentive option plan for the purpose of retaining and attracting the
services of selected Company directors, officers, employees and nonemployees.
This plan provides for the granting of various stock options, stock appreciation
rights, stock bonuses and the sale of common stock. All of the plans are
administered by a committee of the Company's Board of Directors who determine
the terms and conditions of the various grants awarded under the plans. As of
December 31, 1995, only stock options have been granted under these plans.
In March 1994, the Company issued warrants to purchase 150,000 shares of its
common stock at $4.67 per share to a large national account as part of a joint
marketing agreement to promote the Company's software products. These warrants
are exercisable from March 1996 through March 2001.
As of December 31, 1995, the Company has reserved 623,160 shares of common stock
for these stock options and warrants. Information with respect to stock options
and warrants is as follows:
<TABLE>
<CAPTION>
Shares Under Option/Warrants
Option/Warrants Price Range
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1993 254,400 $ 3.083 - 5.833
Granted 128,400 4.167 - 4.667
Exercised (24,450) 3.083 - 3.920
Cancelled (24,300) 3.500 - 4.500
- ------------------------------------------------------------------------------------------------
Outstanding at December 31, 1993 334,050 3.083 - 5.833
Granted 178,500 4.667 - 6.000
Exercised (30,300) 3.083 - 4.293
Cancelled (24,600) 3.500 - 5.087
- ------------------------------------------------------------------------------------------------
Outstanding at December 31, 1994 457,650 3.083 - 6.000
Granted 109,000 8.875 - 9.375
Exercised (67,050) 3.083 - 6.000
Cancelled (11,700) 4.167 - 6.000
- ------------------------------------------------------------------------------------------------
Outstanding at December 31, 1995 487,900 $ 3.083 - 9.375
================================================================================================
Exercisable at December 31, 1995 196,940 $ 3.083 - 9.375
================================================================================================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4. Income taxes:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effect of
significant items comprising the Company's net deferred tax liability as of
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment $ 288,000 $ 251,000
Capitalized software costs 96,000 187,000
Maintenance costs 78,000 37,000
Other 4,000 4,000
- -----------------------------------------------------------------------------------------------
466,000 479,000
- -----------------------------------------------------------------------------------------------
Deferred tax assets:
Allowance for doubtful accounts 88,000 98,000
Employee expenses not currently deductible 26,000 33,000
Accrued rent expenses 22,000 30,000
Other 20,000 22,000
- -----------------------------------------------------------------------------------------------
156,000 183,000
- -----------------------------------------------------------------------------------------------
Net deferred tax liability $ 310,000 $ 296,000
===============================================================================================
The net deferred tax liability is classified in the balance sheet as follows:
Deferred income taxes $ 358,000 $ 398,000
Deferred tax assets included in other current assets (48,000) (102,000)
- -----------------------------------------------------------------------------------------------
Net deferred tax liability $ 310,000 $ 296,000
===============================================================================================
The provision for income taxes is composed of the following:
1995 1994 1993
- -----------------------------------------------------------------------------------------------
Current:
Federal $ 575,000 $ 592,000 $ 163,000
State 125,000 150,000 42,000
Deferred 14,000 9,000 125,000
- -----------------------------------------------------------------------------------------------
Total $ 714,000 $ 751,000 $ 330,000
===============================================================================================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4. Income taxes (continued):
A reconciliation of the difference between the provision for income taxes and
the income taxes computed at the federal statutory rate is summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes based on federal statutory rate $ 832,000 $ 661,000 $ 323,000
State tax, net of federal tax benefit 84,000 97,000 54,000
Research and development credits (231,000) (22,000) (36,000)
Other 29,000 15,000 (11,000)
- ------------------------------------------------------------------------------------------------
Provision for income taxes $ 714,000 $ 751,000 $ 330,000
================================================================================================
</TABLE>
Research and development credits in 1995 include additional amounts which have
been made available from prior years as a result of a recent change in tax
regulations. This reduced the Company's provision for income taxes for the year
ended December 31, 1995, by $150,000, or $.04 per share.
NOTE 5. Commitments:
The Company leases its corporate offices under a noncancelable lease expiring in
1998. The lease provides for payment by the Company of property taxes,
maintenance and other operating costs. The Company has the option of renewing
the lease for two additional five year terms. The Company also leases equipment
and other office facilities under noncancelable operating leases. Total rent
expense under these leases was $711,000, $685,000, and $632,000 in 1995, 1994,
and 1993, respectively.
Future minimum rentals under these leases as of December 31, 1995 are as
follows:
Years ending December 31,
1996 $ 752,000
1997 799,000
1998 676,000
1999 208,000
2000 195,000
Thereafter 452,000
- -----------------------------
Total $3,082,000
=============================
NOTE 6. Employee benefit plan:
The Company has a retirement plan, under the provisions of Section 401(k) of the
Internal Revenue Code covering substantially all employees. Under the terms of
the plan, employees may make contributions computed on a percentage of pay. The
Company may match employee contributions up to a set percentage of pay. The
Company may, at its discretion, make an additional year-end contribution out of
profits. Contributions by the Company under the plan were $304,000 in 1995,
$223,000 in 1994 and $186,000 in 1993.
<PAGE>
NOTE 7. Quarterly financial information (unaudited):
<TABLE>
<CAPTION>
Net Cost and Net Earnings
Revenue Expenses Income per Share
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
1st quarter $ 5,893,559 $ 5,598,792 $ 233,580 $ .07
2nd quarter 5,971,222 5,610,434 287,863 .08
3rd quarter 5,766,128 5,426,971 294,045 .08
4th quarter 7,188,456 6,095,023 917,255(1) .25
1994
1st quarter $ 4,682,989 $ 4,657,647 $ 44,270 $ .01
2nd quarter 4,901,163 4,642,104 179,373 .05
3rd quarter 5,491,851 5,017,047 312,079 .09
4th quarter 6,564,843 5,549,085 658,729 .19
</TABLE>
(1) In the fourth quarter 1995, the Company benefitted from a change in tax
regulations which allowed additional research and development credits from prior
years. This decreased income tax expense and increased net income for this
quarter by $150,000, or $.04 per share.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
There is hereby incorporated by reference the information under the captions
"Election of Directors" and "Compliance with Section 16(a) of the Securities
Exchange Act" in the Company's definitive Proxy Statement filed pursuant to
Regulation 14A with the Securities and Exchange Commission on or about March 15,
1996.
ITEM 10. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under the caption
"Executive Compensation" in the Company's definitive Proxy Statement filed
pursuant to Regulation 14A with the Securities and Exchange Commission on or
about March 15, 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
There is hereby incorporated by reference the information under the caption
"Voting Securities and Principal Holders Thereof" in the Company's definitive
Proxy Statement filed pursuant to Regulation 14A with the Securities and
Exchange Commission on or about March 15, 1996.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Page
----
a. Exhibits
ARTICLES OF INCORPORATION AND BYLAWS
3(i) - Amended and Restated Articles of Incorporation
(Incorporated by reference to Exhibit 3.1
of Annual Report on Form 10-K for the
year ended December 31, 1990)
3(ii) - Amended and Restated Bylaws (incorporated by reference
to Exhibit 3.2 of Annual Report on Form 10-K for the
year ended December 31, 1990)
MATERIAL CONTRACTS
*10.1 - 1987 Non-Qualified Stock Option Plan (Incorporated
by reference to Exhibit 10.1 of Annual Report on
Form 10-K for the year ended December 31, 1990)
*10.1(a) - Amendment No.1 to 1987 Non-Qualified Stock Option Plan 28
*10.2 - 1989 Non-Qualified Stock Option Plan (Incorporated
by reference to Exhibit 10.2 of Annual Report on
Form 10-K for the year ended December 31, 1990)
*10.2(a) - Amendment No. 1 to 1989 Non-Qualified Stock Option Plan 35
10.3 - Form of Indemnification Agreement and signature
pages for all indemnitees (Incorporated by reference
to Exhibit 10.3 of Annual Report on Form 10-K for the
year ended December 31, 1990)
*10.4 - Timberline Employees' Retirement Plan
(Incorporated by reference to Exhibit 10.4 of Annual
Report on Form 10-K for the year ended December 31, 1990)
*10.5 - First and Second Amendments to Timberline Software
Corporation Employees' Retirement Plan (Incorporated
by reference to Exhibit 10.5 of Annual Report on
Form 10-K for the year ended December 31, 1992)
*10.5(a) - Article A - Appendix to Basic Plan Document of Timberline
Software Corporation Employees' Retirement Plan
(Incorporated by reference to Exhibit 10.5(a) of
Annual Report on Form 10-KSB for the year ended
December 31, 1994)
*10.5(b) - Article B - Appendix to Basic Plan Document of
Timberline Software Corporation Employees'
Retirement Plan (Incorporated by reference to
Exhibit 10.5(b) of Annual Report on Form 10-KSB for
the year ended December 31, 1994)
*10.5(c) - Third Amendment to Timberline Software Corporation
Employees' Retirement Plan 42
*10.6 - 1993 Stock Incentive Plan (Incorporated by
reference to Exhibit 10 of Quarterly Report on
Form 10-Q for the three months ended June 30, 1993)
10.7 - Warrant Agreement by and between the Company
and McDonald's Corporation dated as of March 10, 1994
(Incorporated by reference to Exhibit 10.1 of Quarterly
Report on Form 10-QSB for the three months ended
June 30, 1994)
* Management contract or compensatory plan or arrangement
CONSENTS
23 - Independent Auditors' Consent 45
MISCELLANEOUS
27 - Financial Data Schedule 46
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December 31,
1995.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TIMBERLINE SOFTWARE CORPORATION
by /s/ Thomas P. Cox 3/26/96
--------------------------------- ------------------------
Thomas P. Cox Date
Senior Vice President-Finance
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ John Gorman 3/26/96
- -------------------------------------- ------------------------
John Gorman Date
President, Chief Executive Officer and
Chairman of the Board of Directors
/s/ Thomas P. Cox 3/26/96
- -------------------------------------- ------------------------
Thomas P. Cox Date
Senior Vice President-Finance
Chief Financial Officer
/s/ Leslie F. Clark, II 3/26/96
- -------------------------------------- ------------------------
Leslie F. Clarke, II Date
Executive Vice President, Director
/s/ James A. Meyer 3/26/96
- -------------------------------------- ------------------------
James A. Meyer Date
Director
/s/ Donald L. Tisdel 3/26/96
- -------------------------------------- ------------------------
Donald L. Tisdel Date
Director
/s/ Carl C. Asai 3/26/96
- -------------------------------------- ------------------------
Carl C. Asai Date
Controller
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
FORM 10-KSB FOR YEAR ENDED DECEMBER 31, 1995
EXHIBIT INDEX
-------------
Page
----
ARTICLES OF INCORPORATION AND BYLAWS
3(i) - Amended and Restated Articles of Incorporation
(Incorporated by reference to Exhibit 3.1 of
Annual Report on Form 10-K for the
year ended December 31, 1990)
3(ii) - Amended and Restated Bylaws (incorporated by reference
to Exhibit 3.2 of Annual Report on Form 10-K for the
year ended December 31, 1990)
MATERIAL CONTRACTS
*10.1 - 1987 Non-Qualified Stock Option Plan (Incorporated
by reference to Exhibit 10.1 of Annual Report on
Form 10-K for the year ended December 31, 1990)
*10.1(a) - Amendment No.1 to 1987 Non-Qualified Stock Option Plan 28
*10.2 - 1989 Non-Qualified Stock Option Plan (Incorporated
by reference to Exhibit 10.2 of Annual Report on
Form 10-K for the year ended December 31, 1990)
*10.2(a) - Amendment No. 1 to 1989 Non-Qualified Stock Option Plan 35
10.3 - Form of Indemnification Agreement and signature
pages for all indemnitees (Incorporated by reference
to Exhibit 10.3 of Annual Report on Form 10-K for the
year ended December 31, 1990)
*10.4 - Timberline Employees' Retirement Plan
(Incorporated by reference to Exhibit 10.4 of Annual
Report on Form 10-K for the year ended December 31, 1990)
*10.5 - First and Second Amendments to Timberline Software
Corporation Employees' Retirement Plan (Incorporated
by reference to Exhibit 10.5 of Annual Report on
Form 10-K for the year ended December 31, 1992)
*10.5(a) - Article A - Appendix to Basic Plan Document of Timberline
Software Corporation Employees' Retirement Plan
(Incorporated by reference to Exhibit 10.5(a) of
Annual Report on Form 10-KSB for the year ended
December 31, 1994)
*10.5(b) - Article B - Appendix to Basic Plan Document of
Timberline Software Corporation Employees'
Retirement Plan (Incorporated by reference to
Exhibit 10.5(b) of Annual Report on Form 10-KSB for
the year ended December 31, 1994)
*10.5(c) - Third Amendment to Timberline Software Corporation
Employees' Retirement Plan 42
*10.6 - 1993 Stock Incentive Plan (Incorporated by
reference to Exhibit 10 of Quarterly Report on
Form 10-Q for the three months ended June 30, 1993)
10.7 - Warrant Agreement by and between the Company
and McDonald's Corporation dated as of March 10, 1994
(Incorporated by reference to Exhibit 10.1 of Quarterly
Report on Form 10-QSB for the three months ended
June 30, 1994)
* Management contract or compensatory plan or arrangement
CONSENTS
23 - Independent Auditors' Consent 45
MISCELLANEOUS
27 - Financial Data Schedule 46
EXHIBIT 10.1(a)
AMENDMENT NO. 1
TO
TIMBERLINE SOFTWARE CORPORATION
1987 NON-QUALIFIED STOCK OPTION PLAN
This Amendment No. 1 (this "Amendment"), dated as of November 15, 1995,
is to the 1987 Non-Qualified Stock Option Plan (the "Plan") of Timberline
Software Corporation, an Oregon corporation (the "Company").
BACKGROUND
The Compensation Committee of the Board of Directors of the Company
desires to amend the Plan to make it more consistent with the Company's 1993
Stock Incentive Plan. Section 14.1 of the Plan grants the Compensation Committee
the authority to amend the Plan with respect to the matters addressed in this
Amendment.
AGREEMENT
The following changes are hereby made to the Plan:
1. ADMINISTRATION. The following is hereby added to the end
of Section 2.1 of the Plan:
"At any time when the officers and directors of the Company are subject
to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Plan Administrators shall consist solely of "disinterested"
directors as such term is defined from time to time in
Rule 16b-3 under the Exchange Act."
2. ELIGIBILITY AND PARTICIPATION. Section 3 of the Plan is
hereby deleted and replaced in its entirety by the following:
"3. ELIGIBILITY AND PARTICIPATION. All officers and key employees of
the Company or its parent or subsidiary corporations shall be eligible
for selection to participate in the Plan. The Plan Administrators shall
determine and designate from time to time the individuals to whom
options shall be granted, the number of shares subject to such options,
and the other terms and conditions of the options. No person shall be
eligible to receive any option under the Plan while such person serves
as a member of the Company's Compensation Committee. An individual who
has been granted an option, if otherwise eligible and subject to the
limitations
<PAGE>
contained in the Plan, may be granted additional options if the Plan
Administrators so determine. Any options granted under this Plan shall
be granted within ten (10) years from the date of adoption of this Plan
by the Board of Directors."
3. DURATION OF OPTIONS. Section 5.2 of the Plan is hereby
amended by replacing "Board of Directors" with "Plan
Administrators" in the first sentence.
4. TERMS OF OPTIONS. Section 6 of the Plan is hereby
deleted and replaced in its entirety by the following:
"6. EXERCISE
6.1 EXERCISE OF OPTIONS. Except as provided in Section 6.3 or
as determined by the Plan Administrators, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee
is employed by the Company or any parent or subsidiary corporation of
the Company and shall have been so employed continuously since the date
such option was granted. Absence on leave or on account of illness or
disability under rules established by the Plan Administrators shall
not, however, be deemed an interruption of employment for purposes of
the Plan. Unless otherwise determined by the Plan Administrators,
vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. No option
may be exercised by an officer or director of the Company within six
months of the date of grant. Except as provided in Sections 6.3, 8 and
9, options granted under the Plan may be exercised from time to time
over the period stated in each option in such amounts and at such times
as shall be prescribed by the Plan Administrators; PROVIDED, HOWEVER,
that options shall not be exercised for fractional shares.
6.2 NONTRANSFERABILITY. Each option granted under the Plan by
its terms shall be nonassignable and nontransferable by the optionee,
either voluntarily or by operation of law, except by will or by the
laws of descent and distribution of the state or country of the
optionee's domicile at the time of death; PROVIDED, HOWEVER, that with
the consent of the Plan Administrators, options may be assigned or
transferred pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended (the "Code"), or Title
I of the Employee Retirement Income Security Act, as amended ("ERISA"),
or the rules thereunder. Each option granted under the Plan by its
terms shall be exercisable during the optionee's lifetime
<PAGE>
only by the optionee, or his or her permitted assignee or transferee
pursuant to such a qualified domestic relations order.
6.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) In the event the employment of the optionee by the Company
or a parent or subsidiary corporation of the Company terminates for any
reason other than because of death or physical disability, the option
may be exercised at any time prior to the expiration date of the option
or the expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination.
(b) In the event of the termination of the optionee's
employment with the Company or a parent or subsidiary corporation of
the Company because the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code), the option may be exercised at any
time prior to the expiration date of the option or the expiration of
one year after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.
(c) In the event of the death of an optionee while employed by
the Company or a parent or subsidiary corporation of the Company, the
option may be exercised at any time prior to the expiration date of the
option or the expiration of one year after the date of such death,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option on the date of death, and
only by the person or persons to whom such optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(d) The Plan Administrators, at the time of grant or at any
time thereafter, may extend the three-month and one-year expiration
periods any length of time not later than the original expiration date
of the option, and may increase the portion of an option that is
exercisable, subject to such terms and conditions as the Plan
Administrators may determine.
(e) To the extent that the option of any deceased optionee or
of any optionee whose employment terminates is not exercised within the
applicable period, all
<PAGE>
further rights to purchase shares pursuant to such option shall cease
and terminate.
6.4 PURCHASE OF SHARES. Unless the Plan Administrators
determine otherwise, shares may be acquired pursuant to an option only
upon receipt by the Company of notice in writing from the optionee of
the optionee's intention to exercise, specifying the number of shares
as to which the optionee desires to exercise the option and the date on
which the optionee desires to complete the transaction. Unless the Plan
Administrators determine otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Plan Administrators,
cash that may be the proceeds of a loan from the Company), or, with the
consent of the Plan Administrators, in whole or in part, in shares
valued at Fair Market Value, as determined pursuant to Section 5.3.
Unless the Plan Administrators determine otherwise, all payments made
to the Company in connection with the exercise of an option must be
made by a certified or cashier's bank check or by the transfer of
immediately available federal funds. No shares shall be issued until
full payment therefor has been made. With the consent of the Plan
Administrators, an optionee may request the Company to apply
automatically the shares to be received upon the exercise of a portion
of a stock option (even though stock certificates have not yet been
issued) to satisfy the purchase price for additional portions of the
option. Each optionee who has exercised an option shall immediately
upon notification of the amount due, if any, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company
or any parent or subsidiary corporation of the Company may withhold
that amount from other amounts or property payable to the optionee by
the Company or the parent or subsidiary corporation, including salary
and shares issuable upon exercise of the option, subject to applicable
law. With the consent of the Plan Administrators, an optionee may
deliver shares to the Company to satisfy the withholding obligation."
5. ADJUSTMENTS. Sections 8, 9 and 10 of the Plan are hereby
deleted and replaced in their entirety by the following:
<PAGE>
"8. CHANGES IN CAPITAL STRUCTURE. If the outstanding shares of Common
Stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
recapitalization, reclassification, stock split, combination of shares
or dividend payable in shares, the Plan Administrators shall make
appropriate adjustments (a) in the number and kind of shares available
for grants of options under the Plan; and (b) in the number and kind of
shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the participant's
proportionate interest before and after the occurrence of the event is
maintained; PROVIDED, HOWEVER, that this Section 8 shall not apply with
respect to transactions referred to in Section 9. The Plan
Administrators may also require that any securities issued in respect
of or exchanged for shares issued hereunder that are subject to
restrictions be subject to similar restrictions. Notwithstanding the
foregoing, the Plan Administrators shall have no obligation to effect
any adjustment that would or might result in the issuance of fractional
shares, and any fractional shares resulting from any adjustment may be
disregarded or provided for in any manner determined by the Plan
Administrators. Any such adjustment made by the Plan Administrators
shall be conclusive.
9. EFFECT OF REORGANIZATION OR LIQUIDATION.
9.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK. Except as
provided in Section 9.2, upon a merger, consolidation, reorganization,
plan of exchange or liquidation involving the Company, as a result of
which the shareholders of the Company receive cash, stock or other
property in exchange for or in connection with their Common Stock (any
such transaction to be referred to in this Section 9 as an
"Accelerating Event"), any option granted hereunder shall terminate,
except as specified in the following sentence, but the optionee shall
have the right during the 30-day period immediately prior to any such
Accelerating Event to elect to exercise his or her option, in whole or
in part, without any limitation on exercisability; PROVIDED, HOWEVER,
that such exercise shall be deemed to occur immediately prior to such
Accelerating Event and shall be contingent upon the occurrence of such
Accelerating Event. With respect to an option granted to an officer or
director subject to Section 16 of the Exchange Act, less than six
months prior to any Accelerating Event, such officer or director shall
have the right to require the Company to purchase such option or stock
appreciation right at a purchase price computed pursuant to Section
<PAGE>
9.3 during the 30-day period following the expiration of six months
following the date of such grant, and this right shall apply even if
the option has otherwise terminated pursuant to Section 6.3 following
such Accelerating Event.
9.2 STOCK FOR STOCK. If the shareholders of the Company
receive capital stock of another corporation ("Exchange Stock") in
exchange for their Common Stock in any transaction involving a merger,
consolidation, reorganization, or plan of exchange, all options granted
hereunder shall be converted into options to purchase shares of
Exchange Stock, unless the Plan Administrators, in their sole
discretion, determine that any or all such options granted hereunder
shall not be converted, but instead shall terminate in accordance with
the provisions of Section 9.1. The amount and price of converted
options shall be determined by adjusting the amount and price of the
options granted hereunder to take into account the relative values of
the Exchange Stock and the Company's Common Stock in the transaction.
9.3 PURCHASE PRICE FOR CERTAIN OFFICERS AND DIRECTORS. With
respect to an option granted to an officer or director subject to
Section 16 of the Exchange Act less than six months prior to an
Accelerating Event, the purchase price payable pursuant to Section 9.1
shall be the product of (a) the excess, if any, of the purchase price
paid for each share in the Accelerating Event over the option price,
multiplied by (b) the number of shares covered by the option. However,
no right to require the purchase of any option may be exercised in
connection with an Accelerating Event if the purchase price determined
under this Section 9.3 is negative.
9.4 TRANSFERABILITY. The rights set forth in this Section 9
shall be transferable only to the extent the related option is
transferable.
10. EMPLOYMENT RIGHTS. Nothing in the Plan or any award pursuant to the
Plan shall (a) confer upon any employee any right to be continued in
the employment of the Company or any parent or subsidiary corporation
of the Company or shall interfere in any way with the right of the
Company or any parent or subsidiary corporation of the Company by whom
such employee is employed to terminate such employee's employment at
any time, for any reason, with or without cause, or to increase or
decrease such employee's compensation or benefits; or (b) confer upon
any person engaged by the Company or any parent or subsidiary
corporation of the Company any right to be retained or employed by the
Company or the parent or
<PAGE>
subsidiary or to the continuation, extension, renewal, or
modification of any compensation, contract, or
arrangement with or by the Company or the parent or
subsidiary."
6. DELETED PROVISIONS. The text of Sections 12 and 13 of
the Plan are hereby deleted and replaced in each case by the words
"Intentionally omitted."
7. NO FURTHER MODIFICATIONS. Except as specifically
modified in this Amendment, the Plan shall remain unmodified and in
full force.
IN WITNESS WHEREOF, this Amendment was duly approved by the
Compensation Committee of the Board of Directors of the Company as of November
15, 1995.
/s/ James A. Meyer /s/ Donald L. Tisdel
- ----------------------------- --------------------
James A. Meyer Donald L. Tisdel
Compensation Committee Member Compensation Committee Member
EXHIBIT 10.2(a)
AMENDMENT NO. 1
TO
TIMBERLINE SOFTWARE CORPORATION
1989 NON-QUALIFIED STOCK OPTION PLAN
This Amendment No. 1 (this "Amendment"), dated as of November 15, 1995,
is to the 1989 Non-Qualified Stock Option Plan (the "Plan") of Timberline
Software Corporation, an Oregon corporation (the "Company").
BACKGROUND
The Compensation Committee of the Board of Directors of the Company
desires to amend the Plan to make it more consistent with the Company's 1993
Stock Incentive Plan. Section 14.1 of the Plan grants the Compensation Committee
the authority to amend the Plan with respect to the matters addressed in this
Amendment.
AGREEMENT
The following changes are hereby made to the Plan:
1. ADMINISTRATION. The following is hereby added to the end
of Section 2.1 of the Plan:
"At any time when the officers and directors of the Company are subject
to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Plan Administrators shall consist solely of "disinterested"
directors as such term is defined from time to time in
Rule 16b-3 under the Exchange Act."
2. ELIGIBILITY AND PARTICIPATION. Section 3 of the Plan is
hereby deleted and replaced in its entirety by the following:
"3. ELIGIBILITY AND PARTICIPATION. All officers and key employees of
the Company or its parent or subsidiary corporations shall be eligible
for selection to participate in the Plan. The Plan Administrators shall
determine and designate from time to time the individuals to whom
options shall be granted, the number of shares subject to such options,
and the other terms and conditions of the options. No person shall be
eligible to receive any option under the Plan while such person serves
as a member of the Company's Compensation Committee. An individual who
has been granted an option, if otherwise eligible and subject to the
limitations contained in the Plan, may be granted additional options if
the Plan Administrators so determine. Any options
<PAGE>
granted under this Plan shall be granted within ten (10) years from the
date of adoption of this Plan by the Board of Directors."
3. DURATION OF OPTIONS. Section 5.2 of the Plan is hereby
amended by replacing "Board of Directors" with "Plan
Administrators" in the first sentence.
4. TERMS OF OPTIONS. Section 6 of the Plan is hereby
deleted and replaced in its entirety by the following:
"6. EXERCISE
6.1 EXERCISE OF OPTIONS. Except as provided in Section 6.3 or
as determined by the Plan Administrators, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee
is employed by the Company or any parent or subsidiary corporation of
the Company and shall have been so employed continuously since the date
such option was granted. Absence on leave or on account of illness or
disability under rules established by the Plan Administrators shall
not, however, be deemed an interruption of employment for purposes of
the Plan. Unless otherwise determined by the Plan Administrators,
vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. No option
may be exercised by an officer or director of the Company within six
months of the date of grant. Except as provided in Sections 6.3, 8 and
9, options granted under the Plan may be exercised from time to time
over the period stated in each option in such amounts and at such times
as shall be prescribed by the Plan Administrators; PROVIDED, HOWEVER,
that options shall not be exercised for fractional shares.
6.2 NONTRANSFERABILITY. Each option granted under the Plan by
its terms shall be nonassignable and nontransferable by the optionee,
either voluntarily or by operation of law, except by will or by the
laws of descent and distribution of the state or country of the
optionee's domicile at the time of death; PROVIDED, HOWEVER, that with
the consent of the Plan Administrators, options may be assigned or
transferred pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended (the "Code"), or Title
I of the Employee Retirement Income Security Act, as amended ("ERISA"),
or the rules thereunder. Each option granted under the Plan by its
terms shall be exercisable during the optionee's lifetime only by the
optionee, or his or her permitted assignee or
<PAGE>
transferee pursuant to such a qualified domestic
relations order.
6.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) In the event the employment of the optionee by the Company
or a parent or subsidiary corporation of the Company terminates for any
reason other than because of death or physical disability, the option
may be exercised at any time prior to the expiration date of the option
or the expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination.
(b) In the event of the termination of the optionee's
employment with the Company or a parent or subsidiary corporation of
the Company because the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code), the option may be exercised at any
time prior to the expiration date of the option or the expiration of
one year after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.
(c) In the event of the death of an optionee while employed by
the Company or a parent or subsidiary corporation of the Company, the
option may be exercised at any time prior to the expiration date of the
option or the expiration of one year after the date of such death,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option on the date of death, and
only by the person or persons to whom such optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(d) The Plan Administrators, at the time of grant or at any
time thereafter, may extend the three-month and one-year expiration
periods any length of time not later than the original expiration date
of the option, and may increase the portion of an option that is
exercisable, subject to such terms and conditions as the Plan
Administrators may determine.
(e) To the extent that the option of any deceased optionee or
of any optionee whose employment terminates is not exercised within the
applicable period, all further rights to purchase shares pursuant to
such option shall cease and terminate.
<PAGE>
6.4 PURCHASE OF SHARES. Unless the Plan Administrators
determine otherwise, shares may be acquired pursuant to an option only
upon receipt by the Company of notice in writing from the optionee of
the optionee's intention to exercise, specifying the number of shares
as to which the optionee desires to exercise the option and the date on
which the optionee desires to complete the transaction. Unless the Plan
Administrators determine otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Plan Administrators,
cash that may be the proceeds of a loan from the Company), or, with the
consent of the Plan Administrators, in whole or in part, in shares
valued at Fair Market Value, as determined pursuant to Section 5.3.
Unless the Plan Administrators determine otherwise, all payments made
to the Company in connection with the exercise of an option must be
made by a certified or cashier's bank check or by the transfer of
immediately available federal funds. No shares shall be issued until
full payment therefor has been made. With the consent of the Plan
Administrators, an optionee may request the Company to apply
automatically the shares to be received upon the exercise of a portion
of a stock option (even though stock certificates have not yet been
issued) to satisfy the purchase price for additional portions of the
option. Each optionee who has exercised an option shall immediately
upon notification of the amount due, if any, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company
or any parent or subsidiary corporation of the Company may withhold
that amount from other amounts or property payable to the optionee by
the Company or the parent or subsidiary corporation, including salary
and shares issuable upon exercise of the option, subject to applicable
law. With the consent of the Plan Administrators, an optionee may
deliver shares to the Company to satisfy the withholding obligation."
5. ADJUSTMENTS. Sections 8, 9 and 10 of the Plan are hereby
deleted and replaced in their entirety by the following:
"8. CHANGES IN CAPITAL STRUCTURE. If the outstanding
shares of Common Stock of the Company are hereafter
increased or decreased or changed into or exchanged for
a different number or kind of shares or other securities
<PAGE>
of the Company or of another corporation by reason of any
recapitalization, reclassification, stock split, combination of shares
or dividend payable in shares, the Plan Administrators shall make
appropriate adjustments (a) in the number and kind of shares available
for grants of options under the Plan; and (b) in the number and kind of
shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the participant's
proportionate interest before and after the occurrence of the event is
maintained; PROVIDED, HOWEVER, that this Section 8 shall not apply with
respect to transactions referred to in Section 9. The Plan
Administrators may also require that any securities issued in respect
of or exchanged for shares issued hereunder that are subject to
restrictions be subject to similar restrictions. Notwithstanding the
foregoing, the Plan Administrators shall have no obligation to effect
any adjustment that would or might result in the issuance of fractional
shares, and any fractional shares resulting from any adjustment may be
disregarded or provided for in any manner determined by the Plan
Administrators. Any such adjustment made by the Plan Administrators
shall be conclusive.
9. EFFECT OF REORGANIZATION OR LIQUIDATION.
9.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK. Except as
provided in Section 9.2, upon a merger, consolidation, reorganization,
plan of exchange or liquidation involving the Company, as a result of
which the shareholders of the Company receive cash, stock or other
property in exchange for or in connection with their Common Stock (any
such transaction to be referred to in this Section 9 as an
"Accelerating Event"), any option granted hereunder shall terminate,
except as specified in the following sentence, but the optionee shall
have the right during the 30-day period immediately prior to any such
Accelerating Event to elect to exercise his or her option, in whole or
in part, without any limitation on exercisability; PROVIDED, HOWEVER,
that such exercise shall be deemed to occur immediately prior to such
Accelerating Event and shall be contingent upon the occurrence of such
Accelerating Event. With respect to an option granted to an officer or
director subject to Section 16 of the Exchange Act, less than six
months prior to any Accelerating Event, such officer or director shall
have the right to require the Company to purchase such option or stock
appreciation right at a purchase price computed pursuant to Section 9.3
during the 30-day period following the expiration of six months
following the date of such grant, and this right shall apply even if
the option has otherwise
<PAGE>
terminated pursuant to Section 6.3 following such
Accelerating Event.
9.2 STOCK FOR STOCK. If the shareholders of the Company
receive capital stock of another corporation ("Exchange Stock") in
exchange for their Common Stock in any transaction involving a merger,
consolidation, reorganization, or plan of exchange, all options granted
hereunder shall be converted into options to purchase shares of
Exchange Stock, unless the Plan Administrators, in their sole
discretion, determine that any or all such options granted hereunder
shall not be converted, but instead shall terminate in accordance with
the provisions of Section 9.1. The amount and price of converted
options shall be determined by adjusting the amount and price of the
options granted hereunder to take into account the relative values of
the Exchange Stock and the Company's Common Stock in the transaction.
9.3 PURCHASE PRICE FOR CERTAIN OFFICERS AND DIRECTORS. With
respect to an option granted to an officer or director subject to
Section 16 of the Exchange Act less than six months prior to an
Accelerating Event, the purchase price payable pursuant to Section 9.1
shall be the product of (a) the excess, if any, of the purchase price
paid for each share in the Accelerating Event over the option price,
multiplied by (b) the number of shares covered by the option. However,
no right to require the purchase of any option may be exercised in
connection with an Accelerating Event if the purchase price determined
under this Section 9.3 is negative.
9.4 TRANSFERABILITY. The rights set forth in this Section 9
shall be transferable only to the extent the related option is
transferable.
10. EMPLOYMENT RIGHTS. Nothing in the Plan or any award pursuant to the
Plan shall (a) confer upon any employee any right to be continued in
the employment of the Company or any parent or subsidiary corporation
of the Company or shall interfere in any way with the right of the
Company or any parent or subsidiary corporation of the Company by whom
such employee is employed to terminate such employee's employment at
any time, for any reason, with or without cause, or to increase or
decrease such employee's compensation or benefits; or (b) confer upon
any person engaged by the Company or any parent or subsidiary
corporation of the Company any right to be retained or employed by the
Company or the parent or subsidiary or to the continuation, extension,
renewal, or modification of any compensation, contract, or
<PAGE>
arrangement with or by the Company or the parent or
subsidiary."
6. DELETED PROVISIONS. The text of Sections 12 and 13 of
the Plan are hereby deleted and replaced in each case by the words
"Intentionally omitted."
7. NO FURTHER MODIFICATIONS. Except as specifically
modified in this Amendment, the Plan shall remain unmodified and in
full force.
IN WITNESS WHEREOF, this Amendment was duly approved by the
Compensation Committee of the Board of Directors of the Company as of November
15, 1995.
/s/ James A. Meyer /s/ Donald L. Tisdel
- ----------------------------- ------------------------------
James A. Meyer Donald L. Tisdel
Compensation Committee Member Compensation Committee Member
THIRD AMENDMENT
TO
TIMBERLINE SOFTWARE CORPORATION
EMPLOYEES' RETIREMENT PLAN
The Chairman announced that the only order of business was the
consideration by the Board of amendments to Section(s) 6.01 and 9.11 of the
Corporation's existing retirement plan. The Chairman further explained that the
Corporation could make the necessary amendments by replacing certain pages of
the plan's adoption agreement. The Chairman then circulated the proposed
amendments to the Directors. After a brief discussion of the proposed
amendments, motion was made, seconded and it was unanimously:
RESOLVED, THAT THE CORPORATION ADOPT THE AMENDMENTS TO SECTION 6.01 AND
9.11 OF THE CORPORATION'S RETIREMENT PLAN CIRCULATED AT THIS MEETING, THE
AMENDMENTS TO BE EFFECTIVE FOR THE PLAN YEAR COMMENCING JANUARY 1, 1995. TO
EFFECT THE AMENDMENTS, THE SECRETARY WILL SUBSTITUTE AMENDED PAGE(S) 24 AND 29
OF THE PLAN'S ADOPTION AGREEMENT IN CIRCULATION FOR THE CORRESPONDING PAGES(S)
PRESENTLY WITHIN THE ADOPTION AGREEMENT. THE SECRETARY WILL RETAIN ONE COPY OF
THE PAGES(S) REMOVED AS A PART OF THE PERMANENT RECORD OF THE CORPORATION.
Dated: March 30, 1995
Employer: Trustee:
/s/John Gorman /s/Thomas P. Cox
- ------------------------------- -------------------------------
Timberline Software Corporation Administrative Committee
<PAGE>
[] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[] (d) Any Year of Service before a Break in Service if the number
of consecutive Breaks in Service equals or exceeds the greater
of 5 or the aggregate number of the Years of Service prior to
the Break. This exception applies only if the Participant is
0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Break in Service.
Furthermore, the aggregate number of Years of Service before a
Break in Service do not include any Years of Service not
required to be taken into account under this exception by
reason of any prior Break in Service.
[] (e) Any Year of Service earned prior to the effective date of ERISA if the
Plan would have disregarded that Year of Service on account of an Employee's
Separation from Service under a Plan provision in effect and adopted before
January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
CODE SECTION 411(d)(6) PROTECTED BENEFITS. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protection benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional
forms of benefit under the Plan, the more liberal options apply on the later of
the adoption date or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
DISTRIBUTION DATE. A distribution date under the Plan means THE
FIRST DATE OF ANY PLAN YEAR. [NOTE: THE EMPLOYER MUST SPECIFY THE
APPROPRIATE DATE(S). THE SPECIFIED DISTRIBUTION DATES PRIMARILY
ESTABLISH ANNUITY STARTING DATES AND THE NOTICE AND CONSENT PERIODS
PRESCRIBED BY THE PLAN. THE PLAN ALLOWS THE TRUSTEE AN
ADMINISTRATIVELY PRACTICABLE PERIOD OF TIME TO MAKE THE ACTUAL
DISTRIBUTION RELATING TO A PARTICULAR DISTRIBUTION DATE.]
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to
the limitations of Section 6.01(A)(1), the distribution date for
distribution of a Nonforfeitable Accrued Benefit not exceeding
$3,500 is: (CHOOSE (a), (b), (c), (d) or (e))
[X] (a) THE FIRST DAY of the FIRST Plan Year beginning after the Participant's
Separation from Service.
[] (b)----------------------------------------------------
following the Participant's Separation from Service.
<PAGE>
[] (c) of the Plan
----------------------------------------------------------
Year after the Participant incurs Break(s) in Service (as defined in
----
Article V).
[] (d) following the participant's attainment of Normal
------------------------
Retirement Age, but not earlier than days following his
---------------
Separation from Service.
[] (e) (SPECIFY)
-------------------------------
------------.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections
under Section 6.03.
Third Amendment Section 6.01 effective January 1, 1995
<PAGE>
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS.
Pursuant to Section 14.12, to determine the allocation of net
income, gain or loss: (COMPLETE ONLY THOSE ITEMS, IF ANY, WHICH
ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) For salary reduction contributions, the Advisory
Committee will: (CHOOSE (1), (2), (3), (4) or (5))
[X] (1) Apply Section 9.11 without modification
[] (2) Use the segregated account approach described in
Section 14.12.
[] (3) Use the weighted average method described in Section 14.12,
based on a weighting period.
[] (4) Treat as part of the relevant Account at the
beginning of the valuation period % of the salary
----
reduction contributions: (CHOOSE (i) or (ii))
[] (i) made during that valuation period.
[] (ii) made by the following specified time:
---
----------------------------------------------
[] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(a).
[X] (b) For matching contributions, the Advisory Committee will:
(CHOOSE (1), (2), (3) or (4))
[X] (1) Apply Section 9.11 without modification.
[] (2) Use the weighted average method described in Section 14.12,
based on a weighting period.
[] (3) Treat as part of the relevant Account at the
beginning of the valuation period % of the matching
---
<PAGE>
contributions allocated during the valuation period.
[] (4) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(b).
[X] (c) For Participant nondeductible contributions, the
Advisory Committee will: (CHOOSE (1), (2), (3), (4) or (5))
[X] (1) Apply Section 9.11 without modification.
[] (2) Use the segregated account approach described in
Section 14.12.
[] (3) Use the weighted average method described in
Section 14.12, based on a weighting period.
[] (4) Treat as part of the relevant Account at the
beginning of the valuation period % of the
---
Participant nondeductible contributions: (CHOOSE (i)
or (ii))
[] (i) made during that valuation period.
Third Amendment Sections 9.11(a)(1), (b)(1), (c)(1) effective
January 1, 1995.
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Timberline Software Corporation:
We consent to the incorporation by reference in Registration Statements Nos.
33-46716 and 33-69820 on Form S-8 and Registration Statement No. 33-78530 on
Form S-3 of our report dated January 25, 1996 appearing in this Annual Report on
Form 10-KSB of Timberline Software Corporation for the year ended December 31,
1995.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Portland, Oregon
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TIMBERLINE SOFTWARE CORPORATION'S FINANCIAL STATEMENTS CONTAINED IN ITS
ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 3,856,533
<SECURITIES> 3,439,000
<RECEIVABLES> 3,411,646
<ALLOWANCES> 225,909
<INVENTORY> 326,311
<CURRENT-ASSETS> 11,502,796
<PP&E> 5,738,256
<DEPRECIATION> 3,374,494
<TOTAL-ASSETS> 14,384,888
<CURRENT-LIABILITIES> 7,609,236
<BONDS> 0
0
0
<COMMON> 345,906
<OTHER-SE> 6,014,855
<TOTAL-LIABILITY-AND-EQUITY> 14,384,888
<SALES> 13,435,099
<TOTAL-REVENUES> 24,819,365
<CGS> 2,836,423
<TOTAL-COSTS> 22,731,220
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 725
<INCOME-PRETAX> 2,446,743
<INCOME-TAX> 714,000
<INCOME-CONTINUING> 1,732,743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,732,743
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
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