SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
Bottomline Technologies (de), Inc.
(Exact Name of Registrant as Specified in Its Charter)
Commission file number: 0-25259
Delaware 02-0433294
------------------------------ ---------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
|
Registrant's Telephone Number, Including Area Code: (603) 436-0700
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
The number of shares outstanding of the registrant's common stock as of November 9, 2001 was 13,817,860.
INDEX
Page No.
----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2001 and
June 30, 2001 1
Unaudited Condensed Consolidated Statements of Operations for the three months
ended September 30, 2001 and 2000 2
Unaudited Condensed Consolidated Statements of Cash Flows for the three months
ended September 30, 2001 and 2000 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes In Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Bottomline Technologies (de), Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2001 June 30, 2001
----------------- ---------------
Assets
Current assets:
Cash and cash equivalents $ 14,451 $ 13,247
Marketable securities 248 -
Accounts receivable, net of allowance for doubtful accounts and
returns of $1,777 at September 31, 2001 and $1,730 at June 30,
2001 17,354 18,871
Other current assets 4,396 4,930
-------- --------
Total current assets 36,449 37,048
Property, plant and equipment, net 6,110 6,316
Goodwill and other intangible assets, net 65,220 71,766
Other assets 866 1,319
-------- --------
Total assets $108,645 $116,449
======== ========
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable $ 6,348 $ 6,408
Accrued expenses 4,813 5,579
Deferred revenue and deposits 12,213 11,498
-------- --------
Total current liabilities 23,374 23,485
Stockholders' equity:
Common stock 14 14
Additional paid-in-capital 144,800 144,709
Deferred compensation (784) (902)
Accumulated other comprehensive loss (688) (3,069)
Retained deficit (58,071) (47,788)
-------- --------
Total stockholders' equity 85,271 92,964
-------- --------
Total liabilities and stockholders' equity $108,645 $116,449
======== ========
|
See accompanying notes to unaudited condensed consolidated financial statements.
Bottomline Technologies (de), Inc. Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
September 30,
2001 2000
-------- --------
Revenues:
Software licenses $ 3,806 $ 5,696
Service and maintenance 9,279 6,845
Equipment and supplies 4,938 3,544
-------- -------
Total revenues 18,023 16,085
Cost of revenues:
Software licenses 396 221
Service and maintenance 4,370 3,507
Equipment and supplies 3,489 2,725
-------- -------
Total cost of revenues 8,255 6,453
-------- -------
Gross profit 9,768 9,632
Operating expenses:
Sales and marketing:
Sales and marketing 4,572 6,069
Product development and engineering:
Product development and engineering 3,450 2,884
Stock compensation expense 100 37
General and administrative:
General and administrative 3,184 2,605
Amortization of intangible assets 8,353 3,320
-------- -------
Total operating expenses 19,659 14,915
-------- -------
Loss from operations (9,891) (5,283)
Other income (expense), net (332) 264
-------- -------
Loss before provision for income taxes (10,223) (5,019)
Provision for income taxes 60 1,922
-------- -------
Net loss $(10,283) $(6,941)
======== =======
Net loss per share:
Basic and diluted $ (0.75) $ (0.59)
======== =======
Shares used in computing net loss per share:
Basic and diluted 13,776 11,820
======== =======
|
See accompanying notes to unaudited condensed consolidated financial statements.
Bottomline Technologies (de), Inc. Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended
September 30,
2001 2000
--------- ---------
Operating activities:
Net loss $(10,283) $ (6,941)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Amortization of intangible assets 8,353 3,320
Depreciation and amortization of property and equipment 906 729
Deferred income tax expense 40 2,106
Provision for allowances on accounts receivable 265 75
Provision for allowances for obsolescence of inventory 21 -
Deferred compensation expense 100 37
Changes in operating assets and liabilities:
Accounts receivable 1,541 (4,154)
Inventory, prepaid expenses, refundable taxes, and other current assets and
other assets 1,282 (242)
Accounts payable, accrued expenses, income taxes payable and deferred
revenue and deposits (282) 2,040
-------- --------
Net cash provided by (used in) operating activities 1,943 (3,030)
Investing activities:
Purchases of property and equipment, net (608) (828)
Sales (purchases) of marketable securities, net (247) 5,030
Increase in equity investments - (1,400)
Acquisition of businesses and assets, net of cash acquired - (11,415)
-------- --------
Net cash used in investing activities (855) (8,613)
Financing activities:
Proceeds from exercise of stock options and employee stock purchase plan 372 784
Repurchase of common stock (264) -
Payment of certain liabilities assumed upon acquisition - (10,272)
-------- --------
Net cash provided by (used in) financing activities 108 (9,488)
Effect of exchange rate changes on cash 8 (12)
-------- --------
Increase (decrease) in cash and cash equivalents 1,204 (21,143)
Cash and cash equivalents at beginning of period 13,247 27,292
-------- --------
Cash and cash equivalents at end of period $ 14,451 $ 6,149
======== ========
Schedule of non-cash investing and financing activities
Issuance of common stock, common stock options and common stock warrants in
connection with acquisitions $ - $56,558
Issuance of promissory notes in connection with acquisitions $ - $20,356
|
See accompanying notes to unaudited condensed consolidated financial statements.
Bottomline Technologies (de), Inc.
Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2001
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the interim financial information have been included. Operating results for the three months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2002. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC).
In September 2000, the Financial Accounting Standards Board Emerging Issues Task Force (EITF) published its consensus on EITF No. 00-10, "Accounting for Shipping and Handling Fees and Costs", which required that all shipping and handling amounts billed to a customer be classified as revenue. The Company adopted EITF 00-10 effective April 1, 2001. Prior to adoption, the Company had recorded such amounts as a reduction to cost of sales. Financial statements for prior periods presented for comparative purposes have been reclassified to comply with the classification guidelines of EITF 00-10.
Note 2 - Business Combinations
The Company acquired the stock of two companies, Checkpoint Holdings, Ltd. (Bottomline Europe) and Flashpoint, Inc. (Flashpoint) on August 28, 2000. These acquisitions have been accounted for as purchases. Accordingly, the accompanying unaudited condensed consolidated financial statements include the results of operations and the estimated fair values of the assets acquired and liabilities assumed from the respective date of acquisition.
The following unaudited pro forma financial information presents the combined results of operations of the Company, Bottomline Europe and Flashpoint as if the acquisitions had occurred as of the beginning of the three months ended September 30, 2000, after giving effect to certain adjustments, including amortization of goodwill and other intangible assets. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company, Bottomline Europe and Flashpoint been a single entity during such period.
Pro Forma
Three Months Ended
September 30, 2000
-----------
(unaudited)
(in thousands,
except per share amounts)
Revenues $ 20,612
Net loss $(13,301)
Net loss per share $ (1.04)
|
Note 3 - Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended
September 30,
2001 2000
---------- ----------
(in thousands,
except per share amounts)
Numerator:
Numerator for basic and diluted net loss per share $(10,283) $(6,941)
======== ========
Denominator:
Denominator for basic and diluted net loss per share -
weighted-average shares outstanding 13,776 11,820
======== ========
Net loss per share:
Basic and diluted $ (0.75) $ (0.59)
======== ========
|
The effect of outstanding stock options and warrants are excluded from the calculation of diluted net loss per share for the three months ended September 30, 2001 and 2000 as their effect would be anti-dilutive.
Note 4 - Comprehensive Loss
Comprehensive loss represents net loss plus the results of certain stockholders' equity changes not reflected in the unaudited condensed consolidated statements of operations. The components of comprehensive loss, net of tax, are as follows:
Three Months Ended
September 30,
2001 2000
------- -------
(unaudited)
(in thousands)
Net loss $(10,283) $(6,941)
Other comprehensive income (loss):
Foreign currency translation adjustments 2,387 341
Unrealized gain (loss) on investments (6) 16
-------- -------
Comprehensive loss $ (7,902) $(6,584)
======== =======
|
Note 5 - Operations by Industry Segments and Geographic Area
The Company is a global designer and developer of financial software solutions that are sold to businesses and financial institutions. As permitted by the provisions of Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosure About Segments of an Enterprise and Related Information", the Company has one reportable segment for financial statement purposes.
Prior to the acquisition of Checkpoint on August 28, 2000, the Company did not have material operations outside the United States. Net sales, based on the point of sales, not the location of the customer are as follows:
Three Months Ended
September 30,
2001 2000
--------- ---------
(unaudited)
(in thousands)
Sales to unaffiliated customers:
United States $10,463 $12,805
United Kingdom 7,560 3,280
------- -------
Total sales to unaffiliated customers $18,023 $16,085
======= =======
|
At September 31, 2001, long-lived assets of approximately $20,208,000 and $51,988,000 were located in the United States and United Kingdom, respectively. At June 30, 2001, long-lived assets of approximately $22,900,000 and $56,500,000 were located in the United States and United Kingdom, respectively.
Note 6 - Income Taxes
In the three months ended September 30, 2001, the Company incurred a substantial operating loss due primarily to the amortization of recently acquired intangible assets. Since amortization expense will continue to be incurred and the Company has utilized its income tax loss carryback benefit, the Company determined that the deferred tax assets are less likely, rather than more likely, to be realized. Accordingly, the Company has recorded a full valuation allowance for its deferred tax assets as of September 30, 2001.
Note 7 - Recent Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards, among other things, eliminate the pooling of interests method of accounting for future acquisitions and require that goodwill no longer be amortized, but instead be subject to impairment testing on at least an annual basis. SFAS No. 141 was effective for all business combinations completed after June 30, 2001.
SFAS No. 142 must be adopted for fiscal years beginning after December 15, 2001 (fiscal 2003 for the Company). Under the provision of SFAS No. 142, intangible assets with definite useful lives will be amortized to their estimable residual values over those estimated useful lives in proportion to the economic benefits consumed. Such intangible assets remain subject to the impairment provisions of SFAS No. 121. Goodwill and intangible assets with indefinite useful lives will be tested for impairment annually in lieu of being amortized. Goodwill and intangible assets acquired prior to July 1, 2001 will continue to be amortized until adoption of SFAS No. 142.
Upon adoption of SFAS No. 142, we will cease our annual amortization of goodwill. Our current annual amortization of goodwill is approximately $24 million. The Company currently plans to adopt SFAS No. 142 effective July 1, 2002 (fiscal year 2003).
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets. " SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and provides a single accounting model for the disposal of long-lived assets. The Company is required to adopt SFAS No. 144 for the fiscal year beginning after December 15, 2001 (fiscal year 2003) and does not believe it will have a significant impact on its consolidated financial statements.
Note 8 - Subsequent Events
In October 2001, the Company entered into a lease amendment for its new headquarters facility. In connection with the amendment, the Company reduced the amount of space leased from approximately 83,000 square feet to approximately 62,000 square feet and delayed
occupancy to May 2002. In connection with this lease amendment, the Company issued a $2 million irrevocable Letter of Credit to the landlord, secured by $2 million in cash. The Company anticipates closing on an unsecured credit facility during the second quarter of fiscal 2002 and as such, anticipates that the cash will not be secured at December 31, 2001. Also in connection with the lease amendment, the Company issued to the landlord 100,000 shares of common stock and a warrant, valued using the Black-Scholes method, for the right to purchase a total of 100,000 shares of common stock at an exercise price of $4.25 per share. The warrant, which expires in October 2004, was fully vested and exercisable upon issuance. The fair value of the common stock and warrant issued, $750,000, will be capitalized and amortized as rent expense over the term of the lease.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Without limiting the foregoing, the words "may," will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," "continue" and similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this quarterly report are based on information available to us up to, and including the date of this document, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Factors that May Affect Future Results" and elsewhere in this quarterly report. You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange Commission.
Results of Operations
Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000
Revenues
Total revenues increased by $1.9 million to $18.0 million in the three months ended September 30, 2001 from $16.1 million in the three months ended September 30, 2000, an increase of 12%. The increase was attributable to a full quarter of revenue contribution from Bottomline Europe, offset by delayed business decisions and the disruption of business experienced in the U.S. marketplace during September. Revenues, based on the point of sales, rather than the location of the customer, were $10.4 million and $7.6 million in the United States and United Kingdom, respectively, for the three months ended September 30, 2001. Revenues for the three months ended September 30, 2000 were $12.8 million and $3.3 million in the United States and United Kingdom, respectively.
Software Licenses. Software license fees decreased by $1.9 million to $3.8 million in the three months ended September 30, 2001 from $5.7 million in the three months ended September 30, 2000, a decrease of 33%. Software license fees represented 21% of total revenues in the three months ended September 30, 2001 compared to 35% of total revenues in the three months ended September 30, 2000. The decrease in software license fees was due primarily to the disruption of business experienced in the U.S. marketplace during September, offset by a full quarter of revenue contribution from Bottomline Europe. Based on current product plans, we anticipate software license fees, as a percentage of total revenues, will return to historic percentages by the end of the fiscal year.
Service and Maintenance. Service and maintenance fees increased by $2.5 million to $9.3 million in the three months ended September 30, 2001 from $6.8 million in the three months ended September 30, 2000, an increase of 36%. Service and maintenance fees represented 52% of total revenues in the three months ended September 30, 2001 compared to 43% of total
revenues in the three months ended September 30, 2000. The increase in service and maintenance fees was the result of a full quarter of revenue contribution from Bottomline Europe as well as large service contracts from our installed customer base. Based on current product plans, we anticipate service and maintenance revenue dollars will continue to increase, but will decrease as a percentage of total revenues by the end of the fiscal year.
Equipment and Supplies. Equipment and supplies sales increased by $1.3 million to $4.9 million in the three months ended September 30, 2001 from $3.6 million in the three months ended September 30, 2000, an increase of 39%. Equipment and supplies sales represented 27% of total revenues in the three months ended September 30, 2001 compared to 22% of total revenues in the three months ended September 30, 2000. The increase in equipment and supplies sales was primarily the result of a full quarter of revenue contribution from Bottomline Europe offset by delayed IT and capital spending by businesses in the U.S. marketplace during the fiscal quarter. Based on current product plans, we anticipate equipment and supplies revenues will not change significantly during the remainder of the fiscal year.
Cost of Revenues
Software Licenses. Software license costs increased by $175,000 to $396,000 in the three months ended September 30, 2001 from $221,000 in the three months ended September 30, 2000. Software license costs were 10% of software license fees in the three months ended September 30, 2001 compared to 4% of software license fees in the three months ended September 30, 2000. The increase in software license costs was attributable to a full quarter of contribution from Bottomline Europe which generates lower software license margins than historically experienced by the Company in the U.S. We anticipate software license costs, as a percentage of software license revenues, will not change significantly during the remainder of the fiscal year.
Service and Maintenance. Service and maintenance costs increased by approximately $900,000 to $4.4 million in the three months ended September 30, 2001 from $3.5 million in the three months ended September 30, 2000, an increase of 25%. Service and maintenance costs were 47% of service and maintenance fees in the three months ended September 30, 2001 compared to 51% of service and maintenance fees in the three months ended September 30, 2000 due to higher margins on certain large service contracts. Service and maintenance costs increased due to a full quarter of contribution from Bottomline Europe. We anticipate service and maintenance costs, as a percentage of service and maintenance revenues, will not change significantly during the remainder of the fiscal year.
Equipment and Supplies. Equipment and supplies costs increased by approximately $800,000 to $3.5 million in the three months ended September 30, 2001 from $2.7 million in the three months ended September 30, 2000, an increase of 28%. Equipment and supplies costs were 71% of equipment and supplies sales in the three months ended September 30, 2001 compared to 77% of equipment and supplies sales in the three months ended September 30, 2000. Equipment and supplies costs increased due to a full quarter of contribution from Bottomline Europe, offset by lower costs associated with the lower equipment and supplies revenue of the Company in the U.S. Equipment and supplies costs decreased as a percentage of revenue principally due to higher equipment and supplies margins experienced by Bottomline Europe. We anticipate that equipment and supplies costs, as a percentage of revenues, will not change significantly during the remainder of the fiscal year.
Operating Expenses
Sales and Marketing:
Sales and Marketing. Sales and marketing expenses consist primarily of salaries and other related costs for sales and marketing personnel, sales commissions, travel, public relations and marketing materials and trade shows. Sales and marketing expenses decreased by $1.5 million to $4.6 million in the three months ended September 30, 2001 from $6.1 million in the three months ended September 30, 2000, a decrease of 25%. Sales and marketing expenses were 25% of total revenues in the three months ended September 30, 2001 compared to 38% of total
revenues in the three months ended September 30, 2000. The dollar decrease was due primarily to cost reductions implemented in the fourth quarter of the prior fiscal year offset by a full quarter of contribution from Bottomline Europe. We anticipate that sales and marketing expenses will not change significantly as a percentage of revenues during the remainder of the fiscal year.
Product Development and Engineering:
Product Development and Engineering. Product development and engineering expenses consist primarily of personnel costs to support product development. Product development and engineering expenses increased by approximately $600,000 to $3.5 million in the three months ended September 30, 2001 from $2.9 million in the three months ended September 30, 2000, an increase of 20%. Product development and engineering expenses were 19% of total revenues in the three months ended September 30, 2001 compared to 18% of total revenues in the three months ended September 30, 2000. The increase was due primarily to the full quarter contribution of product development and engineering expenses from Flashpoint and Bottomline Europe offset by cost reductions implemented in the fourth quarter of the prior fiscal year. We believe that product development and engineering costs, as a percentage of revenues, will not change significantly during the remainder of the fiscal year.
Stock Compensation Expense. In connection with our acquisition of Flashpoint, we assumed all of the outstanding common stock options of Flashpoint, which were exchanged for our common stock options, and recorded deferred compensation of $1.3 million at the date of acquisition relating to the intrinsic value of the unvested options. The deferred compensation is being amortized to expense over the remaining vesting period of the options. Stock compensation expense increased by $63,000 in the three months ended September 30, 2001 from $37,000 in the three months ended September 30, 2000, an increase of 170%. The increase was due to a full quarter of stock compensation expense recorded in the current quarter.
General and Administrative:
General and Administrative. General and administrative expenses consist primarily of salaries and other related costs for operations and finance employees and legal and accounting services. General and administrative expenses increased by approximately $600,000 to $3.2 million in the three months ended September 30, 2001 from $2.6 million in the three months ended September 30, 2000, an increase of 22%. General and administrative expenses were 18% of total revenues in the three months ended September 30, 2001 compared to 16% of total revenues in the three months ended September 30, 2000. The dollar increase was due primarily to a full quarter of general and administrative expenses from our Bottomline Europe and Flashpoint acquisitions, offset by cost reductions implemented in the fourth quarter of the prior fiscal year. We anticipate that general and administrative expenses will not change significantly during the remainder of the fiscal year.
Amortization of Intangible Assets. Amortization of intangible assets related to our acquisitions increased by $5.1 million to $8.4 million in the three months ended September 30, 2001 from approximately $3.3 million in the three months ended September 30, 2000. The increase was due to a full quarter of amortization expense recorded in the current quarter. We expect to incur a consistent amount of such amortization expense during the remainder of the fiscal year.
Other Income (Expense), Net:
Other income (expense), net consists of interest income less interest and other expense. Other income (expense), net increased by $596,000 to net expense of $332,000 in the three months ended September 30, 2001 from income of $264,000 in the three months ended September 30, 2000. The increase in expense was due primarily to a write down of an equity investment during the quarter. We expect to generate other income during the remainder of the fiscal year.
Provision (Benefit) for Income Taxes:
The provision for income taxes was approximately $60,000 in the three months ended September 30, 2001 compared with a provision of $1.9 million in the three months ended September 30, 2000. In the three months ended September 30, 2001, we incurred a substantial operating loss due primarily to the amortization of recently acquired intangible assets. At September 30, 2001, the provision for income taxes consisted of a small amount of U.S. state tax expense which will be incurred irrespective of our net operating loss position, and tax expense associated with the activities of Bottomline Europe which files a statutory tax return under the tax jurisdiction of the U.K. At September 30, 2001, we had utilized our income tax loss carryback benefit and, accordingly, had recorded a full valuation allowance for our deferred tax assets since they are less likely, rather than more likely, to be realized.
Liquidity and Capital Resources
We have financed our operations primarily from cash provided by the sale of our common stock and operating activities. We had net working capital of $13.1 million at September 30, 2001, which included cash, cash equivalents and marketable securities totaling $14.7 million.
In August 2000, we entered into a ten-year lease for approximately 83,000 square feet of space for a new headquarters facility in Portsmouth, New Hampshire. In October 2001, we entered into a lease amendment for the new headquarters facility. In connection with the amendment, the Company reduced the amount of space leased from approximately 83,000 square feet to approximately 62,000 square feet and delayed occupancy to May 2002. Total lease payments for this new facility, which we anticipate will commence with occupancy in May 2002, will be approximately $11.2 million. In connection with this lease amendment, the Company issued a $2 million irrevocable Letter of Credit to the landlord, secured by $2 million in cash. We anticipate closing on an unsecured credit facility during the second quarter of fiscal 2002 and as such, anticipate that the cash will not be secured at December 31, 2001. Also in connection with the lease amendment, we issued to the landlord 100,000 shares of our common stock and a warrant, valued using the Black-Scholes method, for the right to purchase a total of 100,000 shares of common stock at an exercise price of $4.25 per share. The warrant, which expires in October 2004, was fully vested and exercisable upon issuance. The fair value of the common stock and warrant issued, $750,000, will be capitalized and amortized as rent expense over the term of the lease.
Cash provided by operating activities was $1.9 million in the three months ended September 30, 2001 and cash used in operating activities was $3.0 million in the three months ended September 30, 2000. Net cash provided by operating activities for the three months ended September 30, 2001 was the result of decreases in accounts receivable, inventory and prepaid expenses and increases in deferred revenue, offset by the net loss and decreases in accounts payable and accrued expenses.
Net cash used in investing activities was $855,000 in the three months ended September 30, 2001 and $8.6 million in the three months ended September 30, 2000. Cash was used in the three months ended September 30, 2001 to acquire property and equipment and short-term investments.
Net cash provided by financing activities was $108,000 in the three months ended September 30, 2001 and net cash used in financing activities was $9.5 million in the three months ended September 30, 2000. Net cash provided by financing activities was the result of net proceeds from the issuance of stock pursuant to our employee stock purchase plan offset by the repurchase of common stock under our Stock Repurchase Program, approved by the Board of Directors on September 17, 2001. Common shares repurchased during the quarter and held in the treasury had been reissued as of September 30, 2001 in connection with shares issued under our employee stock purchase plan.
We have generated positive cash flow from operations of approximately $1.9 million during the three months ended September 30, 2001. We believe that our cash, cash equivalents and short-term investments on hand will be sufficient to meet our working capital requirements for at least the next twelve months. We also may receive additional investments from, and make investments in other companies.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before making an investment decision involving our common stock. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall, and you may lose all or part of the money you paid to buy our common stock.
THE MARKET PRICE OF OUR COMMON STOCK HAS EXPERIENCED, AND MAY CONTINUE TO BE SUBJECT TO, EXTREME PRICE AND VOLUME FLUCTUATIONS
Stock markets, in general, and The Nasdaq Stock Market in particular, have experienced extreme price and volume fluctuations. Broad market fluctuations of this type may adversely affect the market price of our common stock. The market price of our common stock has experienced, and may continue to be subject to, extreme fluctuations due to a variety of factors, including:
. public announcements concerning us, including announcements of litigation, our competitors or our industry;
. fluctuations in operating results;
. introductions of new products or services by us or our competitors;
. adverse developments in patent or other proprietary rights;
. changes in analysts' earnings estimates;
. announcements of technological innovations by our competitors; and
. general and industry-specific business, economic and market conditions.
THE SLOWDOWN IN THE ECONOMY HAS AFFECTED THE MARKET FOR INFORMATION TECHNOLOGY SOLUTIONS, INCLUDING OUR PRODUCTS AND SERVICES, AND OUR FUTURE FINANCIAL RESULTS WILL DEPEND, IN PART, UPON WHETHER THIS SLOWDOWN CONTINUES
As a result of recent unfavorable economic conditions and reduced capital spending, demand for our products and services has been adversely affected. In connection with the slowdown, we previously announced in the fourth quarter of fiscal 2001 that we instituted several cost reduction initiatives in order to improve our profitability, including the reduction of U.S. headcount by approximately 10%, the elimination of two group executive positions and the consolidation of two satellite offices. If current economic conditions continue or worsen, we may experience a material adverse impact on our business, operating results, and financial condition.
OUR FIXED COSTS MAY LEAD TO FLUCTUATIONS IN OPERATING RESULTS IF OUR REVENUES ARE BELOW EXPECTATIONS, AND IF OUR OPERATING RESULTS ARE BELOW EXTERNAL EXPECTATIONS, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL
A significant percentage of our expenses, particularly personnel costs and rent, are relatively fixed, and based in part on expectations of future revenues. We may be unable to reduce spending in a timely manner to compensate for any significant fluctuations in revenues.
Accordingly, shortfalls in revenues may cause significant fluctuations in operating results in any quarter.
Quarterly operating results that are below the expectations of public market analysts could adversely affect the market price for our common stock. Factors that could cause these fluctuations include the following:
. the timing of orders and longer sales cycles, particularly due to any increase in average selling prices of our software solutions;
. economic conditions which may affect out customers' and potential customers' budgets for technological expenditures;
. the timing and market acceptance of new products or product enhancements by either us or our competitors;
. the timing of product implementations, which are highly dependent on customers' resources and discretion;
. the incurrence of costs relating to the integration of software products and operations in connection with acquisitions of technologies or businesses; and
. delivery interruptions relating to equipment and supplies purchased from third-party vendors, which could delay system sales.
Because of these factors, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful.
A SIGNIFICANT PERCENTAGE OF OUR REVENUES TO DATE HAVE COME FROM OUR PAYMENT MANAGEMENT OFFERINGS AND OUR PERFORMANCE WILL DEPEND ON CONTINUED MARKET ACCEPTANCE OF THESE OFFERINGS
A significant percentage of our revenues to date have come from the license and maintenance of our payment management offerings and sales of related products and services. Any reduction in demand for our payment management offerings could have a material adverse effect on our business, operating results and financial condition. Our future performance will depend to a large degree upon the market acceptance of our payment management offerings as a payment management solution. Our prospects will also depend upon enterprises seeking to enhance their payment functions to integrate electronic payment capabilities. In addition, our future results will depend on the continued market acceptance of desktop software for use in a departmental setting, including our laser check printing solutions, as well as our ability to introduce enhancements to meet the market's evolving needs for secure, payment management solutions.
OUR FUTURE FINANCIAL RESULTS WILL DEPEND UPON CONTINUED MARKET ACCEPTANCE OF OUR NETTRANSACT, BANKQUEST AND IPOINT PRODUCT OFFERINGS
If the NetTransact, BankQuest and iPoint products that we offer as the result of our acquisitions do not continue to achieve market acceptance, our future financial results will be adversely affected. We acquired the NetTransact bill presentment software from The Northern Trust Company, a financial institution, in July 1999. The NetTransact product was generally available in February 2000. We acquired the web-based BankQuest cash management software in our acquisition of Integrated Cash Management Services, Inc. in October 1999. The BankQuest software was generally available in April 2000. Bottomline Europe, which we acquired in August 2000, offers the iPoint solution, which became generally available in April 2000. If any of these products has any unanticipated performance problems or bugs, or does not enjoy wide commercial success, our long-term business strategy would be adversely affected.
INTEGRATION OF ACQUISITIONS OR STRATEGIC INVESTMENTS COULD DISRUPT OUR BUSINESS AND OUR FINANCIAL CONDITION COULD BE HARMED
We have made acquisitions of companies, including our acquisitions in fiscal 2001 of Bottomline Europe and Flashpoint, and we may acquire or make investments in other businesses, products or technologies in the future. Any future acquisitions or strategic investments, if any, may entail numerous risks that include the following:
. difficulties in assimilating acquired operations, technologies or products;
. diversion of management's attention from our core business concerns;
. risks of entering markets in which we have no or limited prior experience;
. substantial dilution of our current stockholders' ownership;
. incurrence of substantial debt;
. incurrence of significant amortization expenses related to goodwill and other intangible assets; and
. incurrence of significant immediate write-offs.
Any such difficulties encountered as a result of any mergers or acquisitions could adversely affect our business, operating results and financial condition.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS THAT COULD HARM OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our future growth rates and success are in part dependent on continued growth and success in international markets. As is the case with most international operations, the success and profitability of our international operations are subject to numerous risks and uncertainties that include, in addition to the risks our business as a whole faces, the following:
. difficulties and costs of staffing and managing foreign operations;
. certification requirements and differing regulatory and industry standards;
. reduced protection for intellectual property rights in some countries;
. fluctuations in currency exchange rates; and
. import or export licensing requirements.
INCREASED COMPETITION MAY RESULT IN PRICE REDUCTIONS AND DECREASED DEMAND FOR OUR PRODUCTS AND SERVICES
The market for bill presentment, payment and cash management software is intensely competitive and characterized by rapid technological change. Growing competition may result in price reductions of our products and services, reduced revenues and gross margins and loss of market share, any one of which could have a material adverse effect on our business, operating results and financial condition. Some competitors in our market have longer operating histories, significantly greater financial, technical, marketing and other resources, greater brand recognition and a larger installed customer base than we do. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships to expand their product offerings and to offer more comprehensive solutions. We also expect to face additional competition as other established and emerging companies enter the market for payment management solutions.
OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW AND ENHANCED SOFTWARE, SERVICES AND RELATED PRODUCTS
The bill presentment, payment and cash management software markets in which we compete are subject to rapid technological change and our success is dependent on our ability to develop new and enhanced software, services and related products that meet our evolving market needs. Trends that could have a critical impact on us include:
. rapidly changing technology that could require us to make our products compatible with new database or network systems;
. evolving industry standards and mandates, such as those mandated by the National Automated Clearing House Association, the Association for Payment Clearing Services and the Debt Collection Improvement Act of 1996; and
. developments and changes relating to the Internet that we must address as we introduce any new products.
If we are unable to develop and introduce new products, or enhancements to existing products, in a timely and successful manner, our business, operating results and financial condition could be materially adversely affected.
INCREASED GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY IMPAIR THE GROWTH OF THE INTERNET AND DECREASE DEMAND FOR OUR PRODUCTS AND SERVICES
The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws, including those governing intellectual property, privacy, libel and taxation, apply to the Internet generally and to e-commerce in particular.
Legislation could limit the growth in the use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium, which may decrease demand for our products and services and thus have a material adverse effect on our business, operating results and financial condition.
OUR SUCCESS DEPENDS ON THE WIDESPREAD ADOPTION OF THE INTERNET AND GROWTH OF ELECTRONIC BUSINESS
Our future success will in large part depend upon the willingness of businesses and financial institutions to adopt the Internet as a medium of e- business. These entities will probably accept this medium only if the Internet provides substantially greater efficiency and enhances their competitiveness. There are critical issues involved in the commercial use of the Internet that are not yet fully resolved, including concerns regarding the Internet's:
. security;
. reliability;
. ease of access; and
. quality of services.
To the extent that any of these issues inhibit or limit the adoption of the Internet as a medium of e-commerce, our business prospects could be adversely affected. If electronic business does not continue to grow or grows more slowly than expected, demand for our products and services may be reduced.
RAPID GROWTH COULD STRAIN OUR PERSONNEL, SYSTEMS AND CONTROLS
In the past, rapid growth has strained our managerial and other resources. Our ability to manage any future growth will depend in part on our ability to continue to enhance our operating, financial and management information systems. We cannot assure you that our personnel, systems and controls will be adequate to support any future growth. If we are not able to manage growth effectively, should it occur, the quality of our services, our ability to retain key personnel and our business, operating results and financial condition could be materially adversely affected.
OUR BUSINESS CAN BE ADVERSELY AFFECTED BY PROBLEMS WITH THIRD-PARTY HARDWARE THAT WE RESELL
Any problems with third-party hardware that we resell could harm our customer relationships, industry credibility and financial condition. In a prior fiscal year, we experienced a significant problem with a third-party printer that we were then reselling which had a material adverse effect on our operating results. Any repetition of these or similar problems with third party hardware could have a material adverse effect on our business, operating results and financial condition.
WE DEPEND ON A FEW KEY EMPLOYEES WHO ARE SKILLED IN E-COMMERCE, PAYMENT AND BILL PRESENTMENT METHODOLOGY AND INTERNET AND OTHER TECHNOLOGIES
Our success depends upon the efforts and abilities of our executive officers and key technical employees who are skilled in e-commerce, payment methodology and regulation, and Internet, database and network technologies. We currently do not maintain "key man" life insurance policies on any of our employees. While some of our executive officers have employment agreements with us, the loss of the services of any of our executive officers or other key employees could have a material adverse effect on our business, operating results and financial condition.
WE MUST ATTRACT AND RETAIN HIGHLY SKILLED PERSONNEL WITH KNOWLEDGE OF ELECTRONIC PAYMENT AND BILL PRESENTMENT TECHNOLOGY AND THE BANKING INDUSTRY
We are dependent upon the ability to attract, hire, train and retain highly skilled technical, sales and marketing, and support personnel, particularly with expertise in electronic payment and bill presentment technology and knowledge of the banking industry. Competition for qualified personnel is intense. In addition, our corporate headquarters location in Portsmouth, New Hampshire may limit our access to skilled personnel. Any failure to attract, hire or retain qualified personnel could have a material adverse effect on our business, operating results and financial condition. Based on our experience, it takes an average of nine months for a salesperson to become fully productive. We cannot assure you that we will be successful in increasing the productivity of our sales personnel, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.
UNDETECTED BUGS IN OUR SOFTWARE COULD ADVERSELY AFFECT THE PERFORMANCE OF OUR SOFTWARE AND DEMAND FOR OUR PRODUCTS
Our software products could contain errors or "bugs" that we have not been able to detect which could adversely affect their performance and reduce demand for our products. Any defects or errors in products, such as NetTransact, BankQuest or iPoint, or enhancements could harm our customer relationships and result in negative publicity regarding us and our products, which could have a material adverse effect on our business, operating results and financial condition.
OUR BUSINESS COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS
Because our software and hardware products are designed to provide critical payment management, invoicing and cash management functions, we may be subject to significant product liability claims. Our insurance may not be sufficient to cover us against these claims or may not be available at all. A product liability claim brought against us, even if not successful, could require us to spend significant time and money in litigation. As a result, any such claim,
whether successful or not, could seriously damage our reputation and harm our business, operating results and financial condition.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY
We rely upon a combination of patent, copyright and trademark laws and non- disclosure and other intellectual property contractual arrangements to protect our proprietary rights. However, we cannot assure you that our patents, pending applications that may be issued in the future, or other intellectual property will be of sufficient scope and strength to provide meaningful protection of our technology or any commercial advantage to us, or that the patents will not be challenged, invalidated or circumvented. We enter into agreements with our employees and clients that seek to limit and protect the distribution of proprietary information. We cannot assure you that the steps we have taken to protect our intellectual property rights will be adequate to deter misappropriation of proprietary information, and we may not be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights.
WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS, WHICH COULD SERIOUSLY HARM OUR BUSINESS
In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. We may be a party to litigation in the future to protect our intellectual property or as a result of an alleged infringement of the intellectual property of others. These claims could require us to spend significant sums in litigation, pay damages, delay product installments, develop non-infringing intellectual property or acquire licenses to intellectual property that is the subject of the infringement claim. These claims could have a material adverse effect on our business, operating results and financial condition.
WE MAY INCUR SIGNIFICANT COSTS FROM CLASS ACTION LITIGATION DUE TO THE EXPECTED VOLATILITY OF OUR COMMON STOCK
In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. In August 2001, we were named in a securities class action litigation in connection with our initial public offering of common stock. We could incur substantial costs and experience a diversion of our management's attention and resources in connection with such litigation and it could have a material adverse effect on our business, financial condition and results of operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 25, 2001, an action was filed against BancBoston Robertson Stephens, an underwriter of our initial public offering, in the United States District Court for the Southern District of New York. The complaint in the action does not name us, or any of our officers or directors, and asserts claims against the underwriter similar to those described in the Cyrek action described below. As the Cyrek action also names BancBoston Robertson Stephens as a defendant, there is a possibility that this action will be consolidated with the Cyrek action.
On August 10, 2001, a class action complaint was filed against us in the
United States District Court for the Southern District of New York: Paul Cyrek
v. Bottomline Technologies, Inc.; Daniel M. McGurl; Robert A. Eberle;
Fleetboston Robertson Stephens, Inc.; Deutsche Banc Alex Brown Inc.; CIBC World
Markets; and J.P. Morgan Chase & Co. The complaint filed in the action asserts
claims under Sections 11, 12(2) and 15 of the Securities Act of 1933, as
amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as amended. The complaint asserts, among other things, that the description in
our prospectus for our initial public offering was materially false and
misleading in describing the compensation to be earned by the underwriters of
our offering, and in not describing certain alleged arrangements among
underwriters and initial purchasers of our common stock from the underwriters.
The complaint seeks damages (or in the alternative tender of the plaintiff and
class's Bottomline common stock and rescission of their purchases of our
common stock purchased in the initial public offering), costs, attorneys' fees,
experts' fees and other expenses.
We intend to vigorously defend our self against such complaint. While this proceeding is in its early stages, we do not currently believe that the outcome will have a material adverse impact on our financial condition. There have not been any material developments in this litigation since it first became a reportable event.
Item 2. Changes In Securities And Use Of Proceeds
Changes in Rights and Classes of Stock
None.
Sales of Unregistered Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission Of Matters To a Vote Of Security Holders
No matter was submitted to a vote of our stockholders, through the solicitation of proxies or otherwise, during the fiscal quarter ended September 30, 2001.
Item 5. Other Information
None.
Item 6. Exhibits and Reports On Form 8-K
(a) Exhibits:
See the Exhibit Index on page 19 for a list of exhibits filed as part of this Quarterly Report on Form 10-Q, which Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K:
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Bottomline Technologies (de), Inc.
Date: November 13, 2001 By: /s/ Robert A. Eberle
--------------------
Robert A. Eberle
Executive Vice President, Chief Operating Officer,
Chief Financial Officer, and Secretary
(Principal Financial and Accounting Officer)
|
Exhibit Index
Exhibit Number Description
-------------- -----------
10.1 Second Amendment to Sublease, effective as of October 1, 2001,
between the Registrant and 325 Corporate Drive II, LLC.
10.2 Common Stock Purchase Warrant for 100,000 shares of common
stock, $.001 par value of the Registrant, issued to 325
Corporate Drive II, LLC as of October 1, 2001.
|
Exhibit 10.1
SECOND AMENDMENT TO SUBLEASE BETWEEN
325 CORPORATE DRIVE II, LLC
AS "SUBLESSOR"
AND
BOTTOMLINE TECHNOLOGIES, INC.
AS "SUBLESSEE"
THIS SECOND AMENDMENT TO SUBLEASE ("Sublease") is made by and between 325 CORPORATE DRIVE II, LLC, ("Sublessor") and BOTTOMLINE TECHNOLOGIES, INC. ("Sublessee"), the Parties to a certain Sublease dated August 31, 2000, as amended by First Amendment to Sublease dated December 29, 2000 (collectively referred to herein as the "Sublease"). All capitalized terms contained in this Second Amendment to Sublease shall have the meanings given to them in the Sublease.
WHEREAS: The Sublease provides for the design and pricing of the
Leasehold Improvement Work to be constructed by Sublessor, and further provides
a mechanism for the Sublessee to pay the costs of such Leasehold Improvement
Work to the extent such costs exceed $2,436,496 all of which was the subject of
a "CONFIRMATION OF PRICING FOR LEASEHOLD IMPROVEMENT WORK UNDER SECTION 2.8 OF
SUBLEASE BETWEEN 325 CORPORATE DRIVE II, LLC AS 'SUBLESSOR' AND BOTTOMLINE
TECHNOLOGIES, INC. AS 'SUBLESSEE'" (the "Confirmation"); and
WHEREAS: The Parties desire to amend the Sublease and the Confirmation.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, the parties agree that the Sublease shall be, and is hereby, amended as follows:
1. The defined term "Subleased Premises" shall mean no less than 62,000 and not more than 64,000 rentable square feet of space located on the first, third and fourth floor(s) of the approximately 100,000 square foot building at 325 Corporate Drive, Portsmouth, New Hampshire (the "Building"). After completion of the Leasehold Improvement Work, Sublessor shall provide Sublessee with a certified measurement of the rentable space within 60 days from the date of Sublessee's occupancy of the Subleased Premises and the appropriate Lease provision shall automatically be amended consistent therewith.
2. Exhibit 2 to the Sublease is hereby deleted in its entirety and Exhibit 1 hereto added in its place. Exhibit 1 hereto is a plan or plans showing the "Subleased Premises" or "Premises" leased under this Sublease.
3. Section 21.3 of the Sublease is deleted in its entirety and the following substituted therefore:
"21.3 Expansion Option. Sublessee shall have the right and option to expand the space which comprises the Subleased Premises and is subject to this Sublease for up to 10,000 rentable square feet of space. The foregoing expansion option shall be exercisable at any time during the Original Term of the Sublease only by Sublessee and only by giving Sublessor written notice thereof, which notice shall specify the amount of space (up to the maximum of 10,000 rentable square feet) (the "Expansion Space") and the proposed
commencement date for the expansion option (which notice shall be given at least six (6) months in advance). Within thirty (30) days after the receipt of Sublessee's notice of exercise of the expansion option, Sublessor shall designate the location of the Expansion Space within the Building. Sublessor shall use its reasonable best efforts to (i) provide contiguous space located on a single floor for the Expansion Space, and (ii) make the Expansion Space available for Sublessee's occupancy on the commencement date proposed by the Sublessee in its notice of exercise of the expansion option, but in any event no later than twelve (12) months following receipt of such notice. Any costs incurred by Sublessor for relocation of tenants and/or reconfiguration of space in creating the Expansion Space shall be paid by Sublessee upon demand from Sublessor. As a condition precedent to the occupancy of the Expansion Space by the Sublessee, Sublessor and Sublessee shall execute a written amendment of this Sublease to effect the incorporation of the Expansion Space into the Subleased Premises, which amendment shall contain the terms and conditions of such occupancy as agreed to by the parties, including, without limitation, the term of the lease of the Expansion Space.
In the event Sublessee shall commence occupancy of the Expansion Space under this Section 21.3 on or before May 1, 2004 the Base Rent per square foot rental rate shall be the same Base Rent per square foot charge paid by the Sublessee under Article 4.1 of this Sublease plus any other additional charges payable by the Sublessee under this Lease, and the other terms and conditions of the amendment to the Sublease.
In the event Sublessee shall commence occupancy of the Expansion Space under this Section 21.3 after May 1, 2004, the Base Rent per square foot shall be negotiated by the parties hereto, and shall be commercial reasonable. In no event, however, shall the Base Rent for the Expansion Space be less than the Base Rent per square foot charge paid by the Sublessee under Article 4.1 of this Sublease.
4. A list of the final plans and specifications for the Base Building Work, as
approved by the parties in the Confirmation, is attached hereto as Exhibit
2A, which list is subject to the deletions and modifications listed on
Exhibit 9 hereto. A list of the existing plans and specifications for the
Leasehold Improvement Work, as previously approved by the parties, is
attached hereto as Exhibit 2, which list shall be subject to modification
as provided in Section 5 below. Sublessor shall use diligent efforts to
complete construction of the Base Building Work and the Leasehold
Improvement Work on or before April 25, 2002. In the event Sublessor fails
to achieve "Substantial Completion" (as defined in Section 2.5 of the
Sublease) of the Base Building Work and the Leasehold Improvement Work on
or before July 1, 2002, then Sublessee shall have the right, exercisable
by notice to Sublessor given at any time while such failure persists, to
terminate this Sublease; provided, however, if Sublessor fails to achieve
Substantial Completion because of delays caused by the Sublessee, its
agents, or employees ("Sublessee Delays"), Substantial Completion shall be
deemed to have occurred as of the date that Sublessor could reasonably have
been expected to achieve Substantial Completion absent any Sublessee
Delays. The construction deadline of July 1, 2002 shall be extended one
(1) day, up to a maximum of one hundred eighty (180) days, for each day of
delay caused by (a) the occurrence of an event of "Force Majeure" as
defined in Section 2.4 of the Sublease, or (b) Sublessee Delays.
5. The total cost of the Leasehold Improvement Work as set forth in Exhibit 2
is presently calculated to be Three Million One Hundred Thousand and
00/100 Dollars ($3,100.000.00) (the "LIW Cost"). Sublessor shall be
obligated to pay for the entire cost of the Base Building Work and for the
LIW Cost up to the LIW Allowance. The LIW Allowance shall be One Million
Eight Hundred Thousand and 00/100 Dollars ($1,800,000.00) (not the
$2,436,486.00 provided for in Section 2.8 of the Sublease). Sublessee
shall be obligated to reimburse Sublessor for the cost of the Leasehold
Improvement Work in excess of the LIW Allowance, up to an agreed maximum
amount. In the event of any cost overruns, Sublessor shall be obligated to
pay for any costs of the Leasehold Improvement Work, in excess of the LIW
Cost. In the event that the LIW Allowance exceeds the actual cost of the
Leasehold Improvement Work, any unused portion of the LIW Allowance shall
be applied against rent first becoming due. Based on current design of the
Leasehold Improvement Work, the maximum amount payable by Sublessee is One
Million Three Hundred Thousand and 00/100 ($1,300,000.00) (the "Sublessee's
Cost") (i.e., the difference between the LIW Cost and the LIW Allowance).
Section 2.8 of the Sublease is hereby deleted in its entirety. The
Sublessee's Costs shall be paid by Sublessee in accordance with the
provisions of Exhibit 3 hereto. The parties agree to work in good faith and
with due diligence to finalize the design and pricing of revised Leasehold
Improvement Work, and in any event to reach agreement thereon no later than
October 15, 2001. At such time as the final design of the Leasehold
Improvement Work has been agreed upon by the parties, in writing, the plans
therefore shall be attached to and incorporated by reference into, the
Sublease, and the Sublessee's Cost shall be recalculated. In the event that
the parties are unable to agree on revised design and pricing for the
Leasehold Improvement Work on or before October 15, 2001, the Leasehold
Improvement Work shall be completed as originally contemplated in
accordance with the design criteria established by existing plans and
specifications on Exhibit 2A with the exception that the back half of the
original second floor will, to the extent reasonably possible, be
substantially provided for on the rear half of the third floor and the
training rooms originally in the front left section of the first floor
will, to the extent reasonably possible, be provided for on the right half
of the first floor and the Sublessee's Cost shall be as stated above,
($1,300,000.00). Sublessee acknowledges that the value of the Stock and
Warrant delivered to Sublessor pursuant to Paragraph 11 hereof shall not be
credited against, or otherwise reduce, the obligation of Sublessee to pay
the Sublessee's Cost.
6. In light of the change in the Term Commencement Day set forth below, Sublessor shall have until April 25, 2002 to complete the Base Building and the LIW.
7. Section 4.1 of the Sublease is deleted in its entirety and the following substituted therefore:
"4.1. The Base Rent due from Sublessee to Sublessor during the first year of Term hereof shall be calculated by multiplying the number of square feet included in the Subleased Premises by Fifteen and 75/100 Dollars ($15.75). For each year thereafter, the Base Rent due hereunder shall be increased by a percentage of the previous year's Base Rent, which percentage shall be the lesser of (a) five (5) times the increase in the Consumer Price Index for the previous calendar year, or (b) Three and One Tenth Percent (3.1%). By way of example, the following Base Rent schedule has been calculated assuming that there are 62,000 square feet of space within the Subleased Premises, and that the annual increase is 3.1% for each year during the Term:
Per
Annual Rentable Monthly
Year Amount Sq. Ft. Payment
-------------------------------------------------------------
1 $ 976,500.00 $15.75 $ 81,375.00
-------------------------------------------------------------
2 $ 1,006,771.50 $16.24 $ 83,897.63
-------------------------------------------------------------
3 $ 1,037,981.42 $16.74 $ 86,498.45
-------------------------------------------------------------
4 $ 1,070,158.84 $17.26 $ 89,179.90
-------------------------------------------------------------
5 $ 1,103,333.76 $17.80 $ 91,944.48
-------------------------------------------------------------
6 $ 1,137,537.11 $18.35 $ 94,794.76
-------------------------------------------------------------
7 $ 1,172,800.76 $18.92 $ 97,733.40
-------------------------------------------------------------
8 $ 1,209,157.59 $19.50 $100,763.13
-------------------------------------------------------------
9 $ 1,246,641.47 $20.11 $103,886.79
-------------------------------------------------------------
10 $ 1,285,287.36 $20.73 $107,107.28
-------------------------------------------------------------
Total $11,246,169.81 $937,180.82
-------------------------------------------------------------
|
For the purposes of this Sublease, the term "Consumer Price Index" shall mean the Consumer Price Index (All Urban Consumers, All Cities Average) issued by the Bureau of Labor Statistics of the United States, for the period from the first (1st) day of such previous calendar year through the last day of such previous year. In no event shall the Base Rent due hereunder in any year during the Term hereof be less than the Base Rent due during the immediately preceding year."
8. The phrase "Term Commencement Date" as used throughout the Sublease shall mean the later of (a) May 1, 2002, or (b) the date that "Substantial Completion" of the Base Building Work and Leasehold Improvement Work occurs. If, however, the issuance of a Certificate of Occupancy is delayed because of Sublessee Delays, Substantial Completion shall be deemed to have occurred as of the date that the Sublessor could reasonably have been expected to achieve Substantial Completion absent any Sublessee Delays.
9. Sublessor and Sublessee agree that the scope of the Base Building Work shall be reduced by the deletions and modifications listed on Exhibit 9 attached hereto, including eliminating the flagpoles, patio, fitness center, sports court, and generator.
10. Article 18 of the Sublease is deleted in its entirety and the following substituted therefore:
"ARTICLE 18"
SECURITY AND DEFAULT
18.1. If Sublessee shall default in the payment of rent or other payments required of Sublessee hereunder, and if Sublessee shall fail to cure said default within seven (7) business days after receipt of written notice of said default from Sublessor (or if such notice shall adversely affect the rights of the Sublessor in any bankruptcy or receivership, then immediately); or if Sublessee shall default in the performance or observance of any other agreement or condition on its part to be performed or observed, and if Sublessee shall fail to
cure said default within thirty (30) days after notice thereof or such
longer period as shall be reasonably required so long as the Sublessee
shall be diligently pursuing such cure after receipt of written notice of
said default from Sublessor (or if such notice shall adversely affect the
rights of the Sublessor in any bankruptcy or receivership, then
immediately); or if any person shall levy upon, or take this leasehold
interest or any part hereof, upon execution, attachment, or their process
of law; or if Sublessee shall make an assignment of its property for the
benefit of creditors; or if Sublessee shall file voluntary bankruptcy; or
if any bankruptcy or insolvency proceedings shall be commenced by Sublessee
or an involuntary bankruptcy shall be filed against the Sublessee which
remains undischarged for a period of sixty (60) days; or if a receiver,
trustee, or assignee shall be appointed for the whole or any part of the
Sublessee's property (which events are referred to herein as "Defaults" or
singularly as a "Default"), then in any of said cases, Sublessor lawfully
then or at any time thereafter, and without further notice or demand, (a)
enter into and upon the Subleased Premises, or any part hereof in the name
of the whole, and hold the Subleased Premises as if this Sublease had not
been made, and expel Sublessee and those claiming under it, and remove its
or their property without being taken or deemed to be guilty of any manner
of trespass whereupon the term of this Sublease shall terminate; or (b)
send written notice of such termination to Sublessee, whereupon Sublessee
shall immediately and forthwith vacate the Subleased Premises and deliver
same to Sublessor in a good, clear and tenantable condition. Sublessee
hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of Sublessee being evicted or
dispossessed for any cause, or in the event Sublessor terminates this
Sublease as provided in this Article. The Sublessee shall be liable for a
late payment fee equal to Five Percent (5%) of any amounts not paid within
seven (7) business days of the date due under this Sublease.
Notwithstanding the foregoing, or any other provision of this Sublease
(including, without limitation the provisions of Article 29 below) upon the
occurrence of a Default (including failure to timely pay Sublessee's Cost),
Sublessor shall also be immediately entitled to (c) exercise any and all
rights and remedies provided by law, including initiation of legal
proceedings for eviction of Sublessee from the Subleased Premises and
collection of all amounts due hereunder, and (d) exercise its rights under
Section 18.2 below.
18.2. In case of such termination, at the sole option of Sublessor, either
(a) Sublessee shall remain responsible and liable for all rents and payment
obligations as the same become due during the remaining term of this
Sublease, in which event, Sublessee shall pay Sublessor, on demand, all
past due rent as the same become due, less any rents collected, plus all
Costs of Reletting, or (b) Sublessee shall immediately pay to Sublessor
an amount equal to the total rent that Sublessee would have been required
to pay for the remainder of the Term discounted to present value at the
Prime Rate (defined below) then in effect, minus the then full amount of
the LC (as defined in Section 18.3). Sublessor shall use reasonable
efforts to relet the Subleased Premises for a term that may be greater or
less than the balance of the Term and on such conditions (which may include
concessions, free rent and alterations of the Subleased Premises) and for
such uses as Sublessor in its absolute discretion shall determine.
Sublessor may collect and receive all rents and other income from the
reletting, but shall, if Sublessee has timely made the payment provided for
in clause (b) of this Subsection, provide Sublessee with an annual
accounting of such income, during the original Term of this Sublease and
pay to Sublessee so much thereof as may be necessary to repay Sublessee up
to, but no more than, the amount paid by Sublessee pursuant to this Section
allocable to the year in which such income was received, less costs of
Reletting.
Sublessor shall not be responsible or liable for the failure to relet all or any part of the Subleased Premises or for the failure to collect any rent. "Costs of Reletting" shall include all costs and expenses incurred by Sublessor in reletting or attempting to relet the Subleased Premises, including, without limitation, reasonable legal fees, brokerage commissions, the cost of alterations and other concessions or allowances granted to a new tenant. For purposes hereof, the "Prime Rate" shall be the per annum interest rate publicly announced as its prime or base rate by a federally insured bank selected by Sublessor in the sate in which the Building is located.
18.3. Sublessee shall, on or before October 1, 2001, deliver to Sublessor
an irrevocable letter of credit (the "LC") in the amount of Two Million and
00/100 Dollars ($2,000,000.00) in the form of Exhibit LC attached hereto
issued by Silicon Valley Bank or such other FDIC insured which has been
approved in writing by Sublessor, such approval not to be unreasonably
withheld. The LC shall be held by Sublessor as security for the faithful
performance by Sublessee of all terms, covenants and conditions of this
Sublease. Upon the occurrence of any event of Default which remains
uncured after the expiration of any applicable notice and grace period,
Sublessor may (but Sublessor shall not be required to) draw on said LC and,
without prejudice to any other remedy, use all or a portion of the LC to
satisfy past due rent or to cure any uncured default by Sublessee and shall
further be entitled to retain the remaining proceeds of the LC as repayment
by Sublessee to Sublessor for costs incurred by Sublessor to construct the
Building in accordance with the special requirements of Sublessee. If
Sublessor transfers its interest in the Subleased Premises, Sublessor may
assign the LC to the transferee and, following the assignment and
acceptance of the LC by such transferee, Sublessor shall have no further
liability for the return of the LC. If Sublessor intends to assign
Sublessor's interest in the Sublease, Sublessee shall, upon notice from
Sublessor, deliver to Sublessor an amendment to the LC naming Sublessor's
assignee as the beneficiary thereof. Notwithstanding anything herein to
the contrary, provided (i) Sublessee performs all of the terms, covenants
and conditions of this Sublease to be kept and performed by Sublessee and
(ii) Sublessee reports EBITDA profits averaging no less than One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) per quarter for 8
consecutive fiscal quarters, including the fiscal quarter immediately
preceding the effective date of any reduction of the LC, Sublessee shall
have the right to reduce the amount of the LC to be as follows: (a) One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) effective
as of any time on or after May 1, 2005; (b) One Million and 00/100 Dollars
($1,000,000.00) effective any time on or after May 1, 2007; and (c) Five
Hundred Thousand and 00/100 Dollars ($500,000) effective any time on or
after May 1, 2009. Should Sublessee fail to satisfy such requirements on
the aforementioned dates, Sublessee shall have the ability to qualify for
such reductions by meeting the aforementioned requirements for any eight
(8) consecutive fiscal quarters after the applicable date. For example, if
Sublessee does not satisfy the financial requirement on or before May 1,
2005, but does satisfy the financial requirement for the first time on or
after May 1, 2007, the amount of the LC shall be reduced to One Million and
00/100 Dollars ($1,000,000.00). Additionally, Sublessee shall have the
right to reduce the LC on a dollar-for-dollar basis for any gains
recognized by the Sublessor in excess of Three Million and 00/100 Dollars
($3,000,000.00) from the sale of the Stock and/or the Warrant issued
pursuant to Section 10 of this Second Amendment to Sublease. Such
reduction shall be accomplished by having Sublessee provide Sublessor with
a substitute Letter of Credit in the reduced amount, and otherwise meeting
all of the conditions set forth above. If Sublessee
provides Sublessor with a substitute Letter of Credit, Sublessor shall simultaneously return the original LC to Sublessee.
Provided no Default under this Sublease has occurred, which remains uncured after the expiration of any applicable notice and grace period, the LC shall be returned to Sublessee thirty (30) days after the expiration of the original Term (or the extended Term if Sublessee exercised its option to extend the Term) of this Sublease.
11. Sublessee shall issue to Sublessor one hundred thousand (100,000) shares of Sublessee's common stock (the "Stock") and a warrant to purchase one hundred thousand (100,000) additional shares of Sublessee's common stock at an exercise price of Four and 25/100 Dollars ($4.25) (the closing price of Sublessee's stock on September 18, 2001) (the "Warrant") as payment for Leasehold Improvements completed prior to the date hereof for the sole use of the Sublessee under the terms and conditions of the Sublease. Such Stock (and any of Sublessee's common stock purchased under the Warrant) will not be registered by Sublessee; provided, however, if at any time after eighteen (18) months from the date hereof, Sublessee otherwise elects to file a registration of Sublessee's common stock, Sublessee agrees to provide Sublessor with so-called "piggy back" registration rights for such stock. Neither the Stock nor any of Sublessee's common stock purchased under the Warrant, will be assignable or transferable without the prior written consent of Sublessee for a period of three (3) years from the date hereof except (a) for transfers or assignments to Members of Sublessor or such Members' immediate family (provided, however that any such Member or family member of a Member shall abide by the restrictions contained herein); and (b) in conjunction with an acquisition of one hundred percent (100%) of the ownership of Sublessee. The Warrant shall be in the form of Exhibit 10 attached hereto.
12. Sublessee confirms and acknowledges that it is in its best interest, as
well as the best interest of the Sublessor, that Sublessor obtain permanent
mortgage financing for the property of which the Subleased Premises are a
part, and thus agrees to cooperate with Sublessor (so long as Sublessee
incurs no cost or liability) in obtaining such permanent financing by
timely providing to any potential mortgagee copies of any publicly
available information on the financial condition of Sublessee and the
Certificates referenced in Article 20 of the Sublease. Sublessee also
agrees that, in conjunction with any such financing, any amendments of this
Sublease required by such mortgagee shall be subject to Sublessee's
approval, not to be unreasonably withheld, provided no such amendment shall
(a) change any financial terms of the Sublease; (b) make any material
change to any of Sublessee's other rights and benefits under the Sublease;
and (c) impose any additional cost or liability upon Sublessee.
13. The Sublease, as amended by this Second Amendment, contains and sets forth the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein, and supersedes and cancels all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, with respect to the subject matter hereof made by either party, and/or their respective officers, directors, members, employees and agents, including, but not limited to, any and all claims of default made prior hereto by or against either of the parties hereto.
14. In all other respects, except as herein amended, the parties ratify and confirm that the terms and provisions contained in the Sublease shall remain in full force and effect and continue to apply to and bind the parties.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Second Amendment to Sublease effective as of the 19th day of September, 2001.
325 CORPORATE DRIVE II, LLC
By:____________________________
Its:____________________________
BOTTOMLINE TECHNOLOGIES, INC.
By:____________________________
Name: Daniel M. McGurl
Its: Chief Executive Officer
STATE OF NEW HAMPSHIRE
COUNTY OF ROCKINGHAM
On this _____ day of September, 2001, personally appeared ________________, known to me (or proved to me on the basis of satisfactory evidence) to be the ____________________ of 325 CORPORATE DRIVE II, LLC, and on oath stated that he was authorized to execute this instrument and acknowledged it to be his free and voluntary act for the uses and purposes set forth herein.
STATE OF NEW HAMPSHIRE
COUNTY OF ROCKINGHAM
On this _____ day of September, 2001, personally appeared Daniel M. McGurl, known to me (or proved to me on the basis of satisfactory evidence) to be the Chief Executive Officer of BOTTOMLINE TECHNOLOGIES, INC. and on oath stated that he was authorized to execute this instrument and acknowledged it to be his free and voluntary act for the uses and purposes set forth herein.
EXHIBIT 1
A PLAN OR PLANS SHOWING THE SUBLEASED PREMISES
EXHIBIT 2A
A LIST OF FINAL PLANS AND SPECIFICATIONS
FOR THE BASE BUILDING WORK
EXHIBIT 2
A LIST OF THE EXISTING PLANS AND SPECIFICATIONS
FOR THE LEASEHOLD IMPROVEMENT WORK
EXHIBIT 3
SCHEDULE OF SUBLESSEE PAYMENTS
FOR LEASEHOLD IMPROVEMENT WORK
On each January 1, 2002 and April 1, 2002, Sublessee shall pay to Sublessor Fifty Percent (50%) of the total Sublessee's Cost.
EXHIBIT 9
A LIST OF ITEMS EXCLUDED FROM BASE BUILDING WORK
FLAGPOLES,
PATIO,
FITNESS CENTER,
SPORTS COURT,
GENERATOR
TOTALING $350,000.00 IN EXCLUDED ITEMS.
EXHIBIT 10
FORM OF WARRANT
Filed separately
EXHIBIT LC
FORM OF LETTER OF CREDIT
STANDBY LETTER OF CREDIT DRAFT
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB01ISXXXX
DATE:
AMOUNT: US$__________________ (XXXXXXXXXXX AND 00/100 U.S. DOLLARS)
EXPIRATION DATE: _______________, 2001
LOCATION: AT OUR COUNTERS IN SANTA CLARA, CALIFORNIA
DEAR SIR/MADAM:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB01ISXXXX IN YOUR FAVOR AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.
2. A DATED CERTIFICATION FROM THE BENEFICIARY SIGNED BY AN AUTHORIZED
OFFICER, FOLLOWED BY ITS DESIGNATED TITLE, STATING THE FOLLOWING:
(A) "THE AMOUNT REPRESENTS FUNDS DUE AND OWING TO US AS A RESULT OF THE
APPLICANT'S FAILURE TO COMPLY WITH ONE OR MORE OF THE TERMS OF THAT CERTAIN
LEASE BY AND BETWEEN (INSERT BENEFICIARY'S NAME), AS LANDLORD, AND (INSERT
APPLICANT'S NAME), AS TENANT"
OR
(B) "WE HEREBY CERTIFY THAT WE HAVE RECEIVED NOTICE FROM SILICON VALLEY BANK
THAT LETTER OF CREDIT NO. SVB01ISXXXX WILL NOT BE RENEWED, AND THAT WE HAVE
NOT RECEIVED A REPLACEMENT OF THIS LETTER OF CREDIT FROM (INSERT
APPLICANT'S NAME). SATISFACTORY TO US AT LEAST THIRTY (30) DAYS PRIOR TO
THE EXPIRATION DATE OF THIS LETTER OF CREDIT."
PARTIAL DRAWS ARE ALLOWED. THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB01ISXXXX DATED
DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.
THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE NOTIFY YOU AND THE APPLICANT BY REGISTERED MAIL/OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESSES THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND __________________.
THIS LETTER OF CREDIT MAY ONLY BE TRANSFERRED IN ITS ENTIRETY BY THE ISSUING BANK UPON OUR RECEIPT OF THE ATTACHED "EXHIBIT A" DULY COMPLETED AND EXECUTED BY THE BENEFICIARY AND ACCOMPANIED BY THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY, WITH THE PAYMENT OF OUR TRANSFER FEE OF 1/4 OF 1% OF THE TRANSFER AMOUNT (MINIMUM USD250.00).
ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF THE ORIGINAL APPROPRIATE DOCUMENTS PRIOR TO 10:00 A.M. CALIFORNIA TIME, ON A BUSINESS DAY AT OUR OFFICE (THE "BANK'S OFFICE") AT: SILICON VALLEY BANK, 3003 TASMAN DRIVE SANTA CLARA, CA 95054, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION OR BY FACSIMILE TRANSMISSION AT: (408) 654-6211 OR (408) 496-2418; AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: (408) 654-7120 OR (408) 654-3052), ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION WITH ORIGINALS TO FOLLOW BY OVERNIGHT COURIER SERVICE; PROVIDED, HOWEVER, THE BANK WILL DETERMINE HONOR OR DISHONOR ON THE BASIS OF PRESENTATION BY FACSIMILE ALONE, AND WILL NOT EXAMINE THE ORIGINALS.
PAYMENT AGAINST CONFORMING PRESENTATIONS HEREUNDER SHALL BE MADE BY BANK DURING NORMAL BUSINESS HOURS OF THE BANK'S OFFICE WITHIN TWO (2) BUSINESS DAYS AFTER PRESENTATION
WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS AND BONAFIDE HOLDERS THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO THE DRAWEE, IF NEGOTIATED ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB01ISXXXX DATED
THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500.
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
PAGE 3 0F 3
EXHIBIT "A"
DATE:
TO: SILICON VALLEY BANK
3003 TASMAN DRIVE RE: STANDBY LETTER OF CREDIT
SANTA CLARA, CA 95054 NO. ISSUED BY
|
ATTN: INTERNATIONAL DIVISION. SILICON VALLEY BANK, SANTA CLARA
STANDBY LETTERS OF CREDIT L/C AMOUNT:
GENTLEMEN:
FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:
(NAME OF TRANSFEREE)
(ADDRESS)
ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.
BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.
THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.
SINCERELY,
SIGNATURE AUTHENTICATED
Exhibit 10.2
Number of Shares: 100,000
Bottomline Technologies (de), Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that 325 Corporate Drive II, LLC or its registered assigns (the "Registered Holder"), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or from time to time on or after the date of issuance and on or before (i) the closing of a Sale of the Company (as defined in Section 2(e)) or (ii) the third anniversary of the date of issuance of this Warrant, 100,000 shares of Common Stock, $.001 par value per share, of the Company, at a purchase price of $4.25 per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase Price," respectively.
(b) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in subsection 1(a) above (the "Exercise Date"). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in full or in part, and in any event within 10 days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant Shares to which the Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise.
(a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date on which this Warrant was first issued (the "Original Issue Date") effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.
(b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.
(c) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price pursuant to subsections 2(a) or
2(b), the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in
effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(d) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than shares of Common Stock) or in cash or other property (other than cash out of earnings or earned surplus, determined in accordance with generally accepted accounting principles), then and in each such event provision shall be made so that the Registered Holder shall receive upon exercise hereof, in addition to the number of shares of Common Stock issuable hereunder, the kind and amount of securities of the Company and/or cash and other property which the Registered Holder would have been entitled to receive had this Warrant been exercised into Common Stock on the date of such event and had the Registered Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained any such securities receivable, giving application to all adjustments called for during such period under this Section 2 with respect to the rights of the Registered Holder.
(e) Adjustment for Mergers or Reorganizations, etc. If there shall occur
any reorganization, recapitalization, consolidation or merger involving the
Company in which the Common Stock is converted into or exchanged for
securities, cash or other property (other than a Sale of the Company
transaction (as defined below) or a transaction covered by subsections
2(a), 2(b) or 2(d)), then, following any such reorganization,
recapitalization, consolidation or merger, the Registered Holder shall
receive upon exercise hereof the kind and amount of securities, cash or
other property which the Registered Holder would have been entitled to
receive if, immediately prior to such reorganization, recapitalization,
consolidation or merger, the Registered Holder had held the number of
shares of Common Stock subject to this Warrant. In any such case,
appropriate adjustment (as determined in good faith by the Board of
Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests
thereafter of the Registered Holder, to the end that the provisions set
forth in this Section 2 (including provisions with respect to changes in
and other adjustments of the Purchase Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities,
cash or other property thereafter deliverable upon the exercise of this
Warrant. For the purposes hereof, a "Sale of the Company" shall mean (i)
the sale of all or substantially all of the assets or stock of the Company
or (ii) the acquisition of the Company by means of a reorganization,
merger, consolidation or recapitalization unless the owners of the capital
stock of the Company before such transaction continue to own after such
transaction more than 50% of the capital stock of the acquiring or
succeeding entity in substantially the same proportions as held prior to
such transaction.
(f) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Registered Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property for which this Warrant shall be exercisable and the Purchase Price) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Registered Holder, furnish or cause to be furnished to the Registered Holder a certificate setting forth (i) the Purchase Price then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the exercise of this Warrant.
(i) If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately preceding the Exercise Date (provided that if no such price is reported on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company); and, upon request of the Registered Holder, the Board of Directors (or a representative thereof) shall promptly notify the Registered Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board of Directors has not made such a determination within the three-month period prior to the Exercise Date, then (A) the Board of Directors shall make a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Registered Holder that it do so, and (B) the exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until such determination is made.
(a) This Warrant and the Warrant Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. Notwithstanding the foregoing, the Warrant Shares may not be assigned or transferred except as set forth in Section 11 of the Second Amendment to Sublease dated September 19, 2001 between the Company and the Registered Holder.
(b) Each certificate representing Warrant Shares shall bear a legend substantially in the following form:
"The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act.
Each certificate representing Warrant Shares shall bear a legend substantially in the following form:
"The securities represented by this certificate are subject to and have the benefit of certain restrictions on sale or transfer pursuant to a Second Amendment to Sublease dated September 19, 2001, a copy of which is available from the Company upon request."
(a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten days prior to the record date or effective date for the event specified in such notice.
(a) The Company will maintain a register containing the name and address of the Registered Holder of this Warrant. The Registered Holder may change its or his address as shown on the warrant register by written notice to the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.
on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
EXECUTED as of the Date of Issuance indicated above.
BOTTOMLINE TECHNOLOGIES (de), INC.
By:________________________________
[Corporate Seal] Title:_____________________________
ATTEST:
EXHIBIT I
To:_________________ Dated:____________
The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the Common Stock covered by such Warrant.
The undersigned herewith makes payment n lawful money of the United States of the full purchase price for such shares at the price per share provided for in such Warrant, which is $________.
Signature: _______________________
Address: _______________________
EXHIBIT II
FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No. ____) with respect to the number of shares of Common Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares ------------------------------ ------------------------------- ------------------------------- |
Dated:_____________________ Signature:________________________________
Signature Guaranteed:
By: _______________________
The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.